<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 11
Statement of Operations............................................... 12
Statement of Changes in Net Assets.................................... 13
Financial Highlights ................................................. 14
Notes to Financial Statements......................................... 15
</TABLE>
MSEM 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
The performance of international stocks varied widely based on regional
conditions, with most markets experiencing significant volatility as a result of
the economic turmoil in many emerging market nations. Stock indexes in most
European countries turned in solid gains for the year, with Belgium, Greece, and
Finland each posting gains of more than 50 percent. In anticipation of the
economic benefits of European Monetary Union and the introduction of the euro,
the European Dow Jones Stoxx Index climbed 18.4 percent in 1998. However, many
Latin American, Asian, and eastern European stock indexes registered significant
losses.
As a result of interest rate cuts by a number of foreign central banks,
international government bonds generally performed well. In addition to
benefiting from lower interest rates, demand for these bonds increased during
the global flight to quality, as investors pulled assets from riskier
investments and diverted them to government bonds.
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 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>
[SIGNATURE] [SIGNATURE]
Richard F. Powers III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Brazil 7.6%
Greece 8.4%
Hungary 4.2%
India 8.7%
Israel 6.1%
Korea 12.9%
Mexico 11.1%
Poland 3.9%
South Africa 5.6%
Taiwan 7.3%
Other 24.2%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
----------------------------------------------------------------------
AVERAGE ANNUAL
SIX MONTHS ONE YEAR SINCE INCEPTION
---------------------- ---------------------- ----------------------
WITHOUT WITHOUT WITHOUT
WITH SALES SALES WITH SALES SALES WITH SALES SALES
CHARGE* CHARGE CHARGE* CHARGE CHARGE* CHARGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares -17.80 % -12.74 % -30.60 % -26.33 % -10.13 % -8.94 %
- ----------------------------------------------------------------------------------------------
Class B Shares+ -17.42 % -13.07 % -30.48 % -26.82 % -10.50 % -9.92 %
- ----------------------------------------------------------------------------------------------
Class C Shares -13.92 % -13.06 % -27.52 % -26.79 % -9.60 % -9.60 %
- ----------------------------------------------------------------------------------------------
IFC Global Total
Return Composite
Index: N/A -6.22 % N/A -21.08 % N/A -8.69 %
- ----------------------------------------------------------------------------------------------
</TABLE>
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
+ Class B shares have been offered since August 1, 1995.
THE IFC GLOBAL TOTAL RETURN COMPOSITE INDEX IS AN UNMANAGED INDEX OF COMMON
STOCKS AND INCLUDES DEVELOPING COUNTRIES IN LATIN AMERICA, EAST AND SOUTH ASIA,
EUROPE, THE MIDDLE EAST, AND AFRICA (ASSUMING DIVIDENDS ARE REINVESTED).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
ISSUER COUNTRY NET ASSETS
- ----------------------------------- --------- --------------
<S> <C> <C>
OTE Greece 5.3%
Samsung Electronics Co. Korea 5.2%
POSCO Korea 3.3%
Telmex Mexico 2.6%
FEMSA Mexico 2.6%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ----------------- --------- -------------
<S> <C> <C>
Services $ 30,288 31.0%
Consumer Goods 18,566 19.0%
Capital Equipment 15,894 16.3%
Energy 10,849 11.1%
Finance 9,341 9.6%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The investment objective of the Van Kampen Emerging Markets Fund is to seek to
provide long-term capital appreciation by investing primarily in equity
securities of emerging country issuers.
PERFORMANCE
For the six months ended December 31, 1998, the Van Kampen Emerging Markets Fund
had a total return of -12.74 percent for Class A shares at net asset value, as
compared to a total return of -6.22% for the IFC Global Total Return Composite
Index for the same period.
Underperformance relative to the index was partly attributable to performance
during the fourth quarter in fundamentally flawed markets. For example, during
the fourth quarter Russia (up 68.4 percent), Malaysia (up 64.2 percent), and
Colombia (up 33.1 percent) posted strong returns. Year-to-date returns, however,
have disappointed as these markets fell 83.0 percent, 30.8 percent, and 42.2
percent, respectively. In addition, our large positions in Turkey (down 44.6
percent), Brazil (down 28.2 percent), and Mexico (down 14.5 percent), coupled
with our underweight exposure to Greece (up 22.9 percent), detracted from
performance during the past six months. Finally, disappointing stock returns in
some of our Asian positions contributed to underperformance relative to the
index.
While we are disappointed by our uninspiring absolute performance, it could have
been much worse given how tumultuous the year was. Significant positions in
Korea and Thailand throughout the year contributed solidly to our performance.
In addition, underweight positions in Venezuela and Chile contributed favorably.
Notable detractors included our underweight position in Greece, our overweight
position in Pakistan, and poor stock selection in Brazil.
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.
MARKET OVERVIEW
Overall, 1998 was a volatile year that we would prefer not to repeat.
Importantly, though, the year contained significant bright spots. Two positive
trends were the phenomenal stabilization and
3------------------
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(CONT.)
(UNAUDITED)
recovery of Asian financial markets near the end of the year and the continued
fiscal discipline exhibited by the peripheral European markets, most notably
Greece, striving to converge with western Europe.
In Asia, as foreign capital fled and most banking systems seized up (due to
government control), Asian investors continued to restrain their consumption and
deposited their savings in local currency-denominated assets in domestic
financial institutions. Consequently, Asian countries were able to build up
reserve levels through massive current account surpluses despite a dramatic
decline in imports triggered by collapsing domestic consumption and investment.
The recapitalization of the economy and excess supply of money relative to
demand resulted in a historic drop in interest rates in most of the beleaguered
Asian countries. Two primary examples include South Korea and Thailand. We
believe this achievement has singularly restored health to the capital markets
in Asia--much more so than forward-looking reforms or foreign investment flows,
both of which have been largely disappointing.
Equally impressive is the secular change taking place in eastern Europe, in
countries such as Hungary, Poland, the Czech Republic, and especially Greece.
Simply, the power of the euro has many countries seeking to join European
economic and monetary union (EMU). In order to earn acceptance, countries must
demonstrate currency stability and credible financial discipline as outlined in
the Maastricht Treaty signed by the original participants. In Greece, the
remarkable performance of the Greek government to control spending and keep a
lid on inflation--the two most important criteria for EMU acceptance--explains
the immediate convergence of interest rates and the remarkable performance of
its equity market last year. In eastern European markets, governments and their
equally important electorates are beginning to conduct fiscal and monetary
policy in strict accordance with the goal of being accepted into EMU, albeit
further down the road. The relative resilience of eastern European equity
markets during 1998 reflected that underlying determination.
One important positive secular development continued to take place in the
technology field, particularly in Taiwan, India, and, to some extent, Korea.
Taiwan has developed into a PC-component manufacturing powerhouse, and, as the
trend toward lower-cost PCs continues, so does the global outsourcing trend,
which directly benefits that sector. Consequently, the "electronics" sector in
Taiwan posted solid absolute returns in 1998, while the broader Taiwanese market
ended the year in negative territory. A similar phenomenon has taken place in
India. In this case, however, it's in the software services sector. As
programming talent in the United States gets more expensive, Indian companies
are increasingly capturing a larger piece of the global software services
expenditure pie due to their cost advantages and abundant supply of high-quality
programming talent.
OUTLOOK
Due to monetary actions to lower interest rates by the Federal Reserve Board and
the European Central Bank, we expect liquidity to be abundant in the United
States and Europe. We don't, however, believe this developed market liquidity
will reach vulnerable emerging markets due to the reduction in global financial
risk among investors. In addition, we look for the Asian financial market
recovery to continue into 1999, and we hope to see the beginning of an economic
stabilization and the possibility of a full recovery.
Because of these views, we have chosen to tilt our portfolio toward high-quality
markets and sectors with solid fundamentals, especially those less vulnerable to
external shocks. The broader regional strategy, therefore, is to seek overweight
positions in peripheral Europe and Asia and to position the Fund underweight in
Latin America and South Africa. Market liquidity is a big reason for the
expected overweight position in peripheral Europe. In addition, we are confident
that Greece will be accepted into EMU, and therefore its interest rates will
converge with those in western Europe. We are partial to eastern Europe because
of the strong fiscal discipline they have shown, and we are looking for a
related fall in interest rates throughout the year. One concern we will monitor,
- -------------- 4
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(CONT.)
(UNAUDITED)
however, is the widening current account deficits in both Poland and Hungary.
And, we expect good news out of Israel because of the Israeli technology
companies that offer unmatched, bottom-up secular earnings growth compared to
most of our emerging market universe.
Asia is a region that is tough to analyze. Valuations are hard to calculate, and
earnings outlooks are difficult to predict. Nevertheless, we are quite
optimistic that the Korean market represents enormous opportunity for continued
interest rate declines. Also, due to the highly leveraged nature of that
country's corporate sector, we expect substantial earnings growth. The only
other significant position we have taken in Asia is in the Taiwanese electronics
sector, due to the reasons mentioned in the market review. Finally, India is a
market that offers up a wide range of attractive bottom-up stories, especially
in the aforementioned software services sector.
CONCLUSION
Undoubtedly, emerging markets investors have had a difficult few years. Having
said that, we see signs that this multi-year bear market may finally be working
its way through. We believe that most of the risks in the asset class have
dissipated or been fully discounted. Finally, we believe that we have positioned
the Fund to take advantage of opportunities arising from changes in these
markets.
Robert L. Meyer
PORTFOLIO
MANAGER
5------------------
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------------
COMMON STOCKS (91.9%)
ARGENTINA (1.8%)
44,682 Telecom Argentina ADR............................ $ 1,229
9,588 Telefonica de Argentina ADR...................... 268
11,172 YPF ADR.......................................... 312
-------
1,809
-------
BRAZIL (2.0%)
18,403 Brahma PN ADR.................................... 174
18,577 CEMIG PN ADR..................................... 354
(b)1,384,100 Coteminas PN..................................... 149
(c)12,645 Coteminas PN ADR................................. 60
21,754 CVRD PN ADR...................................... 280
(a,c)14,225 Lojas Arupau PN ADR.............................. --
4,660,000 Pao de Acucar PN................................. 75
4,396 Pao de Acucar PN ADR............................. 68
(c)12,185 Petrobras PN ADR................................. 139
(a)1,330 TeleCelular Sul Part PN ADR...................... 23
(a)1,386 TeleCentro Sul PN................................ 58
(a)1,365 Telemig Celular PN ADR........................... 29
(a)1,095 TeleNordeste Celular PN ADR...................... 20
(a)152 Telesp Celular Part PN ADR....................... 3
(a)363 TeleSudeste Celular PN ADR....................... 8
35,181 Unibanco PN GDR.................................. 508
6,605 Usiminas PN ADR (Registered Shares).............. 15
-------
1,963
-------
CHILE (1.2%)
14,870 CCU ADR.......................................... 286
19,524 ENDESA ADR....................................... 222
22,930 Enersis S.A. ADR................................. 592
7,629 Santa Isabel ADR................................. 51
-------
1,151
-------
CHINA (1.3%)
(a)21,065 Huaneng Power International, Inc. ADR............ 305
40,028 Yanzhou Coal Mining Co. ADR...................... 303
2,263,000 Zhenhai Refining & Chemical Co. 'H'.............. 348
1,638,000 Zhejiang Expressway Co., Ltd. 'H'................ 332
-------
1,288
-------
CZECH REPUBLIC (0.4%)
(a)15,688 SPT Telecom a.s.................................. 240
(a)10,440 SPT Telecom a.s. GDR............................. 155
-------
395
-------
EGYPT (1.5%)
(a)4,868 Al-Ahram Beverages Co. S.A.E. GDR................ 141
(a)7,400 Al-Ahram Beverages Co. S.A.E. GDR................ 210
2,000 Ameriyah Cement Co............................... 30
12,314 Eastern Tobacco.................................. 283
2,900 Egypt Gas Co..................................... 215
3,936 Egyptian Finance & Industrial.................... 65
6,377 Industrial & Engineering......................... 90
3,135 Madinet Nsar Housing & Development............... 95
29,600 Paints & Chemical Industry GDR................... 178
9,220 Suez Cement Co. GDR.............................. 127
-------
1,434
-------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------------
GREECE (8.4%)
2,500 Alpha Credit Bank................................ $ 261
14,180 Attica Enterprises............................... 127
9,500 Hellenic Bottling Co. S.A........................ 293
(a)123,241 OTE S.A.......................................... 3,280
(a)143,680 OTE S.A. ADR..................................... 1,904
1,830 Heracles General Cement Co. S.A.................. 50
(a)4,370 Ionian Bank...................................... 232
6,720 National Bank of Greece.......................... 1,513
(a)6,290 Panafon Hell GDR................................. 164
(a)7,400 STAT Hellas Telcommunications S.A. ADR........... 239
1,790 Titan Cement Co. S.A............................. 138
-------
8,201
-------
HONG KONG (0.5%)
272,000 China Telecom Ltd................................ 470
-------
HUNGARY (4.2%)
78,557 Matav Rt......................................... 447
(a)29,910 Matav Rt. ADR.................................... 892
12,860 MOL Magyar Olaj-es Gazipari Rt................... 351
66,406 MOL Magyar Olaj-es Gazipari Rt. GDR.............. 1,834
10,875 OTP Bank Rt...................................... 543
-------
4,067
-------
INDIA (8.7%)
11,600 Bajaj Auto Ltd................................... 142
239,700 Bharat Heavy Electricals Ltd..................... 1,482
(b)125,000 Container Corp. of India Ltd..................... 704
6,000 Gujarat Ambuja Cements Ltd....................... 37
74,305 Hero Honda Motors Ltd............................ 951
(a)4,000 Hindustan Lever Ltd.............................. 157
(a)18,700 Hindustan Lever Ltd.............................. 733
16,000 Hindustan Petroleum Corp., Ltd................... 89
21,900 Hoechst Agrero Ltd............................... 259
7,644 Housing Development Finance Corp., Ltd........... 392
16,000 Infosys Technology Ltd........................... 1,115
65,700 ITC Limited...................................... 1,160
13,200 Larson & Tourbo Ltd., 'A'........................ 50
33,000 Mahanagar Telephone Nigam Ltd.................... 142
5,000 MRF Ltd.......................................... 168
28,000 Satyam Computer Services Ltd..................... 480
2,500 State Bank of India.............................. 9
(a)20,000 Tata Engineering & Locomotive Co., Ltd........... 82
22,000 Tata Engineering & Locomotive Co., Ltd........... 84
18,000 Zee Telefilms Ltd................................ 271
-------
8,507
-------
INDONESIA (1.9%)
560,825 Gudang Garam (Foreign)........................... 817
1,388,880 Indah Kiat Pulp & Paper Corp. (Foreign).......... 378
1,453,700 Telekomunikasi Indonesia......................... 490
19,590 Telekomunikasi Indonesia ADR..................... 127
-------
1,812
-------
ISRAEL (6.1%)
219,503 Bank Hapoalim Ltd................................ 398
(a)80,480 Bezeq Israeli Telecommunication Corp., Ltd....... 251
(a)14,240 Comverse Technology, Inc......................... 1,011
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
ISRAEL (CONT.)
<TABLE>
<C> <S> <C>
(a)22,900 Dor Energy 1988 Ltd. GDR......................... $ 66
26,380 ECI Telecommunications Ltd....................... 940
1 Elbit Systems Ltd................................ --
6,766 Elron Electronic Industries Ltd.................. 108
28,259 First International Bank of Israel Ltd., '5'..... 140
(a)1,840 Gilat Satellite Networks Ltd..................... 101
11,562 Koor Industries Ltd.............................. 1,010
6,810 Koor Industries Ltd. ADR......................... 119
(a)2,319 NICE-Systems Ltd................................. 50
(a)9,970 NICE-Systems Ltd. ADR............................ 216
(a)17,842 Orbotech Ltd..................................... 845
(a)3,440 Orckit Communications Ltd........................ 56
30,620 Supersol Ltd..................................... 76
12,990 Tadiran Telecommunications Ltd................... 248
6,925 Teva Pharmaceutical Industries Ltd. ADR.......... 282
-------
5,917
-------
KOREA (12.9%)
19,350 Hankuk Glass Industry Co., Ltd................... 404
91,740 Korea Electric Power Corp........................ 2,273
(b)50,646 POSCO (Foreign).................................. 3,197
4,425 S1 Corp.......................................... 827
74,565 Samsung Electronics Co. (Foreign)................ 5,002
2,236 Samsung Electronics Co. GDS (New)................ 82
(b)1,092 SK Telecom Co., Ltd.............................. 825
-------
12,610
-------
MALAYSIA (2.5%)
109,000 Genting Bhd...................................... 166
164,000 Kuala Lumpur Kepong Bhd.......................... 196
59,000 Nestle (Malaysia) Bhd............................ 165
186,000 Petronas Gas Bhd................................. 295
72,000 Rothmans of Pall Mall (Malaysia) Bhd............. 297
53,000 Technology Resources Industries Bhd.............. 19
459,000 Telekom Malaysia Bhd............................. 845
314,000 Tenaga Nasional Bhd.............................. 451
-------
2,434
-------
MEXICO (11.1%)
4,381 Alfa............................................. 210
(a)98,435 Banacci 'B'...................................... 129
(a)193,888 Banacci 'L'...................................... 223
(c)31,915 Bancomer 'B' ADR................................. 136
83,528 Bancomer 'B'..................................... 18
89,269 Carso 'A1'....................................... 303
28,420 Cemex 'B'........................................ 70
62,445 Cemex 'B' ADR.................................... 304
122,284 Cemex CPO........................................ 264
52,624 Cemex CPO ADR.................................... 224
17,590 Cifra 'B' ADR.................................... 213
73,195 Cifra 'B'........................................ 89
(a)136,696 Cifra 'C'........................................ 167
5,660 Desc ADR......................................... 109
518,369 FEMSA 'D'........................................ 1,406
41,754 FEMSA ADR........................................ 1,112
304,690 Kimberly 'A'..................................... 968
10,258 TAMSA ADR........................................ 66
52,808 Telmex ADR....................................... 2,571
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------------
(a)40,150 Televisa CPO ADR................................. $ 991
(a)44,214 Televisa CPO GDR................................. 1,091
20,146 TV Azteca ADR.................................... 135
-------
10,799
-------
PAKISTAN (2.2%)
607,900 Fauji Fertilizer Co., Ltd........................ 507
562,900 Hub Power........................................ 131
104,644 Pakistan State Oil Co., Ltd...................... 149
2,119,200 Pakistan Telecommunication Corp.................. 733
13,938 Pakistan Telecommunication Corp. GDR............. 481
(a)887,397 Sui Northern Gas Pipelines....................... 145
-------
2,146
-------
PHILIPPINES (1.8%)
142,320 Manila Electric Co. 'B'.......................... 457
14,055 Philippine Long Distance Telephone Co............ 361
3,200 Philippine Long Distance Telephone Co. ADR....... 83
285,120 San Miguel Corp. 'B'............................. 550
1,765,440 SM Prime Holdings, Inc........................... 336
-------
1,787
-------
POLAND (3.9%)
7,110 Bank of Handlowy W Warszawie S.A................. 88
7,943 Bank of Handlowy W Warszawie S.A. GDS............ 98
7,936 Bank Rozwoju Eksportu S.A........................ 183
3,643 Bank Slaski S.A.................................. 189
13,000 BIG Bank Gdanski S.A. GDR........................ 176
294,471 Big Bank Inicjatyw............................... 264
14,250 Debica S.A....................................... 211
81,613 Elektrim S.A..................................... 884
(a)5,528 Exbud S.A........................................ 48
(a)15,680 Exbud S.A. GDR................................... 135
80 Polifarb Cieszyn-Wroclaw S.A..................... --
2,489 Powszechny Bank Kredytowy S.A.................... 53
20,750 Prokom Software GDR.............................. 391
(a)207,685 Telekomunikacja Polska GDR....................... 1,059
9,947 Wielkopolski Bank Kredytowy...................... 63
-------
3,842
-------
RUSSIA (1.4%)
(a,b)4,570,885 Mustcom.......................................... 517
(c)11,560 Pliva d.d........................................ 192
(a,d)600 Storyfirst Communications, Inc................... 212
(b)2,684,488 Svyaz Finace..................................... 419
-------
1,340
-------
SINGAPORE (0.2%)
159,000 Want Want Holdings............................... 191
-------
SOUTH AFRICA (5.5%)
110,290 Amalgamated Banks of South Africa................ 522
116,026 Bidvest Group Ltd................................ 841
1,037,681 B.O.E. Corp., Ltd. 'N'........................... 590
202,026 B.O.E. Corp., Ltd................................ 131
112,110 Ellerine Holdings Ltd............................ 242
269,700 Firstrand Ltd.................................... 294
20,818 Liberty Life Association of Africa Ltd........... 286
15,140 Nedcor Ltd....................................... 258
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<C> <S> <C>
(a)575,400 New Africa Investments Ltd. 'N'.................. $ 352
36,370 Persetel Holdings Ltd............................ 295
44,900 Primedia Ltd. 'N'................................ 99
77,430 Rembrant Group Ltd............................... 473
74,530 Sasol Ltd........................................ 281
23,410 South African Breweries Ltd...................... 394
174,792 The Education Investment Corp., Ltd.............. 202
279,200 Woolworths Holdings Ltd.......................... 137
-------
5,397
-------
TAIWAN (7.3%)
(a)41,000 Arima Computer Corp.............................. 214
(a)78,986 Asustek Computer, Inc............................ 738
(a)178,600 Compal Electronics, Inc.......................... 582
(a)78,000 Compeq Manufacturing Co., Ltd.................... 511
234,000 Far East Textile Ltd............................. 191
(a)299,000 Hon Hai Precision Industry....................... 1,652
162,232 President Chain Store Corp....................... 511
(a)434,520 Siliconware Precision Industries Co.............. 769
(a)553,000 Taiwan Semiconductor Manufacturing Co............ 1,219
(a)51,190 Taiwan Semiconductor Manufacturing Co. ADR....... 726
-------
7,113
-------
THAILAND (2.2%)
123,600 Advanced Info Service Public Co., Ltd.
(Foreign)...................................... 734
(b)40,700 BEC World Public Co., Ltd........................ 224
73,350 Delta Electronics Public Co., Ltd. (Foreign)..... 387
(a)64,000 PTT Exploration & Production Public Co., Ltd.
(Foreign)...................................... 451
(a)62,440 Shinawatra Computer Public Co., Ltd. (Foreign)... 215
(a)57,000 Siam City Cement Public Co., Ltd. (Foreign)...... 125
-------
2,136
-------
TURKEY (2.1%)
(c)13,600 Akbank T.A.S. ADR................................ 55
4,115,500 Ege Biracilik Ve Malt Sanayii.................... 320
2,268,000 Erciyas Biracilik Ve Malt Sanayii................ 151
163,000 Migros Turk...................................... 163
1,030,260 Petrol Ofisi A.S................................. 139
(a)5,827,470 Vestel Elektronik Sanayi ve Ticaret A.S.......... 480
68,917,467 Yapi Ve Kredi Bankasi A.S........................ 797
-------
2,105
-------
VENEZUELA (0.4%)
22,277 CANTV ADR........................................ 397
-------
ZIMBABWE (0.4%)
718,517 Delta Corp....................................... 156
374,200 Meikles Africa Ltd............................... 210
(c)327,000 Trans Zambesi Industries Ltd..................... 15
270,000 Trans Zambesi Industries Ltd. (Registered)....... 12
-------
393
-------
TOTAL COMMON STOCKS (COST $111,068).................................. 89,704
-------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------------
PREFERRED STOCKS (5.6%)
BRAZIL (NON-VOTING STOCKS) (5.6%)
(a,b)11,156,000 Banco Nacional PN................................ $ --
660,081 Brahma PN........................................ 288
47,104,681 CEMIG PN......................................... 897
4,388,145 CRT PN........................................... 1,580
10,173 CVRD PN.......................................... 131
3,601,000 CVRD 'A' PN...................................... 46
14,025,552 Embratel Participacoes 'A' PN.................... 191
(a)12,437,000 Lojas Arapua PN.................................. 3
5,725 Petrobras PN..................................... 1
(a)6,448,000 Renner Participacoes PN.......................... 5
14,025,552 Telebras PN...................................... 2
(a)7,385 Telebras PN ADR.................................. 537
(a)40,889,552 TeleCel Sul Part PN.............................. 69
(a)32,654,552 TeleCentro Sul PN................................ 283
(a)53,061,552 TeleLeste Celular PN............................. 31
(a)56,455,552 Telemig Celular PN............................... 63
(a)32,248,552 TeleNordeste Celular PN.......................... 29
(a)14,025,552 TeleNorte Celular PN............................. 7
(a)14,025,552 TeleNorteLeste Celular PN........................ 175
(a)2,082,000 Telerj Celular PN................................ 49
(a)12,292,661 Telesp Celular 'B' PN............................ 540
(a)23,310,552 Telesp Celular PN................................ 172
(a)6,352,552 Telesp PN........................................ 144
(a)40,575,552 TeleSudeste Celular PN........................... 171
37,900 Usiminas PN...................................... 84
-------
5,498
-------
COLOMBIA (0.0%)
7,150 BanColombia...................................... 10
-------
TOTAL PREFERRED STOCKS (COST $12,622)................................ 5,508
-------
INVESTMENT COMPANY (0.3%)
UNITED STATES (0.3%)
(e)34,265 Morgan Stanley Africa Investment Fund, Inc. (COST
$414).......................................... 287
-------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
RIGHTS
<C> <S> <C>
- -----------------
RIGHTS (0.0%)
SOUTH AFRICA (0.0%)
(a)57,700 Primedia Ltd. 'N'................................ --
-------
TAIWAN (0.0%)
(a,b)222,600 Compal Electronics, Inc.......................... --
-------
TOTAL RIGHTS (COST $0)............................................... --
-------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS
<C> <S> <C>
- -----------------
WARRANTS (0.0%)
THAILAND (0.0%)
(a)111,466 Siam Commercial Bank, expiring 12/31/02 (COST
$0)............................................ --
-------
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------------------------
CONVERTIBLE DEBENTURE (0.1%)
SOUTH AFRICA (0.1%)
$ (a)15 Sasol Ltd. 8.50%, 12/15/2049 (COST $182)......... $ 51
-------
TOTAL FOREIGN SECURITIES (97.9%) (COST $124,286)..................... 95,550
-------
FOREIGN CURRENCY (4.1%)
BRL 604 Brazilian Real................................... 500
COP 178 Colombian Peso................................... --
EGP 138 Egyptian Pound................................... 40
GRD 59,029 Greek Dramcha.................................... 211
HUF 21 Hungarian Forint................................. --
INR 10,050 Indian Rupee..................................... 237
ILS 669 Israeli Shekel................................... 161
MYR 1,409 Malaysian Ringgit................................ 260
MXN 546 Mexican Peso..................................... 55
PKR 17,787 Pakistani Rupee.................................. 324
PHP 243 Philippine Peso.................................. 6
PLN 552 Polish Zloty..................................... 157
ZAR 222 South African Rand............................... 38
KRW 2 South Korean Won................................. --
TWD 65,488 Taiwan Dollar.................................... 2,032
TKL 1 Turkish Lira..................................... --
-------
TOTAL FOREIGN CURRENCY (COST $4,107)................................. 4,021
-------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)
<C> <S> <C>
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.0%) (COST $128,393)........................... $99,571
LIABILITIES IN EXCESS OF OTHER ASSETS (-2.0%)........................ (1,998)
-------
NET ASSETS (100%).................................................... $97,573
-------
-------
</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 December 31, 1998 was $236,000 or 0.24% 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
GDS -- Global Depositary Shares
PN -- Preferred Shares
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
DECEMBER 31, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE INFORMATION:
Under the terms of foreign currency contracts open at December 31, 1998, the
Portfolio is obligated to deliver or is to receive foreign currency in exchange
for U.S. dollars as indicated below:
<TABLE>
<CAPTION>
CURRENCY IN EXCHANGE NET UNREALIZED
TO DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
- -------------- --------- ----------- -------------- --------- -----------------
<S> <C> <C> <C> <C> <C>
$ 899 $ 899 1/4/99 KRW 1,196,213 $ 994 $ 95
KRW 1,196,213 994 1/4/99 $ 775 775 (219)
$ 97 97 1/5/99 GRD 27,535 98 1
KRW 1,272,240 1,058 1/5/99 $ 837 837 (221)
KRW 236,375 197 1/6/99 $ 155 155 (42)
KRW 1,083,760 900 1/7/99 $ 713 713 (187)
$ 1,424 1,424 2/11/99 MYR 6,427 1,184 (240)
MYR 1,360 251 2/11/99 $ 302 302 51
MYR 5,067 933 2/11/99 $ 1,122 1,122 189
$ 1,708 1,708 6/21/99 ZAR 11,048 1,781 73
ZAR 11,048 1,781 6/21/99 $ 1,880 1,880 99
--------- --------- -----
$ 10,242 $ 9,841 $ (401)
--------- --------- -----
--------- --------- -----
</TABLE>
- ---------------
GRD -- Greek Drachma
MYR -- Malaysian Ringgit
ZAR -- South African Rand
KRW -- South Korean Won
- --------------------------------------------------------------------------------
SWAP AGREEMENT:
The Portfolio had the following Total Return Swap Agreement open at December 31,
1998:
<TABLE>
<CAPTION>
NOTIONAL UNREALIZED
AMOUNT APPRECIATION
(000) DESCRIPTION (000)
- --------- ----------------------------------------------------------------------------- -------------
<S> <C> <C>
$ (d) 782 Agreement with Goldman Sachs International terminating March 8, 1999 to make
quarterly payments equal to 3 month USD-LIBOR plus 2.00% and to pay or
receive quarterly payments equal to the return of the Thailand SET Index
converted into USD at the mid-market rate.................................... $ 24
-------------
-------------
</TABLE>
- ---------------
LIBOR -- London Interbank Offer Rate
USD -- U.S. Dollar
- --------------------------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- ------------------------------------------------------------------------------ --------- -------------
<S> <C> <C>
Services $ 30,288 31.0%
Consumer Goods 18,566 19.0
Capital Equipment 15,894 16.3
Energy 10,849 11.1
Finance 9,341 9.6
Materials 7,707 7.9
Multi-Industry 2,905 3.0
--------- ---
$ 95,550 97.9%
--------- ---
--------- ---
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
(000)
<S> <C>
- --------------------------------------------------------
ASSETS:
Investments in Securities, at Value
(Investments at Cost $124,286) $ 95,550
Foreign Currency (Cost $4,107) 4,021
Receivable for:
Investments Sold 821
Fund Shares Sold 323
Dividends 265
Interest 179
Foreign Withholding Tax Reclaim 57
Net Unrealized Gain on Swap
Agreements 24
Deferred Organizational Costs 2
Other 65
--------
Total Assets 101,307
--------
LIABILITIES:
Payable for:
Investments Purchased 1,785
Fund Shares Redeemed 653
Custody Fees 333
Bank Overdraft 215
Distribution Fees 120
Deferred Country Tax 41
Investment Advisory Fees 40
Shareholder Reporting Expenses 32
Transfer Agent Fees 30
Professional Fees 28
Administrative Fees 23
Directors' Fees and Expenses 7
Dividends Declared 7
Filing and Registration Fees 1
Net Unrealized Loss on Foreign
Currency Exchange Contracts 401
Other 18
--------
Total Liabilities 3,734
--------
NET ASSETS $ 97,573
--------
--------
NET ASSETS CONSIST OF:
Capital Stock at Par $ 14
Paid in Capital in Excess of Par 183,764
Accumulated Net Investment Loss (1,036)
Accumulated Net Realized Loss (56,014)
Unrealized Depreciation on
Investments, Foreign Currency
Translations and Swaps* (29,155)
--------
NET ASSETS $ 97,573
--------
--------
CLASS A SHARES:
Net Assets $ 51,516
Shares Issued and Outstanding
($.001 par value) (Authorized
2,625,000,000) 7,411
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $51,515,763 and
7,410,662 Shares Outstanding) $ 6.95
--------
--------
Maximum Sales Charge 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share x 100/
(100 - maximum sales charge)) $ 7.37
--------
--------
CLASS B SHARES:
Net Assets $ 27,533
Shares Issued and Outstanding
($.001 par value) (Authorized
2,625,000,000) 4,079
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$27,533,404 and 4,078,995 Shares
Outstanding)** $ 6.75
--------
--------
CLASS C SHARES:
Net Assets $ 18,524
Shares Issued and Outstanding
($.001 par value) (Authorized
2,625,000,000) 2,740
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$18,523,487 and 2,740,540 Shares
Outstanding)** $ 6.76
--------
--------
</TABLE>
- ---------------
* Net of accrual for country tax of U.S. $48,000.
** Redemption price may be subject to a contingent deferred sales charge.
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
(000)
<S> <C>
- -------------------------------------------------
INVESTMENT INCOME:
Dividends $ 1,248
Interest 380
Less: Foreign Taxes Withheld (70)
----------
Total Income 1,558
----------
EXPENSES:
Investment Advisory Fees 705
Less: Fees Waived (104)
----------
Net Investment Advisory Fees 601
Distribution Fees
Class A 76
Class B 148
Class C 110
Custody Fees 212
Administrative Fees 152
Shareholder Reports 35
Professional Fees 30
Transfer Agent Fees 26
Filing and Registration Fees 21
Directors' Fees and Expenses 3
Amortization of Organizational
Costs 1
Other 89
----------
Net Expenses 1,504
----------
Net Investment Income 54
----------
NET REALIZED GAIN (LOSS) ON:
Investments (27,886)
Foreign Currency Transactions 176
Swaps (188)
----------
Net Realized Loss (27,898)
----------
CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments 8,452
Foreign Currency Translations (1,211)
Swaps 956
----------
Change in Unrealized
Appreciation/Depreciation 8,197
----------
Net Realized Loss and Change in
Unrealized
Appreciation/Depreciation (19,701)
----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ (19,647)
----------
----------
</TABLE>
- --------------
12
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>
SIX MONTHS ENDED
DECEMBER 31, 1998 YEAR ENDED
(UNAUDITED) JUNE 30, 1998
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 54 $ (617)
Net Realized Loss (27,898) (23,236)
Change in Unrealized Appreciation/Depreciation 8,197 (57,677)
---------- ---------------
Net Decrease in Net Assets Resulting from
Operations (19,647) (81,530)
---------- ---------------
DISTRIBUTIONS:
Net Realized Gain:
Class A (32) (6,225)
Class B (18) (3,112)
Class C (12) (2,878)
In Excess of Net Realized Gain:
Class A -- (2,361)
Class B -- (1,180)
Class C -- (1,091)
---------- ---------------
Net Decrease in Net Assets Resulting from
Distributions (62) (16,847)
---------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 34,189 160,772
Distributions Reinvested 55 15,915
Redeemed (57,024) (151,194)
---------- ---------------
Net Increase (Decrease) in Net Assets Resulting
from Capital Share Transactions (22,780) 25,493
---------- ---------------
Total Decrease in Net Assets (42,489) (72,884)
NET ASSETS--Beginning of Period 140,062 212,946
---------- ---------------
NET ASSETS--End of Period (Including accumulated
net investment loss of $(1,036) and $(1,090),
respectively) $ 97,573 $140,062
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 4,431 10,304
Distributions Reinvested 5 891
Redeemed (6,413) (10,645)
---------- ---------------
Net Increase (Decrease) in Class A Shares
Outstanding (1,977) 550
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 30,427 $114,410
Distributions Reinvested 30 8,101
Redeemed (43,156) (115,555)
---------- ---------------
Net Increase (Decrease) $ (12,699) $ 6,956
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 95,045 $107,744
---------- ---------------
---------- ---------------
Class B:
---------------------
Shares:
Subscribed 373 2,827
Distributions Reinvested 2 457
Redeemed (975) (1,321)
---------- ---------------
Net Increase (Decrease) in Class B Shares
Outstanding (600) 1,963
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 2,544 $ 33,891
Distributions Reinvested 15 4,064
Redeemed (6,533) (13,053)
---------- ---------------
Net Increase (Decrease) $ (3,974) $ 24,902
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 52,479 $ 56,453
---------- ---------------
---------- ---------------
Class C
---------------------
Shares:
Subscribed 182 1,061
Distributions Reinvested 1 421
Redeemed (1,124) (2,173)
---------- ---------------
Net Decrease in Class C Shares Outstanding (941) (691)
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 1,218 $ 12,471
Distributions Reinvested 10 3,750
Redeemed (7,335) (22,586)
---------- ---------------
Net Decrease $ (6,107) $ (6,365)
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 36,254 $ 42,361
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
</TABLE>
-----------------------
13
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, JULY 6, 1994*
DECEMBER 31, 1998 --------------------------------- TO JUNE 30,
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.98 $ 13.47 $ 12.06 $ 10.61 $ 12.00
------- ------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.03 -- 0.01 0.05 0.05
Net Realized and Unrealized Gain
(Loss) (1.06) (4.49) 1.57 1.44 (1.44)
------- ------- -------- -------- -------
Total From Investment Operations (1.03) (4.49) 1.58 1.49 (1.39)
------- ------- -------- -------- -------
DISTRIBUTIONS
Net Investment Income -- -- -- (0.04) --
In Excess of Net Investment
Income -- -- (0.04) -- --
Net Realized Gain --++ (0.73) (0.13) -- --
In Excess of Net Realized Gain -- (0.27) -- -- --
------- ------- -------- -------- -------
Total Distributions -- (1.00) (0.17) (0.04) --
------- ------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 6.95 $ 7.98 $ 13.47 $ 12.06 $ 10.61
------- ------- -------- -------- -------
------- ------- -------- -------- -------
TOTAL RETURN (1) (12.74)% (34.31)% 13.54% 14.16% (11.58)%
------- ------- -------- -------- -------
------- ------- -------- -------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 51,516 $74,959 $119,022 $114,850 $ 26,091
Ratio of Expenses to Average Net
Assets 2.15%** 2.27% 2.21% 2.16% 2.33%**
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.73%** 0.04% (0.06)% 0.93% 0.81%**
Portfolio Turnover Rate 55% 99% 82% 42% 32%
- --------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ 0.01 $ 0.03 $ 0.03 $ 0.02 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets 2.50%** 2.60% 2.41% 2.56% 3.10%**
Net Investment Income (Loss) to
Average Net Assets 0.55%** (0.24)% (0.27)% 0.53% 0.04%**
Ratio of Expenses to Average Net
Assets excluding country tax
expense 2.15%** 2.15% 2.15% 2.15% 2.15%**
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
--------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1998 ------------------- AUGUST 1, 1995+
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1998# 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.78 $ 13.24 $ 11.94 $ 10.91
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.02) (0.07) (0.03) 0.01
Net Realized and Unrealized Gain
(Loss) (1.01) (4.39) 1.50 1.02
------- ------- ------- -------
Total From Investment Operations (1.03) (4.46) 1.47 1.03
------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income -- -- -- --
In Excess of Net Investment
Income -- -- (0.04) --
Net Realized Gain --++ (0.73) (0.13) --
In Excess of Net Realized Gain -- (0.27) -- --
------- ------- ------- -------
Total Distributions -- (1.00) (0.17) --
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 6.75 $ 7.78 $ 13.24 $ 11.94
------- ------- ------- -------
------- ------- ------- -------
TOTAL RETURN (1) (13.07)% (34.76)% 12.67% 9.45%
------- ------- ------- -------
------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 27,533 $36,423 $35,966 $ 10,416
Ratio of Expenses to Average Net
Assets 2.90%** 3.02% 2.96% 2.91%**
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.67)%** (0.67)% (0.64)% 0.30%**
Portfolio Turnover Rate 55% 99% 82% 42%
- --------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ 0.01 $ 0.03 $ 0.01 $ 0.02
Ratios Before Expense Limitation:
Expenses to Average Net Assets 3.25%** 3.35% 3.17% 3.31%**
Net Investment Income (Loss) to
Average Net Assets (0.85)%** (0.97)% (0.87)% (0.10)%**
Ratio of Expenses to Average Net
Assets excluding country tax
expense 2.90%** 2.90% 2.90% 2.90%**
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1998 ------------------------------- JULY 6, 1994* TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1998# 1997 1996 JUNE 30, 1995
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.79 $ 13.26 $ 11.93 $ 10.53 $ 12.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.02) (0.08) (0.08) (0.01) --
Net Realized and Unrealized Gain
(Loss) (1.01) (4.39) 1.55 1.41 (1.47)
------- ------- ------- ------- -------
Total From Investment Operations (1.03) (4.47) 1.47 1.40 (1.47)
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income -- -- -- -- --
In Excess of Net Investment
Income -- -- (0.01) -- --
Net Realized Gain --++ (0.73) (0.13) -- --
In Excess of Net Realized Gain -- (0.27) -- -- --
------- ------- ------- ------- -------
Total Distributions -- (1.00) (0.14) -- --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 6.76 $ 7.79 $ 13.26 $ 11.93 $ 10.53
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN (1) (13.06)% (34.73)% 12.66% 13.30% (12.25)%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 18,524 $28,680 $57,958 $43,601 $ 22,245
Ratio of Expenses to Average Net
Assets 2.90%** 3.01% 2.96% 2.91% 3.08%**
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.66)%** (0.76)% (0.79)% (0.11)% 0.06%**
Portfolio Turnover Rate 55% 99% 82% 42% 32%
- --------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ 0.01 $ 0.03 $ 0.02 $ 0.03 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets 3.25%** 3.34% 3.17% 3.34% 3.90%**
Net Investment Income (Loss) to
Average Net Assets (0.84)%** (1.03)% (1.00)% (0.54)% (0.76)%**
Ratio of Expenses to Average Net
Assets excluding country tax
expense 2.90%** 2.90% 2.90% 2.90% 2.90%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations.
** Annualized
+ The Fund began offering Class B shares on August 1, 1995.
++ Amount is less than $0.01 per share.
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total return for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
- ------------------
14
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
The Van Kampen Emerging Markets 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 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 shares are sold
with a contingent deferred sales charge on redemptions made within 5 years of
purchase which declines annually from 5% for redemptions made in year one, down
to 1.50% in year five. The contingent deferred sales charge is based on the
lesser of the current market value of the shares redeemed or the total cost of
such shares. Class B shares will automatically convert to Class A shares after
the eighth year following purchase. Class C shares are sold with a contingent
deferred sales charge of 1% for shares that are redeemed within one year of
purchase, based on the lesser of the current market value of the shares redeemed
or the total cost of such shares. All three classes of shares have identical
voting, dividend, liquidation and other rights. The Fund began offering the
current Class B shares on August 1, 1995. Class B shares held prior to May 1,
1995 were renamed Class C shares.
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 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.
3. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: The books and records
of the Fund are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the mean of the bid and asked prices of such
currencies against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rates of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the period, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of the securities held at period end. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of securities sold during the period.
Accordingly, realized and unrealized foreign currency gains (losses) on
investments are included in the reported net realized and unrealized gains
(losses) on investments. However, pursuant to U.S. Federal income tax
regulations, the foreign currency portion of gains and losses realized on sales
and maturities of foreign denominated debt securities is treated as ordinary
income for U.S. Federal income tax purposes.
------------------
15
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from forward foreign currency exchange
contracts, disposition of foreign currencies, currency gains or losses realized
between the trade and settlement dates on securities transactions, and the
difference between the amount of investment income and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent amounts actually
received or paid. Net unrealized currency gains (losses) from valuing foreign
currency denominated assets and liabilities at period end exchange rates are
reflected as a component of unrealized appreciation (depreciation) on
investments and foreign currency translations in the Statement of Assets and
Liabilities. The change in net unrealized currency gains (losses) for the period
is reflected on the Statement of Operations.
The net assets of the Fund may include issuers located in emerging markets.
There will be certain considerations and risks of these investments not
typically associated with investments in the United States. Changes in currency
exchange rates will affect the value of and investment income from such
securities. The smaller size of the markets themselves, lesser liquidity and
greater volatility contribute to risks in valuation as compared with the U.S.
securities markets. Also there is often substantially less publicly available
information about these issuers. Emerging markets may be subject to a greater
degree of governmental involvement in the economy and greater economic and
political uncertainty. Accordingly the price which the Fund realizes upon the
sale of securities in such markets may not be equal to its value as presented in
the financial statements.
Prior governmental approval for foreign investments may be required under
certain circumstances in some countries, and the extent of foreign investment in
domestic companies may be subject to limitations in other countries. Foreign
ownership limitations also may be imposed by the charters of individual
companies to prevent, among other concerns, violation of foreign investment
limitations. As a result, an additional class of shares (identified as Foreign
in the Portfolio of Investments) may be created and offered for investment. The
local and foreign shares' market values may vary.
4. FOREIGN CURRENCY EXCHANGE CONTRACTS: 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. The Fund records realized gains or losses
on foreign translation when the contract is closed, equal to the difference
between the value of the contract at the time it was opened and the value of the
contract at the time it was closed. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts but is generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from the
unanticipated movements in the value of a foreign currency relative to the U.S.
dollar.
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. 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.
6. 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 transaction 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. Swap contracts involve market risks in excess of
the amounts recognized in the Statement of Assets and Liabilities.
7. OTHER: Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Dividend income
is recorded on the ex-dividend date (except for certain foreign
- -----------------------
16
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
dividends which may be recorded as soon as the Fund is informed of such
dividends), net of applicable withholding taxes where recovery of such taxes is
not reasonably assured. Interest income is recognized on the accrual basis
except where collection is in doubt. 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. These
differences are primarily due to differing book and tax treatment for foreign
currency transactions, net operating losses, foreign taxes on net realized
gains, deductibility of interest expense on short sales and gains on certain
securities of corporations designated as "passive foreign investment companies."
Permanent book and tax basis differences relating to shareholder distributions
may result in reclassification among undistributed net investment income (loss),
accumulated net realized gain (loss) and paid in capital.
Permanent book and tax basis differences, if any, are not included in ending
undistributed (distributions in excess of) net investment income for the purpose
of presenting net investment income (loss) per share in the Financial
Highlights.
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.) and Morgan Stanley Dean Witter Investment
Management Inc. ("MSDWIM" or a "Sub-Adviser"), 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>
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 $10,813 for Class A shares and deferred sales charges
of $9,540, $117,781 and $4,150 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. Through September 30,
1998, the Fund incurred MSTC fees of approximately $104,000. 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 $58,692,000 and sales of approximately
$81,231,000 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.
------------------
17
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
H. OTHER: During the six months ended December 31, 1998, the Fund incurred
approximately $10,000 as brokerage commissions with Morgan Stanley & Co.
Incorporated, an affiliated broker/dealer.
At December 31, 1998, the Emerging Markets Fund owned shares of affiliated funds
for which the Fund earned dividend income of approximately $2,000 during the
period.
At December 31, 1998, cost and unrealized appreciation (depreciation) for the
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>
$ 124,286 $8,621 $ (37,357) $ (28,736)
</TABLE>
- -----------------------
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
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 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
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 ADVISER
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
CUSTODIANS
The Chase Manhattan Bank
One Pierrepont Plaza
Brooklyn, New York 11210
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>
1 Parkview Plaza n P.O. Box 5555 n Oakbrook Terrace, IL
60181-5555 n www.vankampen.com
-C- Van Kampen Funds Inc. 1999
