VAN KAMPEN SERIES FUND INC, 485BPOS, 2000-10-27

VAN KAMPEN SERIES FUND INC
485BPOS, 2000-10-27

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 2000

FILE NO. 033-51294
FILE NO. 811-7140
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM N-1A

<TABLE>
<S> <C> <C>
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /

POST-EFFECTIVE AMENDMENT NO. 30 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 32 /X/
</TABLE>

------------------------

VAN KAMPEN SERIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)

1 PARKVIEW PLAZA, PO BOX 5555, OAKBROOK TERRACE, ILLINOIS 60181-5555
(Address of Principal Executive Office)

Registrant's Telephone Number (630) 684-6000

A. THOMAS SMITH III
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
VAN KAMPEN INVESTMENTS INC.
1 PARKVIEW PLAZA
PO BOX 5555
OAKBROOK TERRACE, ILLINOIS 60181-5555
(Name and Address of Agent for Service)

------------------------

COPIES TO:

WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 407-0700

------------------------

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable following effectiveness of this Registration Statement.

<TABLE>
<S> <C>
It is proposed that this filing be effective
(Check appropriate box)
/ / Immediately upon filing pursuant to paragraph (b)
/X/ On October 27, 2000 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

/ / This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
</TABLE>

------------------------

Title of securities being registered:
COMMON SHARES, PAR VALUE $0.001 PER SHARE

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<PAGE>
EXPLANATORY NOTE

This Post-Effective Amendment No. 30 to the Registration Statement
contains 14 Prospectuses, describing each of the 14 series of the Registrant
listed below and one Statement of Additional Information describing all of
the series of the Registrant. The Registration Statement is organized as
follows:

Facing Page

Prospectuses relating to the series, in the following order:

Van Kampen American Value Fund
Van Kampen Asian Growth Fund
Van Kampen Emerging Markets Fund
Van Kampen Equity Growth Fund
Van Kampen European Equity Fund
Van Kampen Focus Equity Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Equity Fund
Van Kampen International Magnum Fund
Van Kampen Latin American Fund
Van Kampen Mid Cap Growth Fund
Van Kampen Tax Managed Global Franchise Fund
Van Kampen Value Fund
Van Kampen Worldwide High Income Fund

One Statement of Additional Information relating to all of the series of
the Registrant.

Part C Information

Exhibits

No changes are being made to the prospectuses of Van Kampen Emerging Markets
Debt Fund, Van Kampen Growth and Income Fund II and Van Kampen Japanese Equity
Fund, which were included in Post-Effective Amendment No. 27 to the
Registrant's Registration Statement.

<PAGE>

VAN KAMPEN
AMERICAN VALUE FUND

Van Kampen American Value Fund's investment objective is to seek to provide a
high total return by investing in equity securities of small-to medium-sized
corporations.

Shares of the Fund have not been approved or disapproved by the Securities and
Exchange Commission (SEC) or any state regulator, and neither the SEC nor any
state regulator has passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Purchase of Shares .....................................................11

Redemption of Shares ...................................................18

Distributions from the Fund ............................................20

Shareholder Services ...................................................21

Federal Income Taxation ................................................23

Financial Highlights ...................................................24

No dealer, salesperson or any other person has been authorized to give any
information or to make any representations, other than those contained in this
prospectus, in connection with the offer contained in this prospectus and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund, the Fund's investment adviser or the
Fund's distributor. This prospectus does not constitute an offer by the Fund or
by the Fund's distributor to sell or a solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful for the Fund to make such an offer in such jurisdiction.
<PAGE>
RISK/RETURN SUMMARY

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek to provide a high total return by
investing in equity securities of small- to medium-sized corporations.

INVESTMENT STRATEGIES
The Fund's investment adviser seeks to achieve the Fund's investment objective
by investing primarily in a portfolio of equity securities of small- to medium-
sized U.S. corporations that the Fund's investment adviser believes are
undervalued relative to the stock market in general at the time of investment.
Under normal market conditions, the Fund invests at least 65% of its total
assets in equity securities of small-to medium-sized corporations. The Fund
invests in equity securities including common and preferred stocks;
investment-grade convertible securities and equity-linked securities; and rights
and warrants to purchase common stocks and other equity interests, such as
partnership and trust interests.

The Fund emphasizes a "value" style of investing, seeking securities of
companies that the Fund's investment adviser believes are undervalued. Portfolio
securities are typically sold when the Fund's investment adviser no longer
believes such securities are undervalued. The Fund may invest from time to time
in securities of foreign issuers that are traded on U.S. exchanges or
over-the-counter markets either directly or through depositary receipts. The
Fund may purchase and sell certain derivative instruments, such as options,
futures, options on futures and forward contracts, for various portfolio
management purposes.

Investment opportunities for undervalued small- to medium-sized companies may be
more limited than those in other sectors of the market. To facilitate the
management of the Fund's portfolio, the Fund may, from time to time, suspend the
continuous offering of its shares to new investors. As market conditions permit,
the Fund may reopen sales of its shares to new investors. Any such limited
offerings of the Fund may commence and terminate without any prior notice.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

The Fund emphasizes a value style of investing. This style of investing is
subject to the risk that the valuations never improve or that the returns on
value equity securities are less than returns on other styles of investing or
the stock market. Different types of stocks tend to shift in and out of favor
depending on market and economic conditions. Thus, the value of the Fund's
investments will vary and at times may be lower or higher than that of other
types of investments.

RISKS OF SMALL- AND MEDIUM-SIZED COMPANIES. The Fund invests primarily in small-
and medium-sized companies which often are newer or less established companies.
Investments in small- and medium-sized companies carry additional risks because
earnings of these companies tend to be less predictable; they often have limited
product lines, markets, distribution channels or financial resources; and the
management of such companies may be dependent upon one or a few key people.
Equity securities of small-and medium-sized companies may have market movements
that are more abrupt or erratic than those of stocks of larger, more established
companies or the stock market in general. Historically, small-and medium-sized
companies have sometimes gone through extended periods when they did not perform
as well as larger-sized companies. In addition, equity securities of small- and
medium-sized companies generally are less liquid than those of larger-sized
companies. This means that the Fund could have greater difficulty selling such
securities at the time and price that the Fund would like.

RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an

3
<PAGE>

underlying asset, interest rate or index. Options, futures, options on futures
and forward contracts are examples of derivative instruments. Derivative
instruments involve risks different from direct investments in underlying
securities. These risks include imperfect correlation between the value of the
instruments and the underlying assets; risks of default by the other party to
certain transactions; risks that the transactions may result in losses that
partially or completely offset gains in portfolio positions; and risks that the
transactions may not be liquid.

MANAGER RISK. As with any managed fund, the Fund's investment adviser may not be
successful in selecting the best-performing securities or investment techniques,
and the Fund's performance may lag behind that of similar funds.

INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- Seek a high total return over the long term

- Can withstand substantial volatility in the value of their Fund shares

- Wish to add to their investment portfolio a fund that emphasizes a value style
of investing in equity securities of small- to medium-sized companies

An investment in the Fund is not a deposit of any bank or other insured
depository institution. An investment in the Fund is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.

An investment in the Fund may not be appropriate for all investors. The Fund is
not intended to be a complete investment program, and investors should consider
their long-term investment goals and financial needs when making an investment
decision about the Fund. An investment in the Fund is intended to be a long-term
investment, and the Fund should not be used as a trading vehicle.

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the six calendar years prior to the
date of this prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the returns shown below would have been lower.
Remember that the past performance of the Fund is not indicative of its future
performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ANNUAL RETURN
<S> <C>
1994 2.02%
1995 19.34%
1996 22.33%
1997 36.39%
1998 9.69%
1999 25.68%
</TABLE>

The Fund's return for the nine-month period ended September 30, 2000 was -4.04%.
As a result of market activity, current performance may vary from the figures
shown.

The annual return variability of the Fund's Class B Shares and Class C Shares
would be substantially similar to that shown for the Class A Shares because all
of the Fund's shares are invested in the same portfolio of securities; however,
the actual annual returns of the Class B Shares and Class C Shares would be
lower than the annual returns shown for the Fund's Class A Shares because of
differences in the expenses borne by each class of shares.

During the six-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 21.31% (for the quarter ended June 30, 1999) and the
lowest quarterly return for Class A Shares was -15.75% (for the quarter ended
September 30, 1998).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the Russell 2500 Index*, a
broad-based market index that the Fund's investment adviser believes is an
appropriate benchmark

4
<PAGE>

for the Fund. The Fund's performance figures listed below include the maximum
sales charges paid by investors. The index's performance figures do not include
any commissions or sales charges that would be paid by investors purchasing the
securities represented by the index. An investment cannot be made directly in
the index. Average annual total returns are shown for the periods ended
December 31, 1999 (the most recently completed calendar year prior to the date
of this prospectus). Remember that the past performance of the Fund is not
indicative of its future performance.

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS
FOR THE
PERIODS ENDED PAST PAST 5 SINCE
DECEMBER 31, 1999 1 YEAR YEARS INCEPTION
----------------------------------------------------------
<S> <C> <C> <C>
Van Kampen American
Value Fund
-- Class A Shares 18.46% 20.95% 16.98%(1)
Russell 2500 Index 24.16% 19.37% 15.34%(2)
.........................................................
Van Kampen American
Value Fund
-- Class B Shares 19.71% N/A 20.55%(3)
Russell 2500 Index 24.16% 19.37% 16.43%(4)
.........................................................
Van Kampen American
Value Fund
-- Class C Shares 23.70% 21.45% 17.18%(1)
Russell 2500 Index 24.16% 19.37% 15.34%(2)
.........................................................
</TABLE>

INCEPTION DATES: (1) 10/18/93, (2) 10/31/93, (3) 8/1/95, (4) 7/31/95.

N/A - NOT APPLICABLE
* THE RUSSELL 2500 INDEX IS A SUBSET REPRESENTING THE SMALLEST 2500
COMPANIES OF THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS AN
INDEX OF THE 3000 LARGEST U.S. COMPANIES BASED ON TOTAL MARKET
CAPITALIZATION, REPRESENTING APPROXIMATELY 98% OF THE INVESTABLE U.S.
EQUITY MARKET.

FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
-----------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
-----------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 5.75%(1) None None
..........................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption
proceeds) None(2) 5.00%(3) 1.00%(4)
..........................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
..........................................................
Redemption fee None None None
..........................................................
Exchange fee None None None
..........................................................
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------
Management fees 0.85% 0.85% 0.85%
..........................................................
Distribution and/or
service (12b-1)
fees(5) 0.25% 1.00%(6) 1.00%(6)
..........................................................
Other expenses 0.37% 0.36% 0.36%
..........................................................
Total annual fund
operating expenses 1.47% 2.21% 2.21%
..........................................................
</TABLE>

(1) REDUCED FOR PURCHASES OF $50,000 AND OVER. SEE "PURCHASE OF SHARES --
CLASS A SHARES."
(2) INVESTMENTS OF $1 MILLION OR MORE ARE NOT SUBJECT TO ANY SALES CHARGE
AT THE TIME OF PURCHASE, BUT A DEFERRED SALES CHARGE OF 1.00% MAY BE
IMPOSED ON CERTAIN REDEMPTIONS MADE WITHIN ONE YEAR OF THE PURCHASE.
SEE "PURCHASE OF SHARES -- CLASS A SHARES."
(3) THE MAXIMUM DEFERRED SALES CHARGE IS 5.00% IN THE FIRST YEAR AFTER
PURCHASE, DECLINING THEREAFTER AS FOLLOWS:

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."
(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR AFTER
PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF SHARES -- CLASS C
SHARES."
(5) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO 0.25% OF
THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES.
CLASS B SHARES AND CLASS C SHARES ARE EACH SUBJECT TO A COMBINED
ANNUAL DISTRIBUTION AND SERVICE FEE OF UP TO 1.00% OF THE AVERAGE
DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES. SEE "PURCHASE
OF SHARES."
(6) BECAUSE DISTRIBUTION AND/OR SERVICE (12b-1) FEES ARE PAID OUT OF THE
FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES WILL INCREASE
THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE THAN PAYING OTHER
TYPES OF SALES CHARGES.

5
<PAGE>
EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same each year (except for the ten-year
amounts for Class B Shares which reflect the conversion of Class B Shares to
Class A Shares after eight years). Although your actual costs may be higher or
lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $716 $1,013 $1,332 $2,231
..................................................
Class B Shares $724 $ 991 $1,335 $2,357*
..................................................
Class C Shares $324 $ 691 $1,185 $2,544
..................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $716 $1,013 $1,332 $2,231
..................................................
Class B Shares $224 $ 691 $1,185 $2,357*
..................................................
Class C Shares $224 $ 691 $1,185 $2,544
..................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek to provide a high total return by
investing in equity securities of small- to medium-sized corporations. The
Fund's investment objective is a fundamental policy and may not be changed
without shareholder approval of a majority of the Fund's outstanding voting
securities, as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"). There are risks inherent in all investments in securities;
accordingly, there can be no assurance that the Fund will achieve its investment
objective.

The Fund's investment adviser seeks to achieve the Fund's investment objective
by investing primarily in a portfolio of equity securities of small- to medium-
sized U.S. corporations that the Fund's investment adviser believes are
undervalued relative to the stock market in general at the time of investment.
Under normal market conditions, the Fund invests at least 65% of its total
assets in equity securities of small-to medium-sized corporations. Under current
market conditions, the Fund's investment adviser defines small- and medium-sized
corporations by reference to those companies with market capitalizations in the
range of companies represented in the Russell 2500 Index, a small capitalization
company index which consists of companies with capitalizations up to $4 billion
as of June 30, 2000. The Fund also may invest in larger companies.

In selecting securities for investment, the Fund seeks to identify those
companies with strong fundamentals, promising growth prospects and attractive
valuations. The Fund generally focuses on undervalued companies with
characteristics for improved valuations. The Fund's investment adviser uses a
multi-factor stock selection process which is believed to provide a balance
between a company's valuation and its long-term prospects. The Fund emphasizes a
"value" style of investing. The Fund's investment style presents the risk that
the valuations may never improve or that the returns on value securities may be
less than the returns on other styles of investing or the overall stock market.
The Fund's investment adviser generally seeks such securities which it believes
are undervalued relative to market values and other traditional measures of
intrinsic worth, or are undervalued and have identifiable factors that might
lead to improved valuation. The Fund's investment adviser believes that
attractive values generally are offered by companies with improving near-term
business prospects relative to investor expectations. This catalyst could come
from within the company, such as cost reductions or more effective pricing, or
as a result of external factors, such as changing markets or industry
conditions. The selection process favors companies that offer value in terms of
price-to-earnings ratio and earnings growth rate,

6
<PAGE>
seeking a rational trade-off between a security's valuation, growth potential
and near-term business momentum. The Fund considers value to be achieved when
investors' perceptions improve and the securities of such companies achieve what
the Fund's investment adviser believes is fair valuation.

While the Fund primarily uses a "bottom-up" investment approach (that emphasizes
the analysis of individual stocks rather than economic and market cycles), the
Fund's investment adviser also factors in macroeconomic trends that generally
influence the outlook of certain industries. Such an approach allows the Fund's
investment adviser to identify companies within industries that may be
positioned to benefit from prevailing economic trends or that have attractive
valuation rankings. A combination of fundamental investment insights and
quantitative inputs may be used to focus research attention on the most
attractive sectors of the market in a timely fashion.

The Fund invests primarily in common stocks. Common stocks are shares of a
corporation or other entity that entitle the holder to a pro rata share of the
profits of the corporation, if any, without preference over any other class of
securities, including such entity's debt securities, preferred stock and other
senior equity securities. Common stock usually carries with it the right to vote
and frequently an exclusive right to do so.

While the Fund invests primarily in common stocks, the Fund also may invest in
other equity securities including preferred stocks, investment-grade convertible
securities and equity-linked securities, and rights and warrants to purchase
common stocks and other equity interests, such as partnership and trust
interests. Preferred stock generally has a preference as to dividends and
liquidation over an issuer's common stock but ranks junior to debt securities in
an issuer's capital structure. Unlike interest payments on debt securities,
preferred stock dividends are payable only if declared by the issuer's board of
directors. Preferred stock also may be subject to optional or mandatory
redemption provisions.

A convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock or other equity security of the same or a different issuer or into
cash within a particular period of time at a specified price or formula. A
convertible security generally entitles the holder to receive interest paid or
accrued on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities generally have characteristics similar to both debt and
equity securities. The value of convertible securities tends to decline as
interest rates rise and, because of the conversion feature, tends to vary with
fluctuations in the market value of the underlying equity securities.
Convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stock of the same or similar issuers.
Convertible securities generally rank senior to common stock in a corporation's
capital structure but are usually subordinated to comparable nonconvertible
securities. Convertible securities generally do not participate directly in any
dividend increases or decreases of the underlying equity securities although the
market prices of convertible securities may be affected by any such dividend
changes or other changes in the underlying equity securities.

The Fund only invests in convertible debt securities considered to be
"investment grade" at the time of investment. Investment grade securities are
securities rated BBB or higher by Standard & Poor's ("S&P"), or rated Baa or
higher by Moody's Investors Service, Inc. ("Moody's") or comparably rated by any
nationally recognized statistical rating organization or, if unrated, are
considered by the Fund's investment adviser to be of comparable quality.
Securities rated BBB by S&P or Baa by Moody's are in the lowest of the four
investment grade categories and are considered by the rating agencies to be
medium-grade obligations which possess speculative characteristics so that
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than in the case of
higher-rated securities.

7
<PAGE>

underlying equity security or by a company other than the one to which the
instrument is linked (usually an investment bank), (ii) may convert into equity
securities, such as common stock, within a stated period from the issue date or
may be redeemed for cash or some combination of cash and the linked security at
a value based upon the value of the underlying equity security within a stated
period from the issue date, (iii) may have various conversion features prior to
maturity at the option of the holder or the issuer or both, (iv) may limit the
appreciation value with caps or collars of the value of the underlying equity
security and (v) may have fixed, variable or no interest payments during the
life of the security which reflect the actual or a structured return relative to
the underlying dividends of the linked equity security. Investments in
equity-linked securities may subject the Fund to additional risks not ordinarily
associated with investments in other equity securities. Because equity-linked
securities are sometimes issued by a third party other than the issuer of the
linked security, the Fund is subject to risks if the underlying stock
underperforms or if the issuer defaults on the payment of the dividend or the
common stock at maturity. In addition, the trading market for particular
equity-linked securities may be less liquid, making it difficult for the Fund to
dispose of a particular security when necessary and reduced liquidity in the
secondary market for any such securities may make it more difficult to obtain
market quotations for valuing the Fund's portfolio.

Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights typically have a substantially
shorter term than do warrants. Rights and warrants may be considered more
speculative and less liquid than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any rights in the assets of the
issuing company. Rights and warrants may lack a secondary market.

DERIVATIVE INSTRUMENTS

The Fund may, but is not required to, use various investment strategic
transactions described below to earn income, facilitate portfolio management and
mitigate risks. Although the Fund's investment adviser seeks to use the
practices to further the Fund's investment objective, no assurance can be given
that these practices will achieve this result.

The Fund may purchase and sell derivative instruments such as exchange-listed
and over-the-counter put and call options on securities, financial futures,
equity, fixed-income and interest rate indices, and other financial instruments,
futures contracts and options thereon (including but not limited to securities
index futures, foreign currency exchange futures, interest rate futures and
other financial futures), structured notes, swaps, caps, floors or collars and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currency or currency
futures. In addition, the Fund may invest in other derivative instruments that
are developed over time if their use would be consistent with the objective of
the Fund. Collectively, all of the above are referred to as "Strategic
Transactions." The Fund generally seeks to use Strategic Transactions as a
portfolio management or hedging technique to seek to protect against possible
adverse changes in the market value of securities held in or to be purchased for
the Fund's portfolio, protect the Fund's unrealized gains, facilitate the sale
of certain securities for investment purposes, protect against changes in
currency exchange rates or to adjust the exposure to a particular currency,
manage the effective maturity or duration of the Fund's portfolio, establish
positions in the derivatives markets as a substitute for purchasing or selling
particular securities, including, for example, when the Fund adjusts its
exposure to a market in response to changes in investment strategy, when doing
so provides more liquidity than the direct purchase of the securities underlying
such derivatives, when the Fund is restricted from directly owning the
underlying securities due to foreign investment restrictions or other reasons,
or when doing so provides a price advantage over purchasing the underlying
securities directly, either because of a pricing differential between the
derivatives and securities markets or because of lower transaction costs
associated with the derivatives transaction. The Fund may invest up to 33 1/3%
of its total assets in Strategic Transactions for non-hedging purposes (measured
by the aggregate notional amount of outstanding derivatives). In addition, the
Fund may invest up to 20% of its total assets in futures contracts and options
on

8
<PAGE>
futures contracts (measured by the aggregate notional amount of such outstanding
contracts).

Strategic Transactions have risks including the imperfect correlation between
the value of such instruments and the underlying assets, the possible default of
the other party to the transaction or illiquidity of the derivative instruments.
Furthermore, the ability to successfully use Strategic Transactions depends on
the ability of the Fund's investment adviser to predict pertinent market
movements, which cannot be assured. Thus, the use of Strategic Transactions may
result in losses greater than if they had not been used, may require the Fund to
sell or purchase portfolio securities at inopportune times or for prices other
than current market values, may limit the amount of appreciation the Fund can
otherwise realize on an investment, or may cause the Fund to hold a security
that it might otherwise sell. The use of currency transactions can result in the
Fund incurring losses because of the imposition of exchange controls, suspension
of settlements or the inability of the Fund to deliver or receive a specified
currency. In addition, amounts paid as premiums or cash or other assets held in
margin accounts with respect to Strategic Transactions are not otherwise
available to the Fund for investment purposes.

A more complete discussion of Strategic Transactions and their risks is
contained in the Fund's Statement of Additional Information. The Statement of
Additional Information can be obtained by investors free of charge as described
on the back cover of this prospectus.

OTHER INVESTMENTS AND RISK FACTORS

For cash management purposes, the Fund may engage in repurchase agreements with
broker-dealers, banks and other financial institutions to earn a return on
temporarily available cash. Such transactions are subject to the risk of default
by the other party.

The Fund may lend its portfolio securities in an amount up to 33 1/3% of its
total assets to broker-dealers, banks or other institutional borrowers of
securities. The Fund may incur lending fees and other costs in connection with
securities lending, and securities lending is subject to the risk of default by
the other party.

The Fund may invest up to 15% of the Fund's net assets in illiquid securities
and certain restricted securities. Notwithstanding the foregoing, the Fund may
not invest more than 10% of its total assets in securities subject to legal or
contractual restrictions on resale. Such securities may be difficult or
impossible to sell at the time and the price that the Fund would like. Thus, the
Fund may have to sell such securities at a lower price, sell other securities
instead to obtain cash or forego other investment opportunities.

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for total return has lessened,
or for other reasons. The portfolio turnover rate may vary from year to year. A
high portfolio turnover rate (100% or more) increases a fund's transactions
costs (including brokerage commissions or dealer costs) which would adversely
impact a fund's performance. Higher portfolio turnover may result in the
realization of more short-term capital gains than if a fund had lower portfolio
turnover. The turnover rate will not be a limiting factor, however, if the
Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities, including prime
commercial paper, repurchase agreements and bank obligations, such as bankers
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for total return on
these securities will tend to be lower than the potential for total return on
other securities that may be

9
<PAGE>

owned by the Fund. In taking such a defensive position, the Fund would
temporarily not be pursuing and may not achieve its investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

Van Kampen Investment Advisory Corp. is the investment adviser (the "Adviser" or
"Advisory Corp.") and administrator of the Fund. The Adviser is a wholly owned
subsidiary of Van Kampen Investments Inc. ("Van Kampen Investments"). Van Kampen
Investments is a diversified asset management company that administers more than
three million retail investor accounts, has extensive capabilities for managing
institutional portfolios, and has more than $100 billion under management or
supervision as of September 30, 2000. Van Kampen Investments has more than 50
open-end funds, 38 closed-end funds and more than 2,700 unit investment trusts
that are professionally distributed by leading authorized dealers nationwide.
Van Kampen Funds Inc., the distributor of the Fund (the "Distributor") and the
sponsor of the funds mentioned above, is also a wholly owned subsidiary of Van
Kampen Investments. Van Kampen Investments is an indirect wholly owned
subsidiary of Morgan Stanley Dean Witter & Co. The Adviser's principal office is
located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555.

ADVISORY AGREEMENT AND ADMINISTRATION AGREEMENT. The Fund retains the Adviser to
manage the investment of its assets and to place orders for the purchase and
sale of its portfolio securities. Under an investment advisory agreement between
the Adviser and the Fund (the "Advisory Agreement"), the Fund pays the Adviser a
monthly fee computed based upon an annual rate applied to the average daily net
assets of the Fund as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
-----------------------------------------------
FIRST $1 BILLION 0.85%
..............................................
NEXT $500 MILLION 0.80%
..............................................
OVER $1.5 BILLION 0.75%
..............................................
</TABLE>

Applying this fee schedule, the effective advisory fee rate was 0.85% of the
Fund's average daily net assets for the Fund's fiscal year ended June 30, 2000.
The Fund's average daily net asssets are determined by taking the average of all
of the determinations of the net assets during a given calendar month. Such fee
is payable for each calendar month as soon as practicable after the end of that
month.

The Fund also retains the Adviser to provide administrative services for the
Fund's day-to-day operations. Under an administration agreement between the
Adviser and the Fund, the Fund pays a monthly administration fee computed based
upon an annual rate of 0.25% applied to the average daily net assets of the
Fund.

The Adviser furnishes offices, necessary facilities and equipment, and provides
administrative services to the Fund. The Fund pays all charges and expenses of
its day-to-day operations, including service fees, distribution fees, custodian
fees, legal and independent accountant fees, the costs of reports and proxies to
shareholders, compensation of directors of the Fund (other than those who are
affiliated persons of the Adviser, Distributor or Van Kampen Investments) and
all other ordinary business expenses not specifically assumed by the Adviser.

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

Morgan Stanley Dean Witter Investment Management Inc. is the Fund's investment
subadviser (the "Subadviser"). The Subadviser is a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co.

10
<PAGE>

The Subadviser conducts a worldwide portfolio management business and provides a
broad range of portfolio management services to customers in the United States
and abroad. At September 30, 2000, the Subadviser, together with its affiliated
institutional asset management companies, managed assets of approximately
$178 billion, including assets under fiduciary advice. The Subadviser's
principal office is located at 1221 Avenue of the Americas, New York, New York
10020. On December 1, 1998, Morgan Stanley Asset Management Inc. changed its
name to Morgan Stanley Dean Witter Investment Management Inc. but continues to
do business in certain instances using the name Morgan Stanley Asset Management.

SUBADVISORY AGREEMENT. The Adviser has entered into a subadvisory agreement with
the Subadviser to assist the Adviser in performing its investment advisory
functions. The Adviser pays the Subadviser on a monthly basis a portion of the
net advisory fees the Adviser receives from the Fund.

GENERAL
From time to time, the Adviser, the Subadviser or the Distributor may
voluntarily undertake to reduce the Fund's expenses by reducing the fees payable
to them or by reducing other expenses of the Fund in accordance with such
limitations as the Adviser, the Subadviser or Distributor may establish.

PERSONAL INVESTMENT POLICIES. The Fund, the Adviser, the Subadviser and the
Distributor have adopted Codes of Ethics designed to recognize the fiduciary
relationships among the Fund, the Adviser, the Subadviser, the Distributor and
their respective employees. The Codes of Ethics permit directors, trustees,
officers and employees to buy and sell securities for their personal accounts
subject to certain restrictions. Persons with access to certain sensitive
information are subject to pre-clearance and other procedures designed to
prevent conflicts of interest.

PORTFOLIO MANAGEMENT. Gary G. Schlarbaum, William B. Gerlach and Vitaly V.
Korchevsky are responsible as co-managers for the day-to-day management of the
Fund's investment portfolio.

Mr. Schlarbaum, a Managing Director, joined the Adviser's affiliate, Miller
Anderson & Sherrerd, LLP ("MAS") in 1987 and joined the Subadviser in 1996. He
assumed responsibility for the MAS Funds' Equity and Small Cap Value Portfolio
in 1987, for the MAS Funds' Balanced Portfolio in 1992 and for the MAS Funds'
Multi-Asset-Class and Mid Cap Value Portfolios in 1994. Mr. Schlarbaum also is a
Director of MAS Fund Distribution, Inc. Mr. Schlarbaum holds a B.A. in Economics
from Coe College and a Ph.D. in Applied Economics from the University of
Pennsylvania. Mr. Schlarbaum has been co-manager of the Fund since January 1997.

Mr. Gerlach, a Principal, joined the Subadviser in July 1996 and has worked with
MAS since 1991. Mr. Gerlach also became a portfolio manager of MAS Funds' Small
Cap Value and Mid Cap Value Portfolios in 1996. Mr. Gerlach holds a B.A. in
Economics from Haverford College. Mr. Gerlach has been co-manager of the Fund
since November 1996.

Mr. Korchevsky, a Vice President, joined the Subadviser as a portfolio manager
in 1999. He served as an analyst/portfolio manager for Gardner Lewis Asset
Management from 1998-1999, and as a portfolio manager for Crestar Asset
Management Co. from 1995-1998. He has been co-manager of the MAS Funds' Mid Cap
Value and Small Cap Value Portfolios since January 2000. Mr. Korchevsky holds a
B.A. from Sukhumi University and a M.B.A. from Regent University. Mr. Korchevsky
has been co-manager of the Fund since January 2000.

PURCHASE OF SHARES

GENERAL
The Fund is currently not open to new investors. The Fund may, from time to
time, reopen and close the offering of its shares to new investors. Any such
offerings may commence and terminate at any time and without prior notice.

The Fund offers three classes of shares designated as Class A Shares, Class B
Shares and Class C Shares.

11
<PAGE>
By offering three classes of shares, the Fund permits each investor to choose
the class of shares that is most beneficial given the amount to be invested and
the length of time the investor expects to hold the shares.

Initial investments generally must be at least $1,000 per investor account, and
subsequent investments must be at least $25 per investor account. Minimum
investment amounts may be waived by the Distributor for plans involving periodic
investments and for certain retirement accounts.

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which the class's distribution fee and/ or service fee is paid,
(iii) each class of shares has different exchange privileges, (iv) certain
classes of shares are subject to a conversion feature and (v) certain classes of
shares have different shareholder service options available.

The offering price of the Fund's shares is based upon the Fund's net asset value
per share (plus sales charges, where applicable). The net asset values per share
of the Class A Shares, Class B Shares and Class C Shares are generally expected
to be substantially the same. In certain circumstances, however, the per share
net asset values of the classes of shares may differ from one another,
reflecting the daily expense accruals of the higher distribution fees and
transfer agency costs applicable to the Class B Shares and Class C Shares and
the differential in the dividends that may be paid on each class of shares.

The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Directors reserves the right to calculate the net
asset value per share and adjust the offering price more frequently than once
daily if deemed desirable. Net asset value per share for each class is
determined by dividing the value of the Fund's portfolio securities, cash and
other assets (including accrued interest) attributable to such class, less all
liabilities (including accrued expenses) attributable to such class, by the
total number of shares of the class outstanding. Such computation is made by
using prices as of the close of trading on the Exchange and (i) valuing
securities listed or traded on a national securities exchange at the closing
price, or if no closing price is available, at the last reported sale price, and
if there has been no sale that day, at the mean between the last reported bid
and asked prices, (ii) valuing over-the-counter securities at the last reported
sale price from the National Association of Securities Dealers Automated
Quotations ("NASDAQ") and, if there has been no sale that day, at the mean
between the last reported bid and asked prices, (iii) valuing unlisted
securities at the average of the mean between the current reported bid and asked
prices obtained from reputable brokers and (iv) valuing any securities for which
market quotations are not readily available and any other assets at fair value
as determined in good faith by the Adviser in accordance with procedures
established by the Fund's Board of Directors. Securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.

The Fund has adopted a distribution plan (the "Distribution Plan") with respect
to each class of its shares pursuant to Rule 12b-1 under the 1940 Act. The Fund
also has adopted a service plan (the "Service Plan") with respect to each class
of its shares. Under the Distribution Plan and the Service Plan, the Fund pays
distribution fees in connection with the sale and distribution of its shares and
service fees in connection with the provision of ongoing services to
shareholders and the maintenance of shareholder accounts.

12
<PAGE>

The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution fees and service fees and other expenses of the Fund associated
with that class of shares. To assist investors in comparing classes of shares,
the tables under the Prospectus heading "Fees and Expenses of the Fund" provide
a summary of sales charges and expenses and an example of the sales charges and
expenses of the Fund applicable to each class of shares.

The shares are offered on a continuous basis through the Distributor as
principal underwriter, which is located at 1 Parkview Plaza, Oakbrook Terrace,
Illinois 60181-5555. Shares may be purchased through members of the NASD who are
acting as securities dealers ("dealers") and NASD members or eligible non-NASD
members who are acting as brokers or agents for investors ("brokers"). "Dealers"
and "brokers" are sometimes referred to herein as "authorized dealers."

Shares may be purchased on any business day by completing the account
application form and forwarding the account application form, directly or
through an authorized dealer, to the Fund's shareholder service agent, Van
Kampen Investor Services Inc. ("Investor Services"), a wholly owned subsidiary
of Van Kampen Investments. When purchasing shares of the Fund, investors must
specify whether the purchase is for Class A Shares, Class B Shares or Class C
Shares by selecting the correct Fund number on the account application form.
Sales personnel of authorized dealers distributing the Fund's shares are
entitled to receive compensation for selling such shares and may receive
differing compensation for selling Class A Shares, Class B Shares or Class C
Shares.

The offering price for shares is based upon the next calculation of net asset
value per share (plus sales charges, where applicable) after an order is
received by Investor Services. Orders received by authorized dealers prior to
the close of the Exchange are priced based on the date of receipt provided such
order is transmitted to Investor Services prior to Investor Services' close of
business on such date. Orders received by authorized dealers after the close of
the Exchange or transmitted to Investor Services after its close of business are
priced based on the date of the next determined net asset value per share
provided they are received by Investor Services prior to Investor Services'
close of business on such date. It is the responsibility of authorized dealers
to transmit orders received by them to Investor Services so they will be
received in a timely manner.

The Fund and the Distributor reserve the right to refuse any order for the
purchase of shares. The Fund also reserves the right to suspend the sale of the
Fund's shares in response to conditions in the securities markets or for other
reasons. Shares of the Fund may be sold in foreign countries where permissible.

Investor accounts will automatically be credited with additional shares of the
Fund after any Fund distributions, such as dividends and capital gain dividends,
unless the investor instructs the Fund otherwise. Investors wishing to receive
cash instead of additional shares should contact the Fund by telephone at
(800) 341-2911 or by writing to the Fund, c/o Van Kampen Investor Services Inc.,
PO Box 218256, Kansas City, MO 64121-8256.

CLASS A SHARES
Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 5.75% of the offering price (or 6.10% of the net

13
<PAGE>
amount invested), reduced on investments of $50,000 or more as follows:

CLASS A SHARES
SALES CHARGE SCHEDULE

<TABLE>
AS % OF AS % OF
SIZE OF OFFERING NET AMOUNT
INVESTMENT PRICE INVESTED
-------------------------------------------------------------
<S> <C> <C>
Less than $50,000 5.75% 6.10%
............................................................
$50,000 but less than $100,000 4.75% 4.99%
............................................................
$100,000 but less than $250,000 3.75% 3.90%
............................................................
$250,000 but less than $500,000 2.75% 2.83%
............................................................
$500,000 but less than $1,000,000 2.00% 2.04%
............................................................
$1,000,000 or more * *
............................................................
</TABLE>

* NO SALES CHARGE IS PAYABLE AT THE TIME OF PURCHASE ON INVESTMENTS OF
$1 MILLION OR MORE, ALTHOUGH FOR SUCH INVESTMENTS THE FUND MAY IMPOSE
A CONTINGENT DEFERRED SALES CHARGE OF 1.00% ON CERTAIN REDEMPTIONS
MADE WITHIN ONE YEAR OF THE PURCHASE. THE CONTINGENT DEFERRED SALES
CHARGE IS ASSESSED ON AN AMOUNT EQUAL TO THE LESSER OF THE THEN
CURRENT MARKET VALUE OR THE COST OF THE SHARES BEING REDEEMED.
ACCORDINGLY, NO SALES CHARGE IS IMPOSED ON INCREASES IN NET ASSET
VALUE ABOVE THE INITIAL PURCHASE PRICE.

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

Under the Distribution Plan and the Service Plan, the Fund may spend up to a
total of 0.25% per year of the Fund's average daily net assets with respect to
Class A Shares of the Fund. From such amount, under the Service Plan, the Fund
may spend up to 0.25% per year of the Fund's average daily net assets with
respect to Class A Shares of the Fund.

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
-------------------------------------------------------------------------------
<S> <C>
First 5.00%
..............................................................................
Second 4.00%
..............................................................................
Third 3.00%
..............................................................................
Fourth 2.50%
..............................................................................
Fifth 1.50%
..............................................................................
Sixth and After None
..............................................................................
</TABLE>

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class B
Shares in an amount of $500,000 or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

The amount of the contingent deferred sales charge, if any, varies depending on
the number of years from the time of payment for each purchase of Class B Shares
until the time of redemption of such shares.

In determining whether a contingent deferred sales charge applies to a
redemption, it is assumed that the shares being redeemed first are any shares in
the shareholder's Fund account that are not subject to a contingent deferred
sales charge, followed by shares held the longest in the shareholder's account.

Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to Class B Shares of the Fund. In
addition, under the Service Plan, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets with respect to Class B Shares of the Fund.

14
<PAGE>
CLASS C SHARES
Class C Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge of 1.00% of the dollar amount subject to charge
if redeemed within one year of purchase.

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to Class C Shares of the Fund. In
addition, under the Service Plan, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets with respect to Class C Shares of the Fund.

CONVERSION FEATURE

Class B Shares purchased on or after June 1, 1996, including Class B Shares
received from reinvestment of distributions through the dividend reinvestment
plan, automatically convert to Class A Shares eight years after the end of the
calendar month in which the shares were purchased. Class B Shares purchased
before June 1, 1996, including Class B Shares received from reinvestment of
distributions through the dividend reinvestment plan, automatically convert to
Class A Shares seven years after the end of the calendar month in which the
shares were purchased. Such conversion will be on the basis of the relative net
asset values per share, without the imposition of any sales load, fee or other
charge. The conversion schedule applicable to a share of the Fund acquired
through the exchange privilege from another Van Kampen fund participating in the
exchange program is determined by reference to the Van Kampen fund from which
such share was originally purchased.

The conversion of such shares to Class A Shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution fee and transfer agency costs with respect to such
shares does not result in the Fund's dividends or capital gain dividends
constituting "preferential dividends" under the federal income tax law and
(ii) the conversion of shares does not constitute a taxable event under federal
income tax law. The conversion may be suspended if such an opinion is no longer
available and such shares might continue to be subject to the higher aggregate
fees applicable to such shares for an indefinite period.

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge is waived on redemptions of Class B Shares
and Class C Shares (i) within one year following the death or disability (as
disability is defined by federal income tax law) of a shareholder, (ii) for
required minimum distributions from an individual retirement account ("IRA") or
certain other retirement plan distributions, (iii) for withdrawals under the
Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account, (iv) if no commission or transaction fee is paid to
authorized dealers at the time of purchase of such shares and (v) if made by the
Fund's involuntary liquidation of a shareholder's account as described under the
Prospectus heading "Redemption of Shares." Subject to certain limitations, a
shareholder who has redeemed Class C Shares of the Fund may reinvest in Class C
Shares at net asset value with credit for any contingent deferred sales charge
if the reinvestment is made within 180 days after the redemption. For a more
complete description of contingent deferred sales charge waivers, please refer
to the Fund's Statement of Additional Information or contact your authorized
dealer.

15
<PAGE>
QUANTITY DISCOUNTS

Investors purchasing Class A Shares may, under certain circumstances described
below, be entitled to pay reduced or no sales charges. Investors, or their
authorized dealers, must notify the Fund at the time of the purchase order
whenever a quantity discount is applicable to purchases. Upon such notification,
an investor will pay the lowest applicable sales charge. Quantity discounts may
be modified or terminated at any time. For more information about quantity
discounts, investors should contact their authorized dealer or the Distributor.

A person eligible for a reduced sales charge includes an individual, his or her
spouse and children under 21 years of age and any corporation, partnership or
sole proprietorship which is 100% owned, either alone or in combination, by any
of the foregoing; a trustee or other fiduciary purchasing for a single trust or
for a single fiduciary account, or a "company" as defined in Section 2(a)(8) of
the 1940 Act.

As used herein, "Participating Funds" refers to certain open-end investment
companies advised by Asset Management or Advisory Corp. and distributed by the
Distributor as determined from time to time by the Fund's Board of Directors.

VOLUME DISCOUNTS. The size of investment shown in the Class A Shares sales
charge table applies to the total dollar amount being invested by any person in
shares of the Fund, or in any combination of shares of the Fund and shares of
other Participating Funds, although other Participating Funds may have different
sales charges.

CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the Class A Shares
sales charge table may also be determined by combining the amount being invested
in shares of the Participating Funds plus the current offering price of all
shares of the Participating Funds currently owned.

LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales charge by aggregating investments over a 13-month period
to determine the sales charge as outlined in the Class A Shares sales charge
table. The size of investment shown in the Class A Shares sales charge table
includes purchases of shares of the Participating Funds over a 13-month period
based on the total amount of intended purchases plus the value of all shares of
the Participating Funds previously purchased and still owned. An investor may
elect to compute the 13-month period starting up to 90 days before the date of
execution of a Letter of Intent. Each investment made during the period receives
the reduced sales charge applicable to the total amount of the investment goal.
The initial purchase must be for an amount equal to at least 5% of the minimum
total purchase amount of the level selected. If trades not initially made under
a Letter of Intent subsequently qualify for a lower sales charge through the
90-day backdating provisions, an adjustment will be made at the expiration of
the Letter of Intent to give effect to the lower sales charge. Such adjustment
in sales charge will be used to purchase additional shares. The Fund initially
will escrow shares totaling 5% of the dollar amount of the Letter of Intent to
be held by Investor Services in the name of the shareholder. In the event the
Letter of Intent goal is not achieved within the specified period, the investor
must pay the difference between the sales charge applicable to the purchases
made and the reduced sales charges previously paid. Such payments may be made
directly to the Distributor or, if not paid, the Distributor will liquidate
sufficient escrowed shares to obtain the difference.

OTHER PURCHASE PROGRAMS
Purchasers of Class A Shares may be entitled to reduced or no initial sales
charges in connection with the unit investment trust reinvestment program and
purchases by registered representatives of selling firms or purchases by persons
affiliated with the Fund or the Distributor. The Fund reserves the right to
modify or terminate these arrangements at any time.

16
<PAGE>
investments made from unit investment trust distributions will be 1.00% of the
offering price (1.01% of net asset value). Of this amount, the Distributor will
pay to the authorized dealer, if any, through which such participation in the
qualifying program was initiated 0.50% of the offering price as a dealer
concession or agency commission. Persons desiring more information with respect
to this program, including the terms and conditions that apply to the program,
should contact their authorized dealer or the Distributor.

The administrator of such a unit investment trust must have an agreement with
the Distributor pursuant to which the administrator will (1) submit a single
bulk order and make payment with a single remittance for all investments in the
Fund during each distribution period by all investors who choose to invest in
the Fund through the program and (2) provide Investor Services with appropriate
backup data for each investor participating in the program in a computerized
format fully compatible with Investor Services' processing system.

To obtain these special benefits, all dividends and other distributions from the
Fund must be reinvested in additional shares and there can not be any systematic
withdrawal program. There will be no minimum for reinvestments from unit
investment trusts. The Fund will send account activity statements to such
participants on a quarterly basis only, even if their investments are made more
frequently. The Fund reserves the right to modify or terminate this program at
any time.

NET ASSET VALUE PURCHASE OPTIONS. Class A Shares of the Fund may be purchased at
net asset value, generally upon written assurance that the purchase is made for
investment purposes and that the shares will not be resold except through
redemption by the Fund, by:

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.

(2) Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries; employees of an investment
subadviser to any fund described in (1) above or an affiliate of such
subadviser; and such persons' families and their beneficial accounts.

(3) Directors, officers, employees and, when permitted, registered
representatives, of financial institutions that have a selling group
agreement with the Distributor and their spouses and children under 21
years of age when purchasing for any accounts they beneficially own, or, in
the case of any such financial institution, when purchasing for retirement
plans for such institution's employees; provided that such purchases are
otherwise permitted by such institutions.

(4) Registered investment advisers who charge a fee for their services, trust
companies and bank trust departments investing on their own behalf or on
behalf of their clients. The Distributor may pay authorized dealers through
which purchases are made an amount up to 0.50% of the amount invested, over
a 12-month period.

(5) Trustees and other fiduciaries purchasing shares for retirement plans which
invest in multiple fund families through broker-dealer retirement plan
alliance programs that have entered into agreements with the Distributor
and which are subject to certain minimum size and operational requirements.
Trustees and other fiduciaries should refer to the Statement of Additional
Information for further details with respect to such alliance programs.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

17
<PAGE>

employer or trustee in connection with an eligible deferred compensation
plan under Section 457 of the Code. Such plans will qualify for purchases
at net asset value provided, for plans initially establishing accounts with
the Distributor in the Participating Funds after January 1, 2000, that
(1) the total plan assets are at least $1 million or (2) such shares are
purchased by an employer sponsored plan with more than 100 eligible
employees. Such plans that have been established with a Participating Fund
or have received proposals from the Distributor prior to January 1, 2000
based on net asset value purchase privileges previously in effect will be
qualified to purchase shares of the Participating Funds at net asset value.
Section 403(b) and similar accounts for which Van Kampen Trust Company
serves as custodian will not be eligible for net asset value purchases
based on the aggregate investment made by the plan or the number of
eligible employees, except under certain uniform criteria established by
the Distributor from time to time. A commission will be paid to authorized
dealers who initiate and are responsible for such purchases within a
rolling twelve-month period as follows: 1.00% on sales to $2 million, plus
0.80% on the next $1 million, plus 0.50% on the next $47 million, plus
0.25% on the excess over $50 million.

(9) Individuals who are members of a "qualified group." For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the
Fund and Participating Funds, (iv) has a membership that the authorized
dealer can certify as to the group's members and (v) satisfies other
uniform criteria established by the Distributor for the purpose of
realizing economies of scale in distributing such shares. A qualified group
does not include one whose sole organizational nexus, for example, is that
its participants are credit card holders of the same institution, policy
holders of an insurance company, customers of a bank or broker-dealer,
clients of an investment adviser or other similar groups. Shares purchased
in each group's participants account in connection with this privilege will
be subject to a contingent deferred sales charge of 1.00% in the event of
redemption within one year of purchase, and a commission will be paid to
authorized dealers who initiate and are responsible for such sales to each
individual as follows: 1.00% on sales to $2 million, plus 0.80% on the next
$1 million and 0.50% on the excess over $3 million.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

Purchase orders made pursuant to clause (4) may be placed either through
authorized dealers as described above or directly with Investor Services by the
investment adviser, trust company or bank trust department, provided that
Investor Services receives federal funds for the purchase by the close of
business on the next business day following acceptance of the order. An
authorized dealer may charge a transaction fee for placing an order to purchase
shares pursuant to this provision or for placing a redemption order with respect
to such shares. Authorized dealers will be paid a service fee as described above
on purchases made under options (3) through (9) above. The Fund may terminate,
or amend the terms of, offering shares of the Fund at net asset value to such
groups at any time.

REDEMPTION OF
SHARES

Generally shareholders may redeem for cash some or all of their shares without
charge by the Fund (other than applicable sales charge) at any time. As
described under the Prospectus heading "Purchase of Shares," redemptions of
Class B Shares and Class C Shares may be subject to a contingent deferred sales
charge. In addition, certain redemptions of Class A Shares for shareholder
accounts of $1 million or more may be subject to a contingent deferred sales
charge. Redemptions completed through an authorized dealer or a
custodian/trustee of a retirement plan account may involve additional fees
charged by the dealer or custodian/trustee.

18
<PAGE>

Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the redemption request and any other necessary
documents in proper form as described below. Such payment may be postponed or
the right of redemption suspended as provided by the rules of the SEC. Such
payment may, under certain circumstances, be paid wholly or in part by a
distribution-in-kind of portfolio securities. A distribution-in-kind will result
in recognition by the shareholder of a gain or loss for federal income tax
purposes when such securities are distributed, and the shareholder may have
brokerage costs and a gain or loss for federal income tax purposes upon the
shareholder's disposition of such securities. If the shares to be redeemed have
been recently purchased by check, Investor Services may delay the payment of
redemption proceeds until it confirms the purchase check has cleared, which may
take up to 15 days from the date of purchase. A taxable gain or loss may be
recognized by the shareholder upon redemption of shares. Certificated shares
must be properly endorsed for transfer and must accompany a written redemption
request.

WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by
written request in proper form sent directly to Van Kampen Investor Services
Inc., PO Box 218256, Kansas City, MO 64121-8256. The request for redemption
should indicate the number of shares or dollar amount to be redeemed, the Fund
name and class designation of such shares and the shareholder's account number.
The redemption request must be signed by all persons in whose names the shares
are registered. Signatures must conform exactly to the account registration. If
the proceeds of the redemption exceed $100,000, or if the proceeds are not to be
paid to the record owner at the record address, or if the record address has
changed within the previous 15 days, signature(s) must be guaranteed by one of
the following: a bank or trust company; a broker-dealer; a credit union; a
national securities exchange, registered securities association or clearing
agency; a savings and loan association; or a federal savings bank.

Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption request to be in proper form.
In some cases, however, additional documents may be necessary. Certificated
shares may be redeemed only by written request. The certificates for the shares
being redeemed must be properly endorsed for transfer and must accompany the
written redemption request. Generally, in the event a redemption is requested by
and registered to a corporation, partnership, trust, fiduciary, estate or other
legal entity owning shares of the Fund, a copy of the corporate resolution or
other legal documentation appointing the authorized signer and certified within
the prior 120 days must accompany the redemption request. Retirement plan
distribution requests should be sent to the plan custodian/trustee to be
forwarded to Investor Services. Contact the plan custodian/trustee for further
information.

In the case of written redemption requests sent directly to Investor Services,
the redemption price is the net asset value per share next determined after the
request in proper form is received by Investor Services.

AUTHORIZED DEALER REDEMPTION REQUESTS. Shareholders may place redemption
requests through an authorized dealer. The redemption price for such shares is
the net asset value per share next calculated after an order in proper form is
received by an authorized dealer provided such order is transmitted to the
Distributor prior to the Distributor's close of business on such day. It is the
responsibility of authorized dealers to transmit redemption requests received by
them to the Distributor so they will be received prior to such time. Redemptions
completed through an authorized dealer may involve additional fees charged by
the dealer.

19
<PAGE>

contact the telephone transaction line at (800) 421-5684. Shares may also be
redeemed by telephone through FundInfo-Registered Trademark- (automated
telephone system), which is generally accessible 24 hours a day, seven days a
week at (800) 847-2424. Van Kampen Investments and its subsidiaries, including
Investor Services, and the Fund employ procedures considered by them to be
reasonable to confirm that instructions communicated by telephone are genuine.
Such procedures include requiring certain personal identification information
prior to acting upon telephone instructions, tape-recording telephone
communications and providing written confirmation of instructions communicated
by telephone. If reasonable procedures are employed, none of Van Kampen
Investments, Investor Services or the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. Telephone
redemptions may not be available if the shareholder cannot reach Investor
Services by telephone, whether because all telephone lines are busy or for any
other reason; in such case, a shareholder would have to use the Fund's other
redemption procedure previously described. Requests received by Investor
Services prior to 4:00 p.m., New York time, will be processed at the next
determined net asset value per share. These privileges are available for most
accounts other than retirement accounts or accounts with shares represented by
certificates. If an account has multiple owners, Investor Services may rely on
the instructions of any one owner.

For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 15 days prior to a telephone redemption request. Proceeds from
redemptions payable by wire transfer are expected to be wired on the next
business day following the date of redemption. The Fund reserves the right at
any time to terminate, limit or otherwise modify this redemption privilege.

OTHER REDEMPTION INFORMATION. The Fund may redeem any shareholder account that
has a value on the date of the notice of redemption less than the minimum
initial investment as specified in this prospectus. At least 60 days' advance
written notice of any such involuntary redemption will be provided to the
shareholder and such shareholder will be given an opportunity to purchase the
required value of additional shares at the next determined net asset value
without sales charge. Any involuntary redemption may only occur if the
shareholder account is less than the minimum initial investment due to
shareholder redemptions.

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income at least
quarterly as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.

The per share dividends on Class B Shares and Class C Shares may be lower than
the per share dividends on Class A Shares as a result of the higher distribution
fees and transfer agency costs applicable to such classes of shares.

20
<PAGE>

of dividends, capital gain dividends are automatically reinvested in additional
shares of the Fund at the next determined net asset value unless the shareholder
instructs otherwise.

SHAREHOLDER SERVICES

Listed below are some of the shareholder services the Fund offers to investors.
For a more complete description of the Fund's shareholder services, such as
investment accounts, share certificates, retirement plans, automated clearing
house deposits, dividend diversification and the systematic withdrawal plan,
please refer to the Fund's Statement of Additional Information or contact your
authorized dealer.

INTERNET TRANSACTIONS. In addition to performing transactions on your account
through written instruction or by telephone, you may also perform certain
transactions through the internet. Please refer to our web site at
www.vankampen.com for further instructions regarding internet transactions. Van
Kampen Investments and its subsidiaries, including Investor Services, and the
Fund employ procedures considered by them to be reasonable to confirm that
instructions communicated through the internet are genuine. Such procedures
include requiring use of a personal identification number prior to acting upon
internet instructions and providing written confirmation of instructions
communicated through the internet. If reasonable procedures are employed, none
of Van Kampen Investments, Investor Services or the Fund will be liable for
following instructions received through the internet which it reasonably
believes to be genuine. If an account has multiple owners, Investor Services may
rely on the instructions of any one owner.

REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gain dividends in shares of the
Fund. Such shares are acquired at net asset value per share (without sales
charge) on the applicable payable date of the dividend or capital gain dividend.
Unless the shareholder instructs otherwise, the reinvestment plan is automatic.
This instruction may be made by telephone by calling (800) 341-2911
((800) 421-2833 for the hearing impaired) or by writing to Investor Services.
The investor may, on the account application form or prior to any declaration,
instruct that dividends and/or capital gain dividends be paid in cash, be
reinvested in the Fund at the next determined net asset value, or be invested in
another Participating Fund at the next determined net asset value.

AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which
a shareholder can authorize Investor Services to debit the shareholder's bank
account on a regular basis to invest predetermined amounts in the Fund.
Additional information is available from the Distributor or your authorized
dealer.

EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any Participating Fund based on the next determined net asset value per
share of each fund after requesting the exchange without any sales charge,
subject to certain limitations. Shares of the Fund may be exchanged for shares
of any Participating Fund only if shares of that Participating Fund are
available for sale; however, during periods of suspension of sales, shares of a
Participating Fund may be available for sale only to existing shareholders of a
Participating Fund. Shareholders seeking an exchange into a Participating Fund
should obtain and read the current prospectus for such fund prior to
implementing an exchange. A prospectus of any of the Participating Funds may be
obtained from an authorized dealer or the Distributor.

To be eligible for exchange, shares of the Fund must have been registered in the
shareholder's name for at least 30 days prior to an exchange. Shares of the Fund
registered in a shareholder's name for less than 30 days may only be exchanged
upon receipt of prior approval of the Adviser. It is the policy of the Adviser,
under normal circumstances, not to approve such requests.

21
<PAGE>
shares from a Participating Fund. When such shares are redeemed and not
exchanged for shares of another Participating Fund, the shares are subject to
the contingent deferred sales charge schedule imposed by the Participating Fund
from which such shares were originally purchased.

Exchanges of shares are sales of shares of one Participating Fund and purchases
of shares of another Participating Fund. The sale may result in a gain or loss
for federal income tax purposes. If the shares sold have been held for less than
91 days, the sales charge paid on such shares is carried over and included in
the tax basis of the shares acquired.

A shareholder wishing to make an exchange may do so by sending a written request
to Investor Services, by contacting the telephone transaction line at
(800) 421-5684, through FundInfo-Registered Trademark- (automated telephone
system) at (800) 847-2424 or through the internet at www.vankampen.com. A
shareholder automatically has these exchange privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. Van Kampen Investments and its subsidiaries, including Investor Services,
and the Fund employ procedures considered by them to be reasonable to confirm
that instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape-recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, none of Van Kampen Investments, Investor Services or
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. If the exchanging shareholder does not have an account
in the fund whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gain dividend options (except
dividend diversification) and authorized dealer of record as the account from
which shares are exchanged, unless otherwise specified by the shareholder. In
order to establish a systematic withdrawal plan for the new account or reinvest
dividends from the new account into another fund, however, an exchanging
shareholder must submit a specific request. The Fund reserves the right to
reject any order to acquire its shares through exchange. In addition, the Fund
and other Participating Funds may restrict exchanges by shareholders engaged in
excessive trading by limiting or disallowing the exchange privilege to such
shareholders. For further information on these restrictions, see the Fund's
Statement of Additional Information. The Fund may modify, restrict or terminate
the exchange privilege at any time on 60 days' notice to its shareholders of any
termination or material amendment.

For purposes of determining the sales charge rate previously paid on Class A
Shares, all sales charges paid on the exchanged security and on any security
previously exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment, that
security is deemed to have been sold with a sales charge rate equal to the rate
previously paid on the security on which the dividend or distribution was paid.
If a shareholder exchanges less than all of such shareholder's securities, the
security upon which the highest sales charge rate was previously paid is deemed
exchanged first.

Exchange requests received on a business day prior to the time shares of the
funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares of the fund which the
shareholder is redeeming will be redeemed at the net asset value per share next
determined on the date of receipt. Shares of the fund that the shareholder is
purchasing will also normally be purchased at the net asset value per share,
plus any applicable sales charge, next determined on the date of receipt.
Exchange requests received on a business day after the time that shares of the
funds involved in the request are priced will be processed on the next business
day in the manner described herein.

22
<PAGE>
FEDERAL INCOME
TAXATION

Distributions of the Fund's investment company taxable income (consisting
generally of ordinary income and net short-term capital gain) are taxable to
shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gain (which is the excess of net long-term capital
gain over net short-term capital loss) as capital gain dividends, if any, are
taxable to shareholders as long-term capital gains, whether paid in cash or
reinvested in additional shares, and regardless of how long the shares of the
Fund have been held by such shareholders. The Fund expects that its
distributions will consist primarily of ordinary income and capital gain
dividends. Distributions in excess of the Fund's earnings and profits will first
reduce the adjusted tax basis of a holder's shares and, after such adjusted tax
basis is reduced to zero, will constitute capital gains to such holder (assuming
such shares are held as a capital asset). Although distributions generally are
treated as taxable in the year they are paid, distributions declared in October,
November or December, payable to shareholders of record on a specified date in
such month and paid during January of the following year will be treated as
having been distributed by the Fund and received by the shareholders on the
December 31st prior to the date of payment. The Fund will inform shareholders of
the source and tax status of all distributions promptly after the close of each
calendar year.

The sale or exchange of shares may be a taxable transaction for federal income
tax purposes. Shareholders who sell their shares will generally recognize a gain
or loss in an amount equal to the difference between their adjusted tax basis in
the shares sold and the amount received. If the shares are held by the
shareholder as a capital asset, the gain or loss will be a capital gain or loss.
Any recognized capital gains may be taxed at different rates depending on how
long the shareholder held such shares.

The Fund is required, in certain circumstances, to withhold 31% of dividends and
certain other payments, including redemptions, paid to shareholders who do not
furnish to the Fund their correct taxpayer identification number (in the case of
individuals, their social security number) and certain required certifications
or who are otherwise subject to backup withholding.

The Fund intends to qualify as a regulated investment company under federal
income tax law. If the Fund so qualifies and distributes each year to its
shareholders at least 90% of its investment company taxable income, the Fund
will not be required to pay federal income taxes on any income it distributes to
shareholders. If the Fund distributes less than an amount equal to the sum of
98% of its ordinary income and 98% of its capital gain net income, then the Fund
will be subject to a 4% excise tax on the undistributed amounts.

The federal income tax discussion set forth above is for general information
only. Prospective investors should consult their own tax advisers regarding the
specific federal tax consequences of purchasing, holding and disposing of shares
of the Fund, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.

23
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by Deloitte
& Touche LLP, independent auditors, whose report, along with the Fund's most
recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal years ended June 30, 1999, 1998, 1997 and 1996 and for the fiscal period
August 1, 1995 (commencement of offering for Class B Shares) to June 30, 1996
has been audited by PricewaterhouseCoopers LLP. This information should be read
in conjunction with the financial statements and notes thereto included in the
Statement of Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES
YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# 1998# 1997 1996
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period......... $ 23.58 $ 21.34 $ 17.59 $ 14.63 $ 12.89
-------- -------- -------- ------- -------
Income From Investment Operations
Net Investment Income/Loss................. (0.08) 0.01 (0.02) 0.20 0.27
Net Realized and Unrealized Gain/Loss...... 1.09 3.43 4.84 4.05 1.94
-------- -------- -------- ------- -------
Total from Investment Operations........... 1.01 3.44 4.82 4.25 2.21
-------- -------- -------- ------- -------
Distributions
Net Investment Income...................... -- -- (0.03) (0.20) (0.27)
In Excess of Net Investment Income......... -- -- (0.00)++ (0.00)++ (0.01)
Net Realized Gain.......................... (1.56) (1.20) (1.04) (1.09) (0.19)
-------- -------- -------- ------- -------
Total Distributions........................ (1.56) (1.20) (1.07) (1.29) (0.47)
-------- -------- -------- ------- -------
Net Asset Value, End of Period............... $ 23.03 $ 23.58 $ 21.34 $ 17.59 $ 14.63
======== ======== ======== ======= =======
Total Return (1)............................. 4.62% 17.41% 28.26% 30.68% 17.41%
======== ======== ======== ======= =======
Ratios and Supplemental Data
Net Assets, End of Period (000's)............ $434,766 $343,004 $220,100 $34,331 $19,674
Ratio of Expenses to Average Net Assets...... 1.47% 1.49% 1.50% 1.50% 1.50%
Ratio of Net Investment Income/Loss to
Average Net Assets........................... (0.33%) 0.03% (0.09%) 1.25% 1.90%
Portfolio Turnover Rate...................... 272% 283% 207% 73% 41%
-------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions During
the
Period
Per Share Benefit to Net Investment Income/
Loss..................................... $ -- $ -- $ 0.02 $ 0.04 $ 0.04
Ratios Before Expense Reductions:
Expenses to Average Net Assets............. -- -- 1.58% 1.76% 1.81%
Net Investment Income/Loss to Average Net
Assets..................................... -- -- (0.18%) 0.98% 1.59%
-------------------------------------------------------------------------------------------------------

<CAPTION>
CLASS B SHARES
YEAR ENDED JUNE 30, AUGUST 1, 1995+
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# 1998# 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
--------------------------------------------- ----------------------------------------------------------------
Net Asset Value, Beginning of Period......... $ 23.23 $ 21.20 $ 17.59 $ 14.63 $ 13.37
-------- -------- -------- ------- -------
Income From Investment Operations
Net Investment Income/Loss................. (0.25) (0.14) (0.17) 0.09 0.15
Net Realized and Unrealized Gain/Loss...... 1.06 3.37 4.83 4.05 1.46
-------- -------- -------- ------- -------
Total from Investment Operations........... 0.81 3.23 4.66 4.14 1.61
-------- -------- -------- ------- -------
Distributions
Net Investment Income...................... -- -- (0.01) (0.09) (0.15)
In Excess of Net Investment Income......... -- -- (0.00)++ (0.00)++ (0.01)
Net Realized Gain.......................... (1.56) (1.20) (1.04) (1.09) (0.19)
-------- -------- -------- ------- -------
Total Distributions........................ (1.56) (1.20) (1.05) (1.18) (0.35)
-------- -------- -------- ------- -------
Net Asset Value, End of Period............... $ 22.48 $ 23.23 $ 21.20 $ 17.59 $ 14.63
======== ======== ======== ======= =======
Total Return (1)............................. 3.85% 16.50% 27.30% 29.77% 12.29%*
======== ======== ======== ======= =======
Ratios and Supplemental Data
Net Assets, End of Period (000's)............ $356,717 $341,908 $269,836 $15,331 $ 2,485
Ratio of Expenses to Average Net Assets...... 2.21% 2.24% 2.25% 2.25% 2.25%
Ratio of Net Investment Income/Loss to
Average Net Assets........................... (1.06%) (0.72%) (0.84%) 0.40% 1.18%
Portfolio Turnover Rate...................... 272% 283% 207% 73% 41%*
--------------------------------------------- ----------------------------------------------------------------
Effect of Voluntary Expense Reductions During
the
Period
Per Share Benefit to Net Investment Income/
Loss..................................... $ -- $ -- $ 0.02 $ 0.06 $ 0.04
Ratios Before Expense Reductions:
Expenses to Average Net Assets............. -- -- 2.33% 2.48% 2.61%
Net Investment Income/Loss to Average Net
Assets..................................... -- -- (0.93%) 0.14% 0.82%
--------------------------------------------- ----------------------------------------------------------------

<CAPTION>
CLASS C SHARES
YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# 1998# 1997 1996
<S> <C> <C> <C> <C> <C>
--------------------------------------------- ------------------------------------------------------
Net Asset Value, Beginning of Period......... $ 23.24 $ 21.20 $ 17.59 $ 14.64 $ 12.89
-------- -------- -------- ------- -------
Income From Investment Operations
Net Investment Income/Loss................. (0.25) (0.14) (0.17) 0.08 0.16
Net Realized and Unrealized Gain/Loss...... 1.06 3.38 4.83 4.05 1.94
-------- -------- -------- ------- -------
Total from Investment Operations........... 0.81 3.24 4.66 4.13 2.10
-------- -------- -------- ------- -------
Distributions
Net Investment Income...................... -- -- (0.01) (0.09) (0.15)
In Excess of Net Investment Income......... -- -- (0.00)++ (0.00)++ (0.01)
Net Realized Gain.......................... (1.56) (1.20) (1.04) (1.09) (0.19)
-------- -------- -------- ------- -------
Total Distributions........................ (1.56) (1.20) (1.05) (1.18) (0.35)
-------- -------- -------- ------- -------
Net Asset Value, End of Period............... $ 22.49 $ 23.24 $ 21.20 $ 17.59 $ 14.64
======== ======== ======== ======= =======
Total Return (1)............................. 3.80% 16.55% 27.28% 29.67% 16.50%
======== ======== ======== ======= =======
Ratios and Supplemental Data
Net Assets, End of Period (000's)............ $192,665 $165,351 $127,401 $32,425 $21,193
Ratio of Expenses to Average Net Assets...... 2.21% 2.24% 2.25% 2.25% 2.25%
Ratio of Net Investment Income/Loss to
Average Net Assets........................... (1.06%) (0.72%) (0.84%) 0.49% 1.17%
Portfolio Turnover Rate...................... 272% 283% 207% 73% 41%
--------------------------------------------- ------------------------------------------------------
Effect of Voluntary Expense Reductions During
the
Period
Per Share Benefit to Net Investment Income/
Loss..................................... $ -- $ -- $ 0.02 $ 0.04 $ 0.04
Ratios Before Expense Reductions:
Expenses to Average Net Assets............. -- -- 2.33% 2.47% 2.58%
Net Investment Income/Loss to Average Net
Assets..................................... -- -- (0.92%) 0.22% 0.84%
--------------------------------------------- ------------------------------------------------------
</TABLE>

* NON-ANNUALIZED
+ THE FUND BEGAN OFFERING CLASS B SHARES ON AUGUST 1, 1995.
++ AMOUNT IS LESS THAN $0.01 PER SHARE.
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED
SALES CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

24
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS
BOARD OF DIRECTORS

<TABLE>
<S> <C>
J. Miles Branagan Richard F. Powers, III*
Jerry D. Choate Phillip B. Rooney
Linda Hutton Heagy Fernando Sisto
R. Craig Kennedy Wayne W. Whalen*
Mitchell M. Merin* Suzanne H. Woolsey
Jack E. Nelson
</TABLE>

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday
DEALERS
For dealer information, selling agreements, wire orders, or
redemptions, call the Distributor at (800) 421-5666
TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call
(800) 421-2833
FUNDINFO-REGISTERED TRADEMARK-
For automated telephone services, call (800) 847-2424
WEB SITE
www.vankampen.com

VAN KAMPEN AMERICAN VALUE FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen American Value Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen American Value Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>

VAN KAMPEN
AMERICAN VALUE FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of Additional Information, which contains more details about the
Fund, is incorporated by reference in its entirety into this prospectus.

You will find additional information about the Fund in its annual and semiannual
reports to shareholders. The annual report explains the market conditions and
investment strategies affecting the Fund's performance during its last fiscal
year.

You can ask questions or obtain a free copy of the Fund's reports or its
Statement of Additional Information by calling (800) 341-2911 from 7:00 a.m. to
7:00 p.m., Central time, Monday through Friday. Telecommunications Device for
the Deaf users may call (800) 421-2833. A free copy of the Fund's reports can
also be ordered from our web site at www.vankampen.com.

Information about the Fund, including its reports and Statement of Additional
Information, has been filed with the Securities and Exchange Commission (SEC).
It can be reviewed and copied at the SEC's Public Reference Room in Washington,
DC or on the EDGAR database on the SEC's internet site (http://www.sec.gov).
Information on the operation of the SEC's Public Reference Room may be obtained
by calling the SEC at 1-202-942-8090. You can also request copies of these
materials, upon payment of a duplicating fee, by electronic request at the SEC's
e-mail address ([email protected]), or by writing the Public Reference Section
of the SEC, Washington, DC 20549-0102.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

MSAV PRO 10/00
#65012

<PAGE>

VAN KAMPEN
ASIAN GROWTH FUND

Van Kampen Asian Growth Fund's investment objective is to seek long-term capital
appreciation through investment primarily in equity securities of Asian issuers,
excluding Japan.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Investment Advisory Services ...........................................13

Purchase of Shares .....................................................15

Redemption of Shares ...................................................22

Distributions from the Fund ............................................24

Shareholder Services ...................................................24

Federal Income Taxation ................................................26

Financial Highlights ...................................................28

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek long-term capital appreciation
through investment primarily in equity securities of Asian issuers, excluding
Japan.

INVESTMENT STRATEGIES
Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing at least 65% of the Fund's total
assets in a portfolio of equity securities of companies that are: organized in
and whose business is conducted principally in Asia (other than Japan); or whose
securities are principally traded on a recognized stock exchange in Asia (other
than Japan). Equity securities include common and preferred stocks, convertible
securities, rights and warrants to purchase common stock and depositary receipts
of Asian issuers traded on U.S. stock exchanges.

The Fund's investment adviser uses a disciplined, value-oriented approach to
security selection, focusing on larger companies with strong management teams.
The Fund's investment adviser uses a "bottom-up" research-driven investment
strategy that emphasizes security selection and disposition on an individual
company basis. The Fund generally seeks to invest in large companies located in
emerging Asian markets but also may invest in smaller companies with the
potential for growth. The Fund evaluates top-down country risk factors and
opportunities when determining position sizes and overall exposure to individual
markets. The Fund may invest the remaining 35% of its total assets in debt
securities. The Fund may purchase and sell certain derivative instruments, such
as options, futures, options on futures and, to the extent available,
currency-related transactions involving options, futures, forward contracts and
swaps, for various portfolio management purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. Investments in common
stocks and other equity securities generally are affected by changes in the
stock markets, which fluctuate substantially over time, sometimes suddenly and
sharply. In general, market values of equity securities are more volatile than
those of debt securities. Investments in debt securities generally are affected
by changes in interest rates and the creditworthiness of the issuer. The prices
of debt securities tend to fall as interest rates rise, and such declines tend
to be greater among debt securities with longer maturities. Foreign markets may,
but often do not, move in tandem with U.S. markets, and foreign markets,
especially developing or emerging market countries, may be more volatile than
U.S. markets. At times, securities of Asian issuers may underperform relative to
other sectors of the market. Historically, securities of Asian issuers have
sometimes gone through extended periods when they did not perform as well as
securities of issuers of countries in more developed regions. Thus, the value of
the Fund's investments will vary and at times may be lower or higher than that
of other types of investments. During an overall market decline, securities
prices of smaller companies (in which the Fund may invest) often fluctuate more
and may fall more than the securities prices of larger companies.

FOREIGN, EMERGING MARKET COUNTRIES AND ASIAN REGION RISKS. Because the Fund owns
securities of foreign issuers, it is subject to risks not usually associated
with owning securities of U.S. issuers. These risks include fluctuations in
foreign currencies, foreign currency exchange controls, political and economic
instability, differences in financial reporting, differences in securities
regulation and trading and foreign taxation issues. The risks of investing in
developing or emerging market countries are greater than the risks generally
associated with foreign investments, including investment and trading
limitations, greater credit and liquidity concerns, greater political
uncertainties, an economy's dependence on international trade or development
assistance, greater foreign currency exchange risk and currency transfer
restrictions, and greater delays and disruptions in settlement transactions.

3
<PAGE>
The Fund is subject to additional risks associated with investing in securities
of companies that are subject to economic and financial factors and conditions
of Asia. Securities markets in Asian countries have suffered significant
downturns and volatility and currencies have lost value in relation to the U.S.
dollar. Because the Fund's investments are focused in a single region, its
portfolio is more susceptible to factors adversely affecting issuers located in
that region than a more geographically diverse portfolio of investments.

RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures, options on futures and
currency-related transactions involving options, futures, forward contracts and
swaps are examples of derivative instruments. Derivative instruments involve
risks different from direct investments in underlying securities. These risks
include imperfect correlation between the value of the instruments and the
underlying assets; risks of default by the other party to certain transactions;
risks that the transactions may result in losses that partially or completely
offset gains in portfolio positions; and risks that the transactions may not be
liquid.

INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- Seek capital appreciation over the long term

- Do not seek current income from their investment

- Are willing to take on the increased risks associated with investing primarily
in issuers of securities from Asian countries

- Can withstand substantial volatility in the value of their Fund shares
- Wish to add to their investment portfolio a fund that invests primarily in
equity securities of Asian issuers

ANNUAL PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

ANNUAL RETURN

4
<PAGE>

The Fund's return for the nine-month period ended September 30, 2000 was
-26.33%. As a result of market activity, current performance may vary from the
figures shown.

During the six-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 41.33% (for the quarter ended June 30, 1999) and the
lowest quarterly return for Class A Shares was -37.23% (for the quarter ended
December 31, 1997).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the Morgan Stanley Capital
International ("MSCI") All Country Far East Free Ex-Japan Index*, a broad-based
market index that the Fund's investment adviser believes is an appropriate
benchmark for the Fund. The Fund's performance figures listed below include the
maximum sales charges paid by investors. The index's performance figures do not
include any commissions or sales charges that would be paid by investors
purchasing the securities represented by the index. An investment cannot be made
directly in the index. Average annual total returns are shown for the periods
ended December 31, 1999 (the most recently completed calendar year prior to the
date of this prospectus). Remember that the past performance of the Fund is not
indicative of its future performance.

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS
FOR THE
PERIODS ENDED PAST PAST 5 SINCE
DECEMBER 31, 1999 1 YEAR YEARS INCEPTION
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Van Kampen Asian Growth
Fund -- Class A Shares 73.86% -1.84% 2.81%(1)
MSCI All Country Far East
Free Ex-Japan Index 59.40% -1.26% 3.46%(3)
..................................................................................
Van Kampen Asian Growth
Fund -- Class B Shares 78.00% N/A -3.13%(2)
MSCI All Country Far East
Free Ex-Japan Index 59.40% -1.26% -3.23%(2)
..................................................................................
Van Kampen Asian Growth
Fund -- Class C Shares 82.20% -1.43% 2.98%(1)
MSCI All Country Far East
Free Ex-Japan Index 59.40% -1.26% 3.46%(3)
..................................................................................
INCEPTION DATES: (1) 6/23/93, (2) 8/1/95, (3) 6/30/93.
N/A NOT APPLICABLE
* THE MSCI ALL COUNTRY FAR EAST FREE EX-JAPAN INDEX IS AN UNMANAGED BROAD-BASED
MARKET INDEX OF COMMON STOCKS AND CURRENTLY INCLUDES INDONESIA, HONG KONG, THE
PHILIPPINES, KOREA, TAIWAN AND THAILAND (ASSUMES DIVIDENDS ARE REINVESTED).
</TABLE>

5
<PAGE>
FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
---------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
-----------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 5.75%(1) None None
..............................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption
proceeds) None(2) 5.00%(3) 1.00%(4)
..............................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
..............................................................
Redemption fee None None None
..............................................................
Exchange fee None None None
..............................................................
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------
Management fees(5) 1.00% 1.00% 1.00%
..........................................................
Distribution and/or
service (12b-1)
fees(6) 0.25% 1.00%(7) 1.00%(7)
..........................................................
Other expenses(5) 0.77% 0.77% 0.77%
..........................................................
Total annual fund
operating expenses(5) 2.02% 2.77% 2.77%
..........................................................
</TABLE>

(1) REDUCED FOR PURCHASES OF $50,000 AND OVER. SEE "PURCHASE OF
SHARES -- CLASS A SHARES."
(2) INVESTMENTS OF $1 MILLION OR MORE ARE NOT SUBJECT TO ANY SALES
CHARGE AT THE TIME OF PURCHASE, BUT A DEFERRED SALES CHARGE OF
1.00% MAY BE IMPOSED ON CERTAIN REDEMPTIONS MADE WITHIN ONE
YEAR OF THE PURCHASE. SEE "PURCHASE OF SHARES -- CLASS A
SHARES."
(3) THE MAXIMUM DEFERRED SALES CHARGE IS 5.00% IN THE FIRST YEAR
AFTER PURCHASE, DECLINING THEREAFTER AS FOLLOWS:

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."

(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR
AFTER PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF
SHARES -- CLASS C SHARES."
(5) THE FUND'S INVESTMENT ADVISER IS CURRENTLY WAIVING OR
REIMBURSING A PORTION OF THE FUND'S MANAGEMENT FEES AND OTHER
EXPENSES SUCH THAT THE ACTUAL TOTAL ANNUAL FUND OPERATING
EXPENSES WERE 1.90% FOR CLASS A SHARES. 2.65% FOR CLASS B
SHARES AND 2.65% FOR CLASS C SHARES FOR THE FISCAL YEAR ENDED
JUNE 30, 2000. THE FEE WAIVERS OR EXPENSE REIMBURSEMENTS CAN BE
TERMINATED AT ANY TIME.
(6) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO
0.25% OF THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH
CLASS OF SHARES. CLASS B SHARES AND CLASS C SHARES ARE EACH
SUBJECT TO A COMBINED ANNUAL DISTRIBUTION AND SERVICE FEE OF UP
TO 1.00% OF THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH
CLASS OF SHARES. SEE "PURCHASE OF SHARES."
(7) BECAUSE DISTRIBUTION AND/OR SERVICE (12b-1) FEES ARE PAID OUT
OF THE FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES
WILL INCREASE THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE
THAN PAYING OTHER TYPES OF SALES CHARGES.

EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $768 $1,172 $1,600 $2,788
..................................................
Class B Shares $780 $1,159 $1,614 $2,920*
..................................................
Class C Shares $380 $ 859 $1,464 $3,099
..................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $768 $1,172 $1,600 $2,788
..................................................
Class B Shares $280 $ 859 $1,464 $2,920*
..................................................
Class C Shares $280 $ 859 $1,464 $3,099
..................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

6
<PAGE>
INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek long-term capital appreciation
through investment primarily in equity securities of Asian issuers, excluding
Japan. Any income received from the investment of portfolio securities is
incidental to the Fund's investment objective. The Fund's investment objective
is a fundamental policy and may not be changed without shareholder approval of a
majority of the Fund's outstanding voting securities, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). There are risks
inherent in all investments in securities; accordingly there can be no assurance
that the Fund will achieve its investment objective.

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing at least 65% of the Fund's total
assets in a portfolio of equity securities of Asian companies, other than Japan.
These include securities of companies (i) which are organized under the laws of
an Asian country and whose business is conducted principally in Asia or
(ii) for which the principal securities trading market is in an Asian country.
The Fund emphasizes investments in the emerging Asia markets countries. The
Fund's investment adviser considers emerging markets to be those countries that
major international financial institutions, such as the International Bank for
Reconstruction and Development (commonly referred to as the "World Bank")
considers to be less economically mature than developed nations. Investments in
emerging markets may provide the potential for above-average capital
appreciation but also are subject to special risks not typically associated with
investing in more established economies or securities markets. As a result, the
Fund's portfolio may experience greater price volatility, which may be
heightened by currency fluctuations relative to the U.S. dollar.

Allocation of the Fund's investments will depend upon the relative
attractiveness of the Asian markets and particular issuers. Currently, the Fund
intends to invest in issuers of the following Asian countries: Hong Kong
(China), Singapore, Malaysia, Thailand, the Philippines, Indonesia, mainland
China, Taiwan, South Korea, India, Pakistan, Sri Lanka or any country in the
Asian region (other than Japan) that is open to foreign investment. There are no
prescribed limits on geographic distribution of the Fund's investments;
accordingly, the Fund may invest significant assets in any single Asian country.
Such investment practices subject the Fund to greater risks impacting any single
country. In addition, because of the Fund's policy of concentrating its
investments in a single region, it is more susceptible than a fund without such
a policy to any single economic, political or regulatory occurrence affecting
issuers located in that region.

The Fund's investment adviser employs a disciplined, value-oriented approach to
security selection, focusing on larger companies with strong management teams.
The Fund's investment adviser uses a "bottom-up" research-driven investment
strategy that emphasizes security selection and disposition on an individual
company basis. The Fund's investment program emphasizes internal research of
leading companies as the basis for stock selection, calling on a team of market
specialists strategically based throughout Asia. This research process
encompasses analysis of historical financial statements, identification of the
potential for future earnings and cash flows, valuation of key assets,
discussions with analysts to determine consensus expectations and an evaluation
of the strength and depth of management. Visits with management from members of
the research team are central to this process.

The Fund's investment adviser considers valuation on an absolute basis and
relative to market average and comparable companies in the region and emphasizes
stocks where a catalyst can be identified which will correct undervaluation.
Depending on the type of company, factors considered in selecting securities for
investment include price-to-sales, price-to-earnings, price-to-cash flow,
price-to-book value and price-to-replacement value of assets ratios. The Fund's
investment adviser evaluates top-down country risk factors and opportunities
when determining position sizes and overall exposure to individual markets. The
Fund's research team evaluates macroeconomic and political factors when
determining overall exposures within individual countries.

7
<PAGE>
The Fund invests primarily in common stocks. Common stocks are shares of a
corporation or other entity that entitle the holder to a pro rata share of the
profits of the corporation, if any, without preference over any other class of
securities, including such entity's debt securities, preferred stock and other
senior equity securities. Common stock usually carries with it the right to vote
and frequently an exclusive right to do so.

While the Fund invests primarily in common stocks, the Fund also may invest in
preferred stocks, convertible securities, warrants or rights to purchase common
stock and depositary receipts. Preferred stock generally has a preference as to
dividends and liquidation over an issuer's common stock but ranks junior to debt
securities in an issuer's capital structure. Unlike interest payments on debt
securities, preferred stock dividends are payable only if declared by the
issuer's board of directors. Preferred stock also may be subject to optional or
mandatory redemption provisions. The ability of common stocks and preferred
stocks to generate income is dependent on the earnings and continuing
declaration of dividends by the issuers of such securities.

A convertible security is a bond, debenture, note, preferred stock, or other
security that may be converted into or exchanged for a prescribed amount of
common stock or other equity security of the same or a different issuer or into
cash within a particular period of time at a specified price or formula. A
convertible security generally entitles the holder to receive interest paid or
accrued on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities generally have characteristics similar to both debt and
equity securities. The value of convertible securities tends to decline as
interest rates rise and, because of the conversion feature, tends to vary with
fluctuations in the market value of the underlying equity securities.
Convertible securities generally rank senior to common stock in a corporation's
capital structure but are usually subordinated to comparable nonconvertible
securities. Convertible securities generally do not participate directly in any
dividend increases or decreases of the underlying equity securities although the
market prices of convertible securities may be affected by any such dividend
changes or other changes in the underlying equity securities.

The Fund only invests in convertible debt securities considered to be
"investment grade" at the time of investment. Investment grade securities are
securities rated BBB or higher by Standard & Poor's ("S&P") or rated Baa or
higher by Moody's Investors Service, Inc. ("Moody's") or comparably rated by any
other internationally recognized statistical rating organization ("IRSRO") or,
if unrated, are considered by the Fund's investment adviser to be of comparable
quality. Securities rated BBB by S&P or Baa by Moody's are in the lowest of the
four investment grade categories and are considered by the rating agencies to be
medium-grade obligations which possess speculative characteristics so that
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than in the case of
higher-rated securities.

Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights typically have a substantially
shorter term than do warrants. Rights and warrants may be considered more
speculative and less liquid than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any right in the assets of the
issuing company. Rights and warrants may lack a secondary market.

The Fund may invest up to 35% of its total assets in debt securities, including
bills and bonds issued by the United States or Asian governmental entities;
notes, debentures and bonds of Asian companies; and U.S. money market
instruments. The Fund's investment adviser believes it is likely that many of
the debt securities of Asian issuers in which the Fund will invest will be
unrated, and whether or not rated, may have speculative characteristics. The
market prices of debt securities generally fluctuate inversely with changes in
interest rates so that the value of investments in such securities can be
expected to decrease as interest rates rise and increase as interest rates fall.
Debt securities with longer maturities may increase or decrease in value more
than debt securities of shorter maturities. The

8
<PAGE>

credit risks and market prices of lower-grade securities generally are more
sensitive to negative issuer developments, such as reduced revenues or increased
expenditures, or adverse economic conditions, such as a recession, than are
higher-grade securities.

The Fund may invest in securities of Asian issuers indirectly through
investments in other investment companies. Such investments are commonly used
when direct investments in certain countries are not permitted by foreign
investors. Investments in other investment companies may involve duplication of
management fees and certain other expenses.

While the Fund focuses primarily on larger companies, it also may invest in
small- to medium-sized companies. The securities of small- or medium-sized
companies may be subject to more abrupt or erratic market movements than
securities of larger-sized companies or the market averages in general. In
addition, such companies typically are subject to a greater degree of change in
earnings and business prospects than are larger companies. Thus, to the extent
the Fund invests in small- or medium-sized companies, it may be subject to
greater investment risk than that assumed through investment in the equity
securities of larger companies.

The Fund may enter into forward foreign currency exchange contracts and invest
in derivative instruments. Because of the lack of hedging facilities in the
currency markets of Asia, no active currency hedging strategy is anticipated
currently. Instead, each investment will be considered on a total currency
adjusted basis with the U.S. dollar as a base currency.

RISKS OF INVESTING
IN SECURITIES OF FOREIGN ISSUERS

The Fund invests in securities of foreign issuers. Securities of foreign issuers
may be denominated in U.S. dollars or in currencies other than U.S. dollars. The
percentage of assets invested in securities of a particular country or
denominated in a particular currency will vary in accordance with the investment
adviser's assessment of the relative yield, appreciation potential and the
relationship of a country's currency to the U.S. dollar, which is based upon
such factors as fundamental economic strength, credit quality and interest rate
trends. Investments in foreign securities present certain risks not ordinarily
associated with investments in securities of U.S. issuers. These risks include
fluctuations in foreign currency exchange rates, political, economic or legal
developments (including war or other instability, expropriation of assets,
nationalization and confiscatory taxation), the imposition of foreign exchange
limitations (including currency blockage), withholding taxes on income or
capital transactions or other restrictions, higher transaction costs (including
higher brokerage, custodial and settlement costs and currency conversion costs)
and possible difficulty in enforcing contractual obligations or taking judicial
action. Foreign securities may not be as liquid and may be more volatile than
comparable domestic securities.

In addition, there often is less publicly available information about many
foreign issuers, and issuers of foreign securities are subject to different,
often less comprehensive, auditing, accounting and financial reporting
disclosure requirements than domestic issuers. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the United States, and, with respect to certain foreign countries, there
is a possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Because there is
usually less supervision and governmental regulation of foreign exchanges,
brokers and dealers than there is in the United States, the Fund may experience
settlement difficulties or delays not usually encountered in the United States.

Delays in making trades in foreign securities relating to volume constraints,
limitations or restrictions, clearance or settlement procedures, or otherwise
could impact returns and result in temporary periods when assets of the Fund are
not fully invested or attractive investment opportunities are foregone.

In addition to the increased risks of investing in foreign securities, there are
often increased transaction costs associated with investing in foreign
securities including the costs incurred in connection with converting
currencies, higher foreign brokerage or dealer costs, and higher settlement
costs or custodial costs.

9
<PAGE>

Since the Fund invests in securities denominated or quoted in currencies other
than the U.S. dollar, the Fund will be affected by changes in foreign currency
exchange rates (and exchange control regulations) which affect the value of
investments in the Fund and the accrued income and appreciation or depreciation
of the investments. Changes in foreign currency exchange ratios relative to the
U.S. dollar will affect the U.S. dollar value of the Fund's assets denominated
in that currency and the Fund's return on such assets as well as any temporary
uninvested reserves in bank deposits in foreign currencies. In addition, the
Fund will incur costs in connection with conversions between various currencies.

The Fund may purchase and sell foreign currency on a spot (i.e., cash) basis in
connection with the settlement of transactions in securities traded in such
foreign currency. The Fund also may enter into contracts with banks, brokers or
dealers to purchase or sell securities or foreign currencies at a future date
("forward contracts"). A foreign currency forward contract is a negotiated
agreement between the contracting parties to exchange a specified amount of
currency at a specified future time at a specified rate. The rate can be higher
or lower than the spot rate between the currencies that are the subject of the
contract.

The Fund may attempt to protect against adverse changes in the value of the U.S.
dollar in relation to a foreign currency by entering into a forward contract for
the purchase or sale of the amount of foreign currency invested or to be
invested, or by buying or selling a foreign currency option or futures contract
for such amount. Such strategies may be employed before the Fund purchases a
foreign security traded in the currency which the Fund anticipates acquiring or
between the date the foreign security is purchased or sold and the date on which
payment therefor is made or received. Seeking to protect against a change in the
value of a foreign currency in the foregoing manner does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such transactions reduce or
preclude the opportunity for gain if the value of the currency should move in
the direction opposite to the position taken. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it had not
entered into such contracts. Because of the lack of hedging facilities available
in the currency markets of Asia, no active currency hedging strategy is
anticipated currently.

Investors should consider carefully the risks of foreign investments before
investing in the Fund.

ADDITIONAL RISKS OF INVESTING IN EMERGING MARKET COUNTRIES. The risks of foreign
investment are heightened when the issuer is from an emerging market country.
The extent of economic development, political stability and market depth of such
countries varies widely and investments in the securities of issuers in such
countries typically involve greater potential gain or loss than investments in
securities of issuers in more developed countries. Emerging market countries
tend to have economic structures that are less diverse and mature and political
systems that are less stable than those of developed markets. Emerging market
countries may be more likely to experience political turmoil or rapid changes in
economic conditions than more developed markets, and the financial condition of
issuers in emerging market countries may be more precarious than in other
countries. Certain countries depend to a larger degree upon international trade
or development assistance and, therefore, are vulnerable to changes in trade or
assistance which, in turn, may be affected by a variety of factors. The Fund may
be particularly sensitive to changes in the economies of certain countries
resulting from any reversal of economic liberalization, political unrest or the
imposition of sanctions by the United States or other countries.

10
<PAGE>

countries or increase the administrative costs of such investments. For example,
certain countries may require governmental approval prior to investment by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of the issuer available for purchase by nationals. In addition,
certain countries may restrict or prohibit investment opportunities in issuers
or industries deemed important to national interests. Such restrictions may
affect the market price, liquidity and rights of securities that may be
purchased by the Fund. The repatriation of both investment income and capital
from certain emerging market countries is subject to restrictions such as the
need for governmental consents. Due to restrictions on direct investment in
securities in certain countries, it is anticipated that the Fund may invest in
such countries through other investment funds in such countries.

Many emerging market countries have experienced currency devaluations and
substantial (and, in some cases, extremely high) rates of inflation, which have
had a negative effect on the economies and securities markets of such countries.
Economies in emerging market countries generally are dependent heavily upon
commodity prices and international trade and, accordingly, have been and may
continue to be affected adversely by the economies of their trading partners,
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures negotiated by the countries with which
they trade.

Many emerging market countries are subject to a substantial degree of economic,
political and social instability. Governments of some emerging market countries
are authoritarian in nature or have been installed or removed as a result of
military coups, while governments in other emerging market countries have
periodically used force to suppress civil dissent. Disparities of wealth, the
pace and success of political reforms, and ethnic, religious and racial
disaffection, among other factors, have also led to social unrest, violence
and/or labor unrest in some emerging market countries. Unanticipated political
or social developments may result in sudden and significant investment losses.

Settlement procedures in emerging market countries are frequently less developed
and reliable than those in developed markets. In addition, significant delays
are common in certain markets in registering the transfer of securities.
Settlement or registration problems may make it more difficult for the Fund to
value its portfolio securities and could cause the Fund to miss attractive
investment opportunities, to have a portion of its assets uninvested or to incur
losses due to the failure of a counterparty to pay for securities the Fund has
delivered or the Fund's inability to complete its contractual obligations. The
creditworthiness of the local securities firms used by the Fund in emerging
market countries may not be as sound as the creditworthiness of firms used in
more developed countries. As a result, the Fund may be subject to a greater risk
of loss if a securities firm defaults in the performance of its
responsibilities.

The small size and inexperience of the securities markets in certain emerging
market countries and the limited volume of trading in securities in those
countries may make the Fund's investments in such countries less liquid and more
volatile than investments in countries with more developed securities markets.
The Fund's investments in emerging market countries are subject to the risk that
the liquidity of a particular investment, or investments generally, in such
countries will shrink or disappear suddenly and without warning as a result of
adverse economic, market or political conditions or adverse investor
perceptions, whether or not accurate. Because of the lack of sufficient market
liquidity, the Fund may incur losses because it will be required to effect sales
at a disadvantageous time and only then at a substantial drop in price.
Investments in emerging market countries may be more difficult to price
precisely because of the characteristics discussed above and lower trading
volumes.

The Fund's use of foreign currency management techniques in emerging market
countries may be limited. Due to the limited market for these instruments in
emerging market countries, the Fund's investment adviser does not currently
anticipate that a significant portion of the Fund's currency exposure in
emerging market countries, if any, will be covered by such instruments.

11
<PAGE>
Investors are strongly advised to consider carefully the special risks involved
in investing in emerging market countries, which are in addition to the risks of
investing in foreign securities generally.

DERIVATIVE INSTRUMENTS

The Fund may purchase and sell derivative instruments such as exchange-listed
and over-the-counter put and call options on securities, financial futures,
equity, fixed-income and interest rate indices, and other financial instruments,
futures contracts and options thereon (including but not limited to securities
index futures, foreign currency exchange futures, interest rate futures and
other financial futures), structured notes, swaps, caps, floors or collars and
enter into various currency transactions (to the extent available) such as
currency forward contracts, currency futures contracts, currency swaps or
options on currency or currency futures. In addition, the Fund may invest in
other derivative instruments that are developed over time if their use would be
consistent with the objective of the Fund. Collectively, all of the above are
referred to as "Strategic Transactions." The Fund generally seeks to use
Strategic Transactions as a portfolio management or hedging technique to seek to
protect against possible adverse changes in the market value of securities held
in or to be purchased for the Fund's portfolio, protect the Fund's unrealized
gains, facilitate the sale of certain securities for investment purposes,
protect against changes in currency exchange rates or to adjust the exposure to
a particular currency, manage the effective maturity or duration of the Fund's
portfolio, establish positions in the derivatives markets as a substitute for
purchasing or selling particular securities, including, for example, when the
Fund adjusts its exposure to a market in response to changes in investment
strategy, when doing so provides more liquidity than the direct purchase of the
securities underlying such derivatives, when the Fund is restricted from
directly owning the underlying securities due to foreign investment restrictions
or other reasons, or when doing so provides a price advantage over purchasing
the underlying securities directly, either because of a pricing differential
between the derivatives and securities markets or because of lower transaction
costs associated with the derivatives transaction. The Fund may invest up to
33 1/3% of its total assets in Strategic Transactions for non-hedging purposes
(measured by the aggregate notional amount of outstanding derivatives). In
addition, the Fund may invest up to 20% of its total assets in futures contracts
and options on futures contracts (measured by the aggregate notional amount of
such outstanding contracts).

12
<PAGE>

make trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States and (v) lower
trading volume and liquidity.

OTHER INVESTMENTS AND RISK FACTORS

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for capital appreciation has
lessened, or for other reasons. The portfolio turnover rate may vary from year
to year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs) which would
adversely impact a fund's performance. Higher portfolio turnover may result in
the realization of more short-term capital gains than if a fund had lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities, including prime
commercial paper, repurchase agreements and bank obligations, such as bankers'
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for capital appreciation
on these securities will tend to be lower than the potential for capital
appreciation on other securities that may be owned by the Fund. In taking such a
defensive position, the Fund would temporarily not be pursuing and may not
achieve its investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER
Van Kampen Investment Advisory Corp. is the investment adviser (the "Adviser" or
"Advisory Corp.") and administrator of the Fund. The Adviser

13
<PAGE>

is a wholly owned subsidiary of Van Kampen Investments Inc. ("Van Kampen
Investments"). Van Kampen Investments is a diversified asset management company
that administers more than three million retail investor accounts, has extensive
capabilities for managing institutional portfolios, and has more than $100
billion under management or supervision as of September 30, 2000. Van Kampen
Investments has more than 50 open-end funds, 38 closed-end funds and more than
2,700 unit investment trusts that are professionally distributed by leading
authorized dealers nationwide. Van Kampen Funds Inc., the distributor of the
Fund (the "Distributor") and the sponsor of the funds mentioned above, is also a
wholly owned subsidiary of Van Kampen Investments. Van Kampen Investments is an
indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co. The
Adviser's principal office is located at 1 Parkview Plaza, Oakbrook Terrace,
Illinois 60181-5555.

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
--------------------------------------------------
<S> <C>
FIRST $500 MILLION 1.00%
.................................................
NEXT $500 MILLION 0.95%
.................................................
OVER $1 BILLION 0.90%
.................................................
</TABLE>

Applying this fee schedule, the effective advisory fee rate was 1.00% of the
Fund's average daily net assets for the Fund's fiscal year ended June 30, 2000.
The Fund's average daily net assets are determined by taking the average of all
of the determinations of the net assets during a given calendar month. Such fee
is payable for each calendar month as soon as practicable after the end of that
month.

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

Morgan Stanley Dean Witter Investment Management Inc. is the Fund's investment
subadviser (the "Subadviser"). The Subadviser is a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. The Subadviser conducts a worldwide portfolio
management business and provides a broad range of portfolio management services
to customers in the United States and abroad. At September 30, 2000, the
Subadviser, together with its affiliated institutional asset management
companies (collectively, the "MSDW Investment Management Group"), managed assets
of approximately $178 billion, including assets under fiduciary advice. The
Subadviser's principal office is located at 1221 Avenue of the Americas, New
York, New York 10020. On December 1, 1998, Morgan Stanley Asset Management Inc.
changed its name to Morgan Stanley Dean Witter Investment Management Inc. but
continues to do business in certain instances using the name Morgan Stanley
Asset Management.

14
<PAGE>
GENERAL
From time to time, the Adviser, the Subadviser or the Distributor may
voluntarily undertake to reduce the Fund's expenses by reducing the fees payable
to them or by reducing other expenses of the Fund in accordance with such
limitations as the Adviser, the Subadviser or Distributor may establish.

PORTFOLIO MANAGEMENT. Ashutosh Sinha has been responsible for the day-to-day
management of the Fund's investment portfolio since 1998.

Mr. Sinha, a Principal, joined the MSDW Investment Management Group in 1995 and
is a member of the MSDW Investment Management Group's Emerging Markets Equity
Group, focusing primarily on Asian markets other than Japan. Prior to joining
the MSDW Investment Management Group, Mr. Sinha spent two years at SBI Funds
Management Ltd., as an analyst for the India Magnum Fund and, prior to that
time, he was a consultant for three years for Citicorp Overseas Software Ltd.
Mr. Sinha graduated from the Indian Institute of Technology, Kanpur, with a
degree in Electrical Engineering and received an M.B.A. from the Indian
Institute of Management, Calcutta.

PURCHASE OF SHARES

GENERAL
The Fund offers three classes of shares designated as Class A Shares, Class B
Shares and Class C Shares. By offering three classes of shares, the Fund permits
each investor to choose the class of shares that is most beneficial given the
amount to be invested and the length of time the investor expects to hold the
shares.

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which the class's distribution fee and/or the service fee is paid,
(iii) each class of shares has different exchange privileges, (iv) certain
classes of shares are subject to a conversion feature and (v) certain classes of
shares have different shareholder service options available.

15
<PAGE>

are received or there is not a sufficient degree of trading in the Fund's
portfolio securities such that the Fund's net asset value per share might be
materially affected. The Fund's Board of Directors reserves the right to
calculate the net asset value per share and adjust the offering price more
frequently than once daily if deemed desirable. Net asset value per share for
each class is determined by dividing the value of the Fund's portfolio
securities, cash and other assets (including accrued interest) attributable to
such class, less all liabilities (including accrued expenses) attributable to
such class, by the total number of shares of the class outstanding. Such
computation is made by using prices as of the close of trading on the Exchange
and (i) valuing securities listed or traded on a national securities exchange at
the closing price, or if no closing price is available, at the last reported
sale price, and if there has been no sale that day, at the mean between the last
reported bid and asked prices, (ii) valuing over-the-counter securities at the
last reported sale price from the National Association of Securities Dealers
Automated Quotations ("NASDAQ") and, if there has been no sale that day, at the
mean between the last reported bid and asked prices, (iii) valuing unlisted
securities at the average of the mean between the current reported bid and asked
prices obtained from reputable brokers and (iv) valuing any securities for which
market quotations are not readily available and any other assets at fair value
as determined in good faith by the Adviser in accordance with procedures
established by the Fund's Board of Directors. Securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.

Trading in securities on many foreign securities exchanges (including Far
Eastern securities exchanges) and over-the-counter markets is normally completed
before the close of business on each U.S. business day. In addition, securities
trading in a particular country or countries may not take place on all U.S.
business days or may take place on days which are not U.S. business days.
Changes in valuations on certain securities may occur at times or on days on
which the Fund's net asset value is not calculated and on which the Fund does
not effect sales, redemptions and exchanges of its shares.

The Fund calculates net asset value per share, and therefore effects sales,
redemptions and exchanges of its shares, as of the close of trading on the
Exchange each day the Exchange is open for trading. Such calculation does not
take place contemporaneously with the determination of the prices of certain
foreign portfolio securities used in such calculation.

If events materially affecting the value of foreign portfolio securities or
other portfolio securities occur between the time when their price is determined
and the time when the Fund's net asset value is calculated, such securities may
be valued at fair value as determined in good faith by the Adviser based in
accordance with procedures established by the Fund's Board of Directors.

The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution and service fees and other expenses of the Fund associated with
that class of shares. To assist investors in comparing classes of shares, the
tables under the Prospectus heading "Fees and Expenses of the Fund" provide a
summary of sales charges and expenses and an example of the sales charges and

16
<PAGE>

expenses of the Fund applicable to each class of shares.

CLASS A SHARES
Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 5.75% of the offering price (or 6.10% of the net amount
invested), reduced on investments of $50,000 or more as follows:

CLASS A SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
AS % OF AS % OF
SIZE OF OFFERING NET AMOUNT
INVESTMENT PRICE INVESTED
------------------------------------------------
<S> <C> <C>
Less than $50,000 5.75% 6.10%
...............................................
$50,000 but less than
$100,000 4.75% 4.99%
...............................................
$100,000 but less than
$250,000 3.75% 3.90%
...............................................
$250,000 but less than
$500,000 2.75% 2.83%
...............................................
$500,000 but less than
$1,000,000 2.00% 2.04%
...............................................
$1,000,000 or more * *
...............................................
</TABLE>

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

17
<PAGE>

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
-----------------------------------------------
<S> <C>
First 5.00%
..............................................
Second 4.00%
..............................................
Third 3.00%
..............................................
Fourth 2.50%
..............................................
Fifth 1.50%
..............................................
Sixth and After None
..............................................
</TABLE>

CLASS C SHARES
Class C Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge of 1.00% of the dollar amount subject to charge
if redeemed within one year of purchase.

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

18
<PAGE>

spend up to 0.25% per year of the Fund's average daily net assets with respect
to Class C Shares of the Fund.

CONVERSION FEATURE

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

QUANTITY DISCOUNTS

19
<PAGE>
of the Fund and shares of other Participating Funds, although other
Participating Funds may have different sales charges.

UNIT INVESTMENT TRUST REINVESTMENT PROGRAM. The Fund permits unitholders of unit
investment trusts to reinvest distributions from such trusts in Class A Shares
of the Fund at net asset value per share and with no minimum initial or
subsequent investment requirement, if the administrator of an investor's unit
investment trust program meets certain uniform criteria relating to cost savings
by the Fund and the Distributor. The total sales charge for all other
investments made from unit investment trust distributions will be 1.00% of the
offering price (1.01% of net asset value). Of this amount, the Distributor will
pay to the authorized dealer, if any, through which such participation in the
qualifying program was initiated 0.50% of the offering price as a dealer
concession or agency commission. Persons desiring more information with respect
to this program, including the terms and conditions that apply to the program,
should contact their authorized dealer or the Distributor.

20
<PAGE>

even if their investments are made more frequently. The Fund reserves the right
to modify or terminate this program at any time.

NET ASSET VALUE PURCHASE OPTIONS. Class A Shares of the Fund may be purchased at
net asset value, upon written assurance that the purchase is made for investment
purposes and that the shares will not be resold except through redemption by the
Fund, by:

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

(8) Trusts created under pension, profit sharing or other employee benefit
plans qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), or custodial accounts held by a bank created
pursuant to Section 403(b) of the Code and sponsored by nonprofit
organizations defined under Section 501(c)(3) of the Code and assets held
by an employer or trustee in connection with an eligible deferred
compensation plan under Section 457 of the Code. Such plans will qualify
for purchases at net asset value provided, for plans initially establishing
accounts with the Distributor in the Participating Funds after January 1,
2000, that (1) the total plan assets are at least $1 million or (2) such
shares are purchased by an employer sponsored plan with more than 100
eligible employees. Such plans that have been established with a
Participating Fund or have received proposals from the Distributor prior to
January 1, 2000 based on net asset value purchase privileges previously in
effect will be qualified to purchase shares of the Participating Funds at
net asset value. Section 403(b) and similar accounts for which Van Kampen
Trust Company serves as custodian will not be eligible for net asset value
purchases based on the aggregate investment made by the plan or the number
of eligible employees, except under certain uniform criteria established by
the Distributor from time to time. A commission will be paid to authorized
dealers who initiate and are responsible for such purchases within a
rolling twelve-month period as follows: 1.00% on sales to $2 million, plus
0.80% on the next $1 million, plus 0.50% on the next $47 million, plus
0.25% on the excess over $50 million.

21
<PAGE>
(9) Individuals who are members of a "qualified group." For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the
Fund and Participating Funds, (iv) has a membership that the authorized
dealer can certify as to the group's members and (v) satisfies other
uniform criteria established by the Distributor for the purpose of
realizing economies of scale in distributing such shares. A qualified group
does not include one whose sole organizational nexus, for example, is that
its participants are credit card holders of the same institution, policy
holders of an insurance company, customers of a bank or broker-dealer,
clients of an investment adviser or other similar groups. Shares purchased
in each group's participants account in connection with this privilege will
be subject to a contingent deferred sales charge of 1.00% in the event of
redemption within one year of purchase, and a commission will be paid to
authorized dealers who initiate and are responsible for such sales to each
individual as follows: 1.00% on sales to $2 million, plus 0.80% on the next
$1 million and 0.50% on the excess over $3 million.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

REDEMPTION OF
SHARES

22
<PAGE>

indicate the number of shares or dollar amount to be redeemed, the Fund name and
class designation of such shares and the shareholder's account number. The
redemption request must be signed by all persons in whose names the shares are
registered. Signatures must conform exactly to the account registration. If the
proceeds of the redemption exceed $100,000, or if the proceeds are not to be
paid to the record owner at the record address, or if the record address has
changed within the previous 15 days, signature(s) must be guaranteed by one of
the following: a bank or trust company; a broker-dealer; a credit union; a
national securities exchange, registered securities association or clearing
agency; a savings and loan association; or a federal savings bank.

TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. A shareholder
automatically has telephone redemption privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. For accounts that are not established with telephone redemption
privileges, a shareholder may call the Fund at (800) 341-2911 to request that a
copy of the Telephone Redemption Authorization form be sent to the shareholder
for completion. To redeem shares, contact the telephone transaction line at
(800) 421-5684. Shares may also be redeemed by telephone through
FundInfo-Registered Trademark- (automated telephone system), which is generally
accessible 24 hours a day, seven days a week at (800) 847-2424. Van Kampen
Investments and its subsidiaries, including Investor Services, and the Fund
employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape-recording telephone communications and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, none of Van Kampen Investments, Investor Services or
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. Telephone redemptions may not be available if the
shareholder cannot reach Investor Services by telephone, whether because all
telephone lines are busy or for any other reason; in such case, a shareholder
would have to use the Fund's other redemption procedure previously described.
Requests received by Investor Services prior to 4:00 p.m., New York time, will
be processed at the next determined net asset value per share. These privileges
are available for most accounts other than retirement accounts or accounts with
shares represented by certificates. If an account has multiple owners, Investor
Services may rely on the instructions of any one owner.

23
<PAGE>

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income at least
annually as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.

CAPITAL GAIN DIVIDENDS. The Fund may realize capital gains or losses when it
sells securities, depending on whether the sales prices for the securities are
higher or lower than purchase prices. The Fund distributes any net capital gain
to shareholders as capital gain dividends at least annually. As in the case of
dividends, capital gain dividends are automatically reinvested in additional
shares of the Fund at the next determined net asset value unless the shareholder
instructs otherwise.

SHAREHOLDER SERVICES

24
<PAGE>

none of Van Kampen Investments, Investor Services or the Fund will be liable for
following instructions received through the internet which it reasonably
believes to be genuine. If an account has multiple owners, Investor Services may
rely on the instructions of any one owner.

When shares that are subject to a contingent deferred sales charge are exchanged
among Participating Funds, the holding period for purposes of computing the
contingent deferred sales charge is based upon the date of the initial purchase
of such shares from a Participating Fund. When such shares are redeemed and not
exchanged for shares of another Participating Fund, the shares are subject to
the contingent deferred sales charge schedule imposed by the Participating Fund
from which such shares were originally purchased.

25
<PAGE>

reasonably believes to be genuine. If the exchanging shareholder does not have
an account in the fund whose shares are being acquired, a new account will be
established with the same registration, dividend and capital gain dividend
options (except dividend diversification) and authorized dealer of record as the
account from which shares are exchanged, unless otherwise specified by the
shareholder. In order to establish a systematic withdrawal plan for the new
account or reinvest dividends from the new account into another fund, however,
an exchanging shareholder must submit a specific request. The Fund reserves the
right to reject any order to acquire its shares through exchange. In addition,
the Fund and other Participating Funds may restrict exchanges by shareholders
engaged in excessive trading by limiting or disallowing the exchange privilege
to such shareholders. For further information on these restrictions see the
Fund's Statement of Additional Information. The Fund may modify, restrict or
terminate the exchange privilege at any time on 60 days' notice to its
shareholders of any termination or material amendment.

FEDERAL INCOME
TAXATION

26
<PAGE>

gains may be taxed at different rates depending on how long the shareholder held
such shares.

Foreign shareholders, including shareholders who are non-resident aliens, may be
subject to U.S. withholding tax on certain distributions (whether received in
cash or in shares) at a rate of 30% or such lower rate as prescribed by an
applicable treaty. Accordingly, investment in the Fund is likely to be
appropriate for a foreign shareholder only if such person can utilize a foreign
tax credit or corresponding tax benefit in respect of such U.S. withholding tax.
Prospective foreign investors should consult their tax advisers concerning the
tax consequences to them of an investment in shares.

27
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by Deloitte
& Touche LLP, independent auditors, whose report, along with the Fund's most
recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal years ended June 30, 1999, 1998, 1997, 1996 and the fiscal period
August 1, 1995 (commencement of offering for Class B Shares) to June 30, 1996
has been audited by PricewaterhouseCoopers LLP. This information should be read
in conjunction with the financial statements and notes thereto included in the
Statement of Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES
YEAR ENDED JUNE 30,
2000# 1999# 1998# 1997 1996
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period...... $ 11.48 $ 6.53 $ 16.62 $ 17.15 $ 16.42
-------- ------- -------- -------- --------
Income From Investment
Operations
Net Investment
Income/Loss............ (0.08) 0.02 (0.04) (0.06) (0.04)
Net Realized and
Unrealized Gain/Loss... 1.66 4.93 (10.03) (0.14) 0.77
-------- ------- -------- -------- --------
Total From Investment
Operations............... 1.58 4.95 (10.07) (0.20) 0.73
-------- ------- -------- -------- --------
Distributions
Net Realized Gain...... -- -- -- -- --
In Excess of Net
Realized Gain.......... -- -- (0.02) (0.33) --
-------- ------- -------- -------- --------
Total Distributions...... -- -- (0.02) (0.33) --
-------- ------- -------- -------- --------
Net Asset Value, End of
Period................... $ 13.06 $ 11.48 $ 6.53 $ 16.62 $ 17.15
======== ======= ======== ======== ========
Total Return (1)......... 13.49% 75.69% (60.57%) (1.10%) 4.45%
======== ======= ======== ======== ========
RATIOS AND SUPPLEMENTAL
DATA
NET ASSETS, END OF PERIOD
(000'S).................. $ 76,254 $88,808 $ 47,128 $175,440 $248,009
RATIO OF EXPENSES TO
AVERAGE NET ASSETS....... 1.92% 1.95% 1.90% 1.84% 1.88%
RATIO OF NET INVESTMENT
INCOME/LOSS TO AVERAGE
NET ASSETS............... (0.66%) 0.28% (0.39%) (0.31%) (0.16%)
PORTFOLIO TURNOVER
RATE..................... 108% 138% 130% 74% 38%
----------------------------------------------------------------------------------------

EFFECT OF VOLUNTARY
EXPENSE REDUCTIONS DURING
THE PERIOD
PER SHARE BENEFIT TO
NET INVESTMENT
INCOME/LOSS............ $ 0.01 $ 0.01 $ 0.01 $ -- $ --
RATIOS BEFORE EXPENSE
REDUCTIONS:
EXPENSES TO AVERAGE NET
ASSETS................. 2.02% 2.03% 2.21% -- --
NET INVESTMENT
INCOME/LOSS TO AVERAGE
NET ASSETS............. (0.76%) 0.20% (0.53%) -- --
RATIO OF EXPENSES TO
AVERAGE NET ASSETS
EXCLUDING COUNTRY TAX
EXPENSE AND INTEREST
EXPENSE.................. 1.90% 1.90% 1.90% -- --
----------------------------------------------------------------------------------------

<CAPTION>
CLASS B SHARES
YEAR ENDED JUNE 30, AUGUST 1, 1995+
2000# 1999# 1998# 1997 TO JUNE 30, 1996
------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period...... $ 11.01 $ 6.31 $ 16.17 $ 16.81 $ 16.51
------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment
Income/Loss............ (0.17) (0.03) (0.10) (0.16) (0.03)
Net Realized and
Unrealized Gain/Loss... 1.59 4.73 (9.74) (0.15) 0.33
------- -------- -------- ------- -------
Total From Investment
Operations............... 1.42 4.70 (9.84) (0.31) 0.30
------- -------- -------- ------- -------
Distributions
Net Realized Gain...... -- -- -- (0.33) --
In Excess of Net
Realized Gain.......... -- -- (0.02) -- --
------- -------- -------- ------- -------
Total Distributions...... -- -- (0.02) (0.33) --
------- -------- -------- ------- -------
Net Asset Value, End of
Period................... $ 12.43 $ 11.01 $ 6.31 $ 16.17 $ 16.81
======= ======== ======== ======= =======
Total Return (1)......... 12.81% 74.48% (60.89%) (1.79%) 1.82%*
======= ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL
DATA
NET ASSETS, END OF PERIOD
(000'S).................. $45,837 $ 42,905 $ 26,126 $62,786 $52,853
RATIO OF EXPENSES TO
AVERAGE NET ASSETS....... 2.67% 2.70% 2.65% 2.59% 2.61%
RATIO OF NET INVESTMENT
INCOME/LOSS TO AVERAGE
NET ASSETS............... (1.42%) (0.44%) (1.01%) (1.04%) (0.52%)
PORTFOLIO TURNOVER
RATE..................... 108% 138% 130% 74% 38%*
-------------------------
EFFECT OF VOLUNTARY
EXPENSE REDUCTIONS DURING
THE PERIOD
PER SHARE BENEFIT TO
NET INVESTMENT
INCOME/LOSS............ $ 0.01 $ 0.01 $ 0.02 $ -- $ --
RATIOS BEFORE EXPENSE
REDUCTIONS:
EXPENSES TO AVERAGE NET
ASSETS................. 2.77% 2.78% 2.96% -- --
NET INVESTMENT
INCOME/LOSS TO AVERAGE
NET ASSETS............. (1.52%) (0.52%) (1.15%) -- --
RATIO OF EXPENSES TO
AVERAGE NET ASSETS
EXCLUDING COUNTRY TAX
EXPENSE AND INTEREST
EXPENSE.................. 2.65% 2.65% 2.65% -- --
-------------------------

<CAPTION>
CLASS C SHARES
YEAR ENDED DECEMBER 31,
2000# 1999# 1998# 1997 1996
------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period...... $ 10.97 $ 6.29 $ 16.14 $ 16.78 $ 16.19
------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment
Income/Loss............ (0.17) (0.04) (0.12) (0.21) (0.13)
Net Realized and
Unrealized Gain/Loss... 1.59 4.72 (9.71) (0.10) 0.72
------- -------- -------- -------- --------
Total From Investment
Operations............... 1.42 4.68 (9.83) (0.31) 0.59
------- -------- -------- -------- --------
Distributions
Net Realized Gain...... -- -- -- -- --
In Excess of Net
Realized Gain.......... -- -- (0.02) (0.33) --
------- -------- -------- -------- --------
Total Distributions...... -- -- (0.02) (0.33) --
------- -------- -------- -------- --------
Net Asset Value, End of
Period................... $ 12.39 $ 10.97 $ 6.29 $ 16.14 $ 16.78
======= ======== ======== ======== ========
Total Return (1)......... 12.76% 74.13% (60.88%) (1.79%) 3.64%
======= ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL
DATA
NET ASSETS, END OF PERIOD
(000'S).................. $38,923 $ 40,706 $ 28,823 $114,460 $168,070
RATIO OF EXPENSES TO
AVERAGE NET ASSETS....... 2.67% 2.70% 2.65% 2.59% 2.63%
RATIO OF NET INVESTMENT
INCOME/LOSS TO AVERAGE
NET ASSETS............... (1.43%) (0.48%) (1.17%) (1.06%) (0.94%)
PORTFOLIO TURNOVER
RATE..................... 108% 138% 130% 74% 38%
-------------------------
EFFECT OF VOLUNTARY
EXPENSE REDUCTIONS DURING
THE PERIOD
PER SHARE BENEFIT TO
NET INVESTMENT
INCOME/LOSS............ $ 0.01 $ 0.01 $ 0.01 $ -- $ --
RATIOS BEFORE EXPENSE
REDUCTIONS:
EXPENSES TO AVERAGE NET
ASSETS................. 2.77% 2.78% 2.96% -- --
NET INVESTMENT
INCOME/LOSS TO AVERAGE
NET ASSETS............. (1.53%) (0.56%) (1.31%) -- --
RATIO OF EXPENSES TO
AVERAGE NET ASSETS
EXCLUDING COUNTRY TAX
EXPENSE AND INTEREST
EXPENSE.................. 2.65% 2.65% 2.65% -- --
-------------------------
</TABLE>

* NON-ANNUALIZED
+ THE FUND BEGAN OFFERING CLASS B SHARES ON AUGUST 1, 1995.
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED
SALES CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

28
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS
BOARD OF DIRECTORS

J. Miles Branagan Richard F. Powers, III*
Jerry D. Choate Phillip B. Rooney
Linda Hutton Heagy Fernando Sisto
R. Craig Kennedy Wayne W. Whalen*
Mitchell M. Merin* Suzanne H. Woolsey
Jack E. Nelson

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE
INFORMATION

VAN KAMPEN ASIAN GROWTH FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Asian Growth Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen Asian Growth Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>

VAN KAMPEN
ASIAN GROWTH FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of Additional Information, which contains more details about the
Fund, is incorporated by reference in its entirety into this prospectus.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

MSAG PRO 10/00
#65143

<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND

Van Kampen Emerging Markets Fund's investment objective is to seek to provide
long-term capital appreciation by investing primarily in equity securities of
emerging country issuers.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Investment Advisory Services ...........................................13

Purchase of Shares .....................................................15
Redemption of Shares ...................................................22
Distributions from the Fund ............................................24

Shareholder Services ...................................................24

Federal Income Taxation ................................................26
Financial Highlights ...................................................28
Appendix -- Description of Securities Ratings .........................A-1

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek to provide long-term capital
appreciation by investing primarily in equity securities of emerging country
issuers.

INVESTMENT STRATEGIES

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing at least 65% of the Fund's total
assets in a portfolio of equity securities of emerging country issuers. Equity
securities include common and preferred stocks, convertible securities, rights
and warrants to purchase common stock and depositary receipts. The Fund's
investment adviser seeks to maximize returns by investing in growth-oriented
equity securities of emerging country issuers. The Fund's investment adviser
combines top-down country criteria to allocate the Fund's assets among countries
(based on relative economic, political and social fundamentals, stock
valuations, and investor sentiment) with bottom-up fundamental analysis of
issuers (seeking to identify issuers with strong earnings growth potential).
Portfolio securities are typically sold when any one or more of these
assessments materially changes. The Fund may invest up to 35% of its total
assets in debt securities, including up to 10% of its total assets in
lower-grade debt securities (commonly referred to as "junk bonds"), which
involve special risks. The Fund may purchase and sell certain derivative
instruments, such as options, futures, options on futures and, to the extent
available, currency-related transactions involving options, futures, forward
contracts and swaps, for various portfolio management purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. Investments in common
stocks and other equity securities generally are affected by changes in the
stock markets, which fluctuate substantially over time, sometimes suddenly and
sharply. In general, market values of equity securities are more volatile than
those of debt securities. Investments in debt securities generally are affected
by changes in interest rates and the creditworthiness of the issuer. The prices
of debt securities tend to fall as interest rates rise, and such declines tend
to be greater among debt securities with longer maturities. Foreign markets may,
but often do not, move in tandem with U.S. markets, and foreign markets,
especially developing or emerging market countries, may be more volatile than
U.S. markets. In addition, securities of emerging country issuers may
underperform relative to other sectors of the market. Thus, the value of the
Fund's investments will vary and at times may be lower or higher than that of
other types of investments. During an overall market decline, securities prices
of smaller companies (in which the Fund may invest) often fluctuate more and may
fall more than the securities prices of larger companies.

RISKS OF INVESTING IN EMERGING COUNTRY ISSUERS. Because the Fund owns securities
of foreign issuers, it is subject to risks not usually associated with owning
securities of U.S. issuers. These risks include fluctuations in foreign
currencies, foreign currency exchange controls, political and economic
instability, differences in financial reporting, differences in securities
regulation and trading and foreign taxation issues. The risks of investing in
developing or emerging countries are greater than the risks generally associated
with foreign investments, including investment and trading limitations, greater
credit and liquidity concerns, greater political uncertainties, an economy's
dependence on international or trade development assistance, greater foreign
currency exchange risks and currency transfer restrictions, and greater delays
and disruptions in settlement transactions. To the extent the Fund focuses more
of its assets in a single country or region, its portfolio would be more
susceptible to factors adversely affecting issuers in that country or region.

RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options,

3
<PAGE>

futures, options on futures and currency-related transactions involving options,
futures, forward contracts and swaps are examples of derivative instruments.
Derivative instruments involve risks different from direct investments in
underlying securities. These risks include imperfect correlation between the
value of the instruments and the underlying assets; risks of default by the
other party to certain transactions; risks that the transactions may result in
losses that partially or completely offset gains in portfolio positions, and
risks that the transactions may not be liquid.

INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- Seek capital appreciation over the long term

- Do not seek current income from their investment

- Are willing to take on the substantially increased risks associated with
investing in securities of emerging country issuers

- Can withstand substantial volatility in the value of their Fund shares

- Wish to add to their investment portfolio a fund that invests primarily in a
non-diversified portfolio of equity securities of emerging country issuers

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the five calendar years prior to the
date of this prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the returns shown below would have been lower.
Remember that the past performance of the Fund is not indicative of its future
performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

ANNUAL RETURN

The Fund's return for the nine-month period ended September 30, 2000 was
-22.00%. As a result of market activity, current performance may vary from the
figures shown.

4
<PAGE>
The annual return variability of the Fund's Class B Shares and Class C Shares
would be substantially similar to that shown for the Class A Shares because all
of the Fund's shares are invested in the same portfolio of securities; however,
the actual annual returns of the Class B Shares and Class C Shares would be
lower than the annual returns shown for the Fund's Class A Shares because of
differences in the expenses borne by each class of shares.

During the five-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 50.70% (for the quarter ended December 31, 1999) and the
lowest quarterly return for Class A Shares was -24.34% (for the quarter ended
September 30, 1998).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the MSCI Emerging Markets Free
Index* and the IFC Global Total Return Composite Index**, two broad-based market
indices that the Fund's investment adviser believes are appropriate benchmarks
for the Fund. The Fund's performance figures listed below include the maximum
sales charges paid by investors. The indices' performance figures do not include
any commissions or sales charges that would be paid by investors purchasing the
securities represented by the index. An investment cannot be made directly in
the indices. Average annual total returns are shown for the periods ended
December 31, 1999 (the most recently completed calendar year prior to the date
of this prospectus). Remember that the past performance of the Fund is not
indicative of its future performance.

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS
FOR THE
PERIODS ENDED PAST PAST SINCE
DECEMBER 31, 1999 1 YEAR 5 YEARS INCEPTION
<S> <C> <C> <C>
--------------------------------------------------------------------------
Van Kampen Emerging Markets Fund
-- Class A Shares 89.96% 6.26% 4.11%(1)
MSCI Emerging Markets Free Index 66.41% 2.00% 2.15%(1)
IFC Global Total Return
Composite Index 62.70% 0.75% 2.07%(1)
.........................................................................
Van Kampen Emerging Markets Fund
-- Class B Shares 95.15% N/A 7.67%(2)
MSCI Emerging Markets Free Index 66.41% 2.00% 2.53%(2)
IFC Global Total Return
Composite Index 62.70% 0.75% 2.41%(2)
.........................................................................
Van Kampen Emerging Markets Fund
-- Class C Shares 99.15% 12.53% 4.49%(1)
MSCI Emerging Markets Free Index 66.41% 2.00% 2.15%(1)
IFC Global Total Return
Composite Index 62.70% 0.75% 2.07%(1)
.........................................................................
N/A NOT APPLICABLE
INCEPTION DATES: (1) 7/6/94, (2) 8/1/95.
* THE MSCI EMERGING MARKETS FREE INDEX IS A MARKET
CAPITALIZATION WEIGHTED INDEX OF OVER 850 STOCKS TRADED IN 22
WORLD MARKETS.
** THE IFC GLOBAL TOTAL RETURN COMPOSITE INDEX IS AN UNMANAGED
INDEX OF COMMON STOCKS (ASSUMES DIVIDENDS ARE REINVESTED)
FROM DEVELOPING COUNTRIES IN LATIN AMERICA, EAST AND SOUTH
ASIA, EUROPE, THE MIDDLE EAST AND AFRICA. THIS INDEX WAS
ORIGINALLY SELECTED BECAUSE IT OFFERED A LONGER PERFORMANCE
HISTORY THAN COMPARABLE INDICES. OVER TIME, HOWEVER, THE
MSCI EMERGING MARKETS FREE INDEX HAS BECOME WIDELY ACCEPTED.
UNLIKE THE IFC GLOBAL TOTAL RETURN COMPOSITE INDEX, THE MSCI
EMERGING MARKETS FREE INDEX EXCLUDES COMPANIES AND SHARE
CLASSES THAT FOREIGN PURCHASERS CANNOT ACCESS DUE TO
RESTRICTIONS. THE INVESTMENT ADVISER BELIEVES THAT THE MSCI
EMERGING MARKETS FREE INDEX BETTER REPRESENTS THE
PERFORMANCE OF EMERGING MARKETS SECURITIES AVAILABLE TO
FOREIGN INVESTORS AND HAS ACCORDINGLY ADOPTED THIS INDEX AS
A NEW BENCHMARK FOR THE FUND. FUTURE PROSPECTUSES OF THE
FUND WILL NOT SHOW THE IFC GLOBAL TOTAL RETURN COMPOSITE
INDEX.
</TABLE>

5
<PAGE>
FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
<S> <C> <C> <C>
---------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 5.75%(1) None None
........................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption
proceeds) None(2) 5.00%(3) 1.00%(4)
........................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
........................................................
Redemption fee None None None
........................................................
Exchange fee None None None
........................................................
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------
Management fees(5) 1.25% 1.25% 1.25%
........................................................
Distribution and/or
service (12b-1)
fees(6) 0.25% 1.00%(7) 1.00%(7)
........................................................
Other expenses(5) 0.75% 0.75% 0.75%
........................................................
Total annual fund
operating expenses(5) 2.25% 3.00% 3.00%
........................................................
</TABLE>

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."
(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR AFTER
PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF SHARES -- CLASS C
SHARES."
(5) THE FUND'S INVESTMENT ADVISER IS CURRENTLY WAIVING OR REIMBURSING A
PORTION OF THE FUND'S MANAGEMENT FEES AND OTHER EXPENSES SUCH THAT THE
ACTUAL TOTAL ANNUAL FUND OPERATING EXPENSES WERE 2.20% FOR CLASS A
SHARES, 2.95% FOR CLASS B SHARES AND 2.95% FOR CLASS C SHARES FOR THE
FISCAL YEAR ENDED JUNE 30, 2000. THE FEE WAIVERS OR EXPENSE REIMBURSE-
MENTS CAN BE TERMINATED AT ANY TIME.
(6) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO 0.25% OF
THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES.
CLASS B SHARES AND CLASS C SHARES ARE EACH SUBJECT TO A COMBINED
ANNUAL DISTRIBUTION AND SERVICE FEE OF UP TO 1.00% OF THE AVERAGE
DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES. SEE "PURCHASE
OF SHARES."
(7) BECAUSE DISTRIBUTION AND/OR SERVICE (12b-1) FEES ARE PAID OUT OF THE
FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES WILL INCREASE
THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE THAN PAYING OTHER
TYPES OF SALES CHARGES.

EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
-----------------------------------------------------------------
Class A Shares $790 $1,238 $1,711 $3,011
................................................................
Class B Shares $803 $1,227 $1,727 $3,143*
................................................................
Class C Shares $403 $ 927 $1,577 $3,318
................................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
-----------------------------------------------------------------
Class A Shares $790 $1,238 $1,711 $3,011
................................................................
Class B Shares $303 $ 927 $1,577 $3,143*
................................................................
Class C Shares $303 $ 927 $1,577 $3,318
................................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

6
<PAGE>
INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek to provide long-term capital
appreciation by investing primarily in equity securities of emerging country
issuers. Any income received from the investment of portfolio securities is
incidental to the Fund's investment objective. The Fund's investment objective
is a fundamental policy and may not be changed without shareholder approval of a
majority of the Fund's outstanding voting securities, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). There are risks
inherent in all investments in securities; accordingly there can be no assurance
that the Fund will achieve its investment objective.

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing at least 65% of the Fund's total
assets in a portfolio of equity securities of emerging country issuers. These
include securities of companies (i) whose securities are traded principally on a
stock exchange or over-the-counter in an emerging country, (ii) that are
organized under the laws of and have a principal office(s) in an emerging
country or (iii) that derive 50% or more of their total revenues from either
goods produced, sales made or services performed in an emerging country. The
Fund's investment adviser will base determinations as to a company's eligibility
on publicly available information and inquiries made to the company. Investments
in securities of companies in emerging countries may provide the potential for
above-average capital appreciation but also are subject to special risks not
typically associated with investing in more established economies or securities
markets. As a result, the Fund's portfolio may experience greater price
volatility, which may be heightened by currency fluctuations relative to the
U.S. dollar.

The Fund's investment adviser considers emerging countries to be those that the
international financial community, including the International Bank for
Reconstruction and Development (more commonly known as The World Bank) and the
International Finance Corporation, considers to be emerging or developing
countries on the basis of such factors as trade initiatives, per capita income
and level of industrialization. Allocation of the Fund's investments will depend
upon the relative attractiveness of emerging countries and particular issuers.
There are no prescribed limits on the geographic distribution of the Fund's
investments.

Currently, investing in issuers in many emerging countries is not feasible or
may involve unacceptable political risks. The Fund emphasizes investment in
those emerging countries whose economies are developing strongly and whose
markets are becoming more sophisticated.

The Fund's investment adviser employs an investment strategy which combines
"top-down" country allocation with "bottom-up" stock selection. In selecting
securities for investment, the Fund focuses on those companies that offer
attractive growth characteristics, reasonable valuations and managements with a
strong shareholder value orientation. The Fund's investment adviser works with a
team of investment professionals who individually represent expertise in
emerging countries in which the Fund invests, and who together analyze the
overall global economic environment and its impact on such markets. Within a
market, the Fund's investment adviser allocates the Fund's assets based on a
variety of factors, including relative economic, political and social
fundamentals, stock valuations, investor sentiment and the research and analysis
of its team specialists. The Fund's investment adviser attempts to manage the
overall risk of its investments through its emphasis on thorough macroeconomic
and fundamental research.

While the Fund invests primarily in common stocks, the Fund also may invest in
preferred stocks, convertible securities, warrants or rights to purchase

7
<PAGE>

common stock and depositary receipts. Preferred stock generally has a preference
as to dividends and liquidation over an issuer's common stock but ranks junior
to debt securities in an issuer's capital structure. Unlike interest payments on
debt securities, preferred stock dividends are payable only if declared by the
issuer's board of directors. Preferred stock also may be subject to optional or
mandatory redemption provisions. The ability of common stocks and preferred
stocks to generate income is dependent on the earnings and continuing
declaration of dividends by the issuers of such securities.

Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights typically have a substantially
shorter term than do warrants. Rights and warrants may be considered more
speculative and less liquid than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any right in the assets of the
issuing company. Rights and warrants may lack a secondary market.

The Fund may invest up to 35% of its total assets in (i) debt securities
denominated in the currency of or issued or guaranteed by a company or the
government of an emerging country, (ii) equity or debt securities of corporate
or government issuers located in industrialized countries or (iii) money-market
instruments. The Fund invests in debt securities when the Fund's investment
adviser believes such investments offer opportunities for capital appreciation.
The market prices of debt securities generally fluctuate inversely with changes
in interest rates so that the value of investments in such securities can be
expected to decrease as interest rates rise and increase as interest rates fall.
Debt securities with longer maturities may increase or decrease in value more
than debt securities of shorter maturities. The Fund may invest up to 10% of its
total assets in below investment grade debt securities (commonly referred to as
"junk bonds") which involve, among other things, greater credit risk, greater
market risk and volatility, greater liquidity concerns and potentially greater
manager risk. For a description of securities ratings, see the appendix to this
prospectus. The credit risks and market prices of lower-grade securities
generally are more sensitive to negative issuer developments, such as reduced
revenues or increased expenditures, or adverse economic conditions, such as a
recession, than are higher-grade securities. It is likely that many of the debt
securities in which the Fund will invest will be unrated, and whether or not
rated, such securities may have speculative characteristics. For a further
description of the risks of lower-grade securities, see the Fund's Statement of
Additional Information.

The Fund may invest in securities of certain issuers indirectly through
investments in other investment companies. Such investments are commonly used
when direct investments in certain countries are not permitted by foreign
entities. Investments in other investment companies may involve duplication of
management fees and certain other expenses.

The Fund may invest in issuers of any capitalization range. The securities of
small- to medium-sized companies may be subject to more abrupt or erratic market
movements than securities of larger companies or the market averages in general.
In addition, such companies typically are subject to a greater degree of change
in earnings and business prospects

8
<PAGE>

than are larger companies. Thus, to the extent the Fund invests in small- or
medium-sized companies, the Fund may be subject to greater investment risk than
that assumed through investment in the equity securities of larger companies.

RISKS OF INVESTING IN
SECURITIES OF FOREIGN ISSUERS

The Fund may attempt to protect against adverse changes in the value of the U.S.
dollar in relation to

9
<PAGE>
a foreign currency by entering into a forward contract for the purchase or sale
of the amount of foreign currency invested or to be invested, or by buying or
selling a foreign currency option or futures contract for such amount. Such
strategies may be employed before the Fund purchases a foreign security traded
in the currency which the Fund anticipates acquiring or between the date the
foreign security is purchased or sold and the date on which payment therefor is
made or received. Seeking to protect against a change in the value of a foreign
currency in the foregoing manner does not eliminate fluctuations in the prices
of portfolio securities or prevent losses if the prices of such securities
decline. Furthermore, such transactions reduce or preclude the opportunity for
gain if the value of the currency should move in the direction opposite to the
position taken. Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such contracts.

Investors should consider carefully the risks of foreign investments before
investing in the Fund.

ADDITIONAL RISKS OF INVESTING IN EMERGING COUNTRIES ISSUERS. The risks of
foreign investment are heightened when the issuer is from an emerging country.
The extent of economic development, political stability and market depth of such
countries varies widely and investments in the securities of issuers in such
countries typically involve greater potential gain or loss than investments in
securities of issuers in more developed countries. Emerging countries tend to
have economic structures that are less diverse and mature and political systems
that are less stable than those of developed markets. Emerging countries may be
more likely to experience political turmoil or rapid changes in economic
conditions than more developed markets, and the financial condition of issuers
in emerging countries may be more precarious than in other countries. Certain
countries depend to a larger degree upon international trade or development
assistance and, therefore, are vulnerable to changes in trade or assistance
which, in turn, may be affected by a variety of factors. The Fund may be
particularly sensitive to changes in the economies of certain countries
resulting from any reversal of economic liberalization, political unrest or the
imposition of sanctions by the United States or other countries.

The Fund's purchase and sale of portfolio securities in emerging countries may
be constrained by limitations as to daily changes in the prices of listed
securities, periodic or sporadic trading or settlement, or limitations on
aggregate holdings by foreign investors. Such limitations may be computed based
on the aggregate trading volume by or holdings of the Fund, the Fund's
investment adviser, its affiliates or their respective clients or other service
providers. The Fund may not be able to sell securities in circumstances where
price, trading or settlement volume limitations have been reached. Foreign
investment in the securities markets of certain emerging countries is restricted
or controlled to varying degrees which may limit investment in such countries or
increase the administrative costs of such investments. For example, certain
countries may require governmental approval prior to investment by foreign
persons or limit investment by foreign persons to only a specified percentage of
an issuer's outstanding securities or a specific class of securities which may
have less advantageous terms (including price) than securities of the issuer
available for purchase by nationals. In addition, certain countries may restrict
or prohibit investment opportunities in issuers or industries deemed important
to national interests. Such restrictions may affect the market price, liquidity
and rights of securities that may be purchased by the Fund. The repatriation of
both investment income and capital from certain emerging countries is subject to
restrictions such as the need for governmental consents. Due to restrictions on
direct investment in securities in certain countries, it is anticipated that the
Fund may invest in such countries through other investment funds in such
countries.

Many emerging countries have experienced currency devaluations and substantial
(and, in some cases, extremely high) rates of inflation, which have had a
negative effect on the economies and securities markets of such countries.
Economies in emerging countries generally are dependent heavily upon commodity
prices and international trade and, accordingly, have been and may continue to
be affected adversely by the economies of their trading partners, trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures negotiated by the countries with which they trade.

10
<PAGE>
Many emerging countries are subject to a substantial degree of economic,
political and social instability. Governments of some emerging countries are
authoritarian in nature or have been installed or removed as a result of
military coups, while governments in other emerging countries have periodically
used force to suppress civil dissent. Disparities of wealth, the pace and
success of political reforms, and ethnic, religious and racial disaffection,
among other factors, have also led to social unrest, violence and/or labor
unrest in some emerging countries. Unanticipated political or social
developments may result in sudden and significant investment losses.

Settlement procedures in emerging countries are frequently less developed and
reliable than those in developed markets. In addition, significant delays are
common in certain markets in registering the transfer of securities. Settlement
or registration problems may make it more difficult for the Fund to value its
portfolio securities and could cause the Fund to miss attractive investment
opportunities, to have a portion of its assets uninvested or to incur losses due
to the failure of a counterparty to pay for securities the Fund has delivered or
the Fund's inability to complete its contractual obligations. The
creditworthiness of the local securities firms used by the Fund in emerging
countries may not be as sound as the creditworthiness of firms used in more
developed countries. As a result, the Fund may be subject to a greater risk of
loss if a securities firm defaults in the performance of its responsibilities.

The small size and inexperience of the securities markets in certain emerging
countries and the limited volume of trading in securities in those countries may
make the Fund's investments in such countries less liquid and more volatile than
investments in countries with more developed securities markets. The Fund's
investments in emerging countries are subject to the risk that the liquidity of
a particular investment, or investments generally, in such countries will shrink
or disappear suddenly and without warning as a result of adverse economic,
market or political conditions or adverse investor perceptions, whether or not
accurate. Because of the lack of sufficient market liquidity, the Fund may incur
losses because it will be required to effect sales at a disadvantageous time and
only then at a substantial drop in price. Investments in emerging countries may
be more difficult to price precisely because of the characteristics discussed
above and lower trading volumes.

The Fund's use of foreign currency management techniques in emerging countries
may be limited. Due to the limited market for these instruments in emerging
countries, the Fund's investment adviser does not currently anticipate that a
significant portion of the Fund's currency exposure in emerging countries, if
any, will be covered by such instruments.

Investors are strongly advised to consider carefully the special risks involved
in investing in emerging countries, which are in addition to the risks of
investing in foreign securities generally.

DERIVATIVE INSTRUMENTS

11
<PAGE>
in or to be purchased for the Fund's portfolio, protect the Fund's unrealized
gains, facilitate the sale of certain securities for investment purposes,
protect against changes in currency exchange rates or to adjust the exposure to
a particular currency, manage the effective maturity or duration of the Fund's
portfolio, establish positions in the derivatives markets as a substitute for
purchasing or selling particular securities, including, for example, when the
Fund adjusts its exposure to a market in response to changes in investment
strategy, when doing so provides more liquidity than the direct purchase of the
securities underlying such derivatives, when the Fund is restricted from
directly owning the underlying securities due to foreign investment restrictions
or other reasons, or when doing so provides a price advantage over purchasing
the underlying securities directly, either because of a pricing differential
between the derivatives and securities markets or because of lower transaction
costs associated with the derivatives transaction. The Fund may invest up to
33 1/3% of its total assets in Strategic Transactions for non-hedging purposes
(measured by the aggregate notional amount of outstanding derivatives). In
addition, the Fund may invest up to 20% of its total assets in futures contracts
and options on futures contracts (measured by the aggregate notional amount of
such outstanding contracts).

When conducted outside the United States, Strategic Transactions may not be
regulated as rigorously as in the United States, may not involve a clearing
mechanism and related guarantees, and are subject to the risk of governmental
actions affecting trading in, or the prices of, foreign securities, currencies
and other instruments. The value of such positions also could be adversely
affected by: (i) other complex foreign political, legal and economic factors,
(ii) lesser availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States and (v) lower
trading volume and liquidity.

OTHER INVESTMENTS AND RISK FACTORS

12
<PAGE>
securities subject to legal or contractual restrictions on resale. Such
securities may be difficult or impossible to sell at the time and the price that
the Fund would like. Thus, the Fund may have to sell such securities at a lower
price, sell other securities instead to obtain cash or forego other investment
opportunities.

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for capital appreciation has
lessened, or for other reasons. The portfolio turnover rate may vary from year
to year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs) which would
adversely impact a fund's performance. Higher portfolio turnover may result in
the realization of more short-term capital gains than if a fund had lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may on a temporary basis hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities, including prime
commercial paper, repurchase agreements and bank obligations, such as bankers'
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for capital appreciation
on these securities will tend to be lower than the potential for capital
appreciation on other securities that may be owned by the Fund. In taking such a
defensive position, the Fund temporarily would not be pursuing and may not
achieve its investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
---------------------------------------
<S> <C>
First $500 million 1.25%
......................................
Next $500 million 1.20%
......................................
Over $1 billion 1.15%
......................................
</TABLE>

Applying this fee schedule, the effective advisory fee rate was 1.25% of the
Fund's average daily net assets for the Fund's fiscal year ended June 30, 2000.
The

13
<PAGE>

Fund's average daily net assets are determined by taking the average of all of
the determinations of the net assets during a given calendar month. Such fee is
payable for each calendar month as soon as practicable after the end of that
month.

The Adviser furnishes offices, necessary facilities and equipment, and provides
administrative services to the Fund. The Fund pays all charges and expenses of
its day-to-day operations, including service fees, distribution fees, custodian
fees, legal and independent accountant fees, the cost of reports and proxies to
shareholders, compensation of directors of the Fund (other than those who are
affiliated persons of the Adviser, Distributor or Van Kampen Investments) and
all other ordinary business expenses not specifically assumed by the Adviser.

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

Morgan Stanley Dean Witter Investment Management Inc. is the Fund's investment
subadviser (the "Subadviser"). The Subadviser is a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. The Subadviser conducts a worldwide portfolio
management business and provides a broad range of portfolio management services
to customers in the United States and abroad. At September 30, 2000, the
Subadviser, together with its affiliated institutional asset management
companies, managed assets of approximately $178 billion, including assets under
fiduciary advice. The Subadviser's principal office is located at 1221 Avenue of
the Americas, New York, New York 10020. On December 1, 1998, Morgan Stanley
Asset Management Inc. changed its name to Morgan Stanley Dean Witter Investment
Management Inc. but continues to do business in certain instances using the name
Morgan Stanley Asset Management.

PERSONAL INVESTMENT POLICIES. The Fund, the Adviser, the Subadviser, and the
Distributor have adopted Codes of Ethics designed to recognize the fiduciary
relationships among the Fund, the Adviser, the Subadviser, the Distributor and
their respective employees. The Codes of Ethics permit directors, trustees,
officers and employees to buy and sell securities for their personal accounts
subject to certain restrictions. Persons with access to certain sensitive
information are subject to pre-clearance and other procedures designed to
prevent conflicts of interest.

PORTFOLIO MANAGEMENT. Robert L. Meyer and Andy Skov are responsible as
co-managers for the day-to-day management of the Fund's investment portfolio.

Mr. Meyer, a Managing Director and co-head of the Emerging Markets Equity Group,
joined the Subadviser in 1989. Mr. Meyer was born in Argentina and graduated
from Yale University with a B.A. in Economics and Political Science. He received
a J.D. from Harvard Law School. In addition, he holds the Chartered Financial
Analyst designation. Mr. Meyer has been co-manager of the Fund since September
of 1997 and has been affiliated with the Fund since its inception.

Mr. Skov, a Managing Director and co-head of the Emerging Markets Equity Group,
joined the Subadviser in 1994 as a portfolio manager. Prior to

14
<PAGE>

joining the Subadviser, he worked in the Latin America group at Bankers Trust in
corporate finance, research and sales; two of those years he spent in Argentina.
Mr. Skov graduated from the University of California at Berkeley with a B.A.
(PHI BETA KAPPA) in Political Science and Economic Development. Mr. Skov has
been co-manager of the Fund since October 1998.

PURCHASE OF SHARES

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and service plan (each as described below) under
which the class's distribution fee and/or the service fee is paid, (iii) each
class of shares has different exchange privileges, (iv) certain classes of
shares are subject to a conversion feature and (v) certain classes of shares
have different shareholder service options available.

The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Directors reserves the right to calculate the net
asset value per share and adjust the offering price more frequently than once
daily if deemed desirable. Net asset value per share for each class is
determined by dividing the value of the Fund's portfolio securities, cash and
other assets (including accrued interest) attributable to such class, less all
liabilities (including accrued expenses) attributable to such class, by the
total number of shares of the class outstanding. Such computation is made by
using prices as of the close of trading on the Exchange and (i) valuing
securities listed or traded on a national securities exchange at the closing
price, or if no closing price is available, at the last reported sale price, and
if there has been no sale that day, at the mean between the last reported bid
and asked prices, (ii) valuing over-the-counter securities at the last reported
sale price from the National Association of Securities Dealers Automated
Quotations ("NASDAQ"), and, if there has been no sale that day, at the mean
between the last reported bid and asked prices, (iii) valuing unlisted
securities at the average of the mean between the current reported bid and asked
prices obtained from reputable brokers and (iv) valuing any securities for which
market quotations are not readily available and any other assets at fair value
as determined in good faith

15
<PAGE>

by the Adviser in accordance with procedures established by the Fund's Board of
Directors. Securities with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value.

Trading in securities on many foreign securities exchanges (including European
and Far Eastern securities exchanges) and over-the-counter markets is normally
completed before the close of business on each U.S. business day. In addition,
securities trading in a particular country or countries may not take place on
all U.S. business days or may take place on days which are not U.S. business
days. Changes in valuations on certain securities may occur at times or on days
on which the Fund's net asset value is not calculated and on which the Fund does
not effect sales, redemptions and exchanges of its shares.

The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution and service fees and other expenses of the Fund associated with
that class of shares. To assist investors in comparing classes of shares, the
tables under the Prospectus heading "Fees and Expenses of the Fund" provide a
summary of sales charges and expenses and an example of the sales charges and
expenses of the Fund applicable to each class of shares.

The offering price for shares is based upon the next calculation of net asset
value per share (plus sales

16
<PAGE>

charges, where applicable) after an order is received by Investor Services.
Orders received by authorized dealers prior to the close of the Exchange are
priced based on the date of receipt provided such order is transmitted to
Investor Services prior to Investor Services' close of business on such date.
Orders received by authorized dealers after the close of the Exchange or
transmitted to Investor Services after its close of business are priced based on
the date of the next determined net asset value per share provided they are
received by Investor Services prior to Investor Services' close of business on
such date. It is the responsibility of authorized dealers to transmit orders
received by them to Investor Services so they will be received in a timely
manner.

CLASS A SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
AS % OF AS % OF
SIZE OF OFFERING NET AMOUNT
INVESTMENT PRICE INVESTED
<S> <C> <C>
-----------------------------------------------------------
Less than $50,000 5.75% 6.10%
..........................................................
$50,000 but less than $100,000 4.75% 4.99%
..........................................................
$100,000 but less than $250,000 3.75% 3.90%
..........................................................
$250,000 but less than $500,000 2.75% 2.83%
..........................................................
$500,000 but less than $1,000,000 2.00% 2.04%
..........................................................
$1,000,000 or more * *
..........................................................
</TABLE>

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales

17
<PAGE>
charge if redeemed within five years of purchase as shown in the table as
follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
<S> <C>
--------------------------------------------------------------------
First 5.00%
...................................................................
Second 4.00%
...................................................................
Third 3.00%
...................................................................
Fourth 2.50%
...................................................................
Fifth 1.50%
...................................................................
Sixth and After None
...................................................................
</TABLE>

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

CONVERSION FEATURE

18
<PAGE>

to Class A Shares seven years after the end of the calendar month in which the
shares were purchased. Such conversion will be on the basis of the relative net
asset values per share, without the imposition of any sales load, fee or other
charge. The conversion schedule applicable to a share of the Fund acquired
through the exchange privilege from another Van Kampen fund participating in the
exchange program is determined by reference to the Van Kampen fund from which
such share was originally purchased.

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

QUANTITY DISCOUNTS

LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales charge by aggregating investments over a 13-month

19
<PAGE>

period to determine the sales charge as outlined in the Class A Shares sales
charge table. The size of investment shown in the Class A Shares sales charge
table includes purchases of shares of the Participating Funds over a 13-month
period based on the total amount of intended purchases plus the value of all
shares of the Participating Funds previously purchased and still owned. An
investor may elect to compute the 13-month period starting up to 90 days before
the date of execution of a Letter of Intent. Each investment made during the
period receives the reduced sales charge applicable to the total amount of the
investment goal. The initial purchase must be for an amount equal to at least 5%
of the minimum total purchase amount of the level selected. If trades not
initially made under a Letter of Intent subsequently qualify for a lower sales
charge through the 90-day backdating provisions, an adjustment will be made at
the the expiration of the Letter of Intent to give effect to the lower sales
charge. Such adjustment in sales charge will be used to purchase additional
shares. The Fund initially will escrow shares totaling 5% of the dollar amount
of the Letter of Intent to be held by Investor Services in the name of the
shareholder. In the event the Letter of Intent goal is not achieved within the
specified period, the investor must pay the difference between the sales charge
applicable to the purchases made and the reduced sales charges previously paid.
Such payments may be made directly to the Distributor or, if not paid, the
Distributor will liquidate sufficient escrowed shares to obtain the difference.

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.

(2) Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries; employees of an investment
subadviser to any fund described in

20
<PAGE>
(1) above or an affiliate of such subadviser; and such persons' families
and their beneficial accounts.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

(8) Trusts created under pension, profit sharing or other employee benefit
plans qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), or custodial accounts held by a bank created
pursuant to Section 403(b) of the Code and sponsored by nonprofit
organizations defined under Section 501(c)(3) of the Code and assets held
by an employer or trustee in connection with an eligible deferred
compensation plan under Section 457 of the Code. Such plans will qualify
for purchases at net asset value provided, for plans initially establishing
accounts with the Distributor in the Participating Funds after January 1,
2000, that (1) the total plan assets are at least $1 million or (2) such
shares are purchased by an employer sponsored plan with more than 100
eligible employees. Such plans that have been established with a
Participating Fund or have received proposals from the Distributor prior to
January 1, 2000 based on net asset value purchase privileges previously in
effect will be qualified to purchase shares of the Participating Funds at
net asset value. Section 403(b) and similar accounts for which Van Kampen
Trust Company serves as custodian will not be eligible for net asset value
purchases based on the aggregate investment made by the plan or the number
of eligible employees, except under certain uniform criteria established by
the Distributor from time to time. A commission will be paid to authorized
dealers who initiate and are responsible for such purchases within a
rolling twelve month period as follows: 1.00% on sales to $2 million, plus
0.80% on the next $1 million, plus 0.50% on the next $47 million, plus
0.25% on the excess over $50 million.

21
<PAGE>
deferred sales charge of 1.00% in the event of redemption within one year
of purchase, and a commission will be paid to authorized dealers who
initiate and are responsible for such sales to each individual as follows:
1.00% on sales to $2 million, plus 0.80% on the next $1 million and 0.50%
on the excess over $3 million.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

REDEMPTION OF
SHARES

22
<PAGE>

and must accompany the written redemption request. Generally, in the event a
redemption is requested by and registered to a corporation, partnership, trust,
fiduciary, estate or other legal entity owning shares of the Fund, a copy of the
corporate resolution or other legal documentation appointing the authorized
signer and certified within the prior 120 days must accompany the redemption
request. Retirement plan distribution requests should be sent to the plan
custodian/trustee to be forwarded to Investor Services. Contact the plan
custodian/trustee for further information.

TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. A shareholder
automatically has telephone redemption privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. For accounts that are not established with telephone redemption
privileges, a shareholder may call the Fund at (800) 341-2911 to request a copy
of the Telephone Redemption Authorization form to be sent to the shareholder for
completion. To redeem shares, contact the telephone transaction line at
(800) 421-5684. Shares may also be redeemed by telephone through
FundInfo-Registered Trademark- (automated telephone system), which is generally
accessible 24 hours a day, seven days a week at (800) 847-2424. Van Kampen
Investments and its subsidiaries, including Investor Services, and the Fund
employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape-recording telephone communications and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, none of Van Kampen Investments, Investor Services or
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. Telephone redemptions may not be available if the
shareholder cannot reach Investor Services by telephone, whether because all
telephone lines are busy or for any other reason; in such case, a shareholder
would have to use the Fund's other redemption procedure previously described.
Requests received by Investor Services prior to 4:00 p.m., New York time, will
be processed at the next determined net asset value per share. These privileges
are available for most accounts other than retirement accounts or accounts with
shares represented by certificates. If an account has multiple owners, Investor
Services may rely on the instructions of any one owner.

23
<PAGE>
an opportunity to purchase the required value of additional shares at the next
determined net asset value without sales charge. Any involuntary redemption may
only occur if the shareholder account is less than the minimum initial
investment due to shareholder redemptions.

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income at least
annually as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.

SHAREHOLDER SERVICES

24
<PAGE>

invested in another Participating Fund at the next determined net asset value.

A shareholder wishing to make an exchange may do so by sending a written request
to Investor Services, by contacting the telephone transaction line at
(800) 421-5684, through FundInfo-Registered Trademark- (automated telephone
system) at (800) 847-2424 or through the internet at www.vankampen.com. A
shareholder automatically has these exchange privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. Van Kampen Investments and its subsidiaries, including Investor Services,
and the Fund employ procedures considered by them to be reasonable to confirm
that instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape-recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, none of Van Kampen Investments, Investor Services or
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. If the exchanging shareholder does not have an account
in the fund whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gain dividend options (except
dividend diversification) and authorized dealer of record as the account from
which shares are exchanged, unless otherwise specified by the shareholder. In
order to establish a systematic withdrawal plan for the new account or reinvest
dividends from the new account into another fund, however, an exchanging
shareholder must submit a specific request. The Fund reserves the right to
reject any order to acquire its shares through exchange. In addition, the Fund
and other Participating Funds may restrict exchanges by shareholders engaged in
excessive trading by limiting or disallowing the exchange privilege to such
shareholders. For further information on these restrictions see the Fund's
Statement of Additional Information. The Fund may modify, restrict or terminate
the exchange

25
<PAGE>

privilege at any time on 60 days' notice to its shareholders of any termination
or material amendment.

FEDERAL INCOME
TAXATION

26
<PAGE>
person can utilize a foreign tax credit or corresponding tax benefit in respect
of such U.S. withholding tax. Prospective foreign investors should consult their
tax advisers concerning the tax consequences to them of an investment in shares.

27
<PAGE>
FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by Deloitte
& Touche LLP, independent auditors, whose report, along with the Fund's most
recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal years ended June 30, 1999, 1998, 1997 and 1996 and the fiscal period from
August 1, 1995 (commencement of offering for Class B Shares) to June 30, 1996
has been audited by PricewaterhouseCoopers LLP. This information should be read
in conjunction with the financial statements and notes thereto included in the
Statement of Additional Information.

CLASS A SHARES
YEAR ENDED JUNE 30,
2000# 1999# 1998# 1997 1996
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 9.87 $ 7.98 $ 13.47 $ 12.06 $ 10.61
------- ------ -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME/LOSS................................ (0.18) 0.03 -- 0.01 0.05
NET REALIZED AND UNREALIZED GAIN/LOSS..................... 3.68 1.85 (4.49) 1.57 1.44
------- ------ -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS............................ 3.50 1.88 (4.49) 1.58 1.49
------- ------ -------- ------- -------
NET INVESTMENT INCOME....................................... -- -- -- -- (0.04)
IN EXCESS OF NET INVESTMENT INCOME.......................... -- -- -- (0.04) --
NET REALIZED GAIN........................................... -- -- (0.73) (0.13) --
IN EXCESS OF NET REALIZED GAIN.............................. -- (0.004) (0.27) -- --
RETURN OF CAPITAL........................................... -- (0.000)++ -- -- --
------- ------ -------- ------- -------
TOTAL DISTRIBUTIONS......................................... -- (0.004) (1.00) (0.17) (0.04)
------- ------ -------- ------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 13.37 $9.865 $ 7.98 $ 13.47 $ 12.06
======= ====== ======== ======= =======
TOTAL RETURN(1)............................................. 35.36% 23.92% (34.31)% 13.54% 14.16%
======= ====== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000'S)........................... $106,161 $63,273 $ 74,959 $119,022 $114,850
RATIO OF EXPENSES TO AVERAGE NET ASSETS..................... 2.20% 2.34% 2.27% 2.21% 2.16%
RATIO OF NET INVESTMENT INCOME/LOSS TO AVERAGE NET ASSETS... (1.43)% 0.44% 0.04% (0.06)% 0.93%
PORTFOLIO TURNOVER RATE..................................... 102% 132% 99% 82% 42%
---------------------------------------------------------------------------------------------------------
EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD
PER SHARE BENEFIT TO NET INVESTMENT INCOME/LOSS............. $ 0.01 $ 0.02 $ 0.03 $ 0.03 $ 0.02
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS.............................. 2.25% 2.56% 2.60% 2.41% 2.56%
NET INVESTMENT INCOME/LOSS TO AVERAGE NET ASSETS............ (1.48)% 0.22% (0.24)% (0.27)% 0.53%
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING COUNTRY
TAX EXPENSE AND INTEREST EXPENSE.......................... 2.15% 2.15% 2.15% 2.15% 2.15%

<CAPTION>
CLASS B SHARES
YEAR ENDED JUNE 30,
AUGUST 1, 1995+
2000# 1999# 1998# 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 9.55 $ 7.78 $ 13.24 $ 11.94 $ 10.91
------- -------- -------- -------- ------------------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME/LOSS................................ (0.26) (0.02) (0.07) (0.03) 0.01
NET REALIZED AND UNREALIZED GAIN/LOSS..................... 3.54 1.79 (4.39) 1.50 1.02
------- -------- -------- -------- ------------------
TOTAL FROM INVESTMENT OPERATIONS............................ 3.28 1.77 (4.46) 1.47 1.03
------- -------- -------- -------- ------------------
NET INVESTMENT INCOME....................................... -- -- -- -- --
IN EXCESS OF NET INVESTMENT INCOME.......................... -- -- -- (0.04) --
NET REALIZED GAIN........................................... -- -- (0.73) (0.13) --
IN EXCESS OF NET REALIZED GAIN.............................. -- (0.004) (0.27) -- --
RETURN OF CAPITAL........................................... -- (0.000)++ -- -- --
------- -------- -------- -------- ------------------
TOTAL DISTRIBUTIONS......................................... -- (0.004) (1.00) (0.17) --
------- -------- -------- -------- ------------------
NET ASSET VALUE, END OF PERIOD.............................. $ 12.83 $ 9.553 $ 7.78 $ 13.24 $ 11.94
======= ======== ======== ======== ==================
TOTAL RETURN(1)............................................. 34.35% 22.99% (34.76)% 12.67% 9.45%*
======= ======== ======== ======== ==================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000'S)........................... $62,787 $ 38,313 $ 36,423 $ 35,966 $ 10,416
RATIO OF EXPENSES TO AVERAGE NET ASSETS..................... 2.95% 3.09% 3.02% 2.96% 2.91%
RATIO OF NET INVESTMENT INCOME/LOSS TO AVERAGE NET ASSETS... (2.21)% (0.29)% (0.67)% (0.64)% 0.30%
PORTFOLIO TURNOVER RATE..................................... 102% 132% 99% 82% 42%*
------------------------------------------------------------
EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD
PER SHARE BENEFIT TO NET INVESTMENT INCOME/LOSS............. $ 0.01 $ 0.02 $ 0.03 $ 0.01 $ 0.02
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS.............................. 3.00% 3.31% 3.35% 3.17% 3.31%
NET INVESTMENT INCOME/LOSS TO AVERAGE NET ASSETS............ (2.26)% (0.51)% (0.97)% (0.87)% (0.10)%
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING COUNTRY
TAX EXPENSE AND INTEREST EXPENSE.......................... 2.90% 2.90% 2.90% 2.90% 2.90%

CLASS C SHARES
YEAR ENDED JUNE 30,
2000# 1999# 1998# 1997 1996
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 9.57 $ 7.791 $ 13.26 $ 11.93 $10.53
-------- -------- -------- -------- ------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME/LOSS................................ (0.27) (0.023) (0.08) (0.08) (0.01)
NET REALIZED AND UNREALIZED GAIN/LOSS..................... 3.57 1.805 (4.39) 1.55 1.41
-------- -------- -------- -------- ------
TOTAL FROM INVESTMENT OPERATIONS............................ 3.30 1.782 (4.47) 1.47 1.40
-------- -------- -------- -------- ------
NET INVESTMENT INCOME....................................... -- -- -- -- --
IN EXCESS OF NET INVESTMENT INCOME.......................... -- -- -- (0.01) --
NET REALIZED GAIN........................................... -- -- (0.73) (0.13) --
IN EXCESS OF NET REALIZED GAIN.............................. -- (0.004) (0.27) -- --
RETURN OF CAPITAL........................................... -- (0.000)++ -- -- --
-------- -------- -------- -------- ------
TOTAL DISTRIBUTIONS......................................... -- (0.004) (1.00) (0.14) --
-------- -------- -------- -------- ------
NET ASSET VALUE, END OF PERIOD.............................. $ 12.87 $ 9.569 $ 7.79 $ 13.26 $11.93
======== ======== ======== ======== ======
TOTAL RETURN(1)............................................. 34.38%* 23.09% (34.73)% 12.66% 13.30%
======== ======== ======== ======== ======
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000'S)........................... $ 33,334 $ 21,882 $ 28,680 $ 57,958 $43,601
RATIO OF EXPENSES TO AVERAGE NET ASSETS..................... 2.95% 3.09% 3.01% 2.96% 2.91%
RATIO OF NET INVESTMENT INCOME/LOSS TO AVERAGE NET ASSETS... (2.24)% (0.32)% (0.76)% (0.79)% (0.11)%
PORTFOLIO TURNOVER RATE..................................... 102% 132% 99% 82% 42%
------------------------------------------------------------
EFFECT OF VOLUNTARY EXPENSE LIMITATION DURING THE PERIOD
PER SHARE BENEFIT TO NET INVESTMENT INCOME/LOSS............. $ 0.01 $ 0.02 $ 0.03 $ 0.02 $ 0.03
RATIOS BEFORE EXPENSE LIMITATION:
EXPENSES TO AVERAGE NET ASSETS.............................. 3.00% 3.31% 3.34% 3.17% 3.34%
NET INVESTMENT INCOME/LOSS TO AVERAGE NET ASSETS............ (2.29)% (0.54)% (1.03)% (1.00)% (0.54)%
RATIO OF EXPENSES TO AVERAGE NET ASSETS EXCLUDING COUNTRY
TAX EXPENSE AND INTEREST EXPENSE.......................... 2.90% 2.90% 2.90% 2.90% 2.90%
</TABLE>

28
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES RATINGS

STANDARD & POOR'S -- A brief description of the applicable Standard & Poor's
(S&P) rating symbols and their meanings (as published by S&P) follow:

A S&P credit rating is a current opinion of the creditworthiness of an obligor
with respect to a financial obligation. This assessment may take into
consideration obligors such as guarantors, insurers, or lessees.

The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.

The ratings are based on current information furnished by the obligor or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.

The ratings are based, in varying degrees, on the following considerations:

1. Likelihood of payment -- capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of the
obligation:

2. Nature of and provisions of the obligation; and

3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditor's rights.

1. LONG-TERM CREDIT RATINGS -- INVESTMENT GRADE
AAA: An obligation rated "AAA" has the highest rating assigned by S&P. Capacity
to meet its financial commitment on the obligation is extremely strong.

AA: An obligation rated "AA" differs from the highest rated issues only in small
degree. Capacity to meets its financial commitment on the obligation is very
strong.

A: An obligation rated "A" is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher
rated categories. Capacity to meet its financial commitment on the obligation is
still strong.

BBB: An obligation rated "BBB" exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to meet its financial commitment on the obligation.

SPECULATIVE GRADE
BB, B, CCC, CC, C: Obligations rated "BB", "B", "CCC", "CC" and "C" are regarded
as having significant speculative characteristics. "BB" indicates the least
degree of speculation and "C" the highest. While such obligations will likely
have some quality and protective characteristics, these may be outweighed by
large uncertainties or major exposures to adverse conditions.

BB: An obligation rated "BB" is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.

B: An obligation rated "B" is more vulnerable to nonpayment than obligations
rated "BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.

CCC: An obligation rated "CCC" is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse

A-1
<PAGE>
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

CC: An obligation rated "CC" is currently highly vulnerable to nonpayment.

C: A subordinated, debt or preferred stock obligation rated "C" is currently
highly vulnerable to nonpayment. the "C" rating may be used to cover a situation
where a bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.

D: An obligation rated "D" is in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

r: This symbol highlights derivative, hybrid and certain other obligations that
S&P believes may experience high volatility or high variability in expected
returns as a result of noncredit risks. Examples include: obligations linked or
indexed to equities, currencies, or commodities; certain swaps and options; and
interest-only and principal-only mortgage securities.

DEBT OBLIGATIONS OF ISSUERS OUTSIDE THE UNITED STATES AND ITS TERRITORIES are
rated on the same basis as domestic corporate and municipal issues. The ratings
measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.

BOND INVESTMENT QUALITY STANDARDS: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories ("AAA", "AA", "A", "BBB", commonly known as "investment grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain ratings or
other standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.

2. COMMERCIAL PAPER
A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.

Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:

A-1: A short-term obligation rated "A-1" is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.

A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.

A-3: A short-term obligation rated "A-3" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

B: Issues rated "B" are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.

C: This rating is assigned to short-term debt obligations currently vulnerable
to nonpayment and is

A-2
<PAGE>
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.

D: Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The "D" rating also will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.

A commercial paper rating is not a recommendation to purchase, sell or hold a
financial obligation inasmuch as it does not comment as to market price or
suitability for a particular investor. The ratings are based on current
information furnished to S&P by the issuer or obtained from other sources it
considers reliable. S&P does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or based on other circumstances.

MOODY'S INVESTORS SERVICE -- a brief description of the applicable Moody's
Investors Service (Moody's) rating symbols and their meanings (as published by
Moody's Investors Service) follows:

1. LONG-TERM DEBT
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than the Aaa securities.

A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.

Baa: Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payment
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

A-3
<PAGE>
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the issue
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.

ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that are not rated as a
matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not published in
Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.

2. SHORT-TERM DEBT
Moody's short-term issuer ratings are opinions of the ability of issuers to
honor senior financial obligations and contracts. These obligations have an
original maturity not exceeding one year unless explicitly noted.

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

Issuers rated Prime-1 (or supporting institutions) have a superior ability for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics:
-- Leading market positions in well-established industries.

-- High rates of return on funds employed.

-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

-- Well-established access to a range of financial markets and assured sources
of alternate liquidity.

Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or supporting institutions) have an acceptable ability
for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

3. PREFERRED STOCK
Preferred stock rating symbols and their definitions are as follows:

aaa: An issue which is rated "aaa" is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.

A-4
<PAGE>
aa: An issue which is rated "aa" is considered a high-grade preferred stock.
This rating indicates that there is a reasonable assurance the earnings and
asset protection will remain relatively well maintained in the foreseeable
future.

a: An issue which is rated "a" is considered to be an upper-medium-grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.

baa: An issue which is rated "baa" is considered to be a medium-grade preferred
stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present, but may be questionable over any great
length of time.

ba: An issue which is rated "ba" is considered to have speculative elements. Its
future cannot be considered well assured. Earnings and asset protection may be
very moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.

b: An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.

caa: An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.

ca: An issue which is rated "ca" is speculative in a high degree and is likely
to be in arrears on dividends with little likelihood of eventual payment.

c: This is the lowest rated class of preferred or preference stock. Issues so
rated can thus be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Moody's applies numerical modifiers 1, 2 and 3 in each rating classifications
"aa" through "b". The modifier 1 indicates that the security ranks in the higher
end of its generic rating category, the modifier 2 indicates a mid-range
ranking, and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.

A-5
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS
BOARD OF DIRECTORS

J. Miles Branagan Richard F. Powers, III*
Jerry D. Choate Phillip B. Rooney

Linda Hutton Heagy Fernando Sisto
R. Craig Kennedy Wayne W. Whalen*
Mitchell M. Merin* Suzanne H. Woolsey
Jack E. Nelson

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann,III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

VAN KAMPEN EMERGING MARKETS FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Emerging Markets Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen Emerging Markets Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>

VAN KAMPEN
EMERGING MARKETS FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of Additional Information, which contains more details about the
Fund, is incorporated by reference in its entirety into this prospectus.

[VAN KAMPEN FUNDS LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

MSEM PRO 10/00
#65134

<PAGE>

VAN KAMPEN
EQUITY GROWTH FUND

Van Kampen Equity Growth Fund's investment objective is to seek to provide
long-term capital appreciation by investing primarily in growth-oriented equity
securities of medium- and large-capitalization companies.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Risk/Return Summary .....................................................3

Fees and Expenses of the Fund ...........................................5

Investment Objective, Policies and Risks ................................6

Investment Advisory Services ...........................................10
Purchase of Shares .....................................................12

Redemption of Shares ...................................................18

Distributions from the Fund ............................................20
Shareholder Services ...................................................21

Federal Income Taxation ................................................22

Financial Highlights ...................................................24

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek to provide long-term capital
appreciation by investing primarily in growth-oriented equity securities of
medium- and large-capitalization companies.

INVESTMENT STRATEGIES

The Fund emphasizes individual security selection and may focus its investments
in a smaller number of companies within the limits permissible for a diversified
fund. Portfolio securities are typically sold when the assessments of the Fund's
investment adviser for growth of such securities materially change. The Fund may
invest up to 25% of its total assets in securities of foreign issuers. The Fund
may purchase and sell certain derivative instruments, such as options, futures,
options on futures and forward contracts, for various portfolio management
purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

The Fund emphasizes a growth style of investing. The market values of growth
securities may be more volatile than those of other types of investments. The
returns on growth securities may or may not move in tandem with the returns on
other styles of investing or the stock markets. Different types of stocks tend
to shift in and out of favor depending on market and economic conditions. Thus,
the value of the Fund's investments will vary and at times may be lower or
higher than that of other types of investments. During an overall stock market
decline, stock prices of smaller companies (in which the Fund may invest) often
fluctuate more and may fall more than the stock prices of larger-sized
companies.

FOREIGN RISKS. Because the Fund may own securities of foreign issuers, it may be
subject to risks not usually associated with owning securities of U.S. issuers.
These risks can include fluctuations in foreign currencies, foreign currency
exchange controls, political and economic instability, differences in financial
reporting, differences in securities regulation and trading and foreign taxation
issues.

RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures, options on futures and forward
contracts are examples of derivative instruments. Derivative instruments involve
risks different from direct investments in underlying securities. These risks
include imperfect correlation between the value of the instruments and the
underlying assets; risks of default by the other party to certain transactions;
risks that the transactions may result in losses that partially or completely
offset gains in portfolio positions; and risks that the transactions may not be
liquid.

MANAGER RISK. As with any managed fund, the Fund's investment adviser may not be
successful in selecting the best-performing securities or investment

3
<PAGE>

techniques, and the Fund's performance may lag behind that of similar funds.

INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- Seek capital appreciation over the long term

- Do not seek current income from their investment

- Can withstand substantial volatility in the value of their Fund shares

- Wish to add to their investment portfolio a fund that emphasizes a growth
style of investing in a portfolio of equity securities

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
return of the Fund's Class A Shares over the one calendar year prior to the date
of this prospectus. Sales loads are not reflected in this chart. If these sales
loads had been included, the return shown below would have been lower. Remember
that the past performance of the Fund is not indicative of its future
performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ANNUAL RETURN
<S> <C>
1999 38.34%
</TABLE>

The Fund's return for the nine-month period ended September 30, 2000 was 3.50%.
As a result of recent market activity, current performance may vary from the
figures shown.

During the one-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 21.41% (for the quarter ended 12/31/99) and the lowest
quarterly return for Class A Shares was -0.96% (for the quarter ended 9/30/99).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the Standard & Poor's 500 Index*,
a broad-based market index that the Fund's investment adviser believes is an
appropriate benchmark for the Fund. The Fund's performance figures listed below
include the maximum sales charges paid by investors. The index's performance
figures do not include any commissions or sales charges that would be paid by
investors purchasing the securities represented by the index. An investment
cannot be made directly in the index. Average annual total returns are shown for
the periods ended December 31, 1999

4
<PAGE>

(the most recently completed calendar year prior to the date of this
prospectus). Remember that the past performance of the Fund is not indicative of
its future performance.

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS
FOR THE
PERIODS ENDED PAST SINCE
DECEMBER 31, 1999 1 YEAR INCEPTION
------------------------------------------------------
<S> <C> <C>
Van Kampen Equity
Growth Fund
-- Class A Shares 30.44% 24.68%(1)
Standard & Poor's 500
Index 21.04% 21.73%(2)
.....................................................
Van Kampen Equity
Growth Fund
-- Class B Shares 32.50% 26.37%(1)
Standard & Poor's 500
Index 21.04% 21.73%(2)
.....................................................
Van Kampen Equity
Growth Fund
-- Class C Shares 36.32% 28.43%(1)
Standard & Poor's 500
Index 21.04% 21.73%(2)
.....................................................
</TABLE>

<TABLE>
<S> <C>
INCEPTION DATE: (1) 5/28/98, (2) 5/28/98
* THE STANDARD & POOR'S 500 INDEX IS A BROAD-BASED INDEX OF 500 WIDELY
HELD COMMON STOCKS OF COMPANIES CHOSEN FOR MARKET SIZE, LIQUIDITY AND
INDUSTRY GROUP REPRESENTATION.
</TABLE>

FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
-----------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<CAPTION>
-----------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 5.75%(1) None None
..........................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption
proceeds) None(2) 5.00%(3) 1.00%(4)
..........................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
..........................................................
Redemption fee None None None
..........................................................
Exchange fee None None None
..........................................................
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------
Management fees(5) 0.80% 0.80% 0.80%
...........................................................
Distribution and/or
service
(12b-1) fees(6) 0.25% 1.00%(7) 1.00%(7)
...........................................................
Other expenses(5) 0.64% 0.64% 0.64%
...........................................................
Total annual fund
operating expenses(5) 1.69% 2.44% 2.44%
...........................................................
</TABLE>

(1) REDUCED FOR PURCHASES OF $50,000 AND OVER. SEE "PURCHASE OF
SHARES -- CLASS A SHARES."
(2) INVESTMENTS OF $1 MILLION OR MORE ARE NOT SUBJECT TO ANY SALES
CHARGE AT THE TIME OF PURCHASE, BUT A DEFERRED SALES CHARGE OF
1.00% MAY BE IMPOSED ON CERTAIN REDEMPTIONS MADE WITHIN ONE
YEAR OF THE PURCHASE. SEE "PURCHASE OF SHARES -- CLASS A
SHARES."
(3) THE MAXIMUM DEFERRED SALES CHARGE IS 5.00% IN THE FIRST YEAR
AFTER PURCHASE, DECLINING THEREAFTER AS FOLLOWS:

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."
(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR
AFTER PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF
SHARES -- CLASS C SHARES."
(5) THE FUND'S INVESTMENT ADVISER IS CURRENTLY WAIVING OR
REIMBURSING A PORTION OF THE FUND'S MANAGEMENT FEES AND OTHER
EXPENSES SUCH THAT THE ACTUAL TOTAL ANNUAL FUND OPERATING
EXPENSES WERE 1.50% FOR CLASS A SHARES, 2.25% FOR CLASS B
SHARES AND 2.25% FOR CLASS C SHARES FOR THE FISCAL YEAR ENDED
JUNE 30, 2000. THE FEE WAIVERS OR EXPENSE REIMBURSEMENTS CAN BE
TERMINATED AT ANY TIME.
(6) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO
0.25% OF THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH
CLASS OF SHARES. CLASS B SHARES AND CLASS C SHARES ARE EACH
SUBJECT TO A COMBINED ANNUAL DISTRIBUTION AND SERVICE FEE OF UP
TO 1.00% OF THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH
CLASS OF SHARES. SEE "PURCHASE OF SHARES."
(7) BECAUSE DISTRIBUTION AND/OR SERVICE (12b-1) FEES ARE PAID OUT
OF THE FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES
WILL INCREASE THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE
THAN PAYING OTHER TYPES OF SALES CHARGES.

5
<PAGE>
EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same each year (except for the ten-year
amounts for Class B Shares, which reflect the conversion of Class B Shares to
Class A Shares after eight years). Although your actual costs may be higher or
lower, based on these assumptions your costs would be:

ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
---------------------------------------------------------------
Class A Shares $737 $1,077 $1,440 $2,458
..............................................................
Class B Shares $747 $1,061 $1,451 $2,591*
..............................................................
Class C Shares $347 $ 761 $1,301 $2,776
..............................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
---------------------------------------------------------------
Class A Shares $737 $1,077 $1,440 $2,458
..............................................................
Class B Shares $247 $ 761 $1,301 $2,591*
..............................................................
Class C Shares $247 $ 761 $1,301 $2,776
..............................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek to provide long-term capital
appreciation by investing primarily in growth-oriented equity securities of
medium- and large-capitalization companies. Any income received from the
investment of portfolio securities is incidental to the Fund's investment
objective. The Fund's investment objective is a fundamental policy and may not
be changed without shareholder approval of a majority of the Fund's outstanding
voting securities, as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"). There are risks inherent in all investments in securities;
accordingly, there can be no assurance that the Fund will achieve its investment
objective.

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing at least 65% of the Fund's total
assets in a portfolio of equity securities, including common and preferred
stocks, convertible securities and equity-linked securities, rights and warrants
to purchase common stocks, depositary receipts, equity-related futures and
options and other specialty securities having equity features. The Fund invests
primarily in a portfolio of growth-oriented medium-and large-sized companies
with market capitalizations of $1 billion or more at the time of investment, but
also may invest in smaller companies. The Fund's investment adviser emphasizes a
"bottom-up" stock selection process, seeking attractive growth investments on an
individual company basis. In selecting securities for investment, the Fund's
investment adviser seeks those companies with the potential for strong or
accelerating earnings growth and compelling business strategies. Investments in
growth-oriented equity securities may have above-average volatility of price
movement. Because prices of equity securities fluctuate, the value of an
investment in the Fund will vary based upon the Fund's investment performance.
The Fund attempts to reduce overall exposure to risk by adhering to a
disciplined program of intensive research, careful security selection and the
continual monitoring of the Fund's investments.

The Fund generally follows a flexible investment program seeking attractive
growth opportunities on an individual company basis. Fundamental research drives
the investment process. The Fund emphasizes companies that the Fund's investment
adviser believes are positioned to deliver surprisingly strong earnings growth
versus consensus expectations. The Fund's investment adviser continually and
rigorously studies company developments including business strategy, management
focus and financial results, and closely monitors analysts' consensus
expectations seeking to identify such companies. The Fund's

6
<PAGE>
investment adviser expects that many of the companies in which the Fund invests
will, at the time of investment, be experiencing high rates of earnings growth.
The securities of such companies may trade at higher prices to earnings ratios
relative to more established companies and rates of earnings growth may be
volatile. Valuation is of secondary importance in the Fund's investment program
and is viewed in context of prospects for sustainable earnings growth and the
potential for positive earnings surprises in relation to consensus expectations.

The Fund focuses its investments in a smaller number of companies within the
limits permissible for a diversified fund. While the Fund invests its assets in
a number of issuers, the Fund may invest between 5% and 10% of its assets in
selected issuers. The Fund's investment adviser believes that an effective way
to maximize return and reduce the risks associated with its focused investment
approach is through a program of intensive research, careful selection of
individual securities and continual supervision of the Fund's portfolio.

While the Fund invests primarily in common stocks, the Fund also may invest in
other equity securities including preferred stocks, convertible securities and
equity-linked securities, rights and warrants to purchase common stocks,
depositary receipts, equity-related futures and options and other specialty
securities having equity features. Preferred stock generally has a preference as
to dividends and liquidation over an issuer's common stock but ranks junior to
debt securities in an issuer's capital structure. Unlike interest payments on
debt securities, preferred stock dividends are payable only if declared by the
issuer's board of directors. Preferred stock also may be subject to optional or
mandatory redemption provisions.

7
<PAGE>

relative to the underlying dividends of the linked equity security. Investments
in equity-linked securities may subject the Fund to additional risks not
ordinarily associated with investments in other equity securities. Because
equity-linked securities are sometimes issued by a third party other than the
issuer of the linked security, the Fund is subject to risks if the underlying
stock underperforms or if the issuer defaults on the payment of the dividend or
the common stock at maturity. In addition, the trading market for particular
equity-linked securities may be less liquid, making it difficult for the Fund to
dispose of a particular security when necessary and reduced liquidity in the
secondary market for any such securities may make it more difficult to obtain
market quotations for valuing the Fund's portfolio.

Although the Fund generally invests in medium- and large-sized companies, it
also may invest in smaller companies. The securities of medium- and small-sized
companies may be subject to more abrupt or erratic market movements and may have
lower trading volumes or more erratic trading than securities of large-sized
companies or the market averages in general. To the extent the Fund invests in
medium-and small-sized companies, it will be subject to greater investment risk
than that assumed through investment in the securities of large-sized companies.

RISKS OF INVESTING IN SECURITIES
OF FOREIGN ISSUERS

The Fund may invest up to 25% of its total assets in securities of foreign
issuers. Securities of foreign issuers may be denominated in U.S. dollars or in
currencies other than U.S. dollars. Investments in foreign securities present
certain risks not ordinarily associated with investments in securities of U.S.
issuers. These risks include fluctuations in foreign currency exchange rates,
political, economic or legal developments (including war or other instability,
expropriation of assets, nationalization and confiscatory taxation), imposition
of foreign exchange limitations (including currency blockage), withholding taxes
on income or capital transactions or other restrictions, higher transaction
costs (including higher brokerage, custodial and settlement costs and currency
conversion costs) and possible difficulty in enforcing contractual obligations
or taking judicial action. Foreign securities may not be as liquid and may be
more volatile than comparable domestic securities.

8
<PAGE>

Many European countries have adopted or are in the process of adopting a single
European currency, commonly referred to as the "euro." The long-term
consequences of the euro conversion on foreign exchange rates, interest rates
and the value of European securities, all of which may adversely affect the
Fund, are still uncertain.

DERIVATIVE INSTRUMENTS

The Fund may purchase and sell derivative instruments such as exchange-listed
and over-the-counter put and call options on securities, financial futures,
equity, fixed-income and interest rate indices, and other financial instruments,
futures contracts and options thereon (including but not limited to securities
index futures, foreign currency exchange futures, interest rate futures and
other financial futures), structured notes, swaps, caps, floors or collars and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currency or currency
futures. In addition, the Fund may invest in other derivative instruments that
are developed over time if their use would be consistent with the objective of
the Fund. Collectively, all of the above are referred to as "Strategic
Transactions." The Fund generally seeks to use Strategic Transactions as a
portfolio management or hedging technique to seek to protect against possible
adverse changes in the market value of securities held in or to be purchased for
the Fund's portfolio, protect the Fund's unrealized gains, facilitate the sale
of certain securities for investment purposes, protect against changes in
currency exchange rates or to adjust the exposure to a particular currency,
manage the effective maturity or duration of the Fund's portfolio, establish
positions in the derivatives markets as a substitute for purchasing or selling
particular securities, including, for example, when the Fund adjusts its
exposure to a market in response to changes in investment strategy, when doing
so provides more liquidity than the direct purchase of the securities underlying
such derivatives, when the Fund is restricted from directly owning the
underlying securities due to foreign investment restrictions or other reasons,
or when doing so provides a price advantage over purchasing the underlying
securities directly, either because of a pricing differential between the
derivatives and securities markets or because of lower transaction costs
associated with the derivatives transaction. The Fund may invest up to 50% of
its total assets in Strategic Transactions (measured by the aggregate notional
amount of outstanding derivatives) provided that no more than 33 1/3% of the
Fund's total assets are invested, for non-hedging purposes, in Strategic
Transactions other than futures and options on futures.

9
<PAGE>
A more complete discussion of Strategic Transactions and their risks is
contained in the Fund's Statement of Additional Information. The Statement of
Additional Information can be obtained by investors free of charge as described
on the back cover of this prospectus.

OTHER INVESTMENTS AND RISK FACTORS

The Fund may invest up to 15% of the Fund's net assets in illiquid and certain
restricted securities. Such securities may be difficult or impossible to sell at
the time and the price that the Fund would like. Thus, the Fund may have to sell
such securities at a lower price, sell other securities instead to obtain cash
or forego other investment opportunities.

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for capital appreciation has
lessened, or for other reasons. The portfolio turnover rate may vary from year
to year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs) which would
adversely impact a fund's performance. Higher portfolio turnover may result in
the realization of more short-term capital gains than if a fund had lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities, including prime
commercial paper, repurchase agreements and bank obligations, such as bankers'
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for capital appreciation
on these securities will tend to be lower than the potential for capital
appreciation on other securities that may be owned by the Fund. In taking such a
defensive position, the Fund would temporarily not be pursuing and may not
achieve its investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

10
<PAGE>

Dean Witter & Co. The Adviser's principal office is located at 1 Parkview Plaza,
Oakbrook Terrace, Illinois 60181-5555.

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
-----------------------------------------------
FIRST $500 MILLION 0.80%
..............................................
NEXT $500 MILLION 0.75%
..............................................
OVER $1 BILLION 0.70%
..............................................
</TABLE>

Applying this fee schedule, the effective advisory fee rate was 0.80% of the
Fund's average daily net assets for the Fund's fiscal year ended June 30, 2000.
The Fund's average daily net assets are determined by taking the average of all
of the determinations of the net assets during a given calendar month. Such fee
is payable for each calendar month as soon as practicable after the end of that
month.

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

Morgan Stanley Dean Witter Investment Management Inc. is the Fund's investment
subadviser (the "Subadviser"). The Subadviser is a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. The Subadviser conducts a worldwide portfolio
management business and provides a broad range of portfolio management services
to customers in the United States and abroad. At September 30, 2000, the
Subadviser together with its affiliated institutional asset management companies
managed assets of approximately $178 billion, including assets under fiduciary
advice. The Subadviser's principal office is located at 1221 Avenue of the
Americas, New York, New York 10020. On December 1, 1998, Morgan Stanley Asset
Management Inc. changed its name to Morgan Stanley Dean Witter Investment
Management Inc. but continues to do business in certain instances using the name
Morgan Stanley Asset Management.

11
<PAGE>
restrictions. Persons with access to certain sensitive information are subject
to pre-clearance and other procedures designed to prevent conflicts of interest.

PORTFOLIO MANAGEMENT. The Fund's portfolio managers are Philip W. Friedman and
William S. Auslander.

Mr. Friedman, a Managing Director and leader of the Institutional Equity Group,
joined the Subadviser in 1997. Prior to joining the Subadviser, Mr. Friedman was
the North American Director of Equity Research at Morgan Stanley Dean Witter &
Co. From 1990 to 1995, he was a member of Morgan Stanley Dean Witter & Co.'s
Equity Research team. Mr. Friedman graduated from Rutgers University with a B.A.
(Phi Beta Kappa; Summa Cum Laude) in Economics. He also holds an M.B.A. from
J.L. Kellogg School of Management at Northwestern University. Mr. Friedman has
been a co-manager of the Fund since May 1998.

Mr. Auslander, a Principal and a Portfolio Manager in the Institutional Equity
Group, joined the Subadviser in 1995 as an equity analyst in the Institutional
Equity Group. Prior to joining the Subadviser, Mr. Auslander was an equity
analyst at Icahn & Co. for nine years. He graduated from the University of
Wisconsin at Madison with a B.A. in Economics and received an M.B.A. from
Columbia University in 1993. Mr. Auslander has been a co-manager of the Fund
since May 1998.

PURCHASE OF SHARES

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which the class's distribution fee and/or the service fee is paid,
(iii) each class of shares has different exchange privileges, (iv) certain
classes of shares are subject to a conversion feature and (v) certain classes of
shares have different shareholder service options available.

12
<PAGE>

to such class, less all liabilities (including accrued expenses) attributable to
such class, by the total number of shares of the class outstanding. Such
computation is made by using prices as of the close of trading on the Exchange
and (i) valuing securities listed or traded on a national securities exchange at
the closing price, or if no closing price is available, at the last reported
sale price, and if there has been no sale that day, at the mean between the last
reported bid and asked prices, (ii) valuing over-the-counter securities at the
last reported sale price from the National Association of Securities Dealers
Automated Quotations ("NASDAQ") and, if there has been no sale that day, at the
mean between the last reported bid and asked prices, (iii) valuing unlisted
securities at the average of the mean between the current reported bid and asked
prices obtained from reputable brokers and (iv) valuing any securities for which
market quotations are not readily available and any other assets at fair value
as determined in good faith by the Adviser in accordance with procedures
established by the Fund's Board of Directors. Securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.

The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution and service fees and other expenses of the Fund associated with
that class of shares. To assist investors in comparing classes of shares, the
tables under the Prospectus heading "Fees and Expenses of the Fund" provide a
summary of sales charges and expenses and an example of the sales charges and
expenses of the Fund applicable to each class of shares.

13
<PAGE>

received by them to Investor Services so they will be received in a timely
manner.

CLASS A SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
AS % OF AS % OF
SIZE OF OFFERING NET AMOUNT
INVESTMENT PRICE INVESTED
-----------------------------------------------
<S> <C> <C>
Less than $50,000 5.75% 6.10%
..............................................
$50,000 but less than
$100,000 4.75% 4.99%
..............................................
$100,000 but less than
$250,000 3.75% 3.90%
..............................................
$250,000 but less than
$500,000 2.75% 2.83%
..............................................
$500,000 but less than
$1,000,000 2.00% 2.04%
..............................................
$1,000,000 or more * *
..............................................
</TABLE>

* NO SALES CHARGE IS PAYABLE AT THE TIME OF PURCHASE ON INVESTMENTS OF $1
MILLION OR MORE, ALTHOUGH FOR SUCH INVESTMENTS THE FUND MAY IMPOSE A
CONTINGENT DEFERRED SALES CHARGE OF 1.00% ON CERTAIN REDEMPTIONS MADE
WITHIN ONE YEAR OF THE PURCHASE. THE CONTINGENT DEFERRED SALES CHARGE IS
ASSESSED ON AN AMOUNT EQUAL TO THE LESSER OF THE THEN CURRENT MARKET
VALUE OR THE COST OF THE SHARES BEING REDEEMED. ACCORDINGLY, NO SALES
CHARGE IS IMPOSED ON INCREASES IN NET ASSET VALUE ABOVE THE INITIAL
PURCHASE PRICE.

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
-------------------------------------------------------
<S> <C>
First 5.00%
......................................................
Second 4.00%
......................................................
Third 3.00%
......................................................
Fourth 2.50%
......................................................
Fifth 1.50%
......................................................
Sixth and After None
......................................................
</TABLE>

14
<PAGE>

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

CONVERSION FEATURE

Class B Shares, including Class B Shares received from reinvestment of
distributions through the dividend reinvestment plan, automatically convert to
Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Such conversion will be on the basis of the relative net
asset values per share, without the imposition of any sales load, fee or other
charge. The conversion schedule applicable to a share of the Fund acquired
through the exchange privilege from another Van Kampen fund participating in the
exchange program is determined by reference to the Van Kampen fund from which
such share was originally purchased.

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

15
<PAGE>

within 180 days after the redemption. For a more complete description of
contingent deferred sales charge waivers, please refer to the Fund's Statement
of Additional Information or contact your authorized dealer.

QUANTITY DISCOUNTS

LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales charge by aggregating investments over a 13-month period
to determine the sales charge as outlined in the Class A Shares sales charge
table. The size of investment shown in the Class A Shares sales charge table
includes purchases of shares of the Participating Funds over a 13-month period
based on the total amount of intended purchases plus the value of all shares of
the Participating Funds previously purchased and still owned. An investor may
elect to compute the 13-month period starting up to 90 days before the date of
execution of a Letter of Intent. Each investment made during the period receives
the reduced sales charge applicable to the total amount of the investment goal.
The initial purchase must be for an amount equal to at least 5% of the minimum
total purchase amount of the level selected. If trades not initially made under
a Letter of Intent subsequently qualify for a lower sales charge through the
90-day backdating provisions, an adjustment will be made at the expiration of
the Letter of Intent to give effect to the lower sales charge. Such adjustment
in sales charge will be used to purchase additional shares. The Fund initially
will escrow shares totaling 5% of the dollar amount of the Letter of Intent to
be held by Investor Services in the name of the shareholder. In the event the
Letter of Intent goal is not achieved within the specified period, the investor
must pay the difference between the sales charge applicable to the purchases
made and the reduced sales charge previously paid. Such payments may be made
directly to the Distributor or, if not paid, the Distributor will liquidate
sufficient escrowed shares to obtain the difference.

UNIT INVESTMENT TRUST REINVESTMENT PROGRAM. The Fund permits unitholders of unit
investment trusts to reinvest distributions from such trusts in

16
<PAGE>
Class A Shares of the Fund at net asset value per share and with no minimum
initial or subsequent investment requirement, if the administrator of an
investor's unit investment trust program meets certain uniform criteria relating
to cost savings by the Fund and the Distributor. The total sales charge for all
other investments made from unit investment trust distributions will be 1.00% of
the offering price (1.01% of net asset value). Of this amount, the Distributor
will pay to the authorized dealer, if any, through which such participation in
the qualifying program was initiated 0.50% of the offering price as a dealer
concession or agency commission. Persons desiring more information with respect
to this program, including the terms and conditions that apply to the program,
should contact their authorized dealer or the Distributor.

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

17
<PAGE>

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

REDEMPTION OF
SHARES

18
<PAGE>

Shares," redemptions of Class B Shares and Class C Shares may be subject to a
contingent deferred sales charge. In addition, certain redemptions of Class A
Shares for shareholder accounts of $1 million or more may be subject to a
contingent deferred sales charge. Redemptions completed through an authorized
dealer or a custodian/trustee of a retirement plan account may involve
additional fees charged by the dealer or custodian/trustee.

TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of

19
<PAGE>

record for the account or to the bank account of record as described below. A
shareholder automatically has telephone redemption privileges unless the
shareholder indicates otherwise by checking the applicable box on the account
application form. For accounts that are not established with telephone
redemption privileges, a shareholder may call the Fund at (800) 341-2911 to
request that a copy of the Telephone Redemption Authorization form be sent to
the shareholder for completion. To redeem shares, contact the telephone
transaction line at (800) 421-5684. Shares may also be redeemed by telephone
through Fund Info-Registered Trademark- (automated telephone system), which is
generally accessible 24 hours a day, seven days a week at (800) 847-2424. Van
Kampen Investments and its subsidiaries, including Investor Services, and the
Fund employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape-recording telephone communications and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, none of Van Kampen Investments, Investor Services or
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. Telephone redemptions may not be available if the
shareholder cannot reach Investor Services by telephone, whether because all
telephone lines are busy or for any other reason; in such case, a shareholder
would have to use the Fund's other redemption procedure previously described.
Requests received by Investor Services prior to 4:00 p.m., New York time, will
be processed at the next determined net asset value per share. These privileges
are available for most accounts other than retirement accounts or accounts with
shares represented by certificates. If an account has multiple owners, Investor
Services may rely on the instructions of any one owner.

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income at least
annually as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.

The per share dividends on Class B Shares and Class C Shares may be lower than
the per share dividends on Class A Shares as a result of the higher

20
<PAGE>
distribution fees and transfer agency costs applicable to such classes of
shares.

SHAREHOLDER SERVICES

21
<PAGE>
are redeemed and not exchanged for shares of another Participating Fund, the
shares are subject to the contingent deferred sales charge schedule imposed by
the Participating Fund from which such shares were originally purchased.

FEDERAL INCOME
TAXATION

Distributions of the Fund's investment company taxable income (consisting
generally of ordinary income

22
<PAGE>

and net short-term capital gain) are taxable to shareholders as ordinary income
to the extent of the Fund's earnings and profits, whether paid in cash or
reinvested in additional shares. Distributions of the Fund's net capital gain
(which is the excess of net long-term capital gain over net short-term capital
loss) as capital gain dividends, if any, are taxable to shareholders as
long-term capital gains, whether paid in cash or reinvested in additional
shares, and regardless of how long the shares of the Fund have been held by such
shareholders. The Fund expects that its distributions will consist primarily of
ordinary income and capital gain dividends. Distributions in excess of the
Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). Although distributions generally are treated as taxable in the
year they are paid, distributions declared in October, November or December,
payable to shareholders of record on a specified date in such month and paid
during January of the following year will be treated as having been distributed
by the Fund and received by the shareholders on the December 31st prior to the
date of payment. The Fund will inform shareholders of the source and tax status
of all distributions promptly after the close of each calendar year.

23
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by
Deloitte & Touche LLP, independent auditors, whose report, along with the Fund's
most recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal year ended June 30, 1999 and for the fiscal period May 29, 1998
(commencement of operations) to June 30, 1998 have been audited by
PricewaterhouseCoopers LLP. This information should be read in conjunction with
the financial statements and notes thereto included in the Statement of
Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
YEAR ENDED JUNE 30, MAY 29, 1998* YEAR ENDED JUNE 30, MAY 29, 1998*
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# TO JUNE 30, 1998 2000# 1999# TO JUNE 30, 1998
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 12.54 $ 10.29 $ 10.00 $ 12.45 $ 10.28 $ 10.00
------- ------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Loss.............. (0.11) (0.06) -- (0.21) (0.14) --
Net Realized and Unrealized
Gain/Loss........................ 3.47 2.31 0.29 3.43 2.31 0.28
------- ------- ------- ------- ------- -------
Total From Investment Operations... 3.36 2.25 0.29 3.22 2.17 0.28
------- ------- ------- ------- ------- -------

Distributions
Net Realized Gain................ (0.48) (0.00)+ -- (0.48) (0.00)+ --
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period..... $ 15.42 $ 12.54 $ 10.29 $ 15.19 $ 12.45 $ 10.28
======= ======= ======= ======= ======= =======
Total Return (1)................... 27.26% 21.90% 2.90%** 26.32% 21.14% 2.80%**
======= ======= ======= ======= ======= =======
Ratios and Supplemental Data
Net Assets, End of Period
(000's)............................ $41,625 $17,185 $ 2,057 $49,214 $23,978 $ 1,543
Ratio of Expenses to Average Net
Assets............................. 1.50% 1.50% 1.50% 2.25% 2.25% 2.25%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (0.77%) (0.57%) 0.51% (1.52%) (1.34%) (0.25%)
Portfolio Turnover Rate............ 73% 126% 19%** 73% 126% 19%**
Effect of Voluntary Expense
Limitation During the Period Per
Share Benefit to Net Investment
Loss............................... $ 0.03 $ 0.05 $ 0.02 $ 0.03 $ 0.05 $ 0.02
Ratios Before Expense Reduction:
Expenses to Average Net Assets... 1.69% 1.98% 4.06% 2.44% 2.72% 4.81%
Net Investment Loss to Average
Net Assets....................... (0.96%) (1.05%) (2.05%) (1.71%) (1.81%) (2.81%)
--------------------------------------------------------------------------------------------------------------------

<CAPTION>
CLASS C SHARES
YEAR ENDED JUNE 30, MAY 29, 1998*
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# TO JUNE 30, 1998
----------------------------------- --------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 12.44 $ 10.28 $ 10.00
------- ------- -------
Income From Investment Operations
Net Investment Loss.............. (0.21) (0.14) --
Net Realized and Unrealized
Gain/Loss........................ 3.43 2.30 0.28
------- ------- -------
Total From Investment Operations... 3.22 2.16 0.28
------- ------- -------
Distributions
Net Realized Gain................ (0.48) (0.00)+ --
------- ------- -------
Net Asset Value, End of Period..... $ 15.18 $ 12.44 $ 10.28
======= ======= =======
Total Return (1)................... 26.34% 21.04% 2.80%**
======= ======= =======
Ratios and Supplemental Data
Net Assets, End of Period
(000's)............................ $17,197 $ 7,435 $ 1,543
Ratio of Expenses to Average Net
Assets............................. 2.25% 2.25% 2.25%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (1.52%) (1.32%) (0.25%)
Portfolio Turnover Rate............ 73% 126% 19%**
Effect of Voluntary Expense
Limitation During the Period Per
Share Benefit to Net Investment
Loss............................... $ 0.03 $ 0.05 $ 0.02
Ratios Before Expense Reduction:
Expenses to Average Net Assets... 2.44% 2.75% 4.81%
Net Investment Loss to Average
Net Assets....................... (1.71%) (1.81%) (2.81%)
--------------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
+ AMOUNT IS LESS THAN $0.01 PER SHARE.
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

24
<PAGE>

BOARD OF DIRECTORS
AND OFFICERS

BOARD OF DIRECTORS

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday

DEALERS

For dealer information, selling agreements, wire orders, or
redemptions, call the Distributor at (800) 421-5666

TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call (800) 421-2833

FUNDINFO-REGISTERED TRADEMARK-
For automated telephone services, call (800) 847-2424

WEB SITE
www.vankampen.com

VAN KAMPEN EQUITY GROWTH FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Equity Growth Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen Equity Growth Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>

VAN KAMPEN
EQUITY GROWTH FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of Additional Information, which contains more details about the
Fund, is incorporated by reference in its entirety into this prospectus.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

EQG PRO 10/00

<PAGE>

VAN KAMPEN
EUROPEAN EQUITY FUND

Van Kampen European Equity Fund's investment objective is to seek long-term
capital appreciation. Under normal market conditions, the Fund's investment
adviser seeks to achieve the Fund's investment objective by investing primarily
in a portfolio of equity securities of European issuers based on individual
stock selection.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Risk/Return Summary .....................................................3

Fees and Expenses of the Fund ...........................................5

Investment Objective, Policies and Risks ................................6

Investment Advisory Services ...........................................11

Purchase of Shares .....................................................13

Redemption of Shares ...................................................20

Distributions from the Fund ............................................22

Shareholder Services ...................................................22

Federal Income Taxation ................................................24

Financial Highlights ...................................................26

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek long-term capital appreciation.

INVESTMENT STRATEGIES

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing primarily in a portfolio of equity
securities of European issuers based on individual stock selection. The Fund's
investment adviser uses a bottom-up, value-driven approach to investing that
seeks to identify securities that it believes are undervalued relative to their
market values and other financial measurements with an emphasis on cash flow and
the intrinsic value of company assets. Portfolio securities are typically sold
when they reach the investment adviser's fair value target or reappraised fair
value. Equity securities include common and preferred stocks, convertible
securities, rights and warrants to purchase common stock and depositary
receipts. Under normal market conditions, the Fund invests at least 65% of its
total assets in equity securities of European issuers. The Fund may purchase and
sell certain derivative instruments, such as options, futures, options on
futures and currency-related transactions involving options, futures, forward
contracts and swaps, for various portfolio management purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

FOREIGN RISKS AND EUROPEAN REGION RISKS. Because the Fund owns securities of
foreign issuers, it is subject to risks not usually associated with owning
securities of U.S. issuers. These risks include fluctuations in foreign
currencies, foreign currency exchange controls, political and economic
instability, differences in financial reporting, differences in securities
regulation and trading and foreign taxation issues. The risks of investing in
developing or emerging market countries (in which the Fund may invest) are
greater than the risks generally associated with foreign investments, including
investment and trading limitations, greater credit and liquidity concerns,
greater political uncertainties, an economy's dependence on international trade
or development assistance, greater foreign currency exchange risks and currency
transfer restrictions, and greater delays and disruptions in settlement
transactions. Because the Fund's investments are focused in a single region, its
portfolio is more susceptible to factors adversely affecting issuers located in
that region than a more geographically diverse portfolio of investments.

3
<PAGE>
INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- Seek capital appreciation over the long term

- Do not seek current income from their investment

- Are willing to take on the increased risks associated with investing in
foreign securities from countries in a single region

- Can withstand substantial volatility in the value of their Fund shares

- Wish to add to their investment portfolio a fund that invests primarily in
equity securities of European issuers

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the one calendar year prior to the
date of this prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the return shown below would have been lower.
Remember that the past performance of the Fund is not indicative of its future
performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ANNUAL RETURN
<S> <C>
1999 10.10%
</TABLE>

The Fund's return for the nine-month period ended September 30, 2000 was -2.94%.
As a result of market activity, current performance may vary from the figures
shown.

During the one-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 8.69% (for the quarter ended December 31, 1999) and the
lowest quarterly return for Class A Shares was -3.72% (for the quarter ended
March 31, 1999).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the Morgan Stanley Capital
International ("MSCI") Europe Index*, a broad-based market index that the Fund's
investment adviser believes is an appropriate index for the Fund. The Fund's
performance figures listed below include the maximum sales charges paid by
investors. The index's performance figures do not include commissions or sales
charges that would be paid by investors purchasing the securities represented by
the index. An investment cannot be made directly in the index. Average annual
total returns are shown for the periods ended December 31, 1999 (the most
recently

4
<PAGE>

completed calendar year prior to the date of this prospectus). Remember that the
past performance of the Fund is not indicative of its future performance.

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS
FOR THE PERIODS ENDED PAST SINCE
DECEMBER 31, 1999 1 YEAR INCEPTION
<S> <C> <C>
------------------------------------------------------------------------------
Van Kampen European Equity Index Fund
-- Class A Shares 3.73% 9.23%(1)
MSCI Europe Index 15.89% 29.09%(2)
.............................................................................
Van Kampen European Equity Index Fund
-- Class B Shares 4.27% 10.63%(1)
MSCI Europe Index 15.89% 29.09%(2)
.............................................................................
Van Kampen European Equity Index Fund
-- Class C Shares 8.19% 13.46%(1)
MSCI Europe Index 15.89% 29.09%(2)
.............................................................................
INCEPTION DATES: (1) 9/25/98, (2) 9/30/98.
* MSCI EUROPE INDEX MEASURES THE PERFORMANCE OF SECURITIES WITH REINVESTED
DIVIDENDS ON THE EXCHANGES OF EUROPEAN COUNTRIES.
</TABLE>

FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 5.75%(1) None None
......................................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption
proceeds) None(2) 5.00%(3) 1.00%(4)
......................................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
......................................................................
Redemption fee None None None
......................................................................
Exchange fee None None None
......................................................................
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<S> <C> <C> <C>
-----------------------------------------------------------
Management fees(5) 1.00% 1.00% 1.00%
..........................................................
Distribution and/or
service (12b-1)
fees(6) 0.25% 1.00%(7) 1.00%(7)
..........................................................
Other expenses(5) 2.55% 2.55% 2.55%
..........................................................
Total annual fund
operating expenses(5) 3.80% 4.55% 4.55%
..........................................................
</TABLE>

(1) REDUCED FOR PURCHASES OF $50,000 AND OVER. SEE "PURCHASE OF SHARES --
CLASS A SHARES."
(2) INVESTMENTS OF $1 MILLION OR MORE ARE NOT SUBJECT TO ANY SALES CHARGE AT
THE TIME OF PURCHASE, BUT A DEFERRED SALES CHARGE OF 1.00% MAY BE IMPOSED
ON CERTAIN REDEMPTIONS MADE WITHIN ONE YEAR OF THE PURCHASE. SEE "PURCHASE
OF SHARES -- CLASS A SHARES."
(3) THE MAXIMUM DEFERRED SALES CHARGE IS 5.00% IN THE FIRST YEAR AFTER
PURCHASE, DECLINING THEREAFTER AS FOLLOWS:

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."
(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR AFTER PURCHASE
AND 0.00% THEREAFTER. SEE "PURCHASE OF SHARES -- CLASS C SHARES."
(5) THE FUND'S INVESTMENT ADVISER IS CURRENTLY WAIVING OR REIMBURSING A PORTION
OF THE FUND'S MANAGEMENT FEES AND OTHER EXPENSES SUCH THAT THE ACTUAL TOTAL
ANNUAL FUND OPERATING EXPENSES WERE 1.70% FOR CLASS A SHARES, 2.45% FOR
CLASS B SHARES AND 2.45% FOR CLASS C SHARES FOR THE FISCAL YEAR ENDED
JUNE 30, 2000. THE FEE WAIVERS OR EXPENSE REIMBURSEMENTS CAN BE TERMINATED
AT ANY TIME.
(6) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO 0.25% OF THE
AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES. CLASS B
SHARES AND CLASS C SHARES ARE EACH SUBJECT TO A COMBINED ANNUAL
DISTRIBUTION AND SERVICE FEE OF UP TO 1.00% OF THE AVERAGE DAILY NET ASSETS
ATTRIBUTABLE TO SUCH CLASS OF SHARES. SEE "PURCHASE OF SHARES."
(7) BECAUSE DISTRIBUTION AND/OR SERVICE (12b-1) FEES ARE PAID OUT OF THE FUND'S
ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES WILL INCREASE THE COST OF
YOUR INVESTMENT AND MAY COST YOU MORE THAN PAYING OTHER TYPES OF SALES
CHARGES.

5
<PAGE>
EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $ 935 $1,669 $2,420 $4,379
...............................................................
Class B Shares $ 956 $1,674 $2,451 $4,503*
...............................................................
Class C Shares $ 556 $1,374 $2,301 $4,654
...............................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $ 935 $1,669 $2,420 $4,379
...............................................................
Class B Shares $ 456 $1,374 $2,301 $4,503*
...............................................................
Class C Shares $ 456 $1,374 $2,301 $4,654
...............................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek long-term capital appreciation. Any
income received from the investment of portfolio securities is incidental to the
Fund's investment objective. The Fund's investment objective is a fundamental
policy and may not be changed without shareholder approval of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"). There are risks inherent in all
investments in securities; accordingly there can be no assurance that the Fund
will achieve its investment objective.

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing primarily in a portfolio of equity
securities of European issuers based on individual stock selection. European
issuers include issuers from Germany, France, Switzerland, Belgium, Italy,
Finland, Sweden, Denmark, Norway and the United Kingdom and issuers located in
the developing or emerging market countries of Europe. The Fund's investments in
equity securities include common and preferred stocks, convertible securities,
rights and warrants to purchase common stock and depositary receipts. Under
normal market conditions, the Fund invests at least 65% of its total assets in
equity securities of European issuers.

Under normal market conditions, the Fund's investment adviser selects securities
from a universe of all listed European companies. The Fund's investment process
is value-driven and based on individual stock selection. In assessing investment
opportunities, the Fund's investment adviser considers value criteria with an
emphasis on cash flow and the intrinsic value of company assets. Securities
which appear undervalued according to these criteria are then subjected to
in-depth fundamental analysis. The Fund's investment adviser conducts a thorough
investigation of the issuer's balance sheet, cash flow and income statement and
assesses the company's business franchise, including product competitiveness,
market positioning and industry structure. The Fund's investment adviser makes
company visits, reviews the quality of management and considers meetings with
senior company management as a factor in the investment process.

While the Fund is not subject to any specific geographic diversification
requirements, it currently intends to diversify investments among European
countries. To the extent the Fund focuses more of its assets in a single
country, it will be more susceptible to factors adversely affecting issuers in
that country. Investments will be made primarily in equity securities of
companies domiciled in developed countries, but may be made in the securities of

6
<PAGE>

companies in developing or emerging market countries as well. Securities in
developing or emerging market countries may not be as liquid as those in
developed markets and pose greater risks. Although the Fund intends to invest
primarily in securities listed on stock exchanges, it will also invest in
securities traded in over-the-counter markets. Unlisted securities may not be as
liquid as listed securities and pose greater risks to the Fund. The Fund will
not, in normal circumstances, invest in the equity securities of U.S. issuers.
Because of the Fund's policy of concentrating its investments in a single
region, it is more susceptible than a fund without such a policy to any single
economic, political or regulatory occurrence affecting issuers located in that
region.

While the Fund invests primarily in common stocks, the Fund also may invest in
other equity securities including preferred stocks, convertible securities,
warrants or rights to purchase common stock and depositary receipts. Preferred
stock generally has a preference as to dividends and liquidation over an
issuer's common stock but ranks junior to debt securities in an issuer's capital
structure. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer's board of directors.
Preferred stock also may be subject to optional or mandatory redemption
provisions. The ability of common stocks and preferred stocks to generate income
is dependent on the earnings and continuing declaration of dividends by the
issuers of such securities.

Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights typically have a substantially
shorter term than do warrants. Rights and warrants may be considered more
speculative and less liquid than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any right in the assets of the
issuing company. Rights and warrants may lack a secondary market.

The Fund may invest in securities of certain issuers indirectly through
investments in other investment companies. Such investments are commonly used
when direct investments in certain countries are not permitted by foreign
investors. Investments in other investment companies may involve duplication of
management fees and certain other expenses.

The Fund may invest in small-, medium- or large-sized companies. The securities
of small- or medium-sized companies may be subject to more abrupt or erratic
market movements than securities of larger-sized companies or the market
averages in general. In addition, such companies typically are subject to a
greater degree of change in earnings and business prospects than are larger
companies. Thus, to the extent the Fund invests in small- and medium-sized
companies, the Fund may be subject to greater investment risk than that assumed
through

7
<PAGE>

investment in the equity securities of larger companies.

RISKS OF INVESTING IN SECURITIES
OF FOREIGN ISSUERS

The Fund may invest in securities of issuers in developing or emerging market
countries. Investments in securities of issuers in developing or emerging market
countries are subject to greater risks than investments in securities of
developed countries since emerging market countries tend to have economic
structures that are less diverse and mature and political systems that are less
stable than developed markets. Emerging market countries may be more likely to
experience political turmoil or rapid changes in economic conditions than more
developed countries and the financial condition of issuers in emerging market
countries may be more precarious than in other countries.

In addition to the increased risks of investing in foreign securities, there are
often increased transaction costs associated with investing in foreign
securities, including the costs incurred in connection with converting
currencies, higher foreign brokerage or dealer costs, and higher settlement
costs or custodial costs.

8
<PAGE>

or sell securities or foreign currencies at a future date ("forward contracts").
A foreign currency forward contract is a negotiated agreement between the
contracting parties to exchange a specified amount of currency at a specified
future time at a specified rate. The rate can be higher or lower than the spot
rate between the currencies that are the subject of the contract.

Investors should consider carefully the risks of foreign investments before
investing in the Fund.

ADDITIONAL INFORMATION REGARDING INVESTING IN EUROPEAN ISSUERS. Many European
countries have adopted or are in the process of adopting a single European
currency, commonly referred to as the "euro." The long-term consequences of the
euro conversion on foreign exchange rates, interest rates and the value of
European securities, all of which may adversely affect the Fund, are still
uncertain.

Governments across Europe have initiated major privatization programs shifting a
greater share of economic activity into the more efficient private sector.
Private companies have sought quotation, following the need to compete in the
capital markets, as much as in the market place for their products and services.
To achieve a high rating on their equity, companies need to produce transparent
accounts, communicate effectively with their shareholders and manage their
businesses and assets to their shareholders' advantage. The restructuring,
management incentives and rationalization of companies has led to lower wage
structures and greater flexibility. This has enabled European companies to match
the competitive cost environment of developing economies.

DERIVATIVE INSTRUMENTS

9
<PAGE>

response to changes in investment strategy, when doing so provides more
liquidity than the direct purchase of the securities underlying such
derivatives, when the Fund is restricted from directly owning the underlying
securities due to foreign investment restrictions or other reasons, or when
doing so provides a price advantage over purchasing the underlying securities
directly, either because of a pricing differential between the derivatives and
securities markets or because of lower transaction costs associated with the
derivatives transaction. The Fund may invest up to 33 1/3% of its total assets
in Strategic Transactions for non-hedging purposes (measured by the aggregate
notional amount of outstanding derivatives). In addition, the Fund may invest up
to 20% of its total assets in futures contracts and options on futures contracts
(measured by the aggregate notional amount of such outstanding contracts).

OTHER INVESTMENTS AND RISK FACTORS

Further information about these types of investments and other investment
practices that may be used by

10
<PAGE>

the Fund is contained in the Fund's Statement of Additional Information.

The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for capital appreciation has
lessened, or for other reasons. The portfolio turnover rate may vary from year
to year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs) which would
adversely impact a fund's performance. Higher portfolio turnover may result in
the realization of more short-term capital gains than if a fund had lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities, including prime
commercial paper, repurchase agreements and bank obligations, such as bankers'
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for capital appreciation
on these securities will tend to be lower than the potential for capital
appreciation on other securities that may be owned by the Fund. In taking such a
defensive position, the Fund would temporarily not be pursuing and may not
achieve its investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
-------------------------------------
<S> <C>
First $500 million 1.00%
....................................
Next $500 million 0.95%
....................................
Over $1 billion 0.90%
....................................
</TABLE>

Applying this fee schedule, the effective advisory fee was 1.00% of the Fund's
average daily net assets for the Fund's fiscal year ended June 30, 2000. The
Fund's average daily net assets are determined by taking the average of all the
determinations of the net assets during a given calendar month. Such fee is
payable for each calendar month as soon as practicable after the end of that
month.

11
<PAGE>
The Fund also retains the Adviser to provide administrative services for the
Fund's day-to-day operations. Under an administration agreement between the Fund
and the Adviser, the Fund pays a monthly administration fee computed based upon
an annual rate of 0.25% applied to the average daily net assets of the Fund.

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

PORTFOLIO MANAGEMENT. Margaret Naylor, Nathalie Degans and Willem Vinke are
responsible for the day-to-day management of the Fund's investment portfolio.

Ms. Naylor, a Managing Director, joined the MSDW Investment Management Group in
1987. She has overall responsibility for investment strategy and stock selection
for the Fund. Prior to joining the MSDW Investment Management Group, she spent
three years at the Trade Policy Research Centre, an independent research unit.
Ms. Naylor is a graduate of the University of York, United Kingdom. Ms. Naylor
has been managing the Fund since April 1999.

Ms. Degans, a Principal, joined the MSDW Investment Management Group in 1996.
From 1993 to 1995 she worked in Morgan Stanley & Co.'s Corporate Treasury
Division, and prior to that, she was with Banque Indosuez New York from 1986 to
1992. Ms. Degens is a graduate of ISG, France and INSEAD, France. Ms. Degens has
been managing the Fund since July 2000.

12
<PAGE>

Mr. Vinke, a Principal, joined the MSDW Investment Management Group in 1995.
Prior to 1995, he worked for Morgan Stanley & Co.'s Investment Banking and Fixed
Income Divisions. Mr. Vinke is a graduate of the University of Manchester and
the London School of Economics. Mr. Vinke has been managing the Fund since July
2000.

PURCHASE OF SHARES

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which the class's distribution fee and/ or the service fee is paid,
(iii) each class of shares has different exchange privileges, (iv) certain
classes of shares are subject to a conversion feature and (v) certain classes of
shares have different shareholder service options available.

The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Directors reserves the right to calculate the net
asset value per share and adjust the offering price more frequently than once
daily if deemed desirable. Net asset value per share for each class is
determined by dividing the value of the Fund's portfolio securities, cash and
other assets (including accrued interest) attributable to such class, less all
liabilities (including accrued expenses) attributable to such class, by the
total number of shares of the class outstanding. Such computation is made by
using prices as of the close of trading on the Exchange and (i) valuing
securities listed or traded on a national securities exchange at the closing
price, or, if no closing price is available, at the last reported sale price
and, if there has been no sale that day, at the mean between the last reported
bid and asked prices, (ii) valuing over-the-counter securities at the last
reported sale price from the National Association of Securities Dealers
Automated Quotations ("NASDAQ") and, if there has been no sale that day, at the
mean between the last reported bid and asked prices, (iii) valuing unlisted
securities at the average of the mean between the current reported bid and asked
prices obtained from reputable brokers and (iv) valuing any securities for which
market quotations are not readily available and any other assets at fair value
as determined in good faith by the Adviser in accordance with procedures

13
<PAGE>

established by the Fund's Board of Directors. Securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.

Trading in securities on many foreign securities exchanges (including European
securities exchanges) and over-the-counter markets is normally completed before
the close of business on each U.S. business day. In addition, securities trading
in a particular country or countries may not take place on all U.S. business
days or may take place on days which are not U.S. business days. Changes in
valuations on certain securities may occur at times or on days on which the
Fund's net asset value is not calculated and on which the Fund does not effect
sales, redemptions and exchanges of its shares.

The offering price for shares is based upon the next calculation of net asset
value per share (plus sales

14
<PAGE>

CLASS A SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
AS % OF AS % OF
SIZE OF OFFERING NET AMOUNT
INVESTMENT PRICE INVESTED
-------------------------------------------------------
<S> <C> <C>
Less than $50,000 5.75% 6.10%
......................................................
$50,000 but less than
$100,000 4.75% 4.99%
......................................................
$100,000 but less than
$250,000 3.75% 3.90%
......................................................
$250,000 but less than
$500,000 2.75% 2.83%
......................................................
$500,000 but less than
$1,000,000 2.00% 2.04%
......................................................
$1,000,000 or more * *
......................................................
</TABLE>

* NO SALES CHARGE IS PAYABLE AT THE TIME OF PURCHASE ON INVESTMENTS OF $1
MILLION OR MORE, ALTHOUGH FOR SUCH INVESTMENTS THE FUND MAY IMPOSE A
CONTINGENT DEFERRED SALES CHARGE OF 1.00% ON CERTAIN REDEMPTIONS MADE
WITHIN ONE YEAR OF THE PURCHASE. THE CONTINGENT DEFERRED SALES CHARGE IS
ASSESSED ON AN AMOUNT EQUAL TO THE LESSER OF THE THEN CURRENT MARKET
VALUE OR THE COST OF THE SHARES BEING REDEEMED. ACCORDINGLY, NO SALES
CHARGE IS IMPOSED ON INCREASES IN NET ASSET VALUE ABOVE THE INITIAL
PURCHASE PRICE.

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

15
<PAGE>
CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
---------------------------------------
<S> <C>
First 5.00%
......................................
Second 4.00%
......................................
Third 3.00%
......................................
Fourth 2.50%
......................................
Fifth 1.50%
......................................
Sixth and After None
......................................
</TABLE>

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

CONVERSION FEATURE

Class B Shares, including Class B Shares received from reinvestment of
distributions through the dividend reinvestment plan, automatically convert to
Class A Shares eight years after the end of the

16
<PAGE>

calendar month in which the shares were purchased. Such conversion will be on
the basis of the relative net asset values per share, without the imposition of
any sales load, fee or other charge. The conversion schedule applicable to a
share of the Fund acquired through the exchange privilege from another Van
Kampen fund participating in the exchange program is determined by reference to
the Van Kampen fund from which such share was originally purchased.

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

QUANTITY DISCOUNTS

17
<PAGE>

Funds over a 13-month period based on the total amount of intended purchases
plus the value of all shares of the Participating Funds previously purchased and
still owned. An investor may elect to compute the 13-month period starting up to
90 days before the date of execution of a Letter of Intent. Each investment made
during the period receives the reduced sales charge applicable to the total
amount of the investment goal. The initial purchase must be for an amount equal
to at least 5% of the minimum total purchase amount of the level selected. If
trades not initially made under a Letter of Intent subsequently qualify for a
lower sales charge through the 90-day backdating provisions, an adjustment will
be made at the expiration of the Letter of Intent to give effect to the lower
sales charge. Such adjustment in sales charge will be used to purchase
additional shares. The Fund initially will escrow shares totaling 5% of the
dollar amount of the Letter of Intent to be held by Investor Services in the
name of the shareholder. In the event the Letter of Intent goal is not achieved
within the specified period, the investor must pay the difference between the
sales charge applicable to the purchases made and the reduced sales charges
previously paid. Such payments may be made directly to the Distributor or, if
not paid, the Distributor will liquidate sufficient escrowed shares to obtain
the difference.

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.

(2) Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries; employees of an investment
subadviser to any fund described in

18
<PAGE>
(1) above or an affiliate of such subadviser; and such persons' families
and their beneficial accounts.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

19
<PAGE>
with this privilege will be subject to a contingent deferred sales charge
of 1.00% in the event of redemption within one year of purchase, and a
commission will be paid to authorized dealers who initiate and are
responsible for such sales to each individual as follows: 1.00% on sales to
$2 million, plus 0.80% on the next $1 million and 0.50% on the excess over
$3 million.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

REDEMPTION OF
SHARES

Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption request to be in proper form.
In some

20
<PAGE>

cases, however, additional documents may be necessary. Certificated shares may
be redeemed only by written request. The certificates for the shares being
redeemed must be properly endorsed for transfer and must accompany the written
redemption request. Generally, in the event a redemption is requested by and
registered to a corporation, partnership, trust, fiduciary, estate or other
legal entity owning shares of the Fund, a copy of the corporate resolution or
other legal documentation appointing the authorized signer and certified within
the prior 120 days must accompany the redemption request. Retirement plan
distribution requests should be sent to the plan custodian/trustee to be
forwarded to Investor Services. Contact the plan custodian/trustee for further
information.

OTHER REDEMPTION INFORMATION. The Fund may redeem any shareholder account that
has a value on the date of the notice of redemption less than the

21
<PAGE>

minimum initial investment as specified in this prospectus. At least 60 days'
advance written notice of any such involuntary redemption will be provided to
the shareholder and such shareholder will be given an opportunity to purchase
the required value of additional shares at the next determined net asset value
without sales charge. Any involuntary redemption may only occur if the
shareholder account is less than the minimum initial investment due to
shareholder redemptions.

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income at least
annually as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.

SHAREHOLDER SERVICES

22
<PAGE>

in another Participating Fund at the next determined net asset value.

23
<PAGE>

to its shareholders of any termination or material amendment.

FEDERAL INCOME
TAXATION

24
<PAGE>
tax advisers concerning the tax consequences to them of an investment in shares.

25
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by Deloitte
& Touche LLP, independent auditors, whose report, along with the Fund's most
recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal period September 25, 1998 (commencement of operations) to June 30, 1999
has been audited by PricewaterhouseCoopers LLP. This information should be read
in conjunction with the financial statements and notes thereto included in the
Statement of Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
YEAR ENDED SEPTEMBER 25, 1998* YEAR ENDED SEPTEMBER 25, 1998*
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 2000# TO JUNE 30, 1999# JUNE 30, 2000# TO JUNE 30, 1999#
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period.... $10.65 $ 10.00 $10.62 $ 10.00
====== -------- ====== --------
Income From Investment Operations
Net Investment Income................. 0.11 0.13 0.04 0.08
Net Realized and Unrealized Gain...... 1.27 0.54 1.26 0.55
------ -------- ------ --------
Total From Investment Operations........ 1.38 0.67 1.30 0.63
------ -------- ------ --------
Distributions
Net Investment Income................. (0.14) (0.02) (0.06) (0.01)
---------------------------------------- ------ -------- ------ --------
Net Realized Gain..................... (0.10) -- (0.10) --
------ -------- ------ --------
Total Distributions..................... (0.24) (0.02) (0.16) (0.01)
------ -------- ------ --------
Net Asset Value, End of Period.......... $11.79 $ 10.65 $11.76 $ 10.62
====== ======== ====== ========
Total Return (1)........................ 13.15% 6.75%** 12.43% 6.26%**
====== ======== ====== ========
Ratios and Supplemental Data
Net Assets, End of Period (000's)....... $6,649 $ 2,020 $7,177 $ 3,082
Ratio of Expenses to Average Net
Assets.................................. 1.70% 1.70% 2.45% 2.45%
Ratio of Net Investment Income to
Average Net Assets...................... 0.99% 1.64% 0.45% 0.96%
Portfolio Turnover Rate................. 49% 51%** 49% 51%**
----------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period Per Share Benefit to
Net Investment Income................... $ 0.23 $ 0.36 $ 0.23 $ 0.34
Ratios Before Expense Reductions:
Expenses to Average Net Assets........ 3.80% 6.20% 4.55% 6.61%
Net Investment Income/Loss to Average
Net Assets.......................... (1.11%) (2.87%) (1.65%) (3.20%)

<CAPTION>
CLASS C SHARES
YEAR ENDED SEPTEMBER 25, 1998*
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 2000# TO JUNE 30, 1999#
<S> <C> <C>
---------------------------------------- --------------------------------------
Net Asset Value, Beginning of Period.... $10.59 $ 10.00
====== --------
Income From Investment Operations
Net Investment Income................. 0.01 0.07
Net Realized and Unrealized Gain...... 1.28 0.53
------ --------
Total From Investment Operations........ 1.29 0.60
------ --------
Distributions
Net Investment Income................. (0.06) (0.01)
---------------------------------------- ------ --------
Net Realized Gain..................... (0.10) --
------ --------
Total Distributions..................... (0.16) (0.01)
------ --------
Net Asset Value, End of Period.......... $11.72 $ 10.59
====== ========
Total Return (1)........................ 12.37% 5.96%**
====== ========
Ratios and Supplemental Data
Net Assets, End of Period (000's)....... $2,026 $ 1,457
Ratio of Expenses to Average Net
Assets.................................. 2.45% 2.45%
Ratio of Net Investment Income to
Average Net Assets...................... 0.01% 0.81%
Portfolio Turnover Rate................. 49% 51%**
---------------------------------------- --------------------------------------
Effect of Voluntary Expense Reductions
During the Period Per Share Benefit to
Net Investment Income................... $ 0.24 $ 0.40
Ratios Before Expense Reductions:
Expenses to Average Net Assets........ 4.55% 7.33%
Net Investment Income/Loss to Average
Net Assets.......................... (2.09%) (4.13%)
</TABLE>

* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

26
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS
BOARD OF DIRECTORS

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday

DEALERS
For dealer information, selling agreements, wire orders, or
redemptions, call the Distributor at (800) 421-5666

TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call
(800) 421-2833

FUNDINFO-REGISTERED TRADEMARK-
For automated telephone services, call (800) 847-2424

WEB SITE
www.vankampen.com

VAN KAMPEN EUROPEAN EQUITY FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen European Equity Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen European Equity Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>

VAN KAMPEN
EUROPEAN EQUITY FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of
Additional Information,
which contains more
details about the Fund,
is incorporated by
reference in its
entirety into this
prospectus.

You will find additional
information about the
Fund in its annual and
semiannual reports to
shareholders. The annual
report explains the
market conditions and
investment strategies
affecting the Fund's
performance during its
last fiscal year.

You can ask questions or
obtain a free copy of
the Fund's reports or
its Statement of
Additional Information
by calling (800)
341-2911 from 7:00 a.m.
to 7:00 p.m., Central
time, Monday through
Friday.
Telecommunications
Device for the Deaf
users may call (800)
421-2833. A free copy of
the Fund's reports can
also be ordered from our
web site at
www.vankampen.com.

Information about the
Fund, including its
reports and Statement of
Additional Information,
has been filed with the
Securities and Exchange
Commission (SEC). It can
be reviewed and copied
at the SEC's Public
Reference Room in
Washington, DC or on the
EDGAR database on the
SEC's internet site
(http://www.sec.gov).
Information on the
operation of the SEC's
Public Reference Room
may be obtained by
calling the SEC at
1-202-942-8090. You can
also request copies of
these materials, upon
payment of a duplicating
fee, by electronic
request at the SEC's
e-mail address
([email protected]), or
by writing the Public
Reference Section of the
SEC, Washington, DC
20549-0102.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

EEQ PRO 10/00
#65106

<PAGE>

VAN KAMPEN
FOCUS EQUITY FUND

Van Kampen Focus Equity Fund's investment objective is to seek to provide
capital appreciation by investing primarily in a non-diversified portfolio of
corporate equity and equity-linked securities.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Investment Advisory Services ...........................................10

Purchase of Shares .....................................................12

Redemption of Shares ...................................................18

Distributions from the Fund ............................................20

Shareholder Services ...................................................20

Federal Income Taxation ................................................22

Financial Highlights ...................................................23

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek to provide capital appreciation by
investing primarily in a non-diversified portfolio of corporate equity and
equity-linked securities.

INVESTMENT STRATEGIES

The Fund emphasizes individual security selection. The Fund generally focuses
its investments in a relatively small number of companies and may invest up to
25% of its total assets in a single issuer. Portfolio securities are typically
sold when the assessments of the Fund's investment adviser for growth of such
securities materially change. The Fund may invest up to 25% of its total assets
in securities of foreign issuers. The Fund may purchase and sell certain
derivative instruments, such as options, futures, options on futures and forward
contracts, for various portfolio management purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures, options on futures and forward
contracts are examples of derivative instruments. Derivative instruments involve
risks different from direct investments in underlying securities. These risks
include imperfect correlation between the value of the instruments and the
underlying assets; risks of default by the other party to certain transactions;
risks that the transactions may result in losses that partially or completely
offset gains in portfolio positions; and risks that the transactions may not be
liquid.

NON-DIVERSIFICATION RISKS. The Fund is classified as a "non-diversified" fund,
which means the Fund may invest a greater portion of its assets in a more
limited number of issuers than a "diversified" fund. As a result, the Fund may
be subject to greater risk than a diversified fund because changes in the
financial condition or market assessment of a single issuer may cause greater
fluctuations in the value of the Fund's shares. In addition, as a result of the
Fund's stock selection process, a significant portion of the Fund's assets may
be invested in companies within the same industries or sectors of the market. To
the

3
<PAGE>
extent the Fund focuses its investments in this way, it may be more susceptible
to economic, political, regulatory and other occurrences influencing those
industries or market sectors.

INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- Seek capital appreciation over the long term

- Do not seek current income from their investment

- Can withstand substantial volatility in the value of their Fund shares

- Seek a fund with an investment strategy focused on a relatively small number
of companies

- Wish to add to their investment portfolio a fund that emphasizes a growth
style of investing in a focused portfolio of equity and equity-linked
securities

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the four calendar years prior to the
date of this prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the returns shown below would have been lower.
Remember that the past performance of the Fund is not indicative of its future
performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Annual Return

The Fund's return for the nine-month period ended September 30, 2000 was 2.58%.
As a result of market activity, current performance may vary from the figures
shown.

During the four-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 25.50% (for the quarter ended December 31, 1998) and the
lowest quarterly return for Class A Shares was -19.05% (for the quarter ended
September 30, 1998).

COMPARATIVE PERFORMANCE

4
<PAGE>

charges that would be paid by investors purchasing the securities represented by
those indices. An investment cannot be made directly in the indices. Average
annual total returns are shown for the periods ended December 31, 1999 (the most
recently completed calendar year prior to the date of this prospectus). Remember
that the past performance of the Fund is not indicative of its future
performance.

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS
FOR THE
PERIODS ENDED PAST SINCE
DECEMBER 31, 1999 1 YEAR INCEPTION
------------------------------------------------------
<S> <C> <C>
Van Kampen Focus Equity
Fund
-- Class A Shares 37.33% 29.82%(1)
Standard & Poor's 500
Index 21.04% 26.53%(2)
Lipper Capital
Appreciation
Fund Index 39.17% 22.45%(2)
.....................................................
Van Kampen Focus Equity
Fund
-- Class B Shares 39.49% 30.52%(1)
Standard & Poor's 500
Index 21.04% 26.53%(2)
Lipper Capital
Appreciation
Fund Index 39.17% 22.45%(2)
.....................................................
Van Kampen Focus Equity
Fund
-- Class C Shares 43.60% 30.80%(1)
Standard & Poor's 500
Index 21.04% 26.53%(2)
Lipper Capital
Appreciation
Fund Index 39.17% 22.45%(2)
.....................................................
</TABLE>

<TABLE>
<S> <C>
INCEPTION DATES: (1) 1/2/96, (2) 12/31/95.
* THE STANDARD & POOR'S 500 INDEX IS A BROAD-BASED INDEX OF 500 WIDELY
HELD COMMON STOCKS OF COMPANIES CHOSEN FOR MARKET SIZE, LIQUIDITY AND
INDUSTRY GROUP REPRESENTATION.
** THE LIPPER CAPITAL APPRECIATION FUND INDEX IS A COMPOSITE OF MUTUAL
FUNDS MANAGED FOR MAXIMUM CAPITAL GAINS.
</TABLE>

FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
----------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
----------------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price) 5.75%(1) None None
...............................................................
Maximum deferred sales
charge (load) (as a
percentage of the
lesser of original
purchase price or
redemption proceeds) None(2) 5.00%(3) 1.00%(4)
...............................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
...............................................................
Redemption fee None None None
...............................................................
Exchange fee None None None
...............................................................
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------
Management fees(5) 0.90% 0.90% 0.90%
...........................................................
Distribution and/or
service (12b-1)
fees(6) 0.25% 1.00%(7) 1.00%(7)
...........................................................
Other expenses(5) 0.41% 0.41% 0.41%
...........................................................
Total annual fund
operating expenses(5) 1.56% 2.31% 2.31%
...........................................................
</TABLE>

(1) REDUCED FOR PURCHASES OF $50,000 AND OVER. SEE "PURCHASE OF
SHARES -- CLASS A SHARES."
(2) INVESTMENTS OF $1 MILLION OR MORE ARE NOT SUBJECT TO ANY SALES
CHARGE AT THE TIME OF PURCHASE, BUT A DEFERRED SALES CHARGE OF
1.00% MAY BE IMPOSED ON CERTAIN REDEMPTIONS MADE WITHIN ONE
YEAR OF THE PURCHASE. SEE "PURCHASE OF SHARES -- CLASS A
SHARES."
(3) THE MAXIMUM DEFERRED SALES CHARGE IS 5.00% IN THE FIRST YEAR
AFTER PURCHASE, DECLINING THEREAFTER AS FOLLOWS:

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."
(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR
AFTER PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF
SHARES -- CLASS C SHARES."
(5) THE FUND'S INVESTMENT ADVISER IS CURRENTLY WAIVING OR
REIMBURSING A PORTION OF THE FUND'S MANAGEMENT FEES AND OTHER
EXPENSES SUCH THAT THE ACTUAL TOTAL ANNUAL FUND OPERATING
EXPENSES WERE 1.50% FOR CLASS A SHARES, 2.25% FOR CLASS B
SHARES AND 2.25% FOR CLASS C SHARES FOR THE FISCAL YEAR ENDED
JUNE 30, 2000. THE FEE WAIVERS OR EXPENSE REIMBURSEMENTS CAN BE
TERMINATED AT ANY TIME.
(6) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO
0.25% OF THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH
CLASS OF SHARES. CLASS B SHARES AND CLASS C SHARES ARE EACH
SUBJECT TO A COMBINED ANNUAL DISTRIBUTION AND SERVICE FEE OF UP
TO 1.00% OF THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH
CLASS OF SHARES. SEE "PURCHASE OF SHARES."
(7) BECAUSE DISTRIBUTION AND/OR SERVICE (12b-1) FEES ARE PAID OUT
OF THE FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES
WILL INCREASE THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE
THAN PAYING OTHER TYPES OF SALES CHARGES.

5
<PAGE>
EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $725 $1,039 $1,376 $2,325
...............................................................
Class B Shares $734 $1,021 $1,385 $2,458*
...............................................................
Class C Shares $334 $ 721 $1,235 $2,646
...............................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $725 $1,039 $1,376 $2,325
...............................................................
Class B Shares $234 $ 721 $1,235 $2,458*
...............................................................
Class C Shares $234 $ 721 $1,235 $2,646
...............................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek to provide capital appreciation by
investing primarily in a non-diversified portfolio of corporate equity and
equity-linked securities. Any income received from the investment of portfolio
securities is incidental to the Fund's investment objective. The Fund's
investment objective is a fundamental policy and may not be changed without
shareholder approval of a majority of the Fund's outstanding voting securities,
as defined in the Investment Company Act of 1940, as amended (the "1940 Act").
There are risks inherent in all investments in securities; accordingly, there
can be no assurance that the Fund will achieve its investment objective.

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing at least 65% of the Fund's total
assets in a portfolio of equity and equity-linked securities, including common
and preferred stocks, convertible securities, rights and warrants to purchase
common stocks, depositary receipts, equity-related futures and options and other
specialty securities having equity features. The Fund invests primarily in a
portfolio of growth-oriented companies with market capitalizations of $1 billion
or more at the time of investment, but also may invest in smaller companies. The
Fund's investment adviser emphasizes a "bottom up" stock selection process,
seeking attractive growth investments on an individual company basis. In
selecting securities for investment, the Fund's investment adviser seeks those
companies with the potential for strong or accelerating earnings growth and
compelling business strategies. The Fund generally focuses its investments in a
relatively small number of issuers, which may result in greater volatility of
the value of the Fund's shares. Investments in growth-oriented equity securities
may have above average volatility of price movement. Because prices of equity
securities fluctuate, the value of an investment in the Fund will vary based
upon the Fund's investment performance. The Fund attempts to reduce overall
exposure to risk by adhering to a disciplined program of intensive research,
careful security selection and the continual monitoring of the Fund's
investments.

The Fund emphasizes a strategy that focuses on larger investments in a few
select companies rather than smaller investments in a larger number of issuers.
To the extent the Fund focuses its investments in this way, it may be subject to
more risk than a diversified fund because changes affecting a single issuer may
cause greater fluctuations in the value of the Fund's shares. The Fund's
investment adviser believes that an effective way to maximize return and reduce
the risks associated with its focused investment approach is through a program
of intensive research, careful selection of individual securities and continual
supervision of the Fund's portfolio. In addition, the Fund's stock selection
process may result in a significant portion of the Fund's assets invested in
companies in the same industry or sector of the market. To the extent the Fund's
investments are invested in this way, it may be more susceptible to economic,
political, regulatory and other occurrences influencing those industries or
market sectors.

7
<PAGE>

the linked security at a value based upon the value of the underlying equity
security within a stated period from the issue date, (iii) may have various
conversion features prior to maturity at the option of the holder or the issuer
or both, (iv) may limit the appreciation value with caps or collars of the value
of the underlying equity security and (v) may have fixed, variable or no
interest payments during the life of the security which reflect the actual or a
structured return relative to the underlying dividends of the linked equity
security. Investments in equity-linked securities may subject the Fund to
additional risks not ordinarily associated with investments in other equity
securities. Because equity-linked securities are sometimes issued by a third
party other than the issuer of the linked security, the Fund is subject to risks
if the underlying stock underperforms or if the issuer defaults on the payment
of the dividend or the common stock at maturity. In addition, the trading market
for particular equity-linked securities may be less liquid, making it difficult
for the Fund to dispose of a particular security when necessary and reduced
liquidity in the secondary market for any such securities may make it more
difficult to obtain market quotations for valuing the Fund's portfolio.

RISKS OF INVESTING IN SECURITIES
OF FOREIGN ISSUERS

8
<PAGE>

DERIVATIVE INSTRUMENTS

9
<PAGE>

a security that it might otherwise sell. The use of currency transactions can
result in the Fund incurring losses because of the imposition of exchange
controls, suspension of settlements or the inability of the Fund to deliver or
receive a specified currency. In addition, amounts paid as premiums or cash or
other assets held in margin accounts with respect to Strategic Transactions are
not otherwise available to the Fund for investment purposes.

OTHER INVESTMENTS AND RISK FACTORS

The Fund may lend its portfolio securities in an amount up to 33 1/3% of its
total assets to broker-dealers, banks or other institutional borrowers of
securities. The Fund may incur lending fees and other costs in connection with
securities lending and securities lending is subject to the risk of default by
the other party.

The Fund may invest up to 15% of the Fund's net assets in illiquid and certain
restricted securities. Notwithstanding the foregoing, the Fund may not invest
more than 10% of its total assets in securities subject to legal or contractual
restrictions on resale. Such securities may be difficult or impossible to sell
at the time and the price that the Fund would like. Thus, the Fund may have to
sell such securities at a lower price, sell other securities instead to obtain
cash or forego other investment opportunities.

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for capital appreciation has
lessened, or for other reasons. The portfolio turnover rate may vary from year
to year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs) which would
adversely impact a fund's performance. Higher portfolio turnover may result in
the realization of more short-term capital gains than if a fund had lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities, including prime
commercial paper, repurchase agreements and bank obligations, such as bankers
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for capital appreciation
on these securities will tend to be lower than the potential for capital
appreciation on other securities that may be owned by the Fund. In taking such a
defensive position, the Fund would temporarily not be pursuing and may not
achieve its investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

10
<PAGE>

million retail investor accounts, has extensive capabilities for managing
institutional portfolios, and has more than $100 billion under management or
supervision as of September 30, 2000. Van Kampen Investments has more than 50
open-end funds, 38 closed-end funds and more than 2,700 unit investment trusts
that are professionally distributed by leading authorized dealers nationwide.
Van Kampen Funds Inc., the distributor of the Fund (the "Distributor") and the
sponsor of the funds mentioned above, is also a wholly owned subsidiary of Van
Kampen Investments. Van Kampen Investments is an indirect wholly owned
subsidiary of Morgan Stanley Dean Witter & Co. The Adviser's principal office is
located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555.

<S> <C>
AVERAGE DAILY NET ASSETS % PER ANNUM
-----------------------------------------------
FIRST $500 MILLION 0.90%
..............................................
NEXT $500 MILLION 0.85%
..............................................
OVER $1 BILLION 0.80%
..............................................
</TABLE>

Applying this fee schedule, the effective advisory fee rate was 0.90% of the
Fund's average daily net assets for the Fund's fiscal year ended June 30, 2000.
The Fund's average daily net assets are determined by taking the average of all
of the determinations of the net assets during a given calendar month. Such fee
is payable for each calendar month as soon as practicable after the end of that
month.

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

Morgan Stanley Dean Witter Investment Management Inc. is the Fund's investment
subadviser (the "Subadviser"). The Subadviser is a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. The Subadviser conducts a worldwide portfolio
management business and provides a broad range of portfolio management services
to customers in the United States and abroad. At September 30, 2000, the
Subadviser, together with its affiliated institutional asset management
companies, managed assets of approximately $178 billion, including assets under
fiduciary advice. The Subadviser's principal office is located at 1221 Avenue of
the Americas, New York, New York 10020. On December 1, 1998, Morgan Stanley
Asset Management Inc. changed its name to Morgan Stanley Dean Witter Investment
Management Inc. but continues to do business in certain instances using the name
Morgan Stanley Asset Management.

11
<PAGE>
GENERAL
From time to time, the Adviser, the Subadviser or the Distributor may
voluntarily undertake to reduce the Fund's expenses by reducing the fees payable
to them or by reducing other expenses of the Fund in accordance with such
limitations as the Adviser, the Subadviser or Distributor may establish.

PORTFOLIO MANAGEMENT. The Fund's portfolio managers are Philip W. Friedman and
William S. Auslander.

Mr. Friedman, a Managing Director and leader of the Institutional Equity Group,
joined the Subadviser in 1997. Prior to joining the Subadviser, Mr. Friedman was
the North American Director of Equity Research at Morgan Stanley Dean Witter &
Co. From 1990 to 1995, he was a member of Morgan Stanley Dean Witter & Co.'s
Equity Research team. Mr. Friedman graduated from Rutgers University with a B.A.
(Phi Beta Kappa, Summa Cum Laude) in Economics. He also holds an M.B.A. from
J.L. Kellogg School of Management at Northwestern University. Mr. Friedman has
been a co-manager of the Fund since September 1998.

Mr. Auslander, a Principal and a Portfolio Manager in the Institutional Equity
Group joined the Subadviser in 1995 as an equity analyst in the Institutional
Equity Group. Prior to joining the Subadviser, Mr. Auslander was an equity
analyst for nine years at Icahn & Co. He graduated from the University of
Wisconsin at Madison with a B.A. in Economics and received an M.B.A. from
Columbia University in 1993. Mr. Auslander has been a co-manager of the Fund
since September 1998.

PURCHASE OF SHARES
GENERAL
The Fund offers three classes of shares designated as Class A Shares, Class B
Shares and Class C Shares. By offering three classes of shares, the Fund permits
each investor to choose the class of shares that is most beneficial given the
amount to be invested and the length of time the investor expects to hold the
shares.

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares bear the sales charge expenses at the time of redemption and any
expenses (including higher distribution fees and transfer agency costs)
resulting from such deferred sales charge arrangement, (ii) each class of shares
has exclusive voting rights with respect to approvals of the Rule 12b-1
distribution plan and the service plan (each as described below) under which the
class's distribution fee and/ or the service fee is paid, (iii) each class of
shares has different exchange privileges, (iv) certain classes of shares are
subject to a conversion feature and (v) certain classes of shares have different
shareholder service options available.

12
<PAGE>

each day the Exchange is open for trading except on any day on which no purchase
or redemption orders are received or there is not a sufficient degree of trading
in the Fund's portfolio securities such that the Fund's net asset value per
share might be materially affected. The Fund's Board of Directors reserves the
right to calculate the net asset value per share and adjust the offering price
more frequently than once daily if deemed desirable. Net asset value per share
for each class is determined by dividing the value of the Fund's portfolio
securities, cash and other assets (including accrued interest) attributable to
such class, less all liabilities (including accrued expenses) attributable to
such class, by the total number of shares of the class outstanding. Such
computation is made by using prices as of the close of trading on the Exchange
and (i) valuing securities listed or traded on a national securities exchange at
the closing price, or if no closing price is available, at the last reported
sale price, and if there has been no sale that day, at the mean between the last
reported bid and asked prices, (ii) valuing over-the-counter securities at the
last reported sale price from the National Association of Securities Dealers
Automated Quotations ("NASDAQ") and, if there has been no sale that day, at the
mean between the last reported bid and asked prices, (iii) valuing unlisted
securities at the average of the mean between the current reported bid and asked
prices obtained from reputable brokers and (iv) valuing any securities for which
market quotations are not readily available and any other assets at fair value
as determined in good faith by the Adviser in accordance with procedures
established by the Fund's Board of Directors. Securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.

13
<PAGE>

next determined net asset value per share provided they are received by Investor
Services prior to Investor Services' close of business on such date. It is the
responsibility of authorized dealers to transmit orders received by them to
Investor Services so they will be received in a timely manner.

CLASS A SHARES
SALES CHARGE SCHEDULE

<TABLE>
<S> <C> <C>
AS % OF
AS % OF NET
SIZE OF OFFERING AMOUNT
INVESTMENT PRICE INVESTED
-----------------------------------------------------
<S> <C> <C>
Less than $50,000 5.75% 6.10%
....................................................
$50,000 but less than
$100,000 4.75% 4.99%
....................................................
$100,000 but less than
$250,000 3.75% 3.90%
....................................................
$250,000 but less than
$500,000 2.75% 2.83%
....................................................
$500,000 but less than
$1,000,000 2.00% 2.04%
....................................................
$1,000,000 or more * *
....................................................
</TABLE>

* NO SALES CHARGE IS PAYABLE AT THE TIME OF PURCHASE ON INVESTMENTS OF $1
MILLION OR MORE, ALTHOUGH FOR SUCH INVESTMENTS THE FUND MAY IMPOSE A
CONTINGENT DEFERRED SALES CHARGE OF 1.00% ON CERTAIN REDEMPTIONS MADE
WITHIN ONE YEAR OF THE PURCHASE. THE CONTINGENT DEFERRED SALES CHARGE IS
ASSESSED ON AN AMOUNT EQUAL TO THE LESSER OF THE THEN CURRENT MARKET
VALUE OR THE COST OF THE SHARES BEING REDEEMED. ACCORDINGLY, NO SALES
CHARGE IS IMPOSED ON INCREASES IN NET ASSET VALUE ABOVE THE INITIAL
PURCHASE PRICE.

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
-------------------------------------------
<S> <C>
First 5.00%
..........................................
Second 4.00%
..........................................
Third 3.00%
..........................................
Fourth 2.50%
..........................................
Fifth 1.50%
..........................................
Sixth and After None
..........................................
</TABLE>

14
<PAGE>

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

CONVERSION FEATURE

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

15
<PAGE>

of Additional Information or contact your authorized dealer.

QUANTITY DISCOUNTS

16
<PAGE>
program, should contact their authorized dealer or the Distributor.

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

17
<PAGE>

aggregate investment made by the plan or the number of eligible employees,
except under certain uniform criteria established by the Distributor from
time to time. A commission will be paid to authorized dealers who initiate
and are responsible for such purchases within a rolling twelve-month period
as follows: 1.00% on sales to $2 million, plus 0.80% on the next $1
million, plus 0.50% on the next $47 million, plus 0.25% on the excess over
$50 million.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

REDEMPTION OF
SHARES

WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by
written request in proper form sent directly to Van Kampen Investor

18
<PAGE>

Services Inc., PO Box 218256, Kansas City, MO 64121-8256. The request for
redemption should indicate the number of shares or dollar amount to be redeemed,
the Fund name and class designation of such shares and the shareholder's account
number. The redemption request must be signed by all persons in whose names the
shares are registered. Signatures must conform exactly to the account
registration. If the proceeds of the redemption exceed $100,000, or if the
proceeds are not to be paid to the record owner at the record address, or if the
record address has changed within the previous 15 days, signature(s) must be
guaranteed by one of the following: a bank or trust company; a broker-dealer; a
credit union; a national securities exchange, registered securities association
or clearing agency; a savings and loan association; or a federal savings bank.

19
<PAGE>

account. This privilege is not available if the address of record has been
changed within 15 days prior to a telephone redemption request. Proceeds from
redemptions payable by wire transfer are expected to be wired on the next
business day following the date of redemption. The Fund reserves the right at
any time to terminate, limit or otherwise modify this redemption privilege.

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income, at least
quarterly as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.

SHAREHOLDER SERVICES

20
<PAGE>

the account application form or prior to any declaration, instruct that
dividends and/or capital gain dividends be paid in cash, be reinvested in the
Fund at the next determined net asset value, or be invested in another
Participating Fund at the next determined net asset value.

21
<PAGE>
its predecessors shall be included. If the exchanged security was acquired
through reinvestment, that security is deemed to have been sold with a sales
charge rate equal to the rate previously paid on the security on which the
dividend or distribution was paid. If a shareholder exchanges less than all of
such shareholder's securities, the security upon which the highest sales charge
rate was previously paid is deemed exchanged first.

FEDERAL INCOME
TAXATION

22
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by
Deloitte & Touche LLP, independent auditors, whose report, along with the Fund's
most recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal years ended June 30, 1999, 1998 and 1997 and the fiscal period
January 2, 1996 (commencement of operations) to June 30, 1996 has been audited
by PricewaterhouseCoopers LLP. This information should be read in conjunction
with the financial statements and notes thereto included in the Statement of
Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------ JANUARY 2, 1996*
SELECTED PER SHARE DATA AND RATIOS 2000 # 1999 # 1998 # 1997 TO JUNE 30, 1996
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 22.98 $ 20.01 $ 16.98 $ 14.40 $12.00
-------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss...................... (0.18) (0.14) (0.07) 0.01 0.06
Net Realized and Unrealized Gain................ 5.82 4.70 5.03 3.95 2.40
-------- ------- ------- ------- ------
Total From Investment Operations................ 5.64 4.56 4.96 3.96 2.46
-------- ------- ------- ------- ------
DISTRIBUTIONS
Net Investment Income........................... -- -- -- (0.03) (0.06)
Net Realized Gain............................... (1.45) (1.59) (1.93) (1.35) --
-------- ------- ------- ------- ------
Total Distributions............................. (1.45) (1.59) (1.93) (1.38) (0.06)
-------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD.................... $ 27.17 $ 22.98 $ 20.01 $ 16.98 $14.40
======== ======= ======= ======= ======
TOTAL RETURN (1).................................. 25.28% 25.57% 30.93% 28.93% 20.52%**
======== ======= ======= ======= ======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)................. $185,983 $73,829 $64,035 $22,521 $5,382
Ratio of Expenses to Average Net Assets........... 1.50% 1.50% 1.50% 1.57% 2.03%
Ratio of Net Investment Income/Loss to Average Net
Assets............................................ (0.71%) (0.73%) (0.37%) (0.04%) 1.22%
Portfolio Turnover Rate........................... 106% 282% 308% 241% 204%**
-----------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reduction During
the Period
Per Share Benefit to Net Investment
Income/Loss..................................... $ 0.02 $ 0.02 $ 0.04 $ 0.02 $ 0.06
Ratios Before Expense Reduction:
Expenses to Average Net Assets.................. 1.56% 1.61% 1.71% 2.38% 3.26%
Net Investment Income/Loss to Average Net
Assets.......................................... (0.77%) (0.84%) (0.59%) (0.85%) (0.01%)
Ratio of Expenses to Average Net Assets excluding
dividend expense on securities sold short....... 1.50% 1.50% 1.50% 1.50% 1.50%
-----------------------------------------------------------------------------------------------------------------

<CAPTION>
CLASS B SHARES
----------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------- JANUARY 2, 1996*
SELECTED PER SHARE DATA AND RATIOS 2000 # 1999 # 1998 # 1997 TO JUNE 30, 1996
-------------------------------------------------- ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 22.38 $ 19.67 $ 16.85 $ 14.38 $12.00
-------- -------- -------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss...................... (0.36) (0.28) (0.21) (0.02) 0.03
Net Realized and Unrealized Gain................ 5.65 4.58 4.96 3.86 2.39
-------- -------- -------- ------- ------
Total From Investment Operations................ 5.29 4.30 4.75 3.84 2.42
-------- -------- -------- ------- ------
DISTRIBUTIONS
Net Investment Income........................... -- -- -- (0.02) (0.04)
Net Realized Gain............................... (1.45) (1.59) (1.93) (1.35) --
-------- -------- -------- ------- ------
Total Distributions............................. (1.45) (1.59) (1.93) (1.37) (0.04)
-------- -------- -------- ------- ------
NET ASSET VALUE, END OF PERIOD.................... $ 26.22 $ 22.38 $ 19.67 $ 16.85 $14.38
======== ======== ======== ======= ======
TOTAL RETURN (1).................................. 24.42% 24.59% 29.94% 28.01% 20.18%**
======== ======== ======== ======= ======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)................. $307,758 $176,189 $130,497 $34,382 $2,426
Ratio of Expenses to Average Net Assets........... 2.25% 2.25% 2.25% 2.32% 2.67%
Ratio of Net Investment Income/Loss to Average Net
Assets............................................ (1.46%) (1.50%) (1.11%) (0.83%) 0.43%
Portfolio Turnover Rate........................... 106% 282% 308% 241% 204%**
-----------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reduction During
the Period
Per Share Benefit to Net Investment
Income/Loss..................................... $ 0.01 $ 0.02 $ 0.04 $ 0.02 $ 0.07
Ratios Before Expense Reduction:
Expenses to Average Net Assets.................. 2.31% 2.36% 2.47% 2.88% 3.79%
Net Investment Income/Loss to Average Net
Assets.......................................... (1.52%) (1.61%) (1.34%) (1.43%) (0.69%)
Ratio of Expenses to Average Net Assets excluding
dividend expense on securities sold short....... 2.25% 2.25% 2.25% 2.25% 2.25%
-----------------------------------------------------------------------------------------------------------------

<CAPTION>
CLASS C SHARES
------------------------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------- JANUARY 2, 1996*
SELECTED PER SHARE DATA AND RATIOS 2000 # 1999 # 1998 # 1997 TO JUNE 30, 1996
-------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 22.36 $ 19.66 $ 16.83 $14.37 $12.00
------- ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss...................... (0.36) (0.28) (0.21) (0.06) 0.03
Net Realized and Unrealized Gain................ 5.66 4.57 4.97 3.89 2.38
------- ------- ------- ------ ------
Total From Investment Operations................ 5.30 4.29 4.76 3.83 2.41
------- ------- ------- ------ ------
DISTRIBUTIONS
Net Investment Income........................... -- -- -- (0.02) (0.04)
Net Realized Gain............................... (1.45) (1.59) (1.93) (1.35) --
------- ------- ------- ------ ------
Total Distributions............................. (1.45) (1.59) (1.93) (1.37) (0.04)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD.................... $ 26.21 $ 22.36 $ 19.66 $16.83 $14.37
======= ======= ======= ====== ======
TOTAL RETURN (1).................................. 24.38% 24.67% 29.90% 28.04% 20.10%**
======= ======= ======= ====== ======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)................. $61,316 $27,189 $24,872 $9,410 $2,582
Ratio of Expenses to Average Net Assets........... 2.25% 2.25% 2.25% 2.32% 2.67%
Ratio of Net Investment Income/Loss to Average Net
Assets............................................ (1.46%) (1.48%) (1.13%) (0.77%) 0.44%
Portfolio Turnover Rate........................... 106% 282% 308% 241% 204%**
-----------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reduction During
the Period
Per Share Benefit to Net Investment
Income/Loss..................................... $ 0.01 $ 0.02 $ 0.04 $ 0.02 $ 0.07
Ratios Before Expense Reduction:
Expenses to Average Net Assets.................. 2.31% 2.36% 2.25% 3.23% 3.80%
Net Investment Income/Loss to Average Net
Assets.......................................... (1.52%) (1.59%) (1.35%) (1.67%) (0.69%)
Ratio of Expenses to Average Net Assets excluding
dividend expense on securities sold short....... 2.25% 2.25% 2.25% 2.25% 2.25%
-----------------------------------------------------------------------------------------------------------------
</TABLE>

23
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS

BOARD OF DIRECTORS

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

VAN KAMPEN FOCUS EQUITY FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Focus Equity Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen Focus Equity Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>

VAN KAMPEN
FOCUS EQUITY FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of Additional Information, which contains more details about the
Fund, is incorporated by reference in its entirety into this prospectus.

Information about the Fund, including its reports and Statement of Additional
Information, has been filed with the Securities and Exchange Commission (SEC).
It can be reviewed and copied at the SEC's Public Reference Room in Washington,
DC or on the EDGAR database on the SEC's internet site (http://www.sec.gov).
Information on the operation of the SEC's Public Reference Room may be obtained
by calling the SEC at 1-202-942-8090. You can also request copies of these
materials, upon payment of a duplicating fee, by electronic request at the SEC's
e-mail address ([email protected]), or by writing
the Public Reference Section of the SEC,
Washington, DC 20549-0102.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

MSAE PRO 10/00
#65131

<PAGE>

VAN KAMPEN
GLOBAL EQUITY
ALLOCATION FUND

Van Kampen Global Equity Allocation Fund's investment objective is to seek
long-term capital appreciation by investing in equity securities of U.S. and
non-U.S. issuers in accordance with country weightings determined by the Fund's
investment adviser and with stock selection within each country designed to
replicate a broad market index.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Investment Advisory Services ...........................................11

Purchase of Shares .....................................................13
Redemption of Shares ...................................................20
Distributions from the Fund ............................................22

Shareholder Services ...................................................22

Federal Income Taxation ................................................24
Financial Highlights ...................................................26

INVESTMENT OBJECTIVE

INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests at least 65% of its total
assets in securities of issuers located in at least three countries (including
the U.S.). The composition of the Fund's portfolio will vary over time based
upon the Fund's investment adviser's evaluation of economic and market trends
and the anticipated relative capital appreciation available from particular
countries, sectors and securities. The Fund may invest in any country, including
developing or emerging market countries. Portfolio securities are typically sold
when the Fund's investment adviser's assessments for capital appreciation of
countries or sectors materially change.

Equity securities include common and preferred stocks, convertible securities,
rights and warrants to purchase common stock and depositary receipts. The Fund
may purchase and sell certain derivative instruments, such as options, futures,
options on futures and currency-related transactions involving options, futures,
forward contracts and swaps, for various portfolio management purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

Foreign markets may, but often do not, move in tandem with changes in U.S.
markets, and foreign markets, especially developing or emerging market
countries, may be more volatile than U.S. markets. During an overall stock
market decline, stock prices of smaller companies (in which the Fund may invest)
often fluctuate more and may fall more than the stock prices of larger
companies.

FOREIGN RISKS. Because the Fund owns securities of foreign issuers, it is
subject to risks not usually associated with owning securities of U.S. issuers.
These risks include fluctuations in foreign currencies, foreign currency
exchange controls, political and economic instability, differences in financial
reporting, differences in securities regulation and trading and foreign taxation
issues. The risks of investing in developing or emerging market countries are
greater than the risks generally associated with foreign investments, including
investment and trading limitations, greater credit and liquidity concerns,
greater political uncertainties, an economy's dependence on international trade
or development assistance, greater foreign currency exchange risk and currency
transfer restrictions, and greater delays and disruptions in settlement
transactions. To the extent the Fund focuses its assets in a single country or
region, its portfolio would be more susceptible to factors adversely affecting
issuers in that country or region.

3
<PAGE>

from direct investments in underlying securities. These risks include imperfect
correlation between the value of the instruments and the underlying assets;
risks of default by the other party to certain transactions; risks that the
transactions may result in losses that partially or completely offset gains in
portfolio positions; and risks that the transactions may not be liquid.

INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- Seek capital appreciation over the long term

- Do not seek current income from their investment

- Are willing to take on the increased risks associated with investing in
foreign securities

- Can withstand volatility in the value of their Fund shares

- Wish to add to their investment portfolio a fund that invests in a global
portfolio of equity securities

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the seven calendar years prior to the
date of this prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the returns shown below would have been lower.
Remember that the past performance of the Fund is not indicative of its future
performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ANNUAL RETURN
<S> <C>
1993 22.72%
1994 0.27%
1995 19.65%
1996 13.01%
1997 16.45%
1998 19.38%
1999 23.48%
</TABLE>

The Fund's return for the nine-month period ended September 30, 2000 was -6.09%.
As a result of market activity, current performance may vary from the figures
shown.

During the seven-year period shown in the bar chart, the highest quarterly
return for Class A Shares was 18.08% (for the quarter ended December 31, 1999)
and the lowest quarterly return for Class A Shares was -11.46% (for the quarter
ended September 30, 1998).

4
<PAGE>
COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the Morgan Stanley Capital
International ("MSCI") World Index* (in U.S. dollar terms), a broad-based market
index that the Fund's investment adviser believes is an appropriate benchmark
for the Fund. The Fund's performance figures listed below include the maximum
sales charges paid by investors. The index's performance figures do not include
any commissions or sales charges that would be paid by investors purchasing the
securities represented by the index. An investment cannot be made directly in
the index. Average annual total returns are shown for the periods ended
December 31, 1999 (the most recently completed calendar year prior to the date
of this prospectus). Remember that the past performance of the Fund is not
indicative of its future performance.

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS
FOR THE
PERIODS ENDED PAST PAST 5 SINCE
DECEMBER 31, 1999 1 YEAR YEARS INCEPTION
----------------------------------------------------------
<S> <C> <C> <C>
Van Kampen Global
Equity Allocation
Fund
-- Class A Shares 16.41% 16.95% 15.22%(1)
MSCI World Index 24.93% 19.76% 17.92%(3)
.........................................................
Van Kampen Global
Equity Allocation
Fund
-- Class B Shares 17.53% N/A 17.37%(2)
MSCI World Index 24.93% 19.76% 17.92%(2)
.........................................................
Van Kampen Global
Equity Allocation
Fund
-- Class C Shares 21.62% 17.49% 15.36%(1)
MSCI World Index 24.93% 19.76% 17.92%(3)
.........................................................
INCEPTION DATES: (1) 1/4/93, (2) 8/1/95, (3) 12/31/92.
</TABLE>

N/A -- NOT APPLICABLE
* THE MSCI WORLD INDEX IS AN UNMANAGED INDEX THAT INCLUDES SECURITIES
LISTED ON THE STOCK EXCHANGES OF THE U.S., EUROPE, CANADA, AUSTRALIA,
NEW ZEALAND AND THE FAR EAST AND ASSUMES DIVIDENDS ARE REINVESTED NET
OF WITHHOLDING TAX.

FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------
Management fees 1.00% 1.00% 1.00%
..........................................................
Distribution and/or
service
(12b-1) fees(5) 0.25% 1.00%(6) 1.00%(6)
..........................................................
Other expenses 0.45% 0.45% 0.45%
..........................................................
Total annual fund
operating expenses 1.70% 2.45% 2.45%
..........................................................
</TABLE>

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."
(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR AFTER
PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF SHARES -- CLASS C
SHARES."
(5) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO 0.25% OF
THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES.
CLASS B SHARES AND CLASS C SHARES ARE EACH SUBJECT TO A COMBINED
ANNUAL DISTRIBUTION AND SERVICE FEE OF UP TO 1.00% OF THE AVERAGE
DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES. SEE "PURCHASE
OF SHARES."
(6) BECAUSE DISTRIBUTION AND/OR SERVICE (12b-1) FEES ARE PAID OUT OF THE
FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES WILL INCREASE
THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE THAN PAYING OTHER
TYPES OF SALES CHARGES.

5
<PAGE>
EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $738 $1,080 $1,445 $2,468
...............................................................
Class B Shares $748 $1,064 $1,456 $2,601*
...............................................................
Class C Shares $348 $ 764 $1,306 $2,786
...............................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $738 $1,080 $1,445 $2,468
...............................................................
Class B Shares $248 $ 764 $1,306 $2,601*
...............................................................
Class C Shares $248 $ 764 $1,306 $2,786
...............................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek long-term capital appreciation by
investing in equity securities of U.S. and non-U.S. issuers in accordance with
country weightings determined by the Fund's investment adviser and with stock
selection within each country designed to replicate a broad market index. Any
income received from the investment of portfolio securities is incidental to the
Fund's investment objective. The Fund's investment objective is a fundamental
policy and may not be changed without shareholder approval of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"). There are risks inherent in all
investments in securities; accordingly there can be no assurance that the Fund
will achieve its investment objective.

The Fund's investment adviser seeks to achieve the Fund's investment objective
by applying a "top-down" investment approach that emphasizes country and/or
sector selection and weighting rather than individual security selection. Within
a particular country or sector, the Fund's investment adviser selects equity
securities of issuers designed to track the markets of that country or sector.
Under normal market conditions, the Fund invests at least 65% of its total
assets in securities of issuers located in at least three different countries
(including the U.S.). This investment approach reflects the investment adviser's
philosophy for this Fund that a broad selection of securities representing
exposure to world markets based upon the economic outlook and current valuation
levels for each country and sector is an effective way to maximize the return
and minimize the risk associated with global investment. The Fund's investments
may be shifted among the world's various capital markets, including developing
or emerging market countries, and among different types of securities in
accordance with the investment adviser's ongoing analysis of economic or market
trends, developments affecting the markets and securities in which the Fund may
invest and the anticipated relative capital appreciation available from
particular countries sectors and securities. Accordingly, the composition of the
Fund's portfolio will vary over time. Achieving the Fund's investment objective
depends on the ability of the Fund's investment adviser to assess the effect of
such economic and market trends on different countries and sectors of the
market. Because of the managed approach of the Fund, portfolio turnover of the
Fund may be greater than portfolio turnover of other mutual funds. The Fund's
portfolio turnover is shown under the heading "Financial Highlights." A high
portfolio turnover rate (100% or more) increases a fund's transaction costs
(including brokerage commissions or dealer

6
<PAGE>

costs) which would adversely impact a fund's performance. Higher portfolio
turnover may result in the realization of more short-term capital gains than if
the Fund had lower portfolio turnover.

The Fund's investment adviser determines country and sector allocations for the
Fund on an ongoing basis. The Fund invests primarily in those countries
(including the U.S. and other industrialized countries throughout the world)
that comprise the MSCI World Index. In addition, the Fund may invest a portion
of its assets in securities of developing or emerging market countries whose
economies are developing strongly and whose markets are becoming more
sophisticated.

By analyzing a variety of macroeconomic and political factors, the Fund's
investment adviser develops fundamental projections on interest rates,
currencies, corporate profits and economic growth for each country. These
country projections are then used to determine what the Fund's investment
adviser believes to be a fair value for the securities market of each country.
Discrepancies between actual value and fair value, as determined by the Fund's
investment adviser, provide an expected return for each securities market. The
expected return is adjusted by currency return expectations derived from the
investment adviser's purchasing-power parity exchange rate model to arrive at an
expected total return in U.S. dollars. The final country and sector allocation
decision is then reached by considering the expected total return in light of
various considerations such as market size, volatility, liquidity and country
risk.

Within a particular country or sector, investments are made through the purchase
of equity securities which, in the aggregate, are designed to track the markets
for that particular country or sector.

The investment adviser's sell decisions are based on a country or
industry/sectors relative attractiveness as judged by the three major
components: valuations, fundamentals and market sentiment. The investment
adviser sells a country or sector when the rationale for the purchase has been
realized or the investment adviser expects the country/sector fundamentals (such
as economic growth and government policy) or market sentiment to disappoint. The
investment adviser does not establish pre-specified targets for sell points
given the relative nature of the process. It ranks country/sector attractiveness
and looks to identify alternatives prior to initiating or soon after a sale.

7
<PAGE>

but are usually subordinated to comparable nonconvertible securities.
Convertible securities generally do not participate directly in any dividend
increases or decreases of the underlying equity securities although the market
prices of convertible securities may be affected by any such dividend changes or
other changes in the underlying equity securities.

The Fund only invests in convertible debt securities considered to be
"investment grade" at the time of investment. Investment grade securities are
securities rated BBB or higher by Standard & Poor's ("S&P") or rated Baa or
higher by Moody's Investors Service, Inc. ("Moody's") or comparably rated by any
other internationally recognized statistical rating organization ("IRSRO") or,
if unrated, are considered by the Fund's investment adviser to be of comparable
quality. Securities rated BBB by S&P or Baa by Moody's are in the lowest of the
four investment grade categories and are considered by the rating agencies to be
medium-grade obligations which possess speculative characteristics so that
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than in the case of
higher-rated securities.

Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights typically have a substantially
shorter term than do warrants. Rights and warrants may be considered more
speculative and less liquid than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any right in the assets of the
issuing company. Rights and warrants may lack a secondary market.

The Fund may invest in issuers of small-, medium-or large-capitalization
companies. The securities of smaller companies may be subject to more abrupt or
erratic market movements than securities of larger companies or the market
averages in general. In addition, smaller companies typically are subject to a
greater degree of change in earnings and business prospects than are larger
companies. Thus, to the extent the Fund invests in smaller companies, the Fund
may be subject to greater investment risk than that assumed through investment
in the equity securities of larger companies.

RISKS OF INVESTING IN SECURITIES
OF FOREIGN ISSUERS

8
<PAGE>

developments which could affect investment in those countries. Because there is
usually less supervision and governmental regulation of foreign exchanges,
brokers and dealers than there is in the United States, the Fund may experience
settlement difficulties or delays not usually encountered in the United States.

Investors should consider carefully the risks of foreign investments before
investing in the Fund.

DERIVATIVE INSTRUMENTS

9
<PAGE>
The Fund may purchase and sell derivative instruments such as exchange-listed
and over-the-counter put and call options on securities, financial futures,
equity, fixed-income and interest rate indices, and other financial instruments,
futures contracts and options thereon (including but not limited to securities
index futures, foreign currency exchange futures, interest rate futures and
other financial futures), structured notes, swaps, caps, floors or collars and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currency or currency
futures. In addition, the Fund may invest in other derivative instruments that
are developed over time if their use would be consistent with the objective of
the Fund. Collectively, all of the above are referred to as "Strategic
Transactions." The Fund generally seeks to use Strategic Transactions as a
portfolio management or hedging technique to seek to protect against possible
adverse changes in the market value of securities held in or to be purchased for
the Fund's portfolio, protect the Fund's unrealized gains, facilitate the sale
of certain securities for investment purposes, protect against changes in
currency exchange rates or to adjust the exposure to a particular currency,
manage the effective maturity or duration of the Fund's portfolio, establish
positions in the derivatives markets as a substitute for purchasing or selling
particular securities, including, for example, when the Fund adjusts its
exposure to a market in response to changes in investment strategy, when doing
so provides more liquidity than the direct purchase of the securities underlying
such derivatives, when the Fund is restricted from directly owning the
underlying securities due to foreign investment restrictions or other reasons,
or when doing so provides a price advantage over purchasing the underlying
securities directly, either because of a pricing differential between the
derivatives and securities markets or because of lower transaction costs
associated with the derivatives transaction. The Fund may invest up to 33 1/3%
of its total assets in Strategic Transactions for non-hedging purposes (measured
by the aggregate notional amount of outstanding derivatives). In addition, the
Fund may invest up to 20% of its total assets in futures contracts and options
on futures contracts (measured by the aggregate notional amount of such
outstanding contracts).

10
<PAGE>
OTHER INVESTMENTS AND RISK FACTORS

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities including prime
commercial paper, repurchase agreements and bank obligations, such as bankers'
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for capital appreciation
on these securities will tend to be lower than the potential for capital
appreciation on other securities that may be owned by the Fund. In taking such a
defensive position, the Fund temporarily would not be pursuing and may not
achieve its investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
---------------------------------------
<S> <C>
First $750 million 1.00%
......................................
Next $500 million 0.95%
......................................
Over $1.25 billion 0.90%
......................................
</TABLE>

11
<PAGE>

payable for each calendar month as soon as practicable after the end of that
month.

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

Morgan Stanley Dean Witter Investment Management Inc. is the Fund's investment
subadviser (the "Subadviser"). The Subadviser is a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. The Subadviser conducts a worldwide portfolio
management business and provides a broad range of portfolio management services
to customers in the United States and abroad. At September 30, 2000, the
Subadviser, together with its affiliated institutional asset management
companies, managed assets of approximately $178 billion, including assets under
fiduciary advice. The Subadviser's principal office is located at 1221 Avenue of
the Americas, New York, New York 10020. On December 1, 1998, Morgan Stanley
Asset Management Inc. changed its name to Morgan Stanley Dean Witter Investment
Management Inc. but continues to do business in certain instances using the name
Morgan Stanley Asset Management.

GENERAL
From time to time, the Adviser, the Subadviser or the Distributor may
voluntarily undertake to reduce

the Fund's expenses by reducing the fees payable to them or by reducing other
expenses of the Fund in accordance with such limitations as the Adviser, the
Subadviser or Distributor may establish.

PERSONAL INVESTMENT POLICIES. The Fund, the Adviser, the Subadviser, and the
Distributor have adopted Codes of Ethics designed to recognize the fiduciary
relationships among the Fund, the Adviser, and the Subadviser, the Distributor
and their respective employees. The Codes of Ethics permit directors, trustees,
officers and employees to buy and sell securities for their personal accounts
subject to certain restrictions. Persons with access to certain sensitive
information are subject to pre-clearance and other procedures designed to
prevent conflicts of interest.

PORTFOLIO MANAGEMENT. Ann D. Thivierge and Barton M. Biggs are responsible as
comanagers for the day-to-day management of the Fund's investment portfolio.
Ms. Thivierge and Mr. Biggs have shared primary responsibility for managing the
Fund's assets since June 1995.

Ms. Thivierge, a Managing Director and a member of the Subadviser's Asset
Allocation Committee, joined the Subadviser in 1986 and has worked in global
asset allocation since 1990. She holds a B.A. in International Relations from
James Madison College, Michigan State University, and an M.B.A. in Finance from
New York University.

Mr. Biggs has been Chairman and a Director since 1980 and a Managing Director
since 1975. He is also a Director and Chairman of various registered investment
companies to which the Subadviser and certain of its affiliates provide
investment advisory

12
<PAGE>

services. Mr. Biggs holds a B.A. from Yale University and an M.B.A. from New
York University.

PURCHASE OF SHARES

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which the class's distribution fee and/ or the service fee is paid,
(iii) each class of shares has different exchange privileges, (iv) certain
classes of shares are subject to a conversion feature and (v) certain classes of
shares have different shareholder service options available.

The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Directors reserves the right to calculate the net
asset value per share and adjust the offering price more frequently than once
daily if deemed desirable. Net asset value per share for each class is
determined by dividing the value of the Fund's portfolio securities, cash and
other assets (including accrued interest) attributable to such class, less all
liabilities (including accrued expenses) attributable to such class, by the
total number of shares of the class outstanding. Such computation is made by
using prices as of the close of trading on the Exchange and (i) valuing
securities listed or traded on a national securities exchange at the closing
price, or if no closing price is available, at the last reported sale price, and
if there has been no sale that day, at the mean between the last reported bid
and asked prices, (ii) valuing over-the-counter securities at the last reported
sale price from the National Association of Securities Dealers Automated
Quotations ("NASDAQ"), and if there has been no sale that day, at the mean
between the last reported bid and asked prices, (iii) valuing unlisted
securities at the average of the mean between the current reported bid and asked
prices obtained from reputable brokers and (iv) valuing any securities for which
market quotations are not readily available and any other assets at fair value
as determined in good faith by the Adviser in accordance with procedures
established by the Fund's Board of Directors. Securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.

Trading in securities on many foreign securities exchanges (including European
and Far Eastern

13
<PAGE>
securities exchanges) and over-the-counter markets is normally completed before
the close of business on each U.S. business day. In addition, securities trading
in a particular country or countries may not take place on all U.S. business
days or may take place on days which are not U.S. business days. Changes in
valuations on certain securities may occur at times or on days on which the
Fund's net asset value is not calculated and on which the Fund does not effect
sales, redemptions and exchanges of its shares.

The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution and service fees and other expenses of the Fund associated with
that class of shares. To assist investors in comparing classes of shares, the
tables under the Prospectus heading "Fees and Expenses of the Fund" provide a
summary of sales charges and expenses and an example of the sales charges and
expenses of the Fund applicable to each class of shares.

Shares may be purchased on any business day by completing the account
application form and forwarding the account application form directly or through
an authorized dealer, to the Fund's shareholder service agent, Van Kampen
Investor Services Inc. ("Investor Services"), a wholly owned subsidiary of Van
Kampen Investments. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A Shares, Class B Shares or Class C Shares by
selecting the correct Fund number on the account application form. Sales
personnel of authorized dealers distributing the Fund's shares are entitled to
receive compensation for selling such shares and may receive differing
compensation for selling Class A Shares, Class B Shares or Class C Shares.

14
<PAGE>

close of business are priced based on the date of the next determined net asset
value per share provided they are received by Investor Services prior to
Investor Services' close of business on such date. It is the responsibility of
authorized dealers to transmit orders received by them to Investor Services so
they will be received in a timely manner.

CLASS A SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
AS % OF AS % OF
SIZE OF OFFERING NET AMOUNT
INVESTMENT PRICE INVESTED
---------------------------------------------------------
<S> <C> <C>
Less than $50,000 5.75% 6.10%
........................................................
$50,000 but less than $100,000 4.75% 4.99%
........................................................
$100,000 but less than $250,000 3.75% 3.90%
........................................................
$250,000 but less than $500,000 2.75% 2.83%
........................................................
$500,000 but less than $1,000,000 2.00% 2.04%
........................................................
$1,000,000 or more * *
........................................................
</TABLE>

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
-------------------------------------------------------
<S> <C>
First 5.00%
......................................................
Second 4.00%
......................................................
Third 3.00%
......................................................
Fourth 2.50%
......................................................
Fifth 1.50%
......................................................
Sixth and After None
......................................................
</TABLE>

15
<PAGE>
policy of the Distributor not to accept any order for Class B Shares in an
amount of $500,000 or more because it ordinarily will be more advantageous for
an investor making such an investment to purchase Class A Shares.

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

CONVERSION FEATURE

16
<PAGE>
WAIVER OF CONTINGENT DEFERRED SALES CHARGE

QUANTITY DISCOUNTS

17
<PAGE>

specified period, the investor must pay the difference between the sales charge
applicable to the purchases made and the reduced sales charges previously paid.
Such payments may be made directly to the Distributor or, if not paid, the
Distributor will liquidate sufficient escrowed shares to obtain the difference.

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.

(5) Trustees and other fiduciaries purchasing shares for retirement plans which
invest in multiple fund families through broker-dealer retirement

18
<PAGE>
plan alliance programs that have entered into agreements with the
Distributor and which are subject to certain minimum size and operational
requirements. Trustees and other fiduciaries should refer to the Statement
of Additional Information for further details with respect to such alliance
programs.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

(8) Trusts created under pension, profit sharing or other employee benefit
plans qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), or custodial accounts held by a bank created
pursuant to Section 403(b) of the Code and sponsored by nonprofit
organizations defined under Section 501(c)(3) of the Code and assets held
by an employer or trustee in connection with an eligible deferred
compensation plan under Section 457 of the Code. Such plans will qualify
for purchases at net asset value provided, for plans initially establishing
accounts with the Distributor in the Participating Funds after January 1,
2000, that (1) the total plan assets are at least $1 million or (2) such
shares are purchased by an employer sponsored plan with more than 100
eligible employees. Such plans that have been established with a
Participating Fund or have received proposals from the Distributor prior to
January 1, 2000 based on net asset value purchase privileges previously in
effect will be qualified to purchase shares of the Participating Funds at
net asset value. Section 403(b) and similar accounts for which Van Kampen
Trust Company serves as custodian will not be eligible for net asset value
purchases based on the aggregate investment made by the plan or the number
of eligible employees, except under certain uniform criteria established by
the Distributor from time to time. A commission will be paid to authorized
dealers who initiate and are responsible for such purchases within a
rolling twelve month period as follows: 1.00% on sales to $2 million, plus
0.80% on the next $1 million, plus 0.50% on the next $47 million, plus
0.25% on the excess over $50 million.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

19
<PAGE>
redemption order with respect to such shares. Authorized dealers will be paid a
service fee as described above on purchases made under options (3) through (9)
above. The Fund may terminate, or amend the terms of, offering shares of the
Fund at net asset value to such groups at any time.

REDEMPTION OF
SHARES

Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the redemption request and any other necessary
documents in proper form as described below. Such payment may be postponed or
the right of redemption suspended as provided by the rules of the SEC. Such
payment may, under certain circumstances, be paid wholly or in part by a
distribution-in-kind of portfolio securities. A distribution-in-kind will result
in recognition by a shareholder of a gain or loss for federal income tax
purposes when such securities are distributed, and the shareholder may have
brokerage costs and a gain or loss for federal income tax purposes upon the
shareholder's disposition of such securities. If the shares to be redeemed have
been recently purchased by check, Investor Services may delay the payment of
redemption proceeds until it confirms the purchase check has cleared, which may
take up to 15 days from the date of purchase. A taxable gain or loss may be
recognized by the shareholder upon redemption of shares. Certificated shares
must be properly endorsed for transfer and must accompany a written transfer
request.

In the case of written redemption requests sent directly to Investor Services,
the redemption price is the net asset value per share next determined after

20
<PAGE>
the request in proper form is received by Investor Services.

TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. A shareholder
automatically has telephone redemption privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. For accounts that are not established with telephone redemption
privileges, a shareholder may call the Fund at (800) 341-2911 to request that a
copy of the Telephone Redemption Authorization form be sent to the shareholder
for completion. To redeem shares, contact the telephone transaction line at
(800) 421-5684. Shares may also be redeemed by telephone through
FundInfo-Registered Trademark- (automated telephone system), which is generally
accessible 24 hours a day, seven days a week at (800) 847-2424. Van Kampen
Investments and its subsidiaries, including Investor Services and the Fund
employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape-recording telephone communications and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, none of Van Kampen Investments, Investor Services or
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. Telephone redemptions may not be available if the
shareholder cannot reach Investor Services by telephone, whether because all
telephone lines are busy or for any other reason; in such case, a shareholder
would have to use the Fund's other redemption procedure previously described.
Requests received by Investor Services prior to 4:00 p.m., New York time, will
be processed at the next determined net asset value per share. These privileges
are available for most accounts other than retirement accounts or accounts with
shares represented by certificates. If an account has multiple owners, Investor
Services may rely on the instructions of any one owner.

21
<PAGE>
DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income at least
annually as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.

SHAREHOLDER SERVICES

22
<PAGE>

A shareholder wishing to make an exchange may do so by sending a written request
to Investor Services, or by contacting the telephone transaction line at
(800) 421-5684, through Fund Info-Registered Trademark- (automated telephone
system) at (800) 847-2424 or through the internet at www.vankampen.com. A
shareholder automatically has these exchange privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. Van Kampen Investments and its subsidiaries, including Investor Services,
and the Fund employ procedures considered by them to be reasonable to confirm
that instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape-recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, none of Van Kampen Investments, Investor Services or
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. If the exchanging shareholder does not have an account
in the fund whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gain dividend options (except
dividend diversification) and authorized dealer of record as the account from
which shares are exchanged, unless otherwise specified by the shareholder. In
order to establish a systematic withdrawal plan for the new account or reinvest
dividends from the new account into another fund, however, an exchanging
shareholder must submit a specific request. The Fund reserves the right to
reject any order to acquire its shares through exchange. In addition, the Fund
and other Participating Funds may restrict exchanges by shareholders engaged in
excessive trading by limiting or disallowing the exchange privilege to such
shareholders. For further information on these restrictions see the Fund's
Statement of Additional Information. The Fund may modify, restrict or terminate
the exchange privilege at any time on 60 days' notice to its shareholders of any
termination or material amendment.

23
<PAGE>
charge rate equal to the rate previously paid on the security on which the
dividend or distribution was paid. If a shareholder exchanges less than all of
such shareholder's securities, the security upon which the highest sales charge
rate was previously paid is deemed exchanged first.

FEDERAL INCOME
TAXATION

24
<PAGE>

shareholders. If the Fund distributes less than an amount equal to the sum of
98% of its ordinary income and 98% of its capital gain net income, then the Fund
will be subject to a 4% excise tax on the undistributed amounts.

25
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by Deloitte
& Touche LLP, independent auditors, whose report, along with the Fund's most
recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal years ended June 30, 1999, 1998, 1997 and 1996 and the fiscal period
August 1, 1995 (commencement of offering for Class B Shares) to June 30,1996 has
been audited by PricewaterhouseCoopers LLP. This information should be read in
conjunction with the financial statements and notes thereto included in the
Statement of Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# 1998# 1997 1996
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 16.86 $ 16.67 $ 16.57 $ 14.75 $ 12.60
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................................ 0.02 0.07 0.21 0.10 0.19
Net Realized and Unrealized Gain/Loss..................... 2.09 1.21 2.07 2.76 2.82
-------- -------- -------- ------- -------
Total From Investment Operations............................ 2.11 1.28 2.28 2.86 3.01
-------- -------- -------- ------- -------
DISTRIBUTIONS
Net Investment Income..................................... -- (0.07) (0.35) (0.55) (0.39)
In Excess of Net Investment Income........................ -- (0.15) -- -- --
Net Realized Gain......................................... (1.23) (0.87) (1.83) (0.49) (0.47)
-------- -------- -------- ------- -------
Total Distributions....................................... (1.23) (1.09) (2.18) (1.04) (0.86)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 17.74 $ 16.86 $ 16.67 $ 16.57 $ 14.75
======== ======== ======== ======= =======
TOTAL RETURN (1)............................................ 12.83% 8.41% 16.17% 20.61% 24.62%
======== ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................... $301,905 $240,121 $261,633 $72,704 $63,706
Ratio of Expenses to Average Net Assets..................... 1.70% 1.70% 1.61% 1.70% 1.70%
Ratio of Net Investment Income/Loss to Average Net Assets... 0.12% 0.47% 1.30% 0.59% 0.71%
Portfolio Turnover Rate..................................... 99% 84% 108% 45% 44%
-------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation During the Period
Per Share Benefit to Net Investment Income/Loss............. -- $ 0.00+ $ 0.02 $ 0.03 $ 0.10
Ratios Before Expense Limitation:
Expenses to Average Net Assets............................ -- 1.73% 1.62% 1.90% 2.06%
Net Investment Income/Loss to Average Net Assets.......... -- 0.44% 1.30% 0.40% 0.35%
-------------------------------------------------------------------------------------------------------------------

<CAPTION>
CLASS B SHARES
---------------------------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------- AUGUST 1, 1995** TO
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# 1998# 1997 JUNE 30, 1996
------------------------------------------------------------ ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 16.28 $ 16.14 $ 16.15 $ 14.46 $ 13.01
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................................ (0.11) (0.04) 0.09 (0.05) 0.30
Net Realized and Unrealized Gain/Loss..................... 2.02 1.16 2.01 2.73 1.98
-------- -------- -------- ------- -------
Total From Investment Operations............................ 1.91 1.12 2.10 2.68 2.28
-------- -------- -------- ------- -------
DISTRIBUTIONS
Net Investment Income..................................... -- (0.04) (0.28) (0.50) (0.35)
In Excess of Net Investment Income........................ -- (0.07) -- -- --
Net Realized Gain......................................... (1.23) (0.87) (1.83) (0.49) (0.48)
-------- -------- -------- ------- -------
Total Distributions....................................... (1.23) (0.98) (2.11) (0.99) (0.83)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 16.96 $ 16.28 $ 16.14 $ 16.15 $ 14.46
======== ======== ======== ======= =======
TOTAL RETURN (1)............................................ 12.03% 7.50% 15.33% 19.64% 18.08%*
======== ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................... $252,078 $232,644 $225,797 $38,962 $14,786
Ratio of Expenses to Average Net Assets..................... 2.45% 2.45% 2.35% 2.45% 2.45%
Ratio of Net Investment Income/Loss to Average Net Assets... (0.65)% (0.27)% 0.60% (0.11)% 0.45%
Portfolio Turnover Rate..................................... 99% 84% 108% 45% 44%*
-------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation During the Period
Per Share Benefit to Net Investment Income/Loss............. -- $ 0.00+ $ 0.02 $ 0.09 $ 0.22
Ratios Before Expense Limitation:
Expenses to Average Net Assets............................ -- 2.49% 2.36% 2.65% 2.81%
Net Investment Income/Loss to Average Net Assets.......... -- (0.30)% 0.60% (0.30)% 0.09%
-------------------------------------------------------------------------------------------------------------------

<CAPTION>
CLASS C SHARES
-----------------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# 1998# 1997 1996
------------------------------------------------------------ -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 16.46 $ 16.30 $ 16.24 $ 14.49 $ 12.43
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................................ (0.11) (0.04) 0.08 (0.03) 0.12
Net Realized and Unrealized Gain/Loss..................... 2.04 1.18 2.05 2.73 2.75
-------- -------- -------- ------- -------
Total From Investment Operations............................ 1.93 1.14 2.13 2.70 2.87
-------- -------- -------- ------- -------
DISTRIBUTIONS
Net Investment Income..................................... -- (0.04) (0.24) (0.46) (0.33)
In Excess of Net Investment Income........................ -- (0.07) -- -- --
Net Realized Gain......................................... (1.23) (0.87) (1.83) (0.49) (0.48)
-------- -------- -------- ------- -------
Total Distributions....................................... (1.23) (0.98) (2.07) (0.95) (0.81)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 17.16 $ 16.46 $ 16.30 $ 16.24 $ 14.49
======== ======== ======== ======= =======
TOTAL RETURN (1)............................................ 12.02% 7.61% 15.37% 19.69% 23.65%
======== ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................... $104,715 $101,013 $108,650 $78,199 $63,025
Ratio of Expenses to Average Net Assets..................... 2.45% 2.45% 2.55% 2.45% 2.45%
Ratio of Net Investment Income/Loss to Average Net Assets... (0.66)% (0.28)% 0.52% (0.16)% (0.04)%
Portfolio Turnover Rate..................................... 99% 84% 108% 45% 44%
-------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation During the Period
Per Share Benefit to Net Investment Income/Loss............. -- $ 0.00+ $ 0.02 $ 0.03 $ 1.16
Ratios Before Expense Limitation:
Expenses to Average Net Assets............................ -- 2.48% 2.56% 2.65% 2.81%
Net Investment Income/Loss to Average Net Assets.......... -- (0.30)% 0.52% (0.34)% (0.40)%
-------------------------------------------------------------------------------------------------------------------
</TABLE>

* NON-ANNUALIZED
** THE FUND BEGAN OFFERING CLASS B SHARES ON AUGUST 1, 1995.
+ AMOUNT IS LESS THAN $0.01 PER SHARE.
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALE CHARGES OR DEFERRED SALES
CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

26
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS
BOARD OF DIRECTORS

J. Miles Branagan Richard F. Powers, III*
Jerry D. Choate Phillip B. Rooney
Linda Hutton Heagy Fernando Sisto
R. Craig Kennedy Wayne W. Whalen*
Mitchell M. Merin* Suzanne H. Woolsey
Jack E. Nelson

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday

DEALERS
For dealer information, selling agreements, wire orders, or
redemptions, call the Distributor at (800) 421-5666
TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call
(800) 421-2833

FUNDINFO-REGISTERED TRADEMARK-
For automated telephone services, call (800) 847-2424

WEB SITE
www.vankampen.com

VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Global Equity Allocation Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen Global Equity Allocation Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Ave
Chicago, IL 60601

<PAGE>

VAN KAMPEN
GLOBAL EQUITY
ALLOCATION FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of Additional Information, which contains more details about the
Fund, is incorporated by reference in its entirety into this prospectus.

Information about the Fund, including its reports and Statement of Additional
Information, has been filed with the Securities and Exchange Commission (SEC).
It can be reviewed and copied at the SEC's Public Reference Room in Washington,
DC or on the EDGAR database on the SEC's internet site (http://www.sec.gov).
Information on the operation of the SEC's Public Reference Room may be obtained
by calling the SEC at 1-202-942-8090. You can also request copies of these
materials, upon payment of a duplicating fee, by electronic request at the SEC's
e-mail address ([email protected]) or by writing the Public Reference Section
of the SEC, Washington, DC 20549-0102.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

MSGE PRO 10/00
#65104

<PAGE>

VAN KAMPEN
GLOBAL EQUITY FUND

Van Kampen Global Equity Fund's investment objective is to seek long-term
capital appreciation by investing primarily in equity securities of issuers
throughout the world, including U.S. issuers.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Purchase of Shares .....................................................13

Redemption of Shares ...................................................20

Distributions from the Fund ............................................22

Shareholder Services ...................................................22
Federal Income Taxation ................................................24
Financial Highlights ...................................................26

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek long-term capital appreciation by
investing primarily in equity securities of issuers throughout the world,
including U.S. issuers.

INVESTMENT STRATEGIES

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing in a portfolio of global equity
securities. Equity securities include common and preferred stocks, convertible
securities, rights and warrants to purchase common stock, depositary receipts
and equity-linked securities. The Fund's investment adviser uses a "bottom-up"
investment approach that is value driven and emphasizes security selection and
disposition on an individual company basis. The Fund selects securities of
issuers from a broad range of countries, which may include emerging market
countries. The Fund's investment adviser seeks to identify securities of issuers
that it believes are undervalued relative to their market values and other
measurements of intrinsic worth with an emphasis on company assets and cash
flow. Portfolio securities are typically sold when the Fund's investment
adviser's assessments of the capital appreciation potential of such securities
materially change. Under normal market conditions, the Fund invests at least 65%
of its total assets in securities of issuers from at least three countries
(including the U.S.) and expects to invest at least 20% of its total assets in
equity securities of U.S. issuers. The Fund may purchase and sell certain
derivative instruments, such as options, futures, options on futures and
currency-related transactions involving options, futures, forward contracts and
swaps, for various portfolio management purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. Investments in common
stocks and other equity securities generally are affected by changes in the
stock markets, which fluctuate substantially over time, sometimes suddenly and
sharply. Foreign markets may, but often do not, move in tandem with
U.S. markets, and foreign markets, especially developing or emerging market
countries, may be more volatile than U.S. markets. A "value" style of investing
emphasizes undervalued companies with characteristics for improved valuations.
This style of investing is subject to the risk that the valuations never improve
or that the returns on such securities are less than returns on other styles of
investing or the overall markets. Different types of stocks tend to shift in and
out of favor depending on market and economic conditions. Thus, the value of the
Fund's investments will vary and at times may be lower or higher than that of
other types of investments. During an overall stock market decline, stock prices
of smaller companies (in which the Fund may invest) often fluctuate more and may
fall more than the stock prices of larger companies.

3
<PAGE>

transactions involving options, futures, forward contracts and swaps are
examples of derivatives instruments. Derivative instruments involve risks
different from direct investments in underlying securities. These risks include
imperfect correlation between the value of the instruments and the underlying
assets; risks of default by the other party to certain transactions; risks that
the transactions may result in losses that partially or completely offset gains
in portfolio positions; and risks that the transactions may not be liquid.

INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- Seek capital appreciation over the long term

- Do not seek current income from their investment

- Are willing to take on the increased risks associated with investing in
foreign securities

- Can withstand volatility in the value of their Fund shares

- Wish to add to their investment portfolio a fund that emphasizes a "value"
style of investing in equity securities of global issuers

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the two calendar years prior to the
date of this prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the returns shown below would have been lower.
Remember that the past performance of the Fund is not indicative of its future
performance.

ANNUAL RETURN

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ANNUAL RETURN
<S> <C>
1998 13.49%
1999 3.32%
</TABLE>

The Fund's return for the nine-month period ended September 30, 2000 was 0.56%.
As a result of market activity, current performance may vary from the figures
shown.

During the two-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 15.47% (for the quarter ended December 31, 1998)

4
<PAGE>

and the lowest quarterly return for Class A Shares was -12.41% (for the quarter
ended September 30, 1998).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the Morgan Stanley Capital
International ("MSCI") World Index*, a broad-based market index that the Fund's
investment adviser believes is an appropriate benchmark for the Fund. The Fund's
performance figures listed below include the maximum sales charges paid by
investors. The index's performance figures do not include any commissions or
sales charges that would be paid by investors purchasing the securities
represented by the index. An investment cannot be made directly in the index.
Average annual total returns are shown for the periods ended December 31, 1999
(the most recently completed calendar year prior to the date of this
prospectus). Remember that the past performance of the Fund is not indicative of
its future performance.

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS
FOR THE
PERIODS ENDED PAST SINCE
DECEMBER 31, 1999 1 YEAR INCEPTION
<S> <C> <C>
-----------------------------------------------------------------
Van Kampen Global Equity Fund -- Class A
Shares -2.63% 4.35%(1)
MSCI World Index 24.93% 24.21%(2)
................................................................
Van Kampen Global Equity Fund -- Class B
Shares -2.21% 5.14%(1)
MSCI World Index 24.93% 24.21%(2)
................................................................
Van Kampen Global Equity Fund -- Class C
Shares 1.55% 6.38%(1)
MSCI World Index 24.93% 24.21%(2)
................................................................
INCEPTION DATES: (1) 10/29/97, (2) 10/31/97.
* THE MSCI WORLD INDEX IS AN UNMANAGED INDEX THAT INCLUDES
SECURITIES LISTED ON STOCK EXCHANGES OF THE U.S., EUROPE,
CANADA, AUSTRALIA, NEW ZEALAND AND THE FAR EAST AND ASSUMES
DIVIDENDS ARE REINVESTED NET OF WITHHOLDING TAX.
</TABLE>

FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
<S> <C> <C> <C>
-----------------------------------------------------------
<CAPTION>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
-----------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 5.75%(1) None None
..........................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption
proceeds) None(2) 5.00%(3) 1.00%(4)
..........................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
..........................................................
Redemption fee None None None
..........................................................
Exchange fee None None None
..........................................................
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------
Management fees 1.00% 1.00% 1.00%
..........................................................
Distribution and/or
service (12b-1)
fees(5) 0.25% 1.00%(6) 1.00%(6)
..........................................................
Other expenses 0.41% 0.41% 0.41%
..........................................................
Total annual fund
operating expenses 1.66% 2.41% 2.41%
..........................................................
</TABLE>

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."
(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR AFTER
PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF SHARES -- CLASS C
SHARES."
(5) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO 0.25% OF
THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES.
CLASS B SHARES AND CLASS C SHARES ARE EACH SUBJECT TO A COMBINED
ANNUAL DISTRIBUTION AND SERVICE FEE OF UP TO 1.00% OF THE AVERAGE
DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES. SEE "PURCHASE
OF SHARES."
(6) BECAUSE DISTRIBUTION AND/OR SERVICE (12b-1) FEES ARE PAID OUT OF THE
FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES WILL INCREASE
THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE THAN PAYING OTHER
TYPES OF SALES CHARGES.

5
<PAGE>
EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------
Class A Shares $734 $1,068 $1,425 $2,427
..........................................................................
Class B Shares $744 $1,051 $1,435 $2,561*
..........................................................................
Class C Shares $344 $ 751 $1,285 $2,746
..........................................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------
Class A Shares $734 $1,068 $1,425 $2,427
..........................................................................
Class B Shares $244 $ 751 $1,285 $2,561*
..........................................................................
Class C Shares $244 $ 751 $1,285 $2,746
..........................................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek long-term capital appreciation by
investing primarily in equity securities of issuers throughout the world,
including U.S. issuers. Any income received from the investment of portfolio
securities is incidental to the Fund's investment objective. The Fund's
investment objective is a fundamental policy and may not be changed without
shareholder approval of a majority of the Fund's outstanding voting securities,
as defined in the Investment Company Act of 1940, as amended (the "1940 Act").
There are risks inherent in all investments in securities; accordingly there can
be no assurance that the Fund will achieve its investment objective.

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing in a portfolio of equity securities
of issuers in the U.S. and foreign countries. Under normal market conditions,
the Fund invests at least 65% of its total assets in securities of issuers from
at least three countries (including the U.S.), and expects to invest at least
20% of its total assets in equity securities of U.S. issuers. The Fund's
investment adviser uses a "bottom-up" investment approach that is value driven
and emphasizes security selection and disposition on an individual company
basis. The Fund selects securities of issuers from a broad range of countries,
including emerging market countries. Investments in foreign companies may offer
greater opportunities for capital appreciation, but also may involve special
risks not typically associated with investments in domestic companies. As a
result, the Fund's portfolio may experience greater price volatility, which may
be heightened by currency fluctuations relative to the U.S. dollar.

In selecting securities for investment, the Fund emphasizes a "value" style of
investing focusing on companies with strong fundamentals, promising growth
prospects and attractive valuations. The Fund seeks to identify those companies
that are undervalued relative to their market values and other financial
measurements of intrinsic worth with an emphasis on company assets and cash
flow. The Fund's investment style presents the risk that the valuations never
improve or that the returns on "value" securities are less than returns on other
styles of investing or the overall market.

The Fund's investment adviser determines investments for the Fund on an ongoing
basis. The Fund's primary approach is to seek securities that the Fund's
investment adviser believes are selling below their intrinsic values and offer
attractive growth opportunities. The Fund's investment adviser believes
securities have unrecognized intrinsic value when they sell at a substantial
discount relative to an issuer's assets and cash flow. Securities which appear

6
<PAGE>
undervalued are then subjected to in-depth fundamental analysis. The Fund's
investment adviser conducts a thorough investigation of the company's balance
sheet, cash flow and income statement and assesses the company's business
franchise, including product competitiveness, market positioning and industry
structure. Visits with senior management are integral to the investment process.

While the Fund invests primarily in common stocks, the Fund also may invest in
preferred stocks, convertible securities, warrants or rights to purchase common
stock, depositary receipts and equity-linked securities. Preferred stock
generally has a preference as to dividends and liquidation over an issuer's
common stock but ranks junior to debt securities in an issuer's capital
structure. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer's board of directors.
Preferred stock also may be subject to optional or mandatory redemption
provisions. The ability of common stocks and preferred stocks to generate income
is dependent on the earnings and continuing declaration of dividends by the
issuers of such securities.

Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights typically have a have a
substantially shorter duration than do warrants. Rights and warrants may be
considered more speculative and less liquid than certain other types of
investments in that they do not entitle a holder to dividends or voting rights
with respect to the underlying securities nor do they represent any right in the
assets of the issuing company. Rights and warrants may lack a secondary market.

Equity-linked securities are instruments whose value is based upon the value of
one or more underlying equity securities, a reference rate or an index.
Equity-linked securities come in many forms and may include features, among
others, such as the following: (i) may be issued by the issuer of the underlying
equity security or by a company other than the one to which the instrument is
linked (usually an investment bank), (ii) may convert into equity securities,
such as common stock, within a stated period from the issue date or may be
redeemed for cash or some combination of cash and the linked security at a value
based upon the value of the underlying equity security within a stated period
from the issue date, (iii) may have various conversion features prior to
maturity at the option of the holder or the issuer or both, (iv) may limit the
appreciation value with caps or collars of the value of underlying equity
security and (v) may have fixed, variable or no interest payments during the
life of the security which reflect the actual or a structured return relative to
the underlying dividends of the linked equity security. Investments in
equity-linked securities may subject the Fund to additional risks not ordinarily
associated with investments in convertible securities. Because equity-linked
securities are sometimes issued

7
<PAGE>

by a third party other than the issuer of the linked security, the Fund is
subject to risks if the underlying stock underperforms or if the issuer defaults
on the payment of the dividend or the common stock at maturity. In addition, the
trading market for particular equity-linked securities may be less liquid,
making it difficult for the Fund to dispose of a particular security when
necessary and reduced liquidity in the secondary market for any such securities
may make it more difficult to obtain market quotations for valuing the Fund's
portfolio.

The Fund may invest in issuers of small-, medium-or large-capitalization
companies. The securities of small- or medium-sized companies may be subject to
more abrupt or erratic market movements than securities of larger companies or
the market averages in general. In addition, such companies typically are
subject to a greater degree of change in earnings and business prospects than
are larger companies. Thus, to the extent the Fund invests in small- or medium-
sized companies, the Fund may be subject to greater investment risk than that
assumed through investment in the equity securities of larger companies.

RISKS OF INVESTING IN SECURITIES
OF FOREIGN ISSUERS

8
<PAGE>

Investors should consider carefully the risks of foreign investments before
investing in the Fund.

DERIVATIVE INSTRUMENTS

9
<PAGE>

the derivatives markets as a substitute for purchasing or selling particular
securities, including, for example, when the Fund adjusts its exposure to a
market in response to changes in investment strategy, when doing so provides
more liquidity than the direct purchase of the securities underlying such
derivatives, when the Fund is restricted from directly owning the underlying
securities due to foreign investment restrictions or other reasons, or when
doing so provides a price advantage over purchasing the underlying securities
directly, either because of a pricing differential between the derivatives and
securities markets or because of lower transaction costs associated with the
derivatives transaction. The Fund may invest up to 50% of its total assets in
Strategic Transactions (measured by the aggregate notional amount of outstanding
derivatives) provided that no more than 33 1/3% of the Fund's total assets are
invested for non-hedging purposes in Strategic Transactions (measured by the
aggregate notional amount of outstanding derivatives) other than futures and
options on futures.

OTHER INVESTMENTS AND RISK FACTORS

The Fund may invest up to 15% of the Fund's net assets in illiquid securities
and certain restricted securities. Such securities may be difficult or
impossible to sell at the time and the price that the Fund would like. Thus, the
Fund may have to sell such securities at a lower price, sell other securities
instead to obtain cash or forego other investment opportunities.

10
<PAGE>

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for capital appreciation has
lessened, or for other reasons. The portfolio turnover rate may vary from year
to year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs) which would
adversely impact a fund's performance. Higher portfolio turnover may result in
the realization of more short-term capital gains than if a fund had lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities, including prime
commercial paper, repurchase agreements and bank obligations, such as bankers'
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for capital appreciation
on these securities will tend to be lower than the potential for capital
appreciation on other securities that may be owned by the Fund. In taking such a
defensive position, the Fund temporarily would not be pursuing and may not
achieve its investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
------------------------------------------------------------------
First $750 million 1.00%
.................................................................
Next $500 million 0.95%
.................................................................
Over $1.25 billion 0.90%
.................................................................
</TABLE>

The Fund also retains the Adviser to provide administrative services for the
Fund's day-to-day

11
<PAGE>
operations. Under an administration agreement between the Adviser and the Fund,
the Fund pays a monthly administration fee computed based upon an annual rate of
0.25% applied to the average daily net assets of the Fund.

The Adviser furnishes offices, necessary facilities and equipment, and provides
administrative services to the Fund. The Fund pays all charges and expenses of
its day-to-day operations, including the service fees, distribution fees,
custodian fees, legal and independent accountant fees, the cost of reports and
proxies to shareholders, compensation of directors of the Fund (other than those
who are affiliated persons of the Adviser, Distributor or Van Kampen
Investments) and all other ordinary business expenses not specifically assumed
by the Adviser.

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

PORTFOLIO MANAGEMENT. Frances Campion and Paul Boyne have been responsible as
co-managers for the day-to-day management of the Fund's investment portfolio
since its inception.

Ms. Campion, a Managing Director, joined the MSDW Investment Management Group in
1990. Her responsibilities include day-to-day management of the MSDW Investment
Management Group's global equity products. Ms. Campion has eleven years' global
investment experience. She is a graduate of University College, Dublin.

Mr. Boyne, a Principal, joined the MSDW Investment Management Group in 1993 and
became a Principal in December 1998. He assists with portfolio management on the
MSDW Investment Management Group's global equity program and security analysis
of North American equities. Prior to joining the MSDW Investment Management
Group, Mr. Boyne was a Chartered Accountant with Grant Thornton International in
Dublin.

12
<PAGE>
PURCHASE OF SHARES

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which the class's distribution fee and/or the service fee is paid,
(iii) each class of shares has different exchange privileges, (iv) certain
classes of shares are subject to a conversion feature and (v) certain classes of
shares have different shareholder service options available.

The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Directors reserves the right to calculate the net
asset value per share and adjust the offering price more frequently than once
daily if deemed desirable. Net asset value per share for each class is
determined by dividing the value of the Fund's portfolio securities, cash and
other assets (including accrued interest) attributable to such class, less all
liabilities (including accrued expenses) attributable to such class, by the
total number of shares of the class outstanding. Such computation is made by
using prices as of the close of trading on the Exchange and (i) valuing
securities listed or traded on a national securities exchange at the closing
price, or if no closing price is available, at the last reported sale price, and
if there has been no sale that day, at the mean between the last reported bid
and asked prices, (ii) valuing over-the-counter securities at the last reported
sale price from the National Association of Securities Dealers Automated
Quotations ("NASDAQ"), and, if there has been no sale that day, at the mean
between the last reported bid and asked prices, (iii) valuing unlisted
securities at the average of the mean between the current reported bid and asked
prices obtained from reputable brokers and (iv) valuing any securities for which
market quotations are not readily available and any other assets at fair value
as determined in good faith by the Adviser in accordance with procedures
established by the Fund's Board of Directors. Securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.

13
<PAGE>
in a particular country or countries may not take place on all U.S. business
days or may take place on days which are not U.S. business days. Changes in
valuations on certain securities may occur at times or on days on which the
Fund's net asset value is not calculated and on which the Fund does not effect
sales, redemptions and exchanges of its shares.

The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution and service fees and other expenses of the Fund associated with
that class of shares. To assist investors in comparing classes of shares, the
tables under the Prospectus heading "Fees and Expenses of the Fund" provide a
summary of sales charges and expenses and an example of the sales charges and
expenses of the Fund applicable to each class of shares.

14
<PAGE>

they are received by Investor Services prior to Investor Services' close of
business on such date. It is the responsibility of authorized dealers to
transmit orders received by them to Investor Services so they will be received
in a timely manner.

CLASS A SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
AS % OF AS % OF
SIZE OF OFFERING NET AMOUNT
INVESTMENT PRICE INVESTED
<S> <C> <C>
------------------------------------------------------------------------
Less than $50,000 5.75% 6.10%
.......................................................................
$50,000 but less than $100,000 4.75% 4.99%
.......................................................................
$100,000 but less than $250,000 3.75% 3.90%
.......................................................................
$250,000 but less than $500,000 2.75% 2.83%
.......................................................................
$500,000 but less than $1,000,000 2.00% 2.04%
.......................................................................
$1,000,000 or more * *
.......................................................................
</TABLE>

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
<S> <C>
---------------------------------------------------------------------------
First 5.00%
..........................................................................
Second 4.00%
..........................................................................
Third 3.00%
..........................................................................
Fourth 2.50%
..........................................................................
Fifth 1.50%
..........................................................................
Sixth and After None
..........................................................................
</TABLE>

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

CONVERSION FEATURE

Class B Shares, including Class B Shares received from reinvestment of
distributions through the dividend reinvestment plan, automatically convert to
Class A Shares eight years after the end of the

16
<PAGE>

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

QUANTITY DISCOUNTS

17
<PAGE>

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.

(2) Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries; employees of an investment
subadviser to any fund described in

18
<PAGE>
(1) above or an affiliate of such subadviser; and such persons' families
and their beneficial accounts.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

REDEMPTION OF
SHARES

Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the redemption request and any other necessary
documents in proper form as described below. Such payment may be postponed or
the right of redemption suspended as provided by the rules of the SEC. Such
payment may, under certain circumstances, be paid wholly or in part by a
distribution-in-kind of portfolio securities. A distribution-in-kind will result
in recognition by the shareholder of a gain or loss for federal income tax
purpose when such securities are distributed, and the shareholder may have
brokerage costs and a gain or loss for federal income tax purposes upon the
shareholder's disposition of such securities. If the shares to be redeemed have
been recently purchased by check, Investor Services may delay the payment of
redemption proceeds until it confirms the purchase check has cleared, which may
take up to 15 days from the date of purchase. A taxable gain or loss may be
recognized by the shareholder upon redemption of shares. Certificated shares
must be properly endorsed for transfer and must accompany a written redemption
request.

Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption request to be in proper form.
In some

20
<PAGE>

21
<PAGE>

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income at least
annually as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.

SHAREHOLDER SERVICES

22
<PAGE>

((800) 421-2833 for the hearing impaired) or by writing to Investor Services.
The investor may, on the account application form or prior to any declaration,
instruct that dividends and/or capital gain dividends be paid in cash, be
reinvested in the Fund at the next determinded net asset value or be invested in
another Participating Fund at the determined net asset value.

23
<PAGE>

shareholders engaged in excessive trading by limiting or disallowing the
exchange privilege to such shareholders. For further information on these
restrictions see the Fund's Statement of Additional Information. The Fund may
modify, restrict or terminate the exchange privilege at any time on 60 days'
notice to its shareholders of any termination or material amendment.

FEDERAL INCOME
TAXATION

Foreign shareholders, including shareholders who are non-resident aliens, may be
subject to U.S. withholding tax on certain distributions (whether

24
<PAGE>
received in cash or in shares) at a rate of 30% or such lower rate as prescribed
by an applicable treaty. Accordingly, investment in the Fund is likely to be
appropriate for a foreign shareholder only if such person can utilize a foreign
tax credit or corresponding tax benefit in respect of such U.S. withholding tax.
Prospective foreign investors should consult their tax advisers concerning the
tax consequences to them of an investment in shares.

The federal income tax discussion set forth above is for general information
only. Prospective investors should consult their own tax advisers regarding the
specific federal tax consequences of purchasing, holding, and disposing of
shares of the Fund, as well as the effects of state, local and foreign tax law
and any proposed tax law changes.

25
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by
Deloitte & Touche LLP independent auditors, whose report, along with the Fund's
most recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal year ended June 30, 1999, and the fiscal period October 29, 1997
(commencement of operations) to June 30, 1998 has been audited by
PricewaterhouseCoopers LLP. This information should be read in conjunction with
the financial statements and notes thereto included in the Statement of
Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
YEAR ENDED JUNE 30, OCTOBER 29, 1997* YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# TO JUNE 30, 1998 2000# 1999#
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.................... $ 11.47 $ 11.12 $ 10.00 $ 11.42 $ 11.08
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss... 0.06 0.05 0.06 (0.04) (0.03)
Net Realized and Unrealized
Gain/Loss........... 0.25 0.40 1.08 0.26 0.39
------- ------- -------- -------- --------
Total From Investment
Operations.......... 0.31 0.45 1.14 0.22 0.36
------- ------- -------- -------- --------
DISTRIBUTIONS
Net Investment Income... -- (0.08) (0.02) -- (0.01)
In Excess of Net Investment
Income.............. -- (0.01) -- -- (0.00)+
Net Realized Gain..... (0.68) (0.01) -- (0.68) (0.01)
------- ------- -------- -------- --------
Total Distributions... (0.68) (0.10) (0.02) (0.68) (0.02)
------- ------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD... $ 11.10 $ 11.47 $ 11.12 $ 10.96 $ 11.42
======= ======= ======== ======== ========
TOTAL RETURN (1).......... 3.22% 4.05% 11.38%** 2.24% 3.29%
======= ======= ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's)................... $81,714 $76,731 $ 80,508 $442,256 $596,339
Ratio of Expenses to Average Net
Assets.................... 1.66% 1.65% 1.70% 2.41% 2.40%
Ratio of Net Investment
Income/Loss to Average Net
Assets.................... 0.53% 0.44% (0.88%) (0.34%) (0.31)%
Portfolio Turnover Rate... 47% 40% 4%** 47% 40%

<CAPTION>
CLASS B SHARES CLASS C SHARES
OCTOBER 29, 1997* YEAR ENDED JUNE 30, OCTOBER 29, 1997*
SELECTED PER SHARE DATA AND RATIOS TO JUNE 30, 1998 2000# 1999# TO JUNE 30, 1998
---------------------------------- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.................... $ 10.00 $ 11.42 $ 11.07 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss... 0.01 (0.04) (0.03) 0.01
Net Realized and Unrealized
Gain/Loss........... 1.07 0.26 0.40 1.06
-------- ------- ------- --------
Total From Investment
Operations.......... 1.08 0.22 0.37 1.07
-------- ------- ------- --------
DISTRIBUTIONS
Net Investment Income... -- -- (0.01) --
In Excess of Net Investment
Income.............. -- -- (0.00)+ --
Net Realized Gain..... -- (0.68) (0.01) --
-------- ------- ------- --------
Total Distributions... -- (0.68) (0.02) --
-------- ------- ------- --------
NET ASSET VALUE, END OF PERIOD... $ 11.08 $ 10.96 $ 11.42 $ 11.07
======== ======= ======= ========
TOTAL RETURN (1).......... 10.84%** 2.24% 3.39% 10.74%**
======== ======= ======= ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's)................... $623,229 $42,607 $63,140 $ 69,572
Ratio of Expenses to Average Net
Assets.................... 2.45% 2.41% 2.40% 2.45%
Ratio of Net Investment
Income/Loss to Average Net
Assets.................... 0.12% (0.36%) (0.32)% 0.13%
Portfolio Turnover Rate... 4%** 47% 40% 4%**
</TABLE>

* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
+ AMOUNT IS LESS THAN $0.01 PER SHARE.
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED
SALES CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

26
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS
BOARD OF DIRECTORS

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday
DEALERS
For dealer information, selling agreements, wire orders, or
redemptions, call the Distributor at (800) 421-5666
TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through
Telecommunications Device for the Deaf (TDD), call
(800) 421-2833

FUNDINFO-REGISTERED TRADEMARK-
For automated telephone system, call (800) 847-2424

WEB SITE
www.vankampen.com

VAN KAMPEN GLOBAL EQUITY FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Global Equity Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen Global Equity Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>

VAN KAMPEN
GLOBAL EQUITY FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of
Additional Information,
which contains more
details about the Fund,
is incorporated by
reference in its
entirety into this
prospectus.

You will find additional
information about the
Fund in its annual and
semiannual reports to
shareholders. The annual
report explains the
market conditions and
investment strategies
affecting the Fund's
performance during its
last fiscal year.

You can ask questions or
obtain a free copy of
the Fund's reports or
its Statement of
Additional Information
by calling (800)
341-2911 from 7:00 a.m.
to 7:00 p.m., Central
time, Monday through
Friday.
Telecommunications
Device for the Deaf
users may call (800)
421-2833. A free copy of
the Fund's reports can
also be ordered from our
web site at
www.vankampen.com.

Information about the
Fund, including its
reports and Statement of
Additional Information,
has been filed with the
Securities and Exchange
Commission (SEC). It can
be reviewed and copied
at the SEC's Public
Reference Room in
Washington, DC or on the
EDGAR database on the
SEC's internet site
(http://www.sec.gov).
Information on the
operation of the SEC's
Public Reference Room
may be obtained by
calling the SEC at
1-202-942-8090. You can
also request copies of
these materials, upon
payment of a duplicating
fee, by electronic
request at the SEC's
e-mail address
([email protected]), or
by writing the Public
Reference Section of the
SEC, Washington, DC
20549-0102.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

MSGL PRO 10/00
#65135

<PAGE>

VAN KAMPEN
INTERNATIONAL MAGNUM FUND

Van Kampen International Magnum Fund's investment objective is to seek long-term
capital appreciation by investing primarily in a portfolio of equity securities
of non-U.S. issuers in accordance with the Morgan Stanley Capital International
EAFE Index country weightings determined by the Fund's investment adviser.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Investment Advisory Services ...........................................11

Purchase of Shares .....................................................13

Redemption of Shares ...................................................20

Distributions from the Fund ............................................22

Shareholder Services ...................................................22

Federal Income Taxation ................................................24

Financial Highlights ...................................................26

INVESTMENT OBJECTIVE

INVESTMENT STRATEGIES

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing primarily in a portfolio of
undervalued equity securities of non-U.S. issuers using a combination of
strategic geographic asset allocation and fundamental, value-oriented stock
selection. The Fund's investment adviser makes regional allocation, purchase and
sale decisions considering factors such as relative valuations, earnings
expectations and macroeconomic factors. The Fund's investment adviser selects
securities it believes are undervalued by the market based on its research and
company analysis. The Fund focuses primarily on issuers from countries
comprising the Morgan Stanley Capital International ("MSCI") Europe, Australasia
and Far East ("EAFE") Index. Under normal market conditions, the Fund invests at
least 65% of its total assets in securities of issuers located in at least three
foreign countries. Equity securities include common and preferred stocks,
convertible securities, rights and warrants to purchase common stock and
depositary receipts. The Fund also may invest up to 35% of its total assets in
debt securities. The Fund may purchase and sell certain derivative instruments,
such as options, futures, options on futures and currency-related transactions
involving options, futures, forward contracts and swaps, for various portfolio
management purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

Additionally, stock prices of small- and medium-sized companies in which the
Fund may invest often fluctuate more and may fall more than the stock prices of
the larger companies during an overall stock market decline.

FOREIGN RISKS. Because the Fund owns securities of foreign issuers, it is
subject to risks not usually associated with owning securities of U.S. issuers.
These risks include fluctuations in foreign currencies, foreign currency
exchange controls, political and economic instability, differences in financial
reporting, differences in securities regulation and trading, and foreign
taxation issues. The risks of investing in developing or emerging market
countries are greater than the risks generally associated with foreign
investments, including investment and trading limitations, greater credit and
liquidity concerns, greater political uncertainties, an economy's dependence on
international trade or development assistance, greater foreign currency exchange
risk and currency transfer restrictions and greater delays and disruptions in
settlement transactions.

3
<PAGE>

INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- Seek capital appreciation over the long term

- Do not seek current income from their investment

- Are willing to take on the increased risks associated with investing in
foreign securities

- Can withstand volatility in the value of their Fund shares

- Wish to add to their investment portfolio a fund that emphasizes a "value"
style of investing in equity securities of foreign issuers

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the three calendar years prior to the
date of this prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the returns shown below would have been lower.
Remember that the past performance of the Fund is not indicative of its future
performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Annual Return

The Fund's return for the nine-month period ended September 30, 2000 was -9.47%.
As a result of market activity, current performance may vary from the figures
shown.

During the three-year period shown in the bar chart, the highest quarterly
return for Class A Shares was 13.81% (for the quarter ended March 31, 1998) and
the lowest quarterly return for Class A Shares was -18.19% (for the quarter
ended September 30, 1998).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the MSCI EAFE Index*, a
broad-based market index that the Fund's investment adviser believes is an
appropriate benchmark for the Fund. The Fund's performance figures listed below
include the maximum sales charges paid by investors. The index's performance
figures do not include any commissions or sales charges that would be paid by
investors purchasing the securities represented by the index. An investment
cannot be made directly in the index. Average annual total returns are shown for
the periods ended December 31, 1999 (the most recently completed calendar year
prior to the date of this prospectus). Remember that the past performance of the
Fund is not indicative of its future performance.

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS
FOR THE
PERIODS ENDED PAST SINCE
DECEMBER 31, 1999 1 YEAR INCEPTION
------------------------------------------------------------
<S> <C> <C>
Van Kampen International Magnum
Fund
-- Class A Shares 16.01% 8.46%(1)
MSCI EAFE Index 26.96% 13.82%(2)
...........................................................
Van Kampen International Magnum
Fund
-- Class B Shares 17.34% 8.94%(1)
MSCI EAFE Index 26.96% 13.82%(2)
...........................................................
Van Kampen International Magnum
Fund
-- Class C Shares 21.32% 9.51%(1)
MSCI EAFE Index 26.96% 13.82%(2)
...........................................................
</TABLE>

INCEPTION DATES: (1) 7/1/96, (2) 6/30/96.
* THE MSCI EAFE INDEX IS AN UNMANAGED INDEX OF COMMON STOCKS AND INCLUDES
EUROPE, AUSTRALIA AND THE FAR EAST (ASSUMES DIVIDENDS ARE REINVESTED NET
OF WITHHOLDING TAXES).

5
<PAGE>
FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>

SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)

<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price) 5.75%(1) None None
...........................................................
Maximum deferred sales
charge (load) (as a
percentage of the
lesser of original
purchase price or
redemption proceeds) None(2) 5.00%(3) 1.00%(4)
...........................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
...........................................................
Redemption fee None None None
...........................................................
Exchange fee None None None
...........................................................
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------
Management fees(5) 0.80% 0.80% 0.80%
...........................................................
Distribution and/or
service (12b-1)
fees(6) 0.25% 1.00%(7) 1.00%(7)
...........................................................
Other expenses(5) 0.63% 0.63% 0.63%
...........................................................
Total annual fund
operating expenses(5) 1.68% 2.43% 2.43%
...........................................................
</TABLE>

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."
(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR AFTER
PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF SHARES -- CLASS C
SHARES."

(5) THE FUND'S INVESTMENT ADVISER IS CURRENTLY WAIVING OR REIMBURSING A
PORTION OF THE FUND'S MANAGEMENT FEES AND OTHER EXPENSES SUCH THAT THE
ACTUAL TOTAL ANNUAL FUND OPERATING EXPENSES WERE 1.65% FOR CLASS A
SHARES, 2.40% FOR CLASS B SHARES AND 2.40% FOR CLASS C SHARES FOR THE
FISCAL YEAR ENDED JUNE 30, 2000. THE FEE WAIVERS OR EXPENSE REIMBURSE-
MENTS CAN BE TERMINATED AT ANY TIME.
(6) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO 0.25% OF
THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES.
CLASS B SHARES AND CLASS C SHARES ARE EACH SUBJECT TO A COMBINED
ANNUAL DISTRIBUTION AND SERVICE FEE OF UP TO 1.00% OF THE AVERAGE
DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES. SEE "PURCHASE
OF SHARES."
(7) BECAUSE DISTRIBUTION AND/OR SERVICE (12b-1) FEES ARE PAID OUT OF THE
FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES WILL INCREASE
THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE THAN PAYING OTHER
TYPES OF SALES CHARGES.

EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Class A Shares $736 $1,074 $1,435 $2,448
...............................................................................
Class B Shares $746 $1,058 $1,446 $2,581*
...............................................................................
Class C Shares $346 $ 758 $1,296 $2,766
...............................................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Class A Shares $736 $1,074 $1,435 $2,448
...............................................................................
Class B Shares $246 $ 758 $1,296 $2,581*
...............................................................................
Class C Shares $246 $ 758 $1,296 $2,766
...............................................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

6
<PAGE>
INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek long-term capital appreciation by
investing primarily in a portfolio of equity securities of non-U.S. issuers in
accordance with the MSCI EAFE Index country weightings determined by the Fund's
investment adviser. Any income received from the investment of portfolio
securities is incidental to the Fund's investment objective. The Fund's
investment objective is a fundamental policy and may not be changed without
shareholder approval of a majority of the Fund's outstanding voting securities,
as defined in the Investment Company Act of 1940, as amended (the "1940 Act").
There are risks inherent in all investments in securities; accordingly there can
be no assurance that the Fund will achieve its investment objective.

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing primarily in a portfolio of
undervalued equity securities of non-U.S. issuers using a combination of
strategic geographic asset allocation and fundamental, value-oriented stock
selection. The Fund's investment adviser seeks to create a portfolio of
international equity securities it believes are undervalued by the market. The
Fund focuses primarily on issuers from countries comprising the MSCI EAFE Index.
The Fund may, however, invest up to 5% of its total assets in countries not
included in the MSCI EAFE Index, including emerging market countries. The MSCI
EAFE Index includes most nations in Western Europe, Australasia, Australia, New
Zealand, Hong Kong and the Far East. Under normal market conditions, the Fund
invests at least 65% of its total assets in securities of issuers located in at
least three foreign countries. Investments in foreign companies may offer
greater opportunities for capital appreciation than investments in domestic
companies, but also are subject to special risks not typically associated with
investing in domestic companies. As a result, the Fund's portfolio may
experience greater price volatility than a fund investing in securities of
domestic issuers.

The Fund is managed using a two-part process combining the expertise of a team
of investment professionals, who individually represent different areas of
expertise, and who together develop investment strategies for the Fund to use in
making buy and sell decisions. Members of the global research team are located
in offices around the world, including New York, London, Tokyo and Singapore.
The Fund's investment adviser makes regional allocation decisions based on a
variety of factors, including relative valuations, earnings expectations and
macroeconomic factors, and input from the regionally located research teams.
Once regional allocations have been determined, regional specialists seek to
identify companies they believe are undervalued. Specialists analyze each
company's finances, products and management, and members of the investment teams
often meet with each company's management before a security is purchased for the
Fund's portfolio.

7
<PAGE>

or a different issuer or into cash within a particular period of time at a
specified price or formula. A convertible security generally entitles the holder
to receive interest paid or accrued on debt or the dividend paid on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Before conversion, convertible securities generally have
characteristics similar to both debt and equity securities. The value of
convertible securities tends to decline as interest rates rise and, because of
the conversion feature, tends to vary with fluctuations in the market value of
the underlying equity securities. Convertible securities generally rank senior
to common stock in a corporation's capital structure but are usually
subordinated to comparable nonconvertible securities. Convertible securities
generally do not participate directly in any dividend increases or decreases of
the underlying equity securities although the market prices of convertible
securities may be affected by any such dividend changes or other changes in the
underlying equity securities.

Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights typically have a substantially
shorter term than do warrants. Rights and warrants may be considered more
speculative and less liquid than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any right in the assets of the
issuing company. Rights and warrants may lack a secondary market.

Under normal market conditions, the Fund may invest up to 35% of its total
assets in in debt securities including certain short- and medium-term debt
securities as well as money market instruments. Money-market instruments include
obligations of the United States or foreign governments, high-quality short-term
debt securities (including Eurodollar certificates of deposit), prime commercial
paper, certificates of deposit, bankers' acceptances and other obligations of
banks and repurchase agreements. The market prices of debt securities generally
fluctuate inversely with changes in interest rates so that the value of
investments in such securities can be expected to decrease as interest rates
rise and increase as interest rates fall. Debt securities with longer maturities
may increase or decrease in value more than debt securities of shorter
maturities. The credit risks and market prices of lower-grade securities
generally are more sensitive to negative issuer developments, such as reduced
revenues or increased expenditures, or adverse economic conditions, such as a
recession, than are higher-grade securities.

The Fund may invest in securities of certain issuers indirectly through
investments in other investment companies. Such investments are commonly used
when direct investments in certain countries are not permitted by foreign
investors. Investments in other investment companies may involve duplication of
management fees and certain other expenses.

The Fund may invest in issuers of small-, medium-or large-capitalization
companies. The securities of smaller or medium-sized companies may be subject to
more abrupt or erratic market movements than securities of larger-sized
companies or the market averages in general. In addition, such companies
typically are subject to a greater degree of change in earnings and business
prospects than are larger companies. Thus, to the extent the Fund invests in
smaller or medium-sized companies, the Fund may be subject to greater investment
risk than that assumed through investment in the equity securities of larger
companies.

RISKS OF INVESTING IN SECURITIES
OF FOREIGN ISSUERS

8
<PAGE>

currency blockage), withholding taxes on income or capital transactions or other
restrictions, higher transaction costs (including higher brokerage, custodial
and settlement costs and currency conversion costs) and possible difficulty in
enforcing contractual obligations or taking judicial action. Foreign securities
may not be as liquid and may be more volatile than comparable domestic
securities.

9
<PAGE>
should move in the direction opposite to the position taken. Unanticipated
changes in currency prices may result in poorer overall performance for the Fund
than if it had not entered into such contracts.

Investors should consider carefully the risks of foreign investments before
investing in the Fund.

DERIVATIVE INSTRUMENTS

The Fund may purchase and sell derivative instruments such as exchange-listed
and over-the-counter put and call options on securities, financial futures,
equity, fixed-income and other interest rate indices, and other financial
instruments, futures contracts and options thereon (including but not limited to
securities index futures, foreign currency exchange futures, interest rate
futures and other financial futures), structured notes, swaps, caps, floors or
collars and enter into various currency transactions such as currency forward
contracts, currency futures contracts, currency swaps or options on currency or
currency futures. In addition, the Fund may invest in other derivative
instruments that are developed over time if their use would be consistent with
the objective of the Fund. Collectively, all of the above are referred to as
"Strategic Transactions." The Fund generally seeks to use Strategic Transactions
as a portfolio management or hedging technique to seek to protect against
possible adverse changes in the market value of securities held in or to be
purchased for the Fund's portfolio, protect the Fund's unrealized gains,
facilitate the sale of certain securities for investment purposes, protect
against changes in currency exchange rates or to adjust the exposure to a
particular currency, manage the effective maturity or duration of the Fund's
portfolio, establish positions in the derivatives markets as a substitute for
purchasing or selling particular securities, including, for example, when the
Fund adjusts its exposure to a market in response to changes in investment
strategy, when doing so provides more liquidity than the direct purchase of the
securities underlying such derivatives, when the Fund is restricted from
directly owning the underlying securities due to foreign investment restrictions
or other reasons, or when doing so provides a price advantage over purchasing
the underlying securities directly, either because of a pricing differential
between the derivatives and securities markets or because of lower transaction
costs associated with the derivatives transaction. The Fund may invest up to
33 1/3% of its total assets in Strategic Transactions for non-hedging purposes
(measured by the aggregate notional amount of outstanding derivatives). In
addition, the Fund may invest up to 20% of its total assets in futures contracts
and options on futures contracts (measured by the aggregate notional amount of
such outstanding contracts).

10
<PAGE>

political, legal and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in the
Fund's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States and (v) lower trading volume and liquidity.

A more complete discussion of Strategic Transactions and their risks is
contained in the Fund's Statement of Additional Information. The Fund's
Statement of Additional Information can be obtained by investors free of charge
as described on the back cover of this prospectus.

OTHER INVESTMENTS AND RISK FACTORS

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for capital appreciation has
lessened, or for other reasons. The portfolio turnover rate may vary from year
to year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs) which would
adversely impact a fund's performance. Higher portfolio turnover may result in
the realization of more short-term capital gains than if a fund had lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities, including prime
commercial paper, repurchase agreements and bank obligations, such as bankers'
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for capital appreciation
on these securities will tend to be lower than the potential for capital
appreciation on other securities that may be owned by the Fund. In taking such a
defensive position, the Fund would temporarily not be pursuing and may not
achieve its investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

11
<PAGE>

million retail investor accounts, has extensive capabilities for managing
institutional portfolios, and has more than $100 billion under management or
supervision as of September 30, 2000. Van Kampen Investments has more than 50
open-end funds, 38 closed-end funds and more than 2,700 unit investment trusts
that are professionally distributed by leading authorized dealers nationwide.
Van Kampen Funds Inc., the distributor of the Fund (the "Distributor") and the
sponsor of the funds mentioned above, is also a wholly owned subsidiary of
Van Kampen Investments. Van Kampen Investments is an indirect wholly owned
subsidiary of Morgan Stanley Dean Witter & Co. The Adviser's principal office is
located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555.

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
-------------------------------------
<S> <C>
FIRST $500 MILLION 0.80%
....................................
NEXT $500 MILLION 0.75%
....................................
OVER $1 BILLION 0.70%
....................................
</TABLE>

The Adviser furnishes offices, necessary facilities and equipment, and provides
administrative services to the Fund. The Fund pays all charges and expenses of
its day-to-day operations, including service fees, distribution fees, custodian
fees, legal and independent accountant fees, the costs of reports and proxies to
shareholders, compensation of directors of the Fund (other than those who are
affiliated persons of the Adviser, Distributor or Van Kampen Investments), and
all other ordinary business expenses not specifically assumed by the Adviser.

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

Morgan Stanley Dean Witter Investment Management Inc. is the Fund's investment
subadviser (the "Subadviser"). The Subadviser is a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. The Subadviser conducts a worldwide portfolio
management business and provides a broad range of portfolio management services
to customers in the United States and abroad. At September 30, 2000, the
Subadviser, together with its affiliated institutional asset management
companies managed assets of approximately $178 billion, including assets under
fiduciary advice. The Subadviser's principal office is located at 1221 Avenue of
the Americas, New York, New York 10020. On December 1, 1998, Morgan Stanley
Asset Management Inc. changed its name to Morgan Stanley Dean Witter Investment
Management Inc. but continues to do business in certain instances using the name
Morgan Stanley Asset Management.

GENERAL
From time to time, the Adviser, the Subadviser or the Distributor may
voluntarily undertake to reduce

12
<PAGE>
the Fund's expenses by reducing the fees payable to them or by reducing other
expenses of the Fund in accordance with such limitations as the Adviser, the
Subadviser or Distributor may establish.

PORTFOLIO MANAGEMENT. Francine J. Bovich is responsible for the day-to-day
management of the Fund's investment portfolio. Ms. Bovich, a Managing Director,
joined the Subadviser in 1993. Prior to joining the Subadviser, she was a
Principal and Executive Vice President of Westwood Management Corp., a
registered investment adviser. Ms. Bovich began her investment career at Bankers
Trust Company and also was a Managing Director of Citicorp Investment
Management, Inc., where she had responsibility for the Institutional Investment
Management Group. Ms. Bovich was appointed and serves as the U.S. Representative
to the United Nations Investment Committee. In addition, she serves as an
Emeritus Trustee and Chair of the Investment Sub-Committee for Connecticut
College and is a former board member of the YWCA Retirement Fund. Ms. Bovich
graduated from Connecticut College with a B.A. in Economics and received her
M.B.A. in Finance from New York University. Ms. Bovich has had primary
responsibility for managing the Fund's portfolio since its inception.

PURCHASE OF SHARES

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which the class's distribution fee
and/or the service fee is paid, (iii) each class of shares has different
exchange privileges, (iv) certain classes of shares are subject to a conversion
feature and (v) certain classes of shares have different shareholder service
options available.

13
<PAGE>
and Class C Shares and the differential in the dividends that may be paid on
each class of shares.

14
<PAGE>

reduced by the amount of the distribution and service fees and other expenses of
the Fund associated with that class of shares. To assist investors in comparing
classes of shares, the tables under the Prospectus heading "Fees and Expenses of
the Fund" provide a summary of sales charges and expenses and an example of the
sales charges and expenses of the Fund applicable to each class of shares.

CLASS A SHARES
SALES CHARGE SCHEDULE

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

15
<PAGE>

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
<S> <C>
-----------------------------------------------------------------
First 5.00%
................................................................
Second 4.00%
................................................................
Third 3.00%
................................................................
Fourth 2.50%
................................................................
Fifth 1.50%
................................................................
Sixth and After None
................................................................
</TABLE>

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

16
<PAGE>
CONVERSION FEATURE

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

QUANTITY DISCOUNTS

17
<PAGE>

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co.

18
<PAGE>
and any of its subsidiaries and such persons' families and their beneficial
accounts.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

19
<PAGE>
purpose of realizing economies of scale in distributing such shares. A
qualified group does not include one whose sole organizational nexus, for
example, is that its participants are credit card holders of the same
institution, policy holders of an insurance company, customers of a bank or
broker-dealer, clients of an investment adviser or other similar groups.
Shares purchased in each group's participants account in connection with
this privilege will be subject to a contingent deferred sales charge of
1.00% in the event of redemption within one year of purchase, and a
commission will be paid to authorized dealers who initiate and are
responsible for such sales to each individual as follows: 1.00% on sales to
$2 million, plus 0.80% on the next $1 million and 0.50% on the excess over
$3 million.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

REDEMPTION OF
SHARES

Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the redemption request and any other necessary
documents in proper form as described below. Such payment may be postponed or
the right of redemption suspended as provided by the rules of the SEC. Such
payment may, under certain circumstances, be paid wholly or in part by a
distribution-in-kind of portfolio securities. A distribution-in-kind will result
in recognition by the shareholder of a gain or loss for federal income tax
purposes when such securities are distributed and the shareholder may have
brokerage costs and a gain or loss for federal income tax purposes upon the
shareholder's disposition of such securities. If the shares to be redeemed have
been recently purchased by check, Investor Services may delay the payment of
redemption proceeds until it confirms the purchase check has cleared, which may
take up to 15 days from the date of purchase. A taxable gain or loss may be
recognized by the shareholder upon redemption of shares. Certificated shares
must be properly endorsed for transfer and must accompany a written redemption
request.

20
<PAGE>

record address has changed within the previous 15 days, signature(s) must be
guaranteed by one of the following: a bank or trust company; a broker-dealer; a
credit union; a national securities exchange, registered securities association
or clearing agency; a savings and loan association; or a federal savings bank.

21
<PAGE>

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income at least
annually as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.

SHAREHOLDER SERVICES

22
<PAGE>

23
<PAGE>

dealer of record as the account from which shares are exchanged, unless
otherwise specified by the shareholder. In order to establish a systematic
withdrawal plan for the new account or reinvest dividends from the new account
into another fund, however, an exchanging shareholder must submit a specific
request. The Fund reserves the right to reject any order to acquire its shares
through exchange. In addition, the Fund and other Participating Funds may
restrict exchanges by shareholders engaged in excessive trading by limiting or
disallowing the exchange privilege to such shareholders. For further information
on these restrictions see the Fund's Statement of Additional Information. The
Fund may modify, restrict or terminate the exchange privilege at any time on 60
days' notice to its shareholders of any termination or material amendment.

FEDERAL INCOME
TAXATION

The Fund is required, in certain circumstances, to withhold 31% of dividends and
certain other payments, including redemptions, paid to shareholders

24
<PAGE>
who do not furnish to the Fund their correct taxpayer identification number (in
the case of individuals, their social security number) and certain required
certifications or who are otherwise subject to backup withholding.

25
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by Deloitte
& Touche LLP, independent auditors, whose report, along with the Fund's most
recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal years ended June 30, 1999, 1998, and the fiscal period July 1, 1996
(commencement of operations) to June 30, 1997 has been audited by
PricewaterhouseCoopers LLP. This information should be read in conjunction with
the financial statements and notes thereto included in the Statement of
Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES
YEAR ENDED JUNE 30, JULY 1, 1996* TO
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# 1998# JUNE 30, 1997
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $ 13.57 $ 14.85 $ 13.91 $ 12.00
------- ------- ------- -------
Income From Investment Operations
Net Investment Income/Loss........ 0.04 0.05 0.17 0.17
Net Realized and Unrealized
Gain/Loss......................... 1.97 (0.91) 0.96 1.88
------- ------- ------- -------
Total From Investment Operations.... 2.01 (0.86) 1.13 2.05
------- ------- ------- -------
Distributions
Net Investment Income............. -- (0.25) (0.18) (0.13)
In Excess of Net Investment
Income............................ -- (0.01) -- --
Net Realized Gain................. -- -- (0.01) (0.01)
In Excess of Net Realized Gain.... -- (0.16) -- --
------- ------- ------- -------
Total Distributions................. -- (0.42) (0.19) (0.14)
------- ------- ------- -------
Net Asset Value, End of Period...... $ 15.58 $ 13.57 $ 14.85 $ 13.91
======= ======= ======= =======
Total Return (1).................... 14.81% (5.54%) 8.32% 17.30%**
======= ======= ======= =======
Ratios and Supplemental Data
Net Assets, End of Period (000's)... $62,699 $45,573 $66,817 $21,961
Ratio of Expenses to Average Net
Assets.............................. 1.65% 1.65% 1.65% 1.65%
Ratio of Net Investment Income/Loss
to Average Net Assets............... 0.26% 0.37% 1.19% 1.39%
Portfolio Turnover Rate............. 66% 70% 35% 22%**
---------------------------------------------------------------------------------
Effect of Voluntary Expense
Reductions During the Period
Per Share Benefit to Net
Investment Income/Loss............ $ 0.00+ $ 0.00+ $ 0.02 $ 0.11
Ratios Before Expense Reductions:
Expenses to Average Net Assets.... 1.68% 1.71% 1.82% 2.50%
Net Investment Income/Loss to
Average Net Assets................ 0.23% 0.33% 1.02% 0.52%

<CAPTION>
CLASS B SHARES
YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA AND RATIOS 2000#
------------------------------------ -------
<S> <C>
Net Asset Value, Beginning of
Period.............................. $ 13.47
-------
Income From Investment Operations
Net Investment Income/Loss........ (0.08)
Net Realized and Unrealized
Gain/Loss......................... 1.96
-------
Total From Investment Operations.... 1.88
-------
Distributions
Net Investment Income............. --
In Excess of Net Investment
Income............................ --
Net Realized Gain................. --
In Excess of Net Realized Gain.... --
-------
Total Distributions................. --
-------
Net Asset Value, End of Period...... $ 15.35
=======
Total Return (1).................... 14.12%
=======
Ratios and Supplemental Data
Net Assets, End of Period (000's)... $55,573
Ratio of Expenses to Average Net
Assets.............................. 2.40%
Ratio of Net Investment Income/Loss
to Average Net Assets............... (0.55%)
Portfolio Turnover Rate............. 66%
------------------------------------
Effect of Voluntary Expense
Reductions During the Period
Per Share Benefit to Net
Investment Income/Loss............ $ 0.00+
Ratios Before Expense Reductions:
Expenses to Average Net Assets.... 2.43%
Net Investment Income/Loss to
Average Net Assets................ (0.58%)

<CAPTION>
CLASS B SHARES
YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# JUNE 30, 1997
------------------------------------ ----------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $ 14.72 $ 13.84 $ 12.00
------- ------- -------
Income From Investment Operations
Net Investment Income/Loss........ (0.04) 0.05 0.10
Net Realized and Unrealized
Gain/Loss......................... (0.90) 0.97 1.85
------- ------- -------
Total From Investment Operations.... (0.94) 1.02 1.95
------- ------- -------
Distributions
Net Investment Income............. (0.15) (0.13) (0.10)
In Excess of Net Investment
Income............................ (0.00)+ -- --
Net Realized Gain................. -- (0.01) (0.01)
In Excess of Net Realized Gain.... (0.16) -- --
------- ------- -------
Total Distributions................. (0.31) (0.14) (0.11)
------- ------- -------
Net Asset Value, End of Period...... $ 13.47 $ 14.72 $ 13.84
======= ======= =======
Total Return (1).................... (6.28%) 7.55% 16.40%**
======= ======= =======
Ratios and Supplemental Data
Net Assets, End of Period (000's)... $48,096 $51,541 $18,215
Ratio of Expenses to Average Net
Assets.............................. 2.40% 2.40% 2.40%
Ratio of Net Investment Income/Loss
to Average Net Assets............... (0.33%) 0.40% 0.54%
Portfolio Turnover Rate............. 70% 35% 22%**
------------------------------------
Effect of Voluntary Expense
Reductions During the Period
Per Share Benefit to Net
Investment Income/Loss............ $ 0.00+ $ 0.02 $ 0.17
Ratios Before Expense Reductions:
Expenses to Average Net Assets.... 2.46% 2.57% 3.34%
Net Investment Income/Loss to
Average Net Assets................ (0.37%) 0.23% (0.42%)

<CAPTION>
CLASS C SHARES
YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA AND RATIOS 2000#
------------------------------------ -------
<S> <C>
Net Asset Value, Beginning of
Period.............................. $ 13.52
-------
Income From Investment Operations
Net Investment Income/Loss........ (0.09)
Net Realized and Unrealized
Gain/Loss......................... 2.00
-------
Total From Investment Operations.... 1.91
-------
Distributions
Net Investment Income............. --
In Excess of Net Investment
Income............................ --
Net Realized Gain................. --
In Excess of Net Realized Gain.... --
-------
Total Distributions................. --
-------
Net Asset Value, End of Period...... $ 15.43
=======
Total Return (1).................... 14.13%
=======
Ratios and Supplemental Data
Net Assets, End of Period (000's)... $15,235
Ratio of Expenses to Average Net
Assets.............................. 2.40%
Ratio of Net Investment Income/Loss
to Average Net Assets............... (0.58%)
Portfolio Turnover Rate............. 66%
------------------------------------
Effect of Voluntary Expense
Reductions During the Period
Per Share Benefit to Net
Investment Income/Loss............ $ 0.00+
Ratios Before Expense Reductions:
Expenses to Average Net Assets.... 2.43%
Net Investment Income/Loss to
Average Net Assets................ (0.61%)

<CAPTION>
CLASS C SHARES
YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# JUNE 30, 1997
------------------------------------ ----------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $ 14.78 $ 13.83 $ 12.00
------- ------- -------
Income From Investment Operations
Net Investment Income/Loss........ (0.03) 0.05 0.06
Net Realized and Unrealized
Gain/Loss......................... (0.92) 0.99 1.88
------- ------- -------
Total From Investment Operations.... (0.95) 1.04 1.94
------- ------- -------
Distributions
Net Investment Income............. (0.15) (0.08) (0.10)
In Excess of Net Investment
Income............................ (0.00)+ -- --
Net Realized Gain................. -- (0.01) (0.01)
In Excess of Net Realized Gain.... (0.16) -- --
------- ------- -------
Total Distributions................. (0.31) (0.09) (0.11)
------- ------- -------
Net Asset Value, End of Period...... $ 13.52 $ 14.78 $ 13.83
======= ======= =======
Total Return (1).................... (6.25%) 7.55% 16.27%**
======= ======= =======
Ratios and Supplemental Data
Net Assets, End of Period (000's)... $14,187 $15,520 $ 9,156
Ratio of Expenses to Average Net
Assets.............................. 2.40% 2.40% 2.40%
Ratio of Net Investment Income/Loss
to Average Net Assets............... (0.26%) 0.36% 0.29%
Portfolio Turnover Rate............. 70% 35% 22%**
------------------------------------
Effect of Voluntary Expense
Reductions During the Period
Per Share Benefit to Net
Investment Income/Loss............ $ 0.00+ $ 0.02 $ 0.21
Ratios Before Expense Reductions:
Expenses to Average Net Assets.... 2.46% 2.56% 3.45%
Net Investment Income/Loss to
Average Net Assets................ (0.30%) 0.20% (0.77%)
</TABLE>

* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
+ AMOUNT IS LESS THAN $0.01 PER SHARE.
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED
SALES CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

26
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS
BOARD OF DIRECTORS

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

VAN KAMPEN INTERNATIONAL MAGNUM FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen International Magnum Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen International Magnum Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>

VAN KAMPEN
INTERNATIONAL MAGNUM FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of
Additional Information,
which contains more
details about the Fund,
is incorporated by
reference in its
entirety into this
prospectus.

You will find additional
information about the
Fund in its annual and
semiannual reports to
shareholders. The annual
report explains the
market conditions and
investment strategies
affecting the Fund's
performance during its
last fiscal year.

You can ask questions or
obtain a free copy of
the Fund's reports or
its Statement of
Additional Information
by calling (800)
341-2911 from 7:00 a.m.
to 7:00 p.m., Central
time, Monday through
Friday.
Telecommunications
Device for the Deaf
users may call (800)
421-2833. A free copy of
the Fund's reports can
also be ordered from our
web site at
www.vankampen.com.

Information about the
Fund, including its
reports and Statement of
Additional Information,
has been filed with the
Securities and Exchange
Commission (SEC). It can
be reviewed and copied
at the SEC's Public
Reference Room in
Washington, DC or on the
EDGAR database on the
SEC's internet site
(http://www.sec.gov).
Information on the
operation of the SEC's
Public Reference Room
may be obtained by
calling the SEC at
1-202-942-8090. You can
also request copies of
these materials, upon
payment of a duplicating
fee, by electronic
request at the SEC's
e-mail address
([email protected]), or
by writing
the Public Reference
Section of the SEC,
Washington, DC
20549-0102.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

MSIM PRO 10/00
#65133

<PAGE>

VAN KAMPEN
LATIN AMERICAN FUND

Van Kampen Latin American Fund's investment objective is to seek long-term
capital appreciation by investing primarily in equity securities of Latin
American issuers and investing in debt securities issued or guaranteed by Latin
American governments or governmental entities. Under normal market conditions,
the Fund invests primarily in equity securities.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Investment Advisory Services ...........................................15

Purchase of Shares .....................................................17

Redemption of Shares ...................................................24

Distributions from the Fund ............................................25

Shareholder Services ...................................................26

Federal Income Taxation ................................................28

Financial Highlights ...................................................29

INVESTMENT OBJECTIVE

INVESTMENT STRATEGIES
Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing at least 80% of the Fund's total
assets in a portfolio of:

- equity securities of companies organized in or for which the principal
securities trading market is in Latin America;

- equity securities denominated in a Latin American currency issued by companies
to finance operations in Latin America;

- equity securities of companies that alone or on a consolidated basis derive
50% or more of their annual revenues from either goods produced, sales made or
services performed in Latin America; and

- debt securities issued or guaranteed by Latin American governments or
governmental entities.

Under normal market conditions, the Fund invests primarily in equity securities.
Equity securities include common and preferred stocks, convertible securities,
rights and warrants to purchase stocks, depository receipts and equity interests
in trusts or partnerships.

The Fund is under no obligation to invest any portion of the Fund's total assets
in debt securities.

The Fund's investment adviser combines top-down country criteria to allocate the
Fund's assets among Latin American countries (based on relative economic,
political and social fundamentals; stock valuations; and investor sentiment)
with bottom-up fundamental analysis of Latin American issuers (seeking to
identify issuers with strong earnings growth potential). The Fund's investment
adviser focuses on companies offering attractive growth opportunities,
reasonable valuations and/or management with strong shareholder value
orientation. Portfolio securities are typically sold when the assessments of the
Fund's investment adviser of one or more of the factors listed above materially
change. The Fund focuses its investments in listed equity securities in
Argentina, Brazil, Chile and Mexico, the most developed capital markets in Latin
America. The Fund expects, under normal market conditions, to have at least 55%
of its total assets invested in listed equity securities of issuers in these
four countries.

Under normal market conditions, the Fund will invest more than 25% (but not more
than 50%) of the Fund's total assets in securities of telecommunications
companies, which reflects the increased presence of telecommunications companies
in the Latin American markets. The Fund may invest up to 20% of its total assets
in securities that are rated below investment grade by Standard & Poor's ("S&P")
or Moody's Investors Service, Inc. ("Moody's"), or unrated securities of
comparable quality. The Fund's investments in emerging market countries'
securities and lower-grade securities involve greater risks than investments in
developed countries or higher-grade securities.

The Fund may purchase or sell securities on a when-issued or delayed delivery
basis. The Fund may purchase and sell certain derivative instruments, such as
options, futures, options on futures and currency-related transactions involving
options, futures, forward contracts and swaps, for various portfolio management
purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

3
<PAGE>
stock markets, which fluctuate substantially over time, sometimes suddenly and
sharply.

In general, market values of equity securities are more volatile than those of
debt securities. Investments in debt securities generally are affected by
changes in interest rates and the creditworthiness of the issuer. The prices of
debt securities tend to fall as interest rates rise, and such declines tend to
be greater among debt securities with longer maturities.

Foreign markets may, but often do not, move in tandem with changes in U.S.
markets, and foreign markets, especially developing or emerging market
countries, may be more volatile than U.S. markets. At times, securities of Latin
American issuers may underperform relative to other sectors. Historically,
securities of Latin American issuers have sometimes gone through extended
periods when they did not perform as well as securities of domestic issuers or
issuers of countries in other regions. Thus, the value of the Fund's investments
will vary and at times may be lower or higher than that of other types of
investments. During an overall market decline, securities prices of smaller
companies (in which the Fund invests) often fluctuate more than securities
prices of larger companies.

FOREIGN, EMERGING MARKET COUNTRIES AND LATIN AMERICAN REGION RISKS. Because the
Fund owns securities of foreign issuers, it is subject to risks not usually
associated with owning securities of U.S. issuers. These risks include
fluctuations in foreign currencies, foreign currency exchange controls,
political and economic instability, differences in financial reporting,
differences in securities regulation and trading and foreign taxation issues.
The risks of investing in developing or emerging market countries (in which the
Fund invests) are greater than the risks generally associated with foreign
investments, including investment and trading limitations, greater credit and
liquidity concerns, greater political uncertainties, an economy's dependence on
international trade or development assistance, greater foreign currency exchange
risk and currency transfer restrictions, and greater delays and disruptions in
settlement transactions.

The Fund is subject to additional risks associated with investing in securities
of companies or governments that are subject to economic and financial factors
and conditions of the Latin American region. Securities markets of Latin
American countries are substantially smaller, less liquid, less regulated and
more volatile than domestic securities markets. Because the Fund's investments
are focused in a single region, its portfolio is more susceptible to factors
affecting issuers in that region than a more geographically diverse portfolio of
investments.

TELECOMMUNICATIONS RISKS. Because the Fund emphasizes telecommunication
companies, its portfolio is more susceptible to factors adversely affecting the
telecommunications industry than a Fund without such emphasis. The
telecommunications industry is undergoing significant technological and
structural developments and may be subject to more governmental regulation than
other industries. Securities of telecommunications companies may be more
volatile than and may or may not move in tandem with the overall securities
markets.

4
<PAGE>

INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- Seek capital appreciation over the long term

- Do not seek current income from their investment

- Are willing to take on the increased risks associated with investing in
foreign securities from countries in a single region

- Can withstand substantial volatility in the value of their Fund shares

- Wish to add to their investment portfolio a fund that invests in equity
securities and debt securities of Latin American issuers

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the five calendar years prior to the
date of this prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the returns shown below would have been lower.
Remember that the past performance of the Fund is not indicative of its future
performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ANNUAL RETURN
<S> <C>
1995 -20.43%
1996 47.37%
1997 39.61%
1998 -35.93%
1999 68.16%
</TABLE>

The Fund's return for the nine-month period ended September 30, 2000 was 6.52%.
As a result of market activity, current performance may vary from the figures
shown.

During the five-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 40.08% (for the quarter ended December 31, 1999) and the
lowest quarterly return for Class A Shares was -36.09% (for the quarter ended
March 31, 1995).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the Morgan Stanley Capital
International ("MSCI") Emerging Markets Free Latin America Index*, a broad-based
market index that the Fund's investment adviser believes is an appropriate
benchmark for the Fund.

5
<PAGE>

The Fund's performance figures listed below include the maximum sales charges
paid by investors. The index's performance figures do not include any
commissions or sales charges that would be paid by investors purchasing the
securities represented by the index. An investment cannot be made directly in
the index. Average annual total returns are shown for the periods ended
December 31, 1999 (the most recently completed calendar year prior to the date
of this prospectus). Remember that the past performance of the Fund is not
indicative of its future performance.

FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
---------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 5.75%(1) None None
........................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption
proceeds) None(2) 5.00%(3) 1.00%(4)
........................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
........................................................
Redemption fee None None None
........................................................
Exchange fee None None None
........................................................
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------
Management fees(5) 1.25% 1.25% 1.25%
........................................................
Distribution and/or
service (12b-1)
fees(6) 0.25% 1.00%(7) 1.00%(7)
........................................................
Other expenses(5) 0.88% 0.88% 0.88%
........................................................
Total annual fund
operating expenses(5) 2.38% 3.13% 3.13%
........................................................
</TABLE>

(1) REDUCED FOR PURCHASES OF $50,000 AND OVER. SEE "PURCHASE OF SHARES --
CLASS A SHARES."
(2) INVESTMENTS OF $1 MILLION OR MORE ARE NOT SUBJECT TO ANY SALES CHARGE AT
THE TIME OF PURCHASE, BUT A DEFERRED SALES CHARGE OF 1.00% MAY BE
IMPOSED ON CERTAIN REDEMPTIONS MADE WITHIN ONE YEAR OF THE PURCHASE.
SEE "PURCHASE OF SHARES -- CLASS A SHARES."
(3) THE MAXIMUM DEFERRED SALES CHARGE IS 5.00% IN THE FIRST YEAR AFTER
PURCHASE, DECLINING THEREAFTER AS FOLLOWS:

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."
(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR AFTER
PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF SHARES -- CLASS C
SHARES."
(5) THE FUND'S INVESTMENT ADVISER IS CURRENTLY WAIVING OR REIMBURSING A
PORTION OF THE FUND'S MANAGEMENT FEES AND OTHER EXPENSES SUCH THAT THE
ACTUAL TOTAL ANNUAL FUND OPERATING EXPENSES WERE 2.10% FOR CLASS A
SHARES, 2.85% FOR CLASS B SHARES AND 2.85% FOR CLASS C SHARES FOR THE
FISCAL YEAR ENDED JUNE 30, 2000. THE FEE WAIVERS OR EXPENSE REIMBURSE-
MENTS CAN BE TERMINATED AT ANY TIME.
(6) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO 0.25% OF
THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES.
CLASS B SHARES AND CLASS C SHARES ARE EACH SUBJECT TO A COMBINED ANNUAL
DISTRIBUTION AND SERVICE FEE OF UP TO 1.00% OF THE AVERAGE DAILY NET
ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES. SEE "PURCHASE OF SHARES."
(7) BECAUSE DISTRIBUTION AND/OR SERVICE (12b-1) FEES ARE PAID OUT OF THE
FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES WILL INCREASE
THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE THAN PAYING OTHER
TYPES OF SALES CHARGES.

6
<PAGE>
EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
-----------------------------------------------------------------
Class A Shares $802 $1,275 $1,772 $3,135
................................................................
Class B Shares $816 $1,266 $1,790 $3,266*
................................................................
Class C Shares $416 $ 966 $1,640 $3,439
................................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
-----------------------------------------------------------------
Class A Shares $802 $1,275 $1,772 $3,135
................................................................
Class B Shares $316 $ 966 $1,640 $3,266*
................................................................
Class C Shares $316 $ 966 $1,640 $3,439
................................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek long-term capital appreciation by
investing primarily in equity securities of Latin American issuers and investing
in debt securities issued or guaranteed by Latin American governments or
governmental entities. The Fund's investment objective is a fundamental policy
and may not be changed without shareholder approval of a majority of the Fund's
outstanding voting securities, as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"). There are risks inherent in all investments in
securities; accordingly there can be no assurance that the Fund will achieve its
investment objective.

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing at least 80% of the Fund's total
assets in a portfolio of:

- equity securities of companies organized in or for which the principal
securities trading market is in Latin America;

- equity securities denominated in a Latin American currency issued by companies
to finance operations in Latin America;

- equity securities of companies that alone or on a consolidated basis derive
50% or more of their annual revenues from either goods produced, sales made or
services performed in Latin America (collectively, "Latin American issuers");
and

- debt securities issued or guaranteed by Latin American governments or
governmental entities ("Sovereign Debt").

Under normal market conditions, the Fund invests primarily, or only , in equity
securities.

The Fund is under no obligation to invest any portion of the Fund's total assets
in debt securities.

The Fund's investment adviser combines top-down country allocation with
bottom-up stock selection. The Fund's investment adviser allocates the Fund's
assets among Latin American countries based on relative economic, political and
social fundamentals; stock valuations; and investor sentiment. The Fund invests
within countries based on fundamental analysis of Latin American issuers and
seeks to identify issuers with strong earnings growth potential. The Fund's
investment adviser focuses on companies offering attractive growth
opportunities, reasonable valuations and management with strong shareholder
value orientation.

Latin American countries consist of Argentina, Bolivia, Brazil, Chile, Colombia,
Costa Rica, Cuba, the Dominican Republic, Ecuador, El Salvador, Guatemala,
Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela. The
Fund focuses its investments in listed equity securities in

7
<PAGE>
Argentina, Brazil, Chile and Mexico, the most developed capital markets in Latin
America. The Fund expects, under normal market conditions, to have at least 55%
of its total assets invested in listed equity securities of issuers in these
four countries. In addition, the Fund actively invests in markets in other Latin
American countries such as Colombia, Peru and Venezuela. The Fund is not limited
in the extent to which it may invest in any Latin American country and intends
to invest opportunistically as markets develop. The portion of the Fund's
holdings in any Latin American country will vary from time to time, although the
portion of the Fund's assets invested in Chile may tend to vary less than the
portions invested in other Latin American countries because, with limited
exceptions, capital invested in Chile currently cannot be repatriated for one
year. To the extent the Fund emphasizes issuers of a single country, the Fund is
more susceptible to any single economic, political or regulatory occurance
affecting issues located in that country. Because of the Fund's policy of
concentrating its assets in a single region, it is more susceptible than a fund
without such a policy to any single economic, political or regulatory occurance
affecting issuers located in the Latin American region.

Equity securities in which the Fund invests include common and preferred stocks,
convertible securities, rights and warrants to purchase stocks, depositary
receipts and equity interests in trusts or partnerships. The Fund may invest in
debt securities when the Fund believes that, based upon factors such as relative
interest rate levels and foreign exchange rates, such debt securities offer
opportunities for long-term capital appreciation. It is likely that many of the
debt securities in which the Fund will invest will be unrated. The Fund may
invest up to 20% of its total assets in securities that are rated below
investment grade or unrated securities determined by the Fund's investment
adviser to be of comparable quality, which are commonly referred to as "junk
bonds." Such lower-quality securities are regarded as being predominantly
speculative and involve significant risks including greater credit risk, greater
market risk and volatility, greater liquidity concerns and potentially greater
manager risk. The Fund's holdings of lower-quality debt securities will consist
predominantly of Sovereign Debt, much of which trades at substantial discounts
from face value and which may include Sovereign Debt comparable to securities
rated as low as D by S&P or C by Moody's. The Fund may invest in Sovereign Debt
to hold and trade in appropriate circumstances, as well as to use to participate
in debt for equity conversion programs. The Fund generally invests in Sovereign
Debt only when the Fund believes such investments offer opportunities for
long-term capital appreciation. Investment in Sovereign Debt involves a high
degree of risk and such securities are generally considered to be speculative in
nature.

The Fund's Board of Directors has determined that, in light of the increased
presence of telecommunications companies in the Latin American markets, the
Fund's ability to achieve its investment objective would be materially adversely
affected if it were not permitted to invest more than 25% of its total assets in
securities of companies in the telecommunications industries of the Latin
American countries in which the Fund invests. In accordance with the Fund's
investment restrictions and as a result of the Board's action, the Fund is
required to invest at least 25% of its total assets in securities of Latin
American issuers engaged in the telecommunications industry. The Fund will
remain so invested until the Board determines that the Fund should invest less
than 25% of its total assets in that industry. Because the Fund will have a more
concentrated position in the securities of a single sector within the Latin
American securities markets, the Fund will be subject to certain risks with
respect to these portfolio securities. Market price movements affecting
telecommunications companies and their securities will have a greater impact on
the Fund's performance because of the more concentrated position in such
securities. Telecommunications may be subject to greater government regulation
than many other industries. Changes in government policies and the need to
obtain regulatory approvals may have a material effect on products and services
offered by telecommunications companies. Technological and structural
developments may adversely affect the profitability of telecommunications
companies. To better control the Fund's exposure to such risks, the Board has
limited investments in telecommunications securities to not more than 50% of the
Fund's total assets.

8
<PAGE>
To the extent that the Latin American Fund's assets are not invested in equity
securities of Latin American issuers or in Sovereign Debt, the remainder of the
assets may be invested in (i) debt securities of Latin American corporate
issuers, (ii) equity or debt securities of corporate or governmental issuers
located in countries outside Latin America, and (iii) short-term and medium-term
debt securities of the type described below under "Temporary defensive
strategy."

TYPES OF INVESTMENT SECURITIES
The Fund invests primarily in common stocks. Common stocks are shares of a
corporation or other entity that entitle the holder to a pro rata share of the
profits of the corporation, if any, without preference over any other class of
securities, including such entity's debt securities, preferred stock and other
senior equity securities. Common stock usually carries with it the right to vote
and frequently an exclusive right to do so.

While the Fund invests primarily in common stocks, the Fund also may invest in
other equity securities including preferred stocks, convertible securities,
warrants or rights to purchase common stock, depository receipts and equity
interests in trusts or partnerships. Preferred stock generally has a preference
as to dividends and liquidation over an issuer's common stock but ranks junior
to debt securities in an issuer's capital structure. Unlike interest payments on
debt securities, preferred stock dividends are payable only if declared by the
issuer's board of directors. Preferred stock also may be subject to optional or
mandatory redemption provisions. The ability of common stocks and preferred
stocks to generate income is dependent on the earnings and continuing
declaration of dividends by the issuers of such securities.

Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights typically have a substantially
shorter term than do warrants. Rights and warrants may be considered more
speculative and less liquid than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any right in the assets of the
issuing company. Rights and warrants may lack a secondary market.

The Fund may , but is under no obligation to, invest in certain debt securities.
The market prices of debt securities generally fluctuate inversely with changes
in interest rates so that the value of investments in such securities can be
expected to decrease as interest rates rise and increase as interest rates fall.
Debt securities with longer maturities may increase or decrease in value more
than debt securities of shorter maturities. The credit risks and market prices
of lower-grade securities generally are more sensitive to negative issuer
developments, such as reduced revenues or increased expenditures, or adverse
economic conditions, such as a recession, than are higher-grade securities. For
a further description of securities ratings, see the Fund's Statement of
Additional Information.

The Fund may invest in securities sold at a substantial discount from their
value at maturity, such as zero-coupon and payment-in-kind securities, when

9
<PAGE>
the Fund's investment adviser believes the effective yield on such securities
over comparable instruments paying current cash income makes these investments
attractive. Zero-coupon securities are debt obligations that do not entitle the
holder to any periodic payment of interest prior to maturity or a specified date
when the securities begin paying current interest. They are issued and traded at
a discount from their face amounts or par value, which discount varies depending
on the time remaining until cash payments begin, prevailing interest rates,
liquidity of the security and the perceived credit quality of the issuer.
Because such securities do not entitle the holder to any periodic payments of
interest prior to maturity, this prevents the reinvestment of such interest
payments if prevailing interest rates rise. On the other hand, because there are
no periodic interest payments to be reinvested prior to maturity, "zero-coupon"
securities eliminate the reinvestment risk and may lock in a favorable rate of
return to maturity if interest rates drop. Payment-in-kind securities are
securities that pay interest through the issuance of additional securities.
Prices on non-cash-paying instruments may be more sensitive to changes in the
issuer's financial condition, fluctuations in interest rates and market
demand/supply imbalances than cash-paying securities with similar credit
ratings, and thus may be more speculative than are securities that pay interest
periodically in cash. In addition, the amount of non-cash interest income earned
on such instruments is included, for federal income tax purposes, in the Fund's
calculation of income that is required to be distributed to shareholders for the
Fund to maintain its desired federal income tax status (even though such
non-cash paying securities do not provide the Fund with the cash flow with which
to pay such distributions). Accordingly, the Fund may be required to borrow or
to liquidate portfolio securities at a time that it otherwise would not have
done so in order to make such distributions. The Fund's investment adviser will
weigh these concerns against the expected total returns from such instruments.

The Fund may, but is not obligated to, invest in Brady Bonds and other Sovereign
Debt of countries that have restructured or are in the process of restructuring
Sovereign Debt pursuant to the Brady Plan. Brady Bonds are typically from a
debtor nation restructuring outstanding external commercial bank indebtedness.
Brady Bonds generally are based on issuers with a history of defaults with
respect to commercial bank loans and therefore are often viewed as speculative.
A more complete description of Brady Bonds is contained in the Fund's Statement
of Additional Information.

In addition to Brady Bonds, the Fund may, but is not obligated to, invest in
sovereign or sovereign-related debt obligations, including obligations of
supranational entities. Sovereign Debt differs from debt obligations of private
entities in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party and the legal recourse in enforcing a Sovereign Debt is
often limited. At certain times, certain countries (particularly emerging market
countries) have declared a moratoria on the payment of principal and interest on
external debt. Such investments may include participations and assignments of
sovereign bank debt, restructured external debt that has not undergone a
Brady-style debt exchange, and internal government debt.

The Fund may invest in securities of Latin American issuers indirectly through
investments in other investment companies. Such investments are commonly used
when direct investments in certain countries are not permitted by foreign
entities. Investments in other investment companies may involve duplication of
management fees and certain other expenses.

The Fund may invest in small-, medium- or large-sized companies. The securities
of small- and medium-sized companies may be subject to more abrupt or erratic
market movements than securities of larger companies or the market averages in
general. In addition, such companies typically are subject to a greater degree
of change in earnings and business prospects than are larger companies. Thus, to
the extent the Fund invests in small- and medium-sized companies, the Fund may
be subject to greater investment risk than that assumed through investment in
the securities of larger-sized companies.

The Fund may enter into foreign currency forward contracts and foreign currency
futures contracts, may purchase and sell put and call options on securities,
foreign currency and on foreign currency futures contracts, and may enter into
stock index and interest rate futures contracts and options thereon. There

10
<PAGE>

currently are limited options and futures markets for Latin American currencies,
securities and indices, and the nature of the strategies adopted by the Fund's
investment adviser and the extent to which those strategies are used depends on
the development of those markets.

RISKS OF INVESTING IN SECURITIES
OF FOREIGN ISSUERS

11
<PAGE>
The Fund may attempt to protect against adverse changes in the value of the U.S.
dollar in relation to a foreign currency by entering into a forward contract for
the purchase or sale of the amount of foreign currency invested or to be
invested, or by buying or selling a foreign currency option or futures contract
for such amount. Such strategies may be employed before the Fund purchases a
foreign security traded in the currency which the Fund anticipates acquiring or
between the date the foreign security is purchased or sold and the date on which
payment therefor is made or received. Seeking to protect against a change in the
value of a foreign currency in the foregoing manner does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such transactions reduce or
preclude the opportunity for gain if the value of the currency should move in
the direction opposite to the position taken. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it had not
entered into such contracts. Because of the lack of hedging facilities available
in Latin American countries, the nature of strategies adopted by the Fund's
investment adviser and the extent to which those strategies are used depends on
the development of those markets.

Investors should consider carefully the risks of foreign investments before
investing in the Fund.

ADDITIONAL RISKS OF INVESTING IN LATIN AMERICAN COUNTRIES. The securities
markets of Latin American countries are substantially smaller, less liquid and
more volatile than the major securities markets in the U.S. A high proportion of
the shares of many Latin American issuers may be held by a limited number of
persons, which may limit the number of shares available for investment by the
Fund. A limited number of issuers in most, if not all, Latin American securities
markets may represent a disproportionately large percentage of market
capitalization and trading value. The Fund's investments are subject to the risk
that the liquidity of a particular investment, or investments generally, in such
countries will shrink or disappear suddenly and without warning as a result of
adverse economic, market or political conditions or adverse investor
perceptions, whether or not accurate. Because of the lack of sufficient market
liquidity, the Fund may incur losses because it will be required to effect sales
at a disadvantageous time and only then at a substantial drop in price. In
addition, certain Latin American securities markets, including those of
Argentina, Brazil, Chile and Mexico, are susceptible to being influenced by
large investors trading significant blocks of securities or by large
dispositions of securities resulting from the failure to meet margin calls when
due.

In addition to their smaller size, lesser liquidity and greater volatility,
Latin American securities markets are less developed than U.S. securities
markets. Disclosure and regulatory standards are in many respects less stringent
than U.S. standards. Furthermore, there is a lower level of monitoring and
regulation of the markets and the activities of investors in such markets, and
enforcement of existing regulations has been extremely limited. Consequently,
the prices at which the Fund may acquire investments may be affected by other
market participants' anticipation of the Fund's investing, by trading by persons
with material non-public information and by securities transactions by brokers
in anticipation of transactions by the Fund in particular securities.
Commissions and other transaction costs on most, if not all, Latin American
securities exchanges are generally higher than in the U.S., although the Fund
will endeavor to achieve the most favorable net results on its portfolio
transactions. Investments in Latin American countries may be more difficult to
price precisely because of the characteristics discussed above and lower trading
volumes.

The extent of economic development, political stability and market depth of
Latin American countries varies and investments in the securities of issuers in
such countries typically involve greater potential gain or loss than investments
in securities of issuers in more developed countries. Latin American countries
tend to have economic structures that are less diverse and mature and political
systems that are less stable than those of more developed markets. Latin
American countries may be more likely to experience political turmoil or rapid
changes in economic conditions than more developed markets, and the financial
condition of issuers in Latin American countries may be more precarious than in
more developed countries. Certain countries depend to a larger degree upon
international trade or development assistance and, therefore, are vulnerable to
changes in trade or assistance which, in turn, may be

12
<PAGE>

affected by a variety of factors. The Fund may be particularly sensitive to
changes in the economies of certain countries resulting from any reversal of
economic liberalization, political unrest or the imposition of sanctions by the
United States or other countries.

Certain Latin American countries have experienced currency devaluations and
substantial (and, in some cases, extremely high) rates of inflation, which have
had a negative effect on the economies and securities markets of such countries.
Economies in emerging market countries often are dependent heavily upon
commodity prices and international trade and, accordingly, have been and may
continue to be affected adversely by the economies of their trading partners,
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures negotiated by the countries with which
they trade.

DERIVATIVE INSTRUMENTS

The Fund may purchase and sell derivative instruments such as exchange-listed
and over-the-counter put and call options on securities, financial futures,
equity, fixed-income and interest rate indices, and other financial instruments,
futures contracts and options thereon (including but not limited to securities
index futures, foreign currency exchange futures, interest rate futures and
other financial futures), structured notes, swaps, caps, floors or collars and
enter into various currency transactions (to the extent available) such as
currency forward contracts, currency futures contracts, currency swaps or
options on currency or currency futures. In addition, the Fund may invest in
other derivative instruments that are developed over time if their use would be
consistent with the objective of the Fund. Collectively, all of the above are
referred to as "Strategic Transactions." The Fund generally seeks to use
Strategic Transactions as a portfolio management or hedging technique to seek to
protect against possible adverse changes in the market value of securities held
in or to be purchased for the Fund's portfolio, protect the Fund's unrealized
gains, facilitate the sale of certain securities for investment purposes,
protect against changes in currency exchange rates or to adjust the exposure to
a particular currency, manage the effective maturity or duration of the Fund's
portfolio, establish positions in the derivatives markets as a substitute for
purchasing or selling particular securities, including, for example, when the
Fund adjusts its exposure to a market in response to changes in investment
strategy, when doing so provides more liquidity than the direct purchase of the
securities underlying such derivatives, when the Fund is restricted from
directly owning the underlying securities due to foreign investment restrictions
or other reasons, or when doing so provides a price advantage over purchasing
the underlying securities directly, either because of a pricing differential
between the derivatives and securities markets or because of lower transaction
costs associated with the derivatives transaction. The Fund may invest up to
33 1/3% of its total assets in Strategic Transactions for non-hedging purposes
(measured by the aggregate notional amount of outstanding derivative
instruments). In addition, the Fund may invest up to 20% of its total assets in
futures contracts and options on futures contracts (measured by the aggregate
notional amount of such outstanding contracts).

13
<PAGE>

other assets held in margin accounts with respect to Strategic Transactions are
not otherwise available to the Fund for investment purposes.

OTHER INVESTMENTS AND RISK FACTORS

The Fund may purchase and sell securities in an amount up to 15% of its net
assets on a "when-issued" and "delayed delivery" basis. The Fund accrues no
income on such securities until the Fund actually takes delivery of such
securities. These transactions are subject to market fluctuation; the value of
the securities at delivery may be more or less than their purchase price. The
value or yield generally available on comparable securities when delivery occurs
may be higher than the value or yield on the securities obtained pursuant to
such transactions. Because the Fund relies on the buyer or seller to consummate
the transaction, failure by the other party to complete the transaction may
result in the Fund missing the opportunity of obtaining a price or yield
considered to be advantageous. The Fund will engage in when-issued and delayed
delivery transactions for the purpose of acquiring securities consistent with
the Fund's investment objective and policies and not for the purpose of
investment leverage.

The Fund may lend its portfolio securities in an amount up to 20% of its total
assets to broker-dealers, banks or other institutional borrowers of securities.
The Fund may incur lending fees and other costs in connection with securities
lending, and securities lending is subject to the risk of default by the other
party.

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for capital appreciation has
lessened, or for other reasons. The portfolio turnover rate may vary from year
to year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs) which would
adversely impact a fund's performance. Higher portfolio turnover may result in
the realization of more short-term capital gains than if a fund had lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy,

14
<PAGE>

the Fund may, on a temporary basis, hold cash or invest a portion or all of its
assets in money-market instruments including obligations of the U.S. government,
its agencies or instrumentalities, obligations of foreign sovereignties, other
high-quality debt securities, including prime commercial paper, repurchase
agreements and bank obligations, such as bankers' acceptances and certificates
of deposit. Under normal market conditions, the potential for capital
appreciation on these securities will tend to be lower than the potential for
capital appreciation on other securities that may be owned by the Fund. In
taking such a defensive position, the Fund would temporarily not be pursuing and
may not achieve its investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
-------------------------------------
<S> <C>
First $500 million 1.25%
....................................
Next $500 million 1.20%
....................................
Over $1 billion 1.15%
....................................
</TABLE>

Applying this fee schedule, the effective advisory fee rate was 1.25% of the
Fund's average daily net assets for the Fund's fiscal year ended June 30, 2000.
The Fund's average daily net assets are determined by taking the average of all
of the determinations of the net assets during a given calendar month. Such fee
is payable for each calendar month as soon as practicable after the end of that
month.

The Fund also retains the Adviser to provide administrative services for the
Fund's day-to-day operations. Under an administration agreement between the Fund
and the Adviser, the Fund pays a monthly administration fee computed based upon
an annual rate of 0.25% applied to the average daily net assets of the Fund.

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

15
<PAGE>
INVESTMENT SUBADVISER

SUBADVISER AGREEMENT. The Adviser has entered into a subadvisory agreement with
the Subadviser to assist the Adviser in performing its investment advisory
functions. The Adviser pays the Subadviser on a monthly basis a portion of the
net advisory fees the Adviser receives from the Fund.

PORTFOLIO MANAGEMENT. Robert L. Meyer, Andy Skov and Michael Perl are
responsible as co-managers for the management of the Fund's investment
portfolio.

Mr. Meyer, a Managing Director and co-head of the Emerging Markets Equity Group,
joined the Subadviser in 1989. He was born in Argentina and graduated from Yale
University with a B.A. in Economics and Political Science. He received a J.D.
from Harvard Law School. In addition, he holds the Chartered Financial Analyst
designation. Mr. Meyer has been a co-manager of the Fund since its inception.

Mr. Skov, a Managing Director and co-head of the Emerging Markets Equity Group,
joined the Subadviser in 1994 as a portfolio manager. Prior to joining the
Subadviser, he worked in the Latin America group at Bankers Trust in corporate
finance, research and sales; two of those years he spent in Argentina. He
graduated from the University of California at Berkeley with a B.A. (Phi
Beta Kappa) in Political Science and Economic Development. Mr. Skov has been a
co-manager of the Fund since May 1997.

Mr. Perl, a Principal and a portfolio manager in the Emerging Markets Equity
Group focusing on Latin America, joined the Subadviser in 1998. Prior to joining
the Subadviser, he worked as a Latin American Portfolio Manager at Bankers Trust
Australia from 1992 to 1998. He graduated from the University of New South Wales
and a Bachelor of Commerce (Honors), majoring in Finance, Accounting and
Taxation. Mr. Perl has been a co-manager of the Fund since November 1998.

16
<PAGE>
PURCHASE OF SHARES

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which the class's distribution fee and/ or the service fee is paid,
(iii) each class of shares has different exchange privileges, (iv) certain
classes of shares are subject to a conversion feature and (v) certain classes of
shares have different shareholder service options available.

The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Directors reserves the right to calculate the net
asset value per share and adjust the offering price more frequently than once
daily if deemed desirable. Net asset value per share for each class is
determined by dividing the value of the Fund's portfolio securities, cash and
other assets (including accrued interest) attributable to such class, less all
liabilities (including accrued expenses) attributable to such class, by the
total number of shares of the class outstanding. Such computation is made by
using prices as of the close of trading on the Exchange and (i) valuing
securities listed or traded on a national securities exchange at the closing
price, or if no closing price is available, at the last reported sale price, and
if there has been no sale that day, at the mean between the last reported bid
and asked prices, (ii) valuing over-the-counter securities at the last reported
sale price from the National Association of Securities Dealers Automated
Quotations ("NASDAQ"), and, if there has been no sale that day, at the mean
between the last reported bid and asked prices, (iii) valuing unlisted
securities at the average of the mean between the current reported bid and asked
prices obtained from reputable brokers and (iv) valuing any securities for which
market quotations are not readily available and any other assets at fair value
as determined in good faith by the Adviser in accordance with procedures
established by the Fund's Board of Directors. Securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.

Trading in securities on many foreign securities exchanges and over-the-counter
markets may not coincide with the close of business on each U.S. business day.
In addition, securities trading in a particular country or countries may not
take place on

17
<PAGE>

all U.S. business days or may take place on days which are not U.S. business
days. Changes in valuations on certain securities may occur at times or on days
on which the Fund's net asset value is not calculated and on which the Fund does
not effect sales, redemptions and exchanges of its shares.

18
<PAGE>

CLASS A SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
AS % OF AS % OF
SIZE OF OFFERING NET AMOUNT
INVESTMENT PRICE INVESTED
<S> <C> <C>
---------------------------------------------------------
Less than $50,000 5.75% 6.10%
........................................................
$50,000 but less than $100,000 4.75% 4.99%
........................................................
$100,000 but less than $250,000 3.75% 3.90%
........................................................
$250,000 but less than $500,000 2.75% 2.83%
........................................................
$500,000 but less than $1,000,000 2.00% 2.04%
........................................................
$1,000,000 or more * *
........................................................
</TABLE>

* NO SALES CHARGE IS PAYABLE AT THE TIME OF PURCHASE ON INVESTMENTS OF $1
MILLION OR MORE, ALTHOUGH FOR SUCH INVESTMENTS THE FUND MAY IMPOSE A
CONTINGENT DEFERRED SALES CHARGE OF 1.00% ON CERTAIN REDEMPTIONS MADE
WITHIN ONE YEAR OF THE PURCHASE. THE CONTINGENT DEFERRED SALES CHARGE IS
ASSESSED ON AN AMOUNT EQUAL TO THE LESSER OF THE THEN CURRENT MARKET
VALUE OR THE COST OF THE SHARES BEING REDEEMED. ACCORDINGLY, NO SALES
CHARGE IS IMPOSED ON INCREASES IN NET ASSET VALUE ABOVE THE INITIAL
PURCHASE PRICE.

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
<S> <C>
-------------------------------------------------------
First 5.00%
......................................................
Second 4.00%
......................................................
Third 3.00%
......................................................
Fourth 2.50%
......................................................
Fifth 1.50%
......................................................
Sixth and After None
......................................................
</TABLE>

19
<PAGE>

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

CONVERSION FEATURE

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

20
<PAGE>

or certain other retirement plan distributions, (iii) for withdrawals under the
Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account, (iv) if no commission or transaction fee is paid to
authorized dealers at the time of purchase of such shares and (v) if made by the
Fund's involuntary liquidation of a shareholder's account as described under the
Prospectus heading "Redemption of Shares." Subject to certain limitations, a
shareholder who has redeemed Class C Shares of the Fund may reinvest in Class C
Shares at net asset value with credit for any contingent deferred sales charge
if the reinvestment is made within 180 days after the redemption. For a more
complete description of contingent deferred sales charge waivers, please refer
to the Fund's Statement of Additional Information or contact your authorized
dealer.

QUANTITY DISCOUNTS

21
<PAGE>
OTHER PURCHASE PROGRAMS
Purchasers of Class A Shares may be entitled to reduced or no initial sales
charges in connection with the unit investment trust reinvestment program and
purchases by registered representatives of selling firms or purchases by persons
affiliated with the Fund or the Distributor. The Fund reserves the right to
modify or terminate these arrangements at any time.

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.

22
<PAGE>
(6) Beneficial owners of shares of Participating Funds held by a retirement
plan or held in a tax-advantaged retirement account who purchase shares of
the Fund with proceeds from distributions from such a plan or retirement
account other than distributions taken to correct an excess contribution.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

23
<PAGE>
REDEMPTION OF
SHARES

24
<PAGE>

business on such day. It is the responsibility of authorized dealers to transmit
redemption requests received by them to the Distributor so they will be received
prior to such time. Redemptions completed through an authorized dealer may
involve additional fees charged by the dealer.

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income at least
annually as dividends to shareholders. Dividends are automatically applied to
purchase additional

25
<PAGE>

shares of the Fund at the next determined net asset value unless the shareholder
instructs otherwise.

SHAREHOLDER SERVICES

To be eligible for exchange, shares of the Fund must have been registered in the
shareholder's name for at

26
<PAGE>
least 30 days prior to an exchange. Shares of the Fund registered in a
shareholder's name for less than 30 days may only be exchanged upon receipt of
prior approval of the Adviser. It is the policy of the Adviser, under normal
circumstances, not to approve such requests.

27
<PAGE>
FEDERAL INCOME
TAXATION

28
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by Deloitte
& Touche LLP, independent auditors, whose report, along with the Fund's most
recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal years ended June 30, 1999, 1998, 1997 and 1996 and the fiscal period
August 1, 1995 (commencement of offering of Class B Shares) to June 30, 1996 has
been audited by PricewaterhouseCoopers LLP. This information should be read in
conjunction with the financial statements and notes thereto included in the
Statement of Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 # 1999 # 1998 # 1997 1996
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 11.54 $ 11.42 $ 17.39 $ 12.63 $ 9.08
------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income/Loss................. 0.04 0.09 (0.01) 0.02 0.10
Net Realized and Unrealized Gain/Loss...... 2.66 0.19 (2.73) 6.46 3.47
------- ------- ------- ------- -------
Total From Investment Operations............. 2.70 0.28 (2.74) 6.48 3.57
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income...................... -- (0.04) -- -- (0.02)
In Excess of Net Investment Income......... -- (0.07) -- (0.09) --
Net Realized Gain.......................... -- -- (1.92) (1.63) --
In Excess of Net Realized Gain............. -- (0.05) (1.31) -- --
------- ------- ------- ------- -------
Total Distributions........................ -- (0.16) (3.23) (1.72) (0.02)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............... $ 14.24 $ 11.54 $ 11.42 $ 17.39 $ 12.63
======= ======= ======= ======= =======
TOTAL RETURN (1)............................. 23.29% 3.00% (17.37%) 57.32% 39.35%
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $38,525 $34,139 $44,439 $84,401 $18,701
Ratio of Expenses to Average Net Assets...... 2.17% 2.20% 2.25% 2.24% 2.11%
Ratio of Net Investment Income/Loss to
Average Net Assets........................... 0.31% 0.98% (0.09%) (0.08%) 1.18%
Portfolio Turnover Rate...................... 78% 163% 249% 241% 131%
-------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions During
the Period
Per Share Benefit to Net Investment
Income/Loss.................................. $ 0.03 $ 0.02 $ 0.02 $ 0.10 $ 0.09
Ratios Before Expense Reductions:
Expenses to Average Net Assets............. 2.38% 2.44% 2.41% 2.77% 3.28%
Net Investment Income/Loss to Average Net
Assets................................... 0.10% 0.74% (0.24%) (0.61%) 0.01%
Ratio of Expenses to Average Net Assets
excluding country tax expense and interest
expense.................................... 2.10% 2.10% 2.10% 2.10% 2.10%
-------------------------------------------------------------------------------------------------------

<CAPTION>
CLASS B SHARES
-------------------------------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------------- AUGUST 1, 1995+ TO
SELECTED PER SHARE DATA AND RATIOS 2000 # 1999 # 1998 # 1997 JUNE 30, 1996
--------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 11.19 $ 11.03 $ 16.99 $ 12.45 $ 9.58
-------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income/Loss................. (0.06) 0.02 (0.08) (0.03) 0.03
Net Realized and Unrealized Gain/Loss...... 2.57 0.22 (2.65) 6.28 2.84
-------- ------- ------- ------- -------
Total From Investment Operations............. 2.51 0.24 (2.73) 6.25 2.87
-------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income...................... -- (0.01) -- -- --
In Excess of Net Investment Income......... -- (0.02) -- (0.08) --
Net Realized Gain.......................... -- -- (1.92) (1.63) --
In Excess of Net Realized Gain............. -- (0.05) (1.31) -- --
-------- ------- ------- ------- -------
Total Distributions........................ -- (0.08) (3.23) (1.71) --
-------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............... $ 13.70 $ 11.19 $ 11.03 $ 16.99 $ 12.45
======== ======= ======= ======= =======
TOTAL RETURN (1)............................. 22.32% 2.47% (17.82)% 56.17% 29.26%*
======== ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $ 19,635 $18,570 $24,206 $14,314 $ 2,041
Ratio of Expenses to Average Net Assets...... 2.92% 2.96% 2.99% 2.99% 2.87%
Ratio of Net Investment Income/Loss to
Average Net Assets........................... (0.47%) 0.20% (0.58%) (0.78%) 0.88%
Portfolio Turnover Rate...................... 78% 163% 249% 241% 131%*
-------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions During
the Period
Per Share Benefit to Net Investment
Income/Loss.................................. $ 0.03 $ 0.02 $ 0.02 $ 0.02 $ 0.04
Ratios Before Expense Reductions:
Expenses to Average Net Assets............. 3.13% 3.20% 3.16% 3.55% 3.89%
Net Investment Income/Loss to Average Net
Assets................................... (0.68%) (0.04%) (0.73%) (1.34%) (0.14%)
Ratio of Expenses to Average Net Assets
excluding country tax expense and interest
expense.................................... 2.85% 2.85% 2.85% 2.85% 2.85%
-------------------------------------------------------------------------------------------------------

<CAPTION>
CLASS C SHARES
------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 # 1999 # 1998 # 1997 1996
--------------------------------------------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 11.18 $ 11.04 $ 17.01 $ 12.43 $ 8.99
------- ------- ------- ------- ------
Income From Investment Operations
Net Investment Income/Loss................. (0.06) 0.02 (0.11) (0.07) 0.04
Net Realized and Unrealized Gain/Loss...... 2.57 0.20 (2.63) 6.31 3.40
------- ------- ------- ------- ------
Total From Investment Operations............. 2.51 0.22 (2.74) 6.24 3.44
------- ------- ------- ------- ------
DISTRIBUTIONS
Net Investment Income...................... -- (0.01) -- -- --
In Excess of Net Investment Income......... -- (0.02) -- (0.03) --
Net Realized Gain.......................... -- -- (1.92) (1.63) --
In Excess of Net Realized Gain............. -- (0.05) (1.31) -- --
------- ------- ------- ------- ------
Total Distributions........................ -- (0.08) (3.23) (1.66) --
------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD............... $ 13.69 $ 11.18 $ 11.04 $ 17.01 $12.43
======= ======= ======= ======= ======
TOTAL RETURN (1)............................. 22.34% 2.28% (17.86)% 56.04% 38.26%
======= ======= ======= ======= ======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $10,772 $10,387 $14,577 $20,345 $6,780
Ratio of Expenses to Average Net Assets...... 2.92% 2.96% 3.00% 2.99% 2.86%
Ratio of Net Investment Income/Loss to
Average Net Assets........................... (0.47%) 0.23% (0.77%) (0.79%) 0.42%
Portfolio Turnover Rate...................... 78% 163% 249% 241% 131%
-------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions During
the Period
Per Share Benefit to Net Investment
Income/Loss.................................. $ 0.03 $ 0.02 $ 0.02 $ 0.05 $ 0.12
Ratios Before Expense Reductions:
Expenses to Average Net Assets............. 3.13% 3.20% 3.16% 3.56% 4.06%
Net Investment Income/Loss to Average Net
Assets................................... (0.68%) (0.01%) (0.93%) (1.36%) (0.78%)
Ratio of Expenses to Average Net Assets
excluding country tax expense and interest
expense.................................... 2.85% 2.85% 2.85% 2.85% 2.85%
-------------------------------------------------------------------------------------------------------
</TABLE>

* NON-ANNUALIZED
+ THE FUND BEGAN OFFERING CLASS B SHARES ON AUGUST 1, 1995
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

29
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS
BOARD OF DIRECTORS

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday

FUNDINFO-REGISTERED TRADEMARK-
For automated telephone services, call (800) 847-2424

WEB SITE
www.vankampen.com

VAN KAMPEN LATIN AMERICAN FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Latin American Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen Latin American Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>

VAN KAMPEN
LATIN AMERICAN FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of Additional Information, which contains more details about the
Fund, is incorporated by reference in its entirety into this prospectus.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

MSLA PRO 10/00
#65109

<PAGE>

VAN KAMPEN
MID CAP GROWTH FUND

Van Kampen Mid Cap Growth Fund's investment objective is to seek to achieve
long-term growth. The Fund's investment adviser seeks to achieve the Fund's
investment objective by investing primarily in a portfolio of common stocks and
other equity securities of medium-sized companies that the Fund's investment
adviser believes have long-term growth potential.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Risk/Return Summary .....................................................3
Fees and Expenses of the Fund ...........................................4
Investment Objective, Policies and Risks ................................5
Investment Advisory Services ............................................8

Purchase of Shares ......................................................9

Redemption of Shares ...................................................16

Distributions from the Fund ............................................18

Shareholder Services ...................................................18

Federal Income Taxation ................................................20

Financial Highlights ...................................................22

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek to achieve long-term growth.

INVESTMENT STRATEGIES
The Fund's investment adviser seeks to achieve the Fund's investment objective
by investing primarily in a portfolio of common stocks and other equity
securities of medium-sized companies that the Fund's investment adviser believes
have long-term growth potential. Under normal market conditions, the Fund
invests at least 65% of its total assets in common stocks and other equity
securities of medium-sized companies at the time of investment. Other equity
securities include preferred stocks, convertible securities and rights and
warrants to purchase common stock.

The Fund emphasizes a "growth" style of investing focusing on those companies
selected using the Fund's investment adviser's four-part process. This process
combines quantitative, fundamental and valuation analysis with a strict sell
discipline to seek companies with above-average potential for capital growth.
Portfolio securities are typically sold when the assessments of the Fund's
investment adviser for growth of such securities materially change. The Fund may
purchase and sell certain derivative instruments, such as options, futures,
options on futures and forward contracts, for various portfolio management
purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

The Fund emphasizes a "growth" style of investing. The market values of growth
securities may be more volatile than those of other types of investments. The
returns on growth securities may or may not move in tandem with the returns on
other styles of investing or the overall stock markets. Different types of
stocks tend to shift in and out of favor depending on market and economic
conditions. Thus, the value of the Fund's investments will vary and at times may
be lower or higher than that of other types of investments.

RISKS OF MEDIUM-SIZED COMPANIES. The Fund invests primarily in medium-sized
companies which often are newer or less established companies than larger
companies. Investments in medium-sized companies carry additional risks because
their earnings tend to be less predictable; they often have limited product
lines, markets, distribution channels or financial resources; and the management
of such companies may be dependent upon one or a few key people. The market
movements of equity securities of medium-sized companies may be more abrupt or
erratic than the market movements of equity securities of larger, more
established companies or the stock market in general. Historically, medium-sized
companies have sometimes gone through extended periods where they did not
perform as well as larger companies. In addition, equity securities of medium-
sized companies generally are less liquid than those of larger companies. This
means that the Fund could have greater difficulty selling such securities at the
time and price that the Fund would like.

RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures, options on futures and forward
contracts are examples of derivative instruments. Derivative instruments involve
risks different from direct investments in underlying securities. These risks
include imperfect correlation between the value of the instruments and the
underlying assets; risks of default by the other party to certain transactions;
risks that the transactions may result in losses that partially or completely
offset gains in portfolio positions; and risks that the transactions may not be
liquid.

MANAGER RISK. As with any managed fund, the Fund's investment adviser may not be
successful in selecting the best-performing securities or investment

3
<PAGE>

techniques, and the Fund's performance may lag behind that of similar funds.

INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:
- Seek capital growth over the long term
- Do not seek current income from their investment
- Can withstand substantial volatility in the value of their Fund shares
- Wish to add to their investment portfolio a fund that emphasizes a growth
style of investing in common stocks and other equity securities of
medium-sized companies

PERFORMANCE INFORMATION

The Fund commenced investment operations on October 25, 1999. When the Fund has
completed a full calendar year of investment operations, this section will
include charts that show annual total returns, highest and lowest quarterly
returns and average total returns compared to a benchmark index selected for the
Fund. This information serves as a basis for investors to evaluate the Fund's
performance and risks by looking at how the Fund's performance varies from
year-to-year and how the Fund's performance compares to a broad-based market
index that the Fund's investment adviser believes is an appropriate benchmark
for the Fund. Past performance of the Fund is not indicative of its future
performance.

FEES AND EXPENSES
OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>

SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------
Management fees 0.75% 0.75% 0.75%
...........................................................
Distribution and/or
service
(12b-1) fees(5) 0.25% 1.00%(6) 1.00%(6)
...........................................................
Other expenses 0.63% 0.63% 0.63%
...........................................................
Total annual fund
operating expenses 1.63% 2.38% 2.38%
...........................................................
</TABLE>

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."
(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR AFTER
PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF SHARES--CLASS C
SHARES."
(5) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO 0.25% OF
THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES.
CLASS B SHARES AND CLASS C SHARES ARE EACH SUBJECT TO A COMBINED
ANNUAL DISTRIBUTION AND SERVICE FEE OF UP TO 1.00% OF THE AVERAGE
DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES. SEE "PURCHASE
OF SHARES."
(6) BECAUSE DISTRIBUTION AND/OR SERVICE (12b-1) FEES ARE PAID OUT OF THE
FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES WILL INCREASE
THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE THAN PAYING OTHER
TYPES OF SALES CHARGES.

4
<PAGE>
EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same each year (except for the ten-year
amounts for Class B Shares which reflect the conversion to Class A Shares after
eight years). Although your actual costs may be higher or lower, based on these
assumptions your costs would be:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $731 $1,060 $1,411 $2,397
...............................................................
Class B Shares $741 $1,042 $1,420 $2,530*
...............................................................
Class C Shares $341 $ 742 $1,270 $2,716
...............................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $731 $1,060 $1,411 $ 2,397
...............................................................
Class B Shares $241 $ 742 $1,270 $ 2,530*
...............................................................
Class C Shares $241 $ 742 $1,270 $ 2,716
...............................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek to achieve long-term growth. Any
income received from the investment of portfolio securities is incidental to the
Fund's investment objective. The Fund's investment objective is a fundamental
policy and may not be changed without shareholder approval of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"). There are risks inherent in all
investments in securities; accordingly, there can be no assurance that the Fund
will achieve its investment objective.

The Fund's investment adviser seeks to achieve the Fund's investment objective
by investing primarily in a portfolio of common stocks and other equity
securities of medium-sized companies that the Fund's investment adviser believes
have long-term growth potential. Under normal market conditions, the Fund
invests at least 65% its total assets in common stocks and other equity
securities of medium-sized companies at the time of investment. Under current
market conditions, the Fund's investment adviser defines medium-sized companies
by reference to those companies represented in the Standard & Poor's ("S&P")
MidCap 400 Index, an unmanaged capitalization-weighted measure of 400 stocks in
the mid-range sector of the market (which consists of companies in the
capitalization range of approximately $148 million to $16.6 billion as of
August 31, 2000). The Fund may also invest in common stocks and other equity
securities of small-and large-sized companies.

The Fund's primary approach is to seek to identify those companies that offer
sound fundamental values and opportunities for capital growth. In selecting
securities for investment, the Fund's investment adviser uses a four-step
investment process which combines quantitative screening techniques, fundamental
and valuation analysis with strict sell discipline. The first step of the
process is to screen potential candidates for investment based upon earnings
predictions. From this, companies with rising estimated earnings revisions are
selected and subjected to rigorous fundamental analysis. The investment adviser
uses valuation analysis to eliminate what it believes to be the most overvalued
securities. The most attractive opportunities as determined by the Fund's
investment adviser are selected for investment. After investment, the Fund's
investment adviser follows a strict sell discipline, requiring the sale of Fund
investments, if (i) their earnings fall to unacceptable levels, (ii) research
uncovers unfavorable trends or (iii) valuations exceed levels determined to be
reasonable given the growth prospects. Because of the fully managed approach of
the Fund, the Fund's turnover rate may be greater than other portfolios'
turnover rates and result in increased transaction costs, including higher
brokerage charges, which may adversely impact the Fund's performance.

5
<PAGE>
The Fund invests primarily in common stocks. Common stocks are shares of a
corporation or other entity that entitle the holder to a pro rata share of the
profits of the corporation, if any, without preference over any other class of
securities, including such entity's debt securities, preferred stock and other
senior equity securities. Common stock usually carries with it the right to vote
and frequently an exclusive right to do so.

While the Fund invests primarily in common stocks, the Fund may invest in other
equity securities, including preferred stocks, convertible securities and rights
and warrants to purchase common stock. Preferred stock generally has a
preference as to dividends and liquidation over an issuer's common stock but
ranks junior to debt securities in an issuer's capital structure. Unlike
interest payments on debt securities, preferred stock dividends are payable only
if declared by the issuer's board of directors. Preferred stock also may be
subject to optional or mandatory redemption provisions.

The Fund may invest in foreign equity securities. Foreign securities may involve
greater risks than those issued by U.S. companies. Economic, political, and
other events unique to a country or regions will affect those markets and their
issuers, but may not affect the U.S. market or similar U.S. issuers. Some of the
Fund's investments may be denominated in a foreign currency. Changes in the
value of those currencies compared to the U.S. dollar may affect the value of
the Fund's investments.

DERIVATIVE INSTRUMENTS

6
<PAGE>
the Fund. Collectively, all of the above are referred to as "Strategic
Transactions." The Fund generally seeks to use Strategic Transactions as a
portfolio management or hedging technique to seek to protect against possible
adverse changes in the market value of securities held in or to be purchased for
the Fund's portfolio, protect the Fund's unrealized gains, facilitate the sale
of certain securities for investment purposes, protect against changes in
currency exchange rates or to adjust the exposure to a particular currency,
manage the effective maturity or duration of the Fund's portfolio, establish
positions in the derivatives markets as a substitute for purchasing or selling
particular securities, including, for example, when the Fund adjusts its
exposure to a market in response to changes in investment strategy, when doing
so provides more liquidity than the direct purchase of the securities underlying
such derivatives, when the Fund is restricted from directly owning the
underlying securities due to foreign investment restrictions or other reasons,
or when doing so provides a price advantage over purchasing the underlying
securities directly, either because of a pricing differential between the
derivatives and securities markets or because of lower transaction costs
associated with the derivatives transaction. The Fund may invest up to 33 1/3%
of its total assets in Strategic Transactions for non-hedging purposes (measured
by the aggregate notional amount of outstanding derivatives). The Fund may
invest up to 50% of its total assets in futures contracts and options contracts
(measured by the aggregate notional amount of such outstanding contracts).

OTHER INVESTMENTS AND RISK FACTORS

The Fund may lend its portfolio securities to broker-dealers, banks or other
institutional borrowers of securities. The Fund may incur lending fees and other
costs in connection with securities lending, and securities lending is subject
to the risk of default by the other party.

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

7
<PAGE>

year to year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs), which would
adversely impact a fund's performance. Higher portfolio turnover may result in
the realization of more short-term capital gains than if a fund had lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities including prime
commercial paper, repurchase agreements and bank obligations, such as bankers'
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for long-term growth on
these securities will tend to be lower than the potential for long-term growth
on other securities that may be owned by the Fund. In taking such a defensive
position, the Fund would temporarily not be pursuing and may not achieve its
investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

<TABLE>
% PER
AVERAGE DAILY NET ASSETS ANNUM
-------------------------------------
<S> <C>
First $500 million 0.75%
....................................
Next $500 million 0.70%
....................................
Over $1 billion 0.65%
....................................
</TABLE>

Applying this fee schedule, the effective advisory fee rate was 0.75% of the
Fund's average daily net assets for the Fund's fiscal year ended June 30, 2000.
The Fund's average daily net assets are determined by taking the average of all
of the determinations of the net assets during a given calendar month. Such fee
is payable for each calendar month as soon as practicable after the end of that
month.

8
<PAGE>
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

Miller Anderson & Sherrerd, LLP ("MAS") is the Fund's investment adviser (the
"Subadviser"). The Subadviser is a Pennsylvania limited liability partnership
founded in 1969. The Subadviser is a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co. The Subadviser provides investment advisory services to
employee benefit plans, endowment funds, foundations and other institutional
investors. At September 30, 2000, the Subadviser, together with its affiliated
institutional asset management companies, managed assets of approximately $178
billion, including assets under fiduciary advice. The Subadviser's principal
office is located at One Tower Bridge, West Conshohocken, Pennsylvania 19428.

PORTFOLIO MANAGEMENT. Arden C. Armstrong, David P. Chu and Steven B. Chulik are
responsible as co-managers for the day-to-day management of the Fund's
investment portfolio.

Ms. Armstrong, a Managing Director, joined the Subadviser in 1986. She assumed
responsibility for the MAS-advised institutional mid cap growth fund in 1990,
the MAS-advised institutional equity fund in 1994 and the MAS-advised
institutional small cap growth fund in 1998. Ms. Armstrong holds a B.A. (Magna
Cum Laude) in Economics from Brown University and an M.B.A. from The Wharton
School of the University of Pennsylvania. She holds the Chartered Financial
Analyst designation. Ms. Armstrong has been affiliated with the Fund since its
inception.

Mr. Chu, a Vice President, joined the Subadviser in 1998. He has been comanager
of the MAS-advised institutional mid cap growth fund since 1998 and the
MAS-advised institutional small cap growth fund since 1998. He served as a
Senior Equity Analyst from 1992 to 1997 and as fund comanager in 1997 for
NationsBank and its subsidiary, TradeStreet Investment Associates. Mr. Chu
earned a B.S. from University of Michigan and an M.B.A. from The Wharton School
of the University of Pennsylvania. Mr. Chu has been affiliated with the Fund
since its inception.

Mr. Chulik joined the Subadviser in 1997. He has been comanager of the
MAS-advised institutional mid cap growth fund since 1999 and the MAS-advised
institutional small cap growth fund since 1999. He was a quantitative hedge fund
analyst from 1994 to 1995 for IBJ Schroder Bank and Trust. Prior to that time,
he was an engineer from 1989-1995 for Lockheed Martin, Astro Space Division. Mr.
Chulik earned a B.S. from Columbia University and an M.B.A. from The Wharton
School of the University of Pennsylvania. Mr. Chulick has been affiliated with
the Fund since its inception.

PURCHASE OF SHARES

9
<PAGE>

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which the class's distribution fee and/ or the service fee is paid,
(iii) each class of shares has different exchange privileges, (iv) certain
classes of shares are subject to a conversion feature and (v) certain classes of
shares have different shareholder service options available.

10
<PAGE>

CLASS A SHARES
SALES CHARGE SCHEDULE

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

11
<PAGE>

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
<S> <C>
----------------------------------------------------------------------
First 5.00%
.....................................................................
Second 4.00%
.....................................................................
Third 3.00%
.....................................................................
Fourth 2.50%
.....................................................................
Fifth 1.50%
.....................................................................
Sixth and After None
.....................................................................
</TABLE>

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

12
<PAGE>
CONVERSION FEATURE

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

QUANTITY DISCOUNTS

13
<PAGE>

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co.

14
<PAGE>
and any of its subsidiaries and such persons' families and their beneficial
accounts.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

15
<PAGE>
purpose of realizing economies of scale in distributing such shares. A
qualified group does not include one whose sole organizational nexus, for
example, is that its participants are credit card holders of the same
institution, policy holders of an insurance company, customers of a bank or
broker-dealer, clients of an investment adviser or other similar groups.
Shares purchased in each group's participants account in connection with
this privilege will be subject to a contingent deferred sales charge of
1.00% in the event of redemption within one year of purchase, and a
commission will be paid to authorized dealers who initiate and are
responsible for such sales to each individual as follows: 1.00% on sales to
$2 million, plus 0.80% on the next $1 million and 0.50% on the excess over
$3 million.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

REDEMPTION OF
SHARES

16
<PAGE>

17
<PAGE>

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income at least
annually as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.

SHAREHOLDER SERVICES

18
<PAGE>

19
<PAGE>

FEDERAL INCOME
TAXATION

The Fund is required, in certain circumstances, to withhold 31% of dividends and
certain other payments, including redemptions, paid to shareholders

20
<PAGE>
who do not furnish to the Fund their correct taxpayer identification number (in
the case of individuals, their social security number) and certain required
certifications or who are otherwise subject to backup withholding.

21
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the period indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, independent auditors,
whose report, along with the Fund's financial statements, is included in the
Statement of Additional Information and may be obtained by shareholders without
charge by calling the telephone number on the back cover of this prospectus.
This information should be read in conjunction with the financial statements and
notes thereto included in the Statement of Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
OCTOBER 25, 1999* TO OCTOBER 25, 1999* TO OCTOBER 25, 1999* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 2000# JUNE 30, 2000# JUNE 30, 2000#
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $ 10.00 $ 10.00 $ 10.00
------- ------- -------
Income From Investment Operations
Net Investment Loss.......................................... (0.09) (0.16) (0.16)
Net Realized and Unrealized Gain............................. 3.46 3.47 3.49
------- ------- -------
Total From Investment Operations............................... 3.37 3.31 3.33
------- ------- -------
Net Asset Value, End of Period................................. $ 13.37 $ 13.31 $ 13.33
======= ======= =======
Total Return (1)............................................... 33.70%** 33.10%** 33.30%**
======= ======= =======
Ratios and Supplemental Data
Net Assets, End of Period (000's).............................. $38,401 $40,499 $20,046
Ratio of Expenses to Average Net Assets........................ 1.63% 2.38% 2.38%
Ratio of Net Investment Loss to Average Net Assets............. (1.04%) (1.83%) (1.81%)
Portfolio Turnover Rate........................................ 103%** 103%** 103%**
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED
SALES CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

22
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS
BOARD OF DIRECTORS

J. Miles Branagan Richard F. Powers, III*
Jerry D. Choate Phillip B. Rooney
Linda Hutton Heagy Fernando Sisto
R. Craig Kennedy Wayne W. Whalen*
Mitchell M. Merin* Suzanne H. Woolsey
Jack E. Nelson

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday
DEALERS
For dealer information, selling agreements, wire orders, or
redemptions, call the Distributor at (800) 421-5666
TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call (800) 421-2833
FUNDINFO-REGISTERED TRADEMARK-
For automated telephone services, call (800) 847-2424
WEB SITE
www.vankampen.com

VAN KAMPEN MID CAP GROWTH FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MILLER ANDERSON & SHERRERD, LLP
One Tower Bridge
West Conshohocken, PA 19428

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Mid Cap Growth Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen Mid Cap Growth Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>

VAN KAMPEN
MID CAP GROWTH FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of Additional Information, which contains more details about the
Fund, is incorporated by reference in its entirety into this prospectus.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

MCG PRO 10/00
#65172

<PAGE>

VAN KAMPEN
TAX MANAGED
GLOBAL FRANCHISE FUND

Van Kampen Tax Managed Global Franchise Fund's investment objective is to seek
long-term capital appreciation. Under normal market conditions, the Fund's
investment adviser seeks to achieve the Fund's investment objective by investing
primarily in a portfolio of publicly traded equity securities of issuers located
in the U.S. and other countries that, in the judgment of the Fund's investment
adviser, have resilient business franchises and growth potential, while
attempting to minimize the impact of federal income taxes on shareholder
returns.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Risk/Return Summary .....................................................3
Fees and Expenses of the Fund ...........................................5
Investment Objective, Policies and Risks ................................6
Investment Advisory Services ...........................................12
Purchase of Shares .....................................................13
Redemption of Shares ...................................................20
Distributions from the Fund ............................................22
Shareholder Services ...................................................22
Federal Income Taxation ................................................24
Financial Highlights ...................................................26

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek long-term capital appreciation.

INVESTMENT STRATEGIES

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing primarily in a portfolio of
publicly traded equity securities of issuers located in the U.S. and other
countries that, in the judgment of the Fund's investment adviser, have resilient
business franchises and growth potential, while attempting to minimize the
impact of federal income taxes on shareholder returns. Equity securities include
common and preferred stocks, convertible securities, rights and warrants to
purchase common stock and depositary receipts.

The Fund's investment adviser seeks to minimize the impact of federal income
taxes on shareholder returns by employing certain tax sensitive investment
strategies such as:

- Maintaining a long-term investment focus in an attempt to minimize portfolio
turnover, and, thus, reduce capital gains distributions made by the Fund.

- Selling securities to realize losses for purposes of offsetting capital gains
the Fund has realized or expects to realize.

- When selling a security, selling, in most cases, the shares with the higher
cost basis first.

The Fund's investment adviser uses a "bottom-up" investment approach that
emphasizes security selection on an individual company basis. The Fund invests
in securities of issuers that the Fund's investment adviser believes have
resilient business franchises, strong cash flows, modest capital requirements,
capable managements and growth potential. Securities are selected on a global
basis with a strong bias towards value. Sell decisions are directly connected to
buy decisions.

Under normal market conditions, the Fund invests at least 65% of its total
assets in securities of issuers from at least three countries (including the
U.S.). The Fund may invest in issuers from developing or emerging market
countries. The Fund may purchase and sell certain derivative instruments, such
as options, futures, options on futures and currency-related transactions
involving options, futures, forward contracts and swaps, for various portfolio
management purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

Foreign markets may, but often do not, move in tandem with U.S. markets, and
foreign markets, especially developing or emerging market countries, may be more
volatile than U.S. markets.

TAX MANAGED INVESTING. Managing for after-tax returns may negatively impact the
Fund's performance. Since the Fund balances investment and tax considerations
when deciding whether to buy or sell securities, its pre-tax return may be lower
than that of a similar fund that is not tax managed. The Fund may therefore not
be a suitable investment for individual retirement accounts ("IRAs"), other tax-
exempt or tax-deferred accounts or for investors who are not sensitive to the
federal income tax consequences of their investments. Although the Fund strives
to avoid realizing taxable capital gains, it utilizes an active management style
and may realize capital gains on the sale of securities. For instance, portfolio
securities may be sold when the Fund's investment adviser believes that the tax
impact of the sale is outweighed by other factors such as the risks of holding
the security or the availability of other investments that have better potential
returns. There can be no assurance that your after-tax returns from the Fund
will be better than those you would earn from an investment in a capital
appreciation fund that is not tax managed. Changes in tax laws may

3
<PAGE>

limit the effectiveness of the Fund's tax sensitive strategies.

FOREIGN RISKS. Because the Fund owns securities of foreign issuers, it is
subject to risks not usually associated with owning securities of U.S. issuers.
These risks include fluctuations in foreign currencies, foreign currency
exchange controls, political and economic instability, differences in financial
reporting, differences in securities regulation and trading and foreign taxation
issues. The risks of investing in developing or emerging market countries are
greater than the risks generally associated with foreign investments, including
investment and trading limitations, greater credit and liquidity concerns,
greater political uncertainties, an economy's dependence on international
development assistance, greater foreign currency exchange risk and currency
transfer restrictions, and greater delays and disruptions in settlement
transactions. To the extent the Fund focuses more of its assets in a single
country or region, its portfolio would be more susceptible to factors adversely
affecting issuers in that country or region.

INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- Seek capital appreciation over the long term

- Seek lower taxable distributions than a traditional equity capital
appreciation fund (the Fund may not be an appropriate investment for IRAs,
other tax-exempt or tax-deferred accounts or for investors who are not
sensitive to the federal income tax consequences of their investments)

- Do not seek current income from their investment

- Are willing to take on the increased risks associated with investing in
foreign securities

- Can withstand volatility in the value of their Fund shares

- Wish to add to their investment portfolio a fund that invests primarily in
publicly traded equity securities of U.S. and other issuers while attempting
to minimize the impact of federal income taxes on shareholder returns
(including investors who have already contributed the maximum permitted
amounts to IRAs or other tax-deferred accounts, investors saving for
childrens' educational expenses or investors seeking more liquidity than that
offered by variable annuities)

ANNUAL PERFORMANCE

4
<PAGE>
that the past performance of the Fund is not indicative of its future
performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ANNUAL RETURN
<S> <C>
1999* 20.49%
</TABLE>

* THE ANNUAL RETURN SHOWN ABOVE REFLECTS PERFORMANCE OF THE FUND PRIOR TO
IMPLIMENTING THE FUND'S TAX SENSITIVE STRATEGIES WHICH WERE ADDED TO THE
FUND'S OVERALL INVESTMENT STRATEGY EFFECTIVE APRIL 3, 2000.

The Fund's return for the nine-month period ended September 30, 2000 was 11.94%.
As a result of recent market activity, current performance may vary from the
figures shown.

During the one-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 9.21% (for the quarter ended 6/30/99) and the lowest
quarterly return for Class A Shares was .92% (for the quarter ended 9/30/99).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the Morgan Stanley Capital
International (MSCI) World Index*, a broad-based market index that the Fund's
investment adviser believes is an appropriate benchmark for the Fund. The Fund's
performance figures listed below include the maximum sales charges paid by
investors. The index's performance figures do not include any commissions or
sales charges that would be paid by investors purchasing the securities
represented by the index. An investment cannot be made directly in the index.
Average annual total returns are shown for the periods ended December 31, 1999
(the most recently completed calendar year prior to the date of this
prospectus). Remember that the past performance of the Fund is not indicative of
its future performance.

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS**
FOR THE
PERIODS ENDED PAST SINCE
DECEMBER 31, 1999 1 YEAR INCEPTION
------------------------------------------------------
<S> <C> <C>
Van Kampen Tax Managed
Global Franchise Fund
-- Class A Shares 13.55% 18.52%(1)
MSCI World Index 24.93% 39.28%(2)
.....................................................
Van Kampen Tax Managed
Global Franchise Fund
-- Class B Shares 14.69% 20.28%(1)
MSCI World Index 24.93% 39.28%(2)
.....................................................
Van Kampen Tax Managed
Global Franchise Fund
-- Class C Shares 18.52% 23.94%(1)
MSCI World Index 24.93% 39.28%(2)
.....................................................
</TABLE>

<TABLE>
<S> <C>
INCEPTION DATE: (1) 9/25/98, (2) 9/30/98
* THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD INDEX IS AN
UNMANAGED INDEX WHICH INCLUDES SECURITIES LISTED ON THE STOCK
EXCHANGES OF THE UNITED STATES, EUROPE, CANADA, AUSTRALIA, NEW
ZEALAND, AND THE FAR EAST AND ASSUMES DIVIDENDS ARE REINVESTED NET OF
WITHHOLDING TAX.
** THE ANNUAL RETURNS SHOWN ABOVE REFLECTS PERFORMANCE OF THE FUND PRIOR
TO IMPLIMENTING THE FUND'S TAX SENSITIVE STRATEGIES WHICH WERE ADDED
TO THE FUND'S OVERALL INVESTMENT STRATEGY EFFECTIVE APRIL 3, 2000.
</TABLE>

FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
---------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 5.75%(1) None None
..............................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption
proceeds) None(2) 5.00%(3) 1.00%(4)
..............................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
..............................................................
Redemption fee None None None
..............................................................
Exchange fee None None None
..............................................................
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
----------------------------------------------------------------
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
----------------------------------------------------------------
Management fees(5) 1.00% 1.00% 1.00%
...............................................................
Distribution and/or
service (12b-1)
fees(6) 0.25% 1.00%(7) 1.00%(7)
...............................................................
Other expenses(5) 5.92% 6.17% 5.15%
...............................................................
Total annual fund
operating expenses(5) 7.17% 8.17% 7.15%
...............................................................
</TABLE>

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."
(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR AFTER
PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF SHARES -- CLASS C
SHARES."
(5) THE FUND'S INVESTMENT ADVISER IS CURRENTLY WAIVING OR REIMBURSING A
PORTION OF THE FUND'S MANAGEMENT FEES AND OTHER EXPENSES SUCH THAT THE
ACTUAL TOTAL ANNUAL FUND OPERATING EXPENSES WERE 1.80% FOR CLASS A
SHARES, 2.55% FOR CLASS B SHARES AND 2.55% FOR CLASS C SHARES FOR THE
FISCAL YEAR ENDED JUNE 30, 2000. THE FEE WAIVERS OR EXPENSE REIMBURSE-
MENTS CAN BE TERMINATED AT ANY TIME.
(6) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO 0.25% OF
THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES.
CLASS B SHARES AND CLASS C SHARES ARE EACH SUBJECT TO A COMBINED
ANNUAL DISTRIBUTION AND SERVICE FEE OF UP TO 1.00% OF THE AVERAGE
DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES. SEE "PURCHASE
OF SHARES."
(7) BECAUSE DISTRIBUTION AND/OR SERVICE (12b-1) FEES ARE PAID OUT OF THE
FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES WILL INCREASE
THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE THAN PAYING OTHER
TYPES OF SALES CHARGES.

EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same each year (except for the ten-year
amounts for Class B Shares, which reflect the conversion of Class B Shares to
Class A Shares after eight years). Although your actual costs may be higher or
lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $1,243 $2,537 $3,775 $6,643
...............................................................
Class B Shares $1,304 $2,636 $3,923 $6,847*
...............................................................
Class C Shares $ 807 $2,077 $3,388 $6,427
...............................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $1,243 $2,537 $3,775 $6,643
...............................................................
Class B Shares $ 804 $2,336 $3,773 $6,847*
...............................................................
Class C Shares $ 707 $2,077 $3,388 $6,427
...............................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

INVESTMENT OBJECTIVE,
POLICIES AND RISKS

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing primarily in a portfolio of
publicly traded equity securities of issuers located in the U.S. and other
countries that, in the judgment of the Fund's investment adviser, have resilient
business franchises and growth potential, while attempting to minimize the
impact of federal income taxes on shareholder returns. The franchise focus of
the Fund is based on the investment adviser's belief that the intangible assets
underlying a strong business

6
<PAGE>

franchise (such as patents, copyrights, brand names, licenses or distribution
methods) of issuers are difficult to create or to replicate (unlike many
physical assets) and that carefully selected franchise companies can yield above
average potential for long-term capital appreciation. The Fund seeks to invest
in companies identified by the Fund's investment adviser with resilient business
franchises, strong cash flows, modest capital requirements, capable managements
and growth potential selected on a global basis with a strong bias towards
value. The Fund's investment adviser uses a "bottom up" strategy emphasizing
individual security selection. The Fund's investment adviser relies on its
research capabilities, analytical resources and judgement to identify and
monitor franchise businesses meeting its investment criteria.

In managing the Fund, the Fund's investment adviser seeks to employ investment
strategies that attempt to achieve high after-tax returns by balancing
investment and tax considerations when deciding whether to buy or sell
securities. The Fund is designed to minimize income distributions and the
distributions of capital gains. The Fund may use, but is not limited to, the
following tax management techniques and strategies:

- Maintaining a long-term investment focus in an attempt to minimize portfolio
turnover, and, thus, reduce capital gains distributions made by the Fund.

- Selling securities to realize losses for purposes of offsetting capital gains
the Fund has realized or expects to realize.

- When selling a security, selling, in most cases, the shares with the higher
cost basis first.

The Fund's tax managed strategy can generally be expected to lead to lower
distributions of income and realized capital gains than funds managed without
regard to tax considerations. The Fund is actively managed, however, and there
can be no assurance that taxable distributions can always be avoided. The Fund
added these tax sensitive strategies as part of its overall investment strategy
effective April 3, 2000.

The Fund's investment adviser believes that the number of issuers with strong
business franchises meeting its criteria may be limited, and accordingly, the
Fund's portfolio may consist of less holdings than a fund without such a
specifically defined investment program. While the Fund invests in a number of
different issuers and industries, the Fund may invest in a smaller number of
companies within the limits permissible for a diversified fund and may invest up
to (but not including) 25% of its assets in a single industry. By investing more
of its assets in fewer issuers or industries, the Fund is subject to greater
risks and price volatility impacting individual issuers or industries than a
Fund which does not employ such a practice.

Under normal market conditions, the Fund invests at least 65% of the Fund's
total assets in securities of issuers located in at least three different
countries (including the U.S.). Such equity securities may be denominated in
currencies other than the U.S. dollar. The Fund is not subject to any other
limitations on the portion of its assets which may be invested in any single
country or region. To the extent the Fund does invest more of its assets in a
single country or region, the Fund will be subject to greater risks impacting
such country or region than a fund which maintains broad country diversity. The
Fund may invest in securities of issuers located in developing or emerging
market countries; such securities pose greater risks than securities of issuers
located in developed countries and traded in more established markets. See
"Risks of Investing in Securities of Foreign Issuers" below.

While the Fund invests primarily in common stocks, the Fund also may invest in
preferred stocks, convertible securities, rights or warrants to purchase stocks,
and depositary receipts. Preferred stock generally has a preference as to
dividends and liquidation over an issuer's common stock but ranks junior to debt
securities in an issuer's capital structure.

7
<PAGE>

Unlike interest payments on debt securities, preferred stock dividends are
payable only if declared by the issuer's board of directors. Preferred stock
also may be subject to optional or mandatory redemption provisions. The ability
of common stocks and preferred stocks to generate income is dependent on the
earnings and continuing declaration of dividends by the issuers of such
securities.

A convertible security is a bond, debenture, note, preferred stock, or other
security that may be converted into or exchanged for a prescribed amount of
common stock or other equity security of the same or a different issuer or into
cash within a particular period of time at a specified price or formula. A
convertible security generally entitles the holder to receive interest paid or
accrued on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities generally have characteristics similar to both debt and
equity securities. The value of convertible securities tends to decline as
interest rates rise and, because of the conversion feature, tends to vary with
fluctuations in the market value of the underlying equity securities.
Convertible securities generally rank senior to common stock in a corporation's
capital structure but are usually subordinated to comparable nonconvertible
securities. Convertible securities generally do not participate directly in any
dividend increases or decreases of the underlying equity securities although the
market prices of the convertible securities may be affected by any dividend
changes or other changes in the underlying equity securities.

The Fund may invest in issuers in any capitalization range. The securities of
smaller companies may be subject to more abrupt or erratic market movements than
securities of larger companies or the market averages in general. In addition,
smaller companies typically are subject to a greater degree of change in
earnings and business prospects than are larger companies. Thus, to the extent
the Fund invests in smaller companies, the Fund may be subject to greater
investment risk than that assumed through investment in the equity securities of
larger companies.

RISKS OF INVESTING IN SECURITIES
OF FOREIGN ISSUERS

The Fund invests in securities of foreign issuers. Securities of foreign issuers
may be denominated in U.S. dollars or in currencies other than U.S. dollars.
Investments in foreign securities present certain risks not ordinarily
associated with investments in securities of U.S. issuers. These risks include
fluctuations in foreign currency exchange rates, political, economic or legal
developments (including war or other instability, expropriation of assets,
nationalization and confiscatory taxation), the imposition of foreign exchange
limitations (including currency blockage), withholding taxes on income or
capital transactions or other restrictions, higher transaction costs (including
higher brokerage, custodial and settlement costs and currency conversion costs)
and possible difficulty in enforcing contractual obligations or taking judicial
action. Foreign securities may not be as liquid and may be more volatile than
comparable domestic securities.

8
<PAGE>

expropriation or confiscatory taxation, or diplomatic developments which could
affect investment in those countries. Because there is usually less supervision
and governmental regulation of foreign exchanges, brokers and dealers than there
is in the United States, the Fund may experience settlement difficulties or
delays not usually encountered in the United States.

Investors should consider carefully the risks of foreign investments before
investing in the Fund.

9
<PAGE>
DERIVATIVE INSTRUMENTS
The Fund may, but is not required to, use various investment strategic
transactions described below to earn income, facilitate portfolio management and
mitigate risks. Although the Fund's investment adviser seeks to use the
practices to further the Fund's investment objective, no assurance can be given
that these practices will achieve this result.

Certain derivative instrument transactions may result in the Fund realizing
taxable income or capital gains.

10
<PAGE>
A more complete discussion of Strategic Transactions and their risks is
contained in the Fund's Statement of Additional Information. The Statement of
Additional Information can be obtained by investors free of charge as described
on the back cover of this prospectus.

OTHER INVESTMENTS AND RISK FACTORS

The Fund may from time to time sell securities short. A short sale is a
transaction in which the Fund sells a security in anticipation that the market
price of such security will decline. The Fund may sell securities it owns or has
the right to acquire at no added cost (i.e., "against the box") or it does not
own. When the Fund makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale in
order to satsify its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.
The Fund's obligation to replace the borrowed security will be secured by
collateral of cash or liquid securities. Depending on arrangements made with the
broker-dealer from which it borrowed the security, the Fund may not receive any
payments (including interest) on its collateral. If the price of the security
sold short increases between the time of the short sale and the time the Fund
replaces the borrowed security, the Fund will incur a capital loss; conversely,
if the price declines, the Fund will realize a capital gain. Any gain will be
decreased, and any loss increased, by the transaction costs described above.
Although the Fund's gain is limited to the price at which it sold the security
short, its potential loss is theoretically unlimited.
The Fund may invest up to 15% of the Fund's net assets in illiquid securities
and certain restricted securities. Such securities may be difficult or
impossible to sell at the time and the price that the Fund would like. Thus, the
Fund may have to sell such securities at a lower price, sell other securities
instead to obtain cash or forego other investment opportunities.

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

The Fund balances investment and tax considerations when deciding whether to buy
and sell securities. A strategy of the Fund is to minimize capital gain
producing portfolio turnover. Notwithstanding the foregoing, the Fund may sell
securities and recognize gains when the investment adviser deems it advisable in
order to take advantage of new investment opportunities, or when the Fund's
investment adviser believes the potential for capital appreciation has lessened,
or for other reasons. The portfolio turnover rate may vary from year to year. A
high portfolio turnover rate (100% or more) increases a fund's transaction costs
(including brokerage commissions or dealer costs) which would adversely impact a
fund's performance. Higher portfolio turnover may result in the realization of
more short-term capital gains than if a fund had lower portfolio turnover.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities, including prime
commercial paper, repurchase agreements and bank obligations, such as bankers'
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for capital appreciation
on these securities will tend to be lower than the potential for capital
appreciation on other securities that may be owned by the Fund. In taking such a
defensive position, the Fund would temporarily not be pursuing and may not
achieve its investment objective.

11
<PAGE>
INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

Morgan Stanley Dean Witter Investment Management Inc. is the Fund's investment
subadviser (the "Subadviser"). The Subadviser is a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. The Subadviser conducts a worldwide portfolio
management business and provides a broad range of portfolio management services
to customers in the United States and abroad. At September 30, 2000, the
Subadviser together with its affiliated institutional asset management companies
(collectively, the "MSDW Investment Management Group") managed assets of
approximately $178 billion, including assets under fiduciary advice. The
Subadviser's principal office is located at 1221 Avenue of the Americas, New
York, New York 10020. On December 1, 1998, Morgan Stanley Asset Management Inc.
changed its name to Morgan Stanley Dean Witter Investment Management Inc. but
continues to do

12
<PAGE>
business in certain instances using the name Morgan Stanley Asset Management.

PORTFOLIO MANAGEMENT. Andrew Brown has had primary responsibility for the
day-to-day management of the Fund's investment portfolio since its inception.
Mr. Brown, a Managing Director, joined the MSDW Investment Management Group in
May 1994 as a consultant global analyst specializing in non-cyclical stocks and
became a Managing Director in 1998. Mr. Brown spent the first nine years of his
business career as a journalist at Fortune Magazine, and worked from 1986
through 1991 as an equity research analyst for Morgan Stanley International,
specializing in UK and Continental European consumer stocks. Mr. Brown then
became a Research Director at J.O. Hambro & Partners from 1991 through 1992, and
a Director with Frew Macmaster Ltd, a consulting firm, from 1992 through 1994.
Mr. Brown graduated from Harvard University in 1977 with an A.B. magna cum laude
in English.

PURCHASE OF SHARES

Initial investments generally must be at least $1,000 per investor account and
subsequent investments must be at least $25 per investor account. Minimum
investment amounts may be waived by the Distributor for plans involving periodic
investments and for certain retirement accounts.

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which the class's distribution fee and / or the service fee is paid,
(iii) each class of shares has different exchange privileges, (iv) certain
classes of shares are subject to a conversion feature and (v) certain classes of
shares have different shareholder service options available.

13
<PAGE>

The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Directors reserves the right to calculate the net
asset value per share and adjust the offering price more frequently than once
daily if deemed desirable. Net asset value per share for each class is
determined by dividing the value of the Fund's portfolio securities, cash and
other assets (including accrued interest) attributable to such class, less all
liabilities (including accrued expenses) attributable to such class, by the
total number of shares of the class outstanding. Such computation is made by
using prices as of the close of trading on the Exchange and (i) valuing
securities listed or traded on a national securities exchange at the closing
price, or if no closing price is available, at the last reported sale price, and
if there has been no sale that day, at the mean between the last reported bid
and asked prices, (ii) valuing over-the-counter securities at the last reported
sale price from the National Association of Securities Dealers Automated
Quotations ("NASDAQ") and, if there has been no sale on that day, at the mean
between the last reported bid and asked prices, (iii) valuing unlisted
securities at the average of the mean between the current reported bid and asked
prices obtained from reputable brokers, and (iv) valuing securities for which
market quotations are not readily available and any other assets at fair value
as determined in good faith by the Adviser in accordance with procedures
established by the Fund's Board of Directors. Securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.

The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution and service fees and other expenses of the Fund associated with
that class of shares. To assist investors in comparing classes of shares, the
tables under the Prospectus heading "Fees and Expenses of the Fund"

14
<PAGE>

provide a summary of sales charges and expenses and an example of the sales
charges and expenses of the Fund applicable to each class of shares.

CLASS A SHARES
SALES CHARGE SCHEDULE

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

15
<PAGE>

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
-------------------------------------------------------
<S> <C>
First 5.00%
......................................................
Second 4.00%
......................................................
Third 3.00%
......................................................
Fourth 2.50%
......................................................
Fifth 1.50%
......................................................
Sixth and After None
......................................................
</TABLE>

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

16
<PAGE>

spend up to 0.25% per year of the Fund's average daily net assets with respect
to Class C Shares of the Fund.

CONVERSION FEATURE

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

QUANTITY DISCOUNTS
Investors purchasing Class A Shares may, under certain circumstances described
below, be entitled to pay reduced or no sales charges. Investors, or their
authorized dealers, must notify the Fund at the time of the purchase order
whenever a quantity discount is applicable to purchases. Upon such notification,
an investor will pay the lowest applicable sales charge. Quantity discounts may
be modified or terminated at any time. For more information about quantity
discounts, investors should contact their authorized dealer or the Distributor.

CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the Class A Shares
sales charge table

17
<PAGE>
may also be determined by combining the amount being invested in shares of the
Participating Funds plus the current offering price of all shares of the
Participating Funds currently owned.

LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales charge by aggregating investments over a 13-month period
to determine the sales charge as outlined in the Class A Shares sales charge
table. The size of investment shown in the Class A Shares sales charge table
includes purchases of shares of the Participating Funds over a 13-month period
based on the total amount of intended purchases plus the value of all shares of
the Participating Funds previously purchased and still owned. An investor may
elect to compute the 13-month period starting up to 90 days before the date of
execution of a Letter of Intent. Each investment made during the period receives
the reduced sales charge applicable to the total amount of the investment goal.
The initial purchase must be for an amount equal to at least 5% of the minimum
total purchase amount of the level selected. If trades not initially made under
a Letter of Intent subsequently qualify for a lower sales charge through the
90-day backdating provisions, an adjustment will be made at the expiration of
the Letter of Intent to give effect to the lower sales charge. Such adjustment
in sales charge will be used to purchase additional shares. The Fund initially
will escrow shares totaling 5% of the dollar amount of the Letter of Intent to
be held by Investor Services in the name of the shareholder. In the event the
Letter of Intent goal is not achieved within the specified period, the investor
must pay the difference between the sales charge applicable to the purchases
made and the reduced sales charge previously paid. Such payments may be made
directly to the Distributor or, if not paid, the Distributor will liquidate
sufficient escrowed shares to obtain the difference.

NET ASSET VALUE PURCHASE OPTIONS. Class A Shares of the Fund may be purchased at
net asset value, generally upon written assurance that the purchase is

18
<PAGE>

made for investment purposes and that the shares will not be resold except
through redemption by the Fund, by:

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.

(6) Beneficial owners of shares of Participating Funds held by a retirement
plan or held in a tax-advantaged retirement account who purchase shares of
the Fund with proceeds from distributions from such a plan or retirement
account other than distributions taken to correct an excess contribution.
(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

19
<PAGE>
Participating Funds, (iv) has a membership that the authorized dealer can
certify as to the group's members and (v) satisfies other uniform criteria
established by the Distributor for the purpose of realizing economies of
scale in distributing such shares. A qualified group does not include one
whose sole organizational nexus, for example, is that its participants are
credit card holders of the same institution, policy holders of an insurance
company, customers of a bank or broker-dealer, clients of an investment
adviser or other similar groups. Shares purchased in each group's
participants account in connection with this privilege will be subject to a
contingent deferred sales charge of 1.00% in the event of redemption within
one year of purchase, and a commission will be paid to authorized dealers
who initiate and are responsible for such sales to each individual as
follows: 1.00% on sales to $2 million, plus 0.80% on the next $1 million
and 0.50% on the excess over $3 million.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

REDEMPTION OF
SHARES

20
<PAGE>

indicate the number of shares or dollar amount to be redeemed, the Fund name and
the class designation of such shares and the shareholder's account number. The
redemption request must be signed by all persons in whose names the shares are
registered. Signatures must conform exactly to the account registration. If the
proceeds of the redemption exceed $100,000, or if the proceeds are not to be
paid to the record owner at the record address, or if the record address has
changed within the previous 15 days, signature(s) must be guaranteed by one of
the following: a bank or trust company; a broker-dealer; a credit union; a
national securities exchange, registered securities association or clearing
agency; a savings and loan association; or a federal savings bank.

21
<PAGE>

multiple owners, Investor Services may rely on the instructions of any one
owner.

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income at least
annually as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.

SHAREHOLDER SERVICES

22
<PAGE>

internet instructions and providing written confirmation of instructions
communicated through the internet. If reasonable procedures are employed, none
of Van Kampen Investments, Investor Services or the Fund will be liable for
following instructions received through the internet which it reasonably
believes to be genuine. If an account has multiple owners, Investor Services may
rely on the instructions of any one owner.

REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gain dividends in shares of the
Fund. Such shares are acquired at net asset value per share (without sales
charge) on the applicable payable date of the dividend or capital gain dividend.
Unless the shareholder instructs otherwise, the reinvestment plan is automatic.
This instruction may be made by telephone by calling (800) 341-2911
((800) 421-2833 for the hearing impaired) or by writing to Investor Services.
The investor may, on the initial account application form or prior to any
declaration, instruct that dividends and/or capital gain dividends be paid in
cash, be reinvested in the Fund at the next determined net asset value, or be
reinvested in another Participating Fund at the next determined net asset value.

23
<PAGE>

instructions communicated by telephone. If reasonable procedures are employed,
none of Van Kampen Investments, Investor Services or the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine. If
the exchanging shareholder does not have an account in the fund whose shares are
being acquired, a new account will be established with the same registration,
dividend and capital gain dividend options (except dividend diversification) and
authorized dealer of record as the account from which shares are exchanged,
unless otherwise specified by the shareholder. In order to establish a
systematic withdrawal plan for the new account or reinvest dividends from the
new account into another fund, however, an exchanging shareholder must submit a
specific request. The Fund reserves the right to reject any order to acquire its
shares through exchange. In addition, the Fund and other Participating Funds may
restrict exchanges by shareholders engaged in excessive trading by limiting or
disallowing the exchange privilege to such shareholders. For further information
on these restrictions, see the Fund's Statement of Additional Information. The
Fund may modify, restrict or terminate the exchange privilege at any time on 60
days' notice to its shareholders of any termination or material amendment.

FEDERAL INCOME
TAXATION

The Fund's tax managed strategy can generally be expected to lead to lower
distributions of income and capital gains than funds managed without regard to
tax considerations. The Fund is actively managed,

24
<PAGE>
however, and there can be no assurance that taxable distributions can always be
avoided.

25
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by
Deloitte & Touche LLP, independent auditors, whose report, along with the Fund's
most recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal period September 25, 1998 (commencement of operations) to June 30, 1999
has been audited by PricewaterhouseCoopers LLP. This information should be read
in conjunction with the financial statements and notes thereto included in the
Statement of Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
YEAR ENDED SEPTEMBER 25, 1998* TO YEAR ENDED SEPTEMBER 25, 1998* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 2000# JUNE 30, 1999# JUNE 30, 2000# JUNE 30, 1999#
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................. $11.98 $10.00 $11.92 $10.00
------ ------ ------ ------
Income From Investment Operations
Net Investment Income............ 0.08 0.14 (0.01) 0.07
Net Realized and Unrealized
Gain............................. 2.22 1.97 2.22 1.96
------ ------ ------ ------
Total from Investment Operations... 2.30 2.11 2.21 2.03
------ ------ ------ ------
Distributions
Net Investment Income............ (0.32) (0.13) (0.22) (0.11)
Net Realized Gain................ (0.18) -- (0.18) --
------ ------ ------ ------
Total Distributions................ (0.50) (0.13) (0.40) (0.11)
------ ------ ------ ------
Net Asset Value, End of Period..... $13.78 $11.98 $13.73 $11.92
====== ====== ====== ======
Total Return (1)................... 19.83% 21.22%** 19.09% 20.40%**
====== ====== ====== ======
Ratios and Supplemental Data
Net Assets, End of Period
(000's)............................ $1,902 $1,189 $1,950 $ 614
Ratio of Expenses to Average Net
Assets............................. 1.80% 1.80% 2.55% 2.55%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. 0.70% 1.57% (0.04%) 0.77%
Portfolio Turnover Rate............ 29% 9%** 29% 9%**
----------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Reductions During the Period.......
Per Share Benefit to Net
Investment Income/Loss........... $ 0.66 $ 1.02 $ 0.69 $ 1.02
Ratios Before Expense Reductions:
Expenses to Average Net Assets... 7.17% 13.55% 8.17% 14.45%
Net Investment Income/Loss to
Average Net Assets............... (4.67%) (10.17%) (5.93%) (11.12%)
----------------------------------------------------------------------------------------------------------------------

<CAPTION>
CLASS C SHARES
YEAR ENDED SEPTEMBER 25, 1998* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 2000 JUNE 30, 1999#
----------------------------------- --------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the
Period............................. $12.02 $10.00
------ ------
Income From Investment Operations
Net Investment Income............ 0.00+ 0.06
Net Realized and Unrealized
Gain............................. 2.21 2.07
------ ------
Total from Investment Operations... 2.21 2.13
------ ------
Distributions
Net Investment Income............ (0.22) (0.11)
Net Realized Gain................ (0.18) --
------ ------
Total Distributions................ (0.40) (0.11)
------ ------
Net Asset Value, End of Period..... $13.83 $12.02
====== ======
Total Return (1)................... 18.92% 21.40%**
====== ======
Ratios and Supplemental Data
Net Assets, End of Period
(000's)............................ $1,778 $ 480
Ratio of Expenses to Average Net
Assets............................. 2.55% 2.55%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (0.02%) 0.69%
Portfolio Turnover Rate............ 29% 9%**
-----------------------------------
Effect of Voluntary Expense
Reductions During the Period.......
Per Share Benefit to Net
Investment Income/Loss........... $ 0.57 $ 1.16
Ratios Before Expense Reductions:
Expenses to Average Net Assets... 7.15% 16.07%
Net Investment Income/Loss to
Average Net Assets............... (4.59%) (12.83%)
-----------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED
SALES CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

26
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS
BOARD OF DIRECTORS

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday

FUNDINFO-REGISTERED TRADEMARK-
For automated telephone services, call (800) 847-2424

WEB SITE
www.vankampen.com

VAN KAMPEN TAX MANAGED GLOBAL FRANCHISE FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Tax Managed Global Franchise Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen Tax Managed Global Franchise Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>

VAN KAMPEN
TAX MANAGED
GLOBAL FRANCHISE FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of Additional Information, which contains more details about the
Fund, is incorporated by reference in its entirety into this prospectus.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

GLF PRO 10/00
#65115

<PAGE>
VAN KAMPEN
VALUE FUND

Van Kampen Value Fund's investment objective is to seek to
achieve an above-average total return over a market cycle of
three to five years, consistent with reasonable risk, by
investing primarily in a diversified portfolio of common
stocks and other equity securities which are deemed by the
Fund's investment adviser to be relatively undervalued based
upon various measures such as price-to-earnings ratios and
price-to-book ratios.

Shares of the Fund have not been approved or disapproved by
the Securities and Exchange Commission (SEC) or any state
regulator, and neither the SEC nor any state regulator has
passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Purchase of Shares .....................................................10

Redemption of Shares ...................................................17

Distributions from the Fund ............................................19

Shareholder Services ...................................................19

Federal Income Taxation ................................................21

Financial Highlights ...................................................23

INVESTMENT OBJECTIVE

INVESTMENT STRATEGIES
Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing at least 65% of the Fund's total
assets in a portfolio of equity securities that are deemed relatively
undervalued by the Fund's investment adviser. The Fund invests primarily in
common stocks and other equity securities, including preferred stock;
convertible securities and equity-linked securities; warrants and rights to
purchase common stock; and depositary receipts. The Fund generally invests in
equity securities of companies with market capitalizations greater than
$300 million.

The Fund emphasizes a "value" style of investing seeking securities of companies
that the Fund's investment adviser believes are undervalued relative to
companies in the stock market in general as measured by the S&P 500 Index. In
seeking to identify these companies, the Fund's investment adviser uses
traditional value measures, such as price-to-earnings and price-to-book ratios,
as well as fundamental research and analysis. Portfolio securities are typically
sold when the price of such securities advance and the perceived values are
realized. The Fund may purchase and sell certain derivative instruments, such as
options, futures, options on futures and forward contracts, for various
portfolio management purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.

The Fund emphasizes a "value" style of investing. This style of investing is
subject to the risk that the valuations never improve or that the returns on
value equity securities are less than returns on other styles of investing or
the overall stock market. Different types of stocks tend to shift in and out of
favor depending on market and economic conditions. Thus, the value of the Fund's
investments will vary and at times may be lower or higher than that of other
types of investments. During an overall stock market decline, stock prices of
small- and medium-sized companies (in which the Fund may invest) often fluctuate
more and may fall more than the stock prices of larger-sized companies.

RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures, options on futures and forward
contracts are examples of derivative instruments. Derivative instruments involve
risks different from direct investments in underlying securities. These risks
include imperfect correlation between the value of the instruments and the
underlying assets; risks of default by the other party to certain transactions;
risks that the transactions may result in losses that partially or completely
offset gains in portfolio positions; and risks that the transactions may not be
liquid.

INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- Seek above-average total return over the long term

3
<PAGE>

- Can withstand volatility in the value of their shares of the Fund

- Wish to add to their investment portfolio a fund that emphasizes a "value"
style of investing in equity securities

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the two calendar years prior to the
date of this prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the returns shown below would have been lower.
Remember that the past performance of the Fund is not indicative of its future
performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ANNUAL RETURN
<S> <C>
1998 -2.37%
1999 -1.65%
</TABLE>

The Fund's return for the nine-month period ended September 30, 2000 was 8.93%.
As a result of market activity, current performance may vary from the figures
shown.

During the two-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 15.52% (for the quarter ended 6/30/99) and the lowest
quarterly return for Class A Shares was -18.09% (for the quarter ended
September 30, 1998).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the Standard & Poor's 500 Index,*
a broad-based market index that the Fund's investment adviser believes is an
appropriate benchmark for the Fund. The Fund's performance figures listed below
include the maximum sales charges paid by investors. The index's performance
figures do not include any commissions or sales charges that would be paid by
investors purchasing the securities represented by the index. An investment
cannot be made directly in the index. Average annual total returns are shown for
the periods ended December 31, 1999 (the most recently completed calendar year
prior to the date of this prospectus). Remember that the past performance of the
Fund is not indicative of its future performance.

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS
FOR THE
PERIODS ENDED PAST SINCE
DECEMBER 31, 1999 1 YEAR INCEPTION
-----------------------------------------------------
<S> <C> <C>
Van Kampen Value
Fund
-- Class A Shares -0.83% -0.57%(1)
Standard & Poor's
500 Index 21.04% 24.25%(2)
....................................................
Van Kampen Value
Fund
-- Class B Shares -2.30% -1.62%(1)
Standard & Poor's
500 Index 21.04% 24.25%(2)
....................................................
Van Kampen Value
Fund
-- Class C Shares -2.40% -1.65%(1)
Standard & Poor's
500 Index 24.04% 24.25%(2)
....................................................
INCEPTION DATES: (1) 7/7/97, (2) 6/30/97.
</TABLE>

* THE STANDARD & POOR'S 500 INDEX CONSISTS OF 500 WIDELY-HELD COMMON
STOCKS OF COMPANIES WITH MARKET CAPITALIZATION OF $1 BILLION OR MORE
THAT ARE A REPRESENTATIVE SAMPLE OF APPROXIMATELY 100 INDUSTRIES, CHOSEN
MAINLY FOR MARKET SIZE, LIQUIDITY AND INDUSTRY GROUP REPRESENTATION
(ASSUMES DIVIDENDS ARE REINVESTED).

4
<PAGE>
FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
------------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price) 5.75%(1) None None
...........................................................
Maximum deferred sales
charge (load) (as a
percentage of the
lesser of original
purchase price or
redemption proceeds) None(2) 5.00%(3) 1.00%(4)
...........................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
...........................................................
Redemption fee None None None
...........................................................
Exchange fee None None None
...........................................................
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------
Management fees(5) 0.80% 0.80% 0.80%
...........................................................
Distribution and/or
service (12b-1)
fees(6) 0.25% 1.00%(7) 1.00%(7)
...........................................................
Other expenses(5) 0.48% 0.48% 0.48%
...........................................................
Total annual fund
operating expenses 1.53% 2.28% 2.28%
...........................................................
</TABLE>

(1) REDUCED FOR PURCHASES OF $50,000 AND OVER. SEE "PURCHASE OF SHARES --
CLASS A SHARES."
(2) INVESTMENTS OF $1 MILLION OR MORE ARE NOT SUBJECT TO ANY SALES CHARGE AT
THE TIME OF PURCHASE, BUT A DEFERRED SALES CHARGE OF 1.00% MAY BE
IMPOSED ON CERTAIN REDEMPTIONS MADE WITHIN ONE YEAR OF THE PURCHASE. SEE
"PURCHASE OF SHARES -- CLASS A SHARES."
(3) THE MAXIMUM DEFERRED SALES CHARGE IS 5.00% IN THE FIRST YEAR AFTER
PURCHASE, DECLINING THEREAFTER AS FOLLOWS:

YEAR 1-5.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."

(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR AFTER
PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF SHARES -- CLASS C
SHARES."
(5) THE FUND'S INVESTMENT ADVISER IS CURRENTLY WAIVING OR REIMBURSING A
PORTION OF THE FUND'S MANAGEMENT FEES AND OTHER EXPENSES SUCH THAT THE
ACTUAL TOTAL ANNUAL FUND OPERATING EXPENSES WERE 1.45% FOR CLASS A
SHARES, 2.20% FOR CLASS B SHARES AND 2.20% FOR CLASS C SHARES FOR THE
FISCAL YEAR ENDED JUNE 30, 2000. THE FEE WAIVERS OR EXPENSE REIMBURSE-
MENTS CAN BE TERMINATED AT ANY TIME.
(6) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO 0.25% OF
THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES.
CLASS B SHARES AND CLASS C SHARES ARE EACH SUBJECT TO A COMBINED ANNUAL
DISTRIBUTION AND SERVICE FEE OF UP TO 1.00% OF THE AVERAGE DAILY NET
ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES. SEE "PURCHASE OF SHARES."
(7) BECAUSE DISTRIBUTION AND/OR SERVICE (12B-1) FEES ARE PAID OUT OF THE
FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES WILL INCREASE
THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE THAN PAYING OTHER
TYPES OF SALES CHARGES.

EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $722 $1,031 $1,361 $2,294
................................................................
Class B Shares $731 $1,012 $1,370 $2,427*
................................................................
Class C Shares $331 $ 712 $1,220 $2,615
................................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $722 $1,031 $1,361 $2,294
................................................................
Class B Shares $231 $ 712 $1,220 $2,427*
................................................................
Class C Shares $231 $ 712 $1,220 $2,615
................................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

5
<PAGE>
INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek to achieve an above-average total
return over a market cycle of three to five years, consistent with reasonable
risk, by investing primarily in a diversified portfolio of common stocks and
other equity securities which are deemed by the Fund's investment adviser to be
relatively undervalued based on various measures such as price-to-earnings
ratios and price-to-book ratios. The Fund's investment objective is a
fundamental policy and may not be changed without shareholder approval of a
majority of the Fund's outstanding voting securities, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). There are risks
inherent in all investments in securities; accordingly, there can be no
assurance that the Fund will achieve its investment objective.

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing at least 65% of the Fund's total
assets in a portfolio of equity securities that are deemed relatively
undervalued by the Fund's investment adviser. The Fund generally invests in
equity securities of companies with market capitalizations greater than $300
million. The Fund emphasizes a "value" style of investing seeking securities of
companies that the Fund's investment adviser believes are undervalued relative
to companies in the stock market in general as measured by the S&P 500 Index.
The Fund applies a disciplined investment approach using traditional value
measures to identify potential investments and fundamental research and analysis
to select the most promising of those securities identified.

In selecting securities for investment, the Fund focuses on those companies with
strong fundamentals, promising growth prospects and attractive valuations also
referred to as value companies. The Fund's investment style presents the risk
that the valuations of such companies never improve or that the returns on value
investments are less than returns on other styles of investing or the overall
stock market. Stocks of different types, such as "value" stocks or "growth"
stocks, tend to shift in and out of favor depending on market and economic
conditions. Thus, the value of the Fund's investments in "value" stocks will
vary and at times may be lower or higher than that of other types of funds.

The Fund emphasizes an investment approach that combines a highly structured buy
discipline with a formal sell discipline. The Fund's portfolio generally
consists of broadly diversified stocks with low price-to-earnings ratios. After
screening for low price-to-earnings ratios, the Fund's investment adviser
analyzes and compares other measures of value against the stock market in
general. The stocks selected for investment generally are those issued by
companies with relative valuations below that which is merited based upon the
companies' relative growth and profit characteristics. The Fund's investment
adviser strictly adheres to the Fund's sell approach which requires that
portfolio investments be automatically sold once the prices of such securities
advance and the perceived values are realized.

While the Fund invests primarily in common stocks, the Fund also may invest in
other equity securities, including preferred stocks, convertible securities and
equity-linked securities, rights and warrants to purchase common stock and
depositary receipts. Preferred stock generally has a preference as to dividends
and liquidation over an issuer's common stock but ranks junior to debt
securities in an issuer's capital structure. Unlike interest payments on debt
securities, preferred stock dividends are payable only if declared by the
issuer's board of directors. Preferred stock also may be subject to optional or
mandatory redemption provisions.

A convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of

6
<PAGE>

common stock or other equity security of the same or a different issuer or into
cash within a particular period of time at a specified price or formula. A
convertible security generally entitles the holder to receive interest paid or
accrued on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities generally have characteristics similar to both debt and
equity securities. The value of convertible securities tends to decline as
interest rates rise and, because of the conversion feature, tends to vary with
fluctuations in the market value of the underlying equity securities.
Convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stock of the same or similar issuers.
Convertible securities generally rank senior to common stock in a corporation's
capital structure but are usually subordinated to comparable nonconvertible
securities. Convertible securities generally do not participate directly in any
dividend increases or decreases of the underlying equity securities although the
market prices of convertible securities may be affected by any such dividend
changes or other changes in the underlying equity securities.

Equity-linked securities are instruments whose value is based upon the value of
one or more underlying equity securities, a reference rate or an index.
Equity-linked securities come in many forms and may include features, among
others, such as the following: (i) may be issued by the issuer of the underlying
equity security or by a company other than the one to which the instrument is
linked (usually an investment bank), (ii) may convert into equity securities,
such as common stock, within a stated period from the issue date or may be
redeemed for cash or some combination of cash and the linked security at a value
based upon the value of the underlying equity security within a stated period
from the issue date, (iii) may have various conversion features prior to
maturity at the option of the holder or the issuer or both, (iv) may limit the
appreciation value with caps or collars of the value of the underlying equity
security and (v) may have fixed, variable or no interest payments during the
life of the security which reflect the actual or a structured return relative to
the underlying dividends of the linked equity security. Investments in
equity-linked securities may subject the Fund to additional risks not ordinarily
associated with investments in other equity securities. Because equity-linked
securities are sometimes issued by a third party other than the issuer of the
linked security, the Fund is subject to risks if the underlying stock
underperforms or if the issuer defaults on the payment of the dividend or the
common stock at maturity. In addition, the trading market for particular
equity-linked securities may be less liquid, making it difficult for the Fund to
dispose of a particular security when necessary and reduced liquidity in the
secondary market for any such securities may make it more difficult to obtain
market quotations for valuing the Fund's portfolio.

Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights typically have a substantially
shorter duration than do warrants. Rights and warrants may be considered more
speculative and less liquid than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any rights in the assets of the
issuing company. Rights and warrants may lack a secondary market.

DERIVATIVE INSTRUMENTS

7
<PAGE>
derivative instruments that are developed over time if their use would be
consistent with the objective of the Fund. Collectively, all of the above are
referred to as "Strategic Transactions." The Fund generally seeks to use
Strategic Transactions as a portfolio management or hedging technique to seek to
protect against possible adverse changes in the market value of securities held
in or to be purchased for the Fund's portfolio, protect the Fund's unrealized
gains, facilitate the sale of certain securities for investment purposes,
protect against changes in currency exchange rates or to adjust the exposure to
a particular currency, manage the effective maturity or duration of the Fund's
portfolio, establish positions in the derivatives markets as a substitute for
purchasing or selling particular securities, including, for example, when the
Fund adjusts its exposure to a market in response to changes in investment
strategy, when doing so provides more liquidity than the direct purchase of the
securities underlying such derivatives, when the Fund is restricted from
directly owning the underlying securities due to foreign investment restrictions
or other reasons, or when doing so provides a price advantage over purchasing
the underlying securities directly, either because of a pricing differential
between the derivatives and securities markets or because of lower transaction
costs associated with the derivatives transaction. The Fund may invest up to 50%
of its total assets in futures contracts and options contracts (measured by the
aggregate notional amount of such outstanding contracts).

OTHER INVESTMENTS AND RISK FACTORS

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

8
<PAGE>

adversely impact a fund's performance. Higher portfolio turnover may result in
the realization of more short-term capital gains than if a fund had lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may on a temporary basis hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities, including prime
commercial paper, repurchase agreements and bank obligations, such as bankers
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for high total return on
these securities will tend to be lower than the potential for high total return
on other securities that may be owned by the Fund. In taking such a defensive
position, the Fund temporarily would not be pursuing and may not achieve its
investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

Applying this fee schedule, the Fund paid the Adviser an advisory fee at the
effective rate of 0.80% of the Fund's average daily net assets for the Fund's
fiscal year ended June 30, 2000. The Fund's average daily net assets are
determined by taking the average of all of the determinations of the net assets
during a given calendar month. Such fee is payable for each calendar month as
soon as practicable after the end of that month.

9
<PAGE>
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

Miller Anderson & Sherrerd, LLP is the Fund's investment subadviser (the
"Subadviser" or, "MAS"). The Subadviser is a Pennsylvania limited liability
partnership founded in 1969. The Subadviser is a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. The Subadviser provides investment advisory
services to employee benefit plans, endowment funds, foundations and other
institutional investors. At September 30, 2000, the Subadviser, together with
its affiliated institutional asset management companies, managed assets of
approximately $178 billion, including assets under fiduciary advice. The
Subadviser's principal office is located at is One Tower Bridge, West
Conshohocken, Pennsylvania 19428.

PORTFOLIO MANAGEMENT. Robert J. Marcin and Richard M. Behler have been
responsible as co-managers for the day-to-day management of the Fund's
investment portfolio since its inception.

Mr. Marcin, a Managing Director, joined the Subadviser in 1988. Mr. Marcin
assumed responsibility for the MAS Funds' Value Fund in 1990 and MAS Funds'
Equity Fund in 1994. Mr. Marcin holds a B.A. (Cum Laude) from Dartmouth College
and is a Chartered Financial Analyst.

Mr. Behler, a Principal, joined the Subadviser in 1995. He assumed
responsibility for MAS Funds' Value Fund in 1996. Mr. Behler served as a fund
manager from 1992 through 1995 for Moore Capital Management. Mr. Behler holds a
B.A. (Cum Laude) in Economics from Villanova University and an M.A. and Ph.D. in
Economics from University of Notre Dame.

PURCHASE OF SHARES

10
<PAGE>

generally bear the sales charge expenses at the time of redemption and any
expenses (including higher distribution fees and transfer agency costs)
resulting from such deferred sales charge arrangement, (ii) each class of shares
has exclusive voting rights with respect to approvals of the Rule 12b-1
distribution plan and the service plan (each as described below) under which the
class's distribution fee and/ or the service fee is paid, (iii) each class of
shares has different exchange privileges, (iv) certain classes of shares are
subject to a conversion feature and (v) certain classes of shares have different
shareholder service options available.

The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution and service fees and other expenses of the Fund associated with
that class of shares. To assist investors in comparing classes of shares, the
tables under the Prospectus heading "Fees and Expenses of the Fund" provide a
summary of sales charges and expenses

11
<PAGE>

and an example of the sales charges and expenses of the Fund applicable to each
class of shares.

CLASS A SHARES
SALES CHARGE SCHEDULE

* NO SALES CHARGE IS PAYABLE AT THE TIME OF PURCHASE ON INVESTMENTS OF $1
MILLION OR MORE, ALTHOUGH FOR SUCH INVESTMENTS THE FUND MAY IMPOSE A
CONTINGENT DEFERRED SALES CHARGE OF 1.00% ON CERTAIN REDEMPTIONS MADE
WITHIN ONE YEAR OF THE PURCHASE. THE CONTINGENT DEFERRED SALES CHARGE IS
ASSESSED ON AN AMOUNT EQUAL TO THE LESSER OF THE THEN CURRENT MARKET
VALUE OR THE COST OF THE SHARES BEING REDEEMED. ACCORDINGLY, NO SALES
CHARGE IS IMPOSED ON INCREASES IN NET ASSET VALUE ABOVE THE INITIAL
PURCHASE PRICE.

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

12
<PAGE>

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
<S> <C>
--------------------------------------------------------
First 5.00%
.......................................................
Second 4.00%
.......................................................
Third 3.00%
.......................................................
Fourth 2.50%
.......................................................
Fifth 1.50%
.......................................................
Sixth and After None
.......................................................
</TABLE>

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

13
<PAGE>
CONVERSION FEATURE

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

QUANTITY DISCOUNTS

14
<PAGE>

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.

15
<PAGE>
(2) Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries; employees of an investment
subadviser to any fund described in (1) above or an affiliate of such
subadviser; and such persons' families and their beneficial accounts.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

(8) Trusts created under pension, profit sharing or other employee benefit
plans qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), or custodial accounts held by a bank created
pursuant to Section 403(b) of the Code and sponsored by nonprofit
organizations defined under Section 501(c)(3) of the Code and assets held
by an employer or trustee in connection with an eligible deferred
compensation plan under Section 457 of the Code. Such plans will qualify
for purchases at net asset value provided, for plans initially establishing
accounts with the Distributor in the Participating Funds after January 1,
2000, that (1) the total plan assets are at least $1 million (2) such
shares are purchased by an employer sponsored plan with more than 100
eligible employees. Such plans that have been established with a
Participating Fund or have received proposals from the Distributor prior to
January 1, 2000 based on net asset value purchase privileges previously in
effect will be qualified to purchase shares of the Participating Funds at
net asset value. Section 403(b) and similar accounts for which Van Kampen
Trust Company serves as custodian will not be eligible for net asset value
purchases based on the aggregate investment made by the plan or the number
of eligible employees, except under certain uniform criteria established by
the Distributor from time to time. A commission will be paid to authorized
dealers who initiate and are responsible for such purchases within a
rolling twelve month period as follows: 1.00% on sales to $2 million, plus
0.80% on the next $1 million, plus 0.50% on the next $47 million, plus
0.25% on the excess over $50 million.

16
<PAGE>
other similar groups. Shares purchased in each group's participants account
in connection with this privilege will be subject to a contingent deferred
sales charge of 1.00% in the event of redemption within one year of
purchase, and a commission will be paid to authorized dealers who initiate
and are responsible for such sales to each individual as follows: 1.00% on
sales to $2 million, plus 0.80% on the next $1 million and 0.50% on the
excess over $3 million.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

REDEMPTION OF
SHARES

Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption request to be in proper form.
In some

17
<PAGE>

TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. A shareholder
automatically has telephone redemption privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. For accounts that are not established with telephone redemption
privileges, a shareholder may call the Fund at (800) 341-2911 to request that a
copy of the Telephone Redemption Authorization form be sent to the shareholder
for completion. To redeem shares, contact the telephone transaction line at
(800) 421-5684. Shares may also be redeemed by telephone through
FundInfo-Registered Trademark- (automated telephone system), which is generally
accessible 24 hours a day, seven days a week at (800) 847- 2424. Van Kampen
Investments and its subsidiaries, including Investor Services, and the Fund
employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape-recording telephone communications and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, none of Van Kampen Investments, Investor Services or
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. Telephone redemptions may not be available if the
shareholder cannot reach Investor Services by telephone, whether because all
telephone lines are busy or for any other reason; in such case, a shareholder
would have to use the Fund's other redemption procedure previously described.
Requests received by Investor Services prior to 4:00 p.m., New York time, will
be processed at the next determined net asset value per share. These privileges
are available for most accounts other than retirement accounts or accounts with
shares represented by certificates. If an account has multiple owners, Investor
Services may rely on the instructions of any one owner.

OTHER REDEMPTION INFORMATION. The Fund may redeem any shareholder account that
has a value on the date of the notice of redemption less than the

18
<PAGE>
minimum initial investment as specified in this prospectus. At least 60 days
advance written notice of any such involuntary redemption will be provided to
the shareholder and such shareholder will be given an opportunity to purchase
the required value of additional shares at the next determined net asset value
without sales charge. Any involuntary redemption may only occur if the
shareholder account is less than the minimum initial investment due to
shareholder redemptions.

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Directors, is to
distribute all, or substantially all, of this net investment income, at least
quarterly as dividends to shareholders. Dividends are automatically applied to
purchase additional shares of the Fund at the next determined net asset value
unless the shareholder instructs otherwise.

SHAREHOLDER SERVICES

19
<PAGE>

invested in another Participating Fund at the next determined net asset value.

A shareholder wishing to make an exchange may do so by sending a written request
to Investor Services, or by contacting the telephone transaction line at
(800) 421-5684, through FundInfo-Registered Trademark- (automated telephone
system) at (800) 847-2424 or through the internet at www.vankampen.com. A
shareholder automatically has these exchange privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. Van Kampen Investments and its subsidiaries, including Investor Services,
and the Fund employ procedures considered by them to be reasonable to confirm
that instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape-recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, none of Van Kampen Investments, Investor Services or
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. If the exchanging shareholder does not have an account
in the fund whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gain dividend options (except
dividend diversification) and authorized dealer of record as the account from
which shares are exchanged, unless otherwise specified by the shareholder. In
order to establish a systematic withdrawal plan for the new account or reinvest
dividends from the new account into another fund, however, an exchanging
shareholder must submit a specific request. The Fund reserves the right to
reject any order to acquire its shares through exchange. In addition, the Fund
and other Participating Funds may restrict exchanges by shareholders engaged in
excessive trading by limiting or disallowing the exchange privilege to such
shareholders. For further information on these restrictions see the Fund's
Statement of Additional Information. The Fund may modify, restrict or terminate
the exchange privilege at any time on 60 days' notice to its

20
<PAGE>

shareholders of any termination or material amendment.

FEDERAL INCOME
TAXATION

The Fund intends to qualify as a regulated investment company under federal
income tax law. If the Fund so qualifies and distributes each year to its

21
<PAGE>

shareholders at least 90% of its investment company taxable income, the Fund
will not be required to pay federal income taxes on any income it distributes to
shareholders. If the Fund distributes less than an amount equal to the sum of
98% of its ordinary income and 98% of its capital gain net income, then the Fund
will be subject to a 4% excise tax on the undistributed amounts.

22
<PAGE>
FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by
Deloitte & Touche LLP, independent auditors, whose report, along with the Fund's
most recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal year ended June 30, 1999 and the fiscal period July 7, 1997 (commencement
of operations) to June 30, 1998 has been audited by PricewaterhouseCoopers LLP.
This information should be read in conjunction with the financial statements and
notes thereto included in the Statement of Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
YEAR ENDED YEAR ENDED JULY 7, 1997* TO YEAR ENDED YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 2000# JUNE 30, 1999# JUNE 30, 1998# JUNE 30, 2000# JUNE 30, 1999#
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................ $ 10.88 $ 10.52 $ 10.00 $ 10.84 $ 10.51
------- ------- -------- ------- --------
Income From Investment Operations
Net Investment Income/Loss... 0.05 0.07 0.11 (0.03) (0.00)+
Net Realized and Unrealized
Gain/Loss................... (1.85) 0.51 0.56 (1.83) 0.51
------- ------- -------- ------- --------
Total From Investment
Operations.................. 1.80 0.58 0.67 (1.86) 0.51
------- ------- -------- ------- --------

Distributions
Net Investment Income....... (0.01) (0.06) (0.08) -- (0.01)
In Excess of Net Investment
Income...................... -- (0.00)+ (0.01) -- --
Net Realized Gain........... -- -- (0.05) -- --
In Excess of Net Realized
Gain........................ -- (0.17) -- -- (0.17)
------- ------- -------- ------- --------
Total Distributions......... (0.01) (0.23) (0.14) -- (0.18)
------- ------- -------- ------- --------
Net Asset Value, End of Period... $ 9.07 $ 10.88 $ 10.53 $ 8.98 $ 10.84
======= ======= ======== ======= ========
Total Return(1)............... (16.56)% 5.83% 6.74%** (17.16)% 5.02%
Ratios and Supplemental Data
Net Assets, End of Period
(000's)....................... $52,611 $95,208 $137,447 $70,353 $127,978
Ratio of Expenses to Average Net
Assets........................ 1.45% 1.45% 1.45% 2.20% 2.20%
Ratio of Net Investment
Income/Loss to Average Net
Assets........................ 0.49% 0.74% 1.02% (0.26)% (0.03)%
Portfolio Turnover Rate....... 104% 64% 38%** 104% 64%
-------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Reductions During the Period
Per Share Benefit to Net
Investment Income/Loss...... $ 0.01 $ 0.00+ $ 0.01 $ 0.01 $ 0.00+
Ratios Before Expense Limitation:
Expenses to Average Net
Assets...................... 1.53% 1.48% 1.60% 2.28% 2.23%
Net Investment Income/Loss to
Average Net Assets.......... 0.41% 0.73% 0.88% (0.34)% (0.05)%
-------------------------------------------------------------------------------------------------------------------------

<CAPTION>
CLASS B SHARES CLASS C SHARES
JULY 7, 1997* TO YEAR ENDED YEAR ENDED JULY 7, 1997* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998# JUNE 30, 2000# JUNE 30, 1999# JUNE 30, 1998#
---------------------------------- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................ $ 10.00 $ 10.83 $ 10.50 $ 10.00
-------- ------- ------- -------
Income From Investment Operations
Net Investment Income/Loss... 0.03 (0.03) (0.00)+ 0.03
Net Realized and Unrealized
Gain/Loss................... 0.56 (1.83) 0.51 0.55
-------- ------- ------- -------
Total From Investment
Operations.................. 0.59 (1.86) 0.51 0.58
-------- ------- ------- -------
Distributions
Net Investment Income....... (0.03) -- (0.01) (0.03)
In Excess of Net Investment
Income...................... (0.00)+ -- -- (0.00)+
Net Realized Gain........... (0.05) -- -- (0.05)
In Excess of Net Realized
Gain........................ -- -- (0.17) --
-------- ------- ------- -------
Total Distributions......... (0.08) -- (0.18) (0.08)
-------- ------- ------- -------
Net Asset Value, End of Period... $ 10.51 $ 8.97 $ 10.83 $ 10.50
======== ======= ======= =======
Total Return(1)............... 6.01%** (17.17)% 5.13% 5.83%**
Ratios and Supplemental Data
Net Assets, End of Period
(000's)....................... $142,741 $14,585 $29,071 $35,564
Ratio of Expenses to Average Net
Assets........................ 2.20% 2.20% 2.20% 2.20%
Ratio of Net Investment
Income/Loss to Average Net
Assets........................ 0.28% (0.29)% (0.02)% 0.29%
Portfolio Turnover Rate....... 38%** 104% 64% 38%**
-------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Reductions During the Period
Per Share Benefit to Net
Investment Income/Loss...... $ 0.01 $ 0.01 $ 0.00+ $ 0.01
Ratios Before Expense Limitation:
Expenses to Average Net
Assets...................... 2.35% 2.28% 2.23% 2.35%
Net Investment Income/Loss to
Average Net Assets.......... 0.14% (0.37)% (0.03)% 0.15%
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

23
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS
BOARD OF DIRECTORS

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

VAN KAMPEN VALUE FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MILLER ANDERSON & SHERRERD, LLP
One Tower Bridge
West Conshohocken, PA 19428

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Value Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen Value Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>
VAN KAMPEN
VALUE FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of Additional Information, which contains
more details about the Fund, is incorporated by
reference in its entirety into this prospectus.

You will find additional information about the Fund in
its annual and semiannual reports to shareholders. The
annual report explains the market conditions and
investment strategies affecting the Fund's performance
during its last fiscal year.

You can ask questions or obtain a free copy of the
Fund's reports or its Statement of Additional
Information by calling (800) 341-2911 from 7:00 a.m. to
7:00 p.m., Central time, Monday through Friday.
Telecommunications Device for the Deaf users may call
(800) 421-2833. A free copy of the Fund's reports can
also be ordered from our web site at www.vankampen.com.

Information about the Fund, including its reports and
Statement of Additional Information, has been filed with
the Securities and Exchange Commission (SEC). It can be
reviewed and copied at the SEC's Public Reference Room
in Washington, DC or on the EDGAR database on the SEC's
internet site (http://www.sec.gov). Information on the
operation of the SEC's Public Reference Room may be
obtained by calling the SEC at
1-202-942-8090. You can also request copies of these
materials, upon payment of a duplicating fee, by
electronic request at the SEC's e-mail address
([email protected]), or by writing the Public Reference
Section of the SEC, Washington, DC 20549-0102.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

MSVL PRO 10/00
#65130

<PAGE>

VAN KAMPEN
WORLDWIDE HIGH
INCOME FUND

Van Kampen Worldwide High Income Fund's primary investment objective is to seek
high current income consistent with relative stability of principal and,
secondarily, capital appreciation, by investing primarily in a portfolio of high
yielding, high risk fixed income securities of issuers located throughout the
world.

THIS PROSPECTUS IS DATED OCTOBER 27, 2000

[LOGO]
<PAGE>

TABLE OF CONTENTS

Risk/Return Summary .....................................................3
Fees and Expenses of the Fund ...........................................6
Investment Objectives, Policies and Risks ...............................7
Investment Advisory Services ...........................................19
Purchase of Shares .....................................................21

Redemption of Shares ...................................................29

Distributions from the Fund ............................................30

Shareholder Services ...................................................31

Federal Income Taxation ................................................33

Financial Highlights ...................................................34
Appendix--Description of Securities Ratings ...........................A-1

INVESTMENT OBJECTIVES

INVESTMENT STRATEGIES

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objectives by investing primarily in a portfolio of
lower-grade fixed income securities of issuers located throughout the world. The
Fund allocates its assets among any or all of three investment sectors: U.S.
corporate lower-grade debt securities, emerging market countries debt securities
and global fixed income securities offering high real (inflation adjusted)
yields. The Fund's investment adviser uses equity and fixed income valuation
techniques, together with analyses of economic and industry trends, to determine
the Fund's overall structure, sector allocation and desired maturity. In
selecting U.S. corporate lower-grade debt securities for the Fund's portfolio,
the Fund considers, among other factors, the price of the security and the
financial history, condition, prospects and management of an issuer. In
selecting emerging market countries debt securities, the Fund seeks securities
that provide a high level of current income while offering the potential for
capital appreciation if the perceived creditworthiness of the issuer improves
due to improving economic, financial, political, social or other conditions in
the country in which the issuer is located. In addition, the Fund seeks to
invest in fixed income securities of issuers in the global fixed income markets
displaying high real (inflation adjusted) yields. Portfolio securities are
typically sold when the Fund's investment adviser's assessments for income or
capital appreciation of such securities materially change. This could be a
result of a security exceeding expectations, a security meeting expectations but
identification of better opportunities elsewhere, or a deterioration of
fundamentals of the underlying issuer.

The Fund's investments in lower-grade securities and emerging market countries
securities involve greater risks as compared to investments in higher-grade
securities or developed countries. Lower-grade debt securities are commonly
known as "junk bonds". The Fund may purchase and sell securities on a
when-issued or delayed delivery basis. The Fund may purchase and sell certain
derivative instruments, such as options, futures, options on futures,
currency-related transactions involving options, futures and forward contracts,
and interest rate swaps or other interest rate-related transactions, for various
portfolio management purposes.

INVESTMENT RISKS

An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objectives.

FOREIGN AND EMERGING MARKET COUNTRIES RISKS. Because the Fund owns securities of
foreign issuers, it is subject to risks not usually associated with owning
securities of U.S. issuers. These risks include fluctuations in foreign
currencies, foreign currency exchange controls, political and economic
instability, differences in financial reporting, differences in securities
regulation and trading and foreign taxation issues. The risks of investing in
developing or emerging market countries are greater than the risks generally
associated with foreign investments, including investment and trading
limitations, greater credit and liquidity concerns, greater political
uncertainties, an economy's dependence on international trade or development
assistance, greater foreign currency exchange risks and currency transfer
restrictions, and greater delays and disruptions in settlement transactions. To
the extent the Fund focuses more of its assets in a single country or region,
its portfolio would be more susceptible to factors adversely affecting issuers
in that country or region.

CREDIT RISK. Credit risk refers to an issuer's ability to make timely payments
of interest and principal. Because a significant portion of the Fund's total
assets are invested in lower-grade securities, the Fund is subject to a higher
level of credit risk than a fund that invests only in investment-grade
securities.

3
<PAGE>

The credit quality of "noninvestment-grade" securities is considered speculative
by recognized rating agencies with respect to the issuer's continuing ability to
pay interest and principal. Lower-grade securities may have less liquidity and a
higher incidence of default than higher-grade securities. The Fund may incur
higher expenses to protect the Fund's interest in such securities. The credit
risks and market prices of lower-grade securities generally are more sensitive
to negative issuer developments, such as reduced revenues or increased
expenditures, or adverse economic conditions, such as a recession, than are
higher-grade securities.

MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. The prices of income securities tend to fall as
interest rates rise, and such declines tend to be greater among income
securities with longer maturities. Although the Fund has no policy limiting the
maturities of its investments, under normal market conditions, the Fund's
investment adviser seeks to maintain the portfolio's average time to maturity
within the range of medium-term securities (i.e., those securities with
remaining maturities of approximately five years). This means that the Fund is
subject to more market risk than a fund investing solely in shorter-term
securities but less market risk than a fund investing solely in longer-term
securities. Lower-grade securities, especially those with longer maturities or
that do not make regular interest payments, may be more volatile and may decline
more in price in response to negative issuer or general economic news than
higher-grade securities. Foreign markets may, but often do not, move in tandem
with U.S. markets, and foreign markets, particularly developing or emerging
market countries, may be more volatile than U.S. markets.

Market risk is often greater among certain types of income securities, such as
zero-coupon bonds or pay-in-kind securities. As interest rates change, these
securities often fluctuate more in price than traditional fixed income
securities and may subject the Fund to greater market risk than a fund that does
not own these types of securities.

When-issued and delayed delivery transactions are subject to changes in market
conditions from the time of the commitment until settlement. This may adversely
affect the prices or yields of the securities being purchased, as well as any
portfolio securities held for payment of such commitments. The greater the
Fund's outstanding commitments for these securities, the greater the Fund's
exposure to market price fluctuations.

INCOME RISK. The income you receive from the Fund is based primarily on interest
rates, which can vary widely over the short- and long-term. If interest rates
drop, your income from the Fund may drop as well.

CALL RISK. If interest rates fall, it is possible that issuers of income
securities with high interest rates will prepay or "call" their securities
before their maturity dates. In this event, the proceeds from the called
securities would likely be reinvested by the Fund in securities bearing the new,
lower interest rates, resulting in a possible decline in the Fund's income and
distributions to shareholders.

RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures, options on futures,
currency-related transactions involving options, futures and forward contracts,
and interest rate swaps or other interest rate-related transactions are examples
of derivative instruments. Derivative instruments involve risks different from
direct investments in underlying securities. These risks include imperfect
correlation between the value of the instruments and the underlying assets;
risks of default by the other party to certain transactions; risks that the
transactions may result in losses that partially or completely offset gains in
portfolio positions; and risks that the transactions may not be liquid.

4
<PAGE>

INVESTOR PROFILE
In light of the Fund's investment objectives and strategies, the Fund may be
appropriate for investors who:

- Seek a high level of current income and, secondarily, capital appreciation

- Are willing to take on the increased risks associated with investing in
emerging market countries securities and lower-grade securities

- Can withstand volatility in the value of their Fund shares

- Wish to add to their investment portfolio a fund that invests primarily in
lower-grade income securities of issuers located throughout the world

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the five calendar years prior to the
date of this prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the returns shown below would have been lower.
Remember that the past performance of the Fund is not indicative of its future
performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Annual Return
1995 19.97%
1996 26.01%
1997 15.62%
1998 -17.15%
1999 18.02%
</TABLE>

The Fund's return for the nine-month period ended September 30, 2000 was 0.02%.
As a result of market activity, current performance may vary from the figures
shown.

During the five-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 14.18% (for the quarter ended June 30, 1995) and the
lowest quarterly return for Class A Shares was -24.09% (for the quarter ended
September 30, 1998).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the Worldwide High Income Blended
Index II*, a broad-based market index that the Fund's investment adviser
believes is an appropriate benchmark for the Fund. The Fund's performance
figures listed below include the maximum sales charges paid by investors. The
index's performance figures do not include any commissions

5
<PAGE>

or sales charges that would be paid by investors purchasing the securities
represented by the index. An investment cannot be made directly in the index.
Average annual total returns are shown for the periods ended December 31, 1999
(the most recently completed calendar year prior to the date of this
prospectus). Remember that the past performance of the Fund is not indicative of
its future performance.

<TABLE>
<CAPTION>
Average Annual
Total Returns
for the
Periods Ended
December 31, Past Past Since
1999 1 Year 5 Years Inception
<S> <C> <C> <C>
-------------------------------------------------------------------------------
Van Kampen Worldwide
High Income Fund
-- Class A Shares 12.37% 10.24% 9.16%(1)
Worldwide High Income
Blended Index II 13.44% 12.90% 11.85%(3)
..............................................................................
Van Kampen Worldwide
High Income Fund
-- Class B Shares 13.04% N/A 9.39%(2)
Worldwide High Income
Blended Index II 13.44% 12.90% 12.10%(4)
..............................................................................
Van Kampen Worldwide
High Income Fund
-- Class C Shares 15.92% 10.46% 9.26%(1)
Worldwide High Income
Blended Index II 13.44% 12.90% 11.85%(3)
..............................................................................
INCEPTION DATES: (1) 4/21/94, (2) 8/1/95, (3) 4/29/94, (4) 7/31/95.
N/A NOT APPLICABLE.
*THE WORLDWIDE HIGH INCOME BLENDED INDEX II IS AN UNMANAGED INDEX COMPOSED OF
50 PERCENT CREDIT SUISSE FIRST BOSTON GLOBAL HIGH YIELD INDEX AND 50 PERCENT
J.P. MORGAN EMERGING MARKETS BOND INDEX GLOBAL.
</TABLE>

The current yield for the thirty-day period ended June 30, 2000 is 13.31% for
Class A Shares, 12.53% for Class B Shares and 12.53% for Class C Shares.
Investors can obtain the current yield of the Fund for each class of shares by
calling (800) 341-2911.

FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
------------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price) 4.75%(1) None None
...........................................................
Maximum deferred sales
charge (load) (as a
percentage of the
lesser of original
purchase price or
redemption proceeds) None(2) 4.00%(3) 1.00%(4)
...........................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
...........................................................
Redemption fee None None None
...........................................................
Exchange fee None None None
...........................................................
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------
Management fees 0.75% 0.75% 0.75%
...........................................................
Distribution and/or
service
(12b-1) fees(5) 0.25% 1.00%(6) 1.00%(6)
...........................................................
Other expenses 0.60% 0.60% 0.60%
...........................................................
Total annual fund
operating expenses 1.60% 2.35% 2.35%
...........................................................
</TABLE>

(1) REDUCED FOR PURCHASES OF $100,000 AND OVER. SEE "PURCHASE OF SHARES --
CLASS A SHARES."
(2) INVESTMENTS OF $1 MILLION OR MORE ARE NOT SUBJECT TO ANY SALES CHARGE
AT THE TIME OF PURCHASE, BUT A DEFERRED SALES CHARGE OF 1.00% MAY BE
IMPOSED ON CERTAIN REDEMPTIONS MADE WITHIN ONE YEAR OF THE PURCHASE.
SEE "PURCHASE OF SHARES -- CLASS A SHARES."
(3) THE MAXIMUM DEFERRED SALES CHARGE IS 4.00% IN THE FIRST AND SECOND
YEAR AFTER PURCHASE, DECLINING THEREAFTER AS FOLLOWS:

YEAR 1-4.00%
YEAR 2-4.00%
YEAR 3-3.00%
YEAR 4-2.50%
YEAR 5-1.50%
AFTER-NONE

SEE "PURCHASE OF SHARES -- CLASS B SHARES."
(4) THE MAXIMUM DEFERRED SALES CHARGE IS 1.00% IN THE FIRST YEAR AFTER
PURCHASE AND 0.00% THEREAFTER. SEE "PURCHASE OF SHARES -- CLASS C
SHARES."

6
<PAGE>

(5) CLASS A SHARES ARE SUBJECT TO AN ANNUAL SERVICE FEE OF UP TO 0.25% OF
THE AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES.
CLASS B SHARES AND CLASS C SHARES ARE EACH SUBJECT TO A COMBINED
ANNUAL DISTRIBUTION AND SERVICE FEE OF UP TO 1.00% OF THE AVERAGE
DAILY NET ASSETS ATTRIBUTABLE TO SUCH CLASS OF SHARES. SEE "PURCHASE
OF SHARES."
(6) BECAUSE DISTRIBUTION AND/OR SERVICE (12B-1) FEES ARE PAID OUT OF THE
FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME THESE FEES WILL INCREASE
THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE THAN PAYING OTHER
TYPES OF SALES CHARGES.

EXAMPLE:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
-----------------------------------------------------------------
Class A Shares $630 $ 956 $1,304 $2,285
................................................................
Class B Shares $638 $1,033 $1,405 $2,499*
................................................................
Class C Shares $338 $ 733 $1,255 $2,686
................................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
----------------------------------------------------------------
Class A Shares $630 $956 $1,304 $2,285
...............................................................
Class B Shares $238 $733 $1,255 $2,499*
...............................................................
Class C Shares $238 $733 $1,255 $2,686
...............................................................
</TABLE>

* BASED ON CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS.

INVESTMENT OBJECTIVES,
POLICIES AND RISKS

The Fund's primary investment objective is to seek high current income
consistent with relative stability of principal and, secondarily, capital
appreciation, by investing primarily in a portfolio of high yielding, high risk
fixed income securities of issuers located throughout the world. The Fund's
investment objectives are fundamental policies and may not be changed without
shareholder approval of a majority of the Fund's outstanding voting securities,
as defined in the Investment Company Act of 1940, as amended (the "1940 Act").
There are risks inherent in all investments in securities; accordingly there can
be no assurance that the Fund will achieve its investment objectives.

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objectives by investing primarily in a portfolio of
lower-grade fixed income securities of issuers located throughout the world. The
Fund allocates its assets among any or all of three investment sectors: U.S.
corporate lower-grade debt securities, emerging market countries debt securities
and global fixed income securities offering high real (inflation adjusted)
yields. The Fund's investment adviser uses equity and fixed income valuation
techniques, together with analyses of economic and industry trends, to determine
the Fund's overall structure, sector allocation and desired maturity. The Fund's
investment adviser emphasizes securities of companies that have strong industry
positions and favorable outlooks for cash flow and asset values. The Fund's
investment adviser conducts a credit analysis for each security considered for
investment to evaluate its attractiveness relative to the level of risk it
presents. Under normal conditions, the Fund invests between 80% and 100% of its
total assets in some or all of these three categories of high yielding, high
risk securities, commonly known as "junk bonds." The types of securities in each
of these investment sectors in which the Fund may invest are described below.

7
<PAGE>

UNDERSTANDING
QUALITY RATINGS

Income securities ratings are based on the issuer's ability to pay interest
and repay the principal. Securities with ratings above the line are
considered "investment-grade," while those with ratings below the line are
regarded as "noninvestment-grade," or "junk bonds." A detailed explanation
of these ratings can be found in the appendix to this prospectus.

<TABLE>
<CAPTION>
S&P Moody's Meaning
<C> <S> <C>
------------------------------------------------------------------
AAA Aaa Highest quality
.................................................................
AA Aa High quality
.................................................................
A A Above-average quality
.................................................................
BBB Baa Average quality
------------------------------------------------------------------
BB Ba Below-average quality
.................................................................
B B Marginal quality
.................................................................
CCC Caa Poor quality
.................................................................
CC Ca Highly speculative
.................................................................
C C Lowest quality
.................................................................
D -- In default
.................................................................
</TABLE>

In selecting U.S. corporate lower-rated or comparable quality unrated debt
securities for the Fund's portfolio, the Fund's investment adviser considers,
among other factors, the price of the security and the financial history,
condition, prospects and management of an issuer.

The Fund's investment adviser intends to invest a portion of the Fund's assets
in emerging market countries debt securities that provide a high level of
current income while offering the potential for capital appreciation if the
perceived creditworthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in which the
issuer is located. As used in this Prospectus, the term "emerging market
country" applies to any country which, in the opinion of the Fund's investment
adviser, is generally considered to be an emerging or developing country by the
international financial community, which includes the International Bank for
Reconstruction and Development (more commonly known as the World Bank) and the
International Finance Corporation. The Fund will focus its investments on those
emerging market countries in which it believes the economies are developing
strongly and in which the markets are becoming more sophisticated. In selecting
emerging market countries debt securities for investment, the Fund's investment
adviser applies a market risk analysis assessing factors such as liquidity,
volatility, tax implications, interest rate sensitivity, counterparty risks and
technical market considerations. Emerging market countries debt securities
generally are subject to higher risks than investments in domestic securities or
securities of developed markets. See "Risks of Investing in Securities of
Foreign Issuers" below.

In addition, the Fund's investment adviser intends to invest a portion of the
Fund's assets in fixed income securities of issuers in global fixed income
markets displaying high real (inflation adjusted) yields.

The Fund's approach to multi-currency fixed-income management is strategic and
value-based and designed to produce an attractive real rate of return. The
Fund's investment adviser's assessment of the fixed income markets and
currencies is based on an analysis of real interest rates. Current nominal
yields of securities are adjusted for inflation prevailing in each currency
sector using an analysis of past and projected inflation rates. The Fund's aim
is to invest in fixed income markets which offer the most attractive real
returns relative to inflation.

The types of fixed income securities in which the Fund may invest include, but
are not limited to, the following: fixed or variable rate bonds, notes, bills or
debentures; discount, zero coupon or payment-in-kind securities; preferred
stock; convertible securities; warrants; loans, loan participations and
assignments; assignments and interests issued by entities organized and operated
for the purpose of restructuring the investment characteristics of other debt
securities; and securities whose principal or interest payments are indexed to
changes in the values of currencies, interest rates, commodities or an index.
The Fund may invest up to 10% of its total assets in equity securities other
than preferred stock. The Fund may not invest more than 5% of its total assets
at the time of acquisition in either of (1) equipment lease certificates,
equipment trust certificates and conditional sales contracts or (2) limited
partnership interests.

8
<PAGE>
The value of fixed income securities generally varies inversely with changes in
prevailing interest rates. If interest rates rise, fixed income security prices
generally fall; if interest rates fall, fixed income security prices generally
rise. Shorter-term securities are generally less sensitive to interest rate
changes than longer-term securities; thus, for a given change in interest rates,
the market prices of shorter-maturity fixed income securities generally
fluctuate less than the market prices of longer-maturity fixed income
securities. Fixed income securities with shorter maturities generally offer
lesser yields than fixed income securities with longer maturities assuming all
other factors, including credit quality, being equal. The average time to
maturity of the Fund's securities will vary depending upon the Fund's investment
adviser's perception of market conditions. Under normal market conditions, the
Fund invests primarily in medium-term securities (i.e., those with a remaining
maturity of approximately five years). When the Fund's investment adviser
believes that real yields are high, the Fund lengthens the remaining maturities
of securities held by it and, conversely, when the Fund's investment adviser
believes real yields are low, it shortens the remaining maturities. Thus, the
Fund is not subject to any restrictions on the maturities of the securities it
holds, and the Fund's investment adviser may vary the average maturity of the
securities held in the Fund's portfolio without limit.

Credit risk refers to an issuer's ability to make timely payments of interest
and principal. Under normal market conditions, the Fund invests primarily in
lower-grade fixed income securities. The Fund may purchase unrated lower-grade
securities and rated lower-grade securities with no minimum quality standard
limitation, including securities that are in default. Lower-grade securities
tend to offer higher yields than higher-grade securities with the same
maturities, but generally involve greater risks of default and of volatility in
price than higher-grade securities. Rated lower-grade securities are regarded by
recognized rating organizations as predominantly speculative with respect to the
issuer's continuing ability to pay interest and principal. Ratings agencies
assign ratings based upon their opinions of the quality of the securities they
undertake to rate, but they do not base their assessment on the market value
risk of such securities. It should be emphasized that ratings are general and
are not absolute standards of quality. Many foreign securities, and particularly
securities of issuers from emerging market countries, may not be rated for
creditworthiness by any recognized rating organization. See "Risks of Investing
in Lower-Grade Securities" below.

Certain types of fixed income securities are subject to additional market,
credit or other risks not associated with traditional fixed income securities,
see "Additional Information Regarding Certain Fixed Income Securities" below.

RISKS OF INVESTING IN SECURITIES
OF FOREIGN ISSUERS

9
<PAGE>

than in the United States, and with respect to certain foreign countries, there
is a possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Because there is
usually less supervision and governmental regulation of foreign exchanges,
brokers and dealers than there is in the United States, the Fund may experience
settlement difficulties or delays not usually encountered in the United States.

Delays in making trades in foreign securities relating to volume constraints,
limitations or restrictions, clearance or settlement procedures, or otherwise
could impact yields and result in temporary periods when assets of the Fund are
not fully invested or attractive investment opportunities are foregone.

Investors should consider carefully the risks of foreign investments before
investing in the Fund.

10
<PAGE>

assistance and, therefore, are vulnerable to changes in trade or assistance
which, in turn, may be affected by a variety of factors. The Fund may be
particularly sensitive to changes in the economies of certain countries
resulting from any reversal of economic liberalization, political unrest or the
imposition of sanctions by the United States or other countries.

The Fund's purchase and sale of portfolio securities in emerging market
countries may be constrained by limitations as to daily changes in the prices of
listed securities, periodic or sporadic trading or settlement, or limitations on
aggregate holdings by foreign investors. Such limitations may be computed based
on the aggregate trading volume by or holdings of the Fund, the Fund's
investment adviser, its affiliates or their respective clients or other service
providers. The Fund may not be able to sell securities in circumstances where
price, trading or settlement volume limitations have been reached. Foreign
investment in the securities markets of certain emerging market countries is
restricted or controlled to varying degrees which may limit investment in such
countries or increase the administrative costs of such investments. For example,
certain countries may require governmental approval prior to investment by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of the issuer available for purchase by nationals. In addition,
certain countries may restrict or prohibit investment opportunities in issuers
or industries deemed important to national interests. Such restrictions may
affect the market price, liquidity and rights of securities that may be
purchased by the Fund. The repatriation of both investment income and capital
from certain emerging market countries is subject to restrictions such as the
need for governmental consents. Due to restrictions on direct investment in
securities in certain countries, it is anticipated that the Fund may invest in
such countries through other investment funds in such countries.

11
<PAGE>
countries are subject to the risk that the liquidity of a particular investment,
or investments generally, in such countries will shrink or disappear suddenly
and without warning as a result of adverse economic, market or political
conditions or adverse investor perceptions, whether or not accurate. Because of
the lack of sufficient market liquidity, the Fund may incur losses because it
will be required to effect sales at a disadvantageous time and only then at a
substantial drop in price. Investments in emerging market countries may be more
difficult to price precisely because of the characteristics discussed above and
lower trading volumes.

Investors are strongly advised to consider carefully the special risks involved
in investing in developing or emerging market countries, which are in addition
to the risks of investing in foreign securities generally.

RISKS OF INVESTING IN
LOWER-GRADE SECURITIES
Securities which are in the lower-grade categories generally offer higher yields
than are offered by higher-grade securities of similar maturities, but they also
generally involve greater risks, such as greater credit risk, greater market
risk and volatility, greater liquidity concerns and potentially greater manager
risk. Investors should carefully consider the risks of owning shares of a
portfolio which invests in lower-grade securities before investing in the Fund.

Credit risk relates to the issuer's ability to make timely payment of interest
and principal when due. Lower-grade securities are considered more susceptible
to nonpayment of interest and principal or default than higher-grade securities.
Increases in interest rates or changes in the economy may significantly affect
the ability of issuers of lower-grade income securities to pay interest and to
repay principal, to meet projected financial goals or to obtain additional
financing. In the event that an issuer of securities held by the Fund
experiences difficulties in the timely payment of principal and interest and
such issuer seeks to restructure the terms of its borrowings, the Fund may incur
additional expenses and may determine to invest additional assets with respect
to such issuer or the project or projects to which the Fund's securities relate.
Further, the Fund may incur additional expenses to the extent that it is
required to seek recovery upon a default in the payment of interest or the
repayment of principal on its portfolio holdings, and the Fund may be unable to
obtain full recovery on such amounts.

Market risk relates to changes in market value of a security that occur as a
result of variation in the level of prevailing interest rates and yield
relationships in the income securities market and as a result of real or
perceived changes in credit risk. The value of the Fund's investments can be
expected to fluctuate over time. When interest rates decline, the value of a
portfolio invested in fixed income securities generally can be expected to rise.
Conversely, when interest rates rise, the value of a portfolio invested in fixed
income securities generally can be expected to decline. Income securities with
longer maturities, which may have higher yields, may increase or decrease in
value more than income securities with shorter maturities. However, the
secondary market prices of lower-grade securities generally are less sensitive
to changes in interest rate and are more sensitive to general adverse economic
changes or specific developments with respect to the particular issuers than are
the secondary market prices of higher-grade securities. A significant increase
in interest rates or a general economic downturn could severely disrupt the
market for lower-grade securities and adversely affect the market value of such
securities. Such events also could lead to a higher incidence of default by
issuers of lower-grade securities as compared with higher-grade securities. In
addition, changes in credit risks, interest rates, the credit markets or periods
of general economic uncertainty can be expected to result in increased
volatility in the market price of the lower-grade securities in the Fund and
thus in the net asset value of the Fund. Adverse publicity and investor
perceptions, whether or not based on rational analysis, may affect the value,
volatility and liquidity of lower-grade securities.

12
<PAGE>
The markets for lower-grade securities may be less liquid than the markets for
higher-grade securities. Liquidity relates to the ability of a fund to sell a
security in a timely manner at a price which reflects the value of that
security. To the extent that there is no established retail market for some of
the lower-grade securities in which the Fund may invest, trading in such
securities may be relatively inactive. Prices of lower-grade securities may
decline rapidly in the event a significant number of holders decide to sell.
Changes in expectations regarding an individual issuer of lower-grade securities
generally could reduce market liquidity for such securities and make their sale
by the Fund more difficult, at least in the absence of price concessions. The
effects of adverse publicity and investor perceptions may be more pronounced for
securities for which no established retail market exists as compared with the
effects on securities for which such a market does exist. An economic downturn
or an increase in interest rates could severely disrupt the market for such
securities and adversely affect the value of outstanding securities or the
ability of the issuers to repay principal and interest. Further, the Fund may
have more difficulty selling such securities in a timely manner and at their
stated value than would be the case for securities for which an established
retail market does exist.

The Fund's investment adviser is responsible for determining the net asset value
of the Fund, subject to the supervision of the Fund's Board of Directors. During
periods of reduced market liquidity or in the absence of readily available
market quotations for lower-grade securities held in the Fund's portfolio, the
ability to value the Fund's securities becomes more difficult and the judgment
of the Fund's investment adviser may play a greater role in the valuation of the
Fund's securities due to the reduced availability of reliable objective data.

The Fund may invest in securities not producing immediate cash income, including
securities in default, zero-coupon securities or pay-in-kind securities, when
their effective yield over comparable instruments producing cash income make
these investments attractive. Prices on non-cash-paying instruments may be more
sensitive to changes in the issuer's financial condition, fluctuation in
interest rates and market demand/supply imbalances than cash-paying securities
with similar credit ratings and thus may be more speculative. In addition, the
accrued interest income earned on such instruments is included in investment
company taxable income, thereby increasing the required minimum distributions to
shareholders without providing the corresponding cash flow with which to pay
such distributions. The Fund's investment adviser will weigh these concerns
against the expected total returns from such instruments.

The Fund's investments may include securities with the lowest-grade assigned by
the recognized rating organizations and unrated securities of comparable
quality. Securities assigned such ratings include those of companies that are in
default or are in bankruptcy or reorganization. The Fund may invest in or own
securities of companies in various stages of financial restructuring, bankruptcy
or reorganization which are not currently paying interest or dividends, provided
that the total value, at the time of purchase, of all such securities will not
exceed 10% of the value of the Fund's total assets. The Fund may have limited
recourse in the event of default on such securities. Securities of such
companies are regarded by the rating agencies as having extremely poor prospects
of ever attaining any real investment standing and are usually available at deep
discounts from the face values of the instruments. A security purchased at a
deep discount may currently pay a very high effective yield. In addition, if the
financial condition of the issuer improves, the underlying value of the security
may increase, resulting in capital appreciation. If the company defaults on its
obligations or remains in default, or if the plan of reorganization does not
provide sufficient payments for debtholders, the deep discount securities may
stop generating income and lose value or become worthless. The Fund's investment
adviser will balance the benefits of deep discount securities with their risks.
While a broad portfolio of investments may reduce the overall impact of a deep
discount security that is in default or loses its value, the risk cannot be
eliminated.

Many lower-grade income securities are not listed for trading on any national
securities exchange, and many issuers of lower-grade income securities choose
not to have a rating assigned to their obligations by any recognized rating
organization. As a result, the

13
<PAGE>

Fund's portfolio may consist of a higher portion of unlisted or unrated
securities as compared with an investment company that invests primarily in
higher-grade securities. Unrated securities are usually not as attractive to as
many buyers as are rated securities, a factor which may make unrated securities
less marketable. These factors may have the effect of limiting the availability
of the securities for purchase by the Fund and may also limit the ability of the
Fund to sell such securities at their fair value either to meet redemption
requests or in response to changes in the economy or the financial markets.
Further, to the extent the Fund owns or may acquire illiquid or restricted
lower-grade securities, these securities may involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties.

The Fund will rely on its investment adviser's judgment, analysis and experience
in evaluating the creditworthiness of an issue. The amount of available
information about the financial condition of certain lower-grade issuers may be
less extensive than other issuers. In its analysis, the Fund's investment
adviser may consider the credit ratings of recognized rating organizations in
evaluating securities although the investment adviser does not rely primarily on
these ratings. Credit ratings of securities rating organizations evaluate only
the safety of principal and interest payments, not the market risk. In addition,
ratings are general and not absolute standards of quality, and credit ratings
are subject to the risk that the creditworthiness of an issuer may change and
the rating agencies may fail to change such ratings in a timely fashion. A
rating downgrade does not require the Fund to dispose of a security. The Fund's
investment adviser continuously monitors the issuers of securities held in the
Fund. Additionally, since most foreign income securities are not rated, the Fund
will invest in such securities based on the Fund's investment adviser's analysis
without any guidance from published ratings. Because of the number of investment
considerations involved in investing in lower-grade securities and foreign
income securities, achievement of the Fund's investment objectives may be more
dependent upon the investment adviser's credit analysis than is the case with
investing in higher-grade securities.

New or proposed laws may have an impact on the market for lower-grade
securities. The Fund's investment adviser is unable at this time to predict what
effect, if any, legislation may have on the market for lower-grade securities.

The table below sets forth the percentages of the Fund's assets invested during
the fiscal period ended June 30, 2000, in the various rating categories and in
unrated securities determined by the Fund's investment adviser to be of
comparable quality. The percentages are based on the dollar-weighted average of
credit ratings of all debt securities held by the Fund during the fiscal period
computed on a monthly basis.

<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30, 2000
UNRATED SECURITIES OF
RATED SECURITIES COMPARABLE QUALITY
(AS A PERCENTAGE OF (AS A PERCENTAGE OF
RATING CATEGORY PORTFOLIO VALUE) PORTFOLIO VALUE)
<S> <C> <C>
---------------------------------------------------------------------
AAA/Aaa 0.00% 0.39%
....................................................................
AA/Aa 0.00% 0.00%
....................................................................
A/A 0.23% 0.00%
....................................................................
BBB/Baa 3.62% 0.00%
....................................................................
BB/Ba 27.65% 5.84%
....................................................................
B/B 47.54% 4.08%
....................................................................
CCC/Caa 10.65% 0.00%
....................................................................
CC/Ca 0.00% 0.00%
....................................................................
C/C 0.00% 0.00%
....................................................................
D 0.00% 0.00%
....................................................................
Percentage of Rated and
Unrated Securities 89.69% 10.31%
....................................................................
</TABLE>

The percentage of the Fund's assets invested in securities of various grades may
vary from time to time from those listed above.

ADDITIONAL INFORMATION REGARDING
CERTAIN FIXED INCOME SECURITIES
DISCOUNT, ZERO-COUPON AND PAYMENT-IN-KIND SECURITIES. The Fund may invest in
securities sold at a substantial discount from their value at maturity, such as
zero-coupon and payment-in-kind securities, when the Fund's investment adviser
believes the effective yield on such securities over comparable

14
<PAGE>
instruments paying current cash income makes these investments attractive.
Zero-coupon securities are debt obligations that do not entitle the holder to
any periodic payment of interest prior to maturity or a specified date when the
securities begin paying current interest. They are issued and traded at a
discount from their face amounts or par value, which discount varies depending
on the time remaining until cash payments begin, prevailing interest rates,
liquidity of the security and the perceived credit quality of the issuer.
Because such securities do not entitle the holder to any periodic payments of
interest prior to maturity, this prevents the reinvestment of such interest
payments if prevailing interest rates rise. On the other hand, because there are
no periodic interest payments to be reinvested prior to maturity, "zero-coupon"
securities eliminate the reinvestment risk and may lock in a favorable rate of
return to maturity if interest rates drop. Payment-in-kind securities are
securities that pay interest through the issuance of additional securities.
Prices on non-cash-paying instruments may be more sensitive to changes in the
issuer's financial condition, fluctuations in interest rates and market
demand/supply imbalances than cash-paying securities with similar credit
ratings, and thus may be more speculative than are securities that pay interest
periodically in cash. In addition, the amount of non-cash interest income earned
on such instruments is included, for federal income tax purposes, in the Fund's
calculation of income that is required to be distributed to shareholders for the
Fund to maintain its desired federal income tax status (even though such non-
cash paying securities do not provide the Fund with the cash flow with which to
pay such distributions). Accordingly, the Fund may be required to borrow or to
liquidate portfolio securities at a time that it otherwise would not have done
so in order to make such distributions. The Fund's investment adviser will weigh
these concerns against the expected total returns from such instruments.

BRADY BONDS. The Fund may invest in Brady Bonds and other sovereign debt of
countries that have restructured or are in the process of restructuring
sovereign debt pursuant to the Brady Plan. Brady Bonds are typically from a
debtor nation restructuring outstanding external commercial bank indebtedness.
Brady Bonds generally are based on issuers with a history of defaults with
respect to commercial bank loans and therefore are often viewed as speculative.
A more complete description of Brady Bonds is contained in the Fund's Statement
of Additional Information.

SOVEREIGN DEBT. In addition to Brady Bonds, the Fund may invest in sovereign or
sovereign-related debt obligations, including obligations of supranational
entities. Sovereign debt differs from debt obligations of private entities in
that, generally, remedies for defaults must be pursued in the courts of the
defaulting party and the legal recourse in enforcing a sovereign debt is often
limited. At certain times, certain countries (particularly emerging market
countries) have declared a moratoria on the payment of principal and interest on
external debt. Such investments may include participations and assignments of
sovereign bank debt, restructured external debt that has not undergone a
Brady-style debt exchange, and internal government debt.

LOANS. The Fund may invest in fixed and floating rate loans arranged through
private negotiations between an issuer of sovereign or corporate obligations and
one or more financial institutions. The Fund's investments in loans are expected
in most instances to be in the form of participations in loans and assignments
of all or a portion of loans from third parties.

In the case of participations, the Fund will have the right to receive payments
of principal, interest and any fees to which it is entitled only from the lender
selling the participations and only upon receipt by the lender of the payments
from the borrower. In the event of the insolvency of the lender selling a
participation, the Fund may be treated as a general creditor of the lender and
may not benefit from any set-off between the lender and the borrower. The Fund
will acquire participations only if the lender interpositioned between the Fund
and the borrower is determined by the Fund's investment adviser to be
creditworthy.

When the Fund purchases assignments from lenders it will acquire direct rights
against the borrower on the loan. Because assignments are arranged through
private negotiations between potential assignees and potential assignors,
however, the rights and obligations acquired by the Fund as the purchaser of an

15
<PAGE>
assignment may differ from, and be more limited than, those held by the
assigning lender.

The Fund anticipates that such loan interests may be sold only to a limited
number of institutional investors. The lack of a broad secondary market may have
an adverse impact on the value of such securities and the Fund's ability to
dispose of particular assignments or participations when necessary to meet the
Fund's liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the borrower. The lack of a broad
secondary market for assignments and participations also may make it more
difficult for the Fund to value these securities for purposes of valuing the
Fund's portfolio and calculating its net asset value. The Fund monitors the
liquidity of such loan interests and loan interests not considered liquid are
subject to the Fund's limitation on illiquid securities.

PRIVATE PLACEMENTS. The Fund may invest in income securities that are sold in
private placement transactions between their issuers and their purchasers and
that are neither listed on an exchange nor traded in the over-the-counter
secondary market. A significant portion of the high yield, high risk bond market
is privately placed securities or restricted securities sold to qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as
amended. In many cases, privately placed securities will be subject to
contractual or legal restrictions on transfer. As a result of the absence of a
public trading market, privately placed securities may in turn be less liquid
and more difficult to value than publicly traded securities. In addition,
issuers whose securities are not publicly traded may not be subject to the
disclosure and other investor protection requirements that may be applicable if
their securities were publicly traded. The Fund monitors the liquidity of such
securities and securities not considered liquid are subject to the Fund's
limitation on illiquid securities. Notwithstanding the foregoing, the Fund may
not invest more than 10% of its total assets in securities subject to legal or
contractual restrictions on resale. Certain of the Fund's direct investments,
particularly in emerging market countries, may include investments in smaller,
less seasoned companies, which may involve greater risks. These companies may
have limited product lines, markets or financial resources, or they may be
dependent on a limited management group.

STRUCTURED INVESTMENTS. The Fund may invest a portion of its assets in
"structured investments" which are interests in entities organized and operated
for the purpose of restructuring the investment characteristics of other
securities. This type of restructuring involves the deposit with or purchase by
an entity of income securities (such as mortgages, bank loans or Brady Bonds)
and the issuance by that entity of one or more classes of securities, backed by,
or representing interests in, the underlying instruments. The cash flow on the
underlying instruments may be apportioned among the newly issued securities to
create different investment characteristics such as varying maturities, payment
priorities and interest rate provisions.

OTHER INVESTMENTS
AND RISK FACTORS

DERIVATIVE INSTRUMENTS. The Fund may, but is not required to, use various
investment strategic transactions described below to earn income, facilitate
portfolio management and mitigate risks. Although the Fund's investment adviser
seeks to use the practices to further the Fund's investment objective, no
assurance can be given that these practices will achieve this result.

16
<PAGE>
against possible adverse changes in the market value of securities held in or to
be purchased for the Fund's portfolio, protect the Fund's unrealized gains,
facilitate the sale of certain securities for investment purposes, protect
against changes in currency exchange rates or to adjust the exposure to a
particular currency, manage the effective maturity or duration of the Fund's
portfolio, establish positions in the derivatives markets as a substitute for
purchasing or selling particular securities, including, for example, when the
Fund adjusts its exposure to a market in response to changes in investment
strategy, when doing so provides more liquidity than the direct purchase of the
securities underlying such derivatives, when the Fund is restricted from
directly owning the underlying securities due to foreign investment restrictions
or other reasons, or when doing so provides a price advantage over purchasing
the underlying securities directly, either because of a pricing differential
between the derivatives and securities markets or because of lower transaction
costs associated with the derivatives transaction. The Fund may invest up to
33 1/3% of its total assets in Strategic Transactions for non-hedging purposes
(measured by the aggregate notional amount of outstanding derivatives). In
addition, the Fund may invest up to 20% of its total assets in futures contracts
and options on futures contracts (measured by the aggregate notional amount of
such outstanding contracts).

OTHER PRACTICES. For cash management purposes, the Fund may engage in repurchase
agreements with broker-dealers, banks and other financial institutions to earn a
return on temporarily available cash. Such transactions are subject to the risk
of default by the other party.

17
<PAGE>
party to complete the transaction may result in the Fund missing the opportunity
of obtaining a price or yield considered to be advantageous. The Fund will
engage in when-issued and delayed delivery transactions for the purpose of
acquiring securities consistent with the Fund's investment objectives and
policies and not for the purpose of investment leverage.

The Fund is authorized to borrow money from banks and engage in reverse
repurchase agreements in an aggregate amount up to 33 1/3% of the Fund's total
assets (including the amount borrowed) for investment purposes. The use of such
transactions to purchase additional securities is known as "leverage." Leverage
transactions create an opportunity for increased net income but, at the same
time, may increase the volatility of the Fund's net asset value as a result of
fluctuations in market interest rates and increase the risk of the Fund's
portfolio. The principal amount of these transactions is fixed when the
transaction is opened, but the Fund's assets may change in value during the time
these transactions are outstanding. As a result, interest expenses and other
costs from these transactions may exceed the interest income and other revenues
earned from portfolio assets, and the net income of the Fund may be less than if
these transactions were not used. Borrowing may be done on a secured or
unsecured basis. The Fund may pay various fees and expenses in connection with
the borrowing, and the loan agreements may contain covenants or restrictions on
certain investment practices in which the Fund may otherwise be permitted to
engage.

Reverse repurchase agreements are transactions in which the Fund sells certain
securities concurrently with an agreement to repurchase the same securities at a
later date at a fixed price. During the reverse repurchase agreement period, the
Fund continues to receive principal and interest payments on such securities.
Reverse repurchase agreements involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
the Fund has sold but is obligated to repurchase under the agreement.

The Fund may, from time to time, make short sales without limitation of
securities it owns or has the right to acquire through conversion or exchange of
other securities it owns. A short sale is a transaction in which the Fund sells
a security it does not own in anticipation that the market price of that
security will decline. A short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain, at no added cost,
securities identical to those sold short. When the Fund makes a short sale, it
must borrow the security sold short and deliver it to the broker-dealer through
which it made the short sale in order to satisfy its obligation to deliver the
security upon conclusion of the sale. The Fund is obligated to collateralize its
obligation to replace the borrowed security with cash or other liquid
securities. The Fund may have to pay a fee to borrow particular securities and
is often obligated to pay over any payments received on such borrowed
securities. If the price of the security sold short increases between the time
of the short sale and the time the Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a
capital gain. Although the Fund's gain is limited to the price at which it sold
the security short, its potential loss is theoretically unlimited. The short
sale of a security is considered a speculative investment technique.

The Fund may invest in securities indirectly through investments in other
investment companies. Such

18
<PAGE>

investments are commonly used when direct investments in certain countries is
not permitted by foreign investors. Investments in other investment companies
may involve duplication of management fees and certain other expenses.

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.

The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for income or capital growth
has lessened, or for other reasons. The portfolio turnover rate may vary from
year to year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs) which would
adversely impact a fund's performance. Higher portfolio turnover may result in
the realization of more short-term capital gains than if a fund had lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, obligations of foreign
sovereignties, prime commercial paper, certificates of deposit, bankers'
acceptances and other obligations of domestic banks and in investment grade
corporate debt securities. Under normal market conditions, the potential for
high current income and capital appreciation on these securities will tend to be
lower than the potential for high current income and capital appreciation on
other securities that may be owned by the Fund. In taking such a defensive
position, the Fund would temporarily not be pursuing and may not achieve its
investment objective.

INVESTMENT ADVISORY
SERVICES

INVESTMENT ADVISER

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
-------------------------------------
<S> <C>
First $500 million 0.75%
....................................
Next $500 million 0.70%
....................................
Over $1 billion 0.65%
....................................
</TABLE>

Applying this fee schedule, the effective advisory fee rate was 0.75% of the
Fund's average daily net assets for the Fund's fiscal year ended June 30, 2000.
The

19
<PAGE>

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

Morgan Stanley Dean Witter Investment Management Inc. is the Fund's investment
subadviser (the "Subadviser"). The Subadviser is a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. The Subadviser conducts a worldwide portfolio
management business and provides a broad range of portfolio management services
to customers in the United States and abroad. At September 30, 2000, the
Subadviser, together with its affiliated institutional asset management
companies, managed assets of approximately $178 billion, including assets under
fiduciary advice. The Subadviser's principal office is located at 1221 Avenue of
the Americas, New York, New York 10020. On December 1, 1998, Morgan Stanley
Asset Management Inc. changed its name to Morgan Stanley Dean Witter Investment
Management Inc. but continues to do business in certain instances using the name
Morgan Stanley Asset Management.

PORTFOLIO MANAGEMENT. Robert Angevine, Gordon W. Loery, Stephen F. Esser,
Abigail L. McKenna and Deanna L. Loughnane are responsible as co-managers for
the day-to-day management of the Fund's investment portfolio.

Mr. Angevine, a Principal and portfolio manager for high yield investments,
joined the Subadviser in October 1998. He has shared primary management
responsibility for the Fund since it commenced operations. Prior to joining the
Subadviser, he spent over eight years at Prudential Insurance where he was
responsible for one of the largest open-end high yield mutual funds in the
country. His other experience includes international treasury operations at a
major pharmaceutical company and commercial banking. Mr. Angevine received a
B.A. in Economics from Lafayette College and an M.B.A. from Fairleigh Dickinson
University.

20
<PAGE>

Mr. Loery, a Principal, joined the Subadviser as a Fixed Income Analyst in 1990.
He has shared primary responsibility for managing the Fund's assets since April
1999. Previously, he worked in Fixed Income at Alex Brown and Mabon Nugent and
managed commodity pools for a private firm. He has a degree in economics from
Cornell University, holds the Chartered Financial Analyst designation and is a
member of the New York Society of Securities Analysts.

Mr. Esser, a Managing Director, joined the Subadviser in 1996 and has been a
portfolio manager with Miller Anderson & Sherrerd, LLP ("MAS") since 1988. He
has shared primary responsibility for managing the Fund's assets since October
1998. He assumed responsibility for the MAS-advised MAS Fund's High Yield
Portfolio in 1989. Mr. Esser is a member of the New York Society of Security
Analysts and has a B.S. degree (Summa Cum Laude; Phi Beta Kappa) from the
University of Delaware.

Ms. McKenna, a Principal, joined the Subadviser in 1996. Ms. McKenna has shared
primary responsibility for managing the Fund's assets since 1996. She focuses
primarily on the trading and management of the emerging markets debt portfolios.
Prior to joining the Subadviser, she was a senior portfolio manager at MIMCO and
a Limited Partner at Weiss Peck & Greer from 1991 to 1995 where she was
responsible for the trading and management of Corporate Bond Portfolios. She
holds a B.A. in International Relations from Georgetown University and holds a
Chartered Financial Analyst designation.

Ms. Loughnane, a Principal, joined the Subadviser as a financial analyst in
1997. Ms. Loughnane has shared primary responsibility for managing the Fund's
assets since January 2000. Prior to joining the Subadviser, Ms. Loughnane was a
Vice President and Senior Corporate Bond Analyst for Putnam Investments from
1993 to 1997.

PURCHASE OF SHARES

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which the class's distribution fee and/ or the service fee is paid,
(iii) each class of shares has different exchange privileges, (iv) certain
classes of shares are subject to a conversion feature and (v) certain classes of
shares have different shareholder service options available.

21
<PAGE>
and Class C Shares and the differential in the dividends that may be paid on
each class of shares.

The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Directors reserves the right to calculate the net
asset value per share and adjust the offering price more frequently than once
daily if deemed desirable. Net asset value per share for each class is
determined by dividing the value of the Fund's portfolio securities, cash and
other assets (including accrued interest) attributable to such class, less all
liabilities (including accrued expenses) attributable to such class, by the
total number of shares of the class outstanding. Such computation is made by
using prices as of the close of trading on the Exchange. Securities listed on a
securities exchange for which market quotations are available are valued at
their closing price. If no closing price is available, such securities will be
valued at the last quoted sale price on the day the valuation is made. Price
information on listed securities is taken from the exchange where the security
is primarily traded. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are not readily available are valued
at the average of the mean of current bid and asked prices obtained from
reputable brokers.

Bonds and other fixed income securities are valued according to the broadest and
most representative market, which will ordinarily be the over-the-counter
market. Net asset value includes interest on fixed income securities, which is
accrued daily. In addition, bonds and other fixed income securities may be
valued on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities. The prices
provided by a pricing service are determined without regard to bid or last sale
prices but take into account institutional size trading in similar groups of
securities and any developments related to the specific securities. Securities
not priced in this manner are valued at the most recent quoted bid price, or,
when stock exchange valuations are used, at the latest quoted sale price on the
day of valuation. If there is no such reported sale, the latest quoted bid price
will be used. Securities with remaining maturities of 60 days or less are valued
at amortized cost, which approximates market value. In the event that amortized
cost does not approximate market value, market prices as determined above will
be used. The "amortized cost" method of valuation does not take into account
unrealized gains or losses. This method involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.

The value of other assets and securities for which no quotations are readily
available (including illiquid and unlisted foreign securities) and those
securities for which it is inappropriate to determine prices in accordance with
the above procedures are determined in good faith by the Adviser at fair value
using methods determined by the Fund's Board of Directors.

22
<PAGE>
If events materially affecting the value of foreign portfolio securities or
other portfolio securities occur between the time when their price is determined
and the time when the Fund's net asset value is calculated, such securities may
be valued at fair value as determined in good faith by the Adviser based in
accordance with procedures established by the Fund's Board of Directors. For
purposes of calculating net asset value per share, all assets and liabilities
initially expressed in foreign currencies will be converted into U.S. dollars at
the mean of the bid price and asked price of such currencies against the U.S.
dollar as quoted by a major bank.

The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution and service fees and other expenses of the Fund associated with
that class of shares. To assist investors in comparing classes of shares, the
tables under the Prospectus heading "Fees and Expenses of the Fund" provide a
summary of sales charges and expenses and an example of the sales charges and
expenses of the Fund applicable to each class of shares.

23
<PAGE>
Fund may be sold in foreign countries where permissible.

CLASS A SHARES
Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 4.75% of the offering price (or 4.99% of the net amount
invested), reduced on investments of $100,000 or more as follows:

CLASS A SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
AS % OF AS % OF
SIZE OF OFFERING NET AMOUNT
INVESTMENT PRICE INVESTED
<S> <C> <C>
-----------------------------------------------------
Less than $100,000 4.75% 4.99%
....................................................
$100,000 but less than
$250,000 3.75% 3.90%
....................................................
$250,000 but less than
$500,000 2.75% 2.83%
....................................................
$500,000 but less than
$1,000,000 2.00% 2.04%
....................................................
$1,000,000 or more * *
....................................................
</TABLE>

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES
SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
<S> <C>
--------------------------------------------------------------------------------
First 4.00%
...............................................................................
Second 4.00%
...............................................................................
Third 3.00%
...............................................................................
Fourth 2.50%
...............................................................................
Fifth 1.50%
...............................................................................
Sixth and after None
...............................................................................
</TABLE>

In determining whether a contingent deferred sales charge applies to a
redemption, it is assumed that the shares being redeemed first are any shares in
the

24
<PAGE>

shareholder's Fund account that are not subject to a contingent deferred sales
charge, followed by shares held the longest in the shareholder's account.

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

CONVERSION FEATURE

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

25
<PAGE>

account as described under the Prospectus heading "Redemption of Shares."
Subject to certain limitations, a shareholder who has redeemed Class C Shares of
the Fund may reinvest in Class C Shares at net asset value with credit for any
contingent deferred sales charge if the reinvestment is made within 180 days
after the redemption. For a more complete description of contingent deferred
sales charge waivers, please refer to the Fund's Statement of Additional
Information or contact your authorized dealer.

QUANTITY DISCOUNTS

26
<PAGE>
Fund or the Distributor. The Fund reserves the right to modify or terminate
these arrangements at any time.

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.

27
<PAGE>
other than distributions taken to correct an excess contribution.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.

28
<PAGE>
REDEMPTION OF
SHARES

29
<PAGE>

authorized dealers to transmit redemption requests received by them to the
Distributor so they will be received prior to such time. Redemptions completed
through an authorized dealer may involve additional fees charged by the dealer.

DISTRIBUTIONS FROM
THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Interest earned from investments is the Fund's main source of net
investment income. The Fund's present policy, which may be changed at any time
by the Fund's Board of Directors, is to distribute all, or substantially all, of
this net investment income at least monthly as dividends to shareholders.
Dividends are automatically applied to purchase

30
<PAGE>

additional shares of the Fund at the next determined net asset value unless the
shareholder instructs otherwise.

SHAREHOLDER SERVICES

31
<PAGE>
To be eligible for exchange, shares of the Fund must have been registered in the
shareholder's name for at least 30 days prior to an exchange. Shares of the Fund
registered in a shareholder's name for less than 30 days may only be exchanged
upon receipt of prior approval of the Adviser. It is the policy of the Adviser,
under normal circumstances, not to approve such requests.

A shareholder wishing to make an exchange may do so by sending a written request
to Investor Services, by contacting the telephone transaction line at
(800) 421-5684, through FundInfo-Registered Trademark- (automated telephone
system) at (800) 847-2424 or through the internet at www.vankampen.com. A
shareholder automatically has these exchange privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. Van Kampen Investments and its subsidiaries, including Investor Services,
and the Fund employ procedures considered by them to be reasonable to confirm
that instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape-recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, none of Van Kampen Investments, Investor Services or
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. If the exchanging shareholder does not have an account
in the fund whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gain dividend options (except
dividend diversification) and authorized dealer of record as the account from
which shares are exchanged, unless otherwise specified by the shareholder. In
order to establish a systematic withdrawal plan for the new account or reinvest
dividends from the new account into another fund, however, an exchanging
shareholder must submit a specific request. The Fund reserves the right to
reject any order to acquire its shares through exchange. In addition, the Fund
and other Participating Funds may restrict exchanges by shareholders engaged in
excessive trading by limiting or disallowing the exchange privilege to such
shareholders. For further information on these restrictions see the Fund's
Statement of Additional Information. The Fund may modify, restrict or terminate
the exchange privilege at any time on 60 days' notice to its shareholders of any
termination or material amendment.

32
<PAGE>

of the funds involved in the request are priced will be processed on the next
business day in the manner described herein.

FEDERAL INCOME
TAXATION

33
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information for the fiscal year ended June 30, 2000 has been audited by Deloitte
& Touche LLP, independent auditors, whose report, along with the Fund's most
recent financial statements, is included in the Statement of Additional
Information and may be obtained by shareholders without charge by calling the
telephone number on the back cover of this prospectus. The information for the
fiscal years ended June 30, 1999, 1998, 1997, 1996, and for the fiscal period
August 1, 1995 (commencement of offering for Class B Shares) to June 30, 1996
has been audited by PricewaterhouseCoopers LLP. This information should be read
in conjunction with the financial statements and notes thereto included in the
Statement of Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES
YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# 1998# 1997 1996
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 9.90 $ 12.46 $ 14.26 $ 12.47 $ 11.57
Income From Investment Operations
Net Investment Income................. 1.14 1.06 1.15 1.25 1.36
Net Realized and Unrealized
Gain/Loss........................... (0.06) (2.51) (0.67) 2.30 0.80
------- ------- ------- ------- -------
Total From Investment Operations........ 1.08 (1.45) 0.48 3.55 2.16
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income................. (1.05) (1.10) (1.09) (1.25) (1.26)
Net Realized Gain..................... -- -- (1.19) (0.51) --
In Excess of Net Realized Gain........ -- (0.01) -- -- --
------- ------- ------- ------- -------
Total Distributions................... (1.05) (1.11) (2.28) (1.76) (1.26)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.......... $ 9.93 $ 9.90 $ 12.46 $ 14.26 $ 12.47
======= ======= ======= ======= =======
TOTAL RETURN (1)........................ 11.39% (11.14%) 3.40% 30.29% 19.61%
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net assets, End of Period (000's)....... $44,932 $58,506 $91,579 $76,439 $41,493
Ratio of Expenses to Average Net
Assets.................................. 1.60% 1.45% 1.45% 1.52% 1.55%
Ratio of Net Investment Income to
Average Net Assets...................... 11.41% 10.55% 8.36% 9.73% 11.95%
Portfolio Turnover Rate................. 119% 121% 156% 157% 220%
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income.............................. $ -- $ -- $ -- $ -- $ 0.02
Ratios Before Expense Reductions
Expenses to Average Net Assets........ -- -- -- -- 1.69%
Net Investment Income to Average Net
Assets.............................. -- -- -- -- 11.81%
Ratio of Net Expenses to Average Net
Assets excluding country tax expense
and interest expense.................. 1.46% -- -- -- --

<CAPTION>
CLASS B SHARES
YEAR ENDED JUNE 30, AUGUST 1, 1995+ TO
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# 1998# 1997 JUNE 30, 1996
---------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 9.86 $ 12.40 $ 14.20 $ 12.44 $ 11.63
Income From Investment Operations
Net Investment Income................. 1.06 0.98 1.04 1.07 1.18
Net Realized and Unrealized
Gain/Loss........................... (0.06) (2.50) (0.65) 2.35 0.72
------- -------- -------- ------- -------
Total From Investment Operations........ 1.00 (1.52) 0.39 3.42 1.90
------- -------- -------- ------- -------
DISTRIBUTIONS
Net Investment Income................. (0.97) (1.01) (1.00) (1.15) (1.09)
Net Realized Gain..................... -- -- (1.19) (0.51) --
In Excess of Net Realized Gain........ -- (0.01) -- -- --
------- -------- -------- ------- -------
Total Distributions................... (0.97) (1.02) (2.19) (1.66) (1.09)
------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD.......... $ 9.89 $ 9.86 $ 12.40 $ 14.20 $ 12.44
======= ======== ======== ======= =======
TOTAL RETURN (1)........................ 10.58% (11.82%) 2.63% 29.14% 17.07%*
======= ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net assets, End of Period (000's)....... $90,872 $107,013 $146,401 $78,340 $26,174
Ratio of Expenses to Average Net
Assets.................................. 2.35% 2.20% 2.20% 2.27% 2.30%
Ratio of Net Investment Income to
Average Net Assets...................... 10.65% 9.81% 7.64% 8.86% 12.06%
Portfolio Turnover Rate................. 119% 121% 156% 157% 220%*
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income.............................. $ -- $ -- $ -- $ -- $ 0.02
Ratios Before Expense Reductions
Expenses to Average Net Assets........ -- -- -- -- 2.47%
Net Investment Income to Average Net
Assets.............................. -- -- -- -- 11.89%
Ratio of Net Expenses to Average Net
Assets excluding country tax expense
and interest expense.................. 2.21% -- -- -- --

<CAPTION>
CLASS C SHARES
YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA AND RATIOS 2000# 1999# 1998# 1997 1996
---------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 9.87 $ 12.40 $ 14.21 $ 12.45 $ 11.58
Income From Investment Operations
Net Investment Income................. 1.06 0.98 1.04 1.16 1.30
Net Realized and Unrealized
Gain/Loss........................... (0.07) (2.49) (0.66) 2.26 0.77
------- ------- ------- ------- -------
Total From Investment Operations........ 0.99 (1.51) 0.38 3.42 2.07
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income................. (0.97) (1.01) (1.00) (1.15) (1.20)
Net Realized Gain..................... -- -- (1.19) (0.51) --
In Excess of Net Realized Gain........ -- (0.01) -- -- --
------- ------- ------- ------- -------
Total Distributions................... (0.97) (1.02) (2.19) (1.66) (1.20)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.......... $ 9.89 $ 9.87 $ 12.40 $ 14.21 $ 12.45
======= ======= ======= ======= =======
TOTAL RETURN (1)........................ 10.57% (11.83%) 2.55% 29.12% 18.71%
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net assets, End of Period (000's)....... $33,474 $40,616 $60,197 $41,709 $28,094
Ratio of Expenses to Average Net
Assets.................................. 2.35% 2.20% 2.20% 2.27% 2.30%
Ratio of Net Investment Income to
Average Net Assets...................... 10.65% 9.81% 7.62% 9.04% 11.40%
Portfolio Turnover Rate................. 119% 121% 156% 157% 220%
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income.............................. $ -- $ -- $ -- $ -- $ 0.04
Ratios Before Expense Reductions
Expenses to Average Net Assets........ -- -- -- -- 2.44%
Net Investment Income to Average Net
Assets.............................. -- -- -- -- 11.26%
Ratio of Net Expenses to Average Net
Assets excluding country tax expense
and interest expense.................. 2.21% -- -- -- --
</TABLE>

34
<PAGE>

APPENDIX -- DESCRIPTION OF SECURITIES RATINGS

STANDARD & POOR'S -- A brief description of the applicable Standard & Poor's
(S&P) rating symbols and their meanings (as published by S&P) follow:

The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.

The ratings are based, in varying degrees, on the following considerations:

1. Likelihood of payment -- capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of the
obligation:

2. Nature of and provisions of the obligation; and

1. LONG-TERM CREDIT RATINGS -- INVESTMENT GRADE

AAA: An obligation rated "AAA" has the highest rating assigned by S&P. Capacity
to meet its financial commitment on the obligation is extremely strong.

AA: An obligation rated "AA" differs from the highest rated issues only in small
degree. Capacity to meets its financial commitment on the obligation is very
strong.

SPECULATIVE GRADE

BB, B, CCC, CC, C: Obligations rated "BB", "B", "CCC", "CC" and "C" are regarded
as having significant speculative characteristics. "BB" indicates the least
degree of speculation and "C" the highest. While such obligations will likely
have some quality and protective characteristics, these may be outweighed by
large uncertainties or major exposures to adverse conditions.

A-1
<PAGE>

business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

CC: An obligation rated "CC" is currently highly vulnerable to nonpayment.

C: A subordinated debt or preferred stock obligation rated "C" is currently
highly vulnerable to nonpayment. the "C" rating may be used to cover a situation
where a bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

2. COMMERCIAL PAPER

A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.

Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:

C: This rating is assigned to short-term debt obligations currently vulnerable
to nonpayment and is

A-2
<PAGE>

dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.

MOODY'S INVESTORS SERVICE -- a brief description of the applicable Moody's
Investors Service (Moody's) rating symbols and their meanings (as published by
Moody's Investors Service) follows:

1. LONG-TERM DEBT

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

A-3
<PAGE>

Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the issue
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.

ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that are not rated as a
matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not published in
Moody's publications.

2. SHORT-TERM DEBT

Moody's short-term issuer ratings are opinions of the ability of issuers to
honor senior financial obligations and contracts. These obligations have an
original maturity not exceeding one year unless explicitly noted.

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

-- Leading market positions in well-established industries.

-- High rates of return on funds employed.

-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

-- Well-established access to a range of financial markets and assured sources
of alternate liquidity.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

3. PREFERRED STOCK

Preferred stock rating symbols and their definitions are as follows:

A-4
<PAGE>

aa: An issue which is rated "aa" is considered a high-grade preferred stock.
This rating indicates that there is a reasonable assurance the earnings and
asset protection will remain relatively well maintained in the foreseeable
future.

caa: An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.

ca: An issue which is rated "ca" is speculative in a high degree and is likely
to be in arrears on dividends with little likelihood of eventual payment.

c: This is the lowest rated class of preferred or preference stock. Issues so
rated can thus be regarded as having extremely poor prospects of ever attaining
any real investment standing.

A-5
<PAGE>
BOARD OF DIRECTORS
AND OFFICERS
BOARD OF DIRECTORS

OFFICERS

Richard F. Powers, III*
PRESIDENT

Stephen L. Boyd*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER

A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY

John H. Zimmermann, III*
VICE PRESIDENT

Michael H. Santo*
VICE PRESIDENT

Richard A. Ciccarone*
VICE PRESIDENT

John R. Reynoldson*
VICE PRESIDENT

Joseph P. Stadler*
VICE PRESIDENT

John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER

* "Interested Persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

VAN KAMPEN WORLDWIDE HIGH INCOME FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT ADVISER AND ADMINISTRATOR
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Worldwide High Income Fund

CUSTODIAN
THE CHASE MANHATTAN BANK
3 MetroTech Center
Brooklyn, NY 11245
Attn: Van Kampen Worldwide High Income Fund

LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601

<PAGE>

VAN KAMPEN
WORLDWIDE HIGH
INCOME FUND

PROSPECTUS

OCTOBER 27, 2000

A Statement of Additional Information, which contains more details about the
Fund, is incorporated by reference in its entirety into this prospectus.

[LOGO]

THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7140.

MSWW PRO 10/00

#65132

<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN SERIES FUND, INC.

Van Kampen Series Fund, Inc. (the "Company") is an open-end management
investment company. The Company currently consists of the following seventeen
investment portfolios designed to offer a range of investment choices (each, a
"Fund" and collectively, the "Funds"): Van Kampen American Value Fund, Van
Kampen Asian Growth Fund, Van Kampen Emerging Markets Debt Fund, Van Kampen
Emerging Markets Fund, Van Kampen Equity Growth Fund, Van Kampen European Equity
Fund, Van Kampen Focus Equity Fund (formerly known as Van Kampen Aggressive
Equity Fund), Van Kampen Global Equity Allocation Fund, Van Kampen Global Equity
Fund, Van Kampen Growth and Income Fund II, Van Kampen International Magnum
Fund, Van Kampen Japanese Equity Fund, Van Kampen Latin American Fund, Van
Kampen Mid Cap Growth Fund, Van Kampen Tax Managed Global Franchise Fund
(formerly known as Van Kampen Global Franchise Fund), Van Kampen Value Fund and
Van Kampen Worldwide High Income Fund. For ease of reference, the words "Van
Kampen" which begin the name of each Fund, are not used hereinafter. Each Fund
is organized as a diversified series of the Company, except for Emerging Markets
Debt Fund, Emerging Markets Fund, Focus Equity Fund, International Magnum Fund,
Latin American Fund and Worldwide High Income Fund, each of which is organized
as a non-diversified series of the Company.

This Statement of Additional Information is not a prospectus. This Statement
of Additional Information should be read in conjunction with each Fund's
prospectus (the "Prospectus") dated as of October 27, 2000 for all Funds. This
Statement of Additional Information does not include all the information that a
prospective investor should consider before purchasing shares of a Fund.
Investors should obtain and read the Prospectus of a Fund prior to purchasing
shares of such Fund. A Prospectus for each of the Funds may be obtained without
charge by writing or calling Van Kampen Funds Inc. at 1 Parkview Plaza,
P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 or (800) 341-2911 (or
(800) 421-2833 for the hearing impaired).

------------------------------------

TABLE OF CONTENTS
------------------------------------

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
General Information......................................... 2
Investment Objectives, Policies and Risks................... 7
Investment Restrictions..................................... 24
Directors and Officers...................................... 27
Investment Advisory Agreements.............................. 34
Other Agreements............................................ 36
Distribution and Service.................................... 37
Transfer Agent.............................................. 45
Portfolio Transactions and Brokerage Allocation............. 45
Shareholder Services........................................ 49
Redemption of Shares........................................ 50
Contingent Deferred Sales Charge -- Class A................. 50
Waiver of Class B and Class C Contingent Deferred Sales
Charges.................................................... 51
Taxation.................................................... 52
Performance Information..................................... 55
Other Information........................................... 58
Appendix A -- Description of Securities Ratings............. A-1
Reports of Independent Auditors, Financial Statements and
Notes to Financial Statements.............................. F-1
</TABLE>

This Statement of Additional Information is dated October 27, 2000.

1
<PAGE>
GENERAL INFORMATION

The Company is a corporation established under the laws of the state of
Maryland by Articles of Incorporation dated August 12, 1992 (the "Articles").
The Articles permit the Board of Directors to create one or more separate
investment portfolios and issue a series of shares for each portfolio. The
Articles also permit the Board of Directors to create multiple classes of shares
for each series. The Company's name at the time of its organization was Morgan
Stanley Series Fund, Inc. The company changed its name to Van Kampen Series
Fund, Inc. in July 1998. Similarly, each Fund described herein at the time of
its organization began its name with the words "Morgan Stanley" and each Fund
changed its name to begin with the words "Van Kampen" in July 1998 (except for
the Equity Growth Fund which made this name change in June 1998 and the Global
Franchise Fund which has always had Van Kampen in its name since its
organization in June 1998 and added the words "Tax Managed" to its name in March
2000).

Van Kampen Investment Advisory Corp. ("Advisory Corp.") is the investment
adviser (the "Adviser") and the administrator (the "Administrator") for the
Funds. Morgan Stanley Dean Witter Investment Management Inc. ("MSDWIM") is a
sub-adviser (a "Sub-Adviser") to the Funds, other than Van Kampen Mid Cap Growth
Fund and Van Kampen Value Fund. Miller, Anderson & Sherrard, LLP ("MAS") is a
sub-adviser (a "Sub-Adviser") to Van Kampen Mid Cap Growth Fund and Van Kampen
Value Fund. The Funds are distributed by Van Kampen Funds Inc. (the
"Distributor") and the Funds receive certain shareholder services from Van
Kampen Investor Services Inc. ("Investor Services"). Other service providers for
the Funds are described herein under "Other Agreements" or "Other Information".

Advisory Corp., the Distributor, and Investor Services are wholly owned
subsidiaries of Van Kampen Investments Inc. ("Van Kampen Investments"), which is
an indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co. ("Morgan
Stanley Dean Witter"). MSDWIM and MAS are wholly owned subsidiaries of Morgan
Stanley Dean Witter. The principal office of the Company, each Fund, the
Adviser, the Distributor and Van Kampen Investments is located at 1 Parkview
Plaza, Oakbrook Terrace, Illinois 60181-5555. The principal office of Investor
Services is located at 7501 Tiffany Springs Parkway, Kansas City, Missouri
64153. The principal office of MSDWIM is located at 1221 Avenue of the Americas,
New York, New York 10020. The principal office of MAS is located at One Tower
Bridge, West Conshocken, Pennsylvania 19428.

Morgan Stanley Dean Witter is a preeminant global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.

As of the date of this Statement of Additional Information, the authorized
capitalization of the Company consists of 20,250,000,000 shares of common stock,
par value $0.001 per share, which can be divided into series, such as the Funds,
and further subdivided into classes of each series. Each share represents an
equal proportionate interest in the assets of the series with each other share
in such series and no interest in any other series. No series is subject to the
liabilities of any other series.

Each Fund currently offers three classes of shares, designated Class A
Shares, Class B Shares and Class C Shares. Other classes may be established from
time to time in accordance with provisions of the Articles. Each class of shares
of a Fund generally is identical in all respects except that each class bears
certain distribution expenses and has exclusive voting rights with respect to
its distribution fee. Shares of the Company entitle their holders to one vote
per share; however, separate votes are taken by each series on matters affecting
an individual series and separate votes are taken by each class of a series on
matters affecting an individual class of such series. For example, a change in
investment policy for a series would be voted upon by shareholders of only the
series involved and a change in the distribution fee for a class of a series
would be voted upon by shareholders of only the class of such series involved.
Except as otherwise described in the Prospectus or herein, shares do not have
cumulative voting rights, preemptive rights or any conversion, subscription or
exchange rights.

The Company does not contemplate holding regular meetings of shareholders to
elect Directors or otherwise. Each Fund will assist shareholders in
communicating with other shareholders of such Fund to the extent required by the
Investment Company Act of 1940, as amended (the "1940 Act"), or rules or
regulations promulgated by the Securities and Exchange Commission ("SEC").

In the event of liquidation, each of the shares of each Fund is entitled to
its portion of all of such Fund's net assets after all debts and expenses of the
Fund have been paid. Since Class B Shares and Class C Shares have higher
distribution fees and transfer agency costs, the liquidation proceeds to holders
of Class B Shares and Class C Shares are likely to be lower than to holders of
Class A Shares.

Statements contained in this Statement of Additional Information as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information forms a part, each such statement being
qualified in all respects by such reference.
2
<PAGE>

As of October 6, 2000, no person was known by the Company to own
beneficially or to hold of record 5% or more of the outstanding Class A Shares,
Class B Shares or Class C Shares of any Fund, except as follows:

<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE OF
FUND NAME & ADDRESS OF HOLDER OWNERSHIP CLASS OWNERSHIP
---- ------------------------ ---------- -------- -------------
<S> <C> <C> <C> <C>
American Value Fund MLPF&S For the Sole Benefit 6,586,131 A 36.32 %
of its customers
Attn Fund Administration 97B64
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Edward Jones & CO 992,355 A 5.47 %
Attn: Mutual Fund
Shareholder Accounting
201 Progress Pkwy
Maryland Hts., MO 63043-3009
MLPF&S For the Sole Benefit 2,344,121 B 15.43 %
of its customers
Attn Fund Administration 97B65
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Van Kampen Trust Company 1,010,316 B 6.65 %
2800 Post Oak Blvd.
Houston, TX 77056
MLPF&S For the Sole Benefit 1,851,214 C 22.84 %
of its customers
Attn Fund Administration 97CSB
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Asian Growth Fund Van Kampen Trust Company 172,418 B 5.04 %
2800 Post Oak Blvd
Houston, TX 77056
MLPF&S For the Sole Benefit 232,532 B 6.79 %
of its customers
Attn Fund Administration 97FK4
4800 Deer Lake Drive E 2nd Floor
Jacksonville, FL 32246-6484
Emerging Markets Fund Charles Schwab & Co Inc 2,022,853 A 24.18 %
Exclusive Benefit of its customers
101 Montgomery Street
San Francisco, CA 94104-4122
MLPF&S for the sole benefit of 558,742 A 6.68 %
Its customers 167,085 C 6.54 %
Attn Fund Administration 97FK6
4800 Deer Lake Drive 2nd fl
Jacksonville FL 32246-6584
Van Kampen Trust Company 491,744 A 5.88 %
2800 Post Oak Blvd 407,052 B 8.36 %
Houston, TX 77056
Equity Growth Fund Edward Jones & CO 656,128 A 22.21 %
Attn: Mutual Fund 159,874 C 13.43 %
Shareholder Accounting
201 Progress Pkwy
Maryland Hts., MO 63043-3009
</TABLE>

3
<PAGE>

<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE OF
FUND NAME & ADDRESS OF HOLDER OWNERSHIP CLASS OWNERSHIP
---- ------------------------ ---------- -------- -------------
<S> <C> <C> <C> <C>
MLPF&S For the Sole Benefit 227,654 B 6.29 %
of its customers
Attn Fund Administration 97238
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Van Kampen Trust Company 548,495 A 18.57 %
2800 Post Oak Blvd 621,596 B 17.16 %
Houston, TX 77056 73,215 C 6.15 %
European Equity Fund Van Kampen Trust Company 78,305 A 14.45 %
2800 Post Oak Blvd 139,353 B 26.12 %
Houston, TX 77056 10,666 C 5.69 %
Van Kampen Funds 100,000 A 18.45 %
Distributors, Inc. 100,000 B 18.75 %
Attn: Dominick Cogliandro 100,000 C 53.20 %
One Chase Manhattan Plaza 37th Fl.
New York, New York 10005-12401
Edward Jones & Co. 104,942 A 19.36 %
Attn Mutual Fund 61,551 B 11.54 %
Shareholder Accounting
201 Progress Prkwy
Maryland Heights, MO 63043
Focus Equity Fund Edward Jones & CO 1,071,299 A 14.13 %
Attn: Mutual Fund
Shareholder Accounting
201 Progress Pkwy
Maryland Hts., MO 63043-3009
MLPF&S For the Sole Benefit 152,101 C 5.82 %
of its customers
Attn Fund Administration 97B63
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Van Kampen Trust Company 811,225 A 10.70 %
2800 Post Oak Blvd 135,605 B 10.98 %
Houston, TX 77056 141,326 C 5.41 %
Global Equity Fund Edward Jones & CO 874,025 A 14.39 %
Attn: Mutual Fund
Shareholder Accounting
201 Progress Pkwy
Maryland Hts., MO 63043-3009
Van Kampen Trust Company 365,322 A 6.01 %
2800 Post Oak Blvd
Houston, TX 77056
Global Equity Allocation Fund Edward Jones & CO 2,103,964 A 12.55 %
Attn: Mutual Fund
Shareholder Accounting
201 Progress Pkwy
Maryland Hts., MO 63043-3009
Van Kampen Trust Company 3,734,576 A 22.27 %
2800 Post Oak Blvd 3,072,106 B 21.70 %
Houston, TX 77056 408,821 C 6.88 %
</TABLE>

4
<PAGE>

<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE OF
FUND NAME & ADDRESS OF HOLDER OWNERSHIP CLASS OWNERSHIP
---- ------------------------ ---------- -------- -------------
<S> <C> <C> <C> <C>
International Magnum Fund Edward Jones & CO 1,124,750 A 26.32 %
Attn: Mutual Fund 262,745 B 7.19 %
Shareholder Accounting
201 Progress Pkwy
Maryland Hts., MO 63043-3009
MLPF&S For the Sole Benefit 203,846 B 5.58 %
of its customers 62,610 C 6.07
Attn Fund Administration 97N88
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Van Kampen Trust Company 279,096 A 6.53 %
2800 Post Oak Blvd 359,120 B 9.83 %
Houston, TX 77056 63,459 C 6.16 %
Wexford Clearing Services Corp FBO 63,380 C 6.15 %
Nation Asset Management Ltd.
Rohasco Place Wickhams Cay 1
PO Box 3140
Road Town
British Virgin Islands
Latin American Fund Charles Schwab & Co Inc 146,396 A 5.41 %
Exclusive Benefit of its Customers
101 Montgomery Street
San Francisco, CA 94104-4122
MLPF&S For the Sole Benefit 659,132 A 24.36 %
of its customers
Attn Fund Administration 97N90
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Van Kampen Trust Company 156,750 A 5.79 %
2800 Post Oak Blvd 96,311 B 7.01 %
Houston, TX 77056
Mid Cap Growth Fund MLPF&S For the Sole Benefit 250,383 A 7.18 %
of its customers
Attn Fund Administration 97238
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Edward Jones & CO 552,830 A 15.86 %
Attn: Mutual Fund
Shareholder Accounting
201 Progress Pkwy
Maryland Hts., MO 63043-3009
Trustmark National Bank 215,540 A 6.18 %
FBO Various Trust Accounts - RR
ATTN Mutual Funds Trust RM 1030
248 E. Capitol St.
Jackson MS 39201-2503
Van Kampen Trust Company 520,389 A 14.93 %
2800 Post Oak Blvd 905,087 B 24.41 %
Houston, TX 77056 96,234 C 5.19 %
Tax Managed Global Franchise Fund Van Kampen Funds 40,000 A 16.66 %
Distributors Inc. 30,000 B 12.77 %
Attn: Dominick Cogliandro 30,000 C 17.81 %
One Chase Manhattan Plaza
37th Floor
New York, NY 10005-1401
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE OF
FUND NAME & ADDRESS OF HOLDER OWNERSHIP CLASS OWNERSHIP
---- ------------------------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Dean Witter For the Benefit of 23,233 A 9.68 %
Mitchell M. Merin
P.O. Box 250 Church Street Station
New York, NY 10008-0250
Edward Jones & CO 51,345 A 21.38 %
Attn: Mutual Fund 12,861 B 5.48 %
Shareholder Accounting
201 Progress Pkwy
Maryland Hts., MO 63043-3009
MLPF&S for the Sole 27,842 A 11.60 %
Benefit of its Customers 83,686 B 35.63 %
Attn: Fund Administration 97FW6
4800 Deer Lake Dr. E 2nd fl.
Jacksonville, FL 32246-6484
Hercules Worldwide Corp 643,479 C 5.24 %
P.O. Box 621 54 Bath Street
St. Helier Jersey Channel Island
JE4 8YD United Kingdom
Warrant Trustees Limited 16,474 C 9.78 %
REF TC 6732
Discretionary Trust
PO Box 218 38/39 The Esplanade
St. Helier Jersey JE4 8SD
United Kingdom
Warrant Trustees Limited 8,454 C 5.02 %
REF TC 6730
Discretionary Trust
PO Box 218 38/39 The Esplanade
St. Helier Jersey JE4 8SD
United Kingdom
Value Fund Edward Jones & CO 1,147,380 A 21.58 %
Attn: Mutual Fund
Shareholder Accounting
201 Progress Pkwy
Maryland Hts., MO 63043-3009
MLPF&S For the Sole Benefit 713,646 B 10.10 %
of its customers 94,539 C 6.26 %
Attn Fund Administration 97P52
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Van Kampen Trust Company 497,187 A 9.35 %
2800 Post Oak Blvd 670,049 B 9.48 %
Houston, TX 77056 212,141 C 14.05 %
Worldwide High Income Fund Charles Schwab & Co Inc 284,396 A 6.52 %
Exclusive Benefit of its Customers
101 Montgomery Street
San Francisco, CA 94104-4122
Edward Jones & CO 292,842 A 6.71 %
Attn: Mutual Fund
Shareholder Accounting
201 Progress Pkwy
Maryland Hts., MO 63043-3009
</TABLE>

6
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS

The following disclosure supplements the disclosure set forth in the
"Investment Objective(s), Policies and Risks" sections in each Fund's Prospectus
and does not, standing alone, present a complete or accurate explanation of the
matters disclosed. Readers must refer also to this caption in each Fund's
Prospectus for a complete presentation of the matters disclosed below.

BORROWING AND LEVERAGE

To the extent allowed by the Funds' investment restrictions described
herein, certain Funds may engage in borrowing for temporary or emergency
purposes. To the extent allowed by the Funds' investment restrictions described
herein, certain Funds may engage in borrowing for investment purposes, also
known as leverage. Leveraging will magnify declines as well as increases in the
net asset value of a Fund's shares and in the return on a Fund's investments.
The extent to which a Fund may borrow will depend upon the availability of
credit. No assurance can be given that a Fund will be able to borrow on terms
acceptable to the Fund and the Adviser. Borrowing by a Fund will create the
opportunity for increased net income but, at the same time, will involve special
risk considerations. Borrowing will create interest expenses for a Fund which
can exceed the income from the assets obtained with the proceeds. To the extent
the income derived from securities purchased with funds obtained through
borrowing exceeds the interest and other expenses that a Fund will have to pay
in connection with such borrowing, such Fund's net income will be greater than
if the Fund did not borrow. Conversely, if the income from the assets obtained
through borrowing is not sufficient to cover the cost of borrowing, the net
income of the Fund will be less than if the Fund did not borrow, and therefore
the amount available for distribution to shareholders will be reduced. A Fund's
use of leverage may impair the ability of the Fund to maintain its qualification
for federal income tax purposes as a regulated investment company. The rights of
any lenders to a Fund to receive payments of interest on and repayments of
principal of borrowings will be senior to the rights of such Fund's
shareholders, and the terms of a Fund's borrowings may contain provisions that
limit certain activities of such Fund and could result in precluding the
purchase of securities and instruments that the Fund would otherwise purchase.

CONVERTIBLE SECURITIES, RIGHTS OR WARRANTS AND EQUITY-LINKED SECURITIES

Certain Funds may invest in convertible securities, rights or warrants to
purchase common stocks and other equity-linked securities. A convertible
security is a bond, debenture, note, preferred stock or other security that may
be converted into or exchanged for a prescribed amount of common stock or other
equity security of the same or a different issuer or into cash within a
particular period of time at a specified price or formula. A convertible
security generally entitles the holder to receive interest paid or accrued on
debt securities or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities generally have characteristics similar to both debt and
equity securities. The value of convertible securities tends to decline as
interest rates rise and, because of the conversion feature, tends to vary with
fluctuations in the market value of the underlying equity securities.
Convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stock of the same or similar issuers.
Convertible securities generally rank senior to common stock in a corporation's
capital structure but are usually subordinated to comparable nonconvertible
securities. Convertible securities generally do not participate directly in any
dividend increases or decreases of the underlying equity security although the
market prices of convertible securities may be affected by any such dividend
changes or other changes in the underlying equity securities. Rights and
warrants are instruments giving holders the right, but not the obligation, to
buy shares of a company at a given price during a specified period. Rights
typically have a substantially shorter term than do warrants. Rights and
warrants may be considered more speculative and less liquid than certain other
types of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. Rights and warrants may lack a
secondary market. Equity-linked securities are instruments whose value is based
upon the value of one or more underlying equity securities, a reference rate or
an index. Equity-linked securities come in many forms and may include features,
among others, such as the following: (i) may be issued by the issuer of the
underlying equity security or by a company other than the one to which the
instrument is linked (usually an investment bank), (ii) may convert into equity
securities, such as common stock, within a stated period from the issue date or
may be redeemed for cash or some combination of cash and the linked security at
a value based upon the value of the underlying equity security within a stated
period from the issue date, (iii) may have various conversion features prior to
maturity at the option of the holder or the issuer or both, (iv) may limit the
appreciation value with caps or collars of the value of underlying equity
security and (v) may have fixed, variable or no interest payments during the
life of the security which reflect the actual or a structured return relative to
the underlying dividends of the linked equity security. Investments in
equity-linked securities may subject the Fund to additional risks not ordinarily
associated with investments in other equity securities. Because equity-linked
securities are sometimes issued by a third party other than the issuer of the
linked security, the Fund is subject to risks if the underlying stock
underperforms and if the issuer defaults on the payment of the dividend or the
common stock at maturity. In addition, the trading market for particular
equity-linked securities may be less liquid, making it difficult for the Fund to
dispose of a particular security when necessary and reduced liquidity in the
secondary market for any such securities may make it more difficult to obtain
market quotations for valuing the Fund's portfolio.

7
<PAGE>
DEPOSITARY RECEIPTS

Certain Funds may invest in American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), European Depositary Receipts ("EDRs") and other
depositary receipts, to the extent that such depositary receipts become
available. ADRs are securities, typically issued by a U.S. financial institution
(a "depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer (the "underlying issuer") and deposited
with the depositary. ADRs include American Depositary Shares and New York Shares
and may be "sponsored" or "unsponsored." Sponsored ADRs are established jointly
by a depositary and the underlying issuer, whereas unsponsored ADRs may be
established by a depositary without participation by the underlying issuer.
GDRs, EDRs and other types of depositary receipts are typically issued by
foreign depositaries, although they may also be issued by U.S. depositaries, and
evidence ownership interests in a security or pool of securities issued by
either a foreign or a U.S. corporation.

Holders of unsponsored depositary receipts generally bear all the costs
associated with establishing the unsponsored depositary receipt. The depositary
of an unsponsored depositary receipt is under no obligation to distribute
shareholder communications received from the underlying issuer or to pass
through to the holders of the unsponsored depositary receipt voting rights with
respect to the deposited securities or pool of securities. Depositary receipts
are not necessarily denominated in the same currency as the underlying
securities to which they may be connected. Generally, depositary receipts in
registered form are designed for use in the U.S. securities market and
depositary receipts in bearer form are designed for use in securities markets
outside the United States. For purposes of the Funds' investment policies, a
Fund's investments in depositary receipts will be deemed to be investments in
the underlying securities.

EURODOLLAR AND YANKEE OBLIGATIONS

Eurodollar bank obligations are dollar-denominated certificates of deposit
and time deposits issued outside the U.S. capital markets by foreign branches of
banks and by foreign banks. Yankee bank obligations are dollar-denominated
obligations issued in the U.S. capital markets by foreign banks.

Eurodollar and Yankee obligations are subject to the same risks that pertain
to domestic issues, notably credit risk, market risk and liquidity risk.
Additionally, Eurodollar (and to a limited extent, Yankee) obligations are
subject to certain sovereign risks. One such risk is the possibility that a
sovereign country might prevent capital, in the form of dollars, from flowing
across its borders. Other risks include: adverse political and economic
developments; the extent and quality of government regulation of financial
markets and institutions; the imposition of foreign withholding taxes; and the
expropriation or nationalization of foreign issuers.

FOREIGN INVESTING

Certain Funds may or will invest in securities of foreign issuers. The
Adviser considers an issuer to be from a particular country if (i) its principal
securities trading market is in that country; (ii) alone or on a consolidated
basis it derives 50% or more of its annual revenue from either goods produced,
sales made or services performed in that country; or (iii) it is organized under
the laws of, or has a principal office in that country. By applying these tests,
it is possible that a particular company could be deemed to be from more than
one country. Securities of foreign issuers may be denominated in U.S. dollars or
in currencies other than U.S. dollars. The percentage of assets invested in
securities of a particular country or denominated in a particular currency will
vary in accordance with the Adviser's assessment of the relative yield,
appreciation potential and the relationship of a country's currency to the U.S.
dollar, which is based upon such factors as fundamental economic strength,
credit quality and interest rate trends. Investments in foreign securities
present certain risks not ordinarily associated with investments in securities
of U.S. issuers. These risks include fluctuations in foreign currency exchange
rates, political, economic or legal developments (including war or other
instability, expropriation of assets, nationalization and confiscatory
taxation), the imposition of foreign exchange limitations (including currency
blockage), withholding taxes on income or capital transactions or other
restrictions, higher transaction costs (including higher brokerage, custodial
and settlement costs and currency conversion costs) and possible difficulty in
enforcing contractual obligations or taking judicial action. Also, foreign
securities may not be as liquid and may be more volatile than comparable
domestic securities.

In addition, there often is less publicly available information about many
foreign issuers, and issuers of foreign securities are subject to different,
often less comprehensive, auditing, accounting and financial reporting
disclosure requirements than domestic issuers. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the United States, and, with respect to certain foreign countries, there
is a possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Because there is
usually less supervision and governmental regulation of foreign exchanges,
brokers and dealers than there is in the United States, a Fund may experience
settlement difficulties or delays not usually encountered in the United States.

Delays in making trades in foreign securities relating to volume
constraints, limitations or restrictions, clearance or settlement procedures, or
otherwise could impact yields and result in temporary periods when assets are
not fully invested or attractive investment opportunities are foregone.
8
<PAGE>

In addition to the increased risks of investing in foreign issuers, there
are often increased transaction costs associated with investing in foreign
securities including the costs incurred in connection with converting
currencies, higher foreign brokerage or dealer costs, and higher settlement
costs or custodial costs.

Ratings of a non-U.S. debt instrument, to the extent that those ratings are
undertaken, are related to evaluations of the country in which the issuer of the
instrument is located. Ratings generally take into account the currency in which
a non-U.S. debt instrument is denominated. Instruments issued by a foreign
government in other than the local currency, for example, typically have a lower
rating than local currency instruments due to the existence of an additional
risk that the government will be unable to obtain the required foreign currency
to service its foreign currency-denominated debt. In general, the ratings of
debt securities or obligations issued by a non-U.S. public or private entity
will not be higher than the rating of the currency or the foreign currency debt
of the central government of the country in which the issuer is located,
regardless of the intrinsic creditworthiness of the issuer.

The governments of some countries have been engaged in programs of selling
part or all of their stakes in government owned or controlled enterprises
("privatization"). The Adviser believes that privatization may offer investors
opportunities for significant capital appreciation and intends to invest assets
of the Funds in privatization in appropriate circumstances. In certain
countries, the ability of foreign entities, such as the Funds, to participate in
privatization may be limited by local law, or the terms on which the Funds may
be permitted to participate may be less advantageous than those for local
investors. There can be no assurance that governments will continue to sell
companies currently owned or controlled by them or that any privatization
programs in which the Funds participates will be successful.

FOREIGN CURRENCY EXCHANGE RISKS. To the extent a Fund invests in securities
denominated or quoted in currencies other than the U.S. dollar, such Fund will
be affected by changes in foreign currency exchange rates (and exchange control
regulations) which affect the value of investments in the Fund and the accrued
income and appreciation or depreciation of the investments. Changes in foreign
currency exchange ratios relative to the U.S. dollar will affect the U.S. dollar
value of the Fund's assets denominated in that currency and the Fund's yield on
such assets as well as any temporary uninvested reserves in bank deposits in
foreign currencies. In addition, the Fund will incur costs in connection with
conversions between various currencies. The Funds do not intend to invest in any
security in a country where the currency is not freely convertible to U.S.
dollars, unless the Fund has obtained the necessary governmental licensing to
convert such currency or other appropriately licensed or sanctioned contractual
guarantee to protect such investment against loss of that currency's external
value, or the Fund has a reasonable expectation at the time the investment is
made that such governmental licensing or other appropriately licensed or
sanctioned guarantee would be obtained or that the currency in which the
security is quoted would be freely convertible at the time of any proposed sale
of the security by the Fund.

A Fund's foreign currency exchange transactions may be conducted on a spot
basis (i.e., cash) basis at the spot rate for purchasing or selling currency
prevailing in the foreign currency exchange market. A Fund also may enter into
contracts with banks, brokers or dealers to purchase or sell securities or
foreign currencies at a future date ("forward contracts"). A foreign currency
forward contract is a negotiated agreement between the contracting parties to
exchange a specified amount of currency at a specified future time at a
specified rate. The rate can be higher or lower than the spot rate between the
currencies that are the subject of the contract. These contracts are traded in
the interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for such
trades.

A Fund may attempt to protect against adverse changes in the value of the
U.S. dollar in relation to a foreign currency by entering into a forward
contract for the purchase or sale of the amount of foreign currency invested or
to be invested, or by buying or selling a foreign currency option or futures
contract for such amount. Such strategies may be employed before the Fund
purchases a foreign security traded in the currency which the Fund anticipates
acquiring or between the date the foreign security is purchased or sold and the
date on which payment therefor is made or received. Seeking to protect against a
change in the value of a foreign currency in the foregoing manner does not
eliminate fluctuations in the prices of portfolio securities or prevent losses
if the prices of such securities decline. Furthermore, such transactions reduce
or preclude the opportunity for gain if the value of the currency should move in
the direction opposite to the position taken. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it had not
entered into such contracts. The Funds generally will not enter into a forward
contract with a term of greater than one year. At the maturity of a forward
contract, a Fund may either accept or make delivery of the currency specified in
the contract or, prior to maturity, enter into a closing purchase transaction
involving the purchase or sale of an offsetting contract. Closing purchase
transactions with respect to forward contracts are usually effected with the
currency trader who is a party to the original forward contract. A Fund will
only enter into such a forward contract if it is expected that there will be a
liquid market in which to close out such contract. There can, however, be no
assurance that such a liquid market will exist in which to close a forward
contract, in which case the Fund may suffer a loss.
9
<PAGE>
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly, it
may be necessary for a Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency that such Fund is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency.

If a Fund engages in an offsetting transaction, that Fund will incur a gain
or a loss to the extent that there has been movement in forward contract prices.
Should forward prices decline during the period between a Fund entering into a
forward contract for the sale of a foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, such Fund will
realize a gain to the extent that the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, such Fund would suffer a loss to the extent that the price of
the currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.

The Funds are not required to enter into such transactions with regard to
their foreign currency-denominated securities. It also should be realized that
this method of protecting the value of portfolio securities against a decline in
the value of a currency does not eliminate fluctuations in the underlying prices
of the securities. It simply establishes a rate of exchange which one can
achieve at some future point in time. Additionally, although such contracts tend
to minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result should the value of such currency increase.

In addition, Funds may cross-hedge currencies by entering into a transaction
to purchase or sell one or more currencies that are expected to fluctuate in
value relative to other currencies to which a portfolio has or expects to have
portfolio exposure. These Funds may also engage in proxy hedging, which is
defined as entering into positions in one currency to hedge investments
denominated in another currency, where two currencies are economically linked. A
Fund's entry into forward contracts, as well as any use of proxy or cross
hedging techniques, will generally require the Fund to hold liquid securities or
cash equal to the Fund's obligations in a segregated account throughout the
duration of the contract. Funds may combine forward contracts with investments
in securities denominated in other currencies in order to achieve desired
security and currency exposures. Such combinations are generally referred to as
synthetic securities. For example, in lieu of purchasing a foreign bond, a Fund
may purchase a U.S. dollar-denominated security and at the same time enter into
a forward contract to exchange U.S. dollars for the contract's underlying
currency at a future date. By matching the amount of U.S. dollars to be
exchanged with the anticipated value of the U.S. dollar-denominated security,
the Fund may be able to lock in the foreign currency value of the security and
adopt a synthetic position reflecting the credit quality of the U.S.
dollar-denominated security.

To the extent required by the rules and regulations of the SEC, the Fund
will earmark or place cash or other liquid assets into a segregated account in
an amount equal to the value of such Fund's total assets committed to the
consummation of forward foreign currency exchange contracts. If the value of the
securities placed in the segregated account declines, additional cash or liquid
assets will be placed in the account on a daily basis so that the value of the
account will be at least equal to the amount of such Fund's commitments with
respect to such contracts. See also "Strategic Transactions".

FOREIGN CURRENCY EXCHANGE-RELATED SECURITIES. Foreign currency warrants are
warrants that entitle the holder to receive from their issuer an amount of cash
(generally, for warrants issued in the United States, in U.S. dollars) which is
calculated pursuant to a predetermined formula and based on the exchange rate
between a specified foreign currency and the U.S. dollar as of the exercise date
of the warrant. Foreign currency warrants generally are exercisable upon their
issuance and expire as of a specified date and time. Foreign currency warrants
have been issued in connection with U.S. dollar-denominated debt offerings by
major corporate issuers in an attempt to reduce the foreign currency exchange
risk which, from the point of view of prospective purchasers of the securities,
is inherent in the international fixed-income marketplace. Foreign currency
warrants may attempt to reduce the foreign exchange risk assumed by purchasers
of a security by, for example, providing for a supplemental payment in the event
that the U.S. dollar depreciates against the value of a major foreign currency
such as the Japanese Yen or German Deutschmark. The formula used to determine
the amount payable upon exercise of a foreign currency warrant may make the
warrant worthless unless the applicable foreign currency exchange rate moves in
a particular direction (e.g., unless the U.S. dollar appreciates or depreciates
against the particular foreign currency to which the warrant is linked or
indexed). Foreign currency warrants are severable from the debt obligations with
which they may be offered, and may be listed on exchanges. Foreign currency
warrants may be exercisable only in certain minimum amounts, and an investor
wishing to exercise warrants who possesses less than the minimum number required
for exercise may be required either to sell the warrants or to purchase
additional warrants, thereby incurring additional transaction costs. In the case
of any exercise of warrants, there may be a time delay between the time a holder
of warrants gives instructions to exercise and the time the exchange rate
relating to exercise is determined, during which time the exchange rate could
change significantly, thereby affecting both the market and cash settlement
values of the warrants being exercised. The expiration date of the warrants may
be accelerated if the warrants should be delisted from an exchange or if their
trading should be suspended permanently, which would result in the loss of any
remaining "time value" of the warrants (i.e., the difference between the current
market value and the exercise value of the warrants), and, in the case where the
warrants were "out-of-the-money," in a total loss of the purchase price of the
warrants. Warrants are generally unsecured obligations of their issuers and are
not standardized foreign currency options issued by the Options Clearing
Corporation ("OCC"). Unlike foreign currency options issued by the OCC, the
terms of foreign exchange

10
<PAGE>

warrants generally will not be amended in the event of governmental or
regulatory actions affecting exchange rates or in the event of the imposition of
other regulatory controls affecting the international currency markets. The
initial public offering price of foreign currency warrants is generally
considerably in excess of the price that a commercial user of foreign currencies
might pay in the interbank market for a comparable option involving
significantly larger amounts of foreign currencies. Foreign currency warrants
are subject to complex political or economic factors.

Principal exchange rate linked securities are debt obligations the principal
on which is payable at maturity in an amount that may vary based on the exchange
rate between the U.S. dollar and a particular foreign currency at or about that
time. The return on "standard" principal exchange rate linked securities is
enhanced if the foreign currency to which the security is linked appreciates
against the U.S. dollar, and is adversely affected by increases in the foreign
exchange value of the U.S. dollar; "reverse" principal exchange rate linked
securities are like the "standard" securities, except that their return is
enhanced by increases in the value of the U.S. dollar and adversely impacted by
increases in the value of foreign currency. Interest payments on the securities
are generally made in U.S. dollars at rates that reflect the degree of foreign
currency risk assumed or given up by the purchaser of the notes (i.e., at
relatively higher interest rates if the purchaser has assumed some of the
foreign exchange risk, or relatively lower interest rates if the issuer has
assumed some of the foreign exchange risk, based on the expectations of the
current market). Principal exchange rate linked securities may, in limited
cases, be subject to acceleration of maturity (generally, not without the
consent of the holders of the securities), which may have an adverse impact on
the value of the principal payment to be made at maturity.

Performance indexed paper is U.S. dollar-denominated commercial paper the
yield of which is linked to certain foreign exchange rate movements. The yield
to the investor on performance indexed paper is between the U.S. dollar and a
designated currency as of or about that time (generally, the index maturity two
days prior to maturity). The yield to the investor will be within a range
stipulated at the time of purchase of the obligation, generally with a
guaranteed minimum rate of return that is below, and a potential maximum rate of
return that is above, market yields on U.S. dollar-denominated commercial paper,
with both the minimum and maximum rates of return on the investment
corresponding to the minimum and maximum values of the spot exchange rate two
business days prior to maturity.

INVESTING IN EMERGING MARKET COUNTRIES. The risks of foreign investment are
heightened when the issuer is from an emerging market country. The extent of
economic development, political stability and market depth of such countries
varies widely and investments in the securities of issuers in such countries
typically involve greater potential gain or loss than investments in securities
of issuers in more developed countries. Emerging market countries tend to have
economic structures that are less diverse and mature and political systems that
are less stable than those of developed markets. Emerging market countries may
be more likely to experience political turmoil or rapid changes in economic
conditions than more developed markets, and the financial condition of issuers
in emerging market countries may be more precarious than in other countries.
Certain countries depend to a larger degree upon international trade or
development assistance and, therefore, are vulnerable to changes in trade or
assistance which, in turn, may be affected by a variety of factors. A Fund may
be particularly sensitive to changes in the economies of certain countries
resulting from any reversal of economic liberalization, political unrest or the
imposition of sanctions by the United States or other countries.

A Fund's purchase and sale of portfolio securities in emerging market
countries may be constrained by limitations as to daily changes in the prices of
listed securities, periodic or sporadic trading or settlement or limitations on
aggregate holdings by foreign investors. Such limitations may be computed based
on the aggregate trading volume by or holdings of such Fund, the Fund's
investment adviser, its affiliates or their respective clients or other service
providers. The Fund may not be able to sell securities in circumstances where
price, trading or settlement volume limitations have been reached. Foreign
investment in the securities markets of certain emerging market countries is
restricted or controlled to varying degrees which may limit investment in such
countries or increase the administrative costs of such investments. For example,
certain countries may require governmental approval prior to investment by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of the issuer available for purchase by nationals. In addition,
certain countries may restrict or prohibit investment opportunities in issuers
or industries deemed important to national interests. Such restrictions may
affect the market price, liquidity and rights of securities that may be
purchased by the Fund. The repatriation of both investment income and capital
from certain emerging market countries is subject to restrictions such as the
need for governmental consents. Due to restrictions on direct investment in
securities in certain countries, it is anticipated that the Fund may invest in
such countries through other investment funds in such countries.

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Many emerging market countries are subject to a substantial degree of
economic, political and social instability. Governments of some emerging
countries are authoritarian in nature or have been installed or removed as a
result of military coups, while governments in other emerging market countries
have periodically used force to suppress civil dissent. Disparities of wealth,
the pace and success of political reforms, and ethnic, religious and racial
disaffection, among other factors, have also led to social unrest, violence
and/or labor unrest in some emerging markets countries. Unanticipated political
or social developments may result in sudden and significant investment losses.

Settlement procedures in emerging market countries are frequently less
developed and reliable than those in developed markets. In addition, significant
delays are common in certain markets in registering the transfer of securities.
Settlement or registration problems may make it more difficult for a Fund to
value its portfolio securities and could cause such Fund to miss attractive
investment opportunities, to have a portion of its assets uninvested or to incur
losses due to the failure of a counterparty to pay for securities the Fund has
delivered or the Fund's inability to complete its contractual obligations. The
creditworthiness of the local securities firms used by the Fund in emerging
market countries may not be as sound as the creditworthiness of firms used in
more developed countries. As a result, the Fund may be subject to a greater risk
of loss if a securities firm defaults in the performance of its
responsibilities.

The small size and inexperience of the securities markets in certain
emerging market countries and the limited volume of trading in securities in
those countries may make a Fund's investments in such countries less liquid and
more volatile than investments in countries with more developed securities
markets. A Fund's investments in emerging market countries are subject to the
risk that the liquidity of a particular investment, or investments generally, in
such countries will shrink or disappear suddenly and without warning as a result
of adverse economic, market or political conditions or adverse investor
perceptions, whether or not accurate. Because of the lack of sufficient market
liquidity, the Fund may incur losses because it will be required to effect sales
at a disadvantageous time and only then at a substantial drop in price.
Investments in emerging market countries may be more difficult to price
precisely because of the characteristics discussed above and lower trading
volumes.

A Fund's use of foreign currency management techniques in emerging market
countries may be limited. Due to the limited market for these instruments in
emerging market countries, the Funds' investment adviser does not currently
anticipate that a significant portion of the Funds' currency exposure in
emerging market countries, if any, will be covered by such instruments.

Investments in emerging market country government debt securities involve
special risks. Certain emerging market countries have historically experienced,
and may continue to experience, high rates of inflation, high interest rates,
exchange rate fluctuations, large amounts of external debt, balance of payments
and trade difficulties and extreme poverty and unemployment. The issuer or
governmental authority that controls the repayment of an emerging market
country's debt may not be able or willing to repay the principal and/or interest
when due in accordance with the terms of such debt. As a result of the
foregoing, a government obligor may default on its obligations. If such an event
occurs, a Fund may have limited legal recourse against the issuer and/or
guarantor. Remedies must, in some cases, be pursued in the courts of the
defaulting party itself, and the ability of the holder of foreign government
debt securities to obtain recourse may be subject to the political climate in
the relevant country. In addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders of other foreign
government debt obligations in the event of default under their commercial bank
loan agreements.

Debt securities of corporate issuers in emerging market countries may
include debt securities or obligations issued (i) by banks located in emerging
market countries or by branches of emerging market country banks located outside
the country or (ii) by companies organized under the laws of an emerging market
country. Determinations as to eligibility will be made by the Adviser based on
publicly available information and inquiries made to the issuer.

EUROPEAN INVESTING. Many European countries have adopted or are in the
process of adopting a single European currency, commonly referred to as the
"euro." The long-term consequences of the euro conversion on foreign exchange
rates, interest rates and the value of European securities, all of which may
adversely affect the Fund, are still uncertain.

Governments across Europe have also initiated major privatization programs
shifting a greater share of economic activity into the more efficient private
sector. Private companies have sought quotation, following the need to compete
in the capital markets, as much as in the market place for their products and
services. To achieve a high rating on their equity, companies need to produce
transparent accounts, communicate effectively with their shareholders and manage
their businesses and assets to their shareholders' advantage. The restructuring,
management incentives and rationalization of companies has led to lower wage
structures and greater flexibility. This has enabled European companies to match
the competitive cost environment of developing economies.

RUSSIAN INVESTING. The registration, clearing and settlement of securities
transactions in Russia are subject to significant risks not normally associated
with securities transactions in the United States and other more developed
markets. Ownership of shares in Russian companies is evidenced by entries in a
company's share register (except where shares are held through

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depositories that meet the requirements of the 1940 Act) and the issuance of
extracts from the register or, in certain limited cases, by formal share
certificates. However, Russian share registers are frequently unreliable and the
Funds could possibly lose their registration through oversight, negligence or
fraud. Moreover, Russia lacks a centralized registry to record securities
transactions and registrars located throughout Russia or the companies
themselves maintain share registers. Registrars are under no obligation to
provide extracts to potential purchasers in a timely manner or at all and are
not necessarily subject to effective state supervision. In addition, while
registrars are liable under law for losses resulting from their errors, it may
be difficult for the Funds to enforce any rights they may have against the
registrar or issuer of the securities in the event of loss of share
registration. Although Russian companies with more than 1,000 shareholders are
required by law to employ an independent company to maintain share registers, in
practice, such companies have not always followed this law. Because of this lack
of independence of registrars, management of a Russian company may be able to
exert considerable influence over who can purchase and sell the company's shares
by illegally instructing the registrar to refuse to record transactions on the
share register. Furthermore, these practices may prevent the Funds from
investing in the securities of certain Russian companies deemed suitable by the
Adviser and could cause a delay in the sale of Russian securities by the funds
if the company deems a purchaser unsuitable, which may expose the Funds to
potential loss on their investment.

In light of the risks described above, the Board of Directors has approved
certain procedures concerning the Funds' investments in Russian securities.
Among these procedures is a requirement that the Funds not invest in the
securities of a Russian company unless that issuer's registrar has entered into
a contract with the Funds' sub-custodian containing certain protective
conditions, including, among other things, the sub-custodian's right to conduct
regular share confirmations on behalf of the Funds. This requirement will likely
have the effect of precluding investments in certain Russian companies that the
Funds might otherwise make.

BRADY BONDS. Funds that invest in foreign debt securities may invest in
debt obligations customarily referred to as "Brady Bonds." Brady Bonds are
created through the exchange of existing commercial bank loans to foreign
entities for new obligations in connection with debt restructuring under a plan
introduced by former U.S. Secretary of the Treasury Nicholas F. Brady (the
"Brady Plan"). Brady Bonds may be collateralized or uncollateralized and issued
in various currencies (although most are U.S. dollar-denominated) and they are
actively traded in the over-the-counter secondary market. A Fund may purchase
Brady Bonds either in the primary or secondary markets. The price and yield of
Brady Bonds purchased in the secondary market will reflect the market conditions
at the time of purchase, regardless of the stated face amount and the stated
interest rate. With respect to Brady Bonds with no or limited collateralization,
a Fund will rely for payment of interest and principal primarily on the
willingness and ability of the issuing government to make payment in accordance
with the terms of the bonds.

U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate
par bonds or floating rate discount bonds, are generally collateralized in full
as to principal due at maturity by U.S. Treasury zero coupon obligations which
have the same maturity as the Brady Bonds. Interest payments on these Brady
Bonds generally are collateralized by cash or securities in an amount that, in
the case of fixed rate bonds, is equal to at least one year of rolling interest
payments or, in the case of floating rate bonds, initially is equal to at least
one year's rolling interest payments based on the applicable interest rate at
that time and is adjusted at regular intervals thereafter. Certain Brady Bonds
are entitled to "value recovery payments" in certain circumstances, which in
effect constitute supplemental interest payments but generally are not
collateralized. Brady Bonds are often viewed as having three or four valuation
components: (i) the collateralized repayment of principal at final maturity;
(ii) the collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constitute the "residual risk"). In the event of
a default with respect to collateralized Brady Bonds as a result of which the
payment obligations of the issuer are accelerated, the U.S. Treasury zero coupon
obligations held as collateral for the payment of principal will not be
distributed to investors, nor will such obligations be sold and the proceeds
distributed. The collateral will be held to the scheduled maturity of the
defaulted Brady Bonds by the collateral agent, at which time the face amount of
the collateral will equal the principal payments which would have then been due
on the Brady Bonds in the normal course. In addition, in light of the residual
risk of the Brady Bonds and, among other factors, the history of defaults with
respect to commercial bank loans by public and private entities of countries
issuing Brady Bonds, investments in Brady Bonds should be viewed as speculative.

ILLIQUID SECURITIES

Each Fund may invest a portion of its assets in illiquid securities, which
includes securities that are not readily marketable, repurchase agreements which
have a maturity of longer than seven days and generally includes securities that
are restricted from sale to the public without registration under the Securities
Act of 1933, as amended (the "1933 Act"). The sale of such securities often
requires more time and results in higher brokerage charges or dealer discounts
and other selling expenses than does the sale of liquid securities trading on
national securities exchanges or in the over-the-counter markets. Restricted
securities are often purchased at a discount from the market price of
unrestricted securities of the same issuer reflecting the fact that such
securities may not be readily marketable without some time delay. Investments in
securities for which market quotations are not readily available are valued at
fair value as determined in good faith by the Adviser in accordance with
procedures approved by the Fund's Board of Directors. Ordinarily, a Fund would
invest in restricted securities only when it receives the issuer's commitment to
register the securities without expense to that Fund. However, registration and
underwriting expenses (which

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typically may range from 7% to 15% of the gross proceeds of the securities sold)
may be paid by a Fund. Restricted securities which can be offered and sold to
qualified institutional buyers under Rule 144A under the 1933 Act ("144A
Securities") and are determined to be liquid under guidelines adopted by and
subject to the supervision of the Company's Board of Directors are not subject
to the limitation on illiquid securities; however, such securities are still
subject to any Fund limitation on the securities subject to legal or contractual
restrictions on resale as described in that Fund's investment restrictions. Such
144A Securities are subject to monitoring and may become illiquid to the extent
qualified institutional buyers become, for a time, uninterested in purchasing
such securities. Factors used to determine whether 144A Securities are liquid
include, among other things, a security's trading history, the availability of
reliable pricing information, the number of dealers making quotes or making a
market in such security and the number of potential purchasers in the market for
such security.

INVESTMENT COMPANY SECURITIES

Each Fund may invest in securities of other open-end or closed-end
investment companies, by purchase in the open market involving only customary
brokers' commissions or in connection with mergers, acquisitions of assets or
consolidations or as may otherwise be permitted by the 1940 Act.

Some emerging market countries have laws and regulations that currently
preclude direct foreign investments in the securities of their companies.
However, indirect foreign investments in the securities of companies listed and
traded on the stock exchanges in these countries are permitted by certain
emerging market countries through investment funds which have been specifically
authorized. Certain Funds may invest in these investment funds, including those
advised by Adviser or its affiliates, subject to applicable provisions of the
1940 Act, and other applicable laws.

If a Fund invests in such investment companies or investment funds, that
Fund's shareholders will bear not only their proportionate share of the expenses
of that Fund (including operating expenses and the fees of the Adviser), but
also will indirectly bear similar expenses of the underlying investment
companies or investment funds.

LOAN PARTICIPATIONS AND ASSIGNMENTS

Certain Funds may invest in fixed and floating rate loans ("Loans") arranged
through private negotiations between an issuer of sovereign or corporate debt
obligations and one or more financial institutions ("Lenders"). Such Funds'
investments in Loans are expected in most instances to be in the form of
participations in Loans ("Participations") and assignments of all or a portion
of Loans ("Assignments") from third parties.

In the case of Participations, a Fund will have the right to receive
payments of principal, interest and any fees to which it is entitled only from
the Lender selling the Participations and only upon receipt by the Lender of the
payments from the borrower. In the event of the insolvency of the Lender selling
a Participation, a Fund may be treated as a general creditor of the Lender and
may not benefit from any set-off between the Lender and the borrower. A Fund
will acquire Participations only if the Adviser determines that the Lender
interpositioned between the Fund and the borrower is creditworthy.

When a Fund purchases Assignments from Lenders it will acquire direct rights
against the borrower on the Loan. Because Assignments are arranged through
private negotiations between potential assignees and potential assignors,
however, the rights and obligations acquired by a Fund as the purchaser of an
Assignment may differ from, and be more limited than, those held by the
assigning Lender.

The Funds anticipate that such loan interests may be sold only to a limited
number of institutional investors. The lack of a broad secondary market may have
an adverse impact on the value of such securities and a Fund's ability to
dispose of particular Assignments or Participations when necessary to meet the
Fund's liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the borrower. The lack of a broad
secondary market for Assignments and Participations also may make it more
difficult for a Fund to value these securities for purposes of valuing the
Fund's portfolio and calculating its net asset value.

LOWER-GRADE SECURITIES

Certain Funds may invest in lower-grade income securities. Securities that
are in the lower-grade categories generally offer higher yields than are offered
by higher-grade securities of similar maturities, but they also generally
involve greater risks, such as greater credit risk, greater market risk and
volatility, greater liquidity concerns and potentially greater manager risk.
Investors should carefully consider the risks of owning shares of a Fund that
invests in lower-grade securities.

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<PAGE>

or the project or projects to which the Fund's securities relate. Further, the
Fund may incur additional expenses to the extent that it is required to seek
recovery upon a default in the payment of interest or the repayment of principal
on its portfolio holdings, and the Fund may be unable to obtain full recovery on
such amounts.

Market risk relates to changes in market value of a security that occur as a
result of variation in the level of prevailing interest rates and yield
relationships in the income securities market and as a result of real or
perceived changes in credit risk. The value of such a Fund's investments can be
expected to fluctuate over time. When interest rates decline, the value of a
portfolio invested in fixed income securities generally can be expected to rise.
Conversely, when interest rates rise, the value of a portfolio invested in fixed
income securities generally can be expected to decline. Income securities with
longer maturities, which may have higher yields, may increase or decrease in
value more than income securities with shorter maturities. However, the
secondary market prices of lower-grade securities generally are less sensitive
to changes in interest rates and are more sensitive to general adverse economic
changes or specific developments with respect to the particular issuers than are
the secondary market prices of higher-grade securities. A significant increase
in interest rates or a general economic downturn could severely disrupt the
market for lower-grade securities and adversely affect the market value of such
securities. Such events also could lead to a higher incidence of default by
issuers of lower-grade securities as compared with higher-grade securities. In
addition, changes in credit risks, interest rates, the credit markets or periods
of general economic uncertainty can be expected to result in increased
volatility in the market price of the lower-grade securities in such a Fund and
thus in the net asset value of that Fund. Adverse publicity and investor
perceptions, whether or not based on rational analysis, may affect the value,
volatility and liquidity of lower-grade securities.

The markets for lower-grade securities may be less liquid than the markets
for higher-grade securities. Liquidity relates to the ability of a Fund to sell
a security in a timely manner at a price which reflects the value of that
security. To the extent that there is no established retail market for some of
the lower-grade securities in which a Fund may invest, trading in such
securities may be relatively inactive. Prices of lower-grade securities may
decline rapidly in the event a significant number of holders decide to sell.
Changes in expectations regarding an individual issuer of lower-grade securities
generally could reduce market liquidity for such securities and make their sale
by the Fund more difficult, at least in the absence of price concessions. The
effects of adverse publicity and investor perceptions may be more pronounced for
securities for which no established retail market exists as compared with the
effects on securities for which such a market does exist. An economic downturn
or an increase in interest rates could severely disrupt the market for such
securities and adversely affect the value of outstanding securities or the
ability of the issuers to repay principal and interest. Further, a Fund may have
more difficulty selling such securities in a timely manner and at their stated
value than would be the case for securities for which an established retail
market does exist.

The Adviser is responsible for determining the net asset values of the
Funds, subject to the supervision of the Company's Board of Directors. During
periods of reduced market liquidity or in the absence of readily available
market quotations for lower-grade securities, the ability to value the
securities becomes more difficult and the judgment of the Adviser may play a
greater role in the valuation of such securities due to the reduced availability
of reliable objective data.

A Fund may invest in securities not producing immediate cash income,
including securities in default, zero-coupon securities or pay-in-kind
securities, when their effective yield over comparable instruments producing
cash income make these investments attractive. Prices on non-cash-paying
instruments may be more sensitive to changes in the issuer's financial
condition, fluctuation in interest rates and market demand/supply imbalances
than cash-paying securities with similar credit ratings and thus may be more
speculative. In addition, the accrued interest income earned on such instruments
is included in investment company taxable income, thereby increasing the
required minimum distributions to shareholders without providing the
corresponding cash flow with which to pay such distributions. The Adviser will
weigh these concerns against the expected total returns from such instruments.

A Fund's investments may include securities with the lowest-grade assigned
by the recognized rating organizations and unrated securities of comparable
quality. Securities assigned such ratings include those of companies that are in
default or are in bankruptcy or reorganization. Such a Fund may invest in or own
securities of companies in various stages of financial restructuring, bankruptcy
or reorganization which are not currently paying interest or dividends. A Fund
may have limited recourse in the event of default on such securities. A Fund may
invest in loans, assignments of loans and participation in loans. Securities of
such companies are regarded by the rating agencies as having extremely poor
prospects of ever attaining any real investment standing and are usually
available at deep discounts from the face values of the instruments. A security
purchased at a deep discount may currently pay a very high effective yield. In
addition, if the financial condition of the issuer improves, the underlying
value of the security may increase, resulting in capital appreciation. If the
company defaults on its obligations or remains in default, or if the plan of
reorganization does not provide sufficient payments for debtholders, the deep
discount securities may stop generating income and lose value or become
worthless. The Adviser will balance the benefits of deep discount securities
with their risks. While a broad portfolio of investments may reduce the overall
impact of a deep discount security that is in default or loses its value, the
risk cannot be eliminated.

Many lower-grade securities are not listed for trading on any national
securities exchange, and many issuers of lower-grade securities choose not to
have a rating assigned to their obligations by any recognized rating
organization. As a result, a Fund's portfolio may consist of a higher portion of
unlisted or unrated securities as compared with an investment company that
invests primarily in higher-grade securities. Unrated securities are usually not
as attractive to as many buyers as are rated securities, a

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<PAGE>

factor which may make unrated securities less marketable. These factors may have
the effect of limiting the availability of the securities for purchase by a Fund
and may also limit the ability of a Fund to sell such securities at their fair
value either to meet redemption requests or in response to changes in the
economy or the financial markets. Further, to the extent a Fund owns or may
acquire illiquid or restricted lower-grade securities, these securities may
involve special registration responsibilities, liabilities and costs, and
liquidity and valuation difficulties.

The Funds will rely on the Adviser's judgment, analysis and experience in
evaluating the creditworthiness of an issue. The amount of available information
about the financial condition of certain lower-grade issuers may be less
extensive than other issuers. In its analysis, the Adviser may consider the
credit ratings of recognized rating organizations in evaluating securities
although the Adviser does not rely primarily on these ratings. Credit ratings of
securities rating organizations evaluate only the safety of principal and
interest payments, not the market risk. Additionally, ratings are general and
not absolute standards of quality, and credit ratings are subject to the risk
that the creditworthiness of an issuer may change and the rating agencies may
fail to change such ratings in a timely fashion. A rating downgrade does not
require a Fund to dispose of a security. The Adviser continuously monitors the
issuers of securities held in a Fund. Additionally, since most foreign
securities are not rated, a Fund will invest in such securities based on the
Adviser's analysis without any guidance from published ratings. Because of the
number of investment considerations involved in investing in lower-grade
securities and foreign securities, achievement of such Fund's investment
objectives may be more dependent upon the investment adviser's credit analysis
than is the case with investing in higher-grade securities.

New or proposed laws may have an impact on the market for lower-grade
securities. The Adviser is unable at this time to predict what effect, if any,
legislation may have on the market for lower-grade securities.

MORTGAGE-RELATED DEBT SECURITIES

Mortgage-related debt securities represent ownership interests in individual
pools of residential mortgage loans. These securities are designed to provide
monthly payments of interest and principal to the investor. Each mortgagor's
monthly payment to his lending institution on his residential mortgage is
"passed-through" to investors. Mortgage pools consist of whole mortgage loans or
participations in loans. The terms and characteristics of the mortgage
instruments are generally uniform within a pool but may vary among pools.
Lending institutions which originate mortgages for the pools are subject to
certain standards, including credit and underwriting criteria for individual
mortgages included in the pools.

The coupon rate of interest on mortgage-related securities is lower than the
interest rates paid on the mortgages included in the underlying pool, but only
by the amount of the fees paid to the mortgage pooler, issuer, and/or guarantor
of payment of the securities for the guarantee of the services of passing
through monthly payments to investors. Actual yield may vary from the coupon
rate, however, if mortgage-related securities are purchased at a premium or
discount, traded in the secondary market at a premium or discount, or to the
extent that mortgages in the underlying pool are prepaid as noted above. In
addition, interest on mortgage-related securities is earned monthly, rather than
semi-annually as is the case for traditional bonds, and monthly compounding may
tend to raise the effective yield earned on such securities.

STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-backed securities
("SMBS") are derivative multiclass mortgage securities. SMBS may be issued by
agencies or instrumentalities of the U.S. government or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose entities
of the foregoing.

SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of SMBS will have one class receiving some of the interest
and most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In the most
extreme case, one class will receive all of the interest (the interest-only or
"IO" class), while the other class will receive all of the principal (the
principal-only or "PO" class). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets, and a rapid rate of principal payments may
have a material adverse effect on a Fund's yield to maturity from these
securities. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, a Fund may fail to fully recoup its
initial investment in these securities even if the security is in one of the
highest rating categories.

Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed and, accordingly, certain of these securities may be deemed
"illiquid" and are subject to a Fund's limitations on investment in illiquid
securities.

OBLIGATIONS OF DOMESTIC BANKS, FOREIGN BANKS AND FOREIGN BRANCHES OF U.S. BANKS

For purposes of the Funds' investment policies with respect to bank
obligations, the assets of a bank or savings institution will be deemed to
include the assets of its domestic and foreign branches. Investments in bank
obligations will include obligations of domestic branches of foreign banks and
foreign branches of domestic banks. Such investments may involve risks that are
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different from investments in securities of domestic branches of U.S. banks. See
"Foreign Investing" above for a discussion of the risks of foreign investments.
These institutions may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting and record keeping requirements than
those applicable to domestic branches of U.S. banks.

REPURCHASE AGREEMENTS

The Funds may engage in repurchase agreements with broker-dealers, banks or
other financial institutions to earn a return on temporarily available cash. A
repurchase agreement is a short-term investment in which the purchaser (i.e.,
the Fund) acquires ownership of a security and the seller agrees to repurchase
the obligation at a future time and set price, thereby determining the yield
during the holding period. Repurchase agreements involve certain risks in the
event of default by the other party. A Fund may enter into repurchase agreements
with broker-dealers, banks or other financial institutions deemed to be
creditworthy by the Adviser under guidelines approved by the Company's Board of
Directors. A Fund will not invest in repurchase agreements maturing in more than
seven days if any such investment, together with any other illiquid securities
held by the Fund, would exceed the Fund's limitation on illiquid securities
described herein. A Fund does not bear the risk of a decline in value of the
underlying security unless the seller defaults under its repurchase obligation.
In the event of the bankruptcy or other default of a seller of a repurchase
agreement, a Fund could experience both delays in liquidating the underlying
securities and losses including: (a) possible decline in the value of the
underlying security during the period while the Fund seeks to enforce its rights
thereto; (b) possible lack of access to income on the underlying security during
this period; and (c) expenses of enforcing its rights.

For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of its affiliates would otherwise invest separately into a joint
account. The cash in the joint account is then invested in repurchase agreements
and the funds that contributed to the joint account share pro rata in the net
revenue generated. The Adviser believes that the joint account produces
efficiencies and economies of scale that may contribute to reduced transaction
costs, higher returns, higher quality investments and greater diversity of
investments for the Funds than would be available to the Funds investing
separately. The manner in which the joint account is managed is subject to
conditions set forth in an exemptive order from the SEC permitting this
practice, which conditions are designed to ensure the fair administration of the
joint account and to protect the amounts in that account.

Repurchase agreements are fully collateralized by the underlying securities
and are considered to be loans under the 1940 Act. A Fund pays for such
securities only upon physical delivery or evidence of book entry transfer to the
account of a custodian or bank acting as agent. The seller under a repurchase
agreement will be required to maintain the value of the underlying securities
marked-to-market daily at not less than the repurchase price. The underlying
securities (normally securities of the U.S. government, or its agencies or
instrumentalities) may have maturity dates exceeding one year.

REVERSE REPURCHASE AGREEMENTS

To the extent allowed by the Fund's investment restrictions, certain Funds
may enter into reverse repurchase agreements with broker-dealers banks or other
financial institutions that meet the credit guidelines set by the Company's
Board of Directors. In a reverse repurchase agreement, a Fund sells a security
and agrees to repurchase it at a mutually agreed upon date and price, reflecting
the interest rate effective for the term of the agreement. It may also be viewed
as the borrowing of money by a Fund. A Fund's investment of the proceeds of a
reverse repurchase agreement is the speculative factor known as leverage. A Fund
will enter into a reverse repurchase agreement only if the interest income from
investment of the proceeds is expected to be greater than the interest expense
of the transaction and the proceeds are invested for a period no longer than the
term of the agreement. A Fund will maintain with an appropriate custodian a
separate account with a segregated portfolio of cash or liquid assets in an
amount at least equal to its purchase obligations under these agreements
(including accrued interest). If interest rates rise during a reverse repurchase
agreement, it may adversely affect a Fund's net asset value. In the event that
the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, the buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Fund's
repurchase obligation, and the Fund's use of proceeds of the agreement may
effectively be restricted pending such decision.

SECURITIES LENDING

Certain Funds may lend investment securities to qualified broker-dealers,
banks or other institutional borrowers who need to borrow securities to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, a Fund attempts to increase its net investment income through the
receipt of interest on the loan. Any gain or loss in the market price of the
securities loaned that might occur during the term of the loan would be for the
account of the Fund. Each Fund may lend its investment securities to qualified
brokers-dealers, domestic and foreign banks or other institutional borrowers, so
long as the terms, structure and the aggregate amount of such loans are not
inconsistent with the 1940 Act, or the rules and regulations or interpretations
of the SEC thereunder, which currently require that (a) the borrower pledge and
maintain with the Fund collateral consisting of cash, an irrevocable letter of
credit issued by a domestic U.S. bank, or liquid securities having a value at
all times not less than 100% of the value of the securities loaned, including
accrued interest, (b) the borrower add to such collateral whenever the price of
the securities loaned

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<PAGE>

rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan
be made subject to termination by the Fund at any time, and (d) the Fund receive
reasonable interest on the loan (which may include the Fund investing any cash
collateral in interest bearing short-term investments), any distributions on the
loaned securities and any increase in their market value. There may be risks of
delay in recovery of the securities or even loss of rights in the collateral
should the borrower of the securities fail financially. However, loans will only
be made to borrowers deemed by the Adviser to be of good standing and when, in
the judgment of the Adviser, the consideration which can be earned currently
from such securities loans justifies the attendant risk. All relevant facts and
circumstances, including the creditworthiness of the broker-dealer, bank or
institution, will be considered in making decisions with respect to the lending
of securities, subject to review by the Company's Board of Directors.

At the present time, the staff of the SEC does not object if an investment
company pays reasonable negotiated fees in connection with loaned securities, so
long as such fees are set forth in a written contract and approved by the
investment company's Board of Directors. In addition, voting rights may pass
with the loaned securities, but if a material event will occur affecting an
investment on loan, the loan must be called and the securities voted by the
Fund.

SHORT SALES

Unless limited by a Fund's fundamental investment restrictions described
herein, each Fund may from time to time sell securities short. A short sale is a
transaction in which a Fund sells a security in anticipation that the market
price of such security will decline. Unless limited by a Fund's fundamental
investment restrictions described herein, each Fund may sell securities it owns
or has the right to acquire at no added cost (i.e., "against the box") or it
does not own. When the Fund makes a short sale, it must borrow the security sold
short and deliver it to the broker-dealer through which it made the short sale
in order to satisfy its obligation to deliver the security upon conclusion of
the sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.

The Fund's obligation to replace the borrowed security will be secured by
collateral of cash or liquid securities. Depending on arrangements made with the
broker-dealer, bank or other financial institution from which it borrowed the
security regarding payment over of any payments received by the Fund on such
security, the Fund may not receive any payments (including interest) on its
collateral deposited with such entity.

If the price of the security sold short increases between the time of the
short sale and the time the Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund will realize a capital
gain. Any gain will be decreased, and any loss increased, by the transaction
costs described above. Although the Fund's gain is limited to the price at which
it sold the security short, its potential loss is theoretically unlimited.

STRATEGIC TRANSACTIONS

Each Fund may, but is not required to, use various Strategic Transactions
(as defined in the prospectuses) to earn income, facilitate portfolio management
and mitigate risks. Techniques and instruments may change over time as new
instruments and strategies are developed or regulatory changes occur. Although
the Fund's Adviser seeks to use such transactions to further the Fund's
investment objective(s), no assurance can be given that these transactions will
achieve this result.

FUTURES CONTRACTS. Futures contracts provide for the future sale by one
party and purchase by another party of a specified amount of a specific security
or a specific currency at a specified future time and at a specified price.
Futures contracts that are traded in the United States and that are standardized
as to maturity date and underlying financial instrument, index or currency, are
traded on national futures exchanges. Futures exchanges and trading are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"), a U.S. government agency.

Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities or currencies, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery. Closing out an open futures position is done by taking an opposite
position ("buying" a contract which has previously been "sold" or "selling" a
contract previously "purchased") in an identical contract to terminate the
position. Brokerage commissions are incurred when a futures contract is bought
or sold.

Unless otherwise limited in a Fund's prospectus or herein, each Fund may
sell indexed financial futures contracts in anticipation of or during a market
decline to attempt to offset the decrease in market value of securities in its
portfolio that might otherwise result. An index futures contract is an agreement
to take or make delivery of an amount of cash equal to the difference between
the value of the index at the beginning and at the end of the contract period.
Successful use of index futures will be subject to the Adviser's ability to
predict correctly movements in the direction of the relevant securities market.
No assurance can be given that the Adviser's judgment in this respect will be
correct.

Unless otherwise limited in a Fund's prospectus or herein, each Fund may buy
indexed financial futures contracts in anticipation of or during a market
advance to attempt to capture the increase in market value of securities. For
example, if the Adviser believes that a portion of a Fund's assets should be
invested in emerging market country securities but such investments have not
been fully made and the Adviser anticipates a significant market advance, the
Fund may purchase index futures to gain

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<PAGE>

rapid market exposure that may, in part or entirely, offset increases in the
cost of securities that it intends to purchase. In a substantial majority of
these transactions, the Fund will purchase such securities upon termination of
the futures position but, under unusual market conditions, a futures position
may be terminated without the corresponding purchase of such securities.

Futures traders are required to make a good faith margin deposit in cash or
liquid securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold for prices that
may range upward from less than 5% of the value of the contract being traded.

After a futures contract position is opened, the value of the contract is
marked-to-market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, payment of an
additional "variation" margin will be required. Conversely, a change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Funds
expect to earn interest income on its margin deposits.

Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the underlying securities with futures contracts that they trade, and use
futures contracts with the expectation of realizing profits from market
fluctuations. The Funds intend to use futures contracts only for hedging
purposes.

Regulations of the CFTC applicable to the Funds require generally that all
futures transactions constitute bona fide hedging transactions. A Fund may
engage in futures transactions for other purposes so long as the aggregate
initial margin and premiums required for such transaction will not exceed 5% of
the liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into. The Funds generally will only sell futures contracts to protect securities
owned against declines in price or purchase contracts to protect against an
increase in the price of securities intended for purchase. As evidence of this
hedging interest, the Funds expect that approximately 75% of their respective
futures contracts will be "completed"; that is, equivalent amounts of related
securities will have been purchased or are being purchased by the Fund upon sale
of open futures contracts.

Although techniques other than the sale and purchase of futures contracts
could be used to control a Fund's exposure to market fluctuations, the use of
futures contracts may be a more effective means of hedging this exposure. While
the Funds will incur commission expenses in both opening and closing out futures
positions, these costs are lower than transaction costs incurred in the purchase
and sale of the underlying securities.

RISK FACTORS IN FUTURES TRANSACTIONS. Positions in futures contracts may be
closed out only on an exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, a Fund would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if a Fund has insufficient
cash, it may have to sell portfolio securities to meet its daily margin
requirement at a time when it may be disadvantageous to do so. In addition, the
Fund may be required to make delivery of the instruments underlying the futures
contracts it holds. The inability to close options and futures positions also
could have an adverse impact on the Fund's ability to effectively hedge.

The Funds will minimize the risk that they will be unable to close out a
futures contract by generally entering into futures which are traded on
recognized international or national futures exchanges and for which there
appears to be a liquid secondary market, however, the Funds may enter into
over-the-counter futures transactions to the extent permitted by applicable law.

The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss (as well as gain) to the investor. For example, if, at the time of
purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the Funds engage
in futures strategies only for hedging purposes, the Adviser does not believe
that the Funds are subject to the risks of loss frequently associated with
futures transactions. The Fund would presumably have sustained comparable losses
if, instead of the futures contract, the Fund had invested in the underlying
security or currency and sold it after the decline.

Utilization of futures transactions by a Fund does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities or currencies being
hedged. It is also possible

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<PAGE>

that a Fund could both lose money on futures contracts and also experience a
decline in value of its portfolio securities. There is also the risk that the
Fund will lose margin deposits in the event of bankruptcy of a broker with whom
the Fund has an open position in a futures contract or related option.

Most futures exchanges limit the amount of fluctuation in futures contract
prices during a single trading day. The daily limit establishes the maximum
amount that the price of a futures contract may vary, either up or down, from
the previous day's settlement price. Once the daily limit has been reached in a
particular type of contract, no trades may be made on that day at a price beyond
that limit. The daily limit governs only price movement during a particular
trading day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses.

OPTIONS TRANSACTIONS. Unless otherwise limited in a Fund's prospectus or
herein, each Fund may write (i.e., sell) covered call options which give the
purchaser the right to buy the underlying security covered by the option from
the Fund at the stated exercise price. A "covered" call option means that, so
long as a Fund is obligated as the writer of the option, it will own (i) the
underlying securities subject to the option, or (ii) securities convertible or
exchangeable without the payment of any consideration into the securities
subject to the option.

A Fund will receive a premium from writing call options, which increases the
Fund's return on the underlying security in the event the option expires
unexercised or is closed out at a profit. By writing a call, a Fund will limit
its opportunity to profit from an increase in the market value of the underlying
security above the exercise price of the option for as long as the Fund's
obligation as writer of the option continues. Thus, in some periods a Fund will
receive less total return and in other periods a Fund will receive greater total
return from writing covered call options than it would have received from its
underlying securities had it not written call options.

A Fund may sell put options to receive the premiums paid by purchasers and
to close out a long put option position. In addition, when the Adviser wishes to
purchase a security at a price lower than its current market price, a Fund may
write a covered put at an exercise price reflecting the lower purchase price
sought.

A Fund may purchase call options to close out a covered call position or to
protect against an increase in the price of a security it anticipates
purchasing. A Fund may purchase put options on securities which it holds in its
portfolio to protect itself against a decline in the value of the security. If
the value of the underlying security were to fall below the exercise price of
the put purchased in an amount greater than the premium paid for the option, the
Fund would incur no additional loss. A Fund may also purchase put options to
close out written put positions in a manner similar to call option closing
purchase transactions. There are no other limits on a Fund's ability to purchase
call and put options.

Unless the parties provide for it, there is no central clearing or guaranty
function in an over-the-counter option ("OTC Option"). As a result, if the
counterparty fails to make or take delivery of the security, currency or other
instrument underlying an OTC Option it has entered into with a Fund or fails to
make a cash settlement payment due in accordance with the terms of that option,
the Fund will lose any premium it paid for the option as well as any anticipated
benefit of the transaction. Accordingly, the Adviser must assess the
creditworthiness of each such counterparty or any guarantor of credit
enhancement of the counterparty's credit to determine the likelihood that the
terms of the OTC Options will be satisfied. The staff of the SEC currently takes
the position that OTC Options purchased by a Fund or sold by it (the cost of the
sell-back plus the in-the-money amount, if any) are illiquid unless the Fund has
entered into a special arrangement to dispose of the security, and are subject
to the Fund's limitation on investing in illiquid securities.

Investments in options involve some of the same considerations that are
involved in connection with investments in futures contracts (e.g., the
existence of a liquid secondary market). In addition, the purchase of an option
also entails the risk that changes in the value of the underlying security or
contract will not be fully reflected in the value of the option purchased.
Depending on the pricing of the option compared to either the futures contract
or underlying securities, an option may or may not be less risky than ownership
of the futures contract or actual securities. In general, the market prices of
options can be expected to be more volatile than the market prices on the
underlying futures contract or securities. In the opinion of the Adviser, the
risk that a Fund will be unable to close out an options contract will be
minimized by only entering into options transactions for which there appears to
be a liquid secondary market.

OPTIONS ON FOREIGN CURRENCIES. Unless otherwise limited in a Fund's
prospectus or herein, each Fund may attempt to accomplish objectives similar to
those described herein with respect to foreign currency forward contracts and
futures contracts for currency by means of purchasing put or call options on
foreign currencies on exchanges. A put option gives a Fund the right to sell a
currency at the exercise price until the expiration of the option. A call option
gives a Fund the right to purchase a currency at the exercise price until the
expiration of the option.

The Funds may purchase and write options on foreign currencies in a manner
similar to that in which a Fund may utilize futures contracts on foreign
currencies or forward contracts. For example, a decline in the dollar value of a
foreign currency in which portfolio securities are denominated will reduce the
dollar value of such securities, even if their value in the foreign currency
remains constant. To protect against such diminution in the value of portfolio
securities, the Funds may purchase put

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<PAGE>

options on the foreign currency. If the value of the currency declines, the
Funds will have the right to sell such currency for a fixed amount in dollars
and will thereby offset, in whole or in part, the adverse effect on their
portfolios which otherwise would have resulted. Conversely, the Funds may
purchase call options on currencies whose value is projected to increase,
causing an increase in the cost of securities denominated in that currency. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Funds derived from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, the Funds could sustain losses on transactions in
foreign currency options which would require them to forego a portion or all of
the benefits of advantageous changes in such rates.

Funds may write options on foreign currencies for the same purposes. For
example, where a Fund anticipates a decline in the dollar value of foreign
currency denominated securities due to adverse fluctuations in exchange rates it
could, instead of purchasing a put option, write a call option on the relevant
currency. If the anticipated decline occurs, the option will most likely not be
exercised, and the diminution in value of portfolio securities will be offset by
the amount of the premium received. Similarly, instead of purchasing a call
option to hedge against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant currency
which, if rates move in the manner projected, will expire unexercised and allow
the portfolio to hedge such increased cost up to the amount of the premium. As
in the case of other types of options, however, the writing of a foreign
currency option will constitute only a partial hedge up to the amount of the
premium, and only if rates move in the expected direction. If this does not
occur, the option may be exercised and the Fund would be required to purchase or
sell the underlying currency at a loss which may not be offset by the amount of
the premium. Through the writing of options on foreign currencies, the Fund also
may be required to forego all or a portion of the benefits which might otherwise
have been obtained from favorable movements in exchange rates.

Funds may only write covered call options on foreign currencies. A call
option on a foreign currency written by the portfolio is "covered" if the Fund
owns the underlying foreign currency covered by the call, has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by the Custodian) or can obtain that foreign currency upon conversion or
exchange of another foreign currency(ies) held in its portfolio. A written call
option is also covered if the Fund has a call on the same foreign currency and
in the same principal amount as the call written where the exercise price of the
call held (a) is equal to or less than the exercise price of the call written,
or (b) is greater than the exercise price of the call written if the difference
is maintained by the Fund in cash or other liquid securities in a segregated
account with the Custodian, or (c) maintains in a segregated account cash or
other liquid securities in an amount not less than the value of the underlying
foreign currency in U.S. dollars, marked-to-market daily.

Funds may also write call options on foreign currencies for cross-hedging
purposes. A call option on a foreign currency is for cross-hedging purposes if
it is designed to provide a hedge against a decline in the U.S. dollar value of
a security which the portfolio owns or has the right to acquire due to an
adverse change in the exchange rate and which is denominated in the currency
underlying the option. In such circumstances, the Fund will either "cover" the
transaction as described above or collateralize the option by maintaining in a
segregated account with the Fund's Custodian, cash or other liquid securities in
an amount not less than the value of the underlying foreign currency in U.S.
dollars marked-to-market daily.

CAPS, FLOORS AND COLLARS. Unless otherwise limited by a Fund's prospectus
or herein, each Fund may invest in caps, floors and collars, which are
instruments analogous to options transactions described above. In particular, a
cap is the right to receive the excess of a reference rate over a given rate and
is analogous to a put option. A floor is the right to receive the excess of a
given rate over a reference rate and is analogous to a call option. Finally, a
collar is an instrument that combines a cap and a floor. That is, the buyer of a
collar buys a cap and writes a floor, and the writer of a collar writes a cap
and buys a floor. The risks associated with caps, floors and collars are similar
to those associated with options. In addition, caps, floors and collars are
subject to risk of default by the counterparty because they are privately
negotiated instruments.

COMBINED TRANSACTIONS. Unless otherwise limited by a Fund's prospectus or
herein, each Fund may enter into multiples of the forwards, futures and options
transactions described above, including multiple options transactions, multiple
futures transactions, multiple foreign currency transactions (including forward
foreign currency exchange contracts) and any combination of futures, options and
foreign currency transactions. The Funds may enter into any of the foregoing,
instead of a single transaction, as part of a single portfolio management or
hedging strategy when, in the opinion of the Adviser, it is in the best interest
of the Fund to do so. A combined transaction, while part of a single strategy,
may contain elements of risk that are present in each of its component
transactions and will be structured in accordance with applicable SEC
regulations and SEC staff guidelines.

RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON
FOREIGN CURRENCIES. Options on foreign currencies and forward contracts are not
traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the SEC. To the contrary, such instruments
are traded through financial institutions acting as market-makers, although
foreign currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to SEC regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of the
protections afforded to

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<PAGE>

exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the purchase of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost. Moreover, a writer of options and a trader of
forward contracts could lose amounts substantially in excess of their initial
investments.

Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the OCC, thereby reducing the risk of
counterparty default. Furthermore, a liquid secondary market in options traded
on a national securities exchange may be more readily available than in the
over-the-counter market, potentially permitting a Fund to liquidate open
positions at a profit prior to exercise or expiration, or to limit losses in the
event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effect of other
political and economic events. In addition, exchange-traded options of foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises or would result in undue burdens
on the OCC or its clearing member, impose special procedures on exercise and
settlement. These special procedures may include technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.

In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in the Fund's
ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.

STRUCTURED NOTES. Structured Notes are derivatives, the amount of principal
repayment and/or interest payments of which is based upon the movement of one or
more factors. These factors may include, but are not limited to, currency
exchange rates, interest rates (such as the prime lending rate and LIBOR) and
stock indices such as the S&P 500 Index. In some cases, the impact of the
movements of these factors may increase or decrease through the use of
multipliers or deflators. The Funds may use structured notes to tailor their
investments to the specific risks and returns that the Adviser is willing to
accept, while avoiding or reducing certain other risks.

SWAP CONTRACTS. A swap contract is an agreement to exchange the return
generated by one instrument for the return generated by another instrument. The
payment streams are calculated by reference to a specified index and an agreed
upon notional amount. The term "specified index" may include, but is not limited
to, currencies, fixed interest rates, prices, total return on interest rate
indices, fixed income indices, stock indices and commodity indices (as well as
amounts derived from arithmetic operations on these indices). For example, a
Fund may agree to swap the return generated by a fixed-income index for the
return generated by a second fixed-income index. The currency swaps in which a
Fund may enter will generally involve an agreement to pay interest streams in
one currency based on a specified index in exchange for receiving interest
streams denominated in another currency. Such swaps may involve initial and
final exchanges that correspond to the agreed upon notional amount.

The swaps in which the noted Funds may engage also include rate caps, floors
and collars under which one party pays a single or periodic fixed amount(s) (or
premium), and the other party pays periodic amounts based on the movement of a
specified index. Swaps do not involve the delivery of securities, other
underlying assets or principal. Accordingly, the risk of loss with respect to
swaps is limited to the net amount of payments that the Fund is contractually
obligated to make. If the other party to a swap defaults, the Fund's risk of
loss consists of the net amount of payments that the Fund is contractually
entitled to receive. Currency swaps usually involve the delivery of the entire
principal value of one designated currency in exchange for the other designated
currency. Therefore, the entire principal value of a currency swap is subject to
the risk that the other party to the swap will default on its contractual
delivery obligations. If there is a default by the counterparty, the Fund may
have contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps, floors, and collars are more recent innovations
for which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.

Funds will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of

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<PAGE>

the two payments. The Fund's obligations under a swap agreement will be accrued
daily (offset against any amounts owing to the portfolio) and, to avoid any
potential leveraging of the Fund, any accrued but unpaid net amounts owed to a
swap counterparty will be covered by the maintenance of a segregated account
consisting of cash or liquid securities. To the extent that these swaps, caps,
floors, and collars are entered into for hedging purposes, the Adviser believes
such obligations do not constitute "senior securities" under the 1940 Act and,
accordingly, will not treat them as being subject to the Fund's borrowing
restrictions. Funds may enter into OTC derivatives transactions (swaps, caps,
floors, puts, etc., but excluding foreign exchange contracts) with
counterparties that are approved by the Adviser in accordance with guidelines
established by the Company's Board of Directors. These guidelines provide for a
minimum credit rating for each counterparty and various credit enhancement
techniques (for example, collateralization of amounts due from counterparties)
to limit exposure to counterparties with ratings below AA.

The use of swaps is a highly specialized activity that involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If the Adviser is incorrect in its forecasts of market
values, interest rates and currency exchange rates, the investment performance
of the portfolio would be less favorable than it would have been if this
investment technique were not used.

USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS. Many Strategic Transactions,
in addition to other requirements, require that a Fund segregate cash and liquid
securities with its custodian to the extent such Fund's obligations are not
otherwise "covered" as described above. In general, the Funds must segregate
with the custodian either (i) the full amount of any obligation by the Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered (or securities
convertible into the needed securities without additional consideration), or
(ii) subject to applicable regulatory restrictions, an amount of cash or liquid
securities at least equal to the current amount of the obligation. The
segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. In
the case of a futures contract or an option thereon, the Fund must deposit
initial margin and possible daily variation margin in addition to segregating
cash and liquid securities sufficient to meet its obligation to purchase or
provide securities or currencies, or to pay the amount owed at the expiration of
an index-based futures contract. With respect to swaps, the Fund will accrue the
net amount of the excess, if any, of its obligations over its entitlements with
respect to each swap on a daily basis and will segregate an amount of cash or
liquid securities having a value equal to the accrued excess. Caps, floors and
collars require segregation of cash and liquid securities with a value equal to
the Fund's net obligation, if any. Strategic Transactions may be covered by
other means when consistent with applicable regulatory policies. The Fund may
also enter into offsetting transactions so that its combined position, coupled
with any segregated cash and liquid securities, equals its net outstanding
obligation.

U.S. GOVERNMENT OBLIGATIONS

Examples of types of U.S. Government obligations include U.S. Treasury
Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home
Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Federal National Mortgage Association,
Government National Mortgage Association, General Services Administration,
Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home
Loan Mortgage Corporation, Federal Intermediate Credit Banks, Maritime
Administration, International Bank for Reconstruction and Development (the
"World Bank"), the Asian-American Development Bank and the Inter-American
Development Bank.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

The Funds may purchase securities on a when-issued or delayed delivery
basis. In such transactions, instruments are bought with payment and delivery
taking place in the future to secure what is considered to be an advantageous
yield or price at the time of the transaction. The payment obligation and the
interest rates that will be received are each fixed at the time a Fund enters
into the commitment, and no interest accrues to the Fund until settlement. Thus,
it is possible that the market value at the time of settlement could be higher
or lower than the purchase price if the general level of interest rates has
changed. Because the Fund relies on the buyer or seller, as the case may be, to
consummate the transaction, failure by the other party to complete the
transaction may result in the Fund missing the opportunity of obtaining a price
or yield considered to be advantageous. When the Fund is the buyer in such a
transaction, however, it will maintain, in a segregated account with its
custodian, cash or portfolio securities having an aggregate value equal to the
amount of such purchase commitments until payment is made.

ZERO COUPON BONDS

Zero coupon bonds is a term used to describe notes and bonds that have been
stripped of their unmatured interest coupons or the coupons themselves, and also
receipts or certificates representing interest in such stripped debt obligations
and coupons. The timely payment of coupon interest and principal on zero coupon
bonds issued by the U.S. Treasury remains guaranteed by the "full faith and
credit" of the United States government.

A zero coupon bond does not pay interest. Instead, it is issued at a
substantial discount to its "face value"--what it will be worth at maturity. The
difference between a security's issue or purchase price and its face value
represents the imputed interest

23
<PAGE>

that an investor will earn if the security is held until maturity. For tax
purposes, a portion of this imputed interest is deemed to be income received by
zero coupon bondholders each year. Each Fund, which expects to qualify as a
regulated investment company, intends to pass along such interest as a component
of the Fund's distributions of net investment income.

Zero coupon bonds may offer investors the opportunity to earn higher yields
than those available on U.S. Treasury bonds of similar maturity. However, zero
coupon bond prices may also exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest is
returned to the investor.

Zero Coupon Treasury Bonds are sold under a variety of different names, such
as: Certificate of Accrual on Treasury Securities ("CATS"), Treasury Receipts
("TRs"), Separate Trading of Registered Interest and Principal of Securities
("STRIPS") and Treasury Investment Growth Receipts ("TIGERS").

INVESTMENT RESTRICTIONS

Each Fund has adopted certain investment policies that are either
fundamental investment limitations or non-fundamental investment limitations.
Fundamental investment limitations may not be changed without shareholder
approval by the vote of a majority of its outstanding voting securities, which
is defined by the 1940 Act as the lesser of: (1) 67% or more of the voting
securities of the Fund present at a meeting, if the holders of more than 50% of
the outstanding voting securities of the Fund are present or represented by
proxy, or (2) more than 50% of the outstanding voting securities of the Fund.
Non-fundamental investment limitations may be changed by the Board of Directors
of the Company without shareholder approval.

Each Fund is designated as either a diversified fund or a non-diversified
fund as those terms are defined under the 1940 Act. Like fundamental investment
restrictions, a fund which is designated as a diversified fund may not change
its status to a non-diversified fund without approval by the vote of a majority
of its outstanding voting securities. The following Funds are diversified funds:
American Value Fund, Asian Growth Fund, Equity Growth Fund, European Equity
Fund, Global Equity Allocation Fund, Global Equity Fund, Growth and Income Fund
II, Japanese Equity Fund, Mid Cap Growth Fund, Tax Managed Global Franchise
Fund, and Value Fund. The following Funds are non-diversified funds: Emerging
Markets Debt Fund, Emerging Markets Fund, Focus Equity Fund, International
Magnum Fund, Latin American Fund, and Worldwide High Income Fund. As described
in the prospectuses for the non-diversified funds, such funds may invest a
greater portion of their assets in a more limited number of issuers than
diversified funds, and therefore, non-diversified funds are subject to greater
risk because the changes in the financial condition of a single issuer may cause
greater fluctuation in the value of such funds' shares. The percentage
limitations contained in the restrictions and policies set forth herein apply at
the time of purchase of securities. With respect to the limitation on borrowings
and illiquid securities, the percentage limitations apply at the time of
purchase and on an ongoing basis.

For the purpose of describing fundamental investment limitations, the Funds
have been divided into two separate groups, which limitations apply only to the
Funds that form a part of that group. The groups are comprised as follows:

<TABLE>
<S> <C>
Category I Funds: American Value Fund, Asian Growth Fund, Emerging Markets
Fund, European Equity Fund, Focus Equity Fund, Global Equity
Allocation Fund, Growth and Income Fund II, International
Magnum Fund, Japanese Equity Fund, Latin American Fund and
Worldwide High Income Fund.

Category II Funds: Emerging Markets Debt Fund, Equity Growth Fund, Global
Equity Fund, Mid Cap Growth Fund Tax Managed Global
Franchise Fund, and Value Fund.
</TABLE>

CATEGORY I FUNDS

The following are fundamental investment limitations with respect to the
Category I Funds. No Category I Fund will:

(1) invest in commodities, except that each of the American Value Fund,
Emerging Markets Fund, European Equity Fund, Focus Equity Fund, Growth and
Income Fund II, Latin American Fund and Worldwide High Income Fund may invest in
futures contracts and options to the extent that not more than 5% of its total
assets are required as deposits to secure obligations under futures contracts
and not more than 20% of its total assets are invested in futures contracts and
options at any time.

(2) purchase or sell real estate or real estate limited partnerships,
although it may purchase and sell securities of companies which deal in real
estate and may purchase and sell securities which are secured by interests in
real estate.

(3) underwrite the securities of other issuers.

(4) invest for the purpose of exercising control over management of any
company.

(5) invest more than 5% of its total assets in securities of companies
which have (with predecessors) a record of less than three years' continuous
operation.
24
<PAGE>
(6) except with respect to the Latin American Fund, acquire any securities
of companies within one industry if, as a result of such acquisition, more than
25% of the value of the Fund's total assets would be invested in securities of
companies within such industry; provided, however, that there shall be no
limitation on the purchase of obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.

(7) write or acquire options or interests in oil, gas or other mineral
exploration or development programs or leases.

(8) purchase on margin or sell short except as specified above in (1) and
except that the Emerging Markets Fund, European Equity Fund, Focus Equity Fund,
Latin American Fund and Worldwide High Income Fund may enter into short sales in
accordance with its investment objective and policies.

(9) purchase or retain securities of an issuer if those officers and
directors of the Company or its investment adviser owning more than 1/2 of 1% of
such securities together own more than 5% of such securities.

(10) borrow, except from banks and as a temporary measure for extraordinary
or emergency purposes and then, in no event, in excess of 10% of the Fund's
total assets valued at the lower of market or cost and a Fund may not purchase
additional securities when borrowings exceed 5% of total assets, except that the
Growth and Income Fund II, Latin American Fund and Worldwide High Income Fund
may enter into reverse repurchase agreements in accordance with its investment
objective and policies and except that each of the Focus Equity Fund, Latin
American Fund and Worldwide High Income Fund may borrow amounts up to 33 1/3% of
its total assets (including the amount borrowed), less all liabilities and
indebtedness other than the borrowing.

(11) pledge, mortgage, or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value, except that each of the Focus
Equity Fund, Latin American Fund and Worldwide High Income Fund may pledge,
mortgage or hypothecate its assets to secure borrowings in amounts up to 33 1/3%
of its assets (including the amount borrowed).

(12) invest more than an aggregate of 15% of the total assets of the Fund,
determined at the time of investment, in illiquid assets, including repurchase
agreements having maturities of more than seven days or invest in fixed time
deposits with a duration of from two business days to seven calendar days if
more than 10% of the Fund's total assets would be invested in these time
deposits; provided, however, that no Fund shall invest (i) more than 10% of its
total assets in securities subject to legal or contractual restrictions on
resale, and (ii) in fixed time deposits with a duration of over seven calendar
days.

(13) invest its assets in securities of any investment company, except by
purchase in the open market involving only customary brokers' commissions or in
connection with mergers, acquisitions of assets or consolidations and except as
may otherwise be permitted by the 1940 Act.

(14) issue senior securities.

(15) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the limitation
described in (12) above) which are publicly distributed, and (ii) by lending its
portfolio securities to banks, brokers, dealers and other financial institutions
so long as such loans are not inconsistent with the 1940 Act or the rules and
regulations or interpretations of the SEC thereunder.

(16) except for the Emerging Markets Fund, Focus Equity Fund, International
Magnum Fund, Latin American Fund and Worldwide High Income Fund, purchase more
than 10% of any class of the outstanding securities of any issuer.

(17) except for the Emerging Markets Fund, Focus Equity Fund, International
Magnum Fund, Latin American Fund and Worldwide High Income Fund, purchase
securities of an issuer (except obligations of the U.S. government and its
instrumentalities) if as the result, with respect to 75% of its total assets,
more than 5% of the Fund's total assets, at market value, would be invested in
the securities of such issuer.

The following are non-fundamental investment limitations with respect to the
Category I Funds. As a matter of non-fundamental policy, no Category I Fund
will:

(1) purchase warrants if, by reason of such purchase, more than 5% of the
value of the Fund's net assets would be invested in warrants valued at the lower
of cost or market. Included in this amount, but not to exceed 2% of the value of
the Fund's net assets, may be warrants that are not listed on a nationally
recognized stock exchange.

(2) invest in oil, gas or other mineral leases; invest up to 25% of its
total assets in privately placed securities; or invest more than 15% of its net
assets in illiquid securities.

(3) except with respect to the Latin American Fund, acquire any securities
of companies within one industry if, as a result of such acquisition, 25% or
more of the value of the Fund's total assets would be invested in securities of
companies within such industry; provided, however, that there shall be no
limitation on the purchase of obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.

The percentage limitations contained in these restrictions apply at the time
of purchase of securities, except for limitations on borrowings and illiquid
securities which apply on an ongoing basis.
25
<PAGE>
CATEGORY II FUNDS

The following are fundamental investment limitations with respect to the
Category II Funds. No Category II Fund will:

(1) invest in physical commodities or contracts on physical commodities,
except that any Fund may acquire physical commodities as a result of ownership
of securities or other instruments and may purchase or sell options or futures
contracts or invest in securities or other instruments backed by physical
commodities.

(2) purchase or sell real estate, although each Fund may purchase and sell
securities of companies which deal in real estate, other than real estate
limited partnerships, and may purchase and sell marketable securities which are
secured by interests in real estate.

(3) make loans except: (i) by purchasing debt securities in accordance with
their respective investment objectives and policies, or entering into repurchase
agreements, subject to the limitations described in non-fundamental investment
limitation (9) below, (ii) by lending their portfolio securities, and (iii) by
lending portfolio assets to other Funds, banks, brokers, dealers and other
financial institutions, so long as such loans are not inconsistent with the 1940
Act, the rules, regulations, interpretations or orders of the SEC and its staff
thereunder.

(4) except for the Emerging Markets Debt Fund, with respect to 75% of each
Fund's assets, purchase a security if, as a result, the Fund would hold more
than 10% (taken at the time of such investment) of the outstanding voting
securities of any issuer.

(5) except for the Emerging Markets Debt Fund, with respect to 75% of each
Fund's assets, purchase securities of any issuer if, as a result, more than 5%
of the Fund's total assets, taken at market value at the time of such
investment, would be invested in the securities of such issuer except that this
restriction does not apply to securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities.

(6) issue any class of senior security or sell any senior security of which
it is the issuer, except that each Fund may borrow money as a temporary measure
for extraordinary or emergency purposes, provided that such borrowings do not
exceed 33 1/3% of the Fund's total assets (including the amount borrowed) less
liabilities (exclusive of borrowings) and except that the Emerging Markets Debt
Fund may borrow from banks in an amount not in excess of 33 1/3% of its total
assets (including the amount borrowed) less liabilities in accordance with its
investment objective and policies. The term "senior security" shall not include
any temporary borrowings that do not exceed 5% of the value of a Fund's total
assets at the time the Fund makes such temporary borrowing. Notwithstanding the
foregoing limitations on issuing or selling senior securities and borrowing, a
Fund may engage in investment strategies that obligate it either to purchase
securities or segregate assets, or enter into reverse repurchase agreements,
provided that it will segregate assets to cover its obligations pursuant to such
transactions in accordance with applicable rules, orders, or interpretations of
the SEC or its staff. This investment limitation shall not preclude a Fund from
issuing multiple classes of shares in reliance on SEC rules or orders.

(7) underwrite the securities of other issuers (except to the extent that a
Fund may be deemed to be an underwriter within the meaning of the 1933 Act in
connection with the disposition of restricted securities).

(8) Acquire any securities of companies within one industry, if as a result
of such acquisition, more than 25% of the value of the Fund's total assets would
be invested in securities of companies within such industry; provided, however,
that there shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities, when any
such Fund adopts a temporary defensive position.

The following are non-fundamental investment limitations with respect to the
Category II Funds. As a matter of non-fundamental policy, no Category II Fund
will:

(1) purchase on margin, except for use of short-term credit as may be
necessary for the clearance of purchases and sales of securities, provided that
each Fund may make margin deposits in connection with transactions in options,
futures, and options on futures.

(2) sell short unless the Fund (i) owns the securities sold short, (ii) by
virtue of its ownership of other securities, has the right to obtain securities
equivalent in kind and amount to the securities sold and, if the right is
conditional, the sale is made upon the same conditions, or (iii) maintains in a
segregated account on the books of the Fund's custodian an amount that, when
combined with the amount of collateral deposited with the broker in connection
with the short sale, equals the current market value of the security sold short
or such other amount as the SEC or its staff may permit by rule, regulation,
order, or interpretation, except that the Emerging Markets Debt Fund may from
time to time sell securities short without limitation but consistent with
applicable legal requirements as stated in its Prospectus; provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.

(3) purchase or retain securities of an issuer if those officers and
directors of the Company or any of its investment advisers owning more than 1/2
of 1% of such securities together own more than 5% of such securities.

26
<PAGE>
(4) borrow money other than from banks or other Funds of the Company,
provided that a Fund may borrow from banks or other Funds of the Company so long
as such borrowing is not inconsistent with the 1940 Act or the rules,
regulations, interpretations or orders of the SEC and its staff thereunder; or,
except for the Emerging Markets Debt Fund, purchase additional securities when
borrowings exceed 5% of total assets.

(5) pledge, mortgage or hypothecate assets in an amount greater than 10% of
its total assets in the case of the Emerging Markets Debt Fund, Equity Growth
Fund and Global Equity Funds or 50% of its total assets in the case of the Mid
Cap Growth Fund and Value Fund, provided that each Fund may segregate assets
without limit in order to comply with the requirements of Section 18(f) of the
1940 Act and applicable rules, regulations or interpretations of the SEC and its
staff.

(6) invest more than an aggregate of 15% of the net assets of the Fund in
illiquid securities provided that this limitation shall not apply to any
investment in securities that are not registered under the 1933 Act but that can
be sold to qualified institutional investors in accordance with Rule 144A under
the 1933 Act and are determined to be liquid securities under guidelines or
procedures adopted by the Company's Board of Directors.

(7) invest for the purpose of exercising control over management of any
company.

(8) invest its assets in securities of any investment company, except by
purchase in the open market involving only customary brokers' commissions or in
connection with mergers, acquisitions of assets or consolidations and except as
may otherwise be permitted by the 1940 Act.

(9) in the case of the Emerging Markets Debt Fund, Equity Growth Fund and
Global Equity Fund, make loans as described in fundamental investment
limitations 3(ii) and 3(iii), above, in an amount exceeding 33 1/3% of its total
assets.

If a percentage limitation on investment or utilization of assets as set
forth above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the value or total cost of the Fund's
assets will not be considered a violation of the restriction, and the sale of
securities will not be required, except for the limitation on borrowings and
illiquid securities which apply on an ongoing basis.

DIRECTORS AND OFFICERS

The business and affairs of the Funds are managed under the direction of the
Company's Board of Directors and each Fund's officers appointed by the Board of
Directors. The tables below list the directors and officers of the Funds and
their principal occupations for the last five years and their affiliations, if
any, with Van Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen
Investment Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc.
("Asset Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen
Management Inc., Van Kampen Advisors Inc., Van Kampen Insurance Agency of
Illinois Inc., Van Kampen Insurance Agency of Texas Inc., Van Kampen System
Inc., Van Kampen Recordkeeping Services Inc., American Capital Contractual
Services, Inc., Van Kampen Trust Company, Van Kampen Exchange Corp. and
Van Kampen Investor Services Inc. ("Investor Services"). Advisory Corp. and
Asset Management sometimes are referred to herein collectively as the
"Advisers". For purposes hereof, the term "Fund Complex" includes each of the
open-end investment companies advised by the Advisers (excluding Van Kampen
Exchange Fund).

DIRECTORS

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Trustee/Director of each of the funds in
1632 Morning Mountain Road the Fund Complex. Co-founder, and prior to August 1996,
Raleigh, NC 27614 Chairman, Chief Executive Officer and President, MDT
Date of Birth: 07/14/32 Corporation (now known as Getinge/Castle, Inc., a subsidiary
Age: 68 of Getinge Industrier AB), a company which develops,
manufactures, markets and services medical and scientific
equipment.

Jerry D. Choate........................... Director of Amgen Inc., a biotechnological company, and
53 Monarch Bay Drive Valero Energy Corporation, an independent refining company.
Dana Point, CA 92629 Trustee/Director of each of the funds in the Fund Complex.
Date of Birth: 09/16/38 Prior to January 1999, Chairman and Chief Executive Officer
Age: 62 of The Allstate Corporation ("Allstate") and Allstate
Insurance Company. Prior to January 1995, President and
Chief Executive Officer of Allstate. Prior to August 1994,
various management positions at Allstate.
</TABLE>

27
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an executive search
Sears Tower firm. Trustee/Director of each of the funds in the Fund
233 South Wacker Drive Complex. Prior to 1997, Partner, Ray & Berndtson, Inc., an
Suite 7000 executive recruiting and management consulting firm.
Chicago, IL 60606 Formerly, Executive Vice President of ABN AMRO, N.A., a
Date of Birth: 06/03/48 Dutch bank holding company. Prior to 1992, Executive Vice
Age: 52 President of La Salle National Bank. Trustee on the
University of Chicago Hospitals Board, Vice Chair of the
Board of The YMCA of Metropolitan Chicago and a member of
the Women's Board of the University of Chicago. Prior to
1996, Trustee of The International House Board, a fellowship
and housing organization for international graduate
students.

R. Craig Kennedy.......................... President and Director, German Marshall Fund of the United
11 DuPont Circle, N.W. States, an independent U.S. foundation created to deepen
Washington, D.C. 20016 understanding, promote collaboration and stimulate exchanges
Date of Birth: 02/29/52 of practical experience between Americans and Europeans.
Age: 48 Trustee/Director of each of the funds in the Fund Complex.
Formerly, advisor to the Dennis Trading Group Inc., a
managed futures and option company that invests money for
individual and institutions. Prior to 1992, President and
Chief Executive Officer, Director and Member of the
Investment Committee of the Joyce Foundation, a private
foundation.

Mitchell M. Merin*........................ President and Chief Operating Officer of Asset Management of
Two World Trade Center Morgan Stanley Dean Witter since December 1998. President
66th Floor and Director since April 1997 and Chief Executive Officer
New York, NY 10048 since June 1998 of Morgan Stanley Dean Witter Advisors Inc.
Date of Birth: 08/13/53 and Morgan Stanley Dean Witter Services Company Inc.
Age: 47 Chairman, Chief Executive Officer and Director of Morgan
Stanley Dean Witter Distributors Inc. since June 1998.
Chairman and Chief Executive Officer since June 1998, and
Director since January 1998, of Morgan Stanley Dean Witter
Trust FSB. Director of various Morgan Stanley Dean Witter
subsidiaries. President of the Morgan Stanley Dean Witter
Funds since May 1999. Trustee/Director of each of the funds
in the Fund Complex. Previously Chief Strategic Officer of
Morgan Stanley Dean Witter Advisors Inc. and Morgan Stanley
Dean Witter Services Company Inc. and Executive Vice
President of Morgan Stanley Dean Witter Distributors Inc.
April 1997-June 1998, Vice President of the Morgan Stanley
Dean Witter Funds May 1997-April 1999, and Executive Vice
President of Dean Witter, Discover & Co.

Jack E. Nelson............................ President and owner, Nelson Investment Planning
423 Country Club Drive Services, Inc., a financial planning company and registered
Winter Park, FL 32789 investment adviser in the State of Florida. President and
Date of Birth: 02/13/36 owner, Nelson Ivest Brokerage Services Inc., a member of the
Age: 64 National Association of Securities Dealers, Inc. and
Securities Investors Protection Corp. Trustee/Director of
each of the funds in the Fund Complex.

Richard F. Powers, III*................... Chairman, President and Chief Executive Officer of Van
1 Parkview Plaza Kampen Investments. Chairman, Director and Chief Executive
P.O. Box 5555 Oficer of the Advisers, the Distributor, Van Kampen
Oakbrook Terrace, IL 60181-5555 Advisors Inc. and Van Kampen Management Inc. Director and
Date of Birth: 02/02/46 officer of certain other subsidiaries of Van Kampen
Age: 54 Investments. Chief Sales and Marketing Officer for Morgan
Stanley Dean Witter Asset Management. Trustee/ Director and
President of each of the funds in the Fund Complex. Trustee,
President and Chairman of the Board of other investment
companies advised by the Advisers and their affiliates, and
Chief Executive Officer of Van Kampen Exchange Fund. Prior
to May 1998, Executive Vice President and Director of
Marketing at Morgan Stanley Dean Witter and Director of Dean
Witter Discover & Co. and Dean Witter Realty. Prior to 1996,
Director of Dean Witter Reynolds Inc.
</TABLE>

28
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Phillip B. Rooney......................... Vice Chairman (since April 1997) and Director (since 1994)
One ServiceMaster Way of The ServiceMaster Company, a business and consumer
Downers Grove, IL 60515 services company. Director of Illinois Tool Works, Inc., a
Date of Birth: 07/08/44 manufacturing company and the Urban Shopping Centers Inc., a
Age: 56 retail mall management company. Trustee, University of Notre
Dame. Trustee/Director of each of the funds in the Fund
Complex. Prior to 1998, Director of Stone Smurfit Container
Corp., a paper manufacturing company. From May 1996 through
February 1997 he was President, Chief Executive Officer and
Chief Operating Officer of Waste Management, Inc., an
environmental services company, and from November 1984
through May 1996 he was President and Chief Operating
Officer of Waste Management, Inc.

Fernando Sisto............................ Professor Emeritus. Prior to August 1996, a George M. Bond
155 Hickory Lane Chaired Professor with Stevens Institute of Technology and
Closter, NJ 07624 prior to 1995, Dean of the Graduate School, Stevens
Date of Birth: 08/02/24 Institute of Technology. Director, Dynalysis of Princeton, a
Age: 76 firm engaged in engineering research. Trustee/Director of
each of the funds in the Fund Complex.

Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps, Slate, Meagher &
333 West Wacker Drive Flom (Illinois), legal counsel to the funds in the Fund
Chicago, IL 60606 Complex, and other investment companies advised by the
Date of Birth: 08/22/39 Advisers. Trustee/Director of each of the funds in the Fund
Age: 61 Complex, and Trustee/Managing General Partner of other
investment companies advised by the Advisers.

Suzanne H. Woolsey........................ Chief Operating Officer of the National Academy of
2101 Constitution Ave., N.W. Sciences/National Research Council, an independent,
Room 206 federally chartered policy institution, since 1993. Director
Washington, D.C. 20418 of Neurogen Corporation, a pharmaceutical company, since
Date of Birth: 12/27/41 January 1998. Director of the German Marshall Fund of the
Age: 58 United States, Trustee of Colorado College and Vice Chair of
the Board of the Council for Excellence in Government.
Trustee/Director of each of the funds in the Fund Complex.
Prior to 1993, Executive Director of the Commission on
Behavioral and Social Sciences and Education at the National
Academy of Sciences/ National Research Council. From 1980
through 1989, Partner of Coopers & Lybrand.
</TABLE>

--------------

* Such director is an "interested person" (within the meaning of
Section 2(a)(19) of the 1940 Act). Mr. Whalen is an interested person of each
of the funds in the Fund Complex by reason of his firm currently acting as
legal counsel to each of the funds in the Fund Complex. Messrs. Merin and
Powers are interested persons of each of the funds in the Fund Complex and the
Advisers by reason of their positions with Morgan Stanley Dean Witter or its
affiliates.

OFFICERS

Messrs. Smith, Santo, Ciccarone, Reynoldson, Sullivan and Zimmermann are
located at 1 Parkview Plaza, Oakbrook Terrace, IL 60181-5555. Mr. Boyd is
located at 2800 Post Oak Boulevard, Houston TX 77056 and Mr. Stadler is located
at 1221 Avenue of the Americas, New York, NY 10020.

<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
----------------- -------------------
<S> <C>
A. Thomas Smith III....................... Executive Vice President, General Counsel, Secretary and
Date of Birth: 12/14/56 Director of Van Kampen Investments, the Advisers, Van Kampen
Age: 43 Advisors Inc., Van Kampen Management Inc., the Distributor,
Vice President and Secretary American Capital Contractual Services, Inc., Van Kampen
Exchange Corp., Van Kampen Recordkeeping Services Inc.,
Investor Services, Van Kampen Insurance Agency of Illinois
Inc. and Van Kampen System Inc. Vice President and Secretary
of each of the funds in the Fund Complex. Vice President and
Secretary/Vice President, Principal Legal Officer and
Secretary of other investment companies advised by the
Advisers or their affiliates. Prior to January 1999, Vice
President and Associate General Counsel to New York Life
Insurance Company ("New York Life"), and prior to
March 1997, Associate General Counsel of New York Life.
Prior to December 1993, Assistant General Counsel of The
Dreyfus Corporation. Prior to August 1991, Senior Associate,
Willkie Farr & Gallagher. Prior to January 1989, Staff
Attorney at the Securities and Exchange Commission, Division
of Investment Management, Office of Chief Counsel.
</TABLE>

29
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
----------------- -------------------
<S> <C>
Michael H. Santo.......................... Executive Vice President, Chief Administrative Officer and
Date of Birth: 10/25/55 Director of Van Kampen Investments, the Advisers, the
Age: 45 Distributor, Van Kampen Advisors Inc, Van Kampen Management
Vice President Inc. and Van Kampen Investor Services Inc. and serves as a
Director or Officer of certain other subsidiaries of Van
Kampen Investments. Vice President of each of the funds in
the Fund Complex and certain other investment companies
advised by the Advisers and their affiliates. Prior to 1998,
Senior Vice President and Senior Planning Officer for
Individual Asset Management of Morgan Stanley Dean Witter
and its predecessor since 1994. From 1990-1994, First Vice
President and Assistant Controller in Dean Witter's
Controller's Department.

Stephen L. Boyd........................... Executive Vice President and Chief Investment Officer of Van
Date of Birth: 11/16/40 Kampen Investments, and President and Chief Operating
Age: 59 Officer of the Advisers. Executive Vice President and Chief
Executive Vice President and Chief Investment Officer of each of the funds in the Fund Complex
Investment Officer and certain other investment companies advised by the
Advisers or their affiliates. Prior to April 2000, Executive
Vice President and Chief Investment Officer for Equity
Investments of the Advisers. Prior to October 1998, Vice
President and Senior Portfolio Manager with AIM Capital
Management, Inc. Prior to February 1998, Senior Vice
President and Portfolio Manager of Van Kampen American
Capital Asset Management Inc., Van Kampen American Capital
Investment Advisory Corp. and Van Kampen American Capital
Management, Inc.

Richard A. Ciccarone...................... Senior Vice President and Co-head of the Fixed Income
Date of Birth; 06/15/52 Department of the Advisers, Van Kampen Management Inc. and
Age: 48 Van Kampen Advisors Inc. Prior to May 2000, he served as
Vice President Co-head of Municipal Investments and Director of Research of
the Advisers, Van Kampen Management Inc. and Van Kampen
Advisors Inc. Mr. Ciccarone first joined the Adviser in
June 1983, and worked for the Adviser until May 1989, with
his last position being a Vice President. From June 1989 to
April 1996, he worked at EVEREN Securities (formerly known
as Kemper Securities), with his last position at EVEREN
being an Executive Vice President. Since April 1996,
Mr. Ciccarone has been a Senior Vice President of the
Advisers, Van Kampen Management Inc. and Van Kampen Advisors
Inc.

John R. Reynoldson........................ Senior Vice President and Co-head of the Fixed Income
Date of Birth: 05/15/53 Department of the Advisers, Van Kampen Management Inc. and
Age: 47 Van Kampen Advisors Inc. Prior to May 2000, he managed the
Vice President investment grade taxable group for the Adviser since
July 1999. From July 1988 to June 1999, he managed the
government securities bond group for Asset Management.
Mr. Reynoldson has been with Asset Management since
April 1987, and has been a Senior Vice President of Asset
Management since July 1988. He has been a Senior Vice
President of the Adviser and Van Kampen Management Inc.
since June 1995 and Senior Vice President of Van Kampen
Advisors Inc. since June 2000.

Joseph P. Stadler......................... Since 1998, Principal of Morgan Stanley & Co. Incorporated
Date of Birth: 06/07/54 and Morgan Stanley Dean Witter Investment Management Inc. He
Age: 46 joined Morgan Stanley & Co. Incorporated and Morgan Stanley
Vice President Dean Witter Investment Management Inc. in 1993. Accountant
with Price Waterhouse LLP (now PricewaterhouseCoopers LLP)
(an accounting firm) from 1983 to 1993. Vice President of
various U.S. registered investment companies managed by
Morgan Stanley Dean Witter Investment Management Inc.

John L. Sullivan.......................... Senior Vice President of Van Kampen Investments and the
Date of Birth: 08/20/55 Advisers. Vice President, Chief Financial Officer and
Age: 45 Treasurer of each of the funds in the Fund Complex and
Vice President, Chief Financial Officer certain other investment companies advised by the Advisers
and Treasurer or their affiliates.
</TABLE>

30
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
----------------- -------------------
<S> <C>
John H. Zimmermann, III................... Senior Vice President and Director of Van Kampen
Date of Birth: 11/25/57 Investments, President and Director of the Distributor, and
Age: 42 President of Van Kampen Insurance Agency of Illinois Inc.
Vice President Vice President of each of the funds in the Fund Complex.
From November 1992 to December 1997, Mr. Zimmermann was
Senior Vice President of the Distributor.
</TABLE>

Each trustee/director holds the same position with each of the funds in the
Fund Complex. As of the date of this Statement of Additional Information, there
are 60 operating funds in the Fund Complex. Each trustee/director who is not an
affiliated person of Van Kampen Investments, the Advisers or the Distributor
(each a "Non-Affiliated Trustee") is compensated by an annual retainer and
meeting fees for services to the funds in the Fund Complex. Each fund in the
Fund Complex provides a deferred compensation plan to its Non-Affiliated
Trustees that allows trustees/directors to defer receipt of their compensation
and earn a return on such deferred amounts. Deferring compensation has the
economic effect as if the Non-Affiliated Trustee reinvested his or her
compensation into the funds. Each fund in the Fund Complex provides a retirement
plan to its Non-Affiliated Trustees that provides Non-Affiliated Trustees with
compensation after retirement, provided that certain eligibility requirements
are met as more fully described below.

The compensation of each Non-Affiliated Trustee includes an annual retainer
in an amount equal to $50,000 per calendar year, due in four quarterly
installments on the first business day of each quarter. Payment of the annual
retainer is allocated among the funds in the Fund Complex on the basis of the
relative net assets of each fund as of the last business day of the preceding
calendar quarter. The compensation of each Non-Affiliated Trustee includes a per
meeting fee from each fund in the Fund Complex in the amount of $200 per
quarterly or special meeting attended by the Non-Affiliated Trustee, due on the
date of the meeting, plus reasonable expenses incurred by the Non-Affiliated
Trustee in connection with his or her services as a trustee/ director, provided
that no compensation will be paid in connection with certain telephonic special
meetings.

Under the deferred compensation plan, each Non-Affiliated Trustee generally
can elect to defer receipt of all or a portion of the compensation earned by
such Non-Affiliated Trustee until retirement. Amounts deferred are retained by
each respective Fund and earn a rate of return determined by reference to the
return on the common shares of such Fund or other funds in the Fund Complex as
selected by the respective Non-Affiliated Trustee, with the same economic effect
as if such Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, the Funds may invest in
securities of those funds selected by the Non-Affiliated Trustees in order to
match the deferred compensation obligation. The deferred compensation plan is
not funded and obligations thereunder represent general unsecured claims against
the general assets of each individual Fund.

Under the retirement plan, a Non-Affiliated Trustee who is receiving
compensation from such Fund prior to such Non-Affiliated Trustee's retirement,
has at least 10 years of service (including years of service prior to adoption
of the retirement plan) and retires at or after attaining the age of 60, is
eligible to receive a retirement benefit equal to $2,500 per year for each of
the ten years following such retirement from such Fund. Non-Affiliated Trustees
retiring prior to the age of 60 or with fewer than 10 years but more than 5
years of service may receive reduced retirement benefits from such Fund. Each
trustee/director has served as a member of the Board of Directors of the Funds
since he or she was first appointed or elected in the year set forth below. The
retirement plan contains a Fund Complex retirement benefit cap of $60,000 per
year.

Additional information regarding compensation and benefits for
trustees/directors is set forth below for the periods described in the notes
accompanying the table.

COMPENSATION TABLE

<TABLE>
<CAPTION>
FUND COMPLEX
---------------------------------------------------------
AGGREGATE
AGGREGATE ESTIMATED TOTAL
COMPENSATION AGGREGATE PENSION MAXIMUM ANNUAL COMPENSATION
BEFORE DEFERRAL OR RETIREMENT BENEFITS FROM THE BEFORE DEFERRAL
FROM BENEFITS ACCRUED AS FUND UPON FROM FUND
NAME(1) THE COMPANY(2) PART OF EXPENSES(3) RETIREMENT(4) COMPLEX(5)
------- --------------- ------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
J. Miles Branagan.............................. $ 23,080 $ 40,303 $ 60,000 $ 126,000
Jerry D. Choate(1)............................. 23,080 0 60,000 88,700
Linda Hutton Heagy............................. 23,080 5,045 60,000 126,000
R. Craig Kennedy............................... 23,080 3,571 60,000 125,600
Jack E. Nelson................................. 23,080 21,664 60,000 126,000
Phillip B. Rooney.............................. 23,080 7,787 60,000 113,400
Fernando Sisto................................. 23,080 72,060 60,000 126,000
Wayne W. Whalen................................ 23,080 15,189 60,000 126,000
Suzanne H. Woolsey(1).......................... 20,480 0 60,000 88,700
</TABLE>

31
<PAGE>
--------------

(1) Directors not eligible for compensation are not included in the
Compensation Table. Mr. Choate and Ms. Woolsey became members of the Board
of Directors for the Funds and other funds in the Fund Complex on May 26,
1999 and therefore do not have a full calendar year of information to
report. Paul G. Yovovich resigned as a member of the Board of Directors
for the Fund and other funds in the Fund Complex on April 14, 2000.

(2) The amounts shown in this column represent the aggregate compensation
before deferral from all operating series of the Company with respect to
the Company's fiscal period ended June 30, 2000. The details of aggregate
compensation before deferral for each Fund during the fiscal year ended
June 30, 2000 are shown in Table A below. The details of compensation
deferred for each series during the fiscal year ended June 30, 2000 are
shown in Table B below. Amounts deferred are retained by each Fund and
earn a rate of return determined by reference to either the return on the
common shares of the respective Fund or other funds in the Fund Complex as
selected by the respective Non-Affiliated Trustee, with the same economic
effect as if such Non-Affiliated Trustee had invested in one or more funds
in the Fund Complex. To the extent permitted by the 1940 Act, each Fund
may invest in securities of those funds selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
details of cumulative deferred compensation (including interest) for each
series of the Company as of June 30, 2000 are shown in Table C below. The
deferred compensation plan is described above the Compensation Table.

(3) The amounts shown in this column represent the sum of the retirement
benefits accrued by the operating investment companies in the Fund Complex
for each of the directors for the Funds' respective fiscal years ended in
1999. The retirement plan is described above the Compensation Table.

(4) For each director, this is the sum of the estimated maximum annual
benefits payable by the funds in the Fund Complex for each year of the
10-year period commencing in the year of such director's anticipated
retirement. The Retirement Plan is described above the Compensation Table.
Each Non-Affiliated Trustee has served as a member of the Board of
Directors since the year set forth in Table D below.

(5) The amounts shown in this column represent the aggregate compensation paid
by all funds in the Fund Complex as of December 31, 1999 before deferral
by the directors under the deferred compensation plan. Because the funds
in the Fund Complex have different fiscal year ends, the amounts shown in
this column are presented on a calendar year basis. Certain directors
deferred all or a portion of their aggregate compensation from the Fund
Complex during the calendar year ended December 31, 1999. The deferred
compensation earns a rate of return determined by reference to the return
on the shares of the funds in the Fund Complex as selected by the
respective Non-Affiliated Trustee, with the same economic effect as if
such Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, the Funds may invest in
securities of those investment companies selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
Advisers and their affiliates also serve as investment adviser for other
investment companies; however, with the exception of Mr. Whalen, the
Non-Affiliated Trustees were not trustees of such investment companies.
Combining the Fund Complex with other investment companies advised by the
Advisers and their affiliates, Mr. Whalen received Total Compensation of
$279,250 during the calendar year ended December 31, 1999.

The Fund, the Adviser, each Sub-Adviser, and the Distributor have adopted
Codes of Ethics (collectively, the "Code of Ethics") that set forth general and
specific standards relating to the securities trading activities of their
employees. The Code of Ethics does not prohibit employees from acquiring
securities that may be purchased or held by the Fund, but is intended to ensure
that all employees conduct their personal transactions in a manner that does not
interfere with the portfolio transactions of the Fund or other Van Kampen funds,
or that such employees take unfair advantage of their relationship with the
Fund. Among other things, the Code of Ethics prohibits certain types of
transactions absent prior approval, imposes various trading restrictions (such
as time periods during which personal transactions may or may not be made) and
requires quarterly reporting of securities transactions and other matters. All
reportable securities transactions and other required reports are to be reviewed
by appropriate personnel for compliance with the Code of Ethics. Additional
restrictions apply to portfolio managers, traders, research analysts and others
who may have access to nonpublic information about the trading activities of the
Fund or other Van Kampen funds or who otherwise are involved in the investment
advisory process. Exceptions to these and other provisions of the Code of Ethics
may be granted in particular circumstances after review by appropriate
personnel.

As of October 6, 2000, the directors and officers of the Funds owned as a
group less than 1% of the shares of each of the Funds except for the Tax Managed
Global Franchise Fund. As of October 6, 2000, the directors and officers as a
group owned 10.34% of the Class A Shares of the Tax Managed Global Franchise
Fund.

As of the date of this Statement of Additional Information, the following
Funds had not yet commenced investment operations and therefore are not reported
in tables A-D below: Van Kampen Emerging Markets Debt Fund, Van Kampen Growth
and Income Fund II and Van Kampen Japanese Equity Fund.

32
<PAGE>

FISCAL YEAR 2000 AGGREGATE COMPENSATION FROM THE COMPANY AND EACH PORTFOLIO
TABLE A

<TABLE>
<CAPTION>
FUND NAME BRANAGAN CHOATE HEAGY KENNEDY NELSON ROONEY SISTO WHALEN WOOLSEY
--------- --------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Value Fund........... $ 2,491 $ 2,491 $ 2,491 $ 2,491 $ 2,491 $ 2,491 $ 2,491 $ 2,491 $ 2,291
Asian Growth Fund............. 1,599 1,599 1,599 1,599 1,599 1,599 1,599 1,599 1,399
Emerging Markets Fund......... 1,571 1,571 1,571 1,571 1,571 1,571 1,571 1,571 1,371
Equity Growth Fund............ 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,273
European Equity Fund.......... 1,412 1,412 1,412 1,412 1,412 1,412 1,412 1,412 1,212
Focus Equity Fund............. 1,801 1,801 1,801 1,801 1,801 1,801 1,801 1,801 1,601
Global Equity Allocation
Fund........................ 2,066 2,066 2,066 2,066 2,066 2,066 2,066 2,066 1,866
Global Equity Fund............ 2,186 2,186 2,186 2,186 2,186 2,186 2,186 2,186 1,986
International Magnum Fund..... 1,530 1,530 1,530 1,530 1,530 1,530 1,530 1,530 1,330
Latin American Fund........... 1,471 1,471 1,471 1,471 1,471 1,471 1,471 1,471 1,271
Mid Cap Growth Fund........... 827 827 827 827 827 827 827 827 827
Tax Managed Global Franchise
Fund........................ 1,404 1,404 1,404 1,404 1,404 1,404 1,404 1,404 1,204
Value Fund.................... 1,630 1,630 1,630 1,630 1,630 1,630 1,630 1,630 1,430
Worldwide High Income Fund.... 1,619 1,619 1,619 1,619 1,619 1,619 1,619 1,619 1,419
------- ------- ------- ------- ------- ------- ------- ------- -------
Company Total............... $23,080 $23,080 $23,080 $23,080 $23,080 $23,080 $23,080 $23,080 $20,480
------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>

2000 AGGREGATE COMPENSATION DEFERRED FROM THE COMPANY AND EACH PORTFOLIO
TABLE B

<TABLE>
<CAPTION>
FUND NAME BRANAGAN CHOATE HEAGY KENNEDY NELSON ROONEY SISTO WHALEN WOOLSEY
--------- --------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Value Fund........... $ 2,491 $ 2,491 $ 2,491 $ 1,460 $ 2,491 $ 2,491 $ 1,245 $ 2,491 $ 0
Asian Growth Fund............. 1,599 1,599 1,599 961 1,599 1,599 800 1,599 0
Emerging Markets Fund......... 1,571 1,571 1,571 948 1,571 1,571 786 1,571 0
Equity Growth Fund............ 1,473 1,473 1,473 892 1,473 1,473 736 1,473 0
European Equity Fund.......... 1,412 1,412 1,412 857 1,412 1,412 706 1,412 0
Focus Equity Fund............. 1,801 1,801 1,801 1,080 1,801 1,801 900 1,801 0
Global Equity Allocation
Fund........................ 2,066 2,066 2,066 1,215 2,066 2,066 1,033 2,066 0
Global Equity Fund............ 2,186 2,186 2,186 1,280 2,186 2,186 1,093 2,186 0
International Magnum Fund..... 1,530 1,530 1,530 922 1,530 1,530 765 1,530 0
Latin American Fund........... 1,471 1,471 1,471 900 1,471 1,471 736 1,471 0
Mid Cap Growth Fund........... 827 827 827 568 827 827 414 827 0
Tax Managed Global Franchise
Fund........................ 1,404 1,404 1,404 852 1,404 1,404 702 1,404 0
Value Fund.................... 1,630 1,630 1,630 974 1,630 1,630 815 1,630 0
Worldwide High Income Fund.... 1,619 1,619 1,619 970 1,619 1,619 810 1,619 0
------- ------- ------- ------- ------- ------- ------- ------- ------
Company Total............... $23,080 $23,080 $23,080 $13,879 $23,080 $23,080 $11,541 $23,080 $ 0
------- ------- ------- ------- ------- ------- ------- ------- ------
</TABLE>

CUMULATIVE COMPENSATION DEFERRED (PLUS INTEREST) FROM THE COMPANY AND EACH
PORTFOLIO
TABLE C

FUND NAME BRANAGAN CHOATE HEAGY KENNEDY NELSON ROONEY SISTO WHALEN
--------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
American Value Fund......................... $ 7,346 $ 3,098 $ 5,495 $ 4,265 $ 9,037 $ 9,136 $ 3,900 $ 7,366
Asian Growth Fund........................... 4,940 1,983 3,623 2,893 6,074 6,039 2,618 4,953
Emerging Markets Fund....................... 4,976 1,942 3,645 2,917 6,119 6,093 2,634 4,989
Equity Growth Fund.......................... 3,493 1,821 2,806 2,065 4,323 4,064 1,882 3,511
European Equity Fund........................ 3,061 1,746 2,488 1,818 3,729 3,483 1,653 3,079
Focus Equity Fund........................... 5,421 2,224 4,008 3,172 6,677 6,645 2,876 5,436
Global Equity Allocation Fund............... 10,749 2,579 8,714 7,876 18,494 11,381 14,404 13,159
Global Equity Fund.......................... 7,631 2,744 5,633 4,420 9,444 9,618 4,048 7,643
International Magnum Fund................... 4,842 1,896 3,543 2,837 5,986 5,920 2,568 4,855
Latin American Fund......................... 4,675 1,822 3,412 2,743 5,757 5,705 2,476 4,688
Mid Cap Growth Fund......................... 853 861 837 589 851 877 431 871
Tax Managed Global Franchise Fund........... 3,048 1,737 2,477 1,810 3,715 3,468 1,647 3,066
Value Fund.................................. 5,486 2,035 4,014 3,201 6,803 6,791 2,910 5,498
Worldwide High Income Fund.................. 5,401 2,014 3,952 3,154 6,682 6,673 2,862 5,413
------- ------- ------- ------- ------- ------- ------- -------
Company Total............................. $71,922 $28,502 $54,647 $43,760 $93,691 $85,893 $46,909 $74,527
------- ------- ------- ------- ------- ------- ------- -------

<CAPTION>
FORMER DIRECTORS
------------------------------
FUND NAME WOOLSEY GAUGHAN MILLER ROBINSON
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
American Value Fund......................... $ 0 $ 0 $ 0 $ 0
Asian Growth Fund........................... 0 0 0 0
Emerging Markets Fund....................... 0 0 0 0
Equity Growth Fund.......................... 0 0 0 0
European Equity Fund........................ 0 0 0 0
Focus Equity Fund........................... 0 0 0 0
Global Equity Allocation Fund............... 0 176 2,025 4,890
Global Equity Fund.......................... 0 0 0 0
International Magnum Fund................... 0 0 0 0
Latin American Fund......................... 0 0 0 0
Mid Cap Growth Fund......................... 0 0 0 0
Tax Managed Global Franchise Fund........... 0 0 0 0
Value Fund.................................. 0 0 0 0
Worldwide High Income Fund.................. 0 0 0 0
------- ---- ------ ------
Company Total............................. $ 0 176 $2,025 $4,890
------- ---- ------ ------
</TABLE>

33
<PAGE>
YEAR OF ELECTION TO EACH PORTFOLIO OF THE COMPANY
TABLE D

<TABLE>
<CAPTION>
FUND NAME BRANAGAN CHOATE HEAGY KENNEDY NELSON ROONEY SISTO WHALEN WOOLSEY
--------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Value Fund............ 1997 1999 1997 1997 1997 1997 1997 1997 1999
Asian Growth Fund.............. 1997 1999 1997 1997 1997 1997 1997 1997 1999
Emerging Markets Fund.......... 1997 1999 1997 1997 1997 1997 1997 1997 1999
Equity Growth Fund............. 1997 1999 1997 1997 1997 1997 1997 1997 1999
European Equity Fund........... 1997 1999 1997 1997 1997 1997 1997 1997 1999
Focus Equity Fund.............. 1997 1999 1997 1997 1997 1997 1997 1997 1999
Global Equity Allocation
Fund......................... 1997 1999 1997 1997 1997 1997 1997 1997 1999
Global Equity Fund............. 1997 1999 1997 1997 1997 1997 1997 1997 1999
International Magnum Fund...... 1997 1999 1997 1997 1997 1997 1997 1997 1999
Latin American Fund............ 1997 1999 1997 1997 1997 1997 1997 1997 1999
Mid Cap Growth Fund............ 1999 1999 1999 1999 1999 1999 1999 1999 1999
Tax Managed Global Franchise
Fund......................... 1997 1999 1997 1997 1997 1997 1997 1997 1999
Value Fund..................... 1997 1999 1997 1997 1997 1997 1997 1997 1999
Worldwide High Income Fund..... 1997 1999 1997 1997 1997 1997 1997 1997 1999
</TABLE>

INVESTMENT ADVISORY AGREEMENTS

Each Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, each Fund retains the
Adviser to manage the investment of its assets, including the placing of orders
for the purchase and sale of portfolio securities. The Adviser obtains and
evaluates economic, statistical and financial information to formulate strategy
and implement the Fund's investment objective(s). The Adviser also furnishes
offices, necessary facilities and equipment, provides administrative services to
the Fund, renders periodic reports to the Board of Directors and permits its
officers and employees to serve without compensation as directors of the Company
or officers of the Fund if elected to such positions. The Funds, however, bear
the cost of its day-to-day operations, including service fees, distribution
fees, custodian fees, legal and independent accountant fees, the costs of
providing reports and proxies to shareholders, compensation of directors of the
Company (other than those who are affiliated persons of the Adviser, Distributor
or Van Kampen Investments) and all other ordinary business expenses not
specifically assumed by the Adviser. The Advisory Agreement also provides that
the Adviser shall not be liable to a Fund for any errors of judgment or of law,
or for any loss suffered by the Funds in connection with matters to which the
agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Adviser in the performance of its
obligations and duties, or by reason of its reckless disregard of its
obligations and duties under the Advisory Agreement.

The Advisory Agreement also provides that, in the event the expenses of a
Fund for any fiscal year exceed the most restrictive expense limitation
applicable in any jurisdiction where such Fund's shares are qualified for offer
and sale (excluding any expenses permitted to be excluded from the computation
under applicable law or regulation), the compensation due the Adviser will be
reduced by the amount of such excess and that, if a reduction in and refund of
the advisory fee is insufficient, the Adviser will pay the Fund monthly an
amount sufficient to make up the deficiency, subject to readjustment during the
fiscal year.

The Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by a Fund's Board of Directors or (ii) by a
vote of a majority of such Fund's outstanding voting securities and (b) by a
vote of a majority of the Directors who are not parties to the agreement or
interested persons of any such party by votes cast in person at a meeting called
for such purpose. The Advisory Agreement provides that it shall terminate
automatically if assigned and that it may be terminated without penalty by
either party on 60 days' written notice.

34
<PAGE>

During the fiscal years ended June 30, 2000, 1999 and 1998, the Adviser
received the approximate advisory fees (net of fee waivers) from the Funds as
set forth in the table below.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
FUND NAME JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 1998
--------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
American Value Fund............................ $8,354,616 $5,367,000 $2,424,000
Asian Growth Fund.............................. 1,545,663 1,023,000 1,557,000
Emerging Markets Debt Fund(1).................. -- -- --
Emerging Markets Fund.......................... 1,934,787 1,098,000 1,909,000
Equity Growth Fund(2).......................... 445,461 110,000 0
European Equity Fund(3)........................ 0 0 --
Focus Equity Fund.............................. 3,274,767 1,816,000 848,000
Global Equity Allocation Fund.................. 6,087,799 5,422,000 2,107,000
Global Equity Fund............................. 6,391,605 7,424,000 4,344,000
Growth and Income Fund II(1)................... -- -- --
International Magnum Fund...................... 908,260 904,000 561,000
Japanese Equity Fund(1)........................ -- -- --
Latin American Fund............................ 633,376 573,000 1,247,000
Mid Cap Growth Fund(4)......................... 291,595 -- --
Tax Managed Global Franchise Fund(3)........... 0 0 --
Value Fund..................................... 1,335,258 2,088,000 1,311,000
Worldwide High Income Fund..................... 1,396,416 1,743,000 1,864,000
</TABLE>

------------------

(1) Not operational as of June 30, 2000.

(2) Fund inception May 29, 1998.

(3) Fund inception September 25, 1998.

(4) Fund inception October 25, 1999

During the fiscal years ended June 30, 2000, 1999 and 1998, the Adviser
waived approximate advisory fees from the Funds as set forth in the table below.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
FUND NAME JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 1998
--------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
American Value Fund............................ $ -- $ -- $267,000
Asian Growth Fund.............................. 172,743 85,000 266,000
Emerging Markets Debt Fund(1).................. -- -- --
Emerging Markets Fund.......................... 79,539 239,000 553,000
Equity Growth Fund(2).......................... 136,048 164,000 --
European Equity Fund(3)........................ 218,616 39,000 --
Focus Equity Fund.............................. 233,167 252,000 279,000
Global Equity Allocation Fund.................. -- 152,000 292,000
Global Equity Fund............................. -- -- --
Growth and Income Fund II(1)................... -- -- --
International Magnum Fund...................... 22,526 39,000 148,000
Japanese Equity Fund(1)........................ -- -- --
Latin American Fund............................ 125,821 137,000 169,000
Mid Cap Growth Fund(4)......................... -- -- --
Tax Managed Global Franchise Fund(3)........... 189,166 12,000 --
Value Fund..................................... 127,565 43,000 278,000
Worldwide High Income Fund..................... -- -- --
</TABLE>

------------------

(1) Not operational as of June 30, 2000.

(2) Fund inception May 29, 1998.

(3) Fund inception September 25, 1998.

(4) Fund inception October 25, 1999.

35
<PAGE>
MSDWIM is the investment sub-adviser of all of the Funds except the Mid Cap
Growth Fund and Value Fund. MAS is the investment sub-adviser of the Mid Cap
Growth Fund and Value Fund. The Sub-Advisers provide investment advice and
portfolio management services pursuant to investment sub-advisory agreements
and, subject to the supervision of the Adviser and the Company's Board of
Directors, make the Funds' investment decisions, arrange for the execution of
portfolio transactions and generally manage the Funds' investments.

The Sub-Advisers are entitled to receive sub-advisory fees computed daily
and paid monthly. Except for the Mid Cap Growth Fund, if the average daily net
assets of a Fund during the monthly period are less than or equal to
$500 million, the Adviser shall pay MSDWIM or MAS, as appropriate, one-half of
the total investment advisory fee payable to the Adviser by the Fund (after
application of any fee waivers in effect) for such monthly period; and if a
Fund's average daily net assets for the monthly period are greater than
$500 million, the Adviser shall pay MSDWIM or MAS, as appropriate, a fee for
such monthly period equal to the greater of (a) one-half of what the total
investment advisory fee payable to the Adviser by the Fund (after application of
any fee waivers in effect) for such monthly period would have been had the
Fund's average daily net assets during such period been equal to $500 million,
or (b) forty-five percent of the total investment adisory fee payable to the
Adviser by the Fund (after application of any fee waivers in effect) for such
monthly period. For the Mid Cap Growth Fund, the Adviser shall pay MAS at an
annual rate of .40% of the average daily net assets of such Fund.

OTHER AGREEMENTS

ADMINISTRATION AGREEMENT. Pursuant to an administration agreement between
the Adviser and the Company, the Adviser provides administrative services to the
Funds. The services provided under the Administration Agreement are subject to
the supervision of the officers of the Fund and Board of Directors of the
Company and include day-to-day administration of matters related to the
corporate existence of the Company, maintenance of its records, preparation of
reports, supervision of the Company's arrangements with its custodian and
assistance in the preparation of the Company's registration statements under
federal and state laws. The Administration Agreement also provides that the
Administrator through its agents will provide the Company dividend disbursing
and transfer agent services. The Administration Agreement also provides that the
Administrator shall not be liable to the Company for any actions or omissions if
it or its agents or any of their employees acted without gross negligence or
willful misfeasance.

During the fiscal years ended June 30, 2000, 1999 and 1998, the Adviser
received the approximate administative fees from the Funds as set forth in the
table below.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
FUND NAME JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 1998
--------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
American Value Fund............................ $2,464,240 $1,590,000 $ 799,000
Asian Growth Fund.............................. 441,202 287,000 463,000
Emerging Markets Debt Fund(1).................. -- -- --
Emerging Markets Fund.......................... 416,988 285,000 522,000
Equity Growth Fund(2).......................... 188,161 91,000 1,000
European Equity Fund(3)........................ 30,149 14,000 --
Focus Equity Fund.............................. 979,119 579,000 316,000
Global Equity Allocation Fund.................. 1,613,095 1,473,000 657,000
Global Equity Fund............................. 1,609,507 1,867,000 1,089,000
Growth and Income Fund II(1)................... -- -- --
International Magnum Fund...................... 316,241 318,000 237,000
Japanese Equity Fund(1)........................ -- -- --
Latin American Fund............................ 160,375 161,000 335,000
Mid Cap Growth Fund(4)......................... 98,702 -- --
Tax Managed Global Franchise Fund(3)........... 13,674 7,000 --
Value Fund..................................... 463,813 672,000 500,000
Worldwide High Income Fund..................... 473,300 585,000 626,000
</TABLE>

------------------

(1) Not operational as of June 30, 2000.

(2) Fund inception May 29, 1998.

(3) Fund inception September 25, 1998.

(4) Fund inception October 25, 1999

36
<PAGE>
Under a sub-administration agreement between the Administrator and The Chase
Manhattan Bank ("Chase"), Chase Global Funds Services Company ("CGFSC"), a
corporate affiliate of Chase, provides certain administrative services to the
Company. The Administrator supervises and monitors such administrative services
provided by CGFSC. The services provided under the sub-administration agreement
are subject to the supervision of the Board of Directors of the Company. The
Board of Directors of the Company has approved the provision of services
described above pursuant to the sub-administration agreement as being in the
best interests of the Company. CGFSC's business address is 73 Tremont Street,
Boston, Massachusetts 02108-3913.

LEGAL SERVICES AGREEMENT. The Funds and certain of the other Van Kampen
funds have entered into legal services agreements pursuant to which Van Kampen
Investments provides legal services, including without limitation: accurate
maintenance of the fund's minute books and records, preparation and oversight of
the fund's regulatory reports, and other information provided to shareholders,
as well as responding to day-to-day legal issues on behalf of the funds. Payment
by the Funds for such services is made on a cost basis for the salary and
salary-related benefits, including but not limited to bonuses, group insurance
and other regular wages for the employment of personnel, as well as overhead and
the expenses related to the office space and the equipment necessary to render
the legal services. Of the total costs for such legal services provided to the
Van Kampen funds, one half of such costs are allocated equally to each fund and
the remaining one half of such costs are allocated to specific funds based on
monthly time records.

During the fiscal years ended June 30, 2000, 1999 and 1998, the Adviser
received the following fees from the Funds pursuant to the legal services
agreement:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
FUND NAME JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 1998
--------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
American Value Fund............................ $12,903 $10,876 $ 8,993
Asian Growth Fund.............................. 7,123 5,482 6,152
Emerging Markets Debt Fund(1).................. -- -- --
Emerging Markets Fund.......................... 6,972 5,550 6,610
Equity Growth Fund(2).......................... 6,449 3,442 4
European Equity Fund(3)........................ 6,087 0 N/A
Focus Equity Fund.............................. 9,814 6,382 6,317
Global Equity Allocation Fund.................. 11,189 10,534 9,334
Global Equity Fund............................. 12,844 11,824 11,423
Growth and Income Fund II(1)................... -- -- --
International Magnum Fund...................... 7,069 5,385 5,610
Japanese Equity Fund(1)........................ -- -- --
Latin American Fund............................ 6,546 4,727 5,687
Mid Cap Growth Fund(4)......................... 1,500 -- --
Tax Managed Global Franchise Fund(3)........... 6,041 3,211 N/A
Value Fund..................................... 8,301 7,141 9,199
Worldwide High Income Fund..................... 8,016 6,616 8,061
</TABLE>

------------------

(1) Not operational as of June 30, 2000.

(2) Fund inception May 29, 1998.

(3) Fund inception September 25, 1998.

(4) Fund inception October 25, 1999.

DISTRIBUTION AND SERVICE

The Distributor acts as the principal underwriter of the Funds' shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Funds through
authorized dealers on a continuous basis. The Distributor's obligation is an
agency or "best efforts" arrangement under which the Distributor is required to
take and pay for only such shares of a Fund as may be sold to the public. The
Distributor is not obligated to sell any stated number of shares. The
Distributor bears the cost of printing (but not typesetting) prospectuses used
in connection with this offering and certain other costs including the cost of
supplemental sales literature and advertising. The Distribution and Service
Agreement is renewable from year to year if approved (a)(i) by a Fund's Board of
Directors or (ii) by a vote of a majority of such Fund's outstanding voting
securities and (b) by a vote of a majority of Directors who are not parties to
the Distribution and Service Agreement or interested persons of any party, by
votes cast in person at a meeting called for such purpose. The

37
<PAGE>

Distribution and Service Agreement provides that it will terminate if assigned,
and that it may be terminated without penalty by either party on 90 days'
written notice. Total underwriting commissions on the sale of shares of the
Funds for the last three fiscal years are shown in the chart below.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 1998
-------------------------- -------------------------- --------------------------
TOTAL AMOUNTS TOTAL AMOUNTS TOTAL AMOUNTS
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
FUND NAME COMMISSIONS DISTRIBUTOR COMMISSIONS DISTRIBUTOR COMMISSIONS DISTRIBUTOR
--------- ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
American Value Fund............. $1,273,752 $ 77,774 $2,919,020 $228,560 $4,773,186 $658,912
Asian Growth Fund............... 481,855 29,614 397,591 25,451 749,053 98,417
Emerging Markets Debt Fund(1)... -- -- -- -- -- --
Emerging Markets Fund........... 572,475 70,318 344,275 21,951 638,827 85,770
Equity Growth Fund(2)........... 534,435 79,372 526,879 67,063 0 0
European Equity Fund(3)......... 48,000 425 30,192 3,501 N/A N/A
Focus Equity Fund............... 2,029,694 283,354 1,229,038 83,560 1,640,138 229,561
Global Equity Allocation Fund... 1,364,548 179,448 1,266,693 110,283 1,033,797 135,086
Global Equity Fund.............. 244,412 26,016 3,117,074 62,141 3,370,697 466,837
Growth and Income Fund II(1).... -- -- -- -- -- --
International Magnum Fund....... 418,728 59,571 484,186 34,803 1,045,607 140,250
Japanese Equity Fund(1)......... -- -- -- -- -- --
Latin American Fund............. 124,696 19,996 217,094 13,361 986,259 133,298
Mid Cap Growth Fund(4).......... 826,018 105,104 -- -- -- --
Tax Managed Global Franchise
Fund(3)........................ 13,706 2,303 12,337 1,748 N/A N/A
Value Fund...................... 213,082 27,810 1,338,133 70,253 6,293,710 856,595
Worldwide High Income Fund...... 91,388 10,443 950,093 34,465 1,276,023 135,143
</TABLE>

------------------

(1) Not operational as of June 30, 2000.

(2) Fund inception May 29, 1998.
(3) Fund inception September 25, 1998.

(4) Fund inception October 25, 1999.

With respect to sales of Class A Shares of the Funds, the total sales
charges and concessions reallowed to authorized dealers at the time of purchase
are as follows:

CLASS A SHARES SALES CHARGE TABLES

With respect to Emerging Markets Debt Fund, High Yield & Total Return Fund
and Worldwide High Income Fund:

<TABLE>
<CAPTION>
TOTAL SALES CHARGE
---------------------- REALLOWED
AS % OF AS % OF NET TO DEALERS
SIZE OF OFFERING AMOUNT AS A % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
---------- -------- ----------- --------------
<S> <C> <C> <C>
Less than $100,000.......................................... 4.75% 4.99% 4.25%
$100,000 but less than $250,000............................. 3.75% 3.90% 3.25%
$250,000 but less than $500,000............................. 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000........................... 2.00% 2.04% 1.75%
$1,000,000 or more.......................................... * * *
</TABLE>

With respect to all of the remaining Funds:

<TABLE>
<CAPTION>
TOTAL SALES CHARGE
---------------------- REALLOWED
AS % OF AS % OF NET TO DEALERS
SIZE OF OFFERING AMOUNT AS A % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
---------- -------- ----------- --------------
<S> <C> <C> <C>
Less than $50,000........................................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.............................. 4.75% 4.99% 4.00%
$100,000 but less than $250,000............................. 3.75% 3.90% 3.00%
$250,000 but less than $500,000............................. 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000........................... 2.00% 2.04% 1.75%
$1,000,000 or more.......................................... * * *
</TABLE>

--------------

* No sales charge is payable at the time of purchase on investments of
$1 million or more, although the Fund may impose a contingent deferred sales
charge of 1.00% on certain redemptions made within one year of the purchase. A
commission or transaction fee will be paid by the Distributor at the time of
purchase directly out of the Distributor's assets (and not out of the Fund's
assets) to authorized dealers who initiate and are responsible for purchases
of $1 million or more computed on a percentage of the dollar value of such
shares sold as follows: 1.00% on sales to $2 million, plus 0.80% on the next
$1 million and 0.50% on the excess over $3 million. For single purchases of
$20 million or more by an individual retail investor, the Distributor will
pay, at the time of purchase and directly out of the Distributor's assets (and
not out of the Fund's assets), a commission or transaction fee of 1.00% to
authorized dealers who initiate and are responsible for such purchases. The
commission or transaction fee of 1.00% will be computed on a percentage of the
dollar value of such shares sold.

38
<PAGE>
With respect to sales of Class B Shares and Class C Shares, a commission or
transaction fee generally will be paid by the Distributor at the time of
purchase directly out of the Distributor's assets (and not out of the Fund's
assets) to authorized dealers who initiate and are responsible for such
purchases computed based on a percentage of the dollar value of such shares sold
of 4.00% on Class B Shares and 1.00% on Class C Shares.

Proceeds from any contingent deferred sales charge and any distribution fees
on Class B Shares and Class C Shares are paid to the Distributor and are used by
the Distributor to defray its distribution related expenses in connection with
the sale of the Fund's shares, such as the payment to authorized dealers for
selling such shares. With respect to Class C Shares, the authorized dealers
generally are paid the ongoing commission and transaction fees of up to 0.75% of
the average daily net assets of a Fund's Class C Shares annually commencing in
the second year after purchase.

In addition to reallowances or commissions described above, the Distributor
may from time to time implement programs under which an authorized dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
under which the Distributor will reallow to any authorized dealer that sponsors
sales contests or recognition programs conforming to criteria established by the
Distributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on the sales generated
by the authorized dealer at the public offering price during such programs.
Also, the Distributor in its discretion may from time to time, pursuant to
objective criteria established by the Distributor, pay fees to, and sponsor
business seminars for, qualifying authorized dealers for certain services or
activities which are primarily intended to result in sales of shares of the Fund
or other Van Kampen funds. Fees may include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited registered
representatives for meetings or seminars of a business nature. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its quarterly sales of shares of the Funds and other Van
Kampen funds and increases in net assets of the Funds and other Van Kampen funds
over specified thresholds. All of the foregoing payments are made by the
Distributor out of its own assets. Such fees paid for such services and
activities with respect to a Fund will not exceed in the aggregate 1.25% of the
average total daily net assets of such Fund on an annual basis. These programs
will not change the price an investor will pay for shares or the amount that a
Fund will receive from such sale.

The Funds have each adopted a distribution plan (the "Distribution Plan")
with respect to each class of its shares pursuant to Rule 12b-1 under the 1940
Act. The Fund also has adopted a service plan (the "Service Plan") with respect
to each class of its shares. The Distribution Plan and the Service Plan
sometimes are referred to herein as the "Plans". The Plans provide that a Fund
may spend a portion of the Fund's average daily net assets attributable to each
class of shares in connection with distribution of the respective class of
shares and in connection with the provision of ongoing services to shareholders
of such class, respectively. The Distribution Plan and the Service Plan are
being implemented through the Distribution and Service Agreement with the
Distributor of each class of the Fund's shares, sub-agreements between the
Distributor and members of the NASD who are acting as securities dealers and
NASD members or eligible non-members who are acting as brokers or agents and
similar agreements between a Fund and financial intermediaries who are acting as
brokers (collectively, "Selling Agreements") that may provide for their
customers or clients certain services or assistance, which may include, but not
be limited to, processing purchase and redemption transactions, establishing and
maintaining shareholder accounts regarding the Fund, and such other services as
may be agreed to from time to time and as may be permitted by applicable
statute, rule or regulation. Brokers, dealers and financial intermediaries that
have entered into sub-agreements with the Distributor and sell shares of the
Fund are referred to herein as "financial intermediaries."

Certain financial intermediaries may be prohibited under the law from
providing certain underwriting or distribution services. If a financial
intermediary were prohibited from acting in any capacity or providing any of the
described services, the Distributor would consider what action, if any, would be
appropriate. The Distributor does not believe that termination of a relationship
with a financial intermediary would result in any material adverse consequences
to the Funds.

The Distributor must submit quarterly reports to the Board of Directors,
with respect to each Fund setting forth separately by class of shares all
amounts paid under the Distribution Plan and the purposes for which such
expenditures were made, together with such other information as from time to
time is reasonably requested by the Board of Directors. The Plans provide that
they will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Board of Directors, and
also by a vote of the disinterested Directors, cast in person at a meeting
called for the purpose of voting on the Plans. Each of the Plans may not be
amended to increase materially the amount to be spent for the services described
therein with respect to any class of shares without approval by a vote of a
majority of the outstanding voting shares of such class, and all material
amendments to either of the Plans must be approved by the Board of Directors and
also by the disinterested Directors. Each of the Plans may be terminated with
respect to any class of shares at any time by a vote of a majority of the
disinterested Directors or by a vote of a majority of the outstanding voting
shares of such class.

The Plans obligate the Funds to accrue and pay to the Distributor the fee
agreed to under its Distribution Agreement. The Plans do not obligate the Funds
to reimburse the Distributor for the actual expenses the Distributor may incur
in fulfilling its obligations under the Plan. Thus, under each Plan, even if the
Distributor's actual expenses exceed the fee payable to it thereunder at any
given time, the Funds will not be obligated to pay more than that fee.

Because each Fund is a series of the Company, amounts paid to the
Distributor as reimbursement for expenses of one series of the Company may
indirectly benefit the other Funds which are series of the Company. The
Distributor will endeavor to
39
<PAGE>
allocate such expenses among such funds in an equitable manner. The Distributor
will not use the proceeds from the contingent deferred sales charge applicable
to a particular class of shares to defray distribution-related expenses
attributable to any other class of shares.

As of June 30, 2000, the unreimbursed distribution-related expenses with
respect to Class B Shares and Class C shares, and the percentage of the Fund's
net assets attributable to Class B Shares and Class C Shares are represented
below.

<TABLE>
<CAPTION>
B SHARES C SHARES
---------------------------- ----------------------------
PERCENTAGE OF PERCENTAGE OF
UNREIMBURSED FUND'S NET UNREIMBURSED FUND'S NET
FUND NAME DISTRIBUTION ASSETS DISTRIBUTION ASSETS
--------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
American Value Fund......................... $ 9,637,932 2.70% $ 66,536 0.03%
Asian Growth Fund........................... 2,388,541 5.21 19,394 0.05
Emerging Markets Fund....................... 2,147,029 3.41 86,205 0.26
Equity Growth Fund.......................... 869,306 1.82 47,039 0.27
European Equity Fund........................ 9,384 0.13 3,422 0.17
Focus Equity Fund........................... 5,473,549 1.78 158,586 0.26
Global Equity Fund.......................... 15,346,390 3.47 32,171 0.08
Global Equity Allocation Fund............... 6,894,268 2.73 475,468 0.45
International Magnum Fund................... 1,531,075 2.76 13,042 0.08
Latin American Fund......................... 994,189 5.06 21,462 0.19
Mid Cap Growth Fund......................... 853,527 2.38 134,289 0.67
Tax Managed Global Franchise Fund........... 38,001 1.95 8,259 0.29
Value Fund.................................. 3,347,941 4.76 69,902 0.48
Worldwide High Income Fund.................. 4,608,055 5.07 60,828 0.18
</TABLE>

40
<PAGE>

As reimbursement for providing distribution services to the Company for the
fiscal year ended June 30, 2000, the Distributor received aggregate fees of
approximately 26,864,000 which were attributable approximately as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED PERCENTAGE OF
JUNE 30, 2000 AVERAGE DAILY
FUND NAME (000) NET ASSETS
--------- ----------------- -------------
<S> <C> <C>
American Value Fund -- Class A.............................. $1,058 .25%
American Value Fund -- Class B.............................. 3,672 1.00%
American Value Fund -- Class C.............................. 1,909 1.00%
Asian Growth Fund -- Class A................................ 207 .25%
Asian Growth Fund -- Class B................................ 471 1.00%
Asian Growth Fund -- Class C................................ 419 1.00%
Emerging Markets Debt Fund -- Class A(1).................... -- --%
Emerging Markets Debt Fund -- Class B(1).................... -- --%
Emerging Markets Debt Fund -- Class C(1).................... -- --%
Emerging Markets Fund -- Class A............................ 203 .25%
Emerging Markets Fund -- Class B............................ 510 1.00%
Emerging Markets Fund -- Class C............................ 281 1.00%
Equity Growth Fund -- Class A............................... 67 .25%
Equity Growth Fund -- Class B............................... 343 1.00%
Equity Growth Fund -- Class C............................... 114 1.00%
European Equity Fund -- Class A............................. 11 .25%
European Equity Fund -- Class B............................. 43 1.00%
European Equity Fund -- Class C............................. 17 1.00%
Focus Equity Fund -- Class A................................ 292 .25%
Focus Equity Fund -- Class B................................ 2,312 1.00%
Focus Equity Fund -- Class C................................ 414 1.00%
Global Equity Allocation Fund -- Class A.................... 661 .25%
Global Equity Allocation Fund -- Class B.................... 2,422 1.00%
Global Equity Allocation Fund -- Class C.................... 1,033 1.00%
Global Equity Fund -- Class A............................... 178 .25%
Global Equity Fund -- Class B............................... 5,155 1.00%
Global Equity Fund -- Class C............................... 524 1.00%
Growth and Income Fund II -- Class A(1)..................... -- --%
Growth and Income Fund II -- Class B(1)..................... -- --%
Growth and Income Fund II -- Class C(1)..................... -- --%
International Magnum Fund -- Class A........................ 124 .25%
International Magnum Fund -- Class B........................ 514 1.00%
International Magnum Fund -- Class C........................ 149 1.00%
Japanese Equity Fund -- Class A(1).......................... -- --%
Japanese Equity Fund -- Class B(1).......................... -- --%
Japanese Equity Fund -- Class C(1).......................... -- --%
Latin American Fund -- Class A.............................. 79 .25%
Latin American Fund -- Class B.............................. 188 1.00%
Latin American Fund -- Class C.............................. 103 1.00%
Mid Cap Growth Fund -- Class A.............................. 39 .25%
Mid Cap Growth Fund -- Class B.............................. 140 1.00%
Mid Cap Growth Fund -- Class C.............................. 86 1.00%
Tax Managed Global Franchise Fund -- Class A................ 3 .25%
Tax Managed Global Franchise Fund -- Class B................ 9 1.00%
Tax Managed Global Franchise Fund -- Class C................ 13 1.00%
Value Fund -- Class A....................................... 171 .25%
Value Fund -- Class B....................................... 939 1.00%
Value Fund -- Class C....................................... 202 1.00%
Worldwide High Income Fund -- Class A....................... 125 .25%
Worldwide High Income Fund -- Class B....................... 996 1.00%
Worldwide High Income Fund -- Class C....................... 363 1.00%
</TABLE>

------------------

(1) Not operational as of June 30, 2000.

With respect to the following funds, the Distributor has entered into
agreements with the firms listed below:

AMERICAN VALUE
Hewitt Associates, LLC
Huntington Bank
Merrill Lynch Pierce, Fenner & Smith, Incorporated
Dean Witter Reynolds, Inc.
Wells Fargo Bank, N.A. on behalf of itself and its Affiliated Banks
The Prudential Insurance Company of America
Charles Schwab & Co., Inc.

ASIAN GROWTH
Buck Consultants, Inc.
First Union National Bank
Great West Life & Annuity Insurance Company/Benefits Corp Equities, Inc.
Hewitt Associates, LLC

41
<PAGE>

Huntington Bank
Invesco Retirement and Benefit Services, Inc.
Lincoln National Life Insurance Company
Merrill Lynch Pierce, Fenner & Smith, Incorporated
Dean Witter Reynolds, Inc.
National Deferred Compensation, Inc.
Charles Schwab & Co., Inc.
Union Bank of California, N.A.
The Vanguard Group

EMERGING MARKETS
Buck Consultants, Inc.
First Union National Bank
Great West Life & Annuity Insurance Company/Benefits Corp Equities, Inc.
Hewitt Associates, LLC
Huntington Bank
Invesco Retirement and Benefit Services, Inc.
Lincoln National Life Insurance Company
Merrill Lynch Pierce, Fenner & Smith, Incorporated
Dean Witter Reynolds, Inc.
National Deferred Compensation, Inc.
Wells Fargo Bank, N.A. on behalf of itself and its Affliated Banks
Delaware Charter Guarantee & Trust under the trade name of TrustarSM Retirement
Services
Charles Schwab & Co., Inc.
Salomon Smith Barney, Inc.
Union Bank of California, NA
The Vanguard Group

EQUITY GROWTH
Buck Consultants, Inc.
First Union National Bank
Great West Life Insurance Company/Benefits Corp Equities, Inc.
Invesco Retirement and Benefit Services, Inc.
Lincoln National Life Insurance Company
Merrill Lynch Pierce, Fenner & Smith, Incorporated
National Deferred Compensation, Inc.
Nationwide Investment Services Corporation
Wells Fargo Bank, N.A. on behalf of itself and its Affliated Banks
Union Bank of California, N.A.
The Vanguard Group

FOCUS EQUITY
Buck Consultants, Inc.
Fidelity Brokerage Services, Inc. & National Financial Services Corporation
First Union National Bank
Great West Life & Annuity Insurance Company/Benefits Corp Equities, Inc.
Hewitt Associates, LLC
Huntington Bank
Invesco Retirement and Benefit Services, Inc.
Lincoln National Life Insurance Company
Merrill Lynch Pierce, Fenner & Smith, Incorporated
Dean Witter Reynolds, Inc.
National Deferred Compensation, Inc.
Nationwide Investment Services Corporation
Wells Fargo Bank, N.A. on behalf of itself and its Affilicated Banks
The Prudential Insurance Company of America
Salomon Smith Barney, Inc.
Union Bank of California, N.A.
The Vanguard Group

GLOBAL EQUITY
Buck Consultants, Inc.
Fidelity Investments Institutional Operations Company, Inc.

42
<PAGE>

Fidelity Brokerage Services, Inc. & National Financial Services Corporation
First Union National Bank
Great West Life & Annuity Insurance Company/Benefits Corp Equities
Hewitt Associates, LLC
Huntington Bank
Invesco Retirement and Benefit Services, Inc.
Lincoln National Life Insurance Company
Merrill Lynch Pierce, Fenner & Smith, Incorporated
Dean Witter Reynolds, Inc.
National Deferred Compensation, Inc.
Nationwide Investment Services Corporation
Wells Fargo Bank, N.A. on behalf of itself and its Affliated Banks
The Prudential Insurance Company of America
Charles Schwab & Co., Inc.
Salomon Smith Barney, Inc.
Union Bank of California, N.A.
The Vanguard Group

GLOBAL EQUITY ALLOCATION
Buck Consultants, Inc.
Fidelity Brokerage Services, Inc. & National Financial Services Corporation
First Union National Bank
Great West Life & Annuity Insurance Company/Benefits Corp Equities, Inc.
Hewitt Associates, LLC
Huntington Bank
Invesco Retirement and Benefit Services, Inc.
Lincoln National Life Insurance Company
Merrill Lynch Pierce, Fenner & Smith, Incorporated
Dean Witter Reynolds, Inc.
National Deferred Compensation, Inc.
Nationwide Investment Services Corporation
Wells Fargo Bank, N.A. on behalf of itself and its Affiliated Banks
The Prudential Insurance Company of America
Charles Schwab & Co., Inc.
Salomon Smith Barney, Inc.
Union Bank of California, N.A.
The Vanguard Group

INTERNATIONAL MAGNUM
Buck Consultants, Inc.
Fidelity Brokerage Services, Inc. & National Financial Services Corporation
First Union National Bank
Great West Life & Annuity Insurance Company/Benefits Corp Equities, Inc.
Hewitt Associates, LLC
Huntington Bank
Invesco Retirement and Benefit Services, Inc.
Lincoln National Life Insurance Company
Merrill Lynch Pierce, Fenner & Smith Incorporated
Dean Witter Reynolds, Inc.
National Deferred Compensations, Inc.
Nationwide Investment Services Corporation
Wells Fargo Bank, N.A. on behalf of itself and its Affiliated Banks
The Prudential Insurance Company of America
Delaware Charter Guarantee & Trust under the trade name of TrustarSM Retirement
Services
Charles Schwab & Co., Inc.
Union Bank of California, N.A.
The Vanguard Group

LATIN AMERICAN
Buck Consultants, Inc.
Fidelity Brokerage Services, Inc. & National Financial Services Corporation
First Union National Bank

43
<PAGE>

Great West Life & Annuity Insurance Company/Benefits Corp Equities, Inc.
Hewitt Associates, LLC
Huntington Bank
Invesco Retirement and Benefit Services, Inc.
Lincoln National Life Insurance Company
Merrill Lynch Pierce, Fenner & Smith, Incorporated
Dean Witter Reynolds, Inc.
National Deferred Compensation, Inc.
Wells Fargo Bank, N.A. on behalf of itself and its Affiliated Banks
The Prudential Insurance Company of America
Salomon Smith Barney, Inc.
Union Bank of California, N.A.
The Vanguard Group

TAX MANAGED GLOBAL FRANCHISE
Merrill Lynch Pierce, Fenner & Smith, Incorporated
The Prudential Insurance Company of America
Salomon Smith Barney, Inc.

VALUE
Buck Consultants, Inc.
Fidelity Brokerage Services, Inc. & National Financial Services Corporation
First Union National Bank
Great West Life & Annuity Insurance Company/Benefits Corp Equities, Inc.
Hewitt Associates, LLC
Huntington Bank
Invesco Retirement and Benefit Services, Inc.
Lincoln National Life Insurance Company
Merrill Lynch Pierce, Fenner & Smith, Incorporated
Dean Witter Reynolds, Inc.
National Deferred Compensation, Inc.
Nationwide Investment Services Corporation
Wells Fargo Bank, N.A. on behalf of itself and its Affiliated Banks
Salomon Smith Barney, Inc.
Union Bank of California, N.A.
The Vanguard Group

WORLDWIDE HIGH INCOME
Buck Consultants, Inc.
Fidelity Brokerage Services, Inc. & National Financial Services Corporation
First Union National Bank
Great West Life & Annuity Insurance Company/Benefits Corp Equities, Inc.
Hewitt Associates, LLC
Huntington Bank
Invesco Retirement and Benefit Services, Inc.
Lincoln National Life Insurance Company
Merrill Lynch Pierce, Fenner & Smith, Incorporated
Dean Witter Reynolds, Inc.
National Deferred Compensation, Inc.
Wells Fargo Bank, N.A. on behalf of itself and its Affiliated Banks
The Prudential Insurance Company of America
Union Bank of California, N.A.
The Vanguard Group

Shares of these Funds will be offered pursuant to such firm's retirement
plan alliance program(s). Trustees and other fiduciaries of retirement plans
seeking to invest in multiple fund families through a broker-dealer retirement
plan alliance program should contact the firms mentioned above for further
information concerning the program(s) including, but not limited to, minimum
investment and operational requirements.

44
<PAGE>
TRANSFER AGENT

The Funds' transfer agent, shareholder service agent and dividend disbursing
agent is Van Kampen Investor Services Inc. The transfer agency prices are
determined through negotiations with the Fund's Board of Directors and are based
on competitive benchmarks.

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION

The Adviser is responsible for decisions to buy and sell securities for the
Funds, the selection of brokers and dealers to effect the transactions and the
negotiation of prices and any brokerage commissions on such transactions. While
the Adviser will be primarily responsible for the placement of each Fund's
portfolio business, the policies and practices in this regard will at all times
be subject to review by the Board of Directors of the Company.

With respect to the Emerging Markets Debt Fund and the Worldwide High Income
Fund, most transactions made by such Funds are principal transactions at net
prices and the Funds generally incur little or no brokerage costs. The portfolio
securities in which these Funds invest are normally purchased directly from the
issuer or in the over-the-counter market from an underwriter or market maker for
the securities. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers include a spread or markup to the dealer
between the bid and asked price. Sales to dealers are effected at bid prices.
These Funds may also purchase certain money market instruments directly from an
issuer, in which case no commissions or discounts are paid, or may purchase and
sell listed securities on an exchange, which are effected through brokers who
charge a commission for their services.

The Adviser is responsible for placing portfolio transactions and does so in
a manner deemed fair and reasonable to the Funds and not according to any
formula. The primary consideration in all portfolio transactions is prompt
execution of orders in an effective manner at the most favorable price. In
selecting broker-dealers and in negotiating prices and any brokerage commissions
on such transactions, the Adviser considers the firm's reliability, integrity
and financial condition and the firm's execution capability, the size and
breadth of the market for the security, the size of and difficulty in executing
the order, and the best net price. There are many instances when, in the
judgment of the Adviser, more than one firm can offer comparable execution
services. In selecting among such firms, consideration may be given to those
firms which supply research and other services in addition to execution
services. The Adviser is authorized to pay higher commissions to brokerage firms
that provide it with investment and research information than to firms which do
not provide such services if the Adviser determines that such commissions are
reasonable in relation to the overall services provided. No specific value can
be assigned to such research services which are furnished without cost to the
Adviser. Since statistical and other research information is only supplementary
to the research efforts of the Adviser to the Fund and still must be analyzed
and reviewed by its staff, the receipt of research information is not expected
to reduce its expenses materially. The investment advisory fee is not reduced as
a result of the Adviser's receipt of such research services. Services provided
may include (a) furnishing advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody). Research
services furnished by firms through which the Fund effects its securities
transactions may be used by the Adviser in servicing all of its advisory
accounts; not all of such services may be used by the Adviser in connection with
the Funds.

The Adviser also may place portfolio transactions, to the extent permitted
by law, with brokerage firms affiliated with the Funds, the Adviser or the
Distributor and with brokerage firms participating in the distribution of the
Funds' shares if it reasonably believes that the quality of execution and the
commission are comparable to that available from other qualified firms.
Similarly, to the extent permitted by law and subject to the same considerations
on quality of execution and comparable commission rates, the Adviser may direct
an executing broker to pay a portion or all of any commissions, concessions or
discounts to a firm supplying research or other services.

The Adviser may place portfolio transactions at or about the same time for
other advisory accounts, including other investment companies. The Adviser seeks
to allocate portfolio transactions equitably whenever concurrent decisions are
made to purchase or sell securities for a Fund and another advisory account. In
some cases, this procedure could have an adverse effect on the price or the
amount of securities available to such Fund. In making such allocations among a
Fund and other advisory accounts, the main factors considered by the Adviser are
the respective sizes of the Fund and other advisory accounts, the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and opinions of the persons responsible
for recommending the investment.

Morgan Stanley & Co. Incorporated is an affiliate of the Adviser (and the
predecessor adviser) of the Funds. Effective May 31, 1997, Dean Witter
Reynolds, Inc. ("Dean Witter") became an affiliate of the Adviser (and the
predecessor adviser) of the Funds. The Board of Directors has adopted certain
policies incorporating the standards of Rule 17e-1 issued by the SEC under the
1940 Act which require that the commissions paid to affiliates of the Funds must
be reasonable and fair compared to the commissions, fees or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time.
The rule and procedures also contain review requirements and require the Adviser
to furnish reports to the Board of Directors and to maintain records in
connection with such reviews. After consideration of all factors deemed
relevant, the Board of Directors will consider from time to time whether the
advisory fee for each Fund will be reduced by all or a portion of the brokerage
commission given to affiliated brokers.

The Funds paid the following commissions to all brokers and affiliated
brokers during the periods shown:
45
<PAGE>

<TABLE>
<CAPTION>
EMERGING
AMERICAN ASIAN MARKETS EMERGING EQUITY EUROPEAN FOCUS
FISCAL YEAR ENDED VALUE GROWTH DEBT MARKETS GROWTH EQUITY EQUITY
JUNE 30, 2000 FUND FUND FUND(1) FUND FUND FUND FUND
----------------- -------- ------ -------- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Total brokerage
commissions............... $ 4,467,595 $ 1,164,649 $ -- $ 1,015,316 $ 87,348 $ 30,571 $ 630,097
Commissions with Morgan
Stanley................... $ 46,859 $ 121,099 $ -- $ 14,845 $ 4,580 $ 3,913 $ 56,610
Percentage of total
commissions.............. 1.05% 10.39% --% 1.46% 5.24% 12.80% 8.98%
Commissions with Dean
Witter.................... $ 0 $ 0 $ -- $ 0 $ 0 $ 0 $ 0
Percentage of total
commissions.............. 0% 0% --% 0% 0% 0% 0%
Percentage of total value of
brokerage transactions
with Morgan Stanley....... 2.24% 9.93% --% 1.28% 10.32% 9.27% 9.69%
Percentage of total value of
brokerage transactions
with Dean Witter.......... 0% 0% --% 0% 0% 0% 0%
Commissions for research
services.................. $ 4,704,647 $ 1,059,398 $ -- $ 892,711 $ 76,151 $ 20,070 $ 1,109,511
Value of research
transactions.............. $2,203,037,282 $343,801,578 $ -- $290,639,235 $101,722,754 $16,815,174 $735,843,153

<CAPTION>
GLOBAL
EQUITY GLOBAL
FISCAL YEAR ENDED ALLOCATION EQUITY
JUNE 30, 2000 FUND FUND
----------------- ---------- ------
<S> <C> <C>
Total brokerage
commissions............... $ 1,312,090 $ 1,427,195
Commissions with Morgan
Stanley................... $ 27,028 $ 84,449
Percentage of total
commissions.............. 0.25% 5.92%
Commissions with Dean
Witter.................... $ 0 $ 0
Percentage of total
commissions.............. 0% 0%
Percentage of total value of
brokerage transactions
with Morgan Stanley....... 0.08% 4.33%
Percentage of total value of
brokerage transactions
with Dean Witter.......... 0% 0%
Commissions for research
services.................. $ 723,144 $ 1,180,688
Value of research
transactions.............. $946,903,250 $702,819,315
</TABLE>

<TABLE>
<CAPTION>
TAX
GROWTH INTER- MANAGED
AND NATIONAL JAPANESE LATIN MID CAP GLOBAL
FISCAL YEAR ENDED INCOME MAGNUM EQUITY AMERICAN GROWTH FRANCHISE VALUE
JUNE 30, 2000 FUND II(1) FUND FUND(1) FUND FUND FUND FUND
----------------- ---------- -------- -------- -------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Total brokerage
commissions............... $ -- $ 207,740 $ -- $ 218,791 $ 95,103 $ 19,142 $ 773,184
Commissions with Morgan
Stanley................... $ -- $ 14,525 $ -- $ 696 $ 2,271 $ 1,664 $ 9,708
Percentage of total
commissions.............. --% 6.99% --% 0.32% 2.39% 8.69% 1.26%
Commissions with Dean
Witter.................... $ -- $ 0 $ -- $ 0 $ -- $ 0 $ 0
Percentage of total
commissions.............. --% 0% --% 0% --% 0% 0%
Percentage of total value of
brokerage transactions
with Morgan Stanley....... --% 4.25% --% .50% 3.29% 17.64% .99%
Percentage of total value of
brokerage transactions
with Dean Witter.......... --% 0% --% 0% --% 0% 0%
Commissions for research
services.................. $ -- $ 369,509 $ -- $ 509,214 $ -- $ 4,237 $ 458,024
Value of research
transactions.............. $ -- $133,544,875 $ -- $81,914,501 $130,312.755 $3,908,587 $442,302,212

WORLDWIDE
HIGH
FISCAL YEAR ENDED INCOME
JUNE 30, 2000 FUND
----------------- ---------
<S> <C>
Total brokerage
commissions............... $ 1,540
Commissions with Morgan
Stanley................... $ 0
Percentage of total
commissions.............. 0%
Commissions with Dean
Witter.................... $ 0
Percentage of total
commissions.............. 0%
Percentage of total value of
brokerage transactions
with Morgan Stanley....... 0%
Percentage of total value of
brokerage transactions
with Dean Witter.......... 0%
Commissions for research
services.................. $ 626
Value of research
transactions.............. $22,984,451
</TABLE>

--------------------

(1) Not operational as of June 30, 2000.

46
<PAGE>

<TABLE>
<CAPTION>
EMERGING
AMERICAN ASIAN MARKETS EMERGING EQUITY EUROPEAN FOCUS
FISCAL YEAR ENDED VALUE GROWTH DEBT MARKETS GROWTH EQUITY EQUITY
JUNE 30, 1999 FUND FUND FUND(1) FUND FUND FUND FUND
----------------- -------- ------ -------- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Total brokerage
commissions............... $ 5,210,669 $ 1,059,398 $ -- $ 892,711 $ 96,599 $ 20,070 $ 1,158,339
Commissions with Morgan
Stanley................... $ 2,130 $ 53,519 $ -- $ 49,419 $ 1,755 $ 1,984 $ 13,980
Commissions with Dean
Witter.................... $ 1,356 $ 0 $ -- $ 0 $ 0 $ 0 $ 0

<CAPTION>
GLOBAL
EQUITY GLOBAL
FISCAL YEAR ENDED ALLOCATION EQUITY
JUNE 30, 1999 FUND FUND
----------------- ---------- ------
<S> <C> <C>
Total brokerage
commissions............... $ 723,144 $ 1,180,688
Commissions with Morgan
Stanley................... $ 1,790 $ 106,499
Commissions with Dean
Witter.................... $ 0 $ 0
</TABLE>

<TABLE>
<CAPTION>
TAX
GROWTH INTER- MANAGED
AND NATIONAL JAPANESE LATIN MID CAP GLOBAL
FISCAL YEAR ENDED INCOME MAGNUM EQUITY AMERICAN GROWTH FRANCHISE VALUE
JUNE 30, 1999 FUND II(1) FUND FUND(1) FUND FUND(1) FUND FUND
----------------- ---------- -------- -------- -------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Total brokerage
commissions............... $ -- $ 369,509 $ -- $ 509,214 $ -- $ 4,237 $ 463,294
Commissions with Morgan
Stanley................... $ -- $ 8,443 $ -- $ 7,942 $ -- $ 314 $ 0
Commissions with Dean
Witter.................... $ -- $ 0 $ -- $ 0 $ -- $ 0 $ 0

WORLDWIDE
HIGH
FISCAL YEAR ENDED INCOME
JUNE 30, 1999 FUND
----------------- ---------
<S> <C>
Total brokerage
commissions............... $ 626
Commissions with Morgan
Stanley................... $ 0
Commissions with Dean
Witter.................... $ 0
</TABLE>

--------------------
(1) Not operational as of June 30, 1999.
47
<PAGE>
<TABLE>
<CAPTION>
EMERGING GLOBAL
AMERICAN ASIAN MARKETS EMERGING EQUITY EUROPEAN FOCUS EQUITY
FISCAL YEAR ENDED VALUE GROWTH DEBT MARKETS GROWTH EQUITY EQUITY ALLOCATION
JUNE 30, 1998 FUND FUND FUND(1) FUND FUND FUND FUND FUND
----------------- -------- ------ -------- -------- ------ -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total brokerage
commissions............... $1,863,022 $2,171,340 $ -- $1,122,264 $4,685 $ -- $836,700 $382,680
Commissions with Morgan
Stanley................... $ 0 $ 157,183 $ -- $ 41,792 $ 0 $ -- $ 0 $ 981
Commissions with Dean
Witter.................... $ 0 $ 0 $ -- $ 0 $ 0 $ -- $ 0 $ 0

GLOBAL
FISCAL YEAR ENDED EQUITY
JUNE 30, 1998 FUND
----------------- ------
<S> <C>
Total brokerage
commissions............... $775,168
Commissions with Morgan
Stanley................... $188,780
Commissions with Dean
Witter.................... $ 0
</TABLE>

<TABLE>
<CAPTION>
TAX
GROWTH INTER- MANAGED WORLDWIDE
AND NATIONAL JAPANESE LATIN MID CAP GLOBAL HIGH
FISCAL YEAR ENDED INCOME MAGNUM EQUITY AMERICAN GROWTH FRANCHISE VALUE INCOME
JUNE 30, 1998 FUND II(1) FUND FUND(1) FUND FUND(1) FUND FUND FUND
----------------- ---------- -------- -------- -------- ------- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total brokerage
commissions............... $ -- $243,789 $ -- $1,251,018 $ -- $ -- $475,178 $ 0
Commissions with Morgan
Stanley................... $ -- $ 8,123 $ -- $ 53,140 $ -- $ -- $ 0 $ 0
Commissions with Dean
Witter.................... $ -- $ 0 $ -- $ 0 $ -- $ -- $ 0 $ 0
</TABLE>

--------------------

(1) Not operational as of June 30, 1998.

48
<PAGE>
SHAREHOLDER SERVICES

The Funds offer a number of shareholder services designed to facilitate
investment in their respective shares at little or no extra cost to the
investor. Below is a description of such services. The following information
supplements the section in each Fund's Prospectus captioned "Shareholder
Services."

INVESTMENT ACCOUNT

Each shareholder of each Fund has an investment account under which the
investor's shares of the Fund are held by Investor Services, the Funds' transfer
agent. Investor Services performs bookkeeping, data processing and
administrative services related to the maintenance of shareholder accounts.
Except as described in the Prospectus and this Statement of Additional
Information, after each share transaction in an account, the shareholder
receives a statement showing the activity in the account. Each shareholder who
has an account in any of the Van Kampen funds will receive statements quarterly
from Investor Services showing any reinvestments of dividends and capital gain
dividends and any other activity in the account since the preceding statement.
Such shareholders also will receive separate confirmations for each purchase or
sale transaction other than reinvestment of dividends and capital gain
dividends. Additional shares may be purchased at any time through authorized
dealers or by mailing a check directly to Investor Services.

SHARE CERTIFICATES

Generally, the Funds will not issue share certificates. However, upon
written or telephone request to a Fund, a share certificate will be issued
representing shares (with the exception of fractional shares) of that Fund. A
shareholder will be required to surrender such certificates upon an exchange or
redemption of the shares represented by the certificate. In addition, if such
certificates are lost the shareholder must write to Van Kampen Funds Inc. c/o
Investor Services, PO Box 218256, Kansas City, MO 64121-8256, requesting an
"Affidavit of Loss" and obtain a Surety Bond in a form acceptable to Investor
Services. On the date the letter is received, Investor Services will calculate
the fee for replacing the lost certificate equal to no more than 1.50% of the
net asset value of the issued shares, and bill the party to whom the replacement
certificate was mailed.

RETIREMENT PLANS

Eligible investors may establish individual retirement accounts ("IRAs");
SEP; 401(k) plans; Section 403(b)(7) plans in the case of employees of public
school systems and certain non-profit organizations; or other pension or profit
sharing plans. Documents and forms containing detailed information regarding
these plans are available from the Distributor. Van Kampen Trust Company serves
as custodian under the IRA, 403(b)(7) and Money Purchase and Profit Sharing
Keogh plans. Details regarding fees, as well as full plan administration for
profit sharing, pension and 401(k) plans, are available from the Distributor.

AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS

Shareholders can use ACH to have redemption proceeds deposited
electronically into their bank accounts. Redemption proceeds transferred to a
bank account via the ACH plan are available to be credited to the account on the
second business day following normal payment. In order to utilize this option,
the shareholder's bank must be a member of ACH. In addition, the shareholder
must fill out the appropriate section of the account application form. The
shareholder must also include a voided check or deposit slip from the bank
account into which redemption proceeds are to be deposited together with the
completed application. Once Investor Services has received the application and
the voided check or deposit slip, such shareholder's designated bank account,
following any redemption, will be credited with the proceeds of such redemption.
Once enrolled in the ACH plan, a shareholder may terminate participation at any
time by writing Investor Services or by calling (800) 341-2911 ((800) 421-4833
for the hearing impaired).

DIVIDEND DIVERSIFICATION

A shareholder may, upon written request by completing the appropriate
section of the account application form or by calling (800) 341-2911 ((800)
421-2833 for the hearing impaired), elect to have all dividends and capital gain
dividends paid on a class of shares of a Fund invested into shares of the same
class of any of the Participating Funds so long as the investor has a pre-
existing account for such class of shares of the other fund. Both accounts must
be of the same type, either non-retirement or retirement. If the accounts are
retirement accounts, they must both be for the same class and of the same type
of retirement plan (e.g. IRA, 403(b)(7), 401(k), Money Purchase and Profit
Sharing Keogh) and for the benefit of the same individual. If a qualified,
pre-existing account does not exist, the shareholder must establish a new
account subject to minimum investment and other requirements of the fund into
which distributions would be invested. Distributions are invested into the
selected fund at its net asset value per share as of the payable date of the
distribution from the Fund.

SYSTEMATIC WITHDRAWAL PLAN

A shareholder may establish a monthly, quarterly, semiannual or annual
withdrawal plan if the shareholder owns shares in a single account valued at
$10,000 or more at the next determined net asset value per share at the time the
plan is established. If a

49
<PAGE>

shareholder owns shares in a single account valued at $5,000 or more at the next
determined net asset value per share at the time the plan is established, the
shareholder may establish a quarterly, semiannual or annual withdrawal plan.
This plan provides for the orderly use of the entire account, not only the
income but also the capital, if necessary. Each payment represents the proceeds
of a redemption of shares on which any capital gain or loss will be recognized.
The planholder may arrange for periodic checks in any amount, not less than $25.
Such a systematic withdrawal plan may also be maintained by an investor
purchasing shares for a retirement plan which can be established on a form made
available by such Fund when Van Kampen Trust Company serves as plan custodian.
See "Shareholder Services -- Retirement Plans."

Class B Shareholders and Class C Shareholders who establish a systematic
withdrawal plan may redeem up to 12% annually of the shareholder's initial
account balance without incurring a contingent deferred sales charge. Initial
account balance means the amount of the shareholder's investment at the time the
election to participate in the plan is made.

Under the plan, sufficient shares of the applicable Fund are redeemed to
provide the amount of the periodic withdrawal. Dividends and capital gain
dividends on shares held in accounts with systematic withdrawal plans are
reinvested in additional shares at the next determined net asset value per
share. If periodic withdrawals continuously exceed reinvested dividends and
capital gain dividends, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted. Redemptions made concurrently
with the purchase of additional shares ordinarily will be disadvantageous to the
shareholder because of the duplication of sales charges. Any gain or loss
realized by the shareholder upon redemption of shares is a taxable event. Each
Fund reserves the right to amend or terminate the systematic withdrawal program
upon 30 days' notice to its shareholders.

EXCHANGE PRIVILEGE

All shareholders are limited to eight exchanges per fund during a rolling
365-day period.

Exchange privileges will be suspended on a particular fund if more than
eight exchanges out of that fund are made by a shareholder during a rolling
365-day period. If exchange privileges are suspended, subsequent exchange
requests during the stated period will not be processed. Exchange privileges
will be restored when the account history shows fewer than eight (8) exchanges
in the rolling 365-day period.

This policy does not apply to money market funds, systematic exchange plans,
or employer-sponsored retirement plans.

REINSTATEMENT PRIVILEGE

A Class A Shareholder or Class B Shareholder who has redeemed shares of a
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class A Shares of such Fund. A Class C Shareholder who has redeemed shares of
the Fund may reinstate any portion or all of the net proceeds of such redemption
in Class C Shares of the Fund with credit given for any contingent deferred
sales charge paid upon such redemption. Such reinstatement is made at the net
asset value per share (without sales charge) next determined after the order is
received, which must be made within 180 days after the date of the redemption.
Reinstatement at net asset value per share is also offered to participants in
those eligible retirement plans held or administered by Van Kampen Trust Company
for repayment of principal (and interest) on their borrowings on such plans.

REDEMPTION OF SHARES

Redemptions are not made on days during which the New York Stock Exchange
(the "Exchange") is closed. The right of redemption may be suspended and the
payment therefor may be postponed for more than seven days during any period
when (a) the Exchange is closed for other than customary weekends or holidays;
(b) the SEC determines trading on the Exchange is restricted; (c) the SEC
determines an emergency exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for such Fund to fairly determine the value of its net assets; or
(d) the SEC, by order, so permits.

In addition, if the Company's Board of Directors determines that payment
wholly or partly in cash would be detrimental to the best interests of the
remaining shareholders of a Fund, such Fund may pay the redemption proceeds in
whole or in part by a distribution-in-kind of portfolio securities held by the
Fund in lieu of cash in conformity with applicable rules of the SEC. A
distribution-in-kind will result in recognition by the shareholder of a gain or
loss for federal income tax purposes when such securities are distributed, and
the shareholder may have brokerage charges and a gain or loss for federal income
tax purposes upon the shareholder's disposition of such securities.

CONTINGENT DEFERRED SALES CHARGE -- CLASS A

As described in the Funds' Prospectuses under "Purchase of Shares --
Class A Shares," there is no sales charge payable on Class A Shares at the time
of purchase on investments of $1 million or more, but a contingent deferred
sales charge ("CDSC -- Class A") may be imposed on certain redemptions made
within one year of purchase. For purposes of the CDSC-Class A, when shares of
one fund are exchanged for shares of another fund, the purchase date for the
shares of the fund exchanged into will be assumed to be the date on which shares
were purchased in the fund from which the exchange was made. If the exchanged
shares themselves are acquired through an exchange, the purchase date is assumed
to carry over from the date of the original election to

50
<PAGE>

purchase shares subject to a CDSC-Class A rather than a front-end load sales
charge. In determining whether a CDSC-Class A is payable, it is assumed that
shares being redeemed first are any shares in the shareholder's account not
subject to a contingent deferred sales charge, followed by shares held the
longest in the shareholder's account. The contingent deferred sales charge is
assessed on an amount equal to the lesser of the then current market value or
the cost of the shares being redeemed. Accordingly, no sales charge is imposed
on increases in net asset value above the initial purchase price. In addition,
no sales charge is assessed on shares derived from reinvestment of dividends or
capital gain dividends.

WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGES

As described in the Funds' Prospectuses under "Redemption of Shares,"
redemptions of Class B Shares and Class C Shares will be subject to a contingent
deferred sales charge ("CDSC-Class B and C"). The CDSC-Class B and C is waived
on redemptions of Class B Shares and Class C Shares in the circumstances
described below:

REDEMPTION UPON DEATH OR DISABILITY

A Fund will waive the CDSC-Class B and C on redemptions following the death
or disability of a Class B shareholder and Class C shareholder. An individual
will be considered disabled for this purpose if he or she meets the definition
thereof in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended
(the "Code"), which in pertinent part defines a person as disabled if such
person "is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or to be of long-continued and indefinite duration." While the
Funds do not specifically adopt the balance of the Code's definition which
pertains to furnishing the Secretary of Treasury with such proof as he or she
may require, the Distributor will require satisfactory proof of death or
disability before it determines to waive the CDSC-Class B and C.

In cases of death or disability, the CDSC-Class B and C will be waived where
the decedent or disabled person is either an individual shareholder or owns the
shares as a joint tenant with right of survivorship or is the beneficial owner
of a custodial or fiduciary account, and where the redemption is made within one
year of the death or initial determination of disability. This waiver of the
CDSC-Class B and C applies to a total or partial redemption, but only to
redemptions of shares held at the time of the death or initial determination of
disability.

REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS

A Fund will waive the CDSC-Class B and C when a total or partial redemption
is made in connection with certain distributions from retirement plans. The
CDSC-Class B and C will be waived upon the tax-free rollover or transfer of
assets to another retirement plan invested in one or more Participating Funds;
in such event, as described below, the Fund will "tack" the period for which the
original shares were held on to the holding period of the shares acquired in the
transfer or rollover for purposes of determining what, if any, CDSC-Class B and
C is applicable in the event that such acquired shares are redeemed following
the transfer or rollover. The charge also will be waived on any redemption which
results from the return of an excess contribution pursuant to
Section 408(d)(4) or (5) of the Code, the return of excess deferral amounts
pursuant to Code Section 401(k)(8) or 402(g)(2), the financial hardship of the
employee pursuant to United States Treasury Regulation
Section 1.401(k)-1(d)(2), or from the death or disability of the employee (see
Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In addition, the charge will be
waived on any minimum distribution required to be distributed in accordance with
Code Section 401(a)(9).

The Funds do not intend to waive the CDSC-Class B and C for any
distributions from IRAs or other retirement plans not specifically described
above.

REDEMPTION PURSUANT TO THE FUND'S SYSTEMATIC WITHDRAWAL PLAN

A shareholder may elect to participate in a systematic withdrawal plan with
respect to the shareholder's investment in a Fund. Under the systematic
withdrawal plan, a dollar amount of a participating shareholder's investment in
the Fund will be redeemed systematically by the Fund on a periodic basis, and
the proceeds sent to the designated payee of record. The amount to be redeemed
and frequency of the systematic withdrawals will be specified by the shareholder
upon his or her election to participate in the systematic withdrawal plan. The
CDSC-Class B and C will be waived on redemptions made under the systematic
withdrawal plan.

The amount of the shareholder's investment in the Fund at the time the
election to participate in the systematic withdrawal plan is made with respect
to the Fund is hereinafter referred to as the "initial account balance." The
amount to be systematically redeemed from the Fund without the imposition of a
CDSC-Class B and C may not exceed a maximum of 12% annually of the shareholder's
initial account balance. The Fund reserves the right to change the terms and
conditions of the systematic withdrawal plan and the ability to offer the
systematic withdrawal plan.
51
<PAGE>
NO INITIAL COMMISSION OR TRANSACTION FEE

A Fund will waive the CDSC-Class B and C in circumstances under which no
commission or transaction fee is paid to authorized dealers at the time of
purchase of shares. See "Purchase of Shares--Waiver of Contingent Deferred Sales
Charge" in the Prospectuses.

INVOLUNTARY REDEMPTIONS OF SHARES

Each Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Funds' Prospectuses.
Prior to such redemptions, shareholders will be notified in writing and allowed
a specified period of time to purchase additional shares to bring the value of
the account up to the required minimum balance. Each Fund will waive the
CDSC-Class B and C upon such involuntary redemption.

REINVESTMENT OF REDEMPTION PROCEEDS

A shareholder who has redeemed Class C Shares of a Fund may reinvest at net
asset value, with credit for any CDSC-Class C paid on the redeemed shares, any
portion or all of his or her redemption proceeds (plus that amount necessary to
acquire a fractional share to round off his or her purchase to the nearest full
share) in Class C Shares of the same Fund, provided that the reinvestment is
effected within 180 days after such redemption and the shareholder has not
previously exercised this reinvestment privilege with respect to Class C Shares
of the Fund. Shares acquired in this manner will be deemed to have the original
cost and purchase date of the redeemed shares for purposes of applying the
CDSC-Class C to subsequent redemptions.

REDEMPTION BY ADVISER

A Fund may waive the CDSC-Class B and C when a total or partial redemption
is made by the Adviser with respect to its investments in such Fund.

TAXATION

FEDERAL INCOME TAXATION OF THE FUNDS

The Company and each of the Funds will be treated as separate corporations
for federal income tax purposes. The Funds have elected and qualified (in their
first year of operations), and intend to continue to qualify each year, to be
treated as regulated investment companies under Subchapter M of the Code. To
qualify as a regulated investment company, each Fund must comply with certain
requirements of the Code relating to, among other things, the source of its
income and diversification of its assets.

If a Fund so qualifies and distributes each year to its shareholders at
least 90% of its investment company taxable income (generally including ordinary
income and net short-term capital gain, but not net capital gain, which is the
excess of net long-term capital gain over net short-term capital loss), and
meets certain other requirements, it will not be required to pay federal income
taxes on any income it distributes to shareholders. Each Fund intends to
distribute at least the minimum amount of investment company taxable income
necessary to satisfy the 90% distribution requirement. A Fund will not be
subject to federal income tax on any net capital gain distributed to
shareholders.

To avoid a 4% excise tax, each Fund will be required to distribute, by
December 31st of each year, at least an amount equal to the sum of (i) 98% of
its ordinary income for such year and (ii) 98% of its capital gain net income
(the latter of which generally is computed on the basis of the one-year period
ending on October 31st of such year), plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gain net income retained by, and subject to federal income tax in the
hands of, a Fund will be treated as having been distributed.

If a Fund failed to qualify as a regulated investment company or failed to
satisfy the 90% distribution requirement in any taxable year, that Fund would be
taxed as an ordinary corporation on its taxable income (even if such income were
distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. In addition, the Fund
could be required to recognize unrealized gains, pay taxes and interest charges
and make distributions before requalifying for taxation as a regulated
investment company.

Some of the Funds' investment practices are subject to special provisions of
the Code that, among other things, may (i) disallow, suspend or otherwise limit
the allowance of certain losses or deductions (ii) convert lower taxed long-term
capital gain into higher taxed short-term capital gain or ordinary income,
(iii) convert an ordinary loss or a deduction into a capital loss (the
deductibility of which is more limited) and (iv) cause the fund to recognize
income or gain without a corresponding receipt of cash with which to make
distributions in amounts necessary to satisfy the 90% distribution requirement
and the distribution requirements for avoiding income and excise taxes. Each
Fund will monitor its transactions and may make certain tax elections to
mitigate the effect of these rules and prevent its disqualification as a
regulated investment company.

Investments of a Fund in securities issued at a discount or providing for
deferred interest or payment of interest in kind are subject to special tax
rules that will affect the amount, timing and character of distributions to
shareholders. For example, with

52
<PAGE>

respect to securities issued at a discount, a Fund will be required to accrue as
income each year a portion of the discount and to distribute such income each
year in order to maintain its qualification as a regulated investment company
and to avoid income and excise taxes. To generate sufficient cash to make
distributions necessary to satisfy the 90% distribution requirement and to avoid
income and excise taxes, such Fund may have to dispose of securities that it
would otherwise have continued to hold.

PASSIVE FOREIGN INVESTMENT COMPANIES. The Funds may invest in non-U.S.
corporations that could be classified as "passive foreign investment companies"
as defined for federal income tax purposes. For federal income tax purposes,
such an investment may, among other things, cause the Funds to recognize income
or gain without a corresponding receipt of cash, to incur an interest charge on
taxable income that is deemed to have been deferred and/or to recognize ordinary
income that would otherwise have been treated as capital gain.

DISTRIBUTIONS TO SHAREHOLDERS

Distributions of a Fund's investment company taxable income are taxable to
shareholders as ordinary income to the extent of such Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of a Fund's net capital gain as capital gain dividends, if any, are taxable to
shareholders as long-term capital gains regardless of the length of time shares
of such Fund have been held by such shareholders. Distributions in excess of the
Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). For a summary of the maximum tax rates applicable to capital
gains (including capital gain dividends), see "Capital Gains Rates" below.
Tax-exempt shareholders not subject to federal income tax on their income
generally will not be taxed on distributions from a Fund.

Shareholders receiving distributions in the form of additional shares issued
by a Fund will be treated for federal income tax purposes as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the distribution date. The basis of such shares will equal the
fair market value on the distribution date.

Each Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Some portion of
the distributions from a Fund may be eligible for the dividends received
deduction for corporations if such Fund receives qualifying dividends during the
year and if certain other requirements of the Code are satisfied.

Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by a Fund and received
by the shareholders on the December 31st prior to the date of payment. In
addition, certain other distributions made after the close of a taxable year of
a Fund may be "spilled back" and treated as paid by such Fund (except for
purposes of the 4% excise tax) during such taxable year. In such case,
shareholders will be treated as having received such dividends in the taxable
year in which the distribution was actually made.

Income from investments in foreign securities received by a Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. Shareholders of a Fund may be
entitled to claim United States foreign tax credits with respect to such taxes,
subject to certain provisions and limitations contained in the Code. If more
than 50% in value of a Fund's total assets at the close of its fiscal year
consists of securities of foreign issuers and such Fund meets certain holding
period requirements with respect to the securities, the Fund will be eligible to
file, and may file, elections with the IRS pursuant to which shareholders of
such Fund will be required (i) to include their respective pro rata portions of
such taxes in their United States income tax returns as gross income and (ii) to
treat such respective pro rata portions as taxes paid by them. Each shareholder
will be entitled, subject to certain limitations, either to deduct his pro rata
portion of such foreign taxes in computing his taxable income or to credit them
against his United States federal income taxes. No deduction for such foreign
taxes may be claimed by a shareholder who does not itemize deductions. Each
shareholder of a Fund that may be eligible to file the election described in
this paragraph will be notified annually whether the foreign taxes paid by such
Fund will "pass through" for that year and, if so, such notification will
designate (i) the shareholder's portion of the foreign taxes paid to each
country and (ii) the portion of dividends that represent income derived from
sources within each country. The amount of foreign taxes for which a shareholder
may claim a credit in any year will be subject to an overall limitation such
that the credit may not exceed the shareholder's United States federal income
tax attributable to the shareholder's foreign source taxable income. This
limitation generally applies separately to certain specific categories of
foreign source income including "passive income," which includes dividends and
interest. Because application of the foregoing rules depends on the particular
circumstances of each shareholder, shareholders are advised to consult their tax
advisers.

Certain foreign currency gains or losses attributable to currency exchange
rate fluctuations are treated as ordinary income or loss. Such income or loss
may increase or decrease (or possibly eliminate) a Fund's income available for
distribution. If, under the rules governing the tax treatment of foreign
currency gains and losses, such Fund's income available for distribution is
decreased or eliminated, all or a portion of the dividends declared by the Fund
may be treated for federal income tax purposes as a return of capital or, in
some circumstances, as capital gains. Generally, a shareholder's tax basis in
Fund shares will be reduced to the extent that an amount distributed to such
shareholder is treated as a return of capital.
53
<PAGE>
SALE OF SHARES

The sale of shares (including transfers in connection with a redemption or
repurchase of shares) may be a taxable transaction for federal income tax
purposes. Selling shareholders will generally recognize gain or loss in an
amount equal to the difference between their adjusted tax basis in the shares
and the amount received. If such shares are held as a capital asset, the gain or
loss will be a capital gain or loss. For a summary of the maximum tax rates
applicable to capital gains (including capital gain dividends), see "Capital
Gains Rates" below. Any loss recognized upon a taxable disposition of shares
held for six months or less will be treated as a long-term capital loss to the
extent of any capital gain dividends received with respect to such shares. For
purposes of determining whether shares have been held for six months or less,
the holding period is suspended for any periods during which the shareholder's
risk of loss is diminished as a result of holding one or more other positions in
substantially similar or related property or through certain options or short
sales.

CAPITAL GAINS RATES

The maximum tax rate applicable to net capital gains recognized by
individuals and other non-corporate taxpayers investing in a Fund is (i) the
same as the maximum ordinary income tax rate for capital assets held for one
year or less or (ii) 20% for capital assets held for more than one year. The
maximum long-term capital gains rate for corporations is 35%.

NON-U.S. SHAREHOLDERS

A shareholder who is not (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized under the laws of the
United States or any state thereof, (iii) an estate, the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States fiduciaries who have
the authority to control all substantial decisions of the trust (a "Non-U.S.
Shareholder") generally will be subject to withholding of United States federal
income tax at a 30% rate (or lower applicable treaty rate) on dividends from the
Fund (other than capital gain dividends) that are not "effectively connected"
with a United States trade or business carried on by such shareholder.
Accordingly, investment in certain Funds that invest primarily in debt
securities or securities of foreign issuers is likely to be appropriate for a
Non-U.S. Shareholder only if such person can utilize a foreign tax credit or
corresponding tax benefit in respect of such United States withholding tax.

Non-effectively connected capital gain dividends and gains realized from the
sale of shares will not be subject to United States federal income tax in the
case of (i) a Non-U.S. Shareholder that is a corporation and (ii) an individual
Non-U.S. Shareholder that is not present in the United States for more than 182
days during the taxable year (assuming that certain other conditions are met).
However, certain Non-U.S. Shareholders may nonetheless be subject to backup
withholding on capital gain dividends and gross proceeds paid to them upon the
sale of their shares. See "Backup Withholding" below.

If income from a Fund or gains realized from the sale of shares is
effectively connected with a Non-U.S. Shareholder's United States trade or
business, then such amounts will be subject to United States federal income tax
on a net basis at the tax rates applicable to United States citizens or domestic
corporations. Non-U.S. Shareholders that are corporations may also be subject to
an additional "branch profits tax" with respect to income from the Fund that is
effectively connected with a United States trade or business.

United States Treasury Regulations, effective for payments made after
December 31, 2000, modify the withholding, backup withholding and information
reporting rules, including the procedures to be followed by Non-U.S.
Shareholders in establishing foreign status. Shareholders and prospective
foreign investors should consult their tax advisers concerning the applicability
and effect of such Treasury Regulations on an investment in shares of a Fund.

The tax consequences to a Non-U.S. Shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Non-U.S. Shareholders may be required to provide appropriate
documentation to establish their entitlement to the benefits of such a treaty.
Foreign investors are advised to consult their tax advisers with respect to the
tax implications of purchasing, holding and disposing of shares of a Fund.

BACKUP WITHHOLDING

A Fund may be required to withhold federal income tax at a rate of 31%
("backup withholding") from dividends and redemption proceeds paid to
non-corporate shareholders. This tax may be withheld from dividends if (i) the
shareholder fails to properly furnish such Fund with its correct taxpayer
identification number, (ii) the IRS notifies the Fund that the shareholder has
failed to properly report certain interest and dividend income to the IRS and to
respond to notices to that effect or (iii) when required to do so, the
shareholder fails to certify that he or she is not subject to backup
withholding. Redemption proceeds may be subject to withholding under the
circumstances described in (i) above.

Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from payments made to a shareholder may be refunded or
credited against such shareholder's United States federal income tax liability,
if any, provided that the required information is furnished to the IRS.
54
<PAGE>
INFORMATION REPORTING

Each Fund must report annually to the IRS and to each shareholder (other
than a Non-U.S. Shareholder) the amount of dividends paid to such shareholder
and the amount, if any, of tax withheld pursuant to backup withholding rules
with respect to such dividends. In the case of a Non-U.S. Shareholder, the Fund
must report to the IRS and such shareholder the aggregate amount of dividends
paid that are subject to backup withholding (if any) and the amount of tax
withheld with respect to such dividends pursuant to the backup withholding
rules. This information may also be made available to the tax authorities in a
Non-U.S. Shareholder's country of residence. Generally, dividends paid to
Non-U.S. Shareholders that are subject to the 30% federal income tax withholding
described above under "Non-U.S. Shareholders" are not subject to backup
withholding.

GENERAL

The federal income tax discussion set forth above is for general information
only. Prospective investors and shareholders should consult their advisers
regarding the specific federal tax consequences of purchasing, holding and
disposing of shares, as well as the effects of state, local and foreign tax law
and any proposed tax law changes.

PERFORMANCE INFORMATION

The Company may from time to time quote various performance figures to
illustrate the Funds' past performance.

Performance quotations by investment companies are subject to rules adopted
by the SEC, which require the use of standardized performance quotations. In the
case of total return, non-standardized performance quotations may be furnished
by the Company but must be accompanied by certain standardized performance
information computed as required by the SEC. Current yield and average annual
compounded total return quotations used by the Company are based on the
standardized methods of computing performance mandated by the SEC. An
explanation of those and other methods used by the Company to compute or express
performance follows.

TOTAL RETURN

From time to time the Funds may advertise total return for prior periods.
Total return figures are based on historical earnings and are not intended to
indicate future performance. The average annual total return is determined by
finding the average annual compounded rates of return over 1-, 5-, and 10-year
periods (or over the life of the Fund) that would equate an initial hypothetical
investment to its ending redeemable value. The calculation assumes that all
dividends and distributions are reinvested when paid. The quotation assumes the
amount was completely redeemed at the end of each 1-, 5-, and 10- year period
(or over the life of the Fund) and the deduction of all applicable Company
expenses on an annual basis.

Total return figures are calculated according to the following formula:

<TABLE>
<C> <C> <S>
n

P(1+T) = ERV
</TABLE>

where:

<TABLE>
<C> <C> <S>
P = a hypothetical initial payment
T = average annual total return
n = number of years
ERV = ending redeemable value of hypothetical payment made at the
beginning of the 1-, 5-, or 10-year periods at the end of
the 1-, 5-, or 10-year periods (or fractional portion
thereof).
</TABLE>

Calculated using the formula above, the average annualized total return,
exclusive of a sales charge or deferred sales charge, for each of the Funds that
commenced operations prior to June 30, 2000 for the one and five year periods
ended June 30, 2000 and for the period from the inception of each Fund through
June 30, 2000 are as follows:

55
<PAGE>

<TABLE>
<CAPTION>
ONE-YEAR FIVE-YEAR INCEPTION
INCEPTION PERIOD ENDED PERIOD ENDED THROUGH
DATE JUNE 30, 2000 JUNE 30, 2000 JUNE 30, 2000
--------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Worldwide High Income Fund
Class A Shares.......................................... 04/21/94 6.13 8.70 8.62
Class B Shares(1)....................................... 08/01/95 6.58 N/A 8.60
Class C Shares(1)....................................... 04/21/94 9.57 8.91 8.64
Emerging Markets Fund
Class A Shares.......................................... 07/06/94 27.60 N/A 2.95
Class B Shares(1)....................................... 08/01/95 29.35 N/A 5.74
Class C Shares(1)....................................... 07/06/94 33.38 N/A 3.23
Latin American Fund
Class A Shares.......................................... 07/06/94 16.24 16.75 8.93
Class B Shares(1)....................................... 08/01/95 17.32 N/A 16.03
Class C Shares(1)....................................... 07/06/94 21.34 17.28 9.17
Focus Equity Fund
Class A Shares.......................................... 01/02/96 18.09 N/A 27.86
Class B Shares.......................................... 01/02/96 19.42 N/A 28.49
Class C Shares.......................................... 01/02/96 23.38 N/A 28.61
International Magnum Fund
Class A Shares.......................................... 07/01/96 8.19 N/A 6.76
Class B Shares.......................................... 07/01/96 9.12 N/A 7.07
Class C Shares.......................................... 07/01/96 13.13 N/A 7.57
Japanese Equity Fund
Class A Shares.......................................... N/A -- -- --
Class B Shares.......................................... N/A -- -- --
Class C Shares.......................................... N/A -- -- --
Growth and Income Fund II
Class A Shares.......................................... N/A -- -- --
Class B Shares.......................................... N/A -- -- --
Class C Shares.......................................... N/A -- -- --
European Equity Fund
Class A Shares.......................................... 9/25/98 6.64 N/A 7.64
Class B Shares.......................................... 9/25/98 7.43 N/A 8.50
Class C Shares.......................................... 9/25/98 11.37 N/A 10.41
Equity Growth Fund
Class A Shares.......................................... 5/29/98 19.90 N/A 21.58
Class B Shares.......................................... 5/29/98 21.32 N/A 23.06
Class C Shares.......................................... 5/29/98 25.34 N/A 24.16
Global Equity Fund
Class A Shares.......................................... 10/29/97 -2.72% N/A 4.60%
Class B Shares.......................................... 10/29/97 -2.56 N/A 5.05
Class C Shares.......................................... 10/29/97 1.28 N/A 6.08
Emerging Markets Debt Fund
Class A Shares.......................................... N/A -- -- --
Class B Shares.......................................... N/A -- -- --
Class C Shares.......................................... N/A -- -- --
Mid Cap Growth Fund
Class A Shares.......................................... 10/25/99 N/A N/A 26.01
Class B Shares.......................................... 10/25/99 N/A N/A 28.10
Class C Shares.......................................... 10/25/99 N/A N/A 32.30
Value Fund
Class A Shares.......................................... 7/7/97 -21.33 N/A -3.89
Class B Shares.......................................... 7/7/97 -21.30 N/A -3.64
Class C Shares.......................................... 7/7/97 -18.00 N/A -2.71
Tax Managed Global Franchise Fund
Class A Shares.......................................... 9/25/98 12.95 N/A 19.52
Class B Shares.......................................... 9/25/98 14.09 N/A 20.74
Class C Shares.......................................... 9/25/98 17.92 N/A 23.18
</TABLE>

------------------

The Emerging Markets Debt, Growth and Income II, and Japanese Equity Funds had
not commenced operations in the fiscal year ended June 30, 2000.

(1) The Class B shares listed above were created on May 1, 1995. The original
Class B shares were renamed Class C shares, as listed above, on May 1, 1995.
The Class B shares commenced operations on August 1, 1995.

YIELD FOR CERTAIN FUNDS

From time to time certain of the Funds may advertise yield.
56
<PAGE>
Current yield reflects the income per share earned by a Fund's investments.

Current yield is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base period.

Current yield figures are obtained using the following formula:

Yield = 2[(a-b + 1)TO THE POWER OF 6 - 1]
--------------
cd

where:

<TABLE>
<C> <C> <S>
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the
period
</TABLE>

The respective current yields for the following Funds 30-day period ended
June 30, 2000 were as follows:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
FUND NAME SHARES SHARES SHARES
--------- -------- -------- --------
<S> <C> <C> <C>
Worldwide High Income Fund 11.18% 10.97% 10.97%
</TABLE>

COMPARISONS

To help investors better evaluate how an investment in a Fund might satisfy
their investment objective, advertisements regarding the Company may discuss
various measures of Fund performance as reported by various financial
publications. Advertisements may also compare performance (as calculated above)
to performance as reported by other investments, indices and averages.

In assessing such comparisons of performance an investor should keep in mind
that the composition of the investments in the reported indices and averages is
not identical to the composition of investments in the Company's Funds, that the
averages are generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the formula used by the
Company to calculate its performance. In addition, there can be no assurance
that the Company will continue this performance as compared to such other
averages.

GENERAL PERFORMANCE INFORMATION

Each Fund's performance will fluctuate, unlike bank deposits or other
investments which pay a fixed yield for a stated period of time. Past
performance is not necessarily indicative of future return. Actual performance
will depend on such variables as portfolio quality, average portfolio maturity,
the type of portfolio instruments acquired, changes in interest rates, portfolio
expenses and other factors. Performance is one basis investors may use to
analyze a Fund as compared to other funds and other investment vehicles.
However, performance of other funds and other investment vehicles may not be
comparable because of the foregoing variables, and differences in the methods
used in valuing their portfolio instruments, computing net asset value and
determining performance.

From time to time, a Fund's performance may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, a Fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. Rankings that compare the performance of the
Funds to one another in appropriate categories over specific periods of time may
also be quoted in advertising.

Fund advertising may include data on historical returns of the capital
markets in the United States compiled or published by research firms such as
Ibbotson Associates of Chicago, Illinois ("Ibbotson"), including returns on
common stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. The Funds may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of the Funds. The Funds may also compare their performance to that of other
compilations or indices that may be developed and made available in the future.

The Funds may include in advertisements, charts, graphs or drawings which
illustrate the potential risks and rewards of investment in various investment
vehicles, including but not limited to, foreign securities, stocks, bonds,
treasury bills and shares of a Fund. In addition, advertisements may include a
discussion of certain attributes or benefits to be derived by an investment in
57
<PAGE>
a Fund and/or other mutual funds, shareholder profiles and hypothetical investor
scenarios, timely information on financial management, tax and retirement
planning and various investment alternatives. The Funds may also from time to
time include discussions or illustrations of the effects of compounding in
advertisements. "Compounding" refers to the fact that, if dividends or other
distributions on a Fund investment are reinvested by being paid in additional
Fund shares, any future income or capital appreciation of a Fund would increase
the value, not only of the original investment in the Fund, but also of the
additional Fund shares received through reinvestment.

The Funds may include in its advertisements, discussions or illustrations of
the potential investment goals of a prospective investor (including materials
that describe general principles of investing, such as asset allocation,
diversification, risk tolerance, goal setting, questionnaires designed to help
create a personal financial profile, worksheets used to project savings needs
based on assumed rates of inflation and hypothetical rates of return and action
plans offering investment alternatives), investment management techniques,
policies or investment suitability of a Fund (such as value investing, market
timing, dollar cost averaging, asset allocation, constant ratio transfer,
automatic account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments). Advertisements and sales materials
relating to a Fund may include information regarding the background and
experience of its portfolio managers; the resources, expertise and support made
available to the portfolio managers and the portfolio managers' goals,
strategies and investment techniques.

The Funds' advertisements may discuss economic and political conditions of
the United States and foreign countries, the relationship between sectors of the
U.S., a foreign, or the global economy and the U.S., a foreign, or the global
economy as a whole and the effects of inflation. The Funds may include
discussions and illustrations of the growth potential of various global markets
including, but not limited to, Africa, Asia, Europe, Latin America, North
America, South America, Emerging Markets and individual countries. These
discussions may include the past performance of the various markets or market
sectors; forecasts of population, gross national product and market performance;
and the underlying data which supports such forecasts. From time to time,
advertisements, sales literature, communications to shareholders or other
materials may summarize the substance of information contained in the Funds'
shareholder reports (including the investment composition of a Fund), as well as
views as to current market, economic, trade and interest rate trends,
legislative, regulatory and monetary developments, investment strategies and
related matters believed to be of relevance to a Fund.

The Funds may quote various measures of volatility and benchmark correlation
in advertising. The Funds may compare these measures to those of other funds.
Measures of volatility seek to compare the historical share price fluctuations
or total returns to those of a benchmark. Measures of benchmark correlation
indicate how valid a comparative benchmark may be. Measures of volatility and
correlation may be calculated using averages of historical data. A Fund may also
advertise its current interest rate sensitivity, duration, weighted average
maturity or similar maturity characteristics.

The Funds may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a Fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during periods of low price levels.

From time to time marketing materials may provide a portfolio manager
update, an Adviser update and discuss general economic conditions and outlooks.
The Funds' marketing materials may also show each Fund's asset class
diversification, top sector holdings and largest holdings. Materials may also
mention how the Distributor believes a Fund compares relative to other Van
Kampen funds. Materials may also discuss the Dalbar Financial Services study
from 1984 to 1994 which studied investor cash flow into and out of all types of
mutual funds. The ten-year study found that investors who bought mutual fund
shares and held such shares outperformed investors who bought and sold. The
Dalbar study conclusions were consistent regardless of whether shareholders
purchased their funds in direct or sales force distribution channels. The study
showed that investors working with a professional representative have tended
over time to earn higher returns than those who invested directly. The
performance of the funds purchased by the investors in the Dalbar study and the
conclusions based thereon are not necessarily indicative of future performance
of such funds or conclusions that may result from similar studies in the future.
The Funds may also be marketed on the internet.

OTHER INFORMATION

CUSTODY OF ASSETS

All securities owned by each of the Funds and all cash, including proceeds
from the sale of shares of the Funds and of securities in each Fund's portfolio,
are held by The Chase Manhattan Bank, as the Company's custodian.

SHAREHOLDER REPORTS

Semiannual statements are furnished to shareholders, and annually such
statements are audited by the independent auditors.

58
<PAGE>

INDEPENDENT AUDITORS

Independent auditors for the Company perform an annual audit of the Funds'
financial statements. The Company's Board of Directors has engaged Deloitte &
Touche LLP, located at Two Prudential Plaza, 180 North Stetson Avenue, Chicago,
Illinois 60601, to be the Company's independent auditors, effective May 18,
2000. PricewaterhouseCoopers LLP, located at 200 East Randolph Drive, Chicago,
Illinois 60601 ("PWC"), ceased being the Fund's independent auditors effective
May 18, 2000. The cessation of the client-auditor relationship between the Funds
and PWC was based solely on a possible future business relationship by PWC with
an affiliate of the Company's investment adviser. The change in independent
auditors was approved by the Company's audit committee and the Company's Board
of Directors, including Directors who are not "interested persons" of the Funds
(as defined in the 1940 Act).

LEGAL COUNSEL

Counsel to the Funds is Skadden, Arps, Slate, Meagher & Flom (Illinois).
59
<PAGE>

APPENDIX -- DESCRIPTION OF SECURITIES RATINGS

STANDARD & POOR'S -- A brief description of the applicable Standard & Poor's
(S&P) rating symbols and their meanings (as published by S&P) follow:

The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.

The ratings are based, in varying degrees, on the following considerations:

1. Likelihood of payment -- capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of the
obligation:

2. Nature of and provisions of the obligation; and

1. LONG-TERM CREDIT RATINGS -- INVESTMENT GRADE

AAA: An obligation rated "AAA" has the highest rating assigned by S&P. Capacity
to meet its financial commitment on the obligation is extremely strong.

AA: An obligation rated "AA" differs from the highest rated issues only in small
degree. Capacity to meets its financial commitment on the obligation is very
strong.

SPECULATIVE GRADE

A-1
<PAGE>

business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

CC: An obligation rated "CC" is currently highly vulnerable to nonpayment.

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

2. COMMERCIAL PAPER

A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.

Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:

C: This rating is assigned to short-term debt obligations currently vulnerable
to nonpayment and is

A-2
<PAGE>

dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.

MOODY'S INVESTORS SERVICE -- a brief description of the applicable Moody's
Investors Service (Moody's) rating symbols and their meanings (as published by
Moody's Investors Service) follows:

1. LONG-TERM DEBT

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

A-3
<PAGE>

ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that are not rated as a
matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not published in
Moody's publications.

2. SHORT-TERM DEBT

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

-- Leading market positions in well-established industries.

-- High rates of return on funds employed.

-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

-- Well-established access to a range of financial markets and assured sources
of alternate liquidity.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

3. PREFERRED STOCK

Preferred stock rating symbols and their definitions are as follows:

A-4
<PAGE>

caa: An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.

ca: An issue which is rated "ca" is speculative in a high degree and is likely
to be in arrears on dividends with little likelihood of eventual payment.

c: This is the lowest rated class of preferred or preference stock. Issues so
rated can thus be regarded as having extremely poor prospects of ever attaining
any real investment standing.

A-5
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Van Kampen American Value Fund

We have audited the accompanying statement of assets and liabilities of
Van Kampen American Value Fund (the "Fund"), a fund of Van Kampen Series Fund,
Inc., including the portfolio of investments, as of June 30, 2000, and the
related statements of operations, changes in net assets and the financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit. The Fund's financial statements and financial highlights for
periods ended prior to June 30, 2000, were audited by other auditors whose
report, dated August 6, 1999, expressed an unqualified opinion on those
statements.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2000, by correspondence with the Fund's
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Value Fund as of June 30, 2000, the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-1
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.

MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON STOCKS 95.5%
BASIC RESOURCES 4.3%
BASIC CHEMICALS 0.5%
Nova Chemicals Corp. (a) ......................... 245,600 $ 5,280,400
-------------
NON-FERROUS METALS 1.1%
Agnico-Eagle Mines Ltd. .......................... 468,300 3,014,681
Freeport-McMoRan Copper & Gold, Inc. (a) ......... 549,500 5,082,875
Phelps Dodge Corp. ............................... 58,600 2,179,188
-------------
10,276,744
-------------
PAPER 0.9%
Boise Cascade Corp................................ 93,000 2,406,375
Gaylord Container Corp. 'A' (a)...................1,398,000 3,757,125
Westvaco Corp. ................................... 120,400 2,987,425
-------------
9,150,925
-------------
SPECIALTY CHEMICALS 1.1%
Tetra Technologies, Inc. (a) ..................... 455,400 6,460,988
W.R. Grace & Co. (a) ............................. 380,400 4,612,350
-------------
11,073,338
-------------
STEEL 0.7%
Lone Star Technologies, Inc. ..................... 83,600 3,866,500
Steel Dynamics, Inc. (a) ......................... 274,500 2,487,656
-------------
6,354,156
-------------
TOTAL BASIC RESOURCES ..................................... 42,135,563
-------------
BEVERAGES & PERSONAL PRODUCTS 1.8%
BEVERAGES 1.1%
Pepsi Bottling Group, Inc. ....................... 207,700 6,062,244
Suiza Foods Corp. (a) ............................ 57,000 2,785,875
Triarc Cos., Inc. (a) ............................ 79,200 1,623,600
-------------
10,471,719
-------------
PERSONAL PRODUCTS 0.7%
Fortune Brands, Inc. ............................. 195,500 4,508,719
Salton, Inc. (a) ................................. 65,100 2,400,562
-------------
6,909,281
-------------
TOTAL BEVERAGES & PERSONAL PRODUCTS ....................... 17,381,000
-------------

SEE NOTES TO FINANCIAL STATEMENTS F-2
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
CONSUMER DURABLES 2.2%
AUTOMOTIVE RELATED 1.5%
Lear Corp. (a) ................................... 194,500 $ 3,890,000
Magna International, Inc. 'A'..................... 117,900 5,570,775
Tower Automotive, Inc. (a) ....................... 407,500 5,093,750
-------------
14,554,525
-------------
BUILDING & HOUSING 0.2%
American Standard Cos., Inc. (a) ................. 51,600 2,115,600
-------------
RECREATION & TOYS 0.5%
Hasbro, Inc. ..................................... 231,200 3,482,450
JAKKS Pacific, Inc. (a) .......................... 90,700 1,337,825
-------------
4,820,275
-------------
TOTAL CONSUMER DURABLES ................................... 21,490,400
-------------
CONSUMER SERVICES 3.8%
ENTERTAINMENT & LEISURE 1.8%
ValueVision International, Inc. 'A' (a)........... 736,200 17,668,800
-------------
LODGING & CATERING 0.6%
Hilton Hotels Corp. .............................. 317,900 2,980,312
Starwood Hotels & Resorts Worldwide, Inc. ........ 95,500 3,085,844
-------------
6,066,156
-------------
OTHER 1.1%
Convergys Corp. (a) .............................. 141,400 7,335,125
Corinthian Colleges, Inc. (a) .................... 26,700 625,781
Lifeminders, Inc. (a) ............................ 106,200 3,139,538
-------------
11,100,444
-------------
PUBLISHING & BROADCASTING 0.3%
Infospace.com, Inc. (a) .......................... 54,800 3,027,700
-------------
TOTAL CONSUMER SERVICES ................................... 37,863,100
-------------
ENERGY 6.6%
OIL-DOMESTIC & CRUDE 1.0%
Ocean Energy, Inc. (a) ........................... 228,824 3,246,440
Tosco Corp. ...................................... 96,600 2,734,988
Valero Energy Corp. .............................. 116,300 3,692,525
-------------
9,673,953
-------------
OIL-OFFSHORE DRILLING 2.5%
Global Marine, Inc. (a) .......................... 360,600 10,164,412
Nabors Industries, Inc. (a) ...................... 171,100 7,111,344
Precision Drilling Corp. (a) ..................... 191,900 7,412,138
-------------
24,687,894
-------------

F-3 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
OIL-WELL EQUIPMENT & SERVICES 3.1%
Cooper Cameron Corp. (a) ......................... 95,500 $ 6,303,000
Global Industries, Ltd. (a) ...................... 381,100 7,193,262
Smith International, Inc. (a) .................... 209,900 15,283,344
Varco International, Inc. (a) .................... 72,748 1,691,391
-------------
30,470,997
-------------
TOTAL ENERGY .............................................. 64,832,844
-------------
FINANCIAL SERVICES 12.5%
BANKS 2.6%
Bank of Montreal ................................. 69,900 2,983,856
Bank United Corp. 'A'............................. 216,200 7,607,537
Golden State Bancorp, Inc. (a) ................... 90,900 1,636,200
Greater Bay Bancorp .............................. 21,300 995,775
Hudson United Bancorp ............................ 226,249 5,076,462
Silicon Valley Bancshares (a) .................... 62,400 2,659,800
TCF Financial Corp. .............................. 109,400 2,810,213
Trustmark Corp. .................................. 119,000 2,075,063
-------------
25,844,906
-------------
CREDIT & FINANCE 2.4%
Concord EFS, Inc. (a) ............................ 304,200 7,909,200
Metris Cos., Inc. ................................ 104,950 2,636,869
PMI Group, Inc. .................................. 48,800 2,318,000
Radian Group, Inc. ............................... 204,600 10,588,050
-------------
23,452,119
-------------
INSURANCE 1.6%
Allmerica Financial Corp. ........................ 103,300 5,410,337
Everest Reinsurance Holdings, Inc. ............... 159,200 5,233,700
MONY Group, Inc. (The) ........................... 71,900 2,431,119
Nationwide Financial Services, Inc. 'A'........... 98,000 3,221,750
-------------
16,296,906
-------------
INVESTMENT COMPANIES 1.8%
Catellus Development Corp. (a) ................... 228,800 3,432,000
E*TRADE Group, Inc. (a) .......................... 147,200 2,428,800
eSPEED, Inc. 'A' (a) ............................. 113,700 4,938,844
T. Rowe Price Associates, Inc. ................... 157,700 6,702,250
-------------
17,501,894
-------------
REAL ESTATE INVESTMENT TRUSTS 4.1%
AMB Property Corp. ............................... 528,600 12,058,687
Avalonbay Communities, Inc. ...................... 72,000 3,006,000
Boston Properties, Inc. .......................... 52,200 2,016,225
Camden Property Trust ............................ 64,800 1,903,500

SEE NOTES TO FINANCIAL STATEMENTS F-4
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Cousins Properties, Inc. ......................... 47,400 $ 1,824,900
Crown American Realty Trust ...................... 379,700 2,040,887
Duke Weeks Realty Corp. .......................... 195,000 4,363,125
Glenborough Realty Trust, Inc. ................... 26,500 462,094
Hospitality Properties Trust ..................... 276,300 6,234,019
Lasalle Hotel Properties REIT .................... 36,100 518,938
Liberty Property Trust REIT ...................... 46,000 1,193,125
Manufactured Home Communities, Inc. REIT ......... 78,700 1,883,881
Simon Property Group, Inc. ....................... 46,700 1,036,156
Vornado Realty Trust ............................. 53,500 1,859,124
-------------
40,400,661
-------------
TOTAL FINANCIAL SERVICES ................................... 123,496,486
-------------
FOOD & TOBACCO 2.2%
FOOD & TOBACCO 0.1%
Horizon Organic Holding Corp. (a) ................ 131,900 1,401,438
-------------
FOOD PRODUCTS 2.1%
Earthgrains Co. .................................. 134,600 2,616,287
Fresh Del Monte Produce, Inc. (a) ................ 183,900 1,264,313
General Mills, Inc. .............................. 134,800 5,156,100
Hain Celestial Group, Inc. (a) ................... 156,400 5,737,925
IBP, Inc. ........................................ 148,700 2,295,556
NBTY, Inc. (a) ................................... 565,800 3,606,975
-------------
20,677,156
-------------
TOTAL FOOD & TOBACCO ...................................... 22,078,594
-------------
HEALTH CARE 10.6%
DRUGS 5.4%
Alpharma, Inc. ................................... 124,700 7,762,575
Alza Corp., 'A' (a) .............................. 116,500 6,888,062
Celgene Corp. (a) ................................ 102,900 6,058,237
Cell Pathways, Inc. (a) .......................... 165,500 3,889,250
Genomic Solutions, Inc. (a) ...................... 96,200 1,406,925
Gilead Sciences, Inc. (a) ........................ 50,200 3,570,475
IDEC Pharmaceuticals Corp. (a) ................... 20,600 2,416,638
ImClone Systems, Inc. (a) ........................ 23,200 1,773,350
Intermune Pharmaceuticals, Inc. (a) .............. 135,000 5,577,188
MedImmune, Inc. (a) .............................. 53,700 3,973,800
Millennium Pharmaceuticals, Inc. (a) ............. 32,600 3,647,125
Teva Pharmaceutical Industries Ltd. ADR .......... 111,400 6,175,737
-------------
53,139,362
-------------
HEALTH SERVICES 1.7%
Beverly Enterprises, Inc. (a) .................... 568,100 1,597,781

F-5 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
HEALTH SERVICES (CONTINUED)
First Health Group Corp. (a) ..................... 82,300 $ 2,700,469
Omnicare, Inc. ................................... 252,900 2,291,906
Tenet Healthcare Corp. (a) ....................... 125,100 3,377,700
Trigon Healthcare, Inc. (a) ...................... 67,900 3,501,094
Universal Health Services, Inc. (a) .............. 56,300 3,715,800
-------------
17,184,750
-------------
HEALTH TECHNOLOGY 2.5%
Cephalon, Inc. (a) ............................... 116,300 6,963,462
COR Therapeutics, Inc. (a) ....................... 49,600 4,231,500
Human Genome Sciences, Inc. (a) .................. 1,200 160,050
PE Corp.-Celera Genomics Group (a) ............... 15,900 1,486,650
PerkinElmer, Inc. ................................ 56,200 3,716,225
QLT Phototherapeutics, Inc. (a) .................. 34,600 2,675,013
St. Jude Medical, Inc. (a) ....................... 108,100 4,959,088
-------------
24,191,988
-------------
HOSPITAL SUPPLIES 1.0%
Endocare, Inc. (a) ............................... 149,400 3,025,350
Sybron International Corp. (a) ................... 347,900 6,892,769
-------------
9,918,119
-------------
TOTAL HEALTH CARE ......................................... 104,434,219
-------------
HEAVY INDUSTRY/TRANSPORTATION 8.9%
AEROSPACE 1.8%
Alliant TechSystems, Inc. (a) .................... 56,700 3,823,707
Titan Corp. (a) .................................. 310,600 13,899,350
-------------
17,723,057
-------------
AIR TRANSPORTATION 1.1%
Airtran Holdings, Inc. (a) ....................... 695,200 2,889,425
Frontier Airlines, Inc. (a) ...................... 246,900 3,533,756
Mesa Air Group, Inc. (a) ......................... 422,100 2,334,741
SkyWest, Inc. .................................... 53,300 1,975,431
-------------
10,733,353
-------------
BUSINESS SERVICES 3.0%
AnswerThink Consulting Group, Inc. (a) ........... 149,900 2,492,088
Republic Services, Inc. 'A' (a) .................. 292,200 4,675,200
SCI Systems, Inc. (a) ............................ 235,600 9,232,575
United Rentals, Inc. (a) ......................... 253,000 4,332,625
Xceed, Inc. (a) .................................. 963,500 8,791,937
-------------
29,524,425
-------------
ELECTRICAL EQUIPMENT 0.3%
Black Box Corp. (a) .............................. 38,900 3,079,786
-------------

SEE NOTES TO FINANCIAL STATEMENTS F-6
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
MACHINERY 0.4%
Manitowoc Co., Inc. .............................. 55,350 $ 1,480,613
Stewart & Stevenson Services, Inc. ............... 131,000 1,973,187
-------------
3,453,800
-------------
MISCELLANEOUS INDUSTRIALS 2.3%
GenCorp, Inc. .................................... 282,200 2,257,600
ITT Industries, Inc. ............................. 160,300 4,869,112
Litton Industries, Inc. (a) ...................... 129,500 5,439,000
Martin Marietta Materials, Inc. .................. 108,500 4,387,469
Mettler-Toledo International, Inc. (a) ........... 54,900 2,196,000
Wabash National Corp. ............................ 312,500 3,730,469
-------------
22,879,650
-------------
TOTAL HEAVY INDUSTRY/TRANSPORTATION ....................... 87,394,071
-------------
RETAIL 4.0%
APPAREL 1.7%
Chico's FAS, Inc. (a) ............................ 182,600 3,652,000
Factory 2-U Stores, Inc. (a) ..................... 124,200 4,696,313
Global Sports, Inc. (a) .......................... 601,600 3,872,800
Jones Apparel Group, Inc. (a) .................... 69,700 1,637,950
Vans, Inc. (a) ................................... 181,800 2,658,825
-------------
16,517,888
-------------
DEPARTMENT STORES 0.3%
Neiman-Marcus Group, Inc. 'A' (a) ................ 91,700 2,710,881
-------------
DISCOUNTERS 0.3%
BJ's Wholesale Club, Inc. (a) .................... 101,500 3,349,500
-------------
FOOD RETAILERS 0.3%
SYSCO Corp. ...................................... 76,300 3,214,138
-------------
RESTAURANTS 1.2%
Landry's Seafood Restaurants, Inc. ............... 261,500 2,222,750
Lone Star Steakhouse & Saloon, Inc. (a) .......... 403,600 4,086,450
Ruby Tuesday, Inc. ............................... 242,800 3,050,175
Wendy's International, Inc. ...................... 124,100 2,210,531
-------------
11,569,906
-------------
SPECIALTY SHOPS 0.2%
Sherwin-Williams Co. (The) ....................... 96,800 2,050,950
-------------
TOTAL RETAIL .............................................. 39,413,263
-------------
TECHNOLOGY 31.5%
COMPUTERS & OFFICE EQUIPMENT 2.9%
Accelerated Networks, Inc. (a) ................... 8,700 367,031
Extreme Networks, Inc. (a) ....................... 57,600 6,076,800

F-7 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMPUTERS & OFFICE EQUIPMENT (CONTINUED)
Network Appliance, Inc. (a) ...................... 64,300 $ 5,176,150
Oak Technology, Inc. (a) ......................... 189,200 4,079,625
QLogic Corp. (a) ................................. 108,200 7,147,962
Splash Technology Holdings, Inc. (a) ............. 662,400 5,216,400
Stratos Lightwave Inc. (a) ....................... 12,500 348,438
-------------
28,412,406
-------------
ELECTRONICS 10.1%
Aetrium, Inc. (a) ................................ 122,400 703,800
ANADIGICS, Inc. (a) .............................. 71,700 2,442,281
Applied Micro Circuits Corp. (a) ................. 4,600 454,250
Coherent, Inc. (a) ............................... 58,200 4,881,525
Concord Camera Corp. (a) ......................... 83,800 1,749,325
Conexant Systems, Inc. (a) ....................... 49,700 2,416,663
Cypress Semiconductor Corp. (a) .................. 64,000 2,704,000
Fairchild Semiconductor, Inc. 'A' (a)............. 105,000 4,252,500
Galileo Technology Ltd. (a) ...................... 302,800 6,510,200
Gasonics International Corp. (a) ................. 202,300 7,978,206
GSI Lumonics, Inc. (a) ........................... 190,200 6,680,775
Integrated Device Technology, Inc. (a) ........... 39,800 2,383,025
KLA-Tencor Corp. (a) ............................. 82,600 4,837,263
Lam Research Corp. (a) ........................... 65,300 2,448,750
Lattice Semiconductor Corp. (a) .................. 103,900 7,182,087
M-Systems Flash Disk Pioneers Ltd. (a) ........... 103,700 8,075,637
Microchip Technology, Inc. (a) ................... 44,700 2,604,474
National Semiconductor Corp. (a) ................. 85,200 4,835,100
Novellus Systems, Inc. (a) ....................... 98,400 5,565,750
Parlex Corp. (a) ................................. 84,800 3,572,200
PMC-Sierra, Inc. (a) ............................. 36,800 6,538,900
SanDisk Corp. (a) ................................ 57,700 3,530,519
Vishay Intertechnology, Inc. (a) ................. 62,300 2,363,506
Vitesse Semiconductor Corp. (a) .................. 61,600 4,531,450
-------------
99,242,186
-------------
SOFTWARE & SERVICES 10.6%
Akamai Technologies, Inc. (a) .................... 56,200 6,672,872
Allaire Corp. (a) ................................ 116,400 4,277,700
Applied Digital Solutions, Inc. (a) .............. 626,900 2,115,788
BEA Systems, Inc. (a) ............................ 145,300 7,183,269
Blue Wave Systems, Inc. (a) ...................... 729,400 7,521,937
Brio Technology, Inc. (a) ........................ 208,300 4,413,356
Cadence Design Systems, Inc. (a) ................. 126,000 2,567,250
Commerce One, Inc. (a) ........................... 137,500 6,241,212
i2 Technologies, Inc. (a) ........................ 4,800 500,475

SEE NOTES TO FINANCIAL STATEMENTS F-8
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
SOFTWARE & SERVICES (CONTINUED)
Interwoven, Inc. (a) ............................. 24,600 $ 2,705,616
ISS Group, Inc. (a) .............................. 35,000 3,455,703
Level 8 Systems, Inc. (a) ........................ 30,900 650,831
Macromedia, Inc. (a) ............................. 56,600 5,472,512
MarchFirst, Inc. (a) ............................. 158,200 2,887,150
Mercury Interactive Corp. (a) .................... 58,500 5,659,875
MSI Holdings, Inc. (a,b,c) ....................... 563,100 4,082,475
Portal Software, Inc. (a) ........................ 122,500 7,824,687
Quest Software, Inc. (a) ......................... 63,900 3,538,463
Tanning Technology Corp. (a) ..................... 370,600 7,134,050
Unify Corp. (a) ..................................1,085,700 9,296,306
Vignette Corp. (a) ............................... 95,000 4,941,485
Zomax, Inc. (a) .................................. 398,500 5,230,313
-------------
104,373,325
-------------
TELECOMMUNICATIONS EQUIPMENT 7.9%
Advanced Fibre Communications, Inc. (a) .......... 40,600 1,839,688
CIENA Corp. (a) .................................. 37,800 6,300,787
Clarent Corp. (a) ................................ 69,600 4,976,400
Digital Lightwave, Inc. (a) ...................... 42,900 4,311,450
Digital Microwave Corp. (a) ...................... 249,800 9,523,625
Ditech Communications Corp. (a) .................. 16,200 1,531,913
DSET Corp. (a) ................................... 202,300 6,144,862
Efficient Networks, Inc. (a) ..................... 163,700 12,042,181
Finisar Corp. (a) ................................ 183,700 4,810,644
Powerwave Technologies, Inc. (a) ................. 161,600 7,110,400
REMEC, Inc. (a) .................................. 76,400 3,199,250
RF Micro Devices, Inc. (a) ....................... 13,100 1,147,888
Scientific-Atlanta, Inc. ......................... 78,700 5,863,150
SDL, Inc. (a) .................................... 31,900 9,097,481
-------------
77,899,719
-------------
TOTAL TECHNOLOGY .......................................... 309,927,636
-------------
UTILITIES 7.1%
ELECTRIC POWER 3.0%
Allegheny Energy, Inc. ........................... 83,700 2,291,287
Calpine Corp. (a) ................................ 46,400 3,050,800
DPL, Inc. ........................................ 114,666 2,515,485
Minnesota Power, Inc. ............................ 100,300 1,736,444
Pinnacle West Capital Corp. ...................... 89,200 3,021,650
Potomac Electric Power Co. ....................... 492,600 12,315,000
TXU Corp. ........................................ 140,400 4,141,800
-------------
29,072,466
-------------

F-9 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
TELEPHONE SERVICES 4.1%
Adelphia Business Solutions, Inc. (a) ............ 187,100 $ 4,338,381
Alamosa PCS Holdings, Inc. (a) ................... 279,300 5,830,387
Dobson Communications Corp. 'A' (a) .............. 214,300 4,125,275
FLAG Telecom Holdings Ltd. (a) ................... 169,400 2,519,825
Focal Communications Corp. (a) ................... 155,600 5,630,775
ITXC Corp. (a) ................................... 88,800 3,144,075
Leap Wireless International, Inc. (a) ............ 66,800 3,139,600
MGC Communications, Inc. (a) ..................... 94,400 5,658,100
Northeast Optic Network, Inc. (a) ................ 38,600 2,378,725
Viatel, Inc. (a) ................................. 92,600 2,644,888
Winstar Communications, Inc. (a) ................. 33,500 1,134,813
--------------
40,544,844
--------------
TOTAL UTILITIES ........................................... 69,617,310
--------------
TOTAL INVESTMENTS 95.5%
(Cost $893,880,555) ................................... 940,064,486

OTHER ASSETS IN EXCESS OF LIABILITIES 4.5% ............... 44,083,690
--------------
NET ASSETS 100% .......................................... $984,148,176
==============
</TABLE>

(a) NON-INCOME PRODUCING SECURITY

(b) SECURITY VALUED AT FAIR VALUE - SEE NOTE 1A TO FINANCIAL STATEMENTS.

(c) RETRICTED AS TO PUBLIC RESALE. TOTAL VALUE OF RESTRICTED SECURITIES AT
JUNE 30, 2000 WAS $4,082,475 OR 0.41% OF NET ASSETS (TOTAL COST
$3,378,600).

ADR AMERICAN DEPOSITARY RECEIPT

REIT REAL ESTATE INVESTMENT TRUST

SEE NOTES TO FINANCIAL STATEMENTS F-10
<PAGE>

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
JUNE 30, 2000

<S> <C>
ASSETS:
Investments at Value (Cost $893,880,555) .......................................................... $940,064,486
Cash .............................................................................................. 2,666,238
Receivable for:
Investments Sold ................................................................................ 49,732,995
Fund Shares Sold ................................................................................ 732,075
Dividends ....................................................................................... 614,588
Other ............................................................................................. 19,601
-------------
Total Assets .................................................................................. 993,829,983
-------------
LIABILITIES:
Payable for:
Investments Purchased ........................................................................... 5,676,343
Fund Shares Redeemed ............................................................................ 1,687,467
Distribution Fees ............................................................................... 1,049,248
Investment Advisory Fees ........................................................................ 696,355
Administrative Fees ............................................................................. 200,590
Shareholder Reporting Expenses .................................................................. 129,475
Transfer Agent Fees ............................................................................. 62,260
Professional Fees ............................................................................... 54,703
Custody Fees .................................................................................... 52,026
Directors' Fees and Expenses .................................................................... 48,202
Other ............................................................................................. 25,138
-------------
Total Liabilities ............................................................................. 9,681,807
-------------
NET ASSETS ........................................................................................ $984,148,176
=============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized 2,625,000,000)............................ $ 43,308
Paid in Capital in Excess of Par .................................................................. 888,821,538
Accumulated Net Realized Gain ..................................................................... 49,148,244
Net Unrealized Appreciation on Investments ........................................................ 46,183,931
Accumulated Net Investment Loss ................................................................... (48,845)
-------------
NET ASSETS ........................................................................................ $984,148,176
=============
Class A Shares:
Net Asset Value and Redemption Price Per Share (Based on Net Assets of
$434,765,666 and 18,876,036 Shares Outstanding) ............................................... $ 23.03
=============
Maximum Sales Charge .......................................................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value
Per Share x 100/(100% - maximum sales charge)) ................................................ $ 24.44
=============
Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$356,717,401 and 15,866,845 Shares Outstanding)* .............................................. $ 22.48
=============
Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$192,665,109 and 8,564,861 Shares Outstanding)* ............................................... $ 22.49
=============
</TABLE>

* REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

F-11 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Statement of Operations
YEAR ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends ........................................................................... $ 8,563,276
Interest ............................................................................ 2,722,469
--------------
Total Income..................................................................... 11,285,745
--------------
EXPENSES:
Investment Advisory Fees ............................................................ 8,354,616
Distribution Fees (Attributed to Classes A, B and C of $1,058,693,
$3,672,972 and $1,909,488, respectively) .......................................... 6,641,153
Administrative Fees ................................................................. 2,464,240
Shareholder Reports ................................................................. 435,871
Transfer Agent Fees ................................................................. 333,882
Filing and Registration Fees ........................................................ 111,006
Professional Fees ................................................................... 99,176
Custodian Fees ...................................................................... 90,486
Directors' Fees and Expenses ........................................................ 38,514
Other ............................................................................... 19,608
--------------
Net Expenses .................................................................... 18,588,552
--------------
NET INVESTMENT LOSS ................................................................. $ (7,302,807)
==============
NET REALIZED GAIN/LOSS ON:
Investments ......................................................................... $81,464,181
--------------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period ........................................................... 81,599,541
--------------
End of the Period:
Investments ..................................................................... 46,183,931
--------------
Net Change in Unrealized Appreciation/Depreciation .................................. (35,415,610)
--------------
NET REALIZED GAIN/LOSS AND NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ......................................................... $46,048,571
==============
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ $38,745,764
==============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-12
<PAGE>

Statement of Changes in Net Assets
YEAR ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
-------------- --------------
<S> <C> <C>
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Loss ......................................................... $ (7,302,807) $ (2,941,000)
Net Realized Gain ........................................................... 81,464,181 44,491,000
Net Change in Unrealized Appreciation/Depreciation .......................... (35,415,610) 64,853,000
--------------- ---------------
Net Increase in Net Assets Resulting from Operations ........................ 38,745,764 106,403,000
--------------- ---------------
DISTRIBUTIONS:
Net Realized Gain:
Class A ..................................................................... (27,087,328) (12,659,000)
Class B ..................................................................... (24,196,601) (17,437,000)
Class C ..................................................................... (12,447,392) (7,981,000)
--------------- ---------------
Net Decrease in Net Assets Resulting from Distributions ..................... (63,731,321) (38,077,000)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Subscribed .................................................................. 408,292,208 344,367,000
Distributions Reinvested .................................................... 46,273,947 31,597,000
Redeemed .................................................................... (295,695,701) (211,364,000)
--------------- ---------------
Net Increase in Net Assets Resulting from
Capital Share Transactions ............................................... 158,870,454 164,600,000
--------------- ---------------
Total Increase in Net Assets ................................................ 133,884,897 232,926,000
NET ASSETS--Beginning of Period ............................................. 850,263,279 617,337,000
--------------- ---------------
NET ASSETS--End of Period (Including accumulated
net investment loss of $(48,845) and $(22,000),
respectively) ............................................................ $ 984,148,176 $ 850,263,000
=============== ===============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

F-13 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------
CLASS A SHARES 2000# 1999# 1998# 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ............................................ $ 23.58 $ 21.34 $ 17.59 $ 14.63 $ 12.89
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss ........................... (0.08) 0.01 (0.02) 0.20 0.27
Net Realized and
Unrealized Gain .................................... 1.09 3.43 4.84 4.05 1.94
--------- --------- --------- --------- ---------
Total from Investment Operations ....................... 1.01 3.44 4.82 4.25 2.21
--------- --------- --------- --------- ---------
DISTRIBUTIONS
Net Investment Income ................................ -- -- (0.03) (0.20) (0.27)
In Excess of Net Investment Income ................... -- -- (0.00)+ (0.00)+ (0.01)
Net Realized Gain .................................... (1.56) (1.20) (1.04) (1.09) (0.19)
--------- --------- --------- --------- ---------
Total Distributions .................................. (1.56) (1.20) (1.07) (1.29) (0.47)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD ......................... $ 23.03 $ 23.58 $ 21.34 $ 17.59 $ 14.63
========= ========= ========= ========= =========
TOTAL RETURN (1) ....................................... 4.62% 17.41% 28.26% 30.68% 17.41%
========= ========= ========= ========= =========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ...................... $434,766 $343,004 $220,100 $ 34,331 $ 19,674
Ratio of Expenses to Average
Net Assets ............................................. 1.47% 1.49% 1.50% 1.50% 1.50%
Ratio of Net Investment Income/Loss
to Average Net Assets ................................ (0.33%) 0.03% (0.09%) 1.25% 1.90%
Portfolio Turnover Rate ................................ 272% 283% 207% 73% 41%
-----------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss ........................................ $-- $-- $0.02 $0.04 $0.04
Ratios Before Expense Reductions:
Expenses to Average Net Assets ....................... -- -- 1.58% 1.76% 1.81%
Net Investment Income/Loss to
Average Net Assets ................................. -- -- (0.18%) 0.98% 1.59%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

+ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-14
<PAGE>

Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------- AUGUST 1, 1995+
CLASS B SHARES 2000# 1999# 1998# 1997 TO JUNE 30, 1996
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ............................................ $ 23.23 $ 21.20 $ 17.59 $ 14.63 $ 13.37
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss ........................... (0.25) (0.14) (0.17) 0.09 0.15
Net Realized and
Unrealized Gain .................................... 1.06 3.37 4.83 4.05 1.46
--------- --------- --------- --------- ---------
Total from Investment Operations ....................... 0.81 3.23 4.66 4.14 1.61
--------- --------- --------- --------- ---------
DISTRIBUTIONS
Net Investment Income ................................ -- -- (0.01) (0.09) (0.15)
In Excess of Net Investment Income ................... -- -- (0.00)++ (0.00)++ (0.01)
Net Realized Gain .................................... (1.56) (1.20) (1.04) (1.09) (0.19)
--------- --------- --------- --------- ---------
Total Distributions .................................... (1.56) (1.20) (1.05) (1.18) (0.35)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD ......................... $ 22.48 $ 23.23 $ 21.20 $ 17.59 $ 14.63
========= ========= ========= ========= =========
TOTAL RETURN (1) ....................................... 3.85% 16.50% 27.30% 29.77% 12.29%*
========= ========= ========= ========= =========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ...................... $356,717 $341,908 $269,836 $ 15,331 $ 2,485
Ratio of Expenses to Average
Net Assets ........................................... 2.21% 2.24% 2.25% 2.25% 2.25%
Ratio of Net Investment Income/Loss
to Average Net Assets ................................ (1.06%) (0.72%) (0.84%) 0.40% 1.18%
Portfolio Turnover Rate ................................ 272% 283% 207% 73% 41%*
-----------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss ........................................ $-- $-- $0.02 $0.06 $0.04
Ratios Before Expense Reductions:
Expenses to Average Net Assets ....................... -- -- 2.33% 2.48% 2.61%
Net Investment Income/Loss to
Average Net Assets ................................. -- -- (0.93%) 0.14% 0.82%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

* NON-ANNUALIZED

+ THE FUND BEGAN OFFERING CLASS B SHARES ON AUGUST 1, 1995.

++ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-15 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.

YEAR ENDED JUNE 30,
-------------------------------------------------------------------
CLASS C SHARES 2000# 1999# 1998# 1997 1996
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ............................................ $ 23.24 $ 21.20 $ 17.59 $ 14.64 $ 12.89
-------- -------- -------- -------- --------

INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss ........................... (0.25) (0.14) (0.17) 0.08 0.16
Net Realized and
Unrealized Gain .................................... 1.06 3.38 4.83 4.05 1.94
-------- -------- -------- -------- --------

Total from Investment Operations ....................... 0.81 3.24 4.66 4.13 2.10
-------- -------- -------- -------- --------

DISTRIBUTIONS
Net Investment Income ................................ -- -- (0.01) (0.09) (0.15)
In Excess of Net Investment Income ................... -- -- (0.00)+ (0.00)+ (0.01)
Net Realized Gain .................................... (1.56) (1.20) (1.04) (1.09) (0.19)
-------- -------- -------- -------- --------

Total Distributions .................................. (1.56) (1.20) (1.05) (1.18) (0.35)
-------- -------- -------- -------- --------

NET ASSET VALUE, END OF PERIOD ......................... $ 22.49 $ 23.24 $ 21.20 $ 17.59 $ 14.64
======== ======== ======== ======== ========

TOTAL RETURN (1) ....................................... 3.80% 16.55% 27.28% 29.67% 16.50%
======== ======== ======== ======== ========

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ...................... $192,665 $165,351 $127,401 $ 32,425 $ 21,193
Ratio of Expenses to Average
Net Assets ........................................... 2.21% 2.24% 2.25% 2.25% 2.25%
Ratio of Net Investment Income/Loss
to Average Net Assets ................................ (1.06%) (0.72%) (0.84%) 0.49% 1.17%
Portfolio Turnover Rate ................................ 272% 283% 207% 73% 41%
-----------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss ........................................ $-- $-- $0.02 $0.04 $0.04
Ratios Before Expense Reductions:
Expenses to Average Net Assets ....................... -- -- 2.33% 2.47% 2.58%
Net Investment Income/Loss to
Average Net Assets ................................. -- -- (0.92%) 0.22% 0.84%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

+ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-16
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen American Value Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks high
total return by investing in equity securities of small-to medium-sized
corporations. The Fund commenced operations on October 18, 1993. The Fund 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.

1. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of the financial statements in conformity with accounting
principles accepted in the United States of America (hereafter "generally
accepted accounting principles") requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
period. Actual results could differ from those estimates.

A. SECURITY VALUATION Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the bid and asked prices obtained from reputable brokers.
Debt securities purchased with remaining maturities of 60 days or less are
valued at amortized cost, which approximates market value. All other securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith using procedures approved by the Board of
Directors.

B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.

The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Investment Advisory Corp. or its affiliates, the
daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on

F-17
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

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.

C. INCOME AND EXPENSES Interest income is recorded on an accrual basis and
dividend income is recorded net of applicable withholding taxes on the
ex-dividend date. Income, expenses, and realized and unrealized gains or losses
are allocated on a pro rata basis to each class of shares except for
distribution and service fees which are unique to each class of shares.
Distributions from the Fund are recorded on the ex-distribution date.

Net realized gains or losses may differ for financial and tax reporting
purposes as a result of post October 31 losses which are not recognized for tax
purposes until the first day of the following fiscal year and losses relating to
wash sale transactions.

At June 30, 2000, for federal income tax purposes, cost of long-term
investments is $906,194,249; the aggregate gross unrealized appreciation is
$132,830,156 and the aggregate gross unrealized depreciation is $98,959,919
resulting in net unrealized appreciation on long-term investments of
$33,870,237.

E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains which are included as ordinary income for
tax purposes.

Due to inherent differences in the recognition of income and expenses under
generally accepted accounting principles and federal income tax purposes,
permanent differences between book and tax basis reporting for the current
fiscal year have been identified and appropriately reclassified. A permanent
difference related to a net operating loss which may be used as an offset
against short-term gains for tax purposes totaling $7,768,997 has been
reclassified from accumulated net realized gain to accumulated net investment
loss. A permanent difference of $489,091 related to distributions from Real
Estate Investment Trusts was reclassified from accumulated net investment loss
to accumulated net realized gain. Permanent differences related to partnership
investments were reclassified from accumulated net investment loss ($3,773)and
paid in capital in excess of par ($95,663) to accumulated net realized gain. A
permanent difference of $7,166 related to a correction of the prior year net
operating loss was reclassified from accumulated net realized gain to paid in
capital in excess of par.

Permanent book to tax basis differences are not included in ending
undistrib-

F-18
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

uted/distributions in excess of net investment income for the purpose of
calculating net investment income/loss per share in the Financial Highlights.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Van Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary
of Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Miller Anderson & Sherrerd, LLP (a "Subadviser"),
a wholly owned subsidiary of Morgan Stanley Dean Witter & Co., provide the Fund
with investment advisory services at a fee paid monthly and calculated at the
annual rates based on average daily net assets indicated as follows:

AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $1 billion ............................................ .85 of 1%
Next $500 million............................................ .80 of 1%
Over $1.5 billion............................................ .75 of 1%
</TABLE>

CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
EXPENSE RATIO EXPENSE RATIO
1.50% 2.25%

For the period ended June 30, 2000, the Fund recognized expenses of $50,090
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.

For the period ended June 30, 2000, the Fund recognized expenses of $12,903
representing Van Kampen's cost of providing legal services to the Fund.

Van Kampen Investment Advisory Corp. (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.

F-19
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

quarterly, of an amount of up to 0.25% of the Class A shares and up to 1.00% of
the Class B shares and Class C shares of the Fund, on an annualized basis, of
the average daily net assets attributable to each Class.

The Distributor may receive a front end sales charge for purchases of Class
A shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
June 30, 2000, the Distributor has advised the Fund that it earned initial sales
charges of $817,712 for Class A shares and deferred sales charges of $954,847
and $35,962 for Class B shares and Class C shares, respectively.

Certain officers and directors of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.

The Fund provides deferred compensation and retirement plans for its
directors who are not officers of Van Kampen. Under the deferred compensation
plan, directors may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each director's years of service to the Fund. The maximum
annual benefit per director under the plan is $2,500.

For the period ended June 30, 2000, the Fund incurred $46,859 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.

3. CAPITAL TRANSACTIONS
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. All three classes of shares have identical voting, dividend, liquidation
and other rights. 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 ("CDSC") of 1.00% imposed in
the event of certain redemptions within one year of the purchase. Class B and
Class C shares are offered without a front end sales charge, but are subject to
a CDSC. Class B shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B shares received on such shares, automatically convert
to Class A shares eight years after the end of the calendar month in which the
shares were purchased. Class B shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B shares received on such shares, automatically
convert to Class A shares seven years after the end of the calendar month in
which the shares were purchased. For the period ended June 30, 2000, no Class B
shares converted to Class A shares. The CDSC will be imposed on most redemptions
made within five years of the purchase for Class B shares and one year of the
purchase for Class C shares as detailed in the following schedule:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
---------------------------
<S> <C> <C>
YEAR OF REDEMPTION CLASS B CLASS C
First .................................................. 5.00% 1.00%
Second ................................................. 4.00% None
Third .................................................. 3.00% None
Fourth ................................................. 2.50% None
Fifth .................................................. 1.50% None
Thereafter ............................................. None None
</TABLE>

F-20
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
---------------- -----------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS
CLASS A:
Shares:
Subscribed ................................................. 11,878,707 8,979,000
Distributions Reinvested ................................... 777,244 579,000
Redeemed ................................................... (8,325,235) (5,327,000)
-------------- --------------
Net Increase in Class A Shares Outstanding ................... 4,330,716 4,231,000
============== ==============
Dollars:
Subscribed ................................................. $ 281,234,414 $ 190,079,000
Distributions Reinvested ................................... 17,309,218 11,025,000
Redeemed ................................................... (197,154,804) (104,033,000)
-------------- --------------
Net Increase ................................................. $ 101,388,828 $ 97,071,000
============== ==============
Ending Paid in Capital ....................................... $ 396,402,271+ $ 295,061,000+
============== ==============
CLASS B:
Shares:
Subscribed ................................................. 2,984,461 4,895,000
Distributions Reinvested ................................... 903,072 769,000
Redeemed ................................................... (2,742,195) (3,673,000)
-------------- --------------
Net Increase in Class B Shares Outstanding ................... 1,145,338 1,991,000
============== ==============
Dollars:
Subscribed ................................................. $ 68,496,278 $ 98,965,000
Distributions Reinvested ................................... 19,714,070 14,494,000
Redeemed ................................................... (63,715,963) (70,265,000)
-------------- --------------
Net Increase ................................................. $ 24,494,385 $ 43,194,000
============== ==============
Ending Paid in Capital ....................................... $ 325,531,802+ $ 301,083,000+
============== ==============
CLASS C:
Shares:
Subscribed ................................................. 2,526,613 2,707,000
Distributions Reinvested ................................... 423,565 322,000
Redeemed ................................................... (1,501,481) (1,921,000)
-------------- --------------
Net Increase in Class C Shares Outstanding ................... 1,448,697 1,108,000
============== ==============
Dollars:
Subscribed ................................................. $ 58,561,516 $ 55,323,000
Distributions Reinvested ................................... 9,250,659 6,078,000
Redeemed ................................................... (34,824,934) (37,066,000)
-------------- --------------
Net Increase ................................................. $ 32,987,241 $ 24,335,000
============== ==============
Ending Paid in Capital ....................................... $ 167,019,270+ $ 134,054,000+
============== ==============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

+ ENDING PAID IN CAPITAL AMOUNTS DO NOT REFLECT PERMANENT BOOK TO TAX
DIFFERENCES-SEE NOTE 1E.

F-21
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

4. INVESTMENT TRANSACTIONS
For the period ended June 30, 2000, the Fund made purchases of $2,642,689,657
and sales of $2,497,094,740 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.

5. BORROWINGS
In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, has entered into a $650 million committed line of credit facility
with a group of banks which expires on November 28, 2000, but is renewable with
the consent of the participating banks. Each fund is permitted to utilize the
facility in accordance with the restrictions of its prospectus. In the event the
demand for the credit facility meets or exceeds $650 million on a complex-wide
basis, each fund will be limited to its pro-rata percentage based on the net
assets of each participating fund. Interest on borrowings is charged under the
agreement at a rate of 0.50% above the federal funds rate per annum. An annual
commitment fee of 0.09% per annum is charged on the unused portion of the credit
facility, which each fund incurs based on its pro-rata percentage of quarterly
net assets. The Fund has not borrowed against the credit facility during the
period.

F-22
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Van Kampen Asian Growth Fund

We have audited the accompanying statement of assets and liabilities of
Van Kampen Asian Growth Fund (the "Fund"), a fund of Van Kampen Series Fund,
Inc., including the portfolio of investments, as of June 30, 2000, and the
related statements of operations, changes in net assets and the financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The Fund's financial statements and
financial highlights for the periods ended prior to June 30, 2000, were
audited by other auditors whose report, dated August 6, 1999, expressed an
unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 2000, by
correspondence with the Fund's custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen Asian Growth Fund as of June 30, 2000, the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended, in conformity with accounting principles generally accepted in the
United States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-23
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON STOCKS 99.0%
HONG KONG 33.6%
Asia Satellite Telecommunications Holdings Ltd. ........... 246,500 $ 842,695
ASM Pacific Technology Ltd. ............................... 226,000 846,540
Cable & Wireless HKT Ltd. ................................. 2,356,100 5,183,390
Cathay Pacific Airways Ltd. ............................... 770,000 1,427,298
Cheung Kong Holdings Ltd. ................................. 322,000 3,562,632
China.com Corp. 'A' (a) ................................... 20,000 408,750
China Merchants Holdings International Co., Ltd. .......... 570,000 391,187
China Telecom Ltd. (a) .................................... 859,000 7,575,685
China Unicom Ltd. (a) ..................................... 1,540,000 3,269,450
Citic Pacific Ltd. ........................................ 133,000 696,094
Cosco Pacific Ltd. ........................................ 645,000 508,851
Dao Heng Bank Group Ltd. .................................. 111,000 491,245
Great Wall Technology Co., Ltd. 'H' ....................... 1,930,000 1,336,925
Hang Seng Bank Ltd. ....................................... 86,400 820,166
Hong Kong & China Gas Co., Ltd. ........................... 1,022,900 1,148,146
Hong Kong Land Holdings Ltd. .............................. 205,000 328,000
Hutchison Whampoa Ltd. .................................... 986,930 12,407,048
Johnson Electric Holdings Ltd. ............................ 148,500 1,404,897
Legend Holdings Ltd. ...................................... 390,000 377,718
Li & Fung Ltd. ............................................ 520,000 2,601,501
Phoenix Satellite TV (a) .................................. 918,000 127,770
Sino-i.com Ltd. ........................................... 3,205,000 145,953
SmarTone Telecommunications Holdings Ltd. ................. 145,900 322,850
Soundwill Holdings Ltd. (a) ............................... 5,353,000 127,035
Sun Hung Kai Properties Ltd. .............................. 482,000 3,462,510
Swire Pacific Ltd. 'A' .................................... 354,000 2,070,733
TCL International Holdings Ltd. (a) ....................... 1,120,000 409,467
Television Broadcasts Ltd. ................................ 198,000 1,320,762
Timeless Software Ltd. (a) ................................ 970,000 438,619
------------
54,053,917
------------
INDIA 0.0%
Hero Honda Motors Ltd. .................................... 1,227 27,137
------------
INDONESIA 0.9%
PT Gudang Garam Tbk ....................................... 275,000 444,587
PT Semen Gresik Tbk ....................................... 288,000 261,594
PT Telekomunikasi Indonesia ADR ........................... 117,984 818,514
------------
1,524,695
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-24
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
KOREA 25.8%
Cheil Communications, Inc. ................................ 9,750 $ 1,272,281
CJ39 Shopping Corp. ....................................... 13,460 440,609
Communication Network Interface, Inc. (a) ................. 37,930 209,206
Dongwon Securities Co. .................................... 15,675 113,026
Housing & Commercial Bank ................................. 68,184 1,596,020
Humax Co., Ltd. (a) ....................................... 50,560 700,569
Hyundai Electronics Industries Co. ........................ 38,127 752,265
Kookmin Bank .............................................. 94,505 1,203,535
Korea Electric Power Corp. ADR ............................ 107,110 1,974,841
Korea Telecom Corp. ....................................... 1,990 175,259
Korea Telecom Corp. ADR ................................... 49,830 2,410,526
Korea Telecom Freetel (a) ................................. 8,170 544,410
LG Home Shopping, Inc. .................................... 7,180 682,568
LG Information & Communication Ltd. ....................... 1,400 78,725
Locus Corp. (a) ........................................... 4,510 366,050
Pohang Iron & Steel Co., Ltd. ADR ......................... 34,900 837,600
Prochips Technology, Inc. (a) ............................. 60,961 241,105
Samsung Electro-Mechanics Co. ............................. 30,541 1,914,590
Samsung Electronics Co. ................................... 55,096 18,233,155
Shinhan Bank Co., Ltd. .................................... 114,880 1,081,805
SK Telecom Co., Ltd. ...................................... 2,540 831,461
SK Telecom Co., Ltd. ADR .................................. 135,790 4,930,874
Telson Electronics Co., Ltd. .............................. 50,800 539,880
Tong Yang Confectionery Corp. ............................. 18,060 392,776
------------
41,523,136
------------
MALAYSIA 5.5%
British American Tabacco Bhd. ............................. 85,000 693,421
Carlsberg Brewery Bhd. .................................... 178,000 599,579
Commerce Asset-Holdings Bhd. .............................. 121,000 350,263
Digi.com Bhd. (a) ......................................... 349,000 638,303
Malayan Banking Bhd. ...................................... 437,400 1,772,621
Malaysian Pacific Industries Bhd. ......................... 98,000 1,005,790
Public Bank Bhd. .......................................... 804,000 740,526
Resorts World Bhd ......................................... 259,000 708,842
Tanjong Public Co., Ltd. .................................. 218,000 522,053
Telekom Malaysia Bhd. ..................................... 334,000 1,151,421
Tenaga Nasional Bhd. ...................................... 197,000 642,842
------------
8,825,661
------------
SINGAPORE 10.6%
Chartered Semiconductor Manufacturing Ltd. (a) ............ 120,000 1,048,915
City Developments Ltd. .................................... 135,000 523,589
Datacraft Asia Ltd. ....................................... 111,280 979,264
DBS Group Holdings Ltd. ................................... 266,661 3,426,845
</TABLE>

F-25 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
SINGAPORE (CONTINUED)
Keppel Corp., Ltd. ........................................ 124,000 $ 268,457
NatSteel Electronics Ltd. ................................. 131,000 401,910
Neptune Orient Lines Ltd. (a) ............................. 581,000 538,119
OMNI Industries Ltd. ...................................... 529,000 872,735
Oversea-Chinese Banking Corp., Ltd. ....................... 283,150 1,950,498
Overseas Union Bank Ltd. .................................. 160,300 621,714
Sembcorp Logistics Ltd. ................................... 175,900 987,688
SIA Engineering Co., Ltd. (a) ............................. 396,000 444,712
Singapore Airlines Ltd. ................................... 178,000 1,761,968
Singapore Press Holdings Ltd. ............................. 110,200 1,722,373
ST Assembly Test Services Ltd. (a) ........................ 342,000 879,004
Venture Manufacturing Ltd. ................................ 69,800 711,132
------------
17,138,923
------------
TAIWAN 20.2%
Accton Technology Corp. (a) ............................... 16,200 36,117
Acer Peripherals, Inc. .................................... 390,456 1,105,604
Acer, Inc. (a) ............................................ 241,550 452,046
Advanced Semiconductor Engineering, Inc. (a) .............. 278,219 851,183
Advantech Co., Ltd. ....................................... 94,800 502,926
Ambit Microsystems Corp. .................................. 33,000 327,584
ASE Test Ltd. ADR (a) ..................................... 20,300 597,581
Asustek Computer, Inc. .................................... 228,538 1,889,297
China Steel Corp. ......................................... 734,100 501,745
Chinatrust Commercial Bank (a) ............................ 595,560 517,541
Compal Electronics, Inc. .................................. 274,429 674,350
Delta Electronics, Inc. ................................... 236,000 1,117,592
Far Eastern Textile Ltd. .................................. 518,805 645,024
GigaMedia Ltd. (a) ........................................ 7,700 93,363
Hon Hai Precision Industry (a) ............................ 228,760 2,069,822
Macronix International Co., Ltd. (a) ...................... 254,550 637,928
Microelectronics Technology, Inc. (a) ..................... 128,200 425,595
Nan Ya Plastics Corp. ..................................... 774,340 1,562,541
President Chain Store Corp. ............................... 161,360 603,951
ProMos Technologies, Inc. (a) ............................. 72,000 291,749
Ritek Corp. (a) ........................................... 91,350 365,697
Siliconware Precision Industries Co. ADR (a) .............. 29,300 271,025
Siliconware Precision Industries Co. (a) .................. 451,695 1,014,384
Taishin International Bank ................................ 828,031 530,910
Taiwan Semiconductor Manufacturing Co., Ltd. (a) .......... 1,632,035 7,755,154
United Micro Electronics Corp. (a) ........................ 1,941,980 5,404,045
United World Chinese Commercial Bank ...................... 414,640 394,060
Universal Scientific Industrial Co., Ltd. ................. 181,000 441,823
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-26
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
TAIWAN (CONTINUED)
Winbond Electronics Corp. (a) ............................. 490,350 $ 1,420,379
------------
32,501,016
------------
THAILAND 2.4%
Advanced Info Services Public Co., Ltd. ................... 85,800 1,068,804
BEC World Public Co., Ltd. ................................ 77,600 463,520
Delta Electronics Public Co., Ltd. ........................ 50,100 352,970
Golden Land Property Development Public Co., Ltd. (a) ..... 945,700 140,015
Hana Microelectronics Public Co., Ltd. .................... 41,600 327,066
Siam City Cement Public Co., Ltd. (a) ..................... 190,633 720,196
Thai Farmers Bank Public Co., Ltd. ........................ 734,100 618,387
Total Access Communication Public Co., Ltd. (a) ........... 31,200 125,424
------------
3,816,382
------------
TOTAL COMMON STOCKS (Cost $134,420,406) .............................. 159,410,867
------------
WARRANTS 0.1%
THAILAND 0.1%
Siam Commercial Bank Public Co., Ltd., expiring 5/10/02 (a)
(Cost $46,564) ........................................ 1,023,700 120,205
------------
TOTAL LONG-TERM INVESTMENTS 99.1%
(Cost $134,466,970) ................................... 159,531,072
------------
</TABLE>

F-27 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <C> <C>
SHORT-TERM INVESTMENT 0.3%
REPURCHASE AGREEMENT 0.3%
Chase Securities, Inc. 6.15%, dated 6/30/00,
due 7/3/00, to be repurchased at $588,301,
collateralized by $585,000 U.S. Treasury Bonds
6.25%, due 8/15/23, valued at $602,226
(Cost $588,000) ....................................... $588,000 $ 588,000
------------
TOTAL INVESTMENTS IN SECURITIES 99.4%
(Cost $135,054,970) .............................................. 160,119,072

FOREIGN CURRENCY 0.9%
(Cost $1,429,622) ................................................ 1,430,555
------------
TOTAL INVESTMENTS 100.3%
(Cost $136,484,592) .............................................. 161,549,627

LIABILITIES IN EXCESS OF OTHER ASSETS -0.3% ......................... (535,358)
------------
NET ASSETS 100% ..................................................... $161,014,269
============
</TABLE>

(a) NON-INCOME PRODUCING SECURITY

ADR AMERICAN DEPOSITARY RECEIPT

SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
-------- ----- ----------
<S> <C> <C>
Information Technology ........... $ 59,796,493 37.1%
Financials ....................... 39,239,382 24.4
Telecommunications Services ...... 29,046,371 18.1
Consumer Discretionary ........... 11,786,601 7.3
Industrials ...................... 9,278,405 5.8
Materials ........................ 3,883,676 2.4
Utilities ........................ 3,765,829 2.3
Consumer Staples ................. 2,734,315 1.7
------------ ---
$159,531,072 99.1%
============ ====
</TABLE>

+ CLASSIFIED BY SECTORS WHICH REPRESENT BROAD GROUPINGS OF RELATED INDUSTRIES.

SEE NOTES TO FINANCIAL STATEMENTS F-28
<PAGE>

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
JUNE 30, 2000

<TABLE>
<S> <C>
ASSETS:
Investments in Securities, at Value (Cost $135,054,970) ................... $160,119,072
Foreign Currency (Cost $1,429,622) ........................................ 1,430,555
Receivable for:
Investments Sold ........................................................ 3,664,761
Fund Shares Sold ........................................................ 1,448,003
Dividends ............................................................... 205,335
Interest ................................................................ 100
Other ..................................................................... 18,375
------------
Total Assets .......................................................... 166,886,201
------------
LIABILITIES:
Payable for:
Fund Shares Redeemed .................................................... 4,232,530
Investments Purchased ................................................... 826,996
Bank Overdraft .......................................................... 164,281
Distribution Fees ....................................................... 163,832
Custody Fees ............................................................ 145,607
Investment Advisory Fees ................................................ 126,218
Shareholder Reporting Expenses .......................................... 69,904
Professional Fees ....................................................... 38,083
Administrative Fees ..................................................... 35,516
Directors' Fees and Expenses ............................................ 33,188
Transfer Agent Fees ..................................................... 23,668
Deferred Country Tax .................................................... 2,437
Other ..................................................................... 9,672
------------
Total Liabilities ..................................................... 5,871,932
------------
NET ASSETS ................................................................ $161,014,269
============

NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized 2,625,000,000) .. $ 12,669
Paid in Capital in Excess of Par ......................................... 216,987,625
Net Unrealized Appreciation on Investments and
Foreign Currency Translations* ....................................... 25,059,791
Accumulated Net Investment Loss .......................................... (178,131)
Accumulated Net Realized Loss ............................................ (80,867,685)
------------
NET ASSETS ............................................................... $161,014,269
============
</TABLE>

F-29 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Statement of Assets and Liabilities
JUNE 30, 2000

<TABLE>
<S> <C>
Class A Shares:
Net Asset Value and Redemption Price Per Share (Based on Net Assets of
$76,254,366 and 5,839,478 Shares Outstanding) ........................ $ 13.06
============
Maximum Sales Charge ................................................. 5.75%
Maximum Offering Price Per Share (Net Asset Value
Per Share x 100/ (100% - maximum sales charge)) ...................... $ 13.86
============
Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$45,837,306 and 3,687,316 Shares Outstanding)** ...................... $ 12.43
============
Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$38,922,597 and 3,142,243 Shares Outstanding)** ...................... $ 12.39
============
</TABLE>

* NET OF ACCRUAL FOR DEFERRED COUNTRY TAX OF U.S. $2,437.

** REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

SEE NOTES TO FINANCIAL STATEMENTS F-30
<PAGE>

Statement of Operations
YEAR ENDED JUNE 30, 2000

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ........................................................... $ 2,175,047
Interest ............................................................ 126,880
Less Foreign Taxes Withheld ......................................... (158,856)
-----------
Total Income .................................................... 2,143,071
-----------
EXPENSES:
Investment Advisory Fees ............................................ 1,718,406
Distribution Fees (Attributed to Classes A, B and C of
$207,290, $471,600 and $419,730, respectively) .................... 1,098,620
Administrative Fees ................................................. 441,202
Custodian Fees ...................................................... 371,920
Shareholder Reports ................................................. 226,545
Transfer Agent Fees ................................................. 118,631
Filing & Registration Fees .......................................... 58,525
Professional Fees ................................................... 43,978
Directors' Fees and Expenses ........................................ 26,662
Country Tax Expense ................................................. 16,390
Other ............................................................... 16,489
-----------
Total Expenses .................................................. 4,137,368
Less Expense Reductions ........................................... (172,743)
-----------
Net Expenses ...................................................... 3,964,625
-----------
NET INVESTMENT LOSS ................................................. $(1,821,554)
===========
NET REALIZED GAIN/LOSS ON:
Investments ....................................................... $46,382,500
Foreign Currency Transactions ..................................... (281,789)
-----------
Net Realized Gain ................................................... 46,100,711
-----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period ........................................... 44,849,761
-----------
End of the Period:
Investments ..................................................... 25,064,102
Foreign Currency Translations ................................... (4,311)
-----------
25,059,791
-----------
Net Change in Unrealized Appreciation/Depreciation .................. (19,789,970)
-----------
NET REALIZED GAIN/LOSS AND NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ......................................... $26,310,741
===========
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $24,489,187
===========
</TABLE>

F-31 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Statement of Changes in Net Assets
YEAR ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
------------- --------------
<S> <C> <C>
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Loss .................................... $ (1,821,554) $ (125,000)
Net Realized Gain/Loss ................................. 46,100,711 (5,000)
Net Change in Unrealized Appreciation/Depreciation ..... (19,789,970) 68,333,000
------------ ------------
Net Increase in Net Assets Resulting from Operations ... 24,489,187 68,203,000
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Subscribed ............................................. 246,008,180 84,305,000
Redeemed ............................................... (281,902,284) (82,166,000)
------------ ------------
Net Increase/Decrease in Net Assets Resulting from
Capital Share Transactions ........................... (35,894,104) 2,139,000
------------ ------------
Total Increase/Decrease in Net Assets .................. (11,404,917) 70,342,000
NET ASSETS--Beginning of Period ........................ 172,419,186 102,077,000
------------ ------------
NET ASSETS--End of Period (Including accumulated
net investment loss of $(178,131) and $(25,000),
respectively) ........................................ $161,014,269 $172,419,000
============ ============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

SEE NOTES TO FINANCIAL STATEMENTS F-32
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
FUND OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------
CLASS A SHARES 2000# 1999# 1998# 1997 1996
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ......................... $ 11.48 $ 6.53 $ 16.62 $ 17.15 $ 16.42
------- ------- ------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss ........ (0.08) 0.02 (0.04) (0.06) (0.04)
Net Realized and
Unrealized Gain/Loss ............ 1.66 4.93 (10.03) (0.14) 0.77
------- ------- ------- -------- --------
Total From Investment Operations .... 1.58 4.95 (10.07) (0.20) 0.73
------- ------- ------- -------- --------
DISTRIBUTIONS
In Excess of Net Realized Gain .... -- -- (0.02) (0.33) --
------- ------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD ...... $ 13.06 $ 11.48 $ 6.53 $ 16.62 $ 17.15
======= ======= ======= ======== ========
TOTAL RETURN (1) .................... 13.49% 75.69% (60.57%) (1.10%) 4.45%
======= ======= ======= ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ... $76,254 $88,808 $47,128 $175,440 $248,009
Ratio of Expenses to Average
Net Assets ........................ 1.92% 1.95% 1.90% 1.84% 1.88%
Ratio of Net Investment Income/Loss
to Average Net Assets ............. (0.66%) 0.28% (0.39%) (0.31%) (0.16%)
Portfolio Turnover Rate ............. 108% 138% 130% 74% 38%
------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss ..................... $0.01 $0.01 $0.01 $-- $--
Ratios Before Expense Reductions:
Expenses to Average Net Assets .... 2.02% 2.03% 2.21% -- --
Net Investment Income/Loss to
Average Net Assets .............. (0.76%) 0.20% (0.53%) -- --
Ratio of Expenses to Average
Net Assets excluding country
tax expense and interest expense .. 1.90% 1.90% 1.90% -- --
------------------------------------------------------------------------------------------
</TABLE>

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-33 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
FUND OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------- AUGUST 1, 1995+
CLASS B SHARES 2000# 1999# 1998# 1997 TO JUNE 30, 1996
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ......................... $ 11.01 $ 6.31 $ 16.17 $ 16.81 $ 16.51
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss ............... (0.17) (0.03) (0.10) (0.16) (0.03)
Net Realized and
Unrealized Gain/Loss ............ 1.59 4.73 (9.74) (0.15) 0.33
------- ------- ------- ------- -------
Total From Investment Operations .... 1.42 4.70 (9.84) (0.31) 0.30
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Realized Gain ................. -- -- -- (0.33) --
In Excess of Net Realized Gain .... -- -- (0.02) -- --
------- ------- ------- ------- -------
Total Distributions ................. -- -- (0.02) (0.33) --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ...... $ 12.43 $ 11.01 $ 6.31 $ 16.17 $ 16.81
======= ======= ======= ======= =======
TOTAL RETURN (1) .................... 12.81% 74.48% (60.89%) (1.79%) 1.82%*
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ... $45,837 $42,905 $26,126 $62,786 $52,853
Ratio of Expenses to Average
Net Assets ........................ 2.67% 2.70% 2.65% 2.59% 2.61%
Ratio of Net Investment Loss
to Average Net Assets ............. (1.42%) (0.44%) (1.01%) (1.04%) (0.52%)
Portfolio Turnover Rate ............. 108% 138% 130% 74% 38%*
--------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Loss ............................ $0.01 $0.01 $0.02 $-- $--
Ratios Before Expense Reductions:
Expenses to Average Net Assets .... 2.77% 2.78% 2.96% -- --
Net Investment Loss to
Average Net Assets .............. (1.52%) (0.52%) (1.15%) -- --
Ratio of Expenses to Average
Net Assets excluding country
tax expense and interest expense .. 2.65% 2.65% 2.65% -- --
--------------------------------------------------------------------------------------------
</TABLE>

* NON-ANNUALIZED

+ THE FUND BEGAN OFFERING CLASS B SHARES ON AUGUST 1, 1995.

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-34
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
FUND OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------
CLASS C SHARES 2000# 1999# 1998# 1997 1996
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ......................... $ 10.97 $ 6.29 $ 16.14 $ 16.78 $ 16.19
------- ------- ------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss ............... (0.17) (0.04) (0.12) (0.21) (0.13)
Net Realized and
Unrealized Gain/Loss ............ 1.59 4.72 (9.71) (0.10) 0.72
------- ------- ------- -------- --------
Total From Investment Operations .... 1.42 4.68 (9.83) (0.31) 0.59
------- ------- ------- -------- --------
DISTRIBUTIONS
In Excess of Net Realized Gain .... -- -- (0.02) (0.33) --
------- ------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD ...... $ 12.39 $ 10.97 $ 6.29 $ 16.14 $ 16.78
======= ======= ======= ======== ========
TOTAL RETURN (1) .................... 12.76% 74.13% (60.88%) (1.79%) 3.64%
======= ======= ======= ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ... $38,923 $40,706 $28,823 $114,460 $168,070
Ratio of Expenses to Average
Net Assets ........................ 2.67% 2.70% 2.65% 2.59% 2.63%
Ratio of Net Investment Loss
to Average Net Assets ............. (1.43%) (0.48%) (1.17%) (1.06%) (0.94%)
Portfolio Turnover Rate ............. 108% 138% 130% 74% 38%
------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Loss ............................ $0.01 $0.01 $0.01 $-- $--
Ratios Before Expense Reductions:
Expenses to Average Net Assets .... 2.77% 2.78% 2.96% -- --
Net Investment Loss to
Average Net Assets .............. (1.53%) (0.56%) (1.31%) -- --
Ratio of Expenses to Average
Net Assets excluding country
tax expense and interest expense .. 2.65% 2.65% 2.65% -- --
------------------------------------------------------------------------------------------
</TABLE>

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-35 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen Asian Growth Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation
which is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective
seeks long-term capital appreciation through investment primarily in equity
securities of Asian issuers, excluding Japan. The Fund commenced operations
on June 23, 1993. The Fund 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.

1. SIGNIFICANT ACCOUNTING POLICIES

A. 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 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, which
approximates market value. All other securities and assets for which market
quotations are not readily available are valued at fair value as determined
in good faith using procedures approved by the Board of Directors.

B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.

F-36
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

ment Advisory Corp. or its affiliates, the daily aggregate of which is
invested in repurchase agreements. Repurchase agreements are fully
collateralized by the underlying debt security. A bank as custodian for the
Fund takes possession of the underlying securities, with a market value at
least equal to the amount of the repurchase transaction, including principal
and accrued interest. To the extent that any repurchase transaction exceeds
one business day, the value of the collateral is marked-to-market on a daily
basis to determine the adequacy of the collateral. In the event of default on
the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. In the
event of default or bankruptcy by the counterparty to the agreement,
realization and/or retention of the collateral or proceeds may be subject to
legal proceedings.

C. INCOME AND EXPENSES Interest income is recorded on an accrual basis and
dividend income is recorded net of applicable withholding taxes on the
ex-dividend date. Income, expenses, and realized and unrealized gains or
losses are allocated on a pro rata basis to each class of shares except for
distribution and service fees which are unique to each class of shares.
Distributions from the Fund are recorded on the ex-distribution date.

The Fund intends to utilize provisions of the federal income tax laws
which allow it to carry a realized capital loss forward for eight years
following the year of the loss and offset such losses against any future
realized capital gains. At June 30, 2000, the Fund had an accumulated capital
loss carryforward for tax purposes of $80,258,778, which will expire between
June 30, 2006 and June 30, 2007. Net realized gains or losses may differ for
financial and tax reporting purposes as a result of losses relating to wash
sale transactions.

At June 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $135,663,878, the aggregate gross unrealized
appreciation is $34,397,099 and the aggregate gross unrealized depreciation
is $9,941,905, resulting in net unrealized appreciation on long- and
short-term investments of $24,455,194.

F-37
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

Due to inherent differences in the recognition of income and expenses
under generally accepted accounting principles and federal income tax
purposes, permanent differences between book and tax bases reporting for the
current fiscal year have been identified and appropriately reclassified. A
permanent difference related to a net operating loss totaling $1,583,589 has
been reclassified from paid in capital in excess of par to accumulated net
investment loss. Permanent differences relating to a correction of prior year
amounts were reclassified from accumulated net investment loss ($152,434) and
accumulated net realized loss ($135,518) to paid in capital in excess of par.
A permanent difference related to the recognition of net realized gains on
foreign currency transactions totaling $281,789 was reclassified from
accumulated net realized loss to accumulated net investment loss. Permanent
differences related to the sale of Passive Foreign Investment Company
securities totaling $213,049 were reclassified from accumulated net realized
loss to accumulated net investment loss. A permanent difference related to
taxes accrued against capital gains totaling $257,710 was reclassified from
accumulated net investment loss to accumulated net realized loss.

Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the
purpose of calculating net investment income/loss per share in the Financial
Highlights.

F-38
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

restrictions on exchange traded transactions and currency transactions. These
restrictions may impact the Fund's ability to buy or sell certain securities
or to repatriate certain currencies to U.S. dollars. Additionally, changes in
currency exchange rates will affect the value of and investment income from
such securities.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

Van Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of Van Kampen Investments Inc. (an indirect wholly owned
subsidiary of Morgan Stanley Dean Witter & Co.) and Morgan Stanley Dean
Witter Investment Management Inc., 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 indicated as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $500 million ...................................... 1.00 of 1%
Next $500 million ....................................... .95 of 1%
Over $1 billion ......................................... .90 of 1%
</TABLE>

<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
EXPENSE RATIO EXPENSE RATIO
<S> <C>
1.90% 2.65%
</TABLE>

For the period ended June 30, 2000, the Adviser voluntarily waived
$172,743 of its investment advisory fees. This waiver is voluntary in nature
and can be discontinued at the Adviser's discretion.

For the period ended June 30, 2000, the Fund recognized expenses of
$10,459 representing legal services provided by Skadden, Arps, Slate, Meagher
& Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.

For the period ended June 30, 2000, the Fund recognized expenses of
$7,123 representing Van Kampen's cost of providing legal services to the Fund.

F-39
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

ministrative services to the Fund. Chase is compensated for such services by
the Adviser from the fee it receives from the Fund. Transfer Agency services
are provided to the Fund by Van Kampen Investor Services Inc., an affiliate
of the Adviser.

Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of
Van Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co., serves as the Distributor of the Fund's shares.
The Distributor is entitled to receive from the Portfolio a distribution fee,
which is accrued daily and paid quarterly, of an amount of up to 0.25% of the
Class A shares and up to 1.00% of the Class B shares and Class C shares of
the Fund, on an annualized basis, of the average daily net assets
attributable to each Class.

The Distributor may receive a front end sales charge for purchases of
Class A shares. In addition, the Distributor may receive a contingent
deferred sales charge for certain redemptions of Class B shares and Class C
shares of the Fund redeemed within one to five years following such purchase.
For the period ended June 30, 2000, the Distributor has advised the Fund that
it earned initial sales charges of $253,592 for Class A shares and deferred
sales charges of $237,262 and $15,980 for Class B shares and Class C shares,
respectively.

Certain officers and directors of the Fund are also officers and
directors of Van Kampen. The Fund does not compensate its officers or
directors who are officers of Van Kampen.

The Fund provides deferred compensation and retirement plans for its
directors who are not officers of Van Kampen. Under the deferred compensation
plan, directors may elect to defer all or a portion of their compensation to
a later date. Benefits under the retirement plan are payable for a ten-year
period and are based upon each director's years of service to the Fund. The
maximum annual benefit per director under the plan is $2,500.

For the period ended June 30, 2000, the Fund incurred $121,099 as
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/dealer.

3. CAPITAL TRANSACTIONS

F-40
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

1996, and any dividend reinvestment plan Class B shares received on such
shares, automatically convert to Class A shares seven years after the end of
the calendar month in which the shares were purchased. For the period ended
June 30, 2000, no Class B shares converted to Class A shares. The CDSC will
be imposed on most redemptions made within five years of the purchase for
Class B shares and one year of the purchase for Class C shares as detailed in
the following schedule:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
--------------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First .................................................... 5.00% 1.00%
Second ................................................... 4.00% None
Third .................................................... 3.00% None
Fourth ................................................... 2.50% None
Fifth .................................................... 1.50% None
Thereafter ............................................... None None
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
-------------- --------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS
CLASS A:
Shares:
Subscribed .......................................... 17,452,932 8,906,000
Redeemed ............................................ (19,346,665) (8,391,000)
------------- ------------
Net Increase/Decrease in Class A Shares Outstanding ... (1,893,733) 515,000
============= ============
Dollars:
Subscribed .......................................... $ 222,661,067 $ 70,587,000
Redeemed ............................................ (249,142,808) (61,673,000)
------------- ------------
Net Increase/Decrease ................................. $ (26,481,741) $ 8,914,000
============= ============
Ending Paid in Capital ................................ $ 94,617,222+ $121,936,000+
============= ============
CLASS B:
Shares:
Subscribed .......................................... 1,262,910 944,000
Redeemed ............................................ (1,473,492) (1,189,000)
------------- ------------
Net Decrease in Class B Shares Outstanding ............ (210,582) (245,000)
============= ============
Dollars:
Subscribed .......................................... $ 15,484,002 $ 7,734,000
Redeemed ............................................ (17,962,378) (8,813,000)
------------- ------------
Net Decrease .......................................... $ (2,478,376) $ (1,079,000)
============= ============
Ending Paid in Capital ................................ $ 60,041,721+ $ 62,911,000+
============= ============
</TABLE>

F-41
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
-------------- --------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS (CONTINUED)
CLASS C:
Shares:
Subscribed ........................................... 635,714 807,000
Redeemed ............................................. (1,203,170) (1,680,000)
------------- ------------
Net Decrease in Class C Shares Outstanding ............. (567,456) (873,000)
============= ============
Dollars:
Subscribed ........................................... $ 7,863,111 $ 5,984,000
Redeemed ............................................. (14,797,098) (11,680,000)
------------- ------------
Net Decrease .............................................. $ (6,933,987) $ (5,696,000)
============= ============
Ending Paid in Capital .................................... $ 63,636,988+ $ 70,942,000+
============= ============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

+ ENDING PAID IN CAPITAL AMOUNTS DO NOT REFLECT PERMANENT BOOK TO TAX
DIFFERENCES-SEE NOTE 1E.

4. INVESTMENT TRANSACTIONS

For the period ended June 30, 2000, the Fund made purchases of $180,101,264
and sales of $207,912,555 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.

5. BORROWINGS

In accordance with its investment policies, the Fund may borrow from banks
for temporary purposes and is subject to certain other customary
restrictions. Effective November 30, 1999, the Fund, in conjunction with
certain other funds of Van Kampen, has entered into a $650 million committed
line of credit facility with a group of banks which expires on November 28,
2000, but is renewable with the consent of the participating banks. Each fund
is permitted to utilize the facility in accordance with the restrictions of
its prospectus. In the event the demand for the credit facility meets or
exceeds $650 million on a complex-wide basis, each fund will be limited to
its pro-rata percentage based on the net assets of each participating fund.
Interest on borrowings is charged under the agreement at a rate of 0.50%
above the federal funds rate per annum. An annual commitment fee of 0.09% per
annum is charged on the unused portion of the credit facility, which each
fund incurs based on its pro-rata percentage of quarterly net assets. The
Fund has not borrowed against the credit facility during the period.

F-42
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and
Shareholders of Van Kampen Emerging Markets Fund

We have audited the accompanying statement of assets and liabilities of Van
Kampen Emerging Markets Fund (the "Fund"), a fund of Van Kampen Series Fund,
Inc., including the portfolio of investments, as of June 30, 2000, and the
related statements of operations, changes in net assets and the financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit. The Fund's financial statements and financial highlights for
the periods ended prior to June 30, 2000, were audited by other auditors whose
report, dated August 6, 1999, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2000, by correspondence with the Fund's
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Emerging Markets Fund as of June 30, 2000, the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-43
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE

COMMON STOCKS 92.1%
BRAZIL 5.3%
<S> <C> <C>
CEMIG ADR .............................................. 15,827 $ 273,821
Coteminas .............................................. 1,365,800 79,441
Coteminas ADR (c) ...................................... 12,645 36,764
CRT 'A' (a) ............................................ 4,957,486 2,171,563
CVRD ADR ............................................... 33,089 934,764
Embratel 'A' ADR ....................................... 48,980 1,157,152
Lojas Arupau S.A. ADR (a) .............................. 14,225 --
Petrobras ADR .......................................... 9,700 293,052
Tele Celular Sul ADR ................................... 11,294 511,054
Tele Centro Sul ADR .................................... 10,418 761,165
Tele Nordeste Celular ADR .............................. 2,895 200,479
Tele Norte Leste ADR ................................... 47,479 1,121,691
Telemig Celular ADR .................................... 2,079 148,649
Telesp Celular ADR ..................................... 21,117 947,625
Unibanco GDR ........................................... 56,226 1,616,497
Votorantim Celulose e Papel S.A. ADR ................... 18,100 332,588
-----------
10,586,305
-----------
CHILE 0.2%
Cia Telecom ADR ........................................ 19,300 349,813
-----------
CHINA 3.2%
AsiaInfo Holdings, Inc. (a) ............................ 190 8,491
China Merchants Holdings International Co., Ltd. ....... 521,000 357,559
China Unicom Ltd. (a) .................................. 1,007,000 2,137,881
China Unicom Ltd. ADR (a) .............................. 7,800 165,750
Cosco Pacific Ltd. ..................................... 588,000 463,883
Guangdong Kelon Electrical Holdings Co. Ltd. ........... 147,000 79,671
Legend Holdings Ltd. ................................... 847,000 820,326
Nanjing Panda Electronics Co., Ltd. 'H' (a) ............ 888,000 318,953
Netease.com, Inc. ADR .................................. 2,500 30,312
PetroChina Company Ltd. 'H' (a) ........................ 8,492,000 1,764,741
PetroChina Company Ltd. ADR (a) ........................ 2,500 52,344
Yanzhou Coal Mining Co., Ltd. ADR ...................... 13,928 139,280
Zhenhai Refining & Chemical Co., Ltd. 'H' .............. 565,400 87,760
-----------
6,426,951
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-44
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE

<S> <C> <C>
CZECH REPUBLIC 0.4%
Cesky Telecom a.s. (a) .................................. 29,878 $ 501,630
Cesky Telecom a.s. GDR (a) .............................. 14,318 238,633
-----------
740,263
-----------

EGYPT 1.0%
Al-Ahram Beverages Co. S.A.E. GDR (a) ................... 9,871 169,534
Eastern Tobacco ......................................... 5,198 113,385
Egypt Gas Co. ........................................... 2,900 131,453
Egyptian Co. for Mobile Services (a) .................... 47,915 1,559,351
-----------
1,973,723
-----------

GREECE 2.2%
OTE S.A. ................................................ 109,352 2,666,064
OTE S.A. ADR ............................................ 154,356 1,881,214
-----------
4,547,278
-----------

HONG KONG 4.9%
Asia Satellite Telecommunications Holdings Ltd. ......... 67,000 229,049
China Telecom Ltd. (a) .................................. 407,000 3,589,411
China Telecom Ltd. ADR (a) .............................. 13,200 2,347,125
Citic Pacific Ltd. ...................................... 137,000 717,029
Founder Holdings Ltd. (a) ............................... 560,000 249,631
Great Wall Technology Co., Ltd. .........................1,929,100 1,336,302
Phoenix Satellite Television Holdings Ltd. (a) .......... 702,000 97,706
SINA.com (a) ............................................ 1,700 43,562
TCL International Holdings Ltd. (a) .....................2,032,000 742,890
Timeless Software Ltd. (a) .............................. 416,000 188,109
Yue Yuen Industrial Holdings Ltd. ....................... 132,000 292,938
-----------
9,833,752
-----------

HUNGARY 0.7%
Matav Rt. ............................................... 60,618 421,345
Matav Rt. ADR ........................................... 28,188 970,724
-----------
1,392,069
-----------

INDIA 6.6%
Aptech Ltd. ............................................. 8,200 155,359
Bharat Heavy Electricals Ltd. ........................... 105,300 314,721
BSES Ltd. ............................................... 47,000 258,421
Container Corp. of India Ltd. ........................... 114,500 441,075
Dabur India Ltd. ........................................ 9,800 143,280
Gujarat Ambuja Cements Ltd. ............................. 79,000 345,017
HCL Technologies Ltd. (a) ............................... 11,200 323,182
Hero Honda Motors Ltd. .................................. 14,600 322,900
Hindustan Lever Ltd. .................................... 9,924 630,413
</TABLE>

F-45 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE

<S> <C> <C>
INDIA (CONTINUED)
Housing Development Finance Corp., Ltd. ................. 48,440 $ 606,504
India Info.com Ltd. (a,b) ............................... 47,630 204,814
Indo Gulf Corp., Ltd. ................................... 79,750 75,731
Infosys Technologies Ltd. ............................... 23,100 4,303,817
ITC Ltd. ................................................ 1,250 22,247
Larson & Tourbo Ltd. 'A' ................................ 15,700 86,746
Lupin Laboratories Ltd. ................................. 25,500 112,109
Mahanagar Telephone Nigam Ltd. .......................... 150,750 724,377
Mahanagar Telephone Nigam Ltd. GDR ...................... 23,300 214,069
NIIT Ltd. ............................................... 9,200 455,436
Reliance Industries Ltd. ................................ 56,250 429,465
Reliance Industries Ltd. GDR ............................ 10,000 210,000
Satyam Computer Services Ltd. (a) ....................... 21,350 1,426,027
Sterlite Industries Ltd. ................................ 9,500 177,287
Strides Arcolab Ltd. .................................... 11,000 60,851
Tata Engineering & Locomotive Co., Ltd. ................. 74,700 206,282
Tata Tea Ltd. ........................................... 35,850 266,326
Videsh Sanchar Nigam Ltd. ............................... 11,950 323,787
Zee Telefilms Ltd. ...................................... 48,200 483,673
-----------
13,323,916
-----------
INDONESIA 0.6%
PT Gudang Garam Tbk ..................................... 437,925 707,985
PT Indah Kiat Pulp & Paper Corp. (a) .................... 707,580 143,497
PT Semen Gresik Tbk ..................................... 204,200 185,477
PT TELEKOMUNIKASI INDONESIA ADR ......................... 31,484 218,420
-----------
1,255,379
-----------
ISRAEL 8.3%
Aladdin Knowledge Systems (a) ........................... 17,270 273,082
Amdocs Ltd. (a) ......................................... 6,428 493,349
BATM Advanced Communications Ltd. ....................... 5,608 489,270
BreezeCom Ltd. (a) ...................................... 7,920 344,520
Check Point Software Technologies Ltd. (a) .............. 10,206 2,161,120
Comverse Technology, Inc. (a) ........................... 6,526 606,918
DSP Group, Inc. (a) ..................................... 15,495 867,720
ECI Telecommunications Ltd. ............................. 121,553 4,345,520
Elbit Systems Ltd. ...................................... 1 15
Galileo Technology Ltd. (a) ............................. 52,668 1,132,362
Gilat Satellite Networks Ltd. (a) ....................... 17,431 1,209,276
MIH Ltd. (a) ............................................ 5,500 165,172
M-Systems Flash Disk Pioneers Ltd. (a) .................. 5,473 426,210
NICE-Systems Ltd. (a) ................................... 3,792 294,964
NICE-Systems Ltd. ADR (a) ............................... 4,730 365,097
Optibase Ltd. (a) ....................................... 23,590 414,299
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-46
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE

<S> <C> <C>
ISRAEL (CONTINUED)
Orckit Communications Ltd. (a) .......................... 14,277 $ 430,095
Precise Software Solutions Ltd. ......................... 2,260 54,240
RADWARE Ltd. (a) ........................................ 8,908 236,062
Tecnomatix Technologies Ltd. (a) ........................ 17,317 235,944
Teva Pharmaceutical Industries Ltd. ADR ................. 7,900 437,956
TTI Team Telecom International Ltd. (a) ................. 30,606 1,101,816
VCON Telecommunications Ltd. (a) ........................ 7,384 77,823
Zoran Corp. (a) ......................................... 9,880 651,462
-----------
16,814,292
-----------

KOREA 20.9%
Chel Jedang Corp. ....................................... 8,600 1,122,217
CJ39 Shopping Corp. ..................................... 7,820 255,985
Communication Network Interface, Inc. (a) ............... 39,904 220,093
Daou Technology, Inc. ................................... 106 1,027
Dreamline Corp. (a) ..................................... 1,318 36,289
Hana Bank ............................................... 14,950 93,184
Hanvit Bank ............................................. 125,320 320,318
Hanvit Bank GDR (a) ..................................... 66,050 330,250
Housing & Commercial Bank ............................... 25,291 592,000
Humax Co., Ltd. (a) ..................................... 44,883 621,908
Hyundai Electronics Industries Co. ...................... 54,350 1,072,353
Hyundai Securities Co. .................................. 391 3,892
Kookmin Bank ............................................ 45,877 584,250
Korea Electric Power Corp. .............................. 33,960 1,053,802
Korea Electric Power Corp. ADR .......................... 31,050 572,484
Korea Technology Banking Co. ............................ 25,630 275,832
Korea Telecom Corp. ..................................... 70,180 6,180,737
Korea Telecom Corp. ADR ................................. 52,710 2,549,846
Korea Telecom Freetel (a) ............................... 6,560 437,127
LG Electronics, Inc. .................................... 14,980 419,162
LG Home Shopping, Inc. .................................. 5,600 532,365
LG Information & Communication Ltd. ..................... 2,330 131,020
LG Securities Co. ....................................... 31,290 406,901
Locus Corp. (A) ......................................... 1,840 149,342
Pantech Co., Ltd. ....................................... 15,117 116,324
Pohang Iron & Steel Co., Ltd. ........................... 2,716 237,341
Samsung Electro-Mechanics Co. ........................... 28,749 1,802,251
Samsung Electronics Co. ................................. 45,901 15,190,215
Samsung Securities Co., Ltd. ............................ 25,410 558,324
Shinhan Bank ............................................ 42,460 399,839
SK Telecom Co., Ltd. .................................... 14,610 4,782,538
SK Telecom Co., Ltd. ADR ................................ 16,870 612,592
Telson Electronics Co., Ltd. ............................ 44,264 470,419
</TABLE>

F-47 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE

<S> <C> <C>
KOREA (CONTINUED)
Tong Yang Confectionery Corp. ........................... 8,140 $ 177,032
Trigem Computer, Inc. ................................... 590 11,826
-----------
42,321,085
-----------

MALAYSIA 1.9%
British American Tobacco Bhd. ........................... 73,000 595,526
Commerce Asset Holdings Bhd. ............................ 70,000 202,632
Digi.com Bhd. (a) ....................................... 140,000 256,053
Malayan Banking Bhd. .................................... 178,000 721,368
Malaysian Pacific Industries Bhd. ....................... 38,000 390,000
Public Bank Bhd. (a) .................................... 384,000 353,684
Resorts World Bhd. ...................................... 106,000 290,105
Telekom Malaysia Bhd. ................................... 222,000 765,316
Tenaga Nasional Bhd. .................................... 111,000 362,211
-----------
3,936,895
-----------
MEXICO 9.2%
Alfa 'A' ................................................ 134,498 308,178
Banacci 'L' (a) ......................................... 177,316 717,083
Banacci 'O' ............................................. 85,243 363,787
Cemex CPO ............................................... 122,937 576,492
Cemex CPO ADR ........................................... 42,020 982,218
Cifra 'C' ............................................... 198,564 458,000
Cifra 'V' ............................................... 115,493 271,086
FEMSA (a) ............................................... 237,261 1,012,545
FEMSA ADR (a) ........................................... 15,313 659,416
Grupo Carso 'A1' (a) .................................... 183,784 651,736
Grupo Financiero Bancomer S.A. de C.V. 'O' (a) .......... 644,106 327,240
Grupo Financiero Bancomer S.A. de C.V. 'O' ADR (a,c) .... 31,915 324,234
Grupo Mexico S.A. 'B' (a) ............................... 500 1,407
Grupo Modelo S.A. 'C' ................................... 34,200 76,626
Grupo Sanborns S.A. 'B1' (a) ............................ 9,025 14,489
Grupo Televisa S.A. GDR (a) ............................. 3,450 237,834
Kimberly 'A' ............................................ 142,453 405,292
Soriana 'B' (a) ......................................... 5,900 23,500
Televisa CPO GDR (a) .................................... 42,927 2,959,280
Telmex ADR .............................................. 138,651 7,920,438
Wal-Mart de Mexico S.A. ADR (a) ......................... 9,780 229,517
-----------
18,520,398
-----------

POLAND 0.9%
Elektrim S.A. (a) ....................................... 19,339 222,063
Polski Koncern Naftowy S.A. GDR ......................... 3,100 29,898
Telekomunikacja Polska GDR .............................. 240,523 1,660,811
-----------
1,912,772
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-48
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE

<S> <C> <C>
RUSSIA 3.6%
Lukoil Holding ADR ..................................... 42,313 $ 2,163,041
Lukoil Holding ADR ..................................... 9,500 191,140
Mustcom (a,b) .......................................... 8,129,779 1,695,059
Rostelecom ADR ......................................... 10,210 139,111
Storyfirst Communications, Inc. (a,b,d) ................ 600 511,308
Surgutneftegaz ADR (a) ................................. 161,489 2,151,841
Unified Energy Systems GDR (a) ......................... 52,700 606,050
Vimpel-Communications ADR (a) .......................... 170 3,761
-----------
7,461,311
-----------

SOUTH AFRICA 3.7%
Anglo American Platinum Corp., Ltd. .................... 23,877 688,644
Bidvest Group Ltd. ..................................... 76,329 527,262
BoE Ltd. ............................................... 167,416 95,137
De Beers Centenary AG .................................. 14,961 364,364
De Beers Consolidated Mines ADR ........................ 1,200 29,175
Dimension Data Holdings Ltd. (a) ....................... 93,935 777,823
Ellerine Holdings Ltd. ................................. 55,710 239,286
Impala Platinum Holdings Ltd. .......................... 4,848 180,467
Liberty Life Association of Africa Ltd. ................ 20,360 193,833
M-Cell Ltd. ............................................ 256,520 1,243,791
Naspers Ltd. 'N' ....................................... 22,431 187,063
Nedcor Ltd. ............................................ 31,302 657,920
New Africa Investments Ltd. 'N' (a) .................... 417,910 104,863
Rembrant Group Ltd. .................................... 104,898 990,918
RMB Holdings Ltd. (a) .................................. 1 1
Sappi Ltd. ............................................. 31,240 235,165
Sasol Ltd. ............................................. 144,467 970,221
-----------
7,485,933
-----------

TAIWAN 13.2%
Accton Technology Corp. (a) ............................ 336,400 749,989
Acer Peripherals, Inc. ................................. 404,784 1,146,174
Advanced Semiconductor Engineering, Inc. (a) ........... 221,116 676,482
Advantech Co., Ltd. .................................... 40,300 213,797
Ambit Microsystems Corp. ............................... 47,000 466,558
ASE Test Ltd. ADR (a) .................................. 14,900 438,619
Asustek Computer, Inc. ................................. 204,531 1,690,834
Chinatrust Commercial Bank (a) ......................... 330,640 287,326
Compal Electronics, Inc. ............................... 68,600 168,569
D-Link Corp. ........................................... 314,500 736,989
Delta Electronics, Inc. ................................ 176,000 833,458
Dialer and Business (a) ................................ 193,000 364,329
Far Eastern Textile Ltd. ............................... 447,320 556,147
Far Eastern Textile Ltd. GDR (a,c) ..................... 4,800 60,000
</TABLE>

F-49 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE

<S> <C> <C>
TAIWAN (CONTINUED)
Faraday Technology Corp. (a) ................................. 13,000 $ 143,434
GigaMedia Ltd. (a) ........................................... 5,000 60,625
Hon Hai Precision Industry (a) ............................... 205,200 1,856,651
Hon Hai Precision Industry GDR (a) ........................... 14,100 338,400
International Commercial Bank of China ....................... 324,500 274,597
Macronix International Co., Ltd. (a) ......................... 214,310 537,083
Microelectronics Technology, Inc. (a) ........................ 50,200 166,652
President Chain Store Corp.................................... 201,000 752,319
ProMos Technologies, Inc. (a) ................................ 64,000 259,333
Ritek Corp. (a) .............................................. 11,550 46,238
Ritek Corp. GDR (a) .......................................... 36,612 292,431
Siliconware Precision Industries Co. (a) ..................... 293,350 658,784
Taishin International Bank ................................... 176,380 113,090
Taiwan Semiconductor Manufacturing Co. (a) ................... 1,392,280 6,615,879
United MicroElectronics Corp. Ltd. (a) ....................... 1,462,800 4,070,607
Universal Scientific Industrial Co., Ltd...................... 201,600 492,107
Winbond Electronics Corp. (a) ................................ 430,110 1,245,884
WYSE Technology Taiwan Ltd.................................... 160,000 286,412
Zinwell Corp. (a) ............................................ 28,000 138,519
-----------
26,738,316
-----------
THAILAND 1.2%
Advanced Information Services Co., Ltd. (a) .................. 78,400 976,623
BEC World Public Co., Ltd..................................... 53,200 317,774
Delta Electronics Public Co., Ltd............................. 70,160 494,299
Shinawatra Computer Co., Ltd.................................. 61,580 323,816
Thai Farmers Bank Public Co., Ltd............................. 228,300 192,314
Total Access Communications Public Co., Ltd. (a) ............. 18,800 75,576
-----------
2,380,402
-----------

TURKEY 4.1%
Alcatel Teletas Telekomunikasyon Endustri ve Ticaret A.S. (a) 1,061,000 230,858
Dogan Sirketler Grupo Holdings A.S............................ 36,116,200 873,152
Dogan Yayin Holdings A.S. (a) ................................ 21,699,000 367,219
Ege Biracilik Ve Malt Sanayii ................................ 11,744,500 766,631
Erciyas Biracilik Ve Malt Sanayii (a) ........................ 1,843,488 86,166
Netas Northern Electric Telekomunikasyon A.S.................. 2,582,702 287,224
Turkiye Garanti Bankasi A.S. (a) ............................. 67,243,000 812,840
Vestel Elektronik Sanayii ve Ticaret A.S. (a) ................ 5,042,031 1,523,714
Yapi Ve Kredi Bankasi A.S. (a) ...............................291,192,714 3,238,369
Yapi Ve Kredi Bankasi A.S. GDR (a) ........................... 4,000 40,200
-----------
8,226,373
-----------

TOTAL COMMON STOCKS
(Cost $171,705,315) ...................................... 186,227,226
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-50
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE

<S> <C> <C>
PREFERRED STOCKS 3.4%
BRAZIL 3.4%
Banco Nacional (a,b) ................................. 11,156,000 $ 309
CEMIG ................................................ 8,328,381 145,464
CRT (a) .............................................. 3,733,045 1,262,632
CVRD 'A' ............................................. 18,938 534,485
Embratel 'A' ......................................... 39,146,000 935,510
Lojas Arapua S.A. (a) ................................ 12,437,000 --
Petrobras ............................................ 36,118 1,091,451
Tele Celular Sul ADR ................................. 58,590,452 282,638
Tele Centro Sul ...................................... 56,130,952 812,319
Tele Nordeste Celular ................................ 11,378,752 42,272
Tele Norte Leste ..................................... 10,258,875 240,331
Telebras ADR ......................................... 550 53,419
Telemig Celular ...................................... 76,699,752 276,009
Telesp Celular ....................................... 64,898,132 1,173,096
-----------
6,849,935
-----------

COLOMBIA 0.0%
BanColombia (a) ...................................... 7,150 5,228
-----------

TOTAL PREFERRED STOCKS
(Cost $6,850,386) 6,855,163
-----------
INVESTMENT COMPANY 0.0%
UNITED STATES 0.0%
Morgan Stanley Dean Witter Africa Investment Fund, Inc. (e)
(Cost $57,769) ................................... 4,470 35,481
-----------

TOTAL LONG-TERM INVESTMENTS 95.5%
(Cost $178,613,470) .............................. 193,117,870
-----------
</TABLE>

F-51 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION PAR VALUE VALUE
<S> <C> <C>
SHORT-TERM INVESTMENT 2.5%
REPURCHASE AGREEMENT 2.5%
Chase Securities, Inc. 6.15%, dated $5,048,000
6/30/00, due 7/3/00, to be repurchased at $5,050,587,
collateralized by $5,350,000 U.S. Treasury Notes 5.50%,
due 5/15/09, valued at $5,156,063
(Cost $5,048,000) ....................................................... $ 5,048,000
------------

TOTAL INVESTMENTS IN SECURITIES 98.0%
(Cost $183,661,470) ..................................................... 198,165,870

FOREIGN CURRENCY 0.3%
(Cost $598,367) ......................................................... 599,512
------------

TOTAL INVESTMENTS 98.3%
(Cost $184,259,837) ..................................................... 198,765,382

OTHER ASSETS IN EXCESS OF LIABILITIES 1.7% ................................. 3,516,278
------------

NET ASSETS 100% ............................................................ $202,281,660
============
</TABLE>

(a) NON-INCOME PRODUCING SECURITY

(b) SECURITY VALUED AT FAIR VALUE--SEE NOTE 1A TO FINANCIAL STATEMENTS.

(d) RESTRICTED AS TO PUBLIC RESALE. TOTAL VALUE OF RESTRICTED SECURITIES AT
JUNE 30, 2000 WAS $511,308 OR 0.25% 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

SEE NOTES TO FINANCIAL STATEMENTS F-52
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+

<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
Information Technology ..................... $ 69,736,834 34.5%
Telecommunication Services ................. 61,731,797 30.5
Financials ................................. 17,240,774 8.5
Consumer Discretionary ..................... 13,676,869 6.8
Energy ..................................... 8,794,488 4.3
Materials .................................. 7,169,307 3.6
Consumer Staples ........................... 6,036,150 3.0
Industrials ................................ 4,573,749 2.2
Utilities .................................. 3,403,706 1.7
Health Care ................................ 754,196 0.4
------------ ----
$193,117,870 95.5%
============ ====
</TABLE>

+ CLASSIFIED BY SECTORS WHICH REPRESENT BROAD GROUPINGS OF RELATED INDUSTRIES.

F-53 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
JUNE 30, 2000

<TABLE>
<S> <C>
ASSETS:
Investments in Securities, at Value (Cost $183,661,470)............. $198,165,870
Foreign Currency (Cost $598,367).................................... 599,512
Receivable for:
Fund Shares Sold.................................................. 5,494,736
Investments Sold.................................................. 1,810,588
Dividends......................................................... 236,632
Interest.......................................................... 862
Other............................................................... 18,234
------------
Total Assets.................................................... 206,326,434
------------
LIABILITIES:
Payable for:
Investments Purchased............................................. 2,143,471
Fund Shares Redeemed.............................................. 642,798
Bank Overdraft.................................................... 266,450
Investment Advisory Fees.......................................... 241,284
Deferred Country Tax.............................................. 222,346
Distribution Fees................................................. 198,914
Custody Fees...................................................... 156,695
Shareholder Reporting Expenses.................................... 50,188
Professional Fees................................................. 46,774
Administrative Fees............................................... 42,603
Directors' Fees and Expenses...................................... 31,897
Other............................................................... 1,354
------------
Total Liabilities............................................... 4,044,774
------------
NET ASSETS.......................................................... $202,281,660
============

NET ASSETS CONSIST OF:
Capital Stock at Par
($.001 par value, Shares Authorized 2,625,000,000)................ $ 15,429
Paid in Capital in Excess of Par.................................... 208,695,492
Net Unrealized Appreciation on Investments and Foreign Currency
Translations*...................................................... 14,283,475
Accumulated Net Investment Loss..................................... (544,187)
Accumulated Net Realized Loss....................................... (20,168,549)
------------
NET ASSETS.......................................................... $202,281,660
============
Class A Shares:
Net Asset Value and Redemption Price Per Share (Based on Net Assets
of $106,161,257 and 7,942,708 Shares Outstanding)............... $ 13.37
============
Maximum Sales Charge............................................ 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100/(100% - maximum sales charge))...................... 14.19
============
Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets
of $62,786,836 and 4,894,844 Shares Outstanding)**.............. $ 12.83
============
Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets
of $33,333,567 and 2,591,008 Shares Outstanding)**.............. $ 12.87
============
</TABLE>

* NET OF ACCRUAL FOR DEFERRED COUNTRY TAX OF U.S. $222,346.
** REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

SEE NOTES TO FINANCIAL STATEMENTS F-54
<PAGE>

Statement of Operations
YEAR ENDED JUNE 30, 2000

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends.......................................................... 1,250,061
Less Foreign Taxes Withheld........................................ (68,888)
------------
Total Income................................................... 1,181,173
------------
EXPENSES:
Investment Advisory Fees........................................... 2,014,326
Distribution Fees (Attributed to Classes A, B and C of
$203,080, $510,966 and $281,972, respectively)................... 996,018
Administrative Fees................................................ 416,988
Custodian Fees..................................................... 309,307
Shareholder Reports................................................ 194,202
Professional Fees.................................................. 73,814
Transfer Agent Fees................................................ 63,551
Filing and Registration Fees....................................... 51,201
Country Tax Expense................................................ 45,931
Directors' Fees and Expenses....................................... 25,068
Other.............................................................. 5,317
------------
Total Expenses................................................. 4,195,723
Less Expense Reductions........................................ (79,539)
------------
Net Expenses................................................... 4,116,184
------------
NET INVESTMENT LOSS................................................ $ (2,935,011)
============
NET REALIZED GAIN/LOSS ON:
Investments........................................................ $38,435,508
Foreign Currency Transactions...................................... (443,161)
------------
Net Realized Gain.................................................. 37,992,347
------------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period.......................................... 10,264,407
------------
End of the Period:
Investments.................................................... 14,504,400
Foreign Currency Translations.................................. (220,925)
------------
14,283,475
------------
Net Change in Unrealized Appreciation/Depreciation................. 4,019,068
------------
NET REALIZED GAIN/LOSS AND NET CHANGE IN
UNREALIZED APPRECIATION/DEPRECIATION............................. $42,011,415
============
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $39,076,404
============
</TABLE>

F-55 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Statement of Changes in Net Assets
YEAR ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
------------- ------------
<S> <C>
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ (2,935,011) $ 94,000
Net Realized Gain/Loss.......................... 37,992,347 (31,365,000)
Net Change in Unrealized Appreciation/Depreciation 4,019,068 47,616,000
------------- ------------
Net Increase in Net Assets Resulting from Operations 39,076,404 16,345,000
------------- ------------
DISTRIBUTIONS:
In Excess of Net Realized Gain:
Class A...................................... -- (1,000)
Class B...................................... -- (1,000)
Class C...................................... -- (1,000)
------------- ------------
-- (3,000)
------------- ------------
Return of Capital:
Class A...................................... -- (29,000)
Class B...................................... -- (14,000)
Class C...................................... -- (9,000)
------------- ------------
-- (52,000)
------------- ------------
Net Decrease in Net Assets Resulting from
Distributions.................................. -- (55,000)
------------- ------------
CAPITAL SHARE TRANSACTIONS:
Subscribed...................................... 162,638,033 59,525,000
Distributions Reinvested........................ -- 54,000
Redeemed........................................ (122,901,021) (92,463,000)
------------- ------------
Net Increase/Decrease in Net Assets Resulting from
Capital Share Transactions................... 39,737,012 (32,884,000)
------------- ------------
Total Increase/Decrease in Net Assets........... 78,813,416 (16,594,000)
NET ASSETS--Beginning of Period................. 123,468,244 140,062,000
------------- ------------
NET ASSETS--End of Period (Including accumulated net
investment loss of $(544,187) and $(554,000),
respectively)................................ $ 202,281,660 $123,468,000
============= ============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

SEE NOTES TO FINANCIAL STATEMENTS F-56
<PAGE>

Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------
CLASS A SHARES 2000# 1999# 1998# 1997 1996
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD...................... $ 9.87 $ 7.98 $ 13.47 $ 12.06 $ 10.61
-------- ------- ------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss..... (0.18) 0.03 -- 0.01 0.05
Net Realized and
Unrealized Gain/Loss......... 3.68 1.86 (4.49) 1.57 1.44
-------- ------- ------- -------- --------
Total From Investment Operations 3.50 1.89 (4.49) 1.58 1.49
-------- ------- ------- -------- --------
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. -- (0.00)+ (0.27) -- --
Return of Capital.............. -- (0.00)+ -- -- --
-------- ------- ------- -------- --------
Total Distributions.............. -- (0.00)+ (1.00) (0.17) (0.04)
-------- ------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD... $ 13.37 $ 9.87 $ 7.98 $ 13.47 $ 12.06
======== ======= ======= ======== ========
TOTAL RETURN (1).................. 35.36% 23.92% (34.31%) 13.54% 14.16%
======== ======= ======= ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's). $106,161 $63,273 $74,959 $119,022 $114,850
Ratio of Expenses to Average
Net Assets...................... 2.20% 2.34% 2.27% 2.21% 2.16%
Ratio of Net Investment Income/
Loss to Average Net Assets...... (1.43%) 0.44% 0.04% (0.06%) 0.93%
Portfolio Turnover Rate........... 102% 132% 99% 82% 42%
-------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss..................... $0.01 $0.02 $0.03 $0.03 $0.02
Ratios Before Expense Reductions:
Expenses to Average Net Assets.... 2.25% 2.56% 2.60% 2.41% 2.56%
Net Investment Income/Loss to
Average Net Assets.............. (1.48%) 0.22% (0.24%) (0.27%) 0.53%
Ratio of Expenses to Average
Net Assets excluding country tax
expense and interest expense...... 2.15% 2.15% 2.15% 2.15% 2.15%
-------------------------------------------------------------------------------------
</TABLE>

+ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-57 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.

<TABLE>
<CAPTION>
AUGUST 1,
YEAR ENDED JUNE 30, 1995+ TO
-------------------------------------- JUNE 30,
CLASS B SHARES 2000# 1999# 1998# 1997 1996
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD......................... $ 9.55 $ 7.78 $ 13.24 $ 11.94 $ 10.91
------- ------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss........ (0.26) (0.02) (0.07) (0.03) 0.01
Net Realized and
Unrealized Gain/Loss............ 3.54 1.79 (4.39) 1.50 1.02
------- ------- -------- ------- -------
Total From Investment Operations.... 3.28 1.77 (4.46) 1.47 1.03
------- ------- -------- ------- -------
DISTRIBUTIONS
In Excess of Net Investment
Income.......................... -- -- -- (0.04) --
Net Realized Gain................. -- -- (0.73) (0.13) --
In Excess of Net Realized Gain.... -- (0.00)++ (0.27) -- --
Return of Capital................. -- (0.00)++ -- -- --
------- ------- -------- ------- -------
Total Distributions................. -- (0.00)++ (1.00) (0.17) --
------- ------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD...... $ 12.83 $ 9.55 $ 7.78 $ 13.24 $ 11.94
======= ======= ======== ======= =======
TOTAL RETURN (1).................... 34.35% 22.99% (34.76%) 12.67% 9.45%*
======= ======= ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)... $62,787 $38,313 $ 36,423 $35,966 $10,416
Ratio of Expenses to Average
Net Assets........................ 2.95% 3.09% 3.02% 2.96% 2.91%
Ratio of Net Investment Income/
Loss to Average Net Assets........ (2.21%) (0.29%) (0.67%) (0.64%) 0.30%
Portfolio Turnover Rate............. 102% 132% 99% 82% 42%*
----------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss..................... $0.01 $0.02 $0.03 $0.01 $0.02
Ratios Before Expense Reductions:
Expenses to Average Net Assets.... 3.00% 3.31% 3.35% 3.17% 3.31%
Net Investment Income/Loss to
Average Net Assets.............. (2.26%) (0.51%) (0.97%) (0.87%) (0.10%)
Ratio of Expenses to Average
Net Assets excluding country tax
expense and interest expense..... 2.90% 2.90% 2.90% 2.90% 2.90%
----------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-58
<PAGE>

Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------
CLASS C SHARES 2000# 1999# 1998# 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD....................... $ 9.57 $ 7.79 $ 13.26 $ 11.93 $ 10.53
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss...... (0.27) (0.02) (0.08) (0.08) (0.01)
Net Realized and
Unrealized Gain/Loss.......... 3.57 1.80 (4.39) 1.55 1.41
------- ------- ------- ------- -------
Total From Investment Operations.. 3.30 1.78 (4.47) 1.47 1.40
------- ------- ------- ------- -------
DISTRIBUTIONS
In Excess of Net Investment
Income........................ -- -- -- (0.01) --
Realized Gain................... -- -- (0.73) (0.13) --
In Excess of Net Realized Gain.. -- (0.00)+ (0.27) -- --
Return of Capital............... -- (0.00)+ -- -- --
------- ------- ------- ------- -------
Total Distributions............... -- (0.00)+ (1.00) (0.14) --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.... $ 12.87 $ 9.57 $ 7.79 $ 13.26 $ 11.93
======= ======= ======== ======= =======
Total Return (1)................. 34.38% 23.09% (34.73%) 12.66% 13.30%
======= ======= ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).. $33,334 $21,882 $28,680 $57,958 $43,601
Ratio of Expenses to Average
Net Assets....................... 2.95% 3.09% 3.01% 2.96% 2.91%
Ratio of Net Investment Income/
Loss to Average Net Assets....... (2.24%) (0.32%) (0.76%) (0.79%) (0.11%)
Portfolio Turnover Rate............ 102% 132% 99% 82% 42%
-----------------------------------------------------------------------------------
Effect of Voluntary Expense
Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss.................... $0.01 $0.02 $0.03 $0.02 $0.03
Ratios Before Expense Reductions:
Expenses to Average Net Assets... 3.00% 3.31% 3.34% 3.17% 3.34%
Net Investment Income/Loss to
Average Net Assets............. (2.29%) (0.54%) (1.03%) (1.00%) (0.54%)
Ratio of Expenses to Average
Net Assets excluding country tax
expense and interest expense..... 2.90% 2.90% 2.90% 2.90% 2.90%
-----------------------------------------------------------------------------------
</TABLE>

+ AMOUNT IS LESS THAN $0.01 PER SHARE.
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED
SALES CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-59 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen Emerging Markets Fund, (the "Fund") is organized as a
separate non-diversified fund of Van Kampen Series Fund, Inc., a Maryland
corporation, which is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective seeks long-term capital appreciation by investing primarily in
equity securities of emerging country issuers. The Fund commenced operations
on July 6, 1994. 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.

1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of the financial statements in conformity with accounting principles
accepted in the United States of America (hereafter "generally accepted
accounting principles") requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.

A. 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 bid and asked prices obtained from reputable brokers.
Debt securities purchased with remaining maturities of 60 days or less are
valued at amortized cost, which approximates market values. All other securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith using procedures approved by the Board of
Directors.

F-60
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

curities, 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.

C. INCOME AND EXPENSES Interest income is recorded on an accrual basis and
dividend income is recorded net of applicable withholding taxes on the
ex-dividend date. Income, expenses, and realized and unrealized gains or
losses are allocated on a pro rata basis to each class of shares except for
distribution and service fees which are unique to each class of shares.
Distributions from the Fund are recorded on the ex-distribution date.

D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required. 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.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At June 30, 2000, the Fund had an accumulated capital loss carryforward
for tax purposes of $18,133,162, which will expire on June 30, 2007. Net
realized gains or losses may differ for financial and tax reporting purposes as
a result of losses relating to wash sale transactions.
At June 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $185,911,512, the aggregate gross unrealized
appreciation is $35,130,161 and the aggregate gross unrealized depreciation is
$22,875,803, resulting in net unrealized appreciation on long- and short-term
investments of $12,254,358.

F-61
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends
annually from net investment income and net realized gains, if any.
Distributions from net realized gains for book purposes may include short-term
capital gains which are included as ordinary income for tax purposes.
Due to inherent differences in the recognition of income and expenses under
generally accepted accounting principles and federal income tax purposes,
permanent differences between book and tax basis reporting for the current
fiscal year have been identified and appropriately reclassified. A permanent
difference related to a net operating loss totaling $4,235,594 has been
reclassified from paid in capital in excess of par to accumulated net investment
loss. A permanent difference related to the recognition of certain expenses that
are not deductible for tax purposes totaling $6,217 were reclassified from paid
in capital in excess of par to accumulated net investment loss. A permanent
difference of $346,631 related to a correction of the prior year capital loss
was reclassified from accumulated net realized loss to paid in capital in excess
of par. A permanent difference related to the recognition of net realized gains
on foreign currency transactions totaling $443,161 was reclassified from
accumulated net investment loss to accumulated net realized loss. Permanent
differences related to the sale of Passive Foreign Investment Company securities
totaling $8,825 were reclassified from accumulated net realized loss to
accumulated net investment loss. A permanent difference related to taxes accrued
against capital gains totaling $862,653 was reclassified from accumulated net
investment loss to accumulated net realized loss.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.

F. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices of such currencies against the U.S. dollar. Purchases and sales of
portfolio securities are translated at the rate of exchange prevailing when such
securities were acquired or sold. Income and expenses are translated at rates
prevailing when accrued. Realized and unrealized gains and losses on securities
resulting from changes in exchange rates are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency transactions includes
the net realized amount from the sale of the currency and the amount realized
between trade date and settlement date on security and income transactions.
The Fund invests in issuers located in emerging markets. There are certain
risks inherent in these investments not typically associated with issuers in the
United States, including the smaller size of the markets themselves, lesser
liquidity, greater volatility and potentially less publicly available
information. Emerging markets may be subject

F-62
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

to a greater degree of government involvement in the economy and greater
economic and political uncertainty, which has the potential to extend to
government imposed restrictions on exchange traded transactions and currency
transactions. These restrictions may impact the Fund's ability to buy or sell
certain securities or to repatriate certain currencies to U.S. dollars.
Additionally, changes in currency exchange rates will affect the value of and
investment income from such securities.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Van Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary
of Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc., 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 indicated as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $500 million......................... 1.25 of 1%
Next $500 million.......................... 1.20 of 1%
Over $1 billion............................ 1.15 of 1%
</TABLE>

<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
EXPENSE RATIO EXPENSE RATIO
<S> <C>
2.15% 2.90%
</TABLE>

For the period ended June 30, 2000, the Adviser voluntarily waived $79,539
of its investment advisory fees. This waiver is voluntary in nature and can be
discontinued at the Adviser's discretion.

For the period ended June 30, 2000, the Fund recognized expenses of $8,740
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
For the period ended June 30, 2000, the Fund recognized expenses of $6,972
representing Van Kampen's cost of providing legal services to the Fund.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate

F-63
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

affiliate Chase Global Funds Services Company ("CGFSC"), Chase provides
certain administrative services to the Fund. Chase is compensated for such
services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services
Inc., an affiliate of the Adviser.
Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B and Class C shares of the Fund, on an
annualized basis, of the average daily net assets attributable to each Class.
The Distributor may receive a front end sales charge for purchases of Class
A shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
June 30, 2000, the Distributor has advised the Fund that it earned initial sales
charges of $510,820 for Class A shares and deferred sales charges of $172,407,
and $4,766 for Class B shares and Class C shares, respectively.
Certain officers and directors of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
directors who are not officers of Van Kampen. Under the deferred compensation
plan, directors may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year
period and are based upon each director's years of service to the Fund. The
maximum annual benefit per director under the plan is $2,500.
For the period ended June 30, 2000, the Fund incurred $14,845 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.
At June 30, 2000, the Fund owned shares of affiliated funds for which the
Fund earned dividend income of $1,102 during the period.

F-64
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
---------------------------
<S> <C> <C>
YEAR OF REDEMPTION CLASS B CLASS C
First.............................. 5.00% 1.00%
Second............................. 4.00% None
Third.............................. 3.00% None
Fourth............................. 2.50% None
Fifth.............................. 1.50% None
Thereafter......................... None None

</TABLE>

F-65
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
------------- --------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS
CLASS A:
Shares:
Subscribed....................................... 9,539,735 6,660,000
Distributions Reinvested......................... -- 4,000
Redeemed......................................... (8,010,633) (9,639,000)
------------ ------------
Net Increase/Decrease in Class A Shares Outstanding 1,529,102 (2,975,000)
============ ============
Dollars:
Subscribed....................................... $121,961,746 $ 48,869,000
Distributions Reinvested......................... -- 30,000
Redeemed......................................... (98,726,701) (68,213,000)
------------ ------------
Net Increase/Decrease.............................. $ 23,235,045 $ (19,314,000)
============ ============
Ending Paid in Capital............................. $111,252,782+ $ 88,430,000+
============ ============
CLASS B:
Shares:
Subscribed....................................... 2,175,642 935,000
Distributions Reinvested......................... -- 2,000
Redeemed......................................... (1,291,562) (1,605,000)
------------ ------------
Net Increase/Decrease in Class B Shares Outstanding 884,080 (668,000)
============ ============
Dollars:
Subscribed....................................... $ 27,137,813 $ 7,223,000
Distributions Reinvested......................... -- 14,000
Redeemed......................................... (15,165,855) (11,281,000)
------------ ------------
Net Increase/Decrease.............................. $ 11,971,958 $ (4,044,000)
============ ============
Ending Paid in Capital............................. $ 64,130,625+ $ 52,409,000+
============ ============
CLASS C:
Shares:
Subscribed....................................... 1,049,694 462,000
Distributions Reinvested......................... -- 1,000
Redeemed......................................... (745,457) (1,857,000)
------------ ------------
Net Increase/Decrease in Class C Shares Outstanding 304,237 (1,394,000)
============ ============
Dollars:
Subscribed....................................... $ 13,538,474 $ 3,433,000
Distributions Reinvested......................... -- 10,000
Redeemed......................................... (9,008,465) (12,969,000)
------------ ------------
Net Increase/Decrease.............................. $ 4,530,009 $ (9,526,000)
============ ============
Ending Paid in Capital............................. $ 37,222,694+ $ 32,835,000+
============ ============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

+ ENDING PAID IN CAPITAL AMOUNTS DO NOT REFLECT PERMANENT BOOK TO TAX
DIFFERENCES--SEE NOTE 1E.

F-66
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

4. INVESTMENT TRANSACTIONS
For the period ended June 30, 2000, the Fund made purchases of $189,037,140
and sales of $159,820,509 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.

5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to security
whose value is "derived" from the value of an underlying asset, reference
rate or index.
The Fund has a variety of reasons to use derivative instruments, such as
to attempt to protect the Fund against possible changes in the market value of
its portfolio and to manage the portfolio's effective yield, foreign currency
exposure, maturity and duration, or generate potential gain. All of the
Fund's portfolio holdings, including derivative instruments, are
marked-to-market each day with the change in value reflected in unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when exercising a call option contract or
taking delivery of a security underlying a futures or forward contract. In
these instances, the recognition of gain or loss is postponed until the
disposal of the security underlying the option or forward contract. Risks may
arise as a result of the potential inability of the counterparties to meet
the terms of their contracts.
Summarized below are the specific types of derivative financial instruments
used by the Fund.

A. FORWARD CURRENCY CONTRACTS These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency transactions.
At June 30, 2000, the Fund had no outstanding forward currency contracts.

B. SWAP TRANSACTIONS The Fund may enter into total return swap agreements to
exchange the return generated by one security, instrument or basket of
instruments for the return generated by another security, instrument or basket
of instruments. Total return swaps involve commitments to pay interest in
exchange for a market-linked return based on a notional amount. To the extent
the total return of the security or index underlying the transactions exceeds or
falls short of the offsetting interest obligation, the Fund will receive a
payment from or make a payment to the counterparty, respectively. Total return
swaps are marked-to-market daily based upon quotations from market makers and
the change, if any, is recorded as unrealized gains or losses in the Statement
of Operations. Periodic payments received or made at the end of each measurement
period, but prior to termination, are recorded as realized gains or losses in
the Statement of Operations.

F-67
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

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.
At June 30, 2000, the Fund had no open swap agreements.

6. BORROWINGS
In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, has entered into a $650 million committed line of credit facility
with a group of banks which expires on November 28, 2000, but is renewable with
the consent of the participating banks. Each fund is permitted to utilize the
facility in accordance with the restrictions of its prospectus. In the event the
demand for the credit facility meets or exceeds $650 million on a complex-wide
basis, each fund will be limited to its pro-rata percentage based on the net
assets of each participating fund. Interest on borrowings is charged under the
agreement at a rate of 0.50% above the federal funds rate per annum. An annual
commitment fee of 0.09% per annum is charged on the unused portion of the credit
facility, which each fund incurs based on its pro-rata percentage of quarterly
net assets. The Fund has not borrowed against the credit facility during the
period.

F-68
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Van Kampen Equity Growth Fund

We have audited the accompanying statement of assets and liabilities of Van
Kampen Equity Growth Fund (the "Fund"), a fund of Van Kampen Series Fund, Inc.,
including the portfolio of investments, as of June 30, 2000, and the related
statements of operations, changes in net assets and the financial highlights for
the year then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The Fund's financial statements and financial highlights for the periods
ended prior to June 30, 2000, were audited by other auditors whose report, dated
August 6, 1999, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2000, by correspondence with the Fund's
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Equity Growth Fund as of June 30, 2000, the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-69
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.

MARKET
DESCRIPTION SHARES VALUE

COMMON STOCKS+ 97.0%
CONSUMER DISCRETIONARY 14.9%
HOTELS RESTAURANTS & LEISURE 0.2%
<S> <C> <C>
Brinker International, Inc. (a) ............... 6,000 $ 175,500
-----------
MEDIA 9.1%
AMFM, Inc. (a) ................................ 14,700 1,014,300
AT&T Corp. Liberty Media Group 'A' (a) ........ 60,500 1,467,125
Clear Channel Communications, Inc. (a) ........ 18,300 1,372,500
Comcast Corp. 'A' (a) ......................... 2,100 81,637
Comcast Corp. 'A' (Special) (a) ............... 20,900 846,450
MediaOne Group, Inc. (a) ...................... 17,600 1,170,224
Omnicon Group, Inc. ........................... 5,900 525,469
Time Warner, Inc. ............................. 28,800 2,188,800
TV Guide, Inc. (a) ............................ 7,200 246,600
Viacom, Inc.'B' (a) ........................... 13,194 899,666
-----------
9,812,771
-----------
MULTILINE RETAIL 1.7%
Costco Wholesale Corp. (a) .................... 13,700 452,100
Wal-Mart Stores, Inc. ......................... 24,000 1,383,000
-----------
1,835,100
-----------
SPECIALTY RETAIL 3.9%
Home Depot, Inc. .............................. 60,200 3,006,238
Intimate Brands, Inc. ......................... 27,200 537,200
Limited, Inc. (The) ........................... 15,000 324,375
Tiffany & Co. ................................. 5,600 378,000
-----------
4,245,813
-----------
TOTAL CONSUMER DISCRETIONARY .................. 16,069,184
-----------
CONSUMER STAPLES 4.5%
BEVERAGES 2.0%
Anheuser-Busch Cos., Inc. ..................... 14,200 1,060,563
PepsiCo, Inc. ................................. 23,900 1,062,056
-----------
2,122,619
-----------
FOOD & DRUG RETAILING 0.7%
Safeway, Inc. (a) ............................. 15,800 712,975
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-70
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE

FOOD PRODUCTS 0.5%
<S> <C> <C>
Keebler Foods Co. ........................... 4,800 $ 178,200
Quaker Oats Co. ............................. 5,500 413,187
-----------
591,387
-----------
HOUSEHOLD PRODUCTS 0.5%
Procter & Gamble Co. ........................ 10,200 583,950
-----------
TOBACCO 0.8%
Philip Morris Cos., Inc ..................... 31,700 842,031
-----------
TOTAL CONSUMER STAPLES ...................... 4,852,962
-----------
FINANCIALS 7.0%
BANKS 2.3%
Bank of New York Co., Inc. .................. 37,300 1,734,450
FleetBoston Financial Corp. ................. 21,600 734,400
-----------
2,468,850
-----------
DIVERSIFIED FINANCIALS 3.6%
American Express Co. ........................ 23,300 1,214,513
Citigroup, Inc. ............................. 31,250 1,882,812
Fannie Mae .................................. 15,700 819,344
-----------
3,916,669
-----------
INSURANCE 1.1%
American International Group, Inc. .......... 9,800 1,151,500
-----------
TOTAL FINANCIALS ............................ 7,537,019
-----------
HEALTH CARE 14.4%
BIOTECHNOLOGY 0.9%
Amgen, Inc. (a) ............................. 6,750 474,187
Genentech, Inc. (a) ......................... 1,000 172,000
MedImmune, Inc. (a) ......................... 4,400 325,600
-----------
971,787
-----------
HEALTH CARE EQUIPMENT & SUPPLIES 0.3%
PE Corp.-PE Biosystems Group ................ 5,500 362,313
-----------
HEALTH CARE PROVIDERS & SERVICES 0.3%
HCA-The Healthcare Corp. (a) ................ 12,100 367,537
-----------
PHARMACEUTICALS 12.9%
Abbott Laboratories ......................... 8,900 396,606
American Home Products Corp. ................ 26,800 1,574,500
Bristol-Myers Squibb Co. .................... 13,300 774,725
Eli Lilly & Co. ............................. 4,700 469,413
Johnson & Johnson ........................... 16,100 1,640,188
Merck & Co., Inc. ........................... 14,800 1,134,050
Pfizer, Inc. ................................ 127,450 6,117,600
</TABLE>

F-71 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE

PHARMACEUTICALS (CONTINUED)
<S> <C> <C>
Pharmacia Corp. ........................... 26,418 $ 1,365,480
Schering-Plough Corp. ..................... 7,200 363,600
Tularik, Inc. (a) ......................... 2,500 73,750
-----------
13,909,912
-----------
TOTAL HEALTH CARE ......................... 15,611,549
-----------
INDUSTRIALS 16.6%
AEROSPACE & DEFENSE 5.2%
General Dynamics Corp. .................... 26,100 1,363,725
United Technologies Corp. ................. 71,700 4,221,338
-----------
5,585,063
-----------
COMMERCIAL SERVICES & SUPPLIES 0.1%
VeriSign, Inc. (a) ........................ 900 158,850
-----------
ELECTRICAL EQUIPMENT 0.1%
Capstone Turbine Corp. (a) ................ 1,100 49,569
-----------
INDUSTRIAL CONGLOMERATES 11.2%
General Electric Co. ...................... 90,500 4,796,500
Textron, Inc. ............................. 15,500 841,843
Tyco International Ltd. ................... 136,600 6,471,425
-----------
12,109,768
-----------
TOTAL INDUSTRIALS ......................... 17,903,250
-----------
INFORMATION TECHNOLOGY 34.8%
COMMUNICATIONS EQUIPMENT 14.1%
American Tower Corp. 'A' (a) .............. 25,800 1,075,538
CIENA Corp. (a) ........................... 3,900 650,081
Cisco Systems, Inc. (a) ................... 72,700 4,620,994
Corning, Inc. ............................. 3,400 917,575
General Motors Corp. 'H' (a) .............. 4,400 386,100
JDS Uniphase Corp. (a) .................... 11,700 1,402,537
Juniper Networks, Inc. (a) ................ 4,100 596,806
Lucent Technologies, Inc. ................. 18,300 1,084,275
Motorola, Inc. ............................ 48,000 1,395,000
Nortel Networks Corp. ..................... 37,900 2,586,675
Pinnacle Holdings, Inc. (a) ............... 6,700 361,800
Spectrasite Holdings, Inc. (a) ............ 4,900 139,038
Stratos Lightwave, Inc. (a) ............... 1,800 50,175
-----------
15,266,594
-----------
COMPUTERS & PERIPHERALS 4.1%
EMC Corp. (a) ..................................... 9,100 700,131
Hewlett-Packard Co. ............................... 5,500 686,813
International Business Machines Corp. ............. 8,900 975,106
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-72
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE

COMPUTERS & PERIPHERALS (CONTINUED)
<S> <C> <C>
Seagate Technology, Inc. (a) ...................... 5,100 $ 280,500
StorageNetworks, Inc. (a) ......................... 2,900 261,725
Sun Microsystems, Inc. (a) ........................ 16,200 1,473,188
----------
4,377,463
----------
INTERNET SOFTWARE & SERVICES 0.8%
ASM Lithography Holding N.V. (a) .................. 6,600 291,225
Exfo Electro Optical Engineering, Inc. (a) ........ 2,400 105,300
Genuity, Inc. (a) ................................. 11,100 101,634
Yahoo!, Inc. ...................................... 3,100 384,013
----------
882,172
----------
SEMICONDUCTOR EQUIPMENT & PRODUCTS 10.9%
Analog Devices, Inc. (a) .......................... 2,800 212,800
Applied Materials, Inc. (a) ....................... 23,200 2,102,500
Broadcom Corp. 'A' (a) ............................ 2,600 569,238
Infineon Technologies AG ADR (a) .................. 5,000 396,250
Intel Corp. ....................................... 34,600 4,625,587
Intersil Holding Corp. (a) ........................ 8,800 475,750
Maxim Integrated Products, Inc. (a) ............... 19,300 1,311,194
PMC-Sierra, Inc. (a) .............................. 1,200 213,225
Texas Instruments, Inc. ........................... 28,200 1,936,987
----------
11,843,531
----------
SOFTWARE 4.9%
Inktomi Corp. (a) ................................. 2,900 342,925
Microsoft Corp. (a) ............................... 37,800 3,024,000
Oracle Corp. (a) .................................. 22,900 1,925,031
----------
5,291,956
----------
TOTAL INFORMATION TECHNOLOGY ..................................... 37,661,716
----------
TELECOMMUNICATION SERVICES 4.6%
DIVERSIFIED TELECOMMUNICATION SERVICES 3.4%
BellSouth Corp. ................................... 5,100 217,388
Global Crossing Ltd. (a) .......................... 9,927 261,204
GTE Corp. ......................................... 24,700 1,537,575
NEXTLINK Communications, Inc. (a) ................. 2,900 110,019
Sprint Corp. ...................................... 12,200 622,200
WorldCom, Inc. (a) ................................ 20,300 931,262
----------
3,679,648
----------
WIRELESS TELECOMMUNICATION SERVICES 1.2%
AT&T Wireless Group (a) ........................... 8,800 245,300
Crown Castle International Corp. (a) .............. 17,600 642,400
</TABLE>

F-73 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE

<S> <C> <C>
WIRELESS TELECOMMUNICATION SERVICES (CONTINUED)
Nextel Communications, Inc. 'A' (a) .............. 6,300 $ 385,481
-----------
1,273,181
-----------
TOTAL TELECOMMUNICATION SERVICES ............................... 4,952,829
-----------
UTILITIES 0.2%
ELECTRIC UTILITIES 0.2%
Montana Power Co. ................................ 7,000 247,187
-----------

TOTAL LONG-TERM INVESTMENTS 97.0%
(Cost $86,714,673) ......................................... 104,835,696
-----------
<CAPTION>
PAR
VALUE
<S> <C> <C>
SHORT-TERM INVESTMENT 3.4%
REPURCHASE AGREEMENT 3.4%
Chase Securities, Inc. 6.15%, dated $ 3,629,000
6/30/00, due 7/3/00, to be repurchased at $3,630,860,
collateralized by $2,860,000 U.S. Treasury Bonds 8.75%,
due 5/15/20, valued at $3,696,550
(Cost $3,629,000) ........................................... 3,629,000
-----------
TOTAL INVESTMENTS 100.4%
(Cost $90,343,673) .......................................... 108,464,696
LIABILITIES IN EXCESS OF OTHER ASSETS -0.4% (428,473)
-----------

NET ASSETS 100%.................................................. $ 108,036,223
=============
</TABLE>

(a) NON-INCOME PRODUCING SECURITY

ADR--AMERICAN DEPOSITARY RECEIPT

+ THE COMMON STOCKS ARE CLASSIFIED BY SECTORS WHICH REPRESENT BROAD GROUPINGS
OF RELATED INDUSTRIES.

SEE NOTES TO FINANCIAL STATEMENTS F-74
<PAGE>

FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
<TABLE>

<S> <C>
ASSETS:
Investments at Value (Cost $90,343,673) ............................... $ 108,464,696
Cash .................................................................. 66,495
Receivable for:
Fund Shares Sold .................................................... 847,254
Investments Sold .................................................... 295,963
Dividends ........................................................... 41,929
Interest ............................................................ 620
Deferred Organizational Costs ......................................... 3,439
Other ................................................................. 7,707
-----------
Total Assets ...................................................... 109,728,103
-----------
LIABILITIES:
Payable for:
Investments Purchased ............................................... 1,296,222
Distribution Fees ................................................... 119,280
Fund Shares Redeemed ................................................ 100,448
Investment Advisory Fees ............................................ 40,642
Shareholder Reporting Expenses ...................................... 36,768
Directors' Fees and Expenses ........................................ 23,603
Administrative Fees ................................................. 22,482
Professional Fees ................................................... 19,129
Custody Fees ........................................................ 18,648
Transfer Agent Fees ................................................. 8,304
Dividends Declared .................................................. 54
Other ................................................................. 6,300
-----------
Total Liabilities ................................................. 1,691,880
-----------
NET ASSETS ............................................................ $ 108,036,223
===========

NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized 2,625,000,000) $ 7,073
Paid in Capital in Excess of Par ...................................... 84,503,476
Net Unrealized Appreciation on Investments ............................ 18,121,023
Accumulated Net Realized Gain ......................................... 5,428,497
Accumulated Net Investment Loss ....................................... (23,846)
-----------
NET ASSETS ............................................................ $ 108,036,223
===========
</TABLE>

F-75 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
<TABLE>

<S> <C>
Class A Shares:
Net Asset Value and Redemption Price Per Share (Based on Net Assets
of $41,624,995 and 2,699,624 Shares Outstanding) ................... $ 15.42
==========
Maximum Sales Charge ............................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value
Per Share x 100/(100% - maximum sales charge)) ..................... $ 16.36
==========
Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$49,213,639 and 3,239,921 Shares Outstanding)* ..................... $ 15.19
==========
Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$17,197,589 and 1,133,103 Shares Outstanding)* ..................... $ 15.18
==========
</TABLE>

* REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

SEE NOTES TO FINANCIAL STATEMENTS F-76
<PAGE>

STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2000

<TABLE>

<S> <C>
INVESTMENT INCOME:
Dividends .............................................................. $ 407,060
Interest ............................................................... 119,478
------------
Total Income ....................................................... 526,538
------------

EXPENSES:
Investment Advisory Fees ............................................... 581,509
Distribution Fees (Attributed to Classes A, B and C of $67,201, $343,818
and $114,059, respectively) .......................................... 525,078
Administrative Fees .................................................... 188,161
Shareholder Reports .................................................... 89,547
Filing and Registration Fees ........................................... 59,593
Transfer Agent Fees .................................................... 39,281
Custodian Fees ......................................................... 28,957
Directors' Fees and Expenses ........................................... 24,292
Professional Fees ...................................................... 19,584
Amortization of Organizational Costs ................................... 11,193
Other .................................................................. 2,462
------------
Total Expenses ..................................................... 1,569,657
Less Expense Reductions ............................................ (136,048)
------------
Net Expenses ....................................................... 1,433,609
------------
NET INVESTMENT LOSS .................................................... $ (907,071)
============
NET REALIZED GAIN/LOSS ON:
Investments ............................................................ $ 8,312,381
------------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period .............................................. 9,174,665
------------
End of the Period:
Investments ........................................................ 18,121,023
------------
Net Change in Unrealized Appreciation/Depreciation ..................... 8,946,358
------------
NET REALIZED GAIN/LOSS AND NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ............................................ $ 17,258,739
============
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................... $ 16,351,668
============
</TABLE>

F-77 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2000

YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
------------- -------------
<S> <C> <C>

INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Loss ................................... $ (907,071) $ (364,000)
Net Realized Gain ..................................... 8,312,381 502,000
Net Change in Unrealized Appreciation/Depreciation .... 8,946,358 9,036,000
------------- -------------
Net Increase in Net Assets Resulting from Operations .. 16,351,668 9,174,000
------------- -------------
DISTRIBUTIONS:
NET REALIZED GAIN:
Class A ............................................... (773,283) (3,000)
Class B ............................................... (1,057,330) (4,000)
Class C ............................................... (336,667) (1,000)
------------- --------------
Net Decrease in Net Assets Resulting from Distributions (2,167,280) (8,000)
------------- --------------
CAPITAL SHARES TRANSACTIONS:
Subscribed ............................................ 61,360,897 47,489,000
Distributions Reinvested .............................. 1,959,132 8,000
Redeemed .............................................. (18,066,080) (13,208,000)
------------- -------------
Net Increase in Net Assets Resulting from
Capital Share Transactions ......................... 45,253,949 34,289,000
------------- -------------
Total Increase in Net Assets .......................... 59,438,337 43,455,000
NET ASSETS--Beginning of Period ....................... 48,597,886 5,143,000
------------- -------------
NET ASSETS--End of Period (Including accumulated
net investment loss of $(23,846) and $(8,000),
respectively) ...................................... $ 108,036,223 $ 48,598,000
============== =============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

SEE NOTES TO FINANCIAL STATEMENTS F-78
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

YEAR ENDED JUNE 30, MAY 29, 1998*
--------------------
CLASS A SHARES 2000# 1999# TO JUNE 30, 1998
-----------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .................. $ 12.54 $ 10.29 $ 10.00
--------- --------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss ................................. (0.11) (0.06) --
Net Realized and Unrealized Gain .................... 3.47 2.31 0.29
--------- --------- --------
Total From Investment Operations ...................... 3.36 2.25 0.29
--------- --------- --------
DISTRIBUTIONS
Net Realized Gain ................................... (0.48) (0.00)+ --
--------- --------- --------
NET ASSET VALUE, END OF PERIOD ........................ $ 15.42 $ 12.54 $ 10.29
========= ========= ========
TOTAL RETURN (1) ...................................... 27.26% 21.90% 2.90%**
========= ========= ========

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ..................... $ 41,625 $ 17,185 $ 2,057
Ratio of Expenses to Average Net Assets ............... 1.50% 1.50% 1.50%
Ratio of Net Investment Income/Loss to
Average Net Assets .................................. (0.77%) (0.57%) 0.51%
Portfolio Turnover Rate ............................... 73% 126% 19%**
------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment Loss ............ $ 0.03 $ 0.05 $ 0.02
Ratios Before Expense Reductions:
Expenses to Average Net Assets ...................... 1.69% 1.98% 4.06%
Net Investment Loss to Average
Net Assets ........................................ (0.96%) (1.05%) (2.05%)
------------------------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

+ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-79 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

YEAR ENDED JUNE 30,
---------------------------- MAY 29, 1998*
CLASS B SHARES 2000# 1999# TO JUNE 30, 1998
--------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..... $ 12.45 $ 10.28 $ 10.00
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss .................... (0.21) (0.14) --
Net Realized and Unrealized Gain ....... 3.43 2.31 0.28
---------- ---------- ----------
Total From Investment Operations ......... 3.22 2.17 0.28
---------- ---------- ----------
DISTRIBUTIONS
Net Realized Gain ...................... (0.48) (0.00)+ --
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ........... $ 15.19 $ 12.45 $ 10.28
========== ========== ==========
TOTAL RETURN (1) ......................... 26.32% 21.14% 2.80%**
========== ========== ==========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ........ $ 49,214 $ 23,978 $ 1,543
Ratio of Expenses to Average Net Assets .. 2.25% 2.25% 2.25%
Ratio of Net Investment Loss to
Average Net Assets ..................... (1.52%) (1.34%) (0.25%)
Portfolio Turnover Rate .................. 73% 126% 19%**
------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment Loss $ 0.03 $ 0.05 $ 0.02
Ratios Before Expense Reductions:
Expenses to Average Net Assets ......... 2.44% 2.72% 4.81%
Net Investment Loss to Average
Net Assets ........................... (1.71%) (1.81%) (2.81%)
------------------------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

+ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE
OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-80
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

YEAR ENDED JUNE 30, MAY 29, 1998*
----------------------------
CLASS C SHARES 2000# 1999# TO JUNE 30, 1998
--------------------------------------------------

<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..... $ 12.44 $ 10.28 $ 10.00
--------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss .................... (0.21) (0.14) --
Net Realized and Unrealized Gain ....... 3.43 2.30 0.28
--------- ---------- ---------
Total From Investment Operations ......... 3.22 2.16 0.28
--------- ---------- ---------
DISTRIBUTIONS
Net Realized Gain ...................... (0.48) (0.00)+ --
--------- ---------- ---------
NET ASSET VALUE, END OF PERIOD ........... $ 15.18 $ 12.44 $ 10.28
========= ========== =========
TOTAL RETURN (1) ......................... 26.34% 21.04% 2.80%**
========= ========== =========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ........ $ 17,197 $ 7,435 $ 1,543
Ratio of Expenses to Average Net Assets .. 2.25% 2.25% 2.25%
Ratio of Net Investment Loss to
Average Net Assets ..................... (1.52%) (1.32%) (0.25%)
Portfolio Turnover Rate .................. 73% 126% 19%**
--------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment Loss $ 0.03 $ 0.05 $ 0.02
Ratios Before Expense Reductions:
Expenses to Average Net Assets ......... 2.44% 2.75% 4.81%
Net Investment Loss to Average
Net Assets ........................... (1.71%) (1.81%) (2.81%)
--------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

+ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-81 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen Equity Growth Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to seek
long-term capital appreciation by investing primarily in growth-oriented equity
securities of medium and large capitalization companies. The Fund commenced
operations on May 29, 1998.

B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Investment Advisory Corp. or its affiliates, the
daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transac-

F-82
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

tion, 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.

D. ORGANIZATIONAL COSTS The organizational costs of the Fund are being amortized
on a straight line basis over the 60 month period ending May 27, 2003 beginning
with the Fund's commencement of operations. The Adviser has agreed that in the
event any of the initial shares of the Fund originally purchased by Van Kampen
are redeemed by the Fund during the amortization period, the Fund will be
reimbursed for any unamortized organizational costs in the same proportion as
the number of shares redeemed bears to the number of initial shares held at the
time of redemption.

E. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial and tax reporting
purposes as a result of losses relating to wash sale transactions.
At June 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $90,765,670; the aggregate gross unrealized
appreciation is $19,925,266 and the aggregate gross unrealized depreciation is
$2,226,240, resulting in net unrealized appreciation on long- and short-term
investments of $17,699,026.

F-83
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

F. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends
annually from net investment income and net realized gains, if any.
Distributions from net realized gains for book purposes may include short-term
capital gains which are included as ordinary income for tax purposes.
Due to inherent differences in the recognition of income and expenses under
generally accepted accounting principles and federal income tax purposes,
permanent differences between book and tax basis reporting for the current
fiscal year have been identified and appropriately reclassified. A permanent
difference related to a net operating loss which may be used as an offset
against short-term gains for tax purposes totaling $879,902 has been
reclassified from accumulated net realized gain to accumulated net investment
loss. A permanent difference of $19,122 related to a correction of the prior
year net operating loss was reclassified from paid in capital in excess of par
to accumulated net realized gain. A permanent difference of $11,193 related to
non-deductible organization costs has been reclassified from paid in capital in
excess of par to accumulated net investment loss. A permanent difference of
$1,779 related to a partnership investment was reclassified from paid in capital
in excess of par to accumulated net realized gain.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Van Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of Van Kampen Investments Inc. (an indirect wholly owned
subsidiary of Morgan Stanley Dean Witter & Co.) and Morgan Stanley Dean
Witter Investment Management Inc., 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 indicated as follows:

AVERAGE DAILY NET ASSETS % PER ANNUM

<S> <C>
First $500 million.................... .80 of 1%

Next $500 million..................... .75 of 1%

Over $1 billion....................... .70 of 1%
</TABLE>

The Adviser has agreed to reduce advisory fees payable to it and to reimburse
the Fund if necessary, if the annual operating expenses, expressed as a
percentage of average daily net assets, exceed the maximum ratios indicated as
follows:
<TABLE>
<CAPTION>

CLASS A CLASS B AND CLASS C
MAX. OPERATING MAX. OPERATING
EXPENSE RATIO EXPENSE RATIO
--------------- --------------------
<S> <C>
1.50% 2.25%
</TABLE>

F-84
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

For the period ended June 30, 2000, the Adviser voluntarily waived $136,048
of its investment advisory fees. This waiver is voluntary in nature and can be
discontinued at the Adviser's discretion.
For the period ended June 30, 2000, the Fund recognized expenses of $4,565
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
For the period ended June 30, 2000, the Fund recognized expenses of $6,449
representing Van Kampen's cost of providing legal services to the Fund.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B and Class C shares of the Fund, on an
annualized basis, of the average daily net assets attributable to each Class.
The Distributor may receive a front end sales charge for purchases of
Class A shares. In addition, the Distributor may receive a contingent
deferred sales charge for certain redemptions of Class B and Class C shares
of the Fund redeemed within one to five years following such purchase. For
the period ended June 30, 2000, the Distributor has advised the Fund that it
earned initial sales charges of $503,923 for Class A shares and deferred
sales charges of $91,356 and $2,256 for Class B shares and Class C shares,
respectively.
Certain officers and directors of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
directors who are not officers of Van Kampen. Under the deferred compensation
plan, directors may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each director's years of service to the Fund. The maximum
annual benefit per director under the plan is $2,500.
For the period ended June 30, 2000, the Fund incurred $4,580 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.

F-85
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
---------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First .................... 5.00% 1.00%
Second ................... 4.00% None
Third .................... 3.00% None
Fourth ................... 2.50% None
Fifth .................... 1.50% None
Thereafter ............... None None
</TABLE>

F-86
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
-------------- ---------------
<S> <C> <C>

CAPITAL SHARE TRANSACTIONS
CLASS A:
Shares:
Subscribed ............................. 1,789,258 1,629,000
Distributions Reinvested ............... 52,968 --
Redeemed ............................... (512,671) (459,000)
----------- -------------
Net Increase in Class A Shares Outstanding 1,329,555 1,170,000
============ =============
Dollars:
Subscribed ............................. $25,853,358 $ 16,596,000
Distributions Reinvested ............... 724,074 3,000
Redeemed ............................... (7,382,190) (4,778,000)
----------- -------------
Net Increase ............................. $19,195,242 $ 11,821,000
============ =============
Ending Paid in Capital ................... $33,016,419+ $ 13,821,000+
============ =============
CLASS B:
Shares:
Subscribed ............................. 1,879,249 2,258,000
Distributions Reinvested ............... 70,232 --
Redeemed ............................... (635,631) (482,000)
----------- -------------
Net Increase in Class B Shares Outstanding 1,313,850 1,776,000
============ =============
Dollars:
Subscribed ............................. $26,489,423 $ 23,038,000
Distributions Reinvested ............... 949,535 4,000
Redeemed ............................... (8,938,128) (5,054,000)
----------- -------------
Net Increase ............................. $18,500,830 $ 17,988,000
============ =============
Ending Paid in Capital ................... $37,988,069+ $ 19,488,000+
============ =============
CLASS C:
Shares:
Subscribed ............................. 640,134 788,000
Distributions Reinvested ............... 21,372 --
Redeemed ............................... (125,973) (340,000)
----------- -------------
Net Increase in Class C Shares Outstanding 535,533 448,000
============ =============
Dollars:
Subscribed ............................. $ 9,018,116 $ 7,855,000
Distributions Reinvested ............... 285,523 1,000
Redeemed ............................... (1,745,762) (3,376,000)
----------- -------------
Net Increase ............................. $ 7,557,877 $ 4,480,000
============ =============
Ending Paid in Capital ................... $13,538,155+ $ 5,980,000+
============ =============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

+ ENDING PAID IN CAPITAL AMOUNTS DO NOT REFLECT PERMANENT BOOK TO TAX
DIFFERENCES--SEE NOTE 1F.

F-87
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

4. INVESTMENT TRANSACTIONS
For the period ended June 30, 2000, the Fund made purchases of $91,653,934 and
sales of $51,789,326 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.

F-88
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Van Kampen European
Equity Fund

We have audited the accompanying statement of assets and liabilities of Van
Kampen European Equity Fund (the "Fund"), a fund of Van Kampen Series Fund,
Inc., including the portfolio of investments, as of June 30, 2000, and the
related statements of operations, changes in net assets and the financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit. The Fund's financial statements and financial highlights for
the period ended prior to June 30, 2000, were audited by other auditors whose
report, dated August 6, 1999, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2000, by correspondence with the Fund's
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen European Equity Fund as of June 30, 2000, the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-89
<PAGE>

BY THE NUMBERS
YOUR FUND'S INVESTMENTS
JUNE 30, 2000

THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<TABLE>
<CAPTION>

MARKET
DESCRIPTION SHARES VALUE
COMMON STOCKS 93.0%
BELGIUM 0.5%
<S> <C> <C>
Mobistar S.A. (a) ........................................ 2,590 $ 85,894
-----------
FINLAND 0.6%
Sampo Insurance Co., Ltd. 'A' ............................ 2,400 97,288
-----------
FRANCE 14.9%
Alcatel .................................................. 3,350 219,512
Aventis S.A. ............................................. 6,400 466,674
AXA ...................................................... 1,235 194,360
BNP Paribas .............................................. 510 49,033
CNP Assurances ........................................... 7,610 259,125
Groupe Danone ............................................ 1,860 246,595
Michelin (C.G.D.E.) 'B' (Registered) ..................... 3,210 102,903
Pernod-Ricard S.A. ....................................... 2,630 142,984
Schneider S.A. ........................................... 3,260 226,985
Total Fina Elf S.A. 'B' .................................. 2,927 448,358
-----------
2,356,529
-----------
GERMANY 4.9%
Adidas-Salomon AG ........................................ 1,665 91,473
BASF AG .................................................. 2,345 95,058
Bayer AG ................................................. 1,231 47,082
Bayerische Motoren Werke AG .............................. 3,350 101,928
Deutsche Telekom AG (Registered) ......................... 3,743 215,632
Bayerische Hypo-und Vereinsbank AG ....................... 2,083 136,093
Schering AG .............................................. 1,500 81,621
----------
768,887
----------
ITALY 5.0%
Banca Popolare di Bergamo S.p.A. ......................... 7,760 143,441
ENI S.p.A. ............................................... 25,060 144,608
Marzotto (Gaetano) S.p.A. ................................ 3,630 29,603
Mediaset S.p.A ........................................... 5,900 90,038
Telecom Italia Mobile S.p.A .............................. 9,405 95,984
Telecom Italia S.p.A. .................................... 13,800 189,539
UniCredito Italiano S.p.A. ............................... 21,730 103,837
----------
797,050
----------
NETHERLANDS 7.5%
ABN Amro Holding N.V. .................................... 3,300 80,766
Akzo Nobel N.V. .......................................... 5,660 240,233

SEE NOTES TO FINANCIAL STATEMENTS F-90
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE
NETHERLANDS (CONTINUED)
<S> <C> <C>
Buhrmann N.V. ............................................ 3,672 $ 104,895
ING Groep N.V. ........................................... 4,326 292,130
Koninklijke (Royal) Philips Electronics N.V. ............. 7,024 330,954
Laurus N.V. .............................................. 8,440 101,028
Royal Dutch Petroleum Co. ................................ 700 43,465
----------
1,193,471
----------
PORTUGAL 1.1%
Banco Comercial Portugues S.A. (Registered) .............. 17,070 88,733
Telecel-Comunicacaoes Pessoais S.A. (a) .................. 5,400 81,893
----------
170,626
----------
SPAIN 2.8%
Banco Popular Espanol S.A. ............................... 3,590 110,942
Endesa S.A. .............................................. 7,340 142,048
Telefonica S.A. (a) ...................................... 9,060 194,432
----------
447,422
----------
SWEDEN 5.6%
Autoliv, Inc. SDR ........................................ 5,730 140,199
ForeningsSparbanken AB 'A' ............................... 8,440 123,330
Nordic Baltic Holding AB ................................. 24,442 184,118
Scandic Hotels AB ........................................ 6,650 79,848
Svedala Industri AB ...................................... 6,610 125,791
Svenska Cellulosa Free AB 'B' ............................ 4,080 77,413
Svenska Handelsbanken 'A' ................................ 10,770 156,158
----------
886,857
----------
SWITZERLAND 9.9%
Cie Financiere Richemont AG 'A' .......................... 111 298,723
Holderbank Financiere Glarus AG 'B' (Bearer) ............. 150 183,700
Nestle S.A. (Registered) ................................. 278 555,796
Novartis AG (Registered) ................................. 162 256,327
Schindler Holding AG (Registered) ........................ 80 122,466
UBS AG (Registered) ...................................... 990 144,884
----------
1,561,896
----------
UNITED KINGDOM 40.2%
Allied Domecq plc ........................................ 51,430 272,293
Allied Zurich plc ........................................ 10,680 126,256
AstraZeneca Group plc .................................... 4,250 198,334
BAA plc .................................................. 14,600 117,053
BAE SYSTEMS plc .......................................... 21,900 136,488
Barclays plc ............................................. 5,690 141,417
BG Group plc ............................................. 15,038 97,134
Blue Circle Industries plc ............................... 15,500 100,001

F-91 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE
UNITED KINGDOM (CONTINUED)
<S> <C> <C>
BOC Group plc ............................................ 7,830 $ 112,522
British American Tobacco plc ............................. 22,700 151,432
British Telecom plc ...................................... 18,850 243,513
Cadbury Schweppes plc .................................... 35,600 233,718
Capital Radio plc ........................................ 850 19,866
Centrica plc ............................................. 25,600 85,389
Diageo plc ............................................... 28,070 251,796
GKN plc .................................................. 6,600 84,164
Glaxo Wellcome plc ....................................... 9,950 290,040
Granada Group plc ........................................ 20,404 203,710
Great Universal Stores plc ............................... 28,850 185,476
Halma plc ................................................ 18,000 27,773
Imperial Tobacco Group plc ............................... 23,570 225,692
Lloyds TSB Group plc ..................................... 10,100 95,336
Prudential Corp. plc ..................................... 17,200 251,858
Reckitt Benckiser plc .................................... 36,734 411,199
Rentokil Initial plc ..................................... 40,600 92,123
RMC Group plc ............................................ 5,500 71,551
Rolls-Royce plc .......................................... 45,900 162,820
Bank of Scotland ......................................... 10,417 99,038
Sainsbury (J) plc ........................................ 8,900 40,389
Scottish & Southern Energy plc ........................... 19,500 178,756
Shell Transport & Trading Co. plc ........................ 55,222 460,691
Smith & Nephew plc ....................................... 25,973 95,866
SmithKline Beecham plc ................................... 5,000 65,424
SSL International plc .................................... 21,640 234,054
Vodafone AirTouch plc .................................... 111,434 450,071
Wolseley plc ............................................. 16,200 86,995
WPP Group plc ............................................ 18,480 269,763
----------
6,370,001
----------

TOTAL COMMON STOCKS
(Cost $13,671,600) ................................... 14,735,921
----------

PREFERRED STOCKS 2.9%
GERMANY 2.9%
Fresenius AG ............................................. 1,018 233,129
Henkel KGaA .............................................. 3,989 228,282
----------

TOTAL PREFERRED STOCKS
(Cost $450,200) ...................................... 461,411
----------

TOTAL LONG-TERM INVESTMENTS 95.9%
(Cost $14,121,800) ................................... 15,197,332
----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-92
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

MARKET
DESCRIPTION SHARES VALUE
SHORT-TERM INVESTMENT 5.6%
REPURCHASE AGREEMENT 5.6%
<S> <C> <C>
Chase Securities, Inc. 6.15%, dated 6/30/00, due 7/3/00, $887,000
to be repurchased at $887,455, collateralized by $940,000
U.S. Treasury Notes 5.50%, due 5/15/09, valued at $905,925
(Cost $887,000) ...................................... $ 887,000
----------

TOTAL INVESTMENTS IN SECURITIES 101.5%
(Cost $15,008,800) ................................... 16,084,332
----------

FOREIGN CURRENCY 0.6%
(Cost $97,883) ....................................... 97,687
----------

TOTAL INVESTMENTS 102.1%
(Cost $15,106,683) ................................... 16,182,019
----------
LIABILITIES IN EXCESS OF OTHER ASSETS -2.1% ............. (330,162)
----------

NET ASSETS 100% ......................................... $15,851,857
===========
</TABLE>

(a) NON-INCOME PRODUCING SECURITY

SDR SWEDISH DEPOSITARY RECEIPT

SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION

PERCENT OF
INDUSTRY VALUE NET ASSETS
------------ -----------
<S> <C> <C>
Consumer Staples ................. $ 2,931,646 18.5%
Financials ....................... 2,878,143 18.1
Health Care ...................... 1,921,469 12.1
Consumer Discretionary ........... 1,816,920 11.5
Telecommunications Services ...... 1,556,958 9.8
Materials ........................ 1,155,842 7.3
Energy ........................... 1,097,122 6.9
Industrials ...................... 1,088,621 6.9
Utilities ........................ 503,326 3.2
Information Technology ........... 247,285 1.6
------------ ---
$15,197,332 95.9%
============ =====
</TABLE>

F-93 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
JUNE 30, 2000

ASSETS:
<S> <C>
Investments in Securities, at Value (Cost $15,008,800) ............... $16,084,332
Foreign Currency (Cost $97,883) ...................................... 97,687
Cash ................................................................. 900
Receivable for:
Investments Sold ................................................... 149,797
Fund Shares Sold ................................................... 44,935
Dividends .......................................................... 26,750
Foreign Withholding Tax Reclaim .................................... 9,370
Interest ........................................................... 152
-----------
Total Assets ..................................................... 16,413,923
-----------
LIABILITIES:
Payable for:
Investments Purchased .............................................. 418,441
Shareholder Reporting Expenses ..................................... 36,113
Custody Fees ....................................................... 27,893
Professional Fees .................................................. 23,238
Directors' Fees and Expenses ....................................... 19,650
Distribution Fees .................................................. 17,171
Advisory Expense ................................................... 13,135
Administrative Fees ................................................ 3,215
Transfer Agent Fees ................................................ 1,554
Fund Shares Redeemed ............................................... 520
Other ................................................................ 1,136
-----------
Total Liabilities ................................................ 562,066
-----------
NET ASSETS ........................................................... $15,851,857
============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized 2,625,000,000) $ 1,347
Paid in Capital in Excess of Par ..................................... 14,403,919
Net Unrealized Appreciation on Investments ........................... 1,073,653
Accumulated Net Realized Gain ........................................ 298,544
Accumulated Net Investment Income .................................... 74,394
-----------
NET ASSETS ........................................................... $15,851,857
============
Class A Shares:
Net Asset Value and Redemption Price Per Share (Based on Net Assets of
$6,649,047 and 563,973 Shares Outstanding) ....................... $ 11.79
============
Maximum Sales Charge ............................................. 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100/ (100% - maximum sales charge)) ...................... $ 12.51
============
Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$7,176,969 and 610,152 Shares Outstanding)* ...................... $ 11.76
============
Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$2,025,841 and 172,805 Shares Outstanding)* ...................... $ 11.72
============
</TABLE>

* REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

SEE NOTES TO FINANCIAL STATEMENTS F-94
<PAGE>

Statement of Operations
YEAR ENDED JUNE 30, 2000
<TABLE>
<CAPTION>

INVESTMENT INCOME:
<S> <C>
Dividends ............................................................ $ 282,849
Interest ............................................................. 39,270
Less Foreign Taxes Withheld .......................................... (33,104)
------------
Total Income ..................................................... 289,015
------------
EXPENSES:
Investment Advisory Fees ............................................. 106,237
Distribution Fees (Attributed to Classes A, B and C of $11,224, $43,988
and $17,173, respectively) ......................................... 72,385
Shareholder Reports .................................................. 71,461
Filing and Registration Fees ......................................... 68,654
Custodian Fees ....................................................... 59,106
Administrative Fees .................................................. 30,149
Directors' Fees and Expenses ......................................... 22,482
Professional Fees .................................................... 10,458
Transfer Agent Fees .................................................. 5,511
Other ................................................................ 1,039
------------
Total Expenses ................................................... 447,482
Less Expense Reductions .......................................... (218,616)
------------
Net Expenses ..................................................... 228,866
------------
NET INVESTMENT INCOME ................................................ $ 60,149
============
NET REALIZED GAIN/LOSS ON:
Investments .......................................................... $ 359,359
Foreign Currency Transactions ........................................ 19,136
------------
Net Realized Gain .................................................... 378,495
------------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period ............................................ 168,193
------------
End of the Period:
Investments ...................................................... 1,075,532
Foreign Currency Translations .................................... (1,879)
------------
1,073,653
------------
Net Change in Unrealized Appreciation/Depreciation ................... 905,460
------------
NET REALIZED GAIN/LOSS AND NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION .......................................... $ 1,283,955
============
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................. $ 1,344,104
============
</TABLE>

F-95 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Statement of Changes in Net Assets
YEAR ENDED JUNE 30, 2000
<TABLE>
<CAPTION>

YEAR ENDED SEPTEMBER 25, 1998*
JUNE 30, 2000 TO JUNE 30, 1999**
------------- -------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
<S> <C> <C>
Net Investment Income .......................... $ 60,149 $ 44,000
Net Realized Gain .............................. 378,495 11,000
Net Change in Unrealized Appreciation/
Depreciation ................................ 905,460 169,000
------------ ------------
Net Increase in Net Assets Resulting
from Operations ............................. 1,344,104 224,000
------------ ------------
DISTRIBUTIONS:
Net Investment Income:
Class A ........................................ (50,832) (3,000)
Class B ........................................ (18,315) (1,000)
Class C ........................................ (8,828) (1,000)
------------ ------------
(77,975) (5,000)
------------ ------------
Net Realized Gain:
Class A ........................................ (35,198) --
Class B ........................................ (30,836) --
Class C ........................................ (14,787) --
------------ ------------
(80,821) --
------------ ------------
Net Decrease in Net Assets Resulting
from Distributions .......................... (158,796) (5,000)
------------ ------------
CAPITAL SHARES TRANSACTIONS:
Subscribed ..................................... 10,836,506 4,084,000
Distributions Reinvested ....................... 97,499 1,000
Redeemed ....................................... (2,826,056) (745,000)
------------ ------------
Net Increase in Net Assets Resulting from
Capital Share Transactions .................. 8,107,949 3,340,000
------------ ------------
Total Increase in Net Assets ................... 9,293,257 3,559,000
NET ASSETS--Beginning of Period ................ 6,558,600 3,000,000
------------ ------------
NET ASSETS--End of Period
(Including accumulated net investment
income of $74,394 and $73,000, respectively). $15,851,857 $6,559,000
============ ============
</TABLE>

* COMMENCEMENT OF OPERATIONS

** AMOUNTS ROUNDED TO THE NEAREST (000).

SEE NOTES TO FINANCIAL STATEMENTS F-96
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

YEAR ENDED SEPTEMBER 25, 1998* TO
CLASS A SHARES JUNE 30, 2000# JUNE 30,1999#
-------------- ----------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 10.65 $10.00
------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income ........................ 0.11 0.13
Net Realized and Unrealized Gain ............. 1.27 0.54
------- ------
Total From Investment Operations ............... 1.38 0.67
------- ------
DISTRIBUTIONS
Net Investment Income ........................ (0.14) (0.02)
Net Realized Gain ............................ (0.10) --
------- ------
Total Distributions ............................ (0.24) (0.02)
------- ------
NET ASSET VALUE, END OF PERIOD ................. $ 11.79 $10.65
======= ======
TOTAL RETURN (1) ............................... 13.15% 6.75%**
======= ======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .............. $ 6,649 $2,020
Ratio of Expenses to Average Net Assets ........ 1.70% 1.70%
Ratio of Net Investment Income to Average
Net Assets ................................... 0.99% 1.64%
Portfolio Turnover Rate ........................ 49% 51%**
-----------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment Income ... $ 0.23 $ 0.36
Ratios Before Expense Reductions:
Expenses to Average Net Assets ............... 3.80% 6.20%
Net Investment Income/Loss to Average
Net Assets ................................. (1.11%) (2.87%)
-----------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-97 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

YEAR ENDED SEPTEMBER 25, 1998* TO
CLASS B SHARES JUNE 30, 2000# JUNE 30,1999#
-------------- ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 10.62 $10.00
------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income ........................ 0.04 0.08
Net Realized and Unrealized Gain ............. 1.26 0.55
------- ------
Total From Investment Operations ............... 1.30 0.63
------- ------
DISTRIBUTIONS
Net Investment Income ........................ (0.06) (0.01)
Net Realized Gain ............................ (0.10) --
------- ------
Total Distributions ............................ (0.16) (0.01)
------- ------
NET ASSET VALUE, END OF PERIOD ................. $ 11.76 $10.62
======= ======
TOTAL RETURN (1) ............................... 12.43% 6.26%**
======= ======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .............. $ 7,177 $3,082
Ratio of Expenses to Average Net Assets ........ 2.45% 2.45%
Ratio of Net Investment Income to Average
Net Assets ................................... 0.45% 0.96%
Portfolio Turnover Rate ........................ 49% 51%**
--------------------------------------------------------------------------------------

Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment Income ... $ 0.23 $ 0.34
Ratios Before Expense Reductions:
Expenses to Average Net Assets ............... 4.55% 6.61%
Net Investment Income/Loss to Average
Net Assets ................................. (1.65%) (3.20%)
--------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-98
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

YEAR ENDED SEPTEMBER 25, 1998* TO
CLASS C SHARES JUNE 30, 2000# JUNE 30,1999#
-------------- ----------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 10.59 $10.00
------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income ........................ 0.01 0.07
Net Realized and Unrealized Gain ............. 1.28 0.53
------- ------
Total From Investment Operations ............... 1.29 0.60
------- ------
DISTRIBUTIONS
Net Investment Income ........................ (0.06) (0.01)
Net Realized Gain ............................ (0.10) --
------- ------
Total Distributions ............................ (0.16) (0.01)
------- ------
NET ASSET VALUE, END OF PERIOD ................. $ 11.72 $10.59
======= ======
TOTAL RETURN (1) ............................... 12.37% 5.96%**
======= ======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .............. $ 2,026 $1,457
Ratio of Expenses to Average Net Assets ........ 2.45% 2.45%
Ratio of Net Investment Income to Average
Net Assets ................................... 0.01% 0.81%
Portfolio Turnover Rate ........................ 49% 51%**
------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment Income ... $ 0.24 $ 0.40
Ratios Before Expense Reductions:
Expenses to Average Net Assets ............... 4.55% 7.33%
Net Investment Income/Loss to Average
Net Assets ................................. (2.09%) (4.13%)
------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-99 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen European Equity Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks long-term
capital appreciation. The Fund commenced operations on September 25, 1998.

1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of the financial statements in conformity with accounting
principles accepted in the United States of America (hereafter "generally
accepted accounting principles") requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
period. Actual results could differ from those estimates.

A. 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 bid and asked prices obtained from reputable brokers.
Debt securities purchased with remaining maturities of 60 days or less are
valued at amortized cost, which approximates market value. All other securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith using procedures approved by the Board of
Directors.

F-100
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required. The Fund may be
subject to taxes imposed by countries in which it invests. Such taxes are
generally based on income earned or gains realized or repatriated. Taxes are
accrued and applied to net investment income, net realized capital gains and net
unrealized appreciation, as applicable, as the income is earned or capital gains
are recorded.
Net realized gains or losses may differ for financial and tax reporting
purposes as a result of losses relating to wash sale transactions.
At June 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $15,058,315, the aggregate gross unrealized
appreciation is $1,529,568 and the aggregate gross unrealized depreciation is
$503,551, resulting in net unrealized appreciation on long- and short-term
investments of $1,026,017.

F-101
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

F. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS The Fund may enter into
foreign currency exchange contracts to attempt to protect securities and related
receivables and payables against changes in future foreign currency exchange
rates. A currency exchange contract is an agreement between two parties to buy
or sell currency at a set price on a future date. The market value of the
contract will fluctuate with changes in currency exchange rates. The contract is
marked-to-market daily and the change in market value is recorded by the Fund as
unrealized gain or loss on foreign currency translation.
Assets and liabilities denominated in foreign currencies and commitments
under forward currency contracts are translated into U.S. dollars at the mean of
the quoted bid and asked prices of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated at the rate of
exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities resulting from changes in exchange
rates are not segregated for financial reporting purposes from amounts arising
from changes in the market prices of securities. Realized gains and losses on
foreign currency transactions includes the net realized amount from the sale of
the currency and the amount realized between trade date and settlement date on
security and income transactions. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts. Risks may also arise from the unanticipated movements in the
value of a foreign currency relative to the U.S. dollar.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Van Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary
of Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.), and Morgan Stanley Dean Witter Investment Management
Inc., 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 indicated as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $500 million .................................................. 1.00 of 1%
Next $500 million ................................................... .95 of 1%
Over $1 billion ..................................................... .90 of 1%
</TABLE>

F-102
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
EXPENSE RATIO EXPENSE RATIO
<S> <C>
1.70% 2.45%
</TABLE>

For the period ended June 30, 2000, the Adviser voluntarily waived $218,616
of its investment advisory fees. This waiver is voluntary in nature and can be
discontinued at the Adviser's discretion.
For the period ended June 30, 2000, the Fund recognized expenses of $2,008
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
For the period ended June 30, 2000, the Fund recognized expenses of $6,087
representing Van Kampen's cost of providing legal services to the Fund.
At June 30, 2000, Van Kampen Funds, Inc. owned 18%, 16%, and 58% of the
shares outstanding of each Class A, B, and C shares in the Fund.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
The Distributor may receive a front end sales charge for purchases of Class
A shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
June 30, 2000, the Distributor has advised the Fund that it earned initial sales
charges of $36,692 for Class A

F-103
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

shares and deferred sales charges of $10,062 and $256 for Class B shares and
Class C shares, respectively.
Certain officers and directors of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
directors who are not officers of Van Kampen. Under the deferred compensation
plan, directors may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each director's years of service to the Fund. The maximum
annual benefit per director under the plan is $2,500.
For the period ended June 30, 2000, the Fund incurred $3,913 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE

YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First ......................................... 5.00% 1.00%
Second ........................................ 4.00% None
Third ......................................... 3.00% None
Fourth ........................................ 2.50% None
Fifth ......................................... 1.50% None
Thereafter .................................... None None
</TABLE>

F-104
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 25, 1998*
JUNE 30, 2000 TO JUNE 30, 1999**
-------------- -------------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS
CLASS A:
Shares:
Subscribed (Initial Shares of 100,000) ............... 498,680 205,000
Distributions Reinvested ............................. 5,381 --
Redeemed ............................................. (129,831) (15,000)
---------- ----------
Net Increase in Class A Shares Outstanding .............. 374,230 190,000
========== ==========
Dollars:
Subscribed ........................................... $5,479,269 $1,098,000
Distributions Reinvested ............................. 59,192 1,000
Redeemed ............................................. (1,424,127) (157,000)
---------- ----------
Net Increase ............................................ $4,114,334 $ 942,000
========== ==========
Beginning Paid in Capital ............................... $1,942,000 $1,000,000
========== ==========
Ending Paid in Capital .................................. $6,043,378 $1,942,000+
========== ==========
CLASS B:
Shares:
Subscribed (Initial Shares of 100,000) ............... 407,690 305,000
Distributions Reinvested ............................. 2,787 --
Redeemed ............................................. (90,497) (15,000)
---------- ----------
Net Increase in Class B Shares Outstanding .............. 319,980 290,000
========== ==========
Dollars:
Subscribed ............................................ $4,582,733 $2,142,000
Distributions Reinvested .............................. 30,685 --
Redeemed .............................................. (1,007,931) (152,000)
---------- ----------
Net Increase ............................................ $3,605,487 $1,990,000
========== ==========
Beginning Paid in Capital ............................... $2,990,000 $1,000,000
========== ==========
Ending Paid in Capital .................................. $6,575,332 $2,990,000+
========== ==========
CLASS C:
Shares: (Initial Shares of 100,000)
Subscribed ........................................... 70,319 179,000
Distributions Reinvested ............................. 694 --
Redeemed ............................................. (35,701) (42,000)
---------- ----------
Net Increase in Class C Shares Outstanding .............. 35,312 137,000
========== ==========
Dollars:
Subscribed ........................................... $ 774,504 $ 844,000
Distributions Reinvested ............................. 7,622 --
Redeemed ............................................. (393,998) (436,000)
---------- ----------
Net Increase ............................................ $ 388,128 $ 408,000
========== ==========
Beginning Paid in Capital ............................... $1,408,000 $1,000,000
========== ==========
Ending Paid in Capital .................................. $1,786,556 $1,408,000+
========== ==========
</TABLE>

* COMMENCEMENT OF OPERATIONS
** AMOUNTS ROUNDED TO THE NEAREST (000).
+ ENDING PAID IN CAPITAL AMOUNTS DO NOT REFLECT PERMANENT BOOK TO TAX
DIFFERENCES--SEE NOTE 1E.

F-105
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

4. INVESTMENT TRANSACTIONS
For the period ended June 30, 2000, the Fund made purchases of $12,555,323 and
sales of $4,979,617 of investment securities other than long-term U.S.
government securities and short-term investments. There were no purchases or
sale of long-term U.S. government securities.

F-106
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and
Shareholders of Van Kampen Focus
Equity Fund

We have audited the accompanying statement of assets and liabilities of Van
Kampen Focus Equity Fund (the "Fund"), a fund of Van Kampen Series Fund, Inc.,
including the portfolio of investments, as of June 30, 2000, and the related
statements of operations, changes in net assets and the financial highlights
for the year then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit. The Fund's financial statements and financial highlights for the
periods ended prior to June 30, 2000, were audited by other auditors whose
report, dated August 6, 1999, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of June 30, 2000, by
correspondence with the Fund's custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Van Kampen Focus Equity Fund as of June 30, 2000, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.

DELOITTE & TOUCHE LLP

Chicago, Illinois
August 11, 2000

F-107
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS THE FOLLOWING PAGES DETAIL YOUR FUND'S
JUNE 30, 2000 PORTFOLIO OF INVESTMENTS AT THE END OF THE
REPORTING PERIOD.

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON STOCKS+ 96.8%
CONSUMER DISCRETIONARY 14.0%
MEDIA 8.3%
AMFM, Inc. (a).......................................... 75,800 $ 5,230,200
AT&T Corp. Liberty Media Group 'A' (a).................. 765,861 18,572,122
Clear Channel Communications, Inc. (a).................. 102,500 7,687,500
Time Warner, Inc........................................ 192,800 14,652,800
------------
46,142,622
------------

SPECIALTY RETAIL 5.7%
Home Depot, Inc......................................... 469,300 23,435,669
Intimate Brands, Inc.................................... 38,000 750,500
Limited, Inc. (The)..................................... 334,900 7,242,212
------------
31,428,381
------------
TOTAL CONSUMER DISCRETIONARY....................................... 77,571,003
------------

CONSUMER STAPLES 3.1%
BEVERAGES 1.0%
Anheuser-Busch Cos., Inc................................ 74,400 5,556,750
------------

FOOD & DRUG RETAILING 1.1%
Safeway, Inc. (a)....................................... 131,200 5,920,400
------------

FOOD PRODUCTS 1.0%
Quaker Oats Co.......................................... 77,400 5,814,675
------------
TOTAL CONSUMER STAPLES............................................ 17,291,825
------------

FINANCIALS 6.7%
BANKS 2.3%
Bank of New York Co., Inc............................... 279,600 13,001,400
------------

DIVERSIFIED FINANCIALS 4.4%
American Express Co..................................... 117,400 6,119,475
Citigroup, Inc.......................................... 190,900 11,501,725
Fannie Mae.............................................. 128,300 6,695,656
------------
24,316,856
------------
TOTAL FINANCIALS.................................................. 37,318,256
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-108
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
HEALTH CARE 14.1%
PHARMACEUTICALS 14.1%
American Home Products Corp............................. 227,300 $ 13,353,875
Johnson & Johnson....................................... 99,800 10,167,125
Merck & Co., Inc........................................ 75,200 5,762,200
Pfizer, Inc............................................. 769,325 36,927,600
Pharmacia Corp.......................................... 230,500 11,913,969
------------
78,124,769
------------

INDUSTRIALS 18.6%
AEROSPACE & DEFENSE 6.6%
General Dynamics Corp................................... 134,300 7,017,175
United Technologies Corp................................ 501,500 29,525,813
------------
36,542,988
------------

INDUSTRIAL CONGLOMERATES 12.0%
General Electric Co..................................... 554,300 29,377,900
Tyco International Ltd.................................. 784,800 37,179,900
------------
66,557,800
------------
TOTAL INDUSTRIALS................................................. 103,100,788
------------

INFORMATION TECHNOLOGY 34.6%
COMMUNICATIONS EQUIPMENT 14.9%
American Tower Corp.'A' (a)............................. 148,800 6,203,100
Cisco Systems, Inc. (a)................................. 439,800 27,954,787
JDS Uniphase Corp. (a).................................. 72,900 8,738,888
Lucent Technologies, Inc................................ 105,500 6,250,875
Motorola, Inc........................................... 370,400 10,764,750
Nortel Networks Corp.................................... 336,700 22,979,775
------------
82,892,175
------------

COMPUTERS & PERIPHERALS 2.8%
Hewlett-Packard Co...................................... 42,600 5,319,675
Sun Microsystems, Inc. (a).............................. 115,900 10,539,656
------------
15,859,331
------------

SEMICONDUCTOR EQUIPMENT & PRODUCTS 12.3%
Applied Materials, Inc. (a)............................. 137,200 12,433,750
Intel Corp.............................................. 185,800 24,839,137
Maxim Integrated Products, Inc. (a)..................... 273,100 18,553,731
Texas Instruments, Inc.................................. 180,200 12,377,488
------------
68,204,106
------------
</TABLE>

F-109 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
SOFTWARE 4.6%
Microsoft Corp. (a)..................................... 187,600 $ 15,008,000
Oracle System Corp. (a)................................. 123,500 10,381,719
------------
25,389,719
------------
TOTAL INFORMATION TECHNOLOGY...................................... 192,345,331
------------

TELECOMMUNICATION SERVICES 5.7%
DIVERSIFIED TELECOMMUNICATION SERVICES 4.8%
AT&T Corp.............................................. 152,308 4,816,737
GTE Corp............................................... 208,700 12,991,575
Sprint Corp............................................ 68,100 3,473,100
WorldCom, Inc. (a)..................................... 122,200 5,605,925
------------
26,887,337
------------

WIRELESS TELECOMMUNICATION SERVICES 0.9%
Crown Castle International Corp. (a)................... 136,900 4,996,850
------------
TOTAL TELECOMMUNICATION SERVICES.................................. 31,884,187
------------

TOTAL LONG-TERM INVESTMENTS 96.8%
(Cost $448,532,689)................................ 537,636,159
------------

<CAPTION>
PAR
VALUE
<S> <C> <C>
SHORT-TERM INVESTMENT 4.1%
REPURCHASE AGREEMENT 4.1%
CHASE SECURITIES, INC. 6.15%, DATED 6/30/00, DUE 7/3/00, $22,575,000
to be repurchased at $22,586,570, collateralized by
$24,400,000 U.S. Treasury Notes 4.25%, due 11/15/03,
valued at $23,027,500
(Cost $22,575,000).................................. 22,575,000
------------

TOTAL INVESTMENTS 100.9%
(Cost $471,107,689)................................. 560,211,159

LIABILITIES IN EXCESS OF OTHER ASSETS -0.9%............ (5,153,862)
------------

NET ASSETS 100%........................................ $555,057,297
============
</TABLE>

(a) NON-INCOME PRODUCING SECURITY

+ THE COMMON STOCKS ARE CLASSIFIED BY SECTORS WHICH REPRESENT BROAD GROUPINGS
OF RELATED INDUSTRIES.

SEE NOTES TO FINANCIAL STATEMENTS F-110
<PAGE>

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
JUNE 30, 2000

<TABLE>
<S> <C>
ASSETS:
Investments at Value (Cost $471,107,689)................ $560,211,159
Cash.................................................... 726
Receivable for:
Fund Shares Sold...................................... 3,958,290
Investments Sold...................................... 512,732
Dividends............................................. 255,335
Interest.............................................. 3,856
Deferred Organizational Costs........................... 5,447
Other................................................... 7,277
------------
Total Assets........................................ 564,954,822
------------

LIABILITIES:
Payable for:
Investments Purchased................................. 8,197,734
Distribution Fees..................................... 641,936
Investment Advisory Fees.............................. 374,983
Fund Shares Redeemed.................................. 348,293
Administrative Fees................................... 111,810
Shareholder Reporting Expenses........................ 54,443
Transfer Agent Fees................................... 43,130
Professional Fees..................................... 40,204
Directors' Fees and Expenses.......................... 34,253
Custody Fees.......................................... 20,922
Other................................................... 29,817
------------
Total Liabilities................................... 9,897,525
------------
NET ASSETS.............................................. $555,057,297
============

NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000)........................................ $ 20,921
Paid in Capital in Excess of Par........................ 437,866,376
Net Unrealized Appreciation on Investments.............. 89,103,470
Accumulated Net Realized Gain........................... 28,101,166
Accumulated Net Investment Loss......................... (34,636)
------------
NET ASSETS.............................................. $555,057,297
============

Class A Shares:
Net Asset Value and Redemption Price Per Share (Based
on Net Assets of $185,983,372 and 6,844,207 Shares
Outstanding)........................................ $ 27.17
============
Maximum Sales Charge................................ 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share X 100/ (100% - maximum sales charge))............. $ 28.83
============
</TABLE>

F-111 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Statement of Assets and Liabilities
JUNE 30, 2000

<TABLE>
<S> <C>
Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $307,757,536 and 11,737,694 Shares Outstanding)* $ 26.22
============

Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $61,316,389 and 2,339,609 Shares Outstanding)* $ 26.21
============
</TABLE>

* REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

SEE NOTES TO FINANCIAL STATEMENTS F-112
<PAGE>

Statement of Operations
YEAR ENDED JUNE 30, 2000

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................................... $ 2,377,674
Interest................................................ 725,047
------------
Total Income........................................ 3,102,721
------------

EXPENSES:
Investment Advisory Fees................................ 3,507,934
Distribution Fees (Attributed to Classes A, B and C of
$292,710, $2,312,479 and $414,005, respectively)...... 3,019,194
Administrative Fees..................................... 979,119
Shareholder Reports..................................... 197,974
Transfer Agent Fees..................................... 186,865
Filing and Registration Fees............................ 101,981
Professional Fees....................................... 58,488
Custodian Fees.......................................... 48,145
Directors' Fees and Expenses............................ 27,488
Amortization of Organizational Costs.................... 9,795
Other................................................... 8,890
------------
Total Expenses...................................... 8,145,873
Less Expense Reductions............................. (233,167)
------------
Net Expenses........................................ 7,912,706
------------
NET INVESTMENT LOSS..................................... $ (4,809,985)
============

NET REALIZED GAIN/LOSS ON:
Investments............................................. $35,176,501
------------

NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period............................... 38,496,198
------------

End of the Period:
Investments......................................... 89,103,470
------------
Net Change in Unrealized Appreciation/Depreciation...... 50,607,272
------------

NET REALIZED GAIN/LOSS AND NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION............................. $85,783,773
============

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $80,973,788
============
</TABLE>

F-113 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Statement of Changes in Net Assets
YEAR ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
------------- --------------
<S> <C> <C>
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Loss................................ $ (4,809,985) $ (2,961,000)
Net Realized Gain.................................. 35,176,501 24,593,000
Net Change in Unrealized Appreciation/
Depreciation..................................... 50,607,272 32,373,000
------------ ------------
Net Increase in Net Assets Resulting from
Operations....................................... 80,973,788 54,005,000
------------- ------------
DISTRIBUTIONS:
Net Realized Gain:
Class A............................................ (5,401,493) (4,962,000)
Class B............................................ (12,402,976) (11,751,000)
Class C............................................ (2,123,931) (2,021,000)
------------ ------------
Net Decrease in Net Assets Resulting from
Distributions.................................... (19,928,400) (18,734,000)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Subscribed......................................... 330,426,602 95,378,000
Distributions Reinvested........................... 18,264,016 17,353,000
Redeemed........................................... (131,885,226) (90,199,000)
------------ ------------
Net Increase in Net Assets Resulting from
Capital Share Transactions...................... 216,805,392 22,532,000
------------ ------------
Total Increase in Net Assets....................... 277,850,780 57,803,000
NET ASSETS--Beginning of Period.................... 277,206,517 219,404,000
------------ ------------
NET ASSETS--End of Period (Including accumulated
net investment loss of $(34,636) and $(15,000),
respectively)...................................... $555,057,297 $277,207,000
============ ============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

SEE NOTES TO FINANCIAL STATEMENTS F-114
<PAGE>

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
Financial Highlights HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------- JANUARY 2, 1996*
CLASS A SHARES 2000# 1999# 1998# 1997 TO JUNE 30, 1996
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD......................... $22.98 $20.01 $16.98 $14.40 $12.00
------- ------- ------ ------- ---------

INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss........ (0.18) (0.14) (0.07) 0.01 0.06
Net Realized and
Unrealized Gain................. 5.82 4.70 5.03 3.95 2.40
------- ------- ------ ------- ---------
Total From Investment Operations.... 5.64 4.56 4.96 3.96 2.46
------- ------- ------ ------- ---------
DISTRIBUTIONS
Net Investment Income............. -- -- -- (0.03) (0.06)
Net Realized Gain................. (1.45) (1.59) (1.93) (1.35) --
------- ------- ------- ------- ---------
Total Distributions................. (1.45) (1.59) (1.93) (1.38) (0.06)
------- ------- ------- ------- ---------
NET ASSET VALUE, END OF PERIOD...... $27.17 $22.98 $20.01 $16.98 $14.40
======= ======= ====== ======= =========
TOTAL RETURN (1).................... 25.28% 25.57% 30.93% 28.93% 20.52%**
======= ======= ====== ======= =========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)... $185,983 $73,829 $64,035 $22,521 $5,382
Ratio of Expenses to Average
Net Assets........................ 1.50% 1.50% 1.50% 1.57% 2.03%
Ratio of Net Investment Income/Loss
to Average Net Assets............. (0.71%) (0.73%) (0.37%) (0.04%) 1.22%
Portfolio Turnover Rate............. 106% 282% 308% 241% 204%**
--------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss..................... $0.02 $0.02 $0.04 $0.02 $0.06
Ratios Before Expense Reductions:
Expenses to Average Net Assets.... 1.56% 1.61% 1.71% 2.38% 3.26%
Net Investment Income/Loss to Average
Net Assets...................... (0.77%) (0.84%) (0.59%) (0.85%) (0.01%)
Ratio of Expenses to Average
Net Assets excluding dividend
expense on securities sold short.. 1.50% 1.50% 1.50% 1.50% 1.50%
--------------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-115 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
Financial Highlights HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------- JANUARY 2, 1996*
CLASS B SHARES 2000# 1999# 1998# 1997 TO JUNE 30, 1996
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD......................... $22.38 $19.67 $16.85 $14.38 $12.00
------- ------- ------ ------- ---------

INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss........ (0.36) (0.28) (0.21) (0.02) 0.03
Net Realized and
Unrealized Gain................. 5.65 4.58 4.96 3.86 2.39
------- ------- ------ ------- ---------
Total From Investment Operations.... 5.29 4.30 4.75 3.84 2.42
------- ------- ------ ------- ---------
DISTRIBUTIONS
Net Investment Income............. -- -- -- (0.02) (0.04)
Net Realized Gain................. (1.45) (1.59) (1.93) (1.35) --
------- ------- ------ ------- ---------
Total Distributions................. (1.45) (1.59) (1.93) (1.37) (0.04)
------- ------- ------ ------- ---------
NET ASSET VALUE, END OF PERIOD...... $26.22 $22.38 $19.67 $16.85 $14.38
======= ======= ====== ======= =========
TOTAL RETURN (1).................... 24.42% 24.59% 29.94% 28.01% 20.18%**
======= ======= ====== ======= =========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)... $307,758 $176,189 $130,497 $34,382 $2,426
Ratio of Expenses to Average
Net Assets........................ 2.25% 2.25% 2.25% 2.32% 2.67%
Ratio of Net Investment Income/Loss
to Average Net Assets............. (1.46%) (1.50%) (1.11%) (0.83%) 0.43%
Portfolio Turnover Rate............. 106% 282% 308% 241% 204%**
--------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss..................... $0.01 $0.02 $0.04 $0.02 $0.07
Ratios Before Expense Reductions:
Expenses to Average Net Assets.... 2.31% 2.36% 2.47% 2.88% 3.79%
Net Investment Income/Loss to Average
Net Assets...................... (1.52%) (1.61%) (1.34%) (1.43%) (0.69%)
Ratio of Expenses to Average
Net Assets excluding dividend
expense on securities sold short.. 2.25% 2.25% 2.25% 2.25% 2.25%
--------------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-116
<PAGE>

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
Financial Highlights HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------- JANUARY 2, 1996*
CLASS C SHARES 2000# 1999# 1998# 1997 TO JUNE 30, 1996
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD......................... $22.36 $19.66 $16.83 $14.37 $12.00
------- ------- ------ ------- ---------

INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss........ (0.36) (0.28) (0.21) (0.06) 0.03
Net Realized and
Unrealized Gain................. 5.66 4.57 4.97 3.89 2.38
------- ------- ------ ------- ---------
Total From Investment Operations.... 5.30 4.29 4.76 3.83 2.41
------- ------- ------ ------- ---------

DISTRIBUTIONS
Net Investment Income............. -- -- -- (0.02) (0.04)
Net Realized Gain................. (1.45) (1.59) (1.93) (1.35) --
------- ------- ------ ------- ---------
Total Distributions................. (1.45) (1.59) (1.93) (1.37) (0.04)
------- ------- ------ ------- ---------
NET ASSET VALUE, END OF PERIOD...... $26.21 $22.36 $19.66 $16.83 $14.37
======= ======= ====== ======= =========
TOTAL RETURN (1).................... 24.38% 24.67% 29.90% 28.04% 20.10%**
======= ======= ====== ======= =========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)... $61,316 $27,189 $24,872 $9,410 $2,582
Ratio of Expenses to Average
Net Assets........................ 2.25% 2.25% 2.25% 2.32% 2.67%
Ratio of Net Investment Income/Loss
to Average Net Assets............. (1.46%) (1.48%) (1.13%) (0.77%) 0.44%
Portfolio Turnover Rate............. 106% 282% 308% 241% 204%**
--------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss..................... $0.01 $0.02 $0.04 $0.02 $0.07
Ratios Before Expense Reductions:
Expenses to Average Net Assets.... 2.31% 2.36% 2.25% 3.23% 3.80%
Net Investment Income/Loss to Average
Net Assets...................... (1.52%) (1.59%) (1.35%) (1.67%) (0.69%)
Ratio of Expenses to Average
Net Assets excluding dividend
expense on securities sold short.. 2.25% 2.25% 2.25% 2.25% 2.25%
--------------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-117 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen Focus Equity Fund (formerly Van Kampen Aggressive Equity
Fund) (the "Fund") is organized as a separate non-diversified fund of Van
Kampen Series Fund, Inc., a Maryland corporation, which is registered as an
open-end management investment corporation, under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek capital
appreciation by investing primarily in a non-diversified portfolio of corporate
equity and equity linked securities. The Fund commenced operations on January
2, 1996.

1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of the financial statements in conformity with accounting
principles accepted in the United States of America (hereafter Ogenerally
accepted accounting principlesO) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.

B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Investment Advisory Corp. or its affiliates,
the daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market

F-118
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

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.

D. SHORT SALES The Fund may sell securities short. A short sale is a
transaction in which the Fund sells securities it may or may not own, but has
borrowed, in anticipation of a decline in the market price of the securities.
The Fund is obligated to purchase securities at the market price to replace the
borrowed securities at the time of replacement. The Fund may have to pay a
premium to borrow the securities as well as pay dividends or interest payable
on the securities until they are replaced. The Fund's obligation to replace the
securities borrowed in connection with a short sale will generally be secured
by collateral deposited with the broker that consists of cash, U.S. government
securities, or other liquid, high grade debt obligations. In addition, the Fund
will place in a segregated account with its Custodian an amount of cash, U.S.
government securities, or other liquid high grade debt obligations equal to the
difference, if any, between (1) the market value of the securities sold at the
time they were sold short, and (2) any cash, U.S. government securities, or
other liquid high grade debt obligations deposited as collateral with the
broker in connection with the short sale (not including the proceeds of the
short sale). Short sales by the Fund involve certain risks and special
considerations. Possible losses from short sales differ from losses that could
be incurred from the purchase of a security, because losses from short sales
may be unlimited, whereas losses from purchases cannot exceed the total amount
invested.

E. ORGANIZATIONAL COSTS The organizational costs of the Fund are being
amortized on a straight line basis over the 60 month period ending January 2,
2001 beginning with the Fund's commencement of operations. The Adviser has
agreed that in the event any of the initial shares of the Fund originally
purchased by Van Kampen are redeemed by the Fund during the amortization
period, the Fund will be reimbursed for any unamortized organizational costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.

F-119
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

F. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial and tax reporting
purposes as a result of losses relating to wash sale transactions.
At June 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $472,120,745; the aggregate gross unrealized
appreciation is $96,680,195 and the aggregate gross unrealized depreciation is
$8,589,781, resulting in net unrealized appreciation on long- and short-term
investments of $88,090,414.

G. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains which are included as ordinary income for
tax purposes.
Due to inherent differences in the recognition of income and expenses
under generally accepted accounting principles and federal income tax purposes,
permanent differences between book and tax basis reporting for the current
fiscal year have been identified and appropriately reclassified. A permanent
difference related to a net operating loss which may be used as an offset
against short-term gains for tax purposes totaling $4,784,557 has been
reclassified from accumulated net realized gain to accumulated net investment
loss. A permanent difference of $5,764 related to a correction of the prior
year net operating loss was reclassified from accumulated net realized gain to
accumulated net investment loss.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Van Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary
of Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc., 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 indicated as follows:

AVERAGE DAILY NET ASSETS % PER ANNUM
First $500 million.......................................... .90 of 1%
Next $500 million........................................... .85 of 1%
Over $1 billion............................................. .80 of 1%

F-120
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
EXPENSE RATIO EXPENSE RATIO
1.50% 2.25%

For the period ended June 30, 2000, the Adviser voluntarily waived
$233,167 of its investment advisory fees. This waiver is voluntary in nature
and can be discontinued at the Adviser's discretion.
For the period ended June 30, 2000, the Fund recognized expenses of
$19,086 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
For the period ended June 30, 2000, the Fund recognized expenses of $9,814
representing Van Kampen's cost of providing legal services to the Fund.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.25% of the average daily
net assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
The Distributor may receive a front end sales charge for purchases of
Class A shares. In addition, the Distributor may receive a contingent deferred
sales charge for certain redemptions of Class B shares and Class C shares of
the Fund redeemed within one to five years following such purchase. For the
period ended June 30, 2000, the Distributor has advised the Fund that it earned
initial sales charges of $1,934,828 for Class A shares and deferred sales
charges of $503,252 and $9,130 for Class B shares and Class C shares,
respectively.
Certain officers and directors of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.

F-121
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Fund provides deferred compensation and retirement plans for its
directors who are not officers of Van Kampen. Under the deferred compensation
plan, directors may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year
period and are based upon each director's years of service to the Fund. The
maximum annual benefit per director under the plan is $2,500.
For the period ended June 30, 2000, the Fund incurred $56,610 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.

3. CAPITAL TRANSACTIONS
The Fund currently offers three classes of shares, Class A, Class B, and Class
C shares. All three classes of shares have identical voting, dividend,
liquidation and other rights. 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 (OCDSCO) of
1.00% imposed in the event of certain redemptions within one year of the
purchase. Class B and Class C shares are offered without a front end sales
charge, but are subject to a CDSC. Class B shares purchased on or after June 1,
1996, and any dividend reinvestment plan Class B shares received on such
shares, automatically convert to Class A shares eight years after the end of
the calendar month in which the shares were purchased. Class B shares purchased
before June 1, 1996, and any dividend reinvestment plan Class B shares received
on such shares, automatically convert to Class A shares seven years after the
end of the calendar month in which the shares were purchased. For the period
ended June 30, 2000, no Class B shares converted to Class A shares. The CDSC
will be imposed on most redemptions made within five years of the purchase for
Class B shares and one year of the purchase for Class C shares as detailed in
the following schedule:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
---------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First................................................. 5.00% 1.00%
Second................................................ 4.00% None
Third................................................. 3.00% None
Fourth................................................ 2.50% None
Fifth................................................. 1.50% None
Thereafter............................................ None None
</TABLE>

F-122
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

Dollars:
Subscribed..................................... $164,653,020 $ 31,396,000
Distributions Reinvested....................... 4,868,559 4,594,000
Redeemed....................................... (75,774,990) (34,991,000)
------------ ------------
Net Increase..................................... $ 93,746,589$ 999,000
============ ============
Ending Paid in Capital........................... $151,211,638 $ 57,462,000+
============ ============

CLASS B:
Shares:
Subscribed..................................... 4,942,210 2,694,000
Distributions Reinvested....................... 491,266 650,000
Redeemed....................................... (1,568,254) (2,106,000)
------------ ------------
Net Increase in Class B Shares Outstanding....... 3,865,222 1,238,000
============ ============

Dollars:
Subscribed..................................... $122,523,186 $ 50,034,000
Distributions Reinvested....................... 11,475,970 10,965,000
Redeemed....................................... (38,577,715) (38,411,000)
------------ ------------
Net Increase..................................... $ 95,421,441 $ 22,588,000
============ ============
Ending Paid in Capital........................... $238,109,018 $142,680,000+
============ ============

CLASS C:
Shares:
Subscribed..................................... 1,782,675 744,000
Distributions Reinvested....................... 82,205 106,000
Redeemed....................................... (741,092) (900,000)
------------ ------------
Net Increase/Decrease in Class C Shares
Outstanding.................................... 1,123,788 (50,000)
============ ============

Dollars:
Subscribed..................................... $ 43,250,396 $ 13,948,000
Distributions Reinvested....................... 1,919,487 1,794,000
Redeemed....................................... (17,532,521) (16,797,000)
------------ ------------
Net Increase/Decrease............................ $ 27,637,362$ (1,055,000)
============ ============
Ending Paid in Capital........................... $ 48,566,641 $ 20,928,000+
============ ============
</TABLE>

* Amounts rounded to the nearest (000).
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences-See Note 1G.

F-123
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

4. INVESTMENT TRANSACTIONS
For the period ended June 30, 2000, the Fund made purchases of $586,383,913 and
sales of $401,833,934 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.

5. BORROWINGS
In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, has entered into a $650 million committed line of credit
facility with a group of banks which expires on November 28, 2000, but is
renewable with the consent of the participating banks. Each fund is permitted
to utilize the facility in accordance with the restrictions of its prospectus.
In the event the demand for the credit facility meets or exceeds $650 million
on a complex-wide basis, each fund will be limited to its pro-rata percentage
based on the net assets of each participating fund. Interest on borrowings is
charged under the agreement at a rate of 0.50% above the federal funds rate per
annum. An annual commitment fee of 0.09% per annum is charged on the unused
portion of the credit facility, which each fund incurs based on its pro-rata
percentage of quarterly net assets. The Fund has not borrowed against the
credit facility during the period.

F-124
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Van Kampen Global Equity
Allocation Fund

We have audited the accompanying statement of assets and liabilities of
Van Kampen Global Equity Allocation Fund (the "Fund"), a fund of Van Kampen
Series Fund, Inc., including the portfolio of investments, as of June 30,
2000, and the related statements of operations, changes in net assets and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The Fund's financial statements and
financial highlights for the periods ended prior to June 30, 2000, were
audited by other auditors whose report, dated August 6, 1999, expressed an
unqualified opinion on those statements.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Global Equity Allocation Fund as of June 30, 2000, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-125
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS THE FOLLOWING PAGES DETAIL YOUR FUND'S
JUNE 30, 2000 PORTFOLIO OF INVESTMENTS AT THE END OF THE
REPORTING PERIOD.

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON STOCKS 84.3%
AUSTRALIA 1.1%
Amcor Ltd. .............................................. 29,493 $ 102,888
AMP Ltd. ................................................ 42,011 426,548
Australian Gas Light Co., Ltd. .......................... 21,082 125,283
Brambles Industries Ltd. ................................ 9,544 292,623
Broken Hill Proprietary Co., Ltd. ....................... 46,676 550,576
Coca-Cola Amatil Ltd. ................................... 27,979 54,309
Coles Myer Ltd. ......................................... 48,275 184,930
Commonwealth Bank of Australia .......................... 12,558 207,682
CSL Ltd. ................................................ 4,634 91,430
Faulding (F.H.) & Co., Ltd. ............................. 5,497 26,869
Fosters Brewing Ltd. .................................... 77,599 217,826
General Property Trust .................................. 62,037 99,669
Goodman Fielder Ltd. .................................... 53,358 39,516
Leighton Holdings Ltd. .................................. 11,930 38,334
Lend Lease Corp., Ltd. .................................. 23,809 302,998
Mayne Nickless Ltd. ..................................... 16,737 34,287
National Australia Bank Ltd. ............................ 62,297 1,037,998
News Corp., Ltd. ........................................ 82,071 1,127,389
Normandy Mining Ltd. .................................... 59,045 31,738
North Broken Hill Peko Ltd. ............................. 19,552 46,126
Orica Ltd. .............................................. 5,336 24,151
Pacific Dunlop Ltd. ..................................... 46,862 41,703
Paperlinx Ltd. .......................................... 9,831 18,613
QBE Insurance Group Ltd. ................................ 18,211 88,883
Rio Tinto Ltd. .......................................... 5,416 89,339
Santos Ltd. ............................................. 26,339 80,071
Schroders plc (a) ....................................... 17,133 23,842
Southcorp Ltd. .......................................... 27,923 80,383
Stockland Trust Group ................................... 14,035 29,548
Suncorp-Metway Ltd. ..................................... 13,823 71,181
TABCORP Holdings Ltd. ................................... 14,228 81,578
Telstra Corp., Ltd. ..................................... 2,531 10,249
Wesfarmers Ltd. ......................................... 8,127 64,556
Westfield Trust ......................................... 60,660 117,419
Westpac Banking Corp., Ltd. ............................. 81,063 583,400
WMC Ltd. ................................................ 78,621 350,905
Woolworths Ltd. ......................................... 50,579 186,234
------------
6,981,074
------------
</TABLE>

F-126 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
AUSTRIA 0.4%
Austria Tabakwerke AG ................................... 3,719 $ 137,630
Bank Austria AG ......................................... 11,436 556,508
Bau Holdings AG ......................................... 795 33,288
Boehler-Udderholm AG .................................... 1,232 43,067
BWT AG .................................................. 285 100,170
Flughafen Wein AG ....................................... 3,589 127,650
Generali AG ............................................. 1,197 192,376
Lenzing AG .............................................. 211 12,478
Mayr-Melnhof Karton AG .................................. 2,026 95,750
Oesterreichische Brau-Beteiligungs AG ................... 1,548 70,118
Oesterreichish Elektrizitaets 'A' ....................... 5,159 528,969
OMV AG .................................................. 4,711 408,894
VA Technologies AG ...................................... 2,535 133,419
Wienerberger Baustoffindustrie AG ....................... 11,680 265,029
------------
2,705,346
------------

BELGIUM 0.0%
Electrabel S.A. ......................................... 629 155,324
UCB S.A. ................................................ 600 22,021
------------
177,345
------------

CANADA 2.3%
Abitibi-Consolidated, Inc. .............................. 7,300 67,853
Agrium, Inc. ............................................ 5,400 46,360
Alberta Energy Co., Ltd. ................................ 6,900 278,929
Alcan Aluminum Ltd. ..................................... 8,500 264,314
Anderson Exploration Ltd. (a) ........................... 4,900 89,103
Bank of Montreal ........................................ 5,800 245,048
Bank of Nova Scotia ..................................... 10,500 257,656
Barrick Gold Corp. ...................................... 16,300 294,751
BCE, Inc. ............................................... 200 4,745
Bombardier, Inc. 'A' .................................... 24,000 652,200
Burlington Resources Canada, Inc. ....................... 800 30,528
Cameco Corp. ............................................ 2,100 25,695
Canadian Imperial Bank of Commerce ...................... 8,700 239,069
Canadian Natural Resources Ltd. (a) ..................... 5,500 159,873
Canadian Occidental Petroleum Ltd. ...................... 7,900 214,416
Canadian Pacific Ltd. ................................... 12,700 329,669
Canadian Tire Corp. 'A' ................................. 3,500 52,761
Cominco Ltd. ............................................ 3,300 45,396
Dofasco, Inc. ........................................... 3,800 62,550
Edperbarascan Corp. 'A' ................................. 6,300 74,103
Fairfax Financial Holdings Ltd. (a) ..................... 300 32,853
George Weston Ltd. ...................................... 5,000 219,699
Gulf Canada Resources Ltd. (a) .......................... 34,600 161,387
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-127
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
CANADA (CONTINUED)
Imperial Oil Ltd. ....................................... 25,700 $ 628,037
Inco Ltd. (a) ........................................... 6,300 96,674
Magna International, Inc. 'A' ........................... 2,800 131,643
MDS, Inc. 'B' ........................................... 2,300 70,743
National Bank of Canada ................................. 3,900 58,264
Noranda, Inc. ........................................... 9,400 92,138
Nortel Networks Corp. ................................... 95,114 6,603,269
Petro-Canada ............................................ 16,000 299,060
Placer Dome, Inc. ....................................... 10,200 95,843
Placer Dome, Inc. ADR ................................... 4,460 42,649
Potash Corp. of Saskatchewan, Inc. ...................... 2,100 114,987
Power Corp. of Canada ................................... 6,300 129,467
Quebecor, Inc. 'B' ...................................... 3,000 87,203
Renaissance Energy Ltd. (a) ............................. 5,600 54,323
Rogers Communication, Inc. 'B' (a) ...................... 6,400 181,491
Royal Bank of Canada .................................... 6,800 348,205
Seagram Co., Ltd. ....................................... 12,900 758,670
Suncor Energy, Inc. (a) ................................. 12,700 293,612
Talisman Energy, Inc. (a) ............................... 6,700 222,156
Thomson Corp. ........................................... 21,900 749,838
TransAlta Corp. ......................................... 5,100 54,299
Transcanada Pipelines Ltd. .............................. 23,444 179,083
Westcoast Energy, Inc. .................................. 5,800 89,394
------------
15,230,006
------------

DENMARK 0.0%
Novo Nordisk A/S 'B' .................................... 300 51,003
------------

FINLAND 1.5%
Hartwall Wind Systems A/S ............................... 2,587 51,817
Kesko Oyj ............................................... 7,181 72,944
Metra Oyj 'B' ........................................... 2,750 47,344
Metso Oyj ............................................... 6,423 77,191
Nokia Oyj ............................................... 172,872 8,813,102
Nordic Baltic Holding AB GDR ............................ 41,179 299,287
Outokumpu Oyj ........................................... 5,090 48,548
Raisio Group plc ........................................ 6,660 13,149
Sampo Insurance Co., Ltd. 'A' ........................... 4,372 177,225
Sanitec Oyj ............................................. 557 5,578
Sonera Group Oyj ........................................ 330 15,030
Tieto Corp. ............................................. 2,951 98,372
UPM-Kymmene Corp. ....................................... 11,107 275,440
------------
9,995,027
------------
</TABLE>

F-128 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
FRANCE 2.4%
Accor S.A. .............................................. 1,980 $ 81,074
Alcatel ................................................. 18,803 1,232,084
Alcatel ADR ............................................. 3,159 210,073
Aventis S.A. ............................................ 11,009 802,753
Axa ..................................................... 3,452 543,264
BIC Corp. ............................................... 643 31,462
BNP Paribas ............................................. 2,881 276,987
Bouygues S.A. ........................................... 292 194,956
Canal Plus .............................................. 1,288 216,215
Cap Gemini S.A. ......................................... 1,817 319,748
Carrefour S.A. .......................................... 7,188 490,882
Casino Guichard Perrachon ............................... 800 74,015
Cie de Saint-Gobain (a) ................................. 1,041 140,595
Dassault Systemes S.A. .................................. 3,172 295,586
Eridania Beghin-Say S.A. ................................ 451 44,135
Essilor International ................................... 141 40,373
France Telecom S.A. ..................................... 176 24,576
Gecina .................................................. 3,970 424,475
Groupe Danone (a) ....................................... 6,932 919,030
Klepierre ............................................... 6,048 553,783
L'air Liquide ........................................... 1,054 137,324
L'Oreal ................................................. 688 595,185
Lagardere S.C.A. ........................................ 1,495 114,074
LVMH Moet Hennessy Louis Vuitton ........................ 921 379,402
Lyonnaise des Eaux S.A. ................................. 1,493 261,308
Michelin (C.G.D.E.) 'B' ................................. 2,247 72,032
Pernod-Ricard ........................................... 742 40,340
Pinault-Printemps-Redoute ............................... 1,235 274,107
PSA Peugeot Citroen S.A. ................................ 329 65,961
Sagem ................................................... 29 33,967
Sanofi-Synthelabo S.A. .................................. 7,696 366,287
Schneider S.A. .......................................... 1,810 126,025
Silic ................................................... 1,790 256,095
Simco S.A. (Registered) ................................. 9,480 691,713
Societe Fonciere Lyonnaise .............................. 2,775 291,411
Societe Generale ........................................ 2,408 144,695
Sodexho S.A. ............................................ 650 117,794
STMicroelectronics N.V. (a) ............................. 3,818 240,346
Thomson CSF S.A. ........................................ 1,735 68,279
Total Fina Elf S.A. 'B' ................................. 21,223 3,250,938
Unibail ................................................. 6,370 880,976
Usinor Sacilor .......................................... 1,988 24,233
Valeo S.A. .............................................. 935 49,941
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-129
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
FRANCE (CONTINUED)
Vivendi ................................................. 4,941 $ 435,691
------------
15,834,190
------------

GERMANY 5.3%
Adidas-Salomon AG ....................................... 1,933 106,197
Allianz AG .............................................. 15,292 5,430,174
BASF AG ................................................. 25,900 1,049,893
Bayer AG ................................................ 31,150 1,191,403
Bayerishe Hypo-und Vereinsbank AG ....................... 15,475 1,011,062
Beiersdorf AG ........................................... 9,800 813,208
Bilfinger & Berger Bau AG ............................... 2,550 33,807
Buderus AG .............................................. 1,800 28,671
Continental AG .......................................... 4,633 77,774
Daimler-Chrysler AG ..................................... 70,379 3,732,281
Daimler-Chrysler AG ADR ................................. 1 52
Deutsche Bank AG ........................................ 21,750 1,816,234
Deutsche Telekom AG ..................................... 1,476 85,032
Douglas Holding AG ...................................... 3,600 105,070
Dresdner Bank AG ........................................ 16,967 686,163
EM.TV & Merchandising AG ................................ 3,000 177,406
E.On AG ................................................. 60,161 2,897,763
FAG Kugelfischer Georg Schaefer AG ...................... 5,850 43,075
Fresenius Medical Care AG ............................... 2,450 192,786
Heidelberger Zement AG .................................. 3,000 183,129
IVG Holding AG .......................................... 32,666 419,059
Karstadt AG ............................................. 5,200 144,329
Linde AG ................................................ 7,030 283,630
Lufthansa AG ............................................ 10,500 244,864
MAN AG .................................................. 5,150 159,642
Merck KGaA .............................................. 5,700 173,973
Metro AG ................................................ 16,407 555,538
Muenchener Rueckversicherungs-Gesellschaft AG (Registered) 10,544 3,298,646
Preussag AG ............................................. 9,400 302,144
RWE AG .................................................. 34,754 1,178,422
SAP AG .................................................. 11,031 1,666,581
Schering AG ............................................. 6,450 350,971
Siemens AG .............................................. 35,933 5,373,979
Thyssen AG .............................................. 24,360 387,319
Volkswagen AG ........................................... 14,730 566,193
WCM Beteiligungs-und Grundbesitz AG ..................... 4,600 106,616
------------
34,873,086
------------
</TABLE>

F-130 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
HONG KONG 0.1%
Bank of East Asia ....................................... 61,519 $ 143,627
CLP Holdings Ltd. ....................................... 24,000 111,757
Hong Kong & China Gas Co., Ltd. ......................... 54,000 60,612
------------
315,996
------------

INDIA 0.4%
Cipla Ltd. .............................................. 8,175 158,181
Container Corp. of India Ltd. ........................... 59,000 227,279
HDFC Bank Ltd. .......................................... 94,000 535,368
Hero Honda Motors Ltd. .................................. 14,000 309,631
Infosys Technologies Ltd. ............................... 3,400 633,462
Tata Engineering & Locomotive Co., Ltd. ................. 51,750 142,907
Tata Tea Ltd. ........................................... 31,000 230,296
Titan Industries Ltd. ................................... 52,000 75,816
------------
2,312,940
------------

ITALY 2.0%
Assicurazioni Generali S.p.A. ........................... 56,537 1,935,903
Autogrill S.p.A. ........................................ 9,498 101,191
Banca di Roma ........................................... 117,350 143,940
Banco Ambrosiano Veneto ................................. 133,149 595,617
Banco Popolare di Milano ................................ 9,262 66,697
Benetton Group S.p.A. ................................... 75,710 158,144
Credito Italiano S.p.A. ................................. 114,248 545,937
Enel S.p.A. ............................................. 470,366 2,081,663
Ente Nazionale Idrocarburi S.p.A. ....................... 464,933 2,682,886
Fiat S.p.A .............................................. 9,136 236,844
Impreglio S.p.A. ........................................ 16,292 9,261
Italgas ................................................. 28,337 125,139
La Rinascente S.p.A. (a) ................................ 9,764 55,319
Mediaset S.p.A. ......................................... 52,052 794,354
Mediobanca S.p.A. ....................................... 14,818 152,640
Olivetti Group (a) ...................................... 2,230 8,104
Parmalat Finanziaria S.p.A. ............................. 77,198 108,827
Pirelli S.p.A. .......................................... 98,315 258,344
R.A.S. .................................................. 25,860 283,650
Reno de Medici S.p.A. ................................... 5,208 10,531
S.A.I. .................................................. 3,112 55,060
S.A.I. RNC .............................................. 1 8
San Paolo-Imi S.p.A. .................................... 33,900 601,084
Sirti S.p.A. ............................................ 7,963 13,253
Snia BPD S.p.A. ......................................... 15,975 15,907
Telecom Italia Mobile S.p.A ............................. 154,724 1,579,057
Telecom Italia Mobile S.p.A. RNC ........................ 35,691 179,401
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-131
<PAGE>

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JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
ITALY (CONTINUED)
Telecom Italia S.p.A. ................................... 4,111 $ 56,463
Telecom Italia S.p.A. RNC ............................... 931 6,172
------------
12,861,396
------------

JAPAN 10.4%
Acom Co., Ltd. .......................................... 4,600 386,566
Advantest Corp. ......................................... 1,600 356,493
Ajinomoto Co., Inc. ..................................... 42,800 548,382
Asahi Bank Ltd. ......................................... 86,500 363,456
Asahi Breweries Ltd. .................................... 16,000 191,285
Asahi Chemical Industry Co., Ltd. ....................... 40,400 285,459
Asahi Glass Co. ......................................... 67,600 754,685
Bank of Fukuoka Ltd. .................................... 15,000 102,030
Bank of Tokyo-Mitsubishi Ltd. ........................... 145,600 1,757,159
Bank of Yokohama ........................................ 58,000 259,551
Benesse Corp. ........................................... 5,700 394,696
Bridgestone Corp. ....................................... 27,000 571,058
Canon, Inc. ............................................. 12,800 636,714
Casio Computer Co., Ltd. ................................ 30,000 336,332
Central Japan Railway Co. ............................... 84 474,822
Chugai Pharmaceutical Ltd. .............................. 16,800 317,339
Chuo Mitsui Trust & Banking Co., Ltd. (a) ............... 20,000 87,051
Credit Saison Co., Ltd. ................................. 1,000 23,176
Dai Nippon Printing Co., Ltd. ........................... 32,800 577,542
Daiei, Inc. ............................................. 36,800 137,985
Daiichi Pharmaceutical Co., Ltd. ........................ 4,000 101,371
Daikin Industries Ltd. .................................. 1,800 41,801
Daiwa Bank Ltd. ......................................... 98,000 253,898
Daiwa House Industry .................................... 31,800 231,883
Daiwa Securities Co., Ltd. .............................. 40,000 527,580
Denso Corp. ............................................. 15,600 379,179
East Japan Railway Co. .................................. 202 1,172,283
Ebara Corp. ............................................. 21,800 295,130
Eisai Co., Ltd. ......................................... 7,000 224,222
Fanuc Co. ............................................... 8,200 833,558
Fuji Bank ............................................... 104,000 789,712
Fuji Photo Film Co. ..................................... 22,000 899,524
Fuji Soft ABC, Inc. (First Section) ..................... 1,200 71,110
Fujitsu Ltd. ............................................ 27,600 954,279
Furukawa Electric Co., Ltd. ............................. 26,800 559,254
Gunma Bank Ltd. ......................................... 9,000 46,380
Hirose Electric Co., Ltd. ............................... 1,000 155,542
Hitachi Ltd. ............................................ 49,000 706,298
Honda Motor Co. ......................................... 17,000 578,171
</TABLE>

F-132 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
JAPAN (CONTINUED)
Hoya Corp. .............................................. 1,000 $ 89,500
Industrial Bank of Japan Ltd. ........................... 92,000 696,858
Ito-Yokado Co., Ltd. .................................... 15,000 901,597
Itochu Corp. ............................................ 3,000 15,121
Japan Airlines Co., Ltd. ................................ 21,000 79,731
Japan Energy Corp. ...................................... 5,000 5,370
Japan Tobacco, Inc. ..................................... 158 1,385,821
Joyo Bank, Ltd. ......................................... 6,000 23,063
Jusco Co. ............................................... 13,800 261,322
Kadokawa Shoten Publishing Co., Ltd. .................... 100 10,081
Kajima Corp. ............................................ 61,600 196,154
Kaneka Corp. ............................................ 3,000 33,040
Kansai Electric Power Co. ............................... 46,400 829,688
KAO Corp. ............................................... 28,800 879,099
Kawasaki Heavy Industries, Ltd. ......................... 6,000 9,157
Kawasaki Steel Corp. .................................... 57,000 81,624
Kinden Corp. ............................................ 1,000 6,274
Kinki Nippon Railway Co., Ltd. .......................... 54,600 221,188
Kirin Brewery Co., Ltd. ................................. 65,600 818,880
Komatsu Ltd. ............................................ 54,600 383,735
Konami Co., Ltd. ........................................ 500 31,561
Kubota Corp. ............................................ 82,400 298,874
Kuraray Co., Ltd. ....................................... 2,000 22,912
Kyocera Corp. ........................................... 3,100 525,404
Kyowa Hakko Kogyo Co., Ltd. ............................. 6,800 66,434
Marubeni Corp. .......................................... 4,200 14,442
Marui Co., Ltd. ......................................... 10,000 191,248
Matsushita Electric Industrial Co., Ltd. ................ 62,400 1,616,656
Minebea Co., Ltd. ....................................... 2,000 25,060
Mitsubishi Chemical Corp. ............................... 58,000 237,694
Mitsubishi Corp. ........................................ 10,000 90,348
Mitsubishi Electric Corp. ............................... 85,400 923,635
Mitsubishi Estate Co., Ltd. ............................. 33,000 387,998
Mitsubishi Heavy Industries Ltd. ........................ 162,000 717,321
Mitsubishi Materials Corp. .............................. 40,600 166,003
Mitsubishi Trust & Banking Corp. ........................ 44,000 341,156
Mitsui & Co. ............................................ 12,200 93,099
Mitsui Fire & Marine Insurance Co., Ltd. ................ 3,000 14,414
Mitsui Fudosan Co., Ltd. ................................ 22,000 238,353
Mitsukoshi Ltd. ......................................... 25,800 114,240
Murata Manufacturing Co., Inc. .......................... 4,000 573,555
Mycal Corp. ............................................. 10,800 36,934
NAMCO Ltd. .............................................. 500 17,994
NEC Corp. ............................................... 21,600 677,639
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-133
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
JAPAN (CONTINUED)
New OJI Paper Co., Ltd. ................................. 67,600 $ 464,911
NGK Insulators Ltd. ..................................... 21,800 269,869
NGK Spark Plug Co., Ltd. ................................ 21,000 324,660
Nichiei Co., Ltd. (Kyoto) ............................... 2,700 44,260
Nidec Corp. ............................................. 1,500 130,011
Nikon Corp. ............................................. 1,000 37,025
Nintendo Co., Ltd. ...................................... 4,600 802,600
Nippon Express Co., Ltd. ................................ 33,000 202,393
Nippon Meat Packers, Inc. ............................... 13,800 201,517
Nippon Oil Co. .......................................... 90,600 414,825
Nippon Paper Industries Co., Ltd. ....................... 5,000 34,104
Nippon Sheet Glass Co., Ltd. ............................ 2,000 27,773
Nippon Steel Corp. ...................................... 269,000 565,142
Nippon Telegraph & Telephone Corp. ADR .................. 271 3,599,887
Nippon Yusen Kabushiki Kaisha ........................... 56,400 270,988
Nissan Motor Co., Ltd. .................................. 63,400 373,310
Nissin Food Products Co., Ltd. .......................... 400 10,175
Nitto Denko Corp. ....................................... 1,000 38,532
Nomura Securities Co., Ltd. ............................. 64,000 1,564,652
NSK Ltd. ................................................ 4,000 35,046
Obayashi Corp. .......................................... 7,000 30,929
Olympus Optical Co., Ltd. ............................... 2,000 35,819
Onward Kashiyama Co., Ltd. .............................. 11,000 149,230
Oriental Land Co., Ltd. ................................. 3,100 316,294
Orix Corp. .............................................. 2,200 324,368
Osaka Gas Co. ........................................... 99,200 285,044
Pioneer Electronic Corp. ................................ 7,000 272,363
Promise Co., Ltd ........................................ 3,700 292,110
Rohm Co. ................................................ 1,300 379,669
Sakura Bank Ltd. ........................................ 103,200 712,663
Sankyo Co., Ltd. ........................................ 25,800 582,138
Sanyo Electric Co., Ltd. ................................ 78,400 704,636
Secom Co. ............................................... 9,800 715,531
Sega Enterprises Ltd. (a) ............................... 6,100 93,674
Sekisui Chemical Co., Ltd. .............................. 2,000 7,688
Sekisui House Ltd. ...................................... 31,800 293,898
Sharp Corp. ............................................. 23,600 416,883
Shimamura Co., Ltd. ..................................... 100 11,673
Shimano, Inc. ........................................... 4,700 112,912
Shimizu Corp. ........................................... 45,800 130,740
Shin-Etsu Chemical Co. .................................. 6,000 304,112
Shionogi & Co., Ltd. .................................... 7,000 132,884
Shiseido Co., Ltd. ...................................... 14,000 216,308
Shizuoka Bank ........................................... 26,800 227,236
</TABLE>

F-134 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
JAPAN (CONTINUED)
Showa Shell Sekiyu K.K. ................................. 2,000 $ 9,873
Skylark Co., Ltd. ....................................... 9,000 355,269
SMC Corp. ............................................... 2,700 507,466
Softbank Corp. .......................................... 4,000 542,654
Sony Corp. .............................................. 12,800 1,193,839
Sumitomo Bank Ltd. ...................................... 102,000 1,249,234
Sumitomo Chemical Co. ................................... 60,200 361,841
Sumitomo Corp. .......................................... 6,400 71,932
Sumitomo Electric Industries Ltd. ....................... 48,800 835,823
Sumitomo Marine & Fire Insurance Co., Ltd. .............. 2,000 11,626
Sumitomo Metal Industries Ltd. (a) ...................... 20,400 14,030
Sumitomo Metal Mining Co. ............................... 19,000 89,500
Taisei Corp., Ltd. ...................................... 63,600 101,861
Taisho Pharmaceutical Co. ............................... 21,000 751,802
Taiyo Yuden Co., Ltd. ................................... 3,000 187,668
Takara Shuzo Co., Ltd. .................................. 1,000 24,919
Takeda Chemical Industries Ltd. ......................... 53,800 3,527,703
Takefuji Corp. .......................................... 4,700 567,215
Teijin Ltd. ............................................. 35,600 173,397
Terumo Corp. ............................................ 10,000 338,217
The 77 Bank Ltd. ........................................ 1,000 7,989
Tobu Railway Co. ........................................ 33,800 96,485
Tohoku Electric Power Co., Ltd. ......................... 16,400 220,943
Tokai Bank Ltd. ......................................... 74,600 367,571
Tokio Marine & Fire Insurance Co. ....................... 52,400 604,245
Tokyo Broadcasting System, Inc. ......................... 9,000 388,337
Tokyo Electric Power Co. ................................ 59,000 1,436,855
Tokyo Electron Ltd. ..................................... 2,000 273,588
Tokyo Gas Co. ........................................... 100,200 281,309
Tokyu Corp. ............................................. 38,800 191,542
Toppan Printing Co., Ltd. ............................... 26,800 283,288
Toray Industries, Inc. .................................. 40,500 164,068
Toshiba Corp. ........................................... 43,000 484,912
Tostem Corp. ............................................ 1,000 16,298
Toto Ltd. ............................................... 32,800 251,535
Toyo Seikan Kaisha, Ltd. ................................ 2,000 37,307
Toyota Motor Corp. ...................................... 75,000 3,412,784
Trans Cosmos, Inc. ...................................... 100 14,998
Ube Industries Ltd. ..................................... 61,600 192,672
Uni-Charm Corp.First Section ............................ 400 24,193
World Co., Ltd. ......................................... 400 17,335
Yamanouchi Pharmaceutical Co., Ltd. ..................... 20,000 1,090,960
Yamato Transport Co., Ltd. .............................. 2,000 49,649
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-135
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
JAPAN (CONTINUED)
Yokogawa Electric Corp. ................................. 9,000 $ 89,877
------------
68,808,324
------------

KOREA 0.8%
Hyundai Motor Co., Ltd. ................................. 16,960 217,509
Kookmin Bank ............................................ 17,860 227,450
Korea Electric Power Corp. .............................. 27,710 859,861
LG Chemical Ltd. ........................................ 15,070 301,393
LG Electronics, Inc. .................................... 6,890 192,792
Pohang Iron & Steel Co., Ltd. ........................... 2,360 206,232
Samsung Electro-Mechanics Co. ........................... 8,690 544,769
Samsung Electronics Co. ................................. 6,410 2,121,289
Samsung Securities Co., Ltd. ............................ 11,422 250,971
Shinhan Bank ............................................ 39,720 374,036
SK Telecom Co., Ltd. .................................... 600 196,408
------------
5,492,710
------------

NETHERLANDS 4.4%
ABN Amro Holdings N.V. .................................. 35,875 878,021
Aegon N.V. (a) .......................................... 14 499
Aegon N.V. .............................................. 45,068 1,602,080
Akzo Nobel N.V. ......................................... 5,223 221,685
Buhrmann N.V. ........................................... 124 3,542
Elsevier N.V. ........................................... 24,030 290,852
Getronics N.V. .......................................... 8,613 132,673
Hagemeyer N.V. .......................................... 4,483 123,487
Heineken N.V. ........................................... 24,024 1,460,770
ING Groep N.V. .......................................... 38,254 2,583,251
Koninklijke Ahold N.V. .................................. 24,527 721,231
KPN N.V. ................................................ 674 30,118
Oce N.V. ................................................ 1,454 23,784
Philips Electronics N.V. ................................ 52,888 2,491,957
Rodamco Continental Europe N.V. ......................... 17,180 703,789
Royal Dutch Petroleum ................................... 231,391 14,367,588
Stork N.V. .............................................. 126 1,707
TNT Post Group N.V. ..................................... 19,836 534,477
Uni-Invest N.V. ......................................... 26,763 336,950
Unilever N.V. ........................................... 1 43
Unilever N.V. CVA ....................................... 44,465 2,037,831
Vedior N.V. ............................................. 2,980 36,808
Wolters Kluwer N.V. ..................................... 11,882 316,191
------------
28,899,334
------------

PORTUGAL 0.0%
Electricidade de Portugal S.A. .......................... 6,933 125,773
------------
</TABLE>

F-136 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
SINGAPORE 1.2%
Chartered Semiconductor Manufacturing Ltd. (a) .......... 65,000 $ 568,162
City Developments Ltd. .................................. 77,000 298,640
Creative Technology Ltd. ................................ 7,000 168,973
Cycle & Carriage Ltd. ................................... 26,000 61,106
DBS Group Holdings Ltd. ................................. 124,639 1,601,728
DBS Land Ltd. ........................................... 162,750 211,033
First Capital Corp. ..................................... 10,000 9,551
Fraser & Neave Ltd. ..................................... 36,000 128,162
Hotel Properties Ltd. ................................... 29,000 25,852
Keppel Corp. ............................................ 69,000 149,384
NatSteel Ltd. ........................................... 25,000 76,700
Neptune Orient Lines Ltd. (a) ........................... 105,000 97,250
OMNI Industries Ltd. .................................... 47,000 77,540
Oversea-Chinese Banking Corp., Ltd. ..................... 117,050 806,307
Parkway Holdings Ltd. ................................... 45,000 115,138
Sembcorp Industries Ltd. ................................ 162,235 176,557
Singapore Airlines Ltd. ................................. 121,000 1,197,742
Singapore Press Holdings Ltd. ........................... 36,000 562,663
Singapore Technology Engineering Ltd. ................... 289,000 424,926
Singapore Telecommunications Ltd. ....................... 387,490 567,496
United Industrial Corp., Ltd. ........................... 136,000 64,162
United Overseas Bank Ltd. ............................... 95,080 621,942
United Overseas Land Ltd. ............................... 21,000 18,721
Venture Manufacturing Ltd. .............................. 17,000 173,198
------------
8,202,933
------------

SPAIN 1.6%
Acerinox S.A. ........................................... 2,484 71,788
ACS S.A. ................................................ 2,802 78,840
Altadis S.A. ............................................ 8,964 137,567
Autopistas Concesionaria Espanola S.A. .................. 13,279 115,382
Azucarere Ebro Agricolas S.A. ........................... 3,766 44,900
Banco Bilbao Vizcaya S.A. (Registered) .................. 148,632 2,218,621
Banco Santander Central Hispano S.A. .................... 107,359 1,131,507
Corporacion Financiera Alba S.A. ........................ 4,518 118,936
Corporacion Mapfre S.A. ................................. 3,696 46,780
Empresa Nacional de Cellulosas S.A. ..................... 34 554
Endesa S.A. ............................................. 61,719 1,194,421
Fomento de Construcciones y Contratas S.A. .............. 7,528 142,168
Gas Natural SDG S.A. .................................... 27,755 497,686
Grupo Dragados S.A. ..................................... 8,955 64,145
Iberdrola S.A. .......................................... 55,625 716,243
Immobiliaria Metropolitana Vasco Central S.A. ........... 29,825 500,668
Inmobiliaria Colonial S.A. .............................. 12,700 169,585
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-137
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
SPAIN (CONTINUED)
Prima Inmobiliaria S.A. (a) ............................. 29,360 $ 299,637
Repsol S.A. ............................................. 71,697 1,425,816
Sociedad General de Aguas de Barcelona S.A. ............. 8,737 116,667
Sol Melia S.A. (a) ...................................... 4,941 55,139
Telefonica S.A. (a) ..................................... 2,507 53,801
TelePizza S.A. (a) ...................................... 10,943 61,581
Union Electrica Fenosa S.A. ............................. 18,507 334,504
Vallehermoso S.A. ....................................... 115,795 690,281
Viscofan Industria Navarra de Envolturas Calulosicas S.A. 68 445
Zardoya-Otis S.A. ....................................... 2,528 22,376
------------
10,310,038
------------

SWEDEN 2.2%
Atlas Copco AB 'A' ....................................... 6,650 128,059
Atlas Copco AB 'B' ...................................... 3,600 67,286
Castellum AB ............................................ 38,110 410,110
Diligentia AB ........................................... 2,376 24,223
Drott AB 'B' ............................................ 32,820 353,183
Electrolux AB 'B' ....................................... 15,900 245,848
Fastighets AB Tornet .................................... 20,570 269,125
ForeningsSparbanken AB 'A' ............................... 16,350 238,916
Hennes & Mauritz AB 'B' ................................. 42,400 883,734
JM AB 'B' ............................................... 17,100 290,553
NetCom Systems AB 'B' (a) ............................... 10 737
OM Gruppen AB ........................................... 3,800 169,597
Sandvik AB .............................................. 14,400 301,767
SCA AB 'B' .............................................. 11,500 218,198
Securitas AB 'B' ........................................ 20,200 427,889
Skandia Forsakrings AB .................................. 53,400 1,409,402
Skandinaviska Enskilda Banken AB 'A' ..................... 18,600 220,174
Skanska AB 'B' .......................................... 6,500 230,092
SKF AB 'B' .............................................. 4,500 75,187
Svenska Handelsbanken 'A' ................................ 20,100 291,436
Svenskt Stal AB 'A' ...................................... 4,200 41,629
Telefonaktiebolaget LM Ericsson AB 'B' .................. 393,500 7,778,177
Trelleborg AB 'B' ....................................... 7,600 52,945
Volvo AB 'A' ............................................. 4,600 96,398
Volvo AB 'B' ............................................ 9,500 206,077
Wm-Data AB 'B' .......................................... 13,500 74,167
------------
14,504,909
------------

SWITZERLAND 3.1%
ABB Ltd. (New) .......................................... 10,571 1,263,846
Adecco S.A. (Registered) ................................ 670 568,624
</TABLE>

F-138 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
SWITZERLAND (CONTINUED)
Alusuisse-Lonza Holding AG (Registered) (a) ............. 145 $ 94,382
CS Holding AG (Registered) .............................. 5,850 1,162,406
Georg Fischer AG (Registered) ........................... 115 35,702
Givaudan (Registered) (a) ............................... 358 108,840
Nestle S.A. (Registered) ................................ 2,810 5,617,935
Novartis AG (Registered) ................................ 2,651 4,194,589
Roche Holding AG (Bearer) ............................... 58 612,816
Roche Holding AG-Genusshein ............................. 293 2,849,085
Schweizerische Rueckver (Registered) .................... 535 1,089,263
SMH AG (Bearer) ......................................... 185 234,946
Sulzer AG (Registered) (a) .............................. 150 99,657
Swisscom AG (Registered) ................................ 40 13,839
UBS AG .................................................. 8,862 1,296,931
Valora Holding AG ....................................... 235 65,186
Zurich Allied AG ........................................ 1,725 851,356
------------
20,159,403
------------

UNITED KINGDOM 6.9%
Abbey National plc ...................................... 8,441 100,873
Allied Zurich plc ....................................... 14,047 166,060
Amvescap plc ............................................ 6,073 97,378
Anglian Water plc (a) ................................... 3,144 29,011
Arjo Wiggins Appleton plc ............................... 10,942 42,540
ARM Holdings plc (a) .................................... 8,540 91,463
AstraZeneca Group plc ................................... 46,252 2,158,431
BAA plc ................................................. 12,317 98,749
Barclays plc ............................................ 9,430 234,370
Bass plc ................................................ 8,507 95,613
BG Group plc ............................................ 76,693 495,377
BICC plc ................................................ 8,434 9,760
BOC Group plc ........................................... 16,708 240,105
Boots Co. plc ........................................... 10,715 81,529
BP Amoco plc ............................................ 1,304,732 12,513,048
British Aerospace plc ................................... 33,276 207,387
British American Tobacco plc ............................ 80,563 537,436
British Land Co. plc .................................... 222,583 1,363,640
British Sky Broadcasting Group plc ...................... 16,353 319,604
British Telecommunications plc .......................... 810 10,464
Burford Holdings plc .................................... 135,210 198,907
Burmah Castrol plc ...................................... 5,702 143,699
Cadbury Schweppes plc ................................... 95,408 626,364
Canary Wharf Finance plc (a) ............................ 95,163 533,346
Capita Group plc ........................................ 1,858 45,447
Caradon plc ............................................. 7,551 17,248
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-139
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Centrica plc ............................................ 93,324 $ 311,282
Commercial Union plc .................................... 11,049 183,852
Compass Group plc ....................................... 5,715 75,255
Corus Group plc (a) ..................................... 14,250 20,802
Diageo plc .............................................. 160,594 1,440,577
EMI Group plc ........................................... 8,651 78,518
GKN plc ................................................. 13,825 176,297
Glaxo Wellcome plc ...................................... 94,121 2,743,600
Granada Group plc ....................................... 15,448 154,230
Grantchester Holdings plc .............................. 308,370 793,001
Great Portland Estates plc .............................. 141,350 498,759
Great Universal Stores plc .............................. 9,352 60,124
Halifax plc ............................................. 13,399 128,503
Hammerson plc ........................................... 52,010 347,746
Hays plc ................................................ 16,030 89,356
Hilton Group plc ........................................ 16,186 56,804
HSBC Holdings plc ....................................... 46,011 525,834
Imperial Chemical Industries plc ........................ 3,023 23,985
Invensys plc ............................................ 38,979 146,230
Kingfisher plc .......................................... 15,045 136,893
Land Securities plc ..................................... 71,615 855,822
Lasmo plc ............................................... 21,525 45,748
Legal & General Group plc .............................. 103,897 242,820
Lloyds TSB Group plc .................................... 33,981 320,755
Logica plc .............................................. 3,584 84,793
Marconi plc ............................................. 32,888 427,847
Marks & Spencer plc ..................................... 30,267 106,335
MEPC plc ................................................ 4,116 33,871
Misys plc ............................................... 4,088 34,506
National Grid Group plc ................................. 27,376 215,755
National Power plc ...................................... 27,982 178,202
New Dixons Group plc (a) ................................ 15,349 62,458
Nycomed Amersham plc .................................... 5,746 57,019
Pearson plc ............................................. 6,042 191,934
Peninsular & Oriental Steam Navigation Co. .............. 6,878 58,889
Pilkington plc .......................................... 19,634 27,918
Prudential Corp. plc .................................... 19,979 292,551
Psion plc ............................................... 2,590 25,035
Railtrack Group plc ..................................... 5,250 81,521
Rank Group plc .......................................... 9,767 22,605
Reed International plc .................................. 12,578 109,404
Rentokil Initial plc .................................... 28,483 64,629
Reuters Holdings plc .................................... 12,729 217,006
Rexam plc ............................................... 5,206 20,239
</TABLE>

F-140 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Royal Bank of Scotland Group plc ........................ 19,774 $ 330,828
Rtz Corp. plc (Registered) .............................. 6,916 112,988
Sainsbury (J) plc ....................................... 18,316 83,120
Schroders Property Fund ................................. 1,775 31,898
Scottish Power plc ...................................... 35,174 297,963
SEMA Group plc .......................................... 4,172 59,323
Slough Estates plc ...................................... 109,654 607,097
Smith & Nephew plc ...................................... 10,109 37,312
SmithKline Beecham plc .................................. 144,385 1,889,256
Taylor Woodrow plc ...................................... 7,878 18,233
Tesco plc ............................................... 35,663 110,862
Thames Water plc ........................................ 8,573 110,880
The Sage Group plc ...................................... 10,990 88,941
3I Group plc ............................................ 5,379 110,579
TI Group plc ............................................ 5,966 32,489
Unilever plc ............................................ 136,609 826,593
United Utilities plc .................................... 6,715 66,432
Vodafone AirTouch plc ................................... 2,048,463 8,273,551
WPP Group plc ........................................... 6,935 101,234
------------
45,416,738
------------

UNITED STATES 38.2%
A.G. Edwards, Inc. ...................................... 2,500 97,500
A.H. Belo Corp. 'A' ...................................... 4,200 72,713
Abbott Laboratories ..................................... 67,400 3,003,512
Abercrombie & Fitch Co. 'A' (a) .......................... 3,000 36,563
ACNielsen Corp. (a) ..................................... 2,100 46,200
ADC Telecom, Inc. (a) ................................... 7,800 654,225
Adobe Systems, Inc. ..................................... 14,100 1,833,000
AES Corp. (a) ........................................... 8,800 401,500
AFLAC, Inc. ............................................. 7,400 339,937
Agilent Technologies, Inc. (a) .......................... 4,004 295,295
AGL Resources, Inc. ..................................... 2,100 33,469
Airborne Freight Corp. .................................. 2,000 37,875
AK Steel Holding Corp. .................................. 2,900 23,200
Alaska Air Group, Inc. (a) .............................. 1,100 29,838
Albertson's, Inc. ....................................... 15,000 498,750
Alcoa, Inc. ............................................. 38,800 1,125,200
Allegheny Energy, Inc. .................................. 3,100 84,863
Allegheny Technologies, Inc. ............................ 15,750 283,500
Alliant Energy Corp. .................................... 3,800 98,800
Allied Waste Industries, Inc. (a) ....................... 5,400 54,000
Allstate Corp. .......................................... 24,300 540,675
Alltel Corp. ............................................ 1,005 62,247
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-141
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
Altera Corp. (a) ........................................ 4,800 $ 489,300
Amazon.com, Inc. (a) .................................... 4,900 177,931
AMBAC Finacial Group, Inc. .............................. 2,000 109,625
Amercian Electric Power Co., Inc. ....................... 6,040 178,935
America Online, Inc. (a) ................................ 27,700 1,461,175
American Express Co. .................................... 22,600 1,178,025
American Financial Group, Inc. .......................... 2,200 54,588
American Home Products Corp. ............................ 53,700 3,154,875
American International Group, Inc. ...................... 40,537 4,763,097
American Power Conversion Corp. (a) ..................... 13,800 563,212
American Standard Cos, Inc. (a) ......................... 2,400 98,400
American Telephone & Telegraph Co. ...................... 55,545 1,756,611
American Water Works, Inc. .............................. 2,400 60,000
Amgen, Inc. (a) ......................................... 13,100 920,275
AMR Corp. (a) ........................................... 11,600 306,675
Anadarko Petroleum Corp. ................................ 45,000 2,219,062
Analog Devices (a) ...................................... 8,600 653,600
Anheuser-Busch Cos., Inc. 'A' ............................ 18,900 1,411,594
Apache Corp. ............................................ 42,200 2,481,887
Apollo Group, Inc. 'A' (a) ............................... 2,600 72,800
Apple Computer, Inc. (a) ................................ 600 31,425
Applied Materials, Inc. (a) ............................. 9,300 842,812
Arch Chemicals, Inc. .................................... 1,200 26,250
Arrow Electronics, Inc. (a) ............................. 3,100 96,100
Arvin Industries, Inc. .................................. 1,500 26,063
Associated Banc-Corp. ................................... 2,640 57,585
Associates First Capital Corp. 'A' ....................... 1 22
AT&T Corp. Liberty Media Group 'A' (a) ................... 44,598 1,081,501
Atmel Corp. (a) ......................................... 7,100 261,812
Automatic Data Processing, Inc. ......................... 20,400 1,092,675
Avnet, Inc. ............................................. 1,200 71,100
Avon Products, Inc. ..................................... 10,700 476,150
Baker Hughes, Inc. ...................................... 21,000 672,000
Bank of America Corp. ................................... 37,400 1,608,200
Bank of New York Co., Inc. .............................. 14,100 655,650
Bank One Corp. .......................................... 24,700 656,094
Barnes & Noble, Inc. (a) ................................ 2,100 46,725
Barrett Resources Corp. (a) ............................. 11,900 362,206
Baxter International, Inc. .............................. 7,800 548,437
Beckman Coulter, Inc. ................................... 1,200 70,050
Bed Bath & Beyond, Inc. (a) ............................. 4,000 145,000
Bell Atlantic Corp. ..................................... 34,000 1,727,625
BellSouth Corp. ......................................... 27,700 1,180,712
Bergen Brunswig Corp. 'A' ................................ 3,000 16,500
</TABLE>

F-142 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
Best Buy Co., Inc. (a) .................................. 6,000 $ 379,500
Biogen, Inc. (a) ........................................ 4,200 270,900
BJ Services Co. (a) ..................................... 2,700 168,750
BJ's Wholesale Club, Inc. (a) ........................... 2,800 92,400
Boeing Co. .............................................. 26,700 1,116,394
Borg-Warner Automotive, Inc. ............................ 1,100 38,638
Bowater, Inc. ........................................... 2,000 88,250
Brinker International, Inc (a) .......................... 2,500 73,125
Bristol-Myers Squibb Co. ................................ 77,700 4,526,025
Broadwing, Inc. ......................................... 4,500 116,719
Burlington Northern Railroad Co. ........................ 23,300 534,444
Burlington Resources, Inc. .............................. 86,400 3,304,800
Cabot Corp. ............................................. 2,600 70,850
Cadence Design Systems, Inc. (a) ........................ 6,500 132,438
Cambridge Tech Partner, Inc. (a) ........................ 1,900 16,566
Campbell Soup Co. ....................................... 17,500 509,687
Cardinal Health, Inc. ................................... 1,058 78,292
Carlisle Cos., Inc. ..................................... 1,100 49,500
Carpenter Technology Corp. .............................. 1,200 25,350
Caterpillar, Inc. ....................................... 8,200 277,775
CBRL Group, Inc. ........................................ 2,500 36,719
Cendant Corp. (a) ....................................... 31,100 435,400
Century Telephone Enterprises, Inc. ..................... 3,900 112,125
Chase Manhattan Corp. ................................... 14,550 670,209
Chevron Corp. ........................................... 29,300 2,485,006
Chiron Corp. (a) ........................................ 5,500 261,250
Chris-Craft Industries, Inc. (a) ........................ 1,591 105,105
Cigna Corp. ............................................. 20,400 1,907,400
Cintas Corp. ............................................ 4,650 170,597
Circle.com (a) .......................................... 525 1,936
Cisco Systems, Inc. (a) ................................. 66,000 4,195,125
Citigroup, Inc. ......................................... 77,600 4,675,400
Citrix Systems, Inc. (a) ................................ 5,200 98,475
Clayton Homes, Inc. ..................................... 74,700 597,600
Clorox Co. .............................................. 8,276 370,868
CMS Energy Corp. ........................................ 2,800 61,950
CNF Transportation, Inc. ................................ 1,800 40,950
Coastal Corp. ........................................... 4,500 273,937
Coca-Cola Co. ........................................... 73,800 4,238,887
Columbia Energy Group ................................... 1,900 124,688
Comdisco, Inc. .......................................... 4,800 107,100
Computer Associates International, Inc. ................. 12,608 645,372
Comsat Corp. ............................................ 407 9,565
Comverse Technology, Inc. (a) ........................... 3,900 362,700
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-143
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
Concord EFS, Inc. (a) ................................... 4,350 $ 113,100
Conectiv, Inc. .......................................... 4,100 63,806
Consolidated Edison, Inc. ............................... 4,400 130,350
Consolidated Papers, Inc. ............................... 3,900 142,594
Constellation Energy Group .............................. 39,800 1,295,987
Convergys Corp. (a) ..................................... 4,400 228,250
Corning, Inc. ........................................... 7,300 1,970,087
Covance, Inc. (a) ....................................... 1,800 15,863
COX Communications, Inc. 'A' (a) ........................ 831 37,862
CP&L, Inc. (a) .......................................... 2,900 92,619
Crompton Corp. .......................................... 2,800 34,300
Crown Cork & Seal Co., Inc. ............................. 15,500 232,500
CVS Corp. ............................................... 11,200 448,000
Dean Foods Co. .......................................... 1,200 38,025
Deere & Co. ............................................. 12,600 466,200
Dell Computer Corp. (a) ................................. 23,700 1,168,706
Delphi Automotive Systems Corp. ......................... 24,809 361,281
DENTSPLY International, Inc. ............................ 2,300 70,869
Devon Energy Corp. ...................................... 21,800 1,224,887
Dial Corp. .............................................. 3,200 33,200
Diebold, Inc. ........................................... 1,900 52,963
Dole Food Co., Inc. ..................................... 2,000 28,000
Dollar Tree Stores, Inc. (a) ............................ 2,850 112,753
Dominion Resources, Inc. ................................ 4,900 210,087
Donaldson Co., Inc. ..................................... 3,400 67,150
Dow Chemical Co. ........................................ 27,600 833,175
DPL, Inc. ............................................... 322 7,064
DTE Energy Co. .......................................... 2,900 88,631
Du Pont (EI) de Nemours Co. ............................. 19,400 848,750
Duke Power Co. .......................................... 42,700 2,407,212
Dynergy, Inc. 'A' ........................................ 2,900 198,106
Eastman Kodak Co. ....................................... 6,300 374,850
eBay, Inc. (a) .......................................... 6,800 369,325
Edison International .................................... 6,300 129,150
Edwards Lifesciences Corp. (a) .......................... 1,280 23,680
El Paso Energy Corp. .................................... 7,500 382,031
Electronic Data Systems Corp. ........................... 17,500 721,875
Electronic Arts, Inc. ................................... 2,000 145,875
Eli Lilly & Co. ......................................... 44,700 4,464,412
EMC Corp. (a) ........................................... 19,800 1,523,362
Energy East Corp. ....................................... 3,600 68,625
Enron Corp. ............................................. 31,100 2,005,950
Ensco International, Inc. ............................... 4,200 150,412
Entergy Corp. ........................................... 4,900 133,219
</TABLE>

F-144 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
EOG Resources, Inc. ..................................... 22,400 $ 750,400
Equity Office Properties Trust .......................... 17,000 468,562
Exxon Mobil Corp. ....................................... 140,309 11,014,256
Family Dollar Stores, Inc. .............................. 5,400 105,638
Fannie Mae Corp. ........................................ 19,900 1,038,531
Fastenal Co. ............................................ 1,400 70,875
Federal Signal Corp. .................................... 2,400 39,600
Federal-Mogul Corp. ..................................... 2,000 19,125
FedEx Corp (a). ......................................... 12,100 459,800
Finova Group, Inc. ...................................... 1,700 22,100
First Data Corp. ........................................ 18,900 937,912
First Union Corp. (N.C.) ................................ 19,400 481,362
First Virginia Banks, Inc. .............................. 1,500 52,219
FirstEnergy Corp. ....................................... 4,900 114,538
Fiserv, Inc. (a) ........................................ 3,300 142,725
FleetBoston Financial Corp. ............................. 1,500 51,000
Florida Progress Corp. .................................. 1,900 89,063
Flowers Industries, Inc. ................................ 3,700 73,769
Ford Motor Co. .......................................... 30,600 1,315,800
Forest Laboratories, Inc. 'A' (a) ........................ 2,500 252,500
Foundation Health Systems 'A' (a) ........................ 6,600 85,800
FPL Group, Inc. ......................................... 3,400 168,300
Furniture Brands International, Inc. (a) ................ 1,800 27,225
Gannett Co., Inc. ....................................... 9,200 550,275
Gap, Inc. ............................................... 23,325 728,906
Gatx Corp. .............................................. 2,600 88,400
General Dynamics Corp. .................................. 2,400 125,400
General Electric Co. .................................... 223,699 11,856,047
General Motors Corp. .................................... 17,000 987,062
Genuine Parts Co. ....................................... 22,800 456,000
Genzyme Corp. (a) ....................................... 2,400 142,650
Genzyme Surgical Products (a) ........................... 429 4,263
Georgia-Pacific Corp. (Timber Group) .................... 3,100 67,038
Gillette Co. ............................................ 35,400 1,236,787
Global Marine, Inc. (a) ................................. 7,900 222,681
Grant Prideco, Inc. (a) ................................. 3,500 87,500
H.J. Heinz Co. .......................................... 21,800 953,750
Halliburton Co. ......................................... 61,100 2,883,156
Hannaford Brothers Co. .................................. 1,900 136,563
Harley-Davidson, Inc. ................................... 9,400 361,900
Harsco Corp. ............................................ 1,500 38,250
Health Management Associates, Inc. 'A' (a) ............... 7,400 96,663
HEALTHSOUTH Corp. (a) ................................... 20,400 146,625
Herman Miller, Inc. ..................................... 2,500 64,688
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-145
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
Hewlett-Packard Co. ..................................... 10,500 $ 1,311,187
Hibernia Corp. 'A' ....................................... 5,100 55,463
Hillenbrand Industries, Inc. ............................ 2,200 68,888
Hilton Hotels Corp. ..................................... 24,070 225,656
Home Depot, Inc. ........................................ 35,400 1,767,787
HON INDUSTRIES, Inc. .................................... 2,100 49,350
Hormel Foods Corp. ...................................... 4,800 80,700
Household Internaional, Inc. ............................ 11,600 482,125
Hubbell, Inc. 'B' ....................................... 2,900 73,950
IBP, Inc. ............................................... 3,200 49,400
ICN Pharmaceuticals, Inc. ............................... 2,800 77,875
Illinois Tool Works, Inc. ............................... 11,720 668,040
IMC Global, Inc. ........................................ 4,000 52,000
Informix Corp. (a) ...................................... 5,600 41,650
Intel Corp. ............................................. 33,300 4,451,794
International Business Machines Corp. ................... 17,700 1,939,256
International Game Technology (a) ....................... 4,000 106,000
International Paper Co. ................................. 12,665 377,575
Interstate Bakeries Corp. ............................... 2,300 32,200
Intuit, Inc. (a) ........................................ 5,100 211,012
IPALCO Enterprises, Inc. ................................ 3,400 68,425
Johnson & Johnson ....................................... 54,105 5,511,947
Jones Apparel Group, Inc. (a) ........................... 3,300 77,550
Kansas City Southern Industries, Inc. ................... 3,300 292,669
Kaydon Corp. ............................................ 1,300 27,300
Keane, Inc. (a) ......................................... 2,000 43,250
Kelly Services Inc. 'A' .................................. 1,600 37,000
Kerr-McGee Corp. ........................................ 39,000 2,298,562
Keyspan Energy Corp. .................................... 4,100 126,075
Keystone Financial, Inc. ................................ 1,800 38,250
Kimberly-Clark Corp. .................................... 18,000 1,032,750
Kinder Morgan, Inc. ..................................... 2,200 76,038
Kroger Co. (a) .......................................... 21,800 480,962
Lancaster Colony Corp. .................................. 1,900 36,456
Lear Corp. (a) .......................................... 2,100 42,000
Lee Enterprises ......................................... 2,700 62,944
Legato Systems, Inc. (a) ................................ 2,200 33,275
Leggett & Platt, Inc. ................................... 5,800 95,700
Lexmark International Group, Inc. (a) ................... 3,300 221,925
LG&E Energy Corp. ....................................... 2,900 69,238
Lincare Holdings, Inc. (a) .............................. 2,100 51,713
Linear Technology Corp. ................................. 7,600 485,925
Litton Industries, Inc. (a) ............................. 1,500 63,000
Lubrizol Corp. .......................................... 3,100 65,100
</TABLE>

F-146 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
Lucent Technologies, Inc. ............................... 29,645 $ 1,756,466
Lyondell Petrochemical Co. .............................. 2,900 48,575
Magna Entertainment Corp. 'A' (a) ........................ 560 3,691
Mandalay Resort Group (a) ............................... 3,700 74,000
Manpower, Inc. .......................................... 2,700 86,400
Marsh & McLennan Cos., Inc. ............................. 12,100 1,263,694
Marshall & Ilsley Corp. ................................. 2,900 120,350
Martin Marietta Corp. ................................... 1,700 68,744
Masco Corp. ............................................. 18,000 325,125
Maxim Integrated Products, Inc. (a) ..................... 6,600 448,387
MBNA Corp. .............................................. 27,200 737,800
McCormick & Co., Inc. ................................... 2,900 94,250
McDonald's Corp. ........................................ 42,200 1,389,962
Mckesson Corp. .......................................... 5,183 108,519
MCN Corp. ............................................... 2,400 51,300
Media General, Inc. 'A' .................................. 1,400 67,988
Medtronic, Inc. ......................................... 21,800 1,085,912
Mercantile Bankshares Corp. ............................. 2,600 77,513
Merck & Co., Inc. ....................................... 86,500 6,628,062
Merrill Lynch & Co., Inc. ............................... 16,000 1,840,000
Microchip Technology, Inc. (a) .......................... 2,400 139,838
Micron Technology, Inc. (a) ............................. 6,900 607,631
Microsoft Corp. (a) ..................................... 98,500 7,880,000
Midas, Inc. ............................................. 1 20
Minnesota Mining & Manufacturing Co. .................... 12,600 1,039,500
Minnesota Power & Light Co. ............................. 3,000 51,938
Modis Professional Services, Inc. (a) ................... 3,800 28,975
Molex, Inc. ............................................. 6,000 288,750
Montana Power Co. ....................................... 3,000 105,938
Morgan (J.P.) & Co., Inc. ............................... 14,100 1,552,762
Motorola, Inc. .......................................... 23,400 680,062
Murphy Oil Corp. ........................................ 2,500 148,594
Mylan Laboratories, Inc. ................................ 3,900 71,175
Nabors Industries, Inc. (a) ............................. 3,400 141,313
National City Corp. ..................................... 18,900 322,481
National Fuel Gas Co. ................................... 1,400 68,250
NCR Corp. (a) ........................................... 3,100 120,706
Networks Associates, Inc. (a) ........................... 3,700 75,388
Newmont Mining Corp. .................................... 17,500 378,437
Nike, Inc. 'B' .......................................... 11,600 461,825
NiSource, Inc. .......................................... 2,500 46,563
Noble Affiliates, Inc. .................................. 25,400 946,150
Noble Drilling Corp. (a) ................................ 4,000 164,750
Northeast Utilities ..................................... 4,000 87,000
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-147
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
Nova Corp/Georgia (a) ................................... 2,200 $ 61,463
Occidental Petroleum Corp. .............................. 7,300 153,756
Office Depot, Inc. (a) .................................. 11,250 70,313
Ogden Corp. (a) ......................................... 2,000 18,000
OGE Energy Corp. ........................................ 4,400 81,400
Old Kent Financial Corp. ................................ 3,197 85,520
Old Republic International Corp. ........................ 3,100 51,150
Olin Corp. .............................................. 2,400 39,600
Omnicare, Inc. .......................................... 2,800 25,375
Omnicon Group, Inc. ..................................... 5,300 472,031
Oracle System Corp. (a) ................................. 59,200 4,976,500
Outback Steakhouse, Inc. (a) ............................ 2,400 70,200
Oxford Health Plans, Inc. (a) ........................... 2,600 61,913
Pacific Century Financial Corp. ......................... 3,400 49,725
Pacificare Health Systems (a) ........................... 1,400 84,263
Paine Webber Group, Inc. ................................ 4,000 182,000
PE Corp.-PE Biosystems Group ............................ 5,000 329,375
PECO Energy Co. ......................................... 3,400 137,063
Pentair, Inc. ........................................... 1,500 53,250
PeopleSoft, Inc. (a) .................................... 6,900 115,575
Pfizer, Inc. ............................................ 139,200 6,681,600
PG&E Corp. .............................................. 7,800 192,075
Pharmacia Corp. ......................................... 58,000 2,997,875
Philip Morris Cos., Inc. ................................ 65,500 1,739,844
Pinnacle West Capital Corp. ............................. 2,300 77,913
Pittston Brinks Group ................................... 1,800 24,638
PMI Group, Inc. ......................................... 1,500 71,250
PNC Bank Corp. .......................................... 9,200 431,250
Policy Management Systems Corp. (a) ..................... 1,200 18,450
Potomac Electric Power Co. .............................. 3,000 75,000
PPL Corp. ............................................... 2,900 63,619
Procter & Gamble Co. .................................... 19,900 1,139,275
Protective Life Corp. ................................... 2,300 61,238
Provident Financial Group ............................... 1,400 33,338
Public Service Co. of New Mexico ........................ 2,600 40,138
Public Service Enterprise Group, Inc. ................... 4,400 152,350
Puget Sound Energy, Inc. ................................ 3,000 63,938
QUALCOMM, Inc. (a) ...................................... 20,500 1,230,000
Quantum Corp. (a) ....................................... 4,600 44,563
Quantum Corp.-Hard Disk Drive (a) ....................... 2,250 24,891
Questar Corp. ........................................... 2,900 56,188
Quintiles Transnational Corp. (a) ....................... 2,400 33,900
Rayonier, Inc. .......................................... 1,400 50,225
Reader's Digest Association, Inc. (The) 'A' .............. 5,300 210,675
</TABLE>

F-148 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
Reliant Energy, Inc. .................................... 5,300 $ 156,681
Reliastar Financial Corp. ............................... 2,300 120,606
Reynolds & Reynolds Co. 'A' .............................. 2,700 49,275
Robert Half International, Inc. (a) ..................... 5,600 159,600
Ross Stores, Inc. ....................................... 2,800 47,775
RPM, Inc. ............................................... 4,700 47,588
Sabre Holdings Corp. .................................... 5,962 169,917
Saks, Inc. (a) .......................................... 4,100 43,050
Sara Lee Corp. .......................................... 42,200 814,987
SBC Communications, Inc. ................................ 18,398 795,713
Scana Corp. ............................................. 1,578 38,069
Schlumberger Ltd. ....................................... 6,600 492,525
Schwab (Charles) Corp. .................................. 25,500 857,437
SCI Systems, Inc. (a) ................................... 3,300 129,319
Sears, Roebuck & Co. .................................... 11,200 365,400
Sempra Energy ........................................... 4,400 74,800
Sepracor, Inc. (a) ...................................... 1,600 193,000
Shaw Industries, Inc. ................................... 4,400 55,000
Siebel Systems, Inc. (a) ................................ 5,000 817,812
Smith International, Inc. (a) ........................... 1,700 123,781
Snyder Communications, Inc. (a) ......................... 2,100 49,875
Solutia, Inc. ........................................... 3,400 46,750
Sonoco Products Co. ..................................... 3,100 63,744
Sotheby's Holdings, Inc. 'A' ............................. 2,100 36,750
Southdown, Inc. ......................................... 1,500 86,625
Southern Co. ............................................ 50,000 1,165,625
Southtrust Corp. ........................................ 4,600 104,075
Sovereign Bancorp, Inc. ................................. 5,800 40,781
SPX Corp. (a) ........................................... 1,200 145,125
St. Paul Cos., Inc. ..................................... 1 34
Staples, Inc. (a) ....................................... 4,350 66,881
Starbucks Corp. (a) ..................................... 5,400 206,212
Starwood Hotels & Resorts Worldwide, Inc. ............... 10,200 329,587
Steris Corp. (a) ........................................ 2,100 18,638
Stewart Enterprises, Inc. 'A' ............................ 3,600 12,713
Stone & Webster, Inc. ................................... 3,700 2,775
Storage Technology Corp. (a) ............................ 3,000 32,813
Stryker Corp. ........................................... 5,600 245,000
Sunguard Data Systems, Inc. (a) ......................... 3,000 93,000
Suntrust Banks, Inc. .................................... 11,200 511,700
Sybron International Corp. (a) .......................... 3,300 65,381
Symbol Technologies, Inc. ............................... 4,050 218,700
Synopsys, Inc. (a) ...................................... 2,000 69,125
T. Rowe Price Associates, Inc. .......................... 3,500 148,750
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-149
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
Target Corp. ............................................ 11,200 $ 649,600
TCF Financial Corp. ..................................... 2,500 64,219
Technical Data Corp. (a) ................................ 1,400 60,988
Teco Energy, Inc. ....................................... 2,900 58,181
Teledyne Technologies, Inc. (a) ......................... 2,414 40,435
Teleflex, Inc. .......................................... 1,700 60,775
Telephone & Data Systems, Inc. .......................... 2,100 210,525
Tenet Healthcare Corp. (a) .............................. 12,600 340,200
Teradyne, Inc. (a) ...................................... 4,300 316,050
Texas Instruments, Inc. ................................. 14,400 989,100
Tidewater, Inc. ......................................... 2,000 72,000
Tiffany & Co. ........................................... 2,600 175,500
Time Warner, Inc. ....................................... 21,400 1,626,400
Tosco Corp. ............................................. 4,600 130,238
Total Renal Care Holdings, Inc. (a) ..................... 2,600 15,600
Transocean Offshore, Inc. ............................... 5,400 288,562
Trigon Healthcare, Inc. (a) ............................. 1,600 82,500
Trinity Industries, Inc. ................................ 1,500 27,750
TXU Corp. ............................................... 5,300 156,350
Tyson Foods, Inc. ....................................... 6,500 56,875
U.S. Bancorp ............................................ 10,200 196,350
UAL Corp. ............................................... 2,900 168,744
Ultramar Diamond Shamrock Corp. ......................... 2,900 71,956
Unicom Corp. ............................................ 4,400 170,225
United Technologies Corp. ............................... 19,348 1,139,113
Universal Corp. ......................................... 1,500 31,688
Universal Foods Corp. ................................... 2,600 48,100
Unocal Corp. ............................................ 4,800 159,000
UnumProvident Corp. ..................................... 9,700 194,606
USX-Marathon Group ...................................... 18,700 468,669
UtliCorp. United, Inc. .................................. 3,750 74,531
Ventiv Health, Inc. (a) ................................. 700 7,788
Viacom, Inc., 'B' (a) ................................... 19,123 1,303,950
Viad Corp. .............................................. 3,300 89,925
Visteon Corp. (a) ....................................... 4,007 48,585
Vulcan Materials Co. .................................... 4,900 209,169
Wachovia Corp. .......................................... 4,400 238,700
Wal-Mart Stores, Inc. ................................... 77,200 4,448,650
Walgreen Co. ............................................ 21,400 688,812
Wallace Computer Services, Inc. ......................... 2,100 20,738
Walt Disney Co. ......................................... 38,300 1,486,519
Warnaco Group ........................................... 2,100 16,275
Washington Mutual, Inc. ................................. 8,200 236,775
Washington Post Co. 'B' ................................. 400 191,200
</TABLE>

F-150 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>

UNITED STATES (CONTINUED)
Waste Management, Inc. .................................. 31,100 $ 590,900
Water Pik Technologies, Inc. (a) ........................ 845 5,281
Watson Pharmaceuticals, Inc. (a) ........................ 2,600 139,750
Weatherford International, Inc. (a) ..................... 3,500 139,344
Wells Fargo Co. ......................................... 34,900 1,352,375
Westpoint Stevens, Inc. ................................. 2,300 25,588
Weyerhaeuser Co. ........................................ 1,400 60,200
Whirlpool Corp. ......................................... 4,400 205,150
Whitman Corp. ........................................... 3,800 47,025
Williams Cos., Inc. ..................................... 13,100 546,106
Wilmington Trust Corp. .................................. 1,200 51,300
Wisconsin Energy ........................................ 3,100 61,419
Worldcom, Inc. (a) ...................................... 38,300 1,757,012
Xerox Corp. ............................................. 9,600 199,200
Xilinx, Inc. (a) ........................................ 7,300 602,706
Yahoo!, Inc. (a) ........................................ 14,100 1,746,637
York International Corp. ................................ 2,200 57,475
------------
251,716,666
------------

TOTAL COMMON STOCKS
(Cost $513,214,737) .............................................. 554,974,237
------------

PREFERRED STOCKS 0.4%
AUSTRALIA 0.2%
News Corp., Ltd. ........................................ 72,791 876,662
------------

AUSTRIA 0.0%
Bau Holdings AG ......................................... 5 205
------------

GERMANY 0.2%
RWE AG .................................................. 950 25,824
SAP AG .................................................. 7,728 1,443,233
Volkswagen AG ........................................... 2,200 52,249
------------
1,521,306
------------

ITALY 0.0%
Fiat S.p.A. (Privilegiate) .............................. 1,625 26,426
------------

TOTAL PREFERRED STOCKS
(Cost $2,208,249) ............................................... 2,424,599
------------

INVESTMENT COMPANY 0.2%
UNITED STATES 0.2%
Latin American Discovery Fund (b) (Cost $2,614,831) ..... 160,800 1,638,150
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-151
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
NO. OF MARKET
DESCRIPTION RIGHTS VALUE
<S> <C> <C>
RIGHTS 0.0%
GERMANY 0.0%
IVG Holding AG (a) ...................................... 32,661 $ 1,066
-----------

HONG KONG 0.0%
Sun Hung Kai Properties Ltd. (a) ........................ 105,000 5,356
-----------

SPAIN (0.0%)
Autopistas Concesionaria Espanola S.A. (a) .............. 13,279 --
-----------

TOTAL RIGHTS
(Cost $0) ..................................................... 6,422
-----------

<CAPTION>
NO. OF
WARRANTS
<S> <C> <C>
WARRANTS 0.0%
UNITED STATES 0.0%
Golden State Bancorp, Inc. expiring 1/1/01(a) (Cost $0) .. 1,000 1,125
-----------

<CAPTION>
PAR
VALUE
<S> <C> <C>
CONVERTIBLE DEBENTURES 0.0%
FRANCE 0.0%
Casino Guich-Perrachon 4.50%, 7/12/01 .................FRF 70,400 66,341
Sodexho S.A., 6.00%, 6/7/04 .............................. 3,811 3,662
-----------
70,003
-----------

PORTUGAL 0.0%
Jeromimo Martins (a) ..................................... $ 34,030 20,400
-----------

TOTAL CONVERTIBLE DEBENTURES
(Cost $26,431) ................................................. 90,403
-----------

TOTAL LONG-TERM INVESTMENTS 84.9%
(Cost $518,064,248) .................................. 559,134,936
-----------
</TABLE>

F-152 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <C> <C>
SHORT-TERM INVESTMENT 13.9%
REPURCHASE AGREEMENT 13.9%
Chase Securities, Inc. 6.15%, dated .................... $91,816,000
6/30/00, due 7/3/00, to be repurchased at
$91,863,056, collateralized by $85,665,000
U.S. Treasury Bonds 6.25%-7.125%, due
2/15/23-8/15/23, valued at $93,400,757
(Cost $91,816,000) .................................. $ 91,816,000
------------

TOTAL INVESTMENTS IN SECURITIES 98.8%
(Cost $609,880,248) ................................. 650,950,936

FOREIGN CURRENCY 0.1%
(Cost $522,098) ..................................... 510,540
------------

TOTAL INVESTMENTS 98.9%
(Cost $610,402,346) ................................. 651,461,476

OTHER ASSETS IN EXCESS OF LIABILITIES 1.1% ............. 7,236,716
------------

NET ASSETS 100% ........................................ $658,698,192
============
</TABLE>

(a) NON-INCOME PRODUCING SECURITY

(b) THE FUND IS ADVISED BY AN AFFILIATE WHICH EARNS A MANAGEMENT FEE AS ADVISOR
TO THE FUND.

ADR AMERICAN DEPOSITARY RECEIPT

CVA SHARE CERTIFICATES

FRF FRENCH FRANC

GDR GLOBAL DEPOSITARY RECEIPT

RNC NON-CONVERTIBLE SAVINGS SHARES

SEE NOTES TO FINANCIAL STATEMENTS F-153
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION

<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
Financials ......................................... $101,760,555 15.5%
Information Technology ............................. 90,861,009 13 8
Energy ............................................. 72,080,800 10.9
Health Care ........................................ 69,179,263 10.5
Consumer Discretionary ............................. 61,889,684 9 4
Industrials ........................................ 55,457,807 8.4
Consumer Staples ................................... 39,719,676 6.0
Utilities .......................................... 29,466,087 4.5
Telecommunications Services ........................ 22,443,985 3 4
Materials .......................................... 16,276,070 2.5
------------ -----
$559,134,936 84.9%
============ =====
</TABLE>

F-154 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000

<TABLE>
<S> <C>
ASSETS:
Investments in Securities, at Value (Cost $609,880,248) (including repurchase
agreement of $91,816,000) ................................................. $650,950,936
Foreign Currency (Cost $522,098) ............................................ 510,540
Margin Deposit on Futures ................................................... 11,690,495
Receivable for:
Fund Shares Sold .......................................................... 11,941,388
Investments Sold .......................................................... 968,727
Dividends ................................................................. 512,997
Foreign Withholding Tax Reclaim ........................................... 227,772
Interest .................................................................. 15,773
Net Unrealized Gain on Foreign Currency Exchange Contracts .................. 969,256
Other ....................................................................... 21,316
------------
Total Assets ............................................................ 677,809,200
------------
LIABILITIES:
Payable for:
Fund Shares Redeemed ...................................................... 15,431,035
Variation Margin of Futures Contracts ..................................... 1,002,605
Distribution Fees ......................................................... 738,983
Bank Overdraft ............................................................ 713,110
Investment Advisory Fees .................................................. 542,834
Custody Fees .............................................................. 152,331
Administrative Fees ....................................................... 150,002
Shareholder Reporting Expenses ............................................ 110,791
Directors' Fees and Expenses .............................................. 87,277
Transfer Agent Fees ....................................................... 72,532
Professional Fees ......................................................... 57,213
Other 52,295
------------
Total Liabilities ....................................................... 19,111,008
------------
NET ASSETS .................................................................. $658,698,192
============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized 2,625,000,000) ..... $ 37,983
Paid in Capital in Excess of Par ............................................ 531,656,640
Accumulated Net Realized Gain ............................................... 91,868,708
Net Unrealized Appreciation on Investments, Foreign
Currency Translations and Futures ......................................... 41,016,509
Accumulated Net Investment Loss ............................................. (5,881,648)
------------
NET ASSETS .................................................................. $658,698,192
============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-155
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 2000

<TABLE>
<S> <C>
Class A Shares:
Net Asset Value and Redemption Price Per Share (Based on Net Assets
of $301,904,701 and 17,018,712 Shares Outstanding) ..................... $ 17.74
============

Maximum Sales Charge ................................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100/(100% - maximum sales charge) .............................. $ 18.82
============

Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets
of $252,077,800 and 14,863,155 Shares Outstanding)* .................... $ 16.96
============

Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets
of $104,715,691 and 6,101,176 Shares Outstanding)* ..................... $ 17.16
============
</TABLE>

* REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

F-156 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Statement of Operations
YEAR ENDED JUNE 30, 2000

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ................................................................. $ 7,171,025
Interest .................................................................. 4,401,395
Less Foreign Taxes Withheld ............................................... (551,845)
------------
Total Income .......................................................... 11,020,575
------------
EXPENSES:
Investment Advisory Fees .................................................. 6,087,799
Distribution Fees (Attributed to Classes A, B and C of $661,522, $2,422,402
and $1,033,417, respectively) ........................................... 4,117,341
Administrative Fees ....................................................... 1,613,095
Transfer Agent Fees ....................................................... 378,328
Shareholder Reports ....................................................... 357,763
Custodian Fees ............................................................ 175,409
Professional Fees ......................................................... 81,559
Filing and Registration Fees .............................................. 61,039
Directors' Fees and Expenses .............................................. 51,364
Other ..................................................................... 17,794
------------
Total Expenses ........................................................ 12,941,491
------------
NET INVESTMENT LOSS ....................................................... $ (1,920,916)
============

NET REALIZED GAIN/LOSS ON:
Investments ............................................................... $101,417,015
Foreign Currency Transactions ............................................. (6,593,113)
Futures ................................................................... 12,192,219
------------
Net Realized Gain ......................................................... 107,016,121
------------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period ................................................. 77,821,678
------------
End of the Period:
Investments ........................................................... 41,070,688
Foreign Currency Translations ......................................... 934,236
Futures ............................................................... (988,415)
------------
41,016,509
------------
Net Change in Unrealized Appreciation/Depreciation ........................ (36,805,169)
------------

NET REALIZED GAIN/LOSS AND NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ............................................... $ 70,210,952
============

NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ......................................................... $ 68,290,036
============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-157
<PAGE>

Statement of Changes in Net Assets
YEAR ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
-------------- -------------
<S> <C> <C>
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss .......................... $ (1,920,916) $ 210,000
Net Realized Gain ................................... 107,016,121 40,543,000
Net Change in Unrealized Appreciation/Depreciation .. (36,805,169) (1,563,000)
-------------- ------------
Net Increase in Net Assets Resulting from Operations. 68,290,036 39,190,000
-------------- ------------
DISTRIBUTIONS:
Net Investment Income:
Class A .......................................... -- (1,038,000)
Class B .......................................... -- (488,000)
Class C .......................................... -- (217,000)
In Excess of Net Investment Income:
Class A .......................................... -- (2,120,000)
Class B .......................................... -- (996,000)
Class C .......................................... -- (444,000)
-------------- ------------
-- (5,303,000)
-------------- ------------
Net Realized Gain:
Class A .......................................... (17,161,695) (12,336,000)
Class B .......................................... (16,508,167) (12,000,000)
Class C .......................................... (7,198,264) (5,364,000)
-------------- ------------
(40,868,126) (29,700,000)
-------------- ------------
Net Decrease in Net Assets Resulting
from Distributions ................................ (40,868,126) (35,003,000)
-------------- ------------
CAPITAL SHARE TRANSACTIONS:
Subscribed .......................................... 389,767,569 172,653,000
Distributions Reinvested ............................ 37,345,275 31,543,000
Redeemed ............................................ (369,614,087) (230,685,000)
-------------- ------------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions ................... 57,498,757 (26,489,000)
-------------- ------------
Total Increase/Decrease in Net Assets ............... 84,920,667 (22,302,000)
NET ASSETS--Beginning of Period ..................... 573,777,525 596,080,000
-------------- ------------
NET ASSETS--End of Period (Including undistributed/
distributions in excess of net investment loss of
$(5,881,648) and $(217,000), respectively) ........ $658,698,192 $573,778,000
============== ============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

F-158 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
CLASS A SHARES 2000# 1999# 1998# 1997 1996
------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD .......................... $ 16.86 $ 16.67 $ 16.57 $ 14.75 $ 12.60
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income .............. 0.02 0.07 0.21 0.10 0.19
Net Realized and Unrealized Gain ... 2.09 1.21 2.07 2.76 2.82
-------- -------- -------- ------- -------
Total From Investment Operations ..... 2.11 1.28 2.28 2.86 3.01
-------- -------- -------- ------- -------
DISTRIBUTIONS
Net Investment Income .............. -- (0.07) (0.35) (0.55) (0.39)
In Excess of Net Investment Income . -- (0.15) -- -- --
Net Realized Gain .................. (1.23) (0.87) (1.83) (0.49) (0.47)
-------- -------- -------- ------- -------
Total Distributions .................. (1.23) (1.09) (2.18) (1.04) (0.86)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD ....... $ 17.74 $ 16.86 $ 16.67 $ 16.57 $ 14.75
======== ======== ======== ======= =======
TOTAL RETURN (1) ..................... 12.83% 8.41% 16.17% 20.61% 24.62%
======== ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .... $301,905 $240,121 $261,633 $72,704 $63,706
Ratio of Expenses to Average
Net Assets ......................... 1.70% 1.70% 1.61% 1.70% 1.70%
Ratio of Net Investment Income
to Average Net Assets .............. 0.12% 0.47% 1.30% 0.59% 0.71%
Portfolio Turnover Rate .............. 99% 84% 108% 45% 44%
----------------------------------------------------------------------------------------
Effect of Voluntary Expense
Reductions During the Period
Per Share Benefit to Net Investment
Income ........................... -- $0.00+ $0.02 $0.03 $0.10
Ratios Before Expense Reductions:
Expenses to Average Net Assets ..... -- 1.73% 1.62% 1.90% 2.06%
Net Investment Income to
Average Net Assets ............... -- 0.44% 1.30% 0.40% 0.35%
----------------------------------------------------------------------------------------
</TABLE>

+ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE SALE CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-159
<PAGE>

Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.
<TABLE>
<CAPTION>
AUGUST 1,
YEAR ENDED JUNE 30, 1995** TO
------------------------------------- JUNE 30,
CLASS B SHARES 2000# 1999# 1998# 1997 1996
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD .......................... $ 16.28 $ 16.14 $ 16.15 $ 14.46 $ 13.01
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss ......... (0.11) (0.04) 0.09 (0.05) 0.30
Net Realized and Unrealized Gain ... 2.02 1.16 2.01 2.73 1.98
-------- -------- -------- ------- -------
Total From Investment Operations ..... 1.91 1.12 2.10 2.68 2.28
-------- -------- -------- ------- -------
DISTRIBUTIONS
Net Investment Income .............. -- (0.04) (0.28) (0.50) (0.35)
In Excess of Net Investment Income . -- (0.07) -- -- --
Net Realized Gain .................. (1.23) (0.87) (1.83) (0.49) (0.48)
-------- -------- -------- ------- -------
Total Distributions .................. (1.23) (0.98) (2.11) (0.99) (0.83)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD ....... $ 16.96 $ 16.28 $ 16.14 $ 16.15 $ 14.46
======== ======== ======== ======= =======
TOTAL RETURN (1) ..................... 12.03% 7.50% 15.33% 19.64% 18.08%*
======== ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .... $252,078 $232,644 $225,797 $38,962 $14,786
Ratio of Expenses to Average
Net Assets ......................... 2.45% 2.45% 2.35% 2.45% 2.45%
Ratio of Net Investment Income/Loss
to Average Net Assets .............. (0.65%) (0.27%) 0.60% (0.11%) 0.45%
Portfolio Turnover Rate .............. 99% 84% 108% 45% 44%*
---------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Reductions During the Period
Per Share Benefit to Net Investment
Income/Loss ...................... -- $0.00+ $0.02 $0.09 $0.22
Ratios Before Expense Reductions:
Expenses to Average Net Assets ..... -- 2.49% 2.36% 2.65% 2.81%
Net Investment Income/Loss to
Average Net Assets ............... -- (0.30%) 0.60% (0.30%) 0.09%
---------------------------------------------------------------------------------------------
</TABLE>

* NON-ANNUALIZED

** THE FUND BEGAN OFFERING CLASS B SHARES ON AUGUST 1, 1995.

+ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE SALE CHARGES OR DEFERRED SALES CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-160 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------
CLASS C SHARES 2000# 1999# 1998# 1997 1996
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ........................... $ 16.46 $ 16.30 $ 16.24 $ 14.49 $ 12.43
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss .......... (0.11) (0.04) 0.08 (0.03) 0.12
Net Realized and Unrealized Gain .... 2.04 1.18 2.05 2.73 2.75
-------- -------- -------- ------- -------
Total From Investment Operations ...... 1.93 1.14 2.13 2.70 2.87
-------- -------- -------- ------- -------
DISTRIBUTIONS
Net Investment Income ............... -- (0.04) (0.24) (0.46) (0.33)
In Excess of Net Investment Income .. -- (0.07) -- -- --
Net Realized Gain ................... (1.23) (0.87) (1.83) (0.49) (0.48)
-------- -------- -------- ------- -------
Total Distributions ................... (1.23) (0.98) (2.07) (0.95) (0.81)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD ........ $ 17.16 $ 16.46 $ 16.30 $ 16.24 $ 14.49
======== ======== ======== ======= =======
TOTAL RETURN (1) ...................... 12.02% 7.61% 15.37% 19.69% 23.65%
======== ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ..... $104,715 $101,013 $108,650 $78,199 $63,025
Ratio of Expenses to Average
Net Assets .......................... 2.45% 2.45% 2.55% 2.45% 2.45%
Ratio of Net Investment Income/Loss
to Average Net Assets ............... (0.66%) (0.28%) 0.52% (0.16%) (0.04%)
Portfolio Turnover Rate ............... 99% 84% 108% 45% 44%
---------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Reductions During the Period
Per Share Benefit to Net Investment
Income/Loss ....................... -- $0.00+ $0.02 $0.03 $ 1.16
Ratios Before Expense Reductions:
Expenses to Average Net Assets ...... -- 2.48% 2.56% 2.65% 2.81%
Net Investment Income/Loss to
Average Net Assets ................ -- (0.30%) 0.52% (0.34%) (0.40%)
---------------------------------------------------------------------------------------------
</TABLE>

+ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE SALE CHARGES OR DEFERRED SALES CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-161
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen Global Equity Allocation Fund (the "Fund") is organized
as a separate diversified fund of Van Kampen Series Fund, Inc., a Maryland
corporation, which is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective seeks long-term capital appreciation by investing in equity
securities of U.S. and non-U.S. issuers in accordance with country weightings
determined by the Adviser and with stock selection within each country
designed to replicate a broad market index. The Fund commenced operations on
January 4, 1993. The Fund 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.

1. SIGNIFICANT ACCOUNTING POLICIES

A. 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 bid and asked prices obtained from
reputable brokers. Bonds and other fixed income securities may be valued
according to the broadest and most representative market. Debt securities
purchased with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value. All other securities and
assets for which market quotations are not readily available are valued at
fair value as determined in good faith using procedures approved by the Board
of Directors.

B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.

F-162
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

cash account along with other investment companies advised by Van Kampen
Investment Advisory Corp. or its affiliates, the daily aggregate of which is
invested in repurchase agreements. Repurchase agreements are fully
collateralized by the underlying debt security. A bank as custodian for the
Fund takes possession of the underlying securities, with a market value at
least equal to the amount of the repurchase transaction, including principal
and accrued interest. To the extent that any repurchase transaction exceeds
one business day, the value of the collateral is marked-to-market on a daily
basis to determine the adequacy of the collateral. In the event of default on
the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. In the
event of default or bankruptcy by the counterparty to the agreement,
realization and/or retention of the collateral or proceeds may be subject to
legal proceedings.

C. INCOME AND EXPENSES Interest income is recorded on an accrual basis and
dividend income is recorded net of applicable withholding taxes on the
ex-dividend date. Income, expenses, and realized and unrealized gains or
losses are allocated on a pro rata basis to each class of shares except for
distribution and service fees which are unique to each class of shares.
Distributions from the Fund are recorded on the ex-distribution date.

Net realized gains or losses may differ for financial and tax reporting
purposes as a result of losses relating to wash sale transactions.

At June 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $617,075,220, the aggregate gross unrealized
appreciation is $73,157,452 and the aggregate gross unrealized depreciation
is $39,281,736, resulting in net unrealized appreciation on long- and
short-term investments of $33,875,716.

Due to inherent differences in the recognition of income and expenses
under generally accepted accounting principles and federal income tax
purposes, perma-

F-163
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

nent differences between book and tax basis reporting for the current fiscal
year have been identified and appropriately reclassified. A permanent
difference related to a net operating loss which may be used as an offset
against short-term gains for tax purposes totaling $5,595,623 has been
reclassified from accumulated net realized gain to accumulated net investment
loss. A permanent difference of $3,151,811 related to a correction of prior
year amounts was reclassified from accumulated net investment loss to
accumulated net realized gain ($3,052,174) and paid in capital in excess of
par ($99,637). A permanent difference related to the recognition of net
realized losses on foreign currency transactions totaling $6,593,113 was
reclassified from accumulated net investment loss to accumulated net realized
gain. Permanent differences related to the sale of Passive Foreign Investment
Company securities totaling $441,399 were reclassified from accumulated net
realized gain to accumulated net investment loss. A permanent difference
related to taxes paid to a foreign country totaling $33,443 was reclassified
from accumulated net investment loss to accumulated net realized gain. A
permanent difference of $3,112 related to distributions from Real Estate
Investment Trusts was reclassified from accumulated net investment loss to
accumulated net realized gain. Permanent differences relating to a correction
of prior year amounts were reclassified from accumulated net realized gain of
$40,880 to paid in capital in excess of par.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary
of Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment
Management Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of
Morgan Stanley Dean Witter & Co., provide the Fund with investment advisory
services at a fee paid monthly and calculated at the annual rates based on
average daily net assets indicated as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $750 million .................................................. 1.00 of 1%
Next $500 million ................................................... .95 of 1%
Over $1.25 billion .................................................. .90 of 1%
</TABLE>

F-164
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
EXPENSE RATIO EXPENSE RATIO
<S> <C> <C>
1.70% 2.45%
</TABLE>
For the period ended June 30, 2000, the Fund recognized expenses of
$32,076 representing legal services provided by Skadden, Arps, Slate, Meagher
& Flom (Illinois), counsel to the Fund, of which a director of the Fund is
anaffiliated person.

For the period ended June 30, 2000, the Fund recognized expenses of
$11,189 representing Van Kampen's cost of providing legal services to the
Fund.

Van Kampen Investment Advisory Corp. (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.25% of the average daily
net assets of the Fund, plus reimbursement of out-of-pocket expenses. Under
an agreement between the Adviser and The Chase Manhattan Bank ("Chase"),
through its corporate affiliate Chase Global Funds Services Company
("CGFSC"), Chase provides certain administrative services to the Fund. Chase
is compensated for such services by the Adviser from the fee it receives from
the Fund. Transfer Agency services are provided to the Fund by Van Kampen
Investor Services Inc., an affiliate of the Adviser.

Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of
Van Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co., serves as the Distributor of the Fund's shares.
The Distributor is entitled to receive from the Fund a distribution fee,
which is accrued daily and paid quarterly, of an amount of up to 0.25% of the
Class A shares and up to 1.00% of the Class B shares and Class C shares of
the Fund on an annualized basis, of the average daily net assets attributable
to each Class.

The Distributor may receive a front end sales charge for purchases of
Class A shares. In addition, the Distributor may receive a contingent
deferred sales charge for certain redemptions of Class B shares and Class C
shares of the Fund redeemed within one to five years following such purchase.
For the period ended June 30, 2000, the Distributor has advised the Fund that
it earned initial sales charges of $1,220,638 for Class A shares and deferred
sales charges of $429,845 and $11,545 for Class B shares and Class C shares,
respectively.

Certain officers and directors of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.

The Fund provides deferred compensation and retirement plans for its
directors who are not officers of Van Kampen. Under the deferred compensation
plan,

F-165
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

directors may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year
period and are based upon each director's years of service to the Fund. The
maximum annual benefit per director under the plan is $2,500.

For the period ended June 30, 2000, the Fund incurred $27,028 as
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/dealer.

At June 30, 2000, the Fund owned shares of affiliated funds for which
the Fund earned dividend income of $34,474 during the period.

3. CAPITAL TRANSACTIONS

The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. All three classes of shares have identical voting, dividend, liquidation
and other rights. Class A shares are sold with a front-end sales charge of up to
5.75%. For certain purchases of Class A shares, the front-end sales charges may
be waived and a contingent deferred sales charge ("CDSC") of 1.00% imposed in
the event of certain redemptions within one year of the purchase. Class B and
Class C shares are offered without a front end sales charge, but are subject to
a CDSC. Class B shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B shares received on such shares, automatically convert
to Class A shares eight years after the end of the calendar month in which the
shares were purchased. Class B shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B shares received on such shares, automatically
convert to Class A shares seven years after the end of the calendar month in
which the shares were purchased. For the period ended June 30, 2000, no Class B
shares converted to Class A shares. The CDSC will be imposed on most redemptions
made within five years of the purchase for Class B shares and one year of the
purchase for Class C shares as detailed in the following schedule:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First ................................................ 5.00% 1.00%
Second ............................................... 4.00% None
Third ................................................ 3.00% None
Fourth ............................................... 2.50% None
Fifth ................................................ 1.50% None
Thereafter ........................................... None None
</TABLE>

F-166
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
-------------- --------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS
CLASS A:
Shares:
Subscribed ................................ 16,429,387 6,401,000
Distributions Reinvested .................. 939,649 953,000
Redeemed .................................. (14,592,980) (8,806,000)
------------- -------------
Net Increase/Decrease in Class A
Shares Outstanding ........................ 2,776,056 (1,452,000)
============= =============
Dollars:
Subscribed ................................ $ 288,886,146 $ 102,532,000
Distributions Reinvested .................. 16,039,804 14,538,000
Redeemed .................................. (256,831,261) (139,451,000)
------------- -------------
Net Increase/Decrease ....................... $ 48,094,689 $ (22,381,000)
============= =============
Ending Paid in Capital ...................... $ 240,972,903+ $ 192,898,000+
============= =============
CLASS B:
Shares:
Subscribed ................................ 4,980,511 3,651,000
Distributions Reinvested .................. 902,307 790,000
Redeemed .................................. (5,306,787) (4,141,000)
------------- -------------
Net Increase in Class B
Shares Outstanding ........................ 576,031 300,000
============= =============
Dollars:
Subscribed ................................ $ 84,382,284 $ 56,414,000
Distributions Reinvested .................. 14,779,795 11,694,000
Redeemed .................................. (89,091,503) (64,043,000)
------------- -------------
Net Increase ................................ $ 10,070,576 $ 4,065,000
============= =============
Ending Paid in Capital ...................... $ 213,053,271+ $ 202,973,000+
============= =============

CLASS C:
Shares:
Subscribed ................................ 966,641 871,000
Distributions Reinvested .................. 393,587 355,000
Redeemed .................................. (1,395,666) (1,755,000)
------------- -------------
Net Decrease in Class C
Shares Outstanding ....................... (35,438) (529,000)
============= =============
Dollars:
Subscribed ................................ $ 16,499,139 $ 13,707,000
Distributions Reinvested .................. 6,525,676 5,311,000
Redeemed .................................. (23,691,323) (27,191,000)
------------- -------------
Net Decrease ................................ $ (666,508) $ (8,173,000)
============= =============
Ending Paid in Capital ...................... $ 77,527,932+ $ 78,195,000+
============= =============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

+ ENDING PAID IN CAPITAL AMOUNTS DO NOT REFLECT PERMANENT BOOK TO TAX
DIFFERENCES-SEE NOTE 1E.

F-167
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

4. INVESTMENT TRANSACTIONS

For the period ended June 30, 2000, the Fund made purchases of $519,365,344
and sales of $529,204,922 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.

5. DERIVATIVE FINANCIAL INSTRUMENTS

A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate,
or index.

The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the Fund's foreign currency exposure or generate
potential gain. All of the Fund's portfolio holdings, including derivative
instruments, are marked-to-market each day with the change in value reflected in
unrealized appreciation/depreciation. Upon disposition, a realized gain or loss
is recognized accordingly, except when exercising a call option contract or
taking delivery of a security underlying a futures or forward contract. In these
instances, the recognition of gain or loss is postponed until the disposal of
the security underlying the option or forward contract. Risks may arise as a
result of the potential inability of the counterparties to meet the terms of
their contracts.

Summarized below are the specific types of derivative financial
instruments used by the Fund.

F-168
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

At June 30, 2000, the Fund has outstanding forward currency contracts as
follows:

<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
FORWARD CURRENCY CONTRACTS VALUE DEPRECIATION
<S> <C> <C>
LONG CONTRACTS:
British Pound, 195,478 expiring 9/8/00 ............... $ 296,088 $ (340)
Euro, 762,861 expiring 9/8/00 ........................ 730,794 6,206
Japanese Yen, 2,394,624,842 expiring 7/21/00-9/11/00 . 22,653,905 341,110
----------- --------
$23,680,787 $346,976
=========== ========

SHORT CONTRACTS:
British Pound, 4,458,740 expiring 9/12/00 ............ $ 6,754,132 $(47,453)
Euro, 40,345,131 expiring 9/8/00 ..................... 38,649,204 114,042
Japanese Yen, 3,902,110,896 expiring 7/21/00 ......... 36,914,107 555,691
----------- --------
$82,317,443 $622,280
=========== ========
$969,256
========
</TABLE>

B. FUTURES CONTRACTS A futures contract is an agreement involving the
delivery of a particular asset on a specified future date at an agreed upon
price. The Fund generally invests in futures of equity indices and typically
closes the contract prior to the delivery date. These contracts are generally
used to manage the portfolio's effective maturity and duration.

Upon entering into futures contracts, the Fund maintains, in a
segregated account with its custodian, cash or liquid securities with a value
equal to its obligation under the futures contracts. During the period the
futures contract is open, payments are received from or made to the broker
based upon changes in the value of the contract (the variation margin). The
potential risk of loss associated with a futures contract in excess of the
variation margin is reflected on the Statement of Assets and Liabilities. The
cost of securities acquired through delivery under a contract is adjusted by
the unrealized gain or loss on the contract.

F-169
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

Transactions in futures contracts for the period ended June 30, 2000, were as
follows:

<TABLE>
<CAPTION>
CONTRACTS
<S> <C>
Outstanding at June 30, 1999 ...................................... 515
Futures Opened .................................................... 4,858
Futures Closed .................................................... (4,374)
------
Outstanding at June 30, 2000 ...................................... 999
======
</TABLE>

The futures contracts outstanding as of June 30, 2000, and the descriptions and
the unrealized appreciation/depreciation are as follows:

<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
<S> <C> <C>
LONG CONTRACTS:
CAC 40 Index - September 2000
(Current notional value $6,492 per contract) ....... 509 $(858,208)
Goldman Sachs Index - August 2000
(Current notional value $6,357 per contract) ....... 67 (302,215)
Goldman Sachs Index - August 2000
(Current notional value $1,592 per contract) ....... 183 46,724
Hang Seng Index - July 2000
(Current notional value $16,240 per contract) ...... 66 10,579
IBEX Plus Index - July 2000
(Current notional value $10,498 per contract) ...... 56 (216,156)
MIB 30 Index - August 2000
(Current notional value $46,950 per contract) ...... 34 (36,299)
TOPIX Index - August 2000
(Current notional value $1,592 per contract) ....... 46 16,104
SHORT CONTRACTS:
DAX Index - September 2000
(Current notional value $6,950 per contract) ....... 35 341,827
FTSE 100 Index - August 2000
(Current notional value $6,357 per contract) ....... 3 9,229
--- ---------
999 $(988,415)
=== =========
</TABLE>

6. BORROWINGS

F-170
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Van Kampen Global Equity Fund

We have audited the accompanying statement of assets and liabilities of Van
Kampen Global Equity Fund (the "Fund"), a fund of Van Kampen Series Fund, Inc.,
including the portfolio of investments, as of June 30, 2000, and the related
statements of operations, changes in net assets and the financial highlights for
the year then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The Fund's financial statements and financial highlights for the periods
ended prior to June 30, 2000, were audited by other auditors whose report, dated
August 6, 1999, expressed an unqualified opinion on those statements.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Kampen Global Equity Fund as of June 30, 2000, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-171
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON STOCKS 95.1%
AUSTRALIA 1.8%
CSR Ltd. ........................... 1,643,230 $ 4,553,787
Westpac Banking Corp., Ltd. ........ 808,178 5,816,348
-----------
10,370,135
-----------
BELGIUM 0.6%
Delhaize Freres et Cie 'Le Lion' S.A 56,390 3,369,610
-----------
CANADA 2.0%
Potash Corp. of Saskatchewan, Inc. . 84,460 4,624,660
TELUS Corp. ........................ 244,524 6,529,236
TELUS Corp. (Non-Voting) ........... 16,000 426,688
-----------
11,580,584
-----------
DENMARK 0.5%
Danisco A/S ........................ 79,800 2,662,346
-----------
FRANCE 7.5%
Alcatel ............................ 72,350 4,740,801
Aventis S.A ........................ 129,160 9,418,071
Groupe Danone ...................... 47,000 6,231,162
Lafarge S.A ........................ 36,030 2,797,339
Michelin (C.G.D.E.) 'B' (Registered) 64,270 2,060,313
Pernod-Ricard ...................... 96,340 5,237,667
Total Fina Elf S.A. 'B' ............ 77,550 11,879,106
-----------
42,364,459
-----------
GERMANY 3.0%
BASF AG ............................ 159,695 6,473,463
Bayer AG ........................... 146,460 5,601,700
E.On AG ............................ 106,500 5,129,764
-----------
17,204,927
-----------
HONG KONG 1.0%
Hong Kong Electric Holdings Ltd. ... 1,785,000 5,747,354
-----------
IRELAND 1.6%
Bank of Ireland .................... 647,795 4,077,913
Green Property plc ................. 847,930 4,973,837
-----------
9,051,750
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-172
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
ITALY 2.1%
ENI S.p.A .................................. 572,970 $ 3,306,311
Telecom Italia S.p.A ....................... 1,278,320 8,473,850
-----------
11,780,161
-----------
JAPAN 12.7%
Daiichi Pharmaceutical Co., Ltd. ........... 129,000 3,269,207
Fuji Photo Film Co. ........................ 186,000 7,605,068
Fujitsu Ltd. ............................... 47,000 1,625,041
Hitachi Ltd. ............................... 577,000 8,317,019
Matsushita Electric Industrial Co., Ltd. ... 117,000 3,031,231
Mitsubishi Electric Corp. .................. 397,000 4,293,711
Mitsui & Co. ............................... 376,000 2,869,283
NTT Corp. .................................. 1,163 15,448,961
Pioneer Electronic Corp. ................... 92,000 3,579,632
Sankyo Co., Ltd. ........................... 141,000 3,181,450
Sumitomo Bank Ltd. ......................... 247,000 3,025,107
Sumitomo Marine & Fire Insurance Co., Ltd. . 536,000 3,115,663
Tokyo Gas Co. .............................. 1,471,000 4,129,804
Toppan Printing Co., Ltd. .................. 402,000 4,249,319
Toshiba Corp. .............................. 359,000 4,048,453
-----------
71,788,949
-----------
NETHERLANDS 5.1%
Akzo Nobel N.V ............................. 104,480 4,434,550
ING Groep N.V .............................. 88,818 5,997,782
Koninklijke (Royal) Philips Electronics N.V 210,212 9,904,690
Royal Dutch Petroleum Co. .................. 137,120 8,441,450
-----------
28,778,472
-----------
SINGAPORE 0.3%
United Overseas Bank Ltd. (Foreign) ........ 272,000 1,779,218
-----------
SPAIN 2.4%
Iberdrola S.A .............................. 340,920 4,389,779
Telefonica S.A. (a) ........................ 432,554 9,282,806
-----------
13,672,585
-----------
SWEDEN 1.2%
Nordic Baltic Holding AB ................... 864,280 6,510,492
-----------
SWITZERLAND 4.9%
Cie Financiere Richemont AG 'A' ............ 2,205 5,934,098
Holderbank Financiere Glarus AG 'B' (Bearer) 3,548 4,345,110
Nestle S.A. (Registered) ................... 5,240 10,476,150
Swisscom AG (Registered) ................... 10,500 3,632,662
UBS AG (Registered) ........................ 24,780 3,626,489
-----------
28,014,509
-----------
</TABLE>

F-173 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED KINGDOM 16.5%
Allied Domecq plc .......................... 1,675,690 $ 8,871,852
AstraZeneca Group plc ...................... 130,400 6,085,346
BAA plc .................................... 372,800 2,988,851
BAE SYSTEMS plc ............................ 897,600 5,594,131
Blue Circle Industries plc ................. 862,750 5,566,171
British Telecom plc ........................ 461,300 5,959,281
Burmah Castrol plc ......................... 178,887 4,508,233
Cadbury Schweppes plc ...................... 1,376,500 9,036,880
Diageo plc ................................. 663,780 5,954,310
Granada Group plc .......................... 149,000 1,487,588
Great Universal Stores plc ................. 460,400 2,959,898
Imperial Tobacco Group plc ................. 597,400 5,720,335
Matthews (Bernard) plc ..................... 982,400 2,095,367
Reckitt Benckiser plc ...................... 547,443 6,128,062
Royal & Sun Alliance Insurance Group plc ... 851,111 5,523,267
Sainsbury (J) plc .......................... 1,053,519 4,780,972
Vodafone AirTouch plc ...................... 527,100 2,128,908
WPP Group plc .............................. 553,900 8,085,581
-----------
93,475,033
-----------
UNITED STATES 31.9%
Albertson's, Inc. ..................... 317,028 10,541,181
Alcoa, Inc. ........................... 279,540 8,106,660
American Home Products Corp. .......... 33,100 1,944,625
BJ's Wholesale Club, Inc. (a) ......... 150,180 4,955,940
Boise Cascade Corp. ................... 209,410 5,418,484
Borg-Warner Automotive, Inc. .......... 132,470 4,653,009
Bristol-Myers Squibb Co. .............. 47,800 2,784,350
Cadiz, Inc. (a) ....................... 403,898 3,231,184
Chase Manhattan Corp. ................. 240,356 11,071,421
COMSAT Corp. .......................... 166,064 3,902,504
Deere & Co. ........................... 33,180 1,227,660
First Data Corp. ...................... 113,500 5,632,437
Fort James Corp. ...................... 236,540 5,469,988
General Dynamics Corp. ................ 134,350 7,019,787
GenRad, Inc. (a) ...................... 162,170 1,459,530
Georgia-Pacific Corp. ................. 113,210 2,971,763
Goodrich (B.F.) Co. ................... 117,440 4,000,300
GTE Corp. ............................. 156,360 9,733,410
Honeywell International, Inc. ......... 29,570 996,139
Houghton Mifflin Co. .................. 101,853 4,755,262
MBIA, Inc. ............................ 114,570 5,520,842
Mellon Financial Corp. ................ 237,700 8,661,194
MetLife, Inc. (a) ..................... 176,300 3,713,319
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-174
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
NCR Corp. (a) ................................... 182,580 $ 7,109,209
New York Times Co. 'A' .......................... 73,040 2,885,080
Pharmacia Corp. ................................. 102,390 5,292,283
Philip Morris Cos., Inc. ........................ 543,630 14,440,172
Rockwell International Corp. .................... 61,200 1,927,800
SBC Communications, Inc. ........................ 196,930 8,517,222
Sears, Roebuck & Co. ............................ 210,510 6,867,889
Tupperware Corp. ................................ 173,340 3,813,480
Unicom Corp. .................................... 209,010 8,086,074
U.S. Bancorp .................................... 199,180 3,834,215
-----------
180,544,413
-----------
Total Common Stocks (Cost $521,128,898) .................. 538,694,997
-----------
PREFERRED STOCK 0.5%
GERMANY 0.5%
Volkswagen AG (Cost $5,702,550) ................. 113,600 2,697,952
-----------

TOTAL LONG-TERM INVESTMENTS 95.6%
(Cost $526,831,448) .................................. 541,392,949
-----------
</TABLE>

<TABLE>
<CAPTION>
PAR
VALUE
<S> <C> <C>
SHORT-TERM INVESTMENT 6.7%
REPURCHASE AGREEMENT 6.7%
Chase Securities, Inc. 6.15%, dated 6/30/00,
due due 7/3/00, to be repurchased at $37,927,000
$37,946,438, collateralized by $37,975,000
U.S. Treasury Notes 6.25%, due 2/15/03,
valued at $38,737,173
(Cost $37,927,000) .......................... 37,927,000
-------------

TOTAL INVESTMENTS IN SECURITIES 102.3%
(Cost $564,758,448) ......................... 579,319,949

FOREIGN CURRENCY 0.1%
(Cost $670,702) ...................................... 675,931
-------------

TOTAL INVESTMENTS 102.4%
(Cost $565,429,150) .................................. 579,995,880

LIABILITIES IN EXCESS OF OTHER ASSETS -2.4% .............. (13,418,485)
-------------
NET ASSETS 100% ................................. $ 566,577,395
=============
</TABLE>
(a) NON-INCOME PRODUCING SECURITY

F-175 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION

<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
------------ ----------
<S> <C> <C>
Consumer Staples $110,181,334 19.4%
Financials 77,247,107 13.6
Telecommunication Services 74,035,529 13.1
Consumer Discretionary 73,591,931 13.0
Materials 54,893,687 9.7
Industrials 36,550,101 6.5
Health Care 31,975,332 5.6
Energy 28,135,100 5.0
Utilities 27,482,776 4.9
Information Technology 27,300,052 4.8
------------ ---
$541,392,949 95.6%
============ =====
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-176
<PAGE>

FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000

<TABLE>
<S> <C>
ASSETS:
Investments in Securities, at Value (Cost $564,758,448) ................. $579,319,949
Foreign Currency (Cost $670,702) ......................................... 675,931
Receivable for:
Dividends .............................................................. 2,596,230
Investments Sold ....................................................... 1,341,279
Foreign Withholding Tax Reclaim ........................................ 677,786
Fund Shares Sold ....................................................... 198,167
Interest ............................................................... 6,479
Deferred Organizational Costs ............................................ 10,673
Other .................................................................... 20,503
--------------
Total Assets ......................................................... 584,846,997
--------------
LIABILITIES:
Payable for:
Investments Purchased .................................................. 10,591,752
Fund Shares Redeemed ................................................... 5,913,847
Distribution Fees ...................................................... 805,238
Investment Advisory Fees ............................................... 467,358
Administrative Fees .................................................... 117,442
Custody Fees ........................................................... 103,267
Shareholder Reporting Expenses ......................................... 91,648
Professional Fees ...................................................... 64,845
Transfer Agent Fees .................................................... 61,666
Directors' Fees and Expenses ........................................... 48,835
Bank Overdraft ......................................................... 3,704
--------------
Total Liabilities .................................................... 18,269,602
--------------
NET ASSETS ............................................................... $566,577,395
=============

NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value,
Shares Authorized 2,625,000,000) ........................................ $ 51,606
Paid in Capital in Excess of Par ......................................... 512,909,677
Accumulated Net Realized Gain ............................................ 39,201,392
Net Unrealized Appreciation on Investments
and Foreign Currency Translations ...................................... 14,463,712
Accumulated Net Investment Loss .......................................... (48,992)
-------------
NET ASSETS ............................................................... $ 566,577,395
=============
Class A Shares:
Net Asset Value and Redemption Price Per Share (Based on Net Assets of
$81,714,098 and 7,360,193 Shares Outstanding) ........................ $ 11.10
=============
Maximum Sales Charge ................................................. 5.75%
Maximum Offering Price Per Share (Net Asset Value
Per Share x 100/ (100% - maximum sales charge)) ...................... $ 11.78
=============
Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$442,255,954 and 40,357,646 Shares Outstanding)* ..................... $ 10.96
=============
Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$42,607,343 and 3,888,444 Shares Outstanding)* ....................... $ 10.96
=============
</TABLE>
* REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

F-177 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2000

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ................................................................ $ 13,340,333
Interest ................................................................. 923,055
Less Foreign Taxes Withheld .............................................. (871,945)
--------------
Total Income ......................................................... 13,391,443
--------------
EXPENSES:
Investment Advisory Fees ................................................. 6,391,605
Distribution Fees (Attributed to Classes A, B and C
of $178,634, $5,155,374 and $524,825, respectively) .................... 5,858,833
Administrative Fees ...................................................... 1,609,507
Transfer Agent Fees ...................................................... 342,769
Shareholder Reports ...................................................... 293,883
Custodian Fees ........................................................... 277,557
Professional Fees ........................................................ 77,429
Filing and Registration Fees ............................................. 41,594
Directors' Fees and Expenses ............................................. 20,494
Amortization of Organizational Costs ..................................... 4,590
Other .................................................................... 19,456
--------------
Net Expenses ......................................................... 14,937,717
--------------
NET INVESTMENT LOSS ....................................................... $ (1,546,274)
==============
NET REALIZED GAIN/LOSS ON:
Investments ............................................................... $ 55,332,311
Foreign Currency Transactions ............................................. 929,509
--------------
Net Realized Gain ......................................................... 56,261,820
--------------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period ................................................. 61,356,214
--------------
End of the Period:
Investments ........................................................... 14,561,501
Foreign Currency Translations ........................................... (97,789)
--------------
14,463,712
--------------
Net Change in Unrealized Appreciation/Depreciation ........................ (46,892,502)
--------------
NET REALIZED GAIN/LOSS AND NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ............................................... $ 9,369,318
==============
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................... $ 7,823,044
==============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-178
<PAGE>

STATEMENT OF CHANGES IN NET ASSETS
JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
-------------- --------------
<S> <C> <C>
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Loss ....................................................... $ (1,546,274) $ (1,709,000)
Net Realized Gain ......................................................... 56,261,820 23,770,000
Net Change in Unrealized Appreciation/
Depreciation ........................................................... (46,892,502) 1,000
-------------- --------------
Net Increase in Net Assets Resulting
from Operations ........................................................ 7,823,044 22,062,000
-------------- --------------
DISTRIBUTIONS:
Net Investment Income:
Class A ................................................................... -- (532,000)
Class B ................................................................... -- (472,000)
Class C ................................................................... -- (52,000)
In Excess of Net Investment Income:
Class A ................................................................... -- (94,000)
Class B ................................................................... -- (83,000)
Class C ................................................................... -- (9,000)
-------------- --------------
-- (1,242,000)
-------------- --------------
Net Realized Gain:
Class A ................................................................... (3,981,600) (97,000)
Class B ................................................................... (32,257,364) (796,000)
Class C ................................................................... (3,351,236) (87,000)
-------------- --------------
(39,590,200) (980,000)
-------------- --------------
Net Decrease in Net Assets Resulting
from Distributions ..................................................... (39,590,200) (2,222,000)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Subscribed ................................................................ 223,168,409 166,640,000
Distributions Reinvested .................................................. 37,021,039 2,068,000
Redeemed .................................................................. (398,054,833) (225,647,000)
-------------- --------------
Net Decrease in Net Assets Resulting from
Capital Share Transactions ............................................. (137,865,385) (56,939,000)
-------------- --------------
Total Decrease in Net Assets .............................................. (169,632,541) (37,099,000)
NET ASSETS--Beginning of Period ........................................... 736,209,936 773,309,000
-------------- --------------
NET ASSETS--End of Period
(Including accumulated/undistributed net investment
income/loss of $(48,992) and $188,000, respectively) $ 566,577,395 $ 736,210,000
============== ==============
</TABLE>
* AMOUNTS ROUNDED TO THE NEAREST (000).

F-179 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

FINANCIAL HIGHLIGHTS

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------- OCTOBER 29, 1997*
CLASS A SHARES 2000# 1999# TO JUNE 30, 1998
------------------------- -----------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ................ $ 11.47 $ 11.12 $ 10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income .............. 0.06 0.05 0.06
Net Realized and
Unrealized Gain ................... 0.25 0.40 1.08
-------- -------- --------
Total From Investment Operations ..... 0.31 0.45 1.14
-------- -------- --------
DISTRIBUTIONS
Net Investment Income .............. -- (0.08) (0.02)
In Excess of Net Investment Income . -- (0.01) --
Net Realized Gain .................. (0.68) (0.01) --
-------- -------- --------
Total Distributions .................. (0.68) (0.10) (0.02)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD ....... $ 11.10 $ 11.47 $ 11.12
======== ======== ========
TOTAL RETURN (1) ..................... 3.22% 4.05% 11.38%**
======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .... $81,714 $76,731 $80,508
Ratio of Expenses to
Average Net Assets ................. 1.66% 1.65% 1.70%
Ratio of Net Investment Income/Loss
to Average Net Assets .............. 0.53% 0.44% (0.88%)
Portfolio Turnover Rate .............. 47% 40% 4%**
</TABLE>
* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-180
<PAGE>

FINANCIAL HIGHLIGHTS

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------- OCTOBER 29, 1997*
CLASS B SHARES 2000# 1999# TO JUNE 30, 1998
------------------------- -----------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ................ $ 11.42 $ 11.08 $ 10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss ......... (0.04) (0.03) 0.01
Net Realized and
Unrealized Gain ................... 0.26 0.39 1.07
-------- -------- --------
Total From Investment Operations ..... 0.22 0.36 1.08
-------- -------- --------
DISTRIBUTIONS
Net Investment Income .............. -- (0.01) --
In Excess of Net Investment Income . -- (0.00)+ --
Net Realized Gain .................. (0.68) (0.01) --
-------- -------- --------
Total Distributions .................. (0.68) (0.02) --
-------- -------- --------
NET ASSET VALUE, END OF PERIOD ....... $ 10.96 $ 11.42 $ 11.08
======== ======== ========
TOTAL RETURN (1) ..................... 2.24% 3.29% 10.84%**
======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .... $442,256 $596,339 $623,229
Ratio of Expenses to
Average Net Assets ................. 2.41% 2.40% 2.45%
Ratio of Net Investment Income/Loss
to Average Net Assets .............. (0.34%) (0.31%) 0.12%
Portfolio Turnover Rate .............. 47% 40% 4%**
</TABLE>
* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
+ AMOUNT IS LESS THAN $0.01 PER SHARE.
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-181 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

FINANCIAL HIGHLIGHTS

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------- OCTOBER 29, 1997*
CLASS C SHARES 2000# 1999# TO JUNE 30, 1998
------------------------- -----------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ................ $ 11.42 $ 11.07 $ 10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss ......... (0.04) (0.03) 0.01
Net Realized and
Unrealized Gain ................... 0.26 0.40 1.06
-------- -------- --------
Total From Investment Operations ..... 0.22 0.37 1.07
-------- -------- --------
DISTRIBUTIONS
Net Investment Income .............. -- (0.01) --
In Excess of Net Investment Income . -- (0.00)+ --
Net Realized Gain .................. (0.68) (0.01) --
-------- -------- --------
Total Distributions .................. (0.68) (0.02) --
-------- -------- --------
NET ASSET VALUE, END OF PERIOD ....... $ 10.96 $ 11.42 $ 11.07
======== ======== ========
TOTAL RETURN (1) ..................... 2.24% 3.39% 10.74%**
======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .... $ 42,607 $ 63,140 $ 69,572
Ratio of Expenses to
Average Net Assets ................. 2.41% 2.40% 2.45%
Ratio of Net Investment Income/Loss
to Average Net Assets .............. (0.36%) (0.32%) 0.13%
Portfolio Turnover Rate .............. 47% 40% 4%**
</TABLE>
* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
+ AMOUNT IS LESS THAN $0.01 PER SHARE.
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-182
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen Global Equity Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks long-term
capital appreciation by investing primarily in equity securities of issuers
throughout the world, including U.S. issuers. The Fund commenced operations on
October 29, 1997.

A. 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 bid and asked prices obtained from reputable brokers.
Debt securities purchased with remaining maturities of 60 days or less are
valued at amortized cost, which approximates market value. All other securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith using procedures approved by the Board of
Directors.

B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.

F-183
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

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.

D. ORGANIZATIONAL COSTS The organizational costs of the Fund are being amortized
on a straight line basis over the 60 month period ending October 28, 2002
beginning with the Fund's commencement of operations. The Adviser has agreed
that in the event any of the initial shares of the Fund originally purchased by
Van Kampen are redeemed by the Fund during the amortization period, the Fund
will be reimbursed for any unamortized organizational costs in the same
proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.

E. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required. The Fund may be
subject to taxes imposed by countries in which it invests. Such taxes are
generally based on income earned or gains realized or repatriated. Taxes are
accrued and applied to net investment income, net realized capital gains and net
unrealized appreciation, as applicable, as the income is earned or capital gains
are recorded.

Net realized gains or losses may differ for financial and tax reporting
purposes as a result of losses relating to wash sale transactions.

At June 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $565,411,558, the aggregate gross unrealized
appreciation is $68,389,201 and the aggregate gross unrealized depreciation is
$54,480,810, resulting in net unrealized appreciation on long- and short-term
investments of $13,908,391.

F-184
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

nent differences between book and tax basis reporting for the current fiscal
year have been identified and appropriately reclassified. A permanent
difference related to a net operating loss which may be used as an offset
against short-term gains for tax purposes totaling $756,627 has been
reclassified from accumulated net realized gain to accumulated net investment
loss. A permanent difference related to the recognition of certain expenses
that are not deductible for tax purposes totaling $3,102 were reclassified
from accumulated net investment loss to paid in capital in excess of par. A
permanent difference of $373,964 related to a correction of the prior year
net operating loss was reclassified from accumulated net investment income to
paid in capital in excess of par. A permanent difference related to
recognized currency gains totaling $929,509 was reclassified from accumulated
net realized gain to accumulated net investment loss. A permanent difference
of $2,086 related to a correction of prior year amounts was reclassified from
paid in capital in excess of par to accumulated net realized gain.

Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of presenting net investment income/loss per share in the Financial Highlights.

G. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices of such currencies against the U.S. dollar. Purchases and sales of
portfolio securities are translated at the rate of exchange prevailing when such
securities were acquired or sold. Income and expenses are translated at rates
prevailing when accrued. Realized and unrealized gains and losses on securities
resulting from changes in exchange rates are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency transactions includes
the net realized amount from the sale of the currency and the amount realized
between trade date and settlement date on security and income transactions.

The Fund invests in issuers located in emerging markets. There are certain
risks inherent in these investments not typically associated with issuers in the
United States, including the smaller size of the markets themselves, lesser
liquidity, greater volatility, and potentially less publicly available
information. Emerging markets may be subject to a greater degree of government
involvement in the economy and greater economic and political uncertainty, which
has the potential to extend to government imposed restrictions on exchange
traded transactions and currency transactions. These restrictions may impact the
Fund's ability to buy or sell certain securities or to repatriate certain
currencies to U.S. dollars. Additionally, changes in currency exchange rates
will affect the value of and investment income from such securities.

F-185
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

Morgan Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment
Management Inc., 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
indicated as follows:

AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C> <C>
First $750 million .............. 1.00 of 1%
Next $500 million ............... .95 of 1%
Over $1.25 billion .............. .90 of 1%
</TABLE>

CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
EXPENSE RATIO EXPENSE RATIO
<S> <C> <C>
1.80% 2.55%
</TABLE>

For the period ended June 30, 2000, the Fund recognized expenses of $38,974
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.

For the period ended June 30, 2000, the Fund recognized expenses of $12,844
representing Van Kampen's cost of providing legal services to the Fund.

Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.

F-186
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

one to five years following such purchase. For the period ended June 30, 2000,
the Distributor has advised the Fund that it earned initial sales charges of
$215,551 for Class A shares and deferred sales charges of $2,581,073 and $8,726
for Class B shares and Class C shares, respectively.

Certain officers and directors of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.

For the period ended June 30, 2000, the Fund incurred $84,449 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker dealer.

CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
-----------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First ............................. 5.00% 1.00%
Second ............................ 4.00% None
Third ............................. 3.00% None
Fourth ............................ 2.50% None
Fifth ............................. 1.50% None
Thereafter ........................ None None
</TABLE>

F-187
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
------------- ---------------
CAPITAL SHARE TRANSACTIONS
CLASS A:
Shares:
<S> <C> <C>
Subscribed ............................. 17,302,482 7,057,000
Distributions Reinvested ............... 336,380 60,000
Redeemed ............................... (16,969,125) (7,666,000)
-------------- -------------
Net Increase/Decrease in
Class A Shares Outstanding ............. 669,737 (549,000)
============== =============
Dollars:
Subscribed ............................. $ 188,823,212 $ 76,578,000
Distributions Reinvested ............... 3,521,901 652,000
Redeemed ............................... (185,892,793) (82,720,000)
-------------- -------------
Net Increase/Decrease .................... $ 6,452,320 $ (5,490,000)
============== =============
Ending Paid in Capital ................... $ 74,820,756+ $ 68,606,000+
============== =============
CLASS B:
Shares:
Subscribed ............................. 2,877,849 7,094,000
Distributions Reinvested ............... 2,931,584 118,000
Redeemed ............................... (17,652,678) (11,280,000)
-------------- -------------
Net Decrease in Class B Shares Outstanding (11,843,245) (4,068,000)
============== =============
Dollars:
Subscribed ............................. $ 30,744,324 $ 75,705,000
Distributions Reinvested ............... 30,429,833 1,280,000
Redeemed ............................... (188,036,986) (120,388,000)
-------------- -------------
Net Decrease ............................. $(126,862,829) $ (43,403,000)
============== =============
Ending Paid in Capital ................... $ 399,141,563+ $ 527,856,000+
============== =============
CLASS C:
Shares:
Subscribed ............................. 330,119 1,344,000
Distributions Reinvested ............... 295,694 13,000
Redeemed ............................... (2,264,840) (2,112,000)
-------------- -------------
Net Decrease in Class C Shares Outstanding (1,639,027) (755,000)
============== =============
Dollars:
Subscribed ............................. $ 3,600,873 $ 14,357,000
Distributions Reinvested ............... 3,069,305 136,000
Redeemed ............................... (24,125,054) (22,539,000)
-------------- -------------
Net Decrease ............................. $ (17,454,876) $ (8,046,000)
-------------- -------------
Ending Paid in Capital ................... $ 38,623,984+ $ 56,274,000+
============== =============
</TABLE>

* Amounts rounded to the nearest (000).
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences-See Note 1F.

F-188
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

4. INVESTMENT TRANSACTIONS
For the period ended June 30, 2000, the Fund made purchases of $288,862,056 and
sales of $470,381,415 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.

F-189

<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Van Kampen International Magnum
Fund

We have audited the accompanying statement of assets and liabilities of
Van Kampen International Magnum Fund (the "Fund"), a fund of Van Kampen
Series Fund, Inc., including the portfolio of investments, as of June 30,
2000, and the related statements of operations, changes in net assets and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The Fund's financial statements and
financial highlights for the periods ended prior to June 30, 2000, were
audited by other auditors whose report, dated August 6, 1999, expressed an
unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 2000, by
correspondence with the Fund's custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Van Kampen International Magnum Fund as of June 30, 2000, the
results of its operations, the changes in its net assets and the financial
highlights for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-190
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS THE FOLLOWING PAGES DETAIL YOUR FUND'S
JUNE 30, 2000 PORTFOLIO OF INVESTMENTS AT THE END OF THE
REPORTING PERIOD.
<TABLE>
<CAPTION>

MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>

COMMON STOCKS 90.4%
AUSTRALIA 1.9%
AMP Ltd. ................................................ 6,750 $ 68,534
Brambles Industries Ltd. ................................ 3,500 107,312
Broken Hill Proprietary Co., Ltd. ....................... 15,800 186,372
Commonwealth Bank of Australia .......................... 14,500 239,799
CSL Ltd. ................................................ 3,000 59,190
Fosters Brewing Group Ltd. .............................. 57,100 160,284
Lend Lease Corp., Ltd. .................................. 8,350 106,264
Macquarie Corporate Telecommunications Holdings Ltd. (a) 68,200 83,502
National Australia Bank Ltd. ............................ 18,350 305,749
News Corp., Ltd. ........................................ 31,740 436,005
Normandy Mining Ltd. .................................... 142,200 76,436
Qantas Airways Ltd. ..................................... 29,200 58,946
Rio Tinto Ltd. .......................................... 11,750 193,822
Solution 6 Holdings Ltd. (a) ............................ 48,450 94,045
Telstra Corp., Ltd. ..................................... 50,500 204,492
Westpac Banking Corp., Ltd. ............................. 29,700 213,747
----------
2,594,499
----------

BELGIUM 0.2%
Mobistar S.A. (a) ....................................... 7,770 257,681
----------
DENMARK 0.1%
Tele Danmark A/S ........................................ 2,285 153,636
----------
FINLAND 1.3%
Nokia Oyj ............................................... 27,760 1,415,219
Sampo Insurance Co., Ltd. 'A' ........................... 7,245 293,686
----------
1,708,905
----------
FRANCE 9.0%
Alcatel ................................................. 22,690 1,486,783
Aventis S.A. ............................................ 33,981 2,477,822
AXA ..................................................... 7,397 1,164,115
BNP Paribus ............................................. 9,310 895,090
Castorama Dubois Investissement S.A. .................... 970 239,623
CNP Assurances .......................................... 22,490 765,798
Groupe Danone (a) ....................................... 5,460 723,875
Michelin (C.G.D.E.) 'B' (Registered) .................... 9,860 316,084
Pernod-Ricard ........................................... 8,010 435,476
Sanofi-Synthelabo S.A. .................................. 4,400 209,416
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS. F-191
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
FRANCE (CONTINUED)
Schneider Electric S.A. ................................. 9,960 $ 693,487
Societe Television Francaise 1 (a) ...................... 1,660 115,581
Thomson Multimedia (a) .................................. 3,250 210,169
Total Fina Elf S.A. 'B' ................................. 15,113 2,315,009
-----------
12,048,328
-----------
GERMANY 3.2%
Adidas-Salomon AG ....................................... 5,320 292,274
BASF AG ................................................. 7,225 292,875
Bayer AG ................................................ 3,659 139,947
Bayerische Hypo-und Vereinsbank AG ...................... 9,772 638,455
Bayerische Motoren Werke AG ............................. 9,320 283,572
Deutsche Telekom AG ..................................... 19,839 1,142,913
SAP AG .................................................. 3,850 581,664
Schering AG ............................................. 4,860 264,453
Siemens AG .............................................. 3,440 514,471
Software AG ............................................. 2,050 186,730
-----------
4,337,354
-----------

HONG KONG 1.9%
Asia Satellite Telecommunications Holdings Ltd. ......... 41,400 141,532
Cable & Wireless HKT Ltd. ............................... 94,000 206,799
Cathay Pacific Airways Ltd. ............................. 52,700 97,686
Cheung Kong Holdings Ltd. ............................... 15,100 167,068
China Telecom Ltd. (a) .................................. 49,100 433,022
Hong Kong & China Gas Co., Ltd. ......................... 98,000 109,999
HSBC Holdings plc ....................................... 13,300 151,844
Hutchison Whampoa Ltd. .................................. 45,870 576,648
Li & Fung Ltd. .......................................... 57,200 286,165
SmarTone Telecommunications Holdings Ltd. ............... 22,400 49,567
Sun Hung Kai Properties Ltd. ............................ 22,700 163,068
Swire Pacific Ltd. 'A' .................................. 9,000 52,646
Television Broadcasts Ltd. .............................. 15,000 100,058
-----------
2,536,102
-----------

ITALY 2.6%
Banca Popolare di Bergamo S.p.A. ........................ 28,940 534,944
ENI S.p.A. .............................................. 120,180 693,496
Marzotto (Gaetano) S.p.A. ............................... 9,970 81,305
Mediaset S.p.A .......................................... 18,100 276,220
Telecom Italia Mobile S.p.A ............................. 31,500 321,478
Telecom Italia S.p.A. ................................... 82,090 1,127,481
UniCredito Italiano S.p.A. .............................. 83,660 399,772
-----------
3,434,696
-----------
</TABLE>

F-192 SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>

JAPAN 28.1%
Aiwa Co., Ltd. .......................................... 14,000 $ 223,958
Amada Co., Ltd. ......................................... 62,000 525,696
Bank of Tokyo-Mitsubishi Ltd. ........................... 9,000 108,616
Canon, Inc. ............................................. 25,000 1,243,582
Casio Computer Co., Ltd. ................................ 48,000 538,132
Dai Nippon Printing Co., Ltd. ........................... 35,000 616,280
Daicel Chemical Industries Ltd. ......................... 92,000 296,425
Daifuku Co., Ltd. ....................................... 51,000 565,038
Daikin Industries Ltd. .................................. 44,000 1,021,810
FamilyMart Co., Ltd. .................................... 12,300 472,787
Fuji Machine Manufacturing Co. .......................... 13,700 718,913
Fuji Photo Film Co. ..................................... 26,000 1,063,074
Fujitec Co., Ltd. ....................................... 29,000 252,174
Fujitsu Ltd. ............................................ 42,000 1,452,165
Furukawa Electric Co., Ltd. ............................. 24,000 500,824
Hitachi Credit Corp. .................................... 31,300 846,305
Hitachi Ltd. ............................................ 87,000 1,254,039
House Foods Corp. ....................................... 11,000 169,956
Kaneka Corp. ............................................ 65,000 715,860
Kurita Water Industries Ltd. ............................ 26,000 571,953
Kyocera Corp. ........................................... 5,800 983,014
Kyudenko Co., Ltd. ...................................... 25,000 75,133
Lintec Corp. ............................................ 38,000 395,591
Matsushita Electric Industrial Co., Ltd. ................ 44,000 1,139,950
Minebea Co., Ltd. ....................................... 46,000 576,381
Mitsubishi Chemical Corp. ............................... 96,000 393,424
Mitsubishi Estate Co., Ltd. ............................. 30,000 352,725
Mitsubishi Heavy Industries Ltd. ........................ 136,000 602,195
Mitsubishi Logistics Corp. .............................. 10,000 90,442
Mitsumi Electric Co., Ltd. .............................. 26,000 955,297
NEC Corp. ............................................... 50,000 1,568,609
Nifco, Inc. ............................................. 31,000 395,440
Nintendo Co., Ltd. ...................................... 7,800 1,360,931
Nippon Meat Packers, Inc. ............................... 23,000 335,861
Nissan Motor Co., Ltd. .................................. 95,000 559,376
Nissei Sangyo Co., Ltd. ................................. 13,000 189,835
Nissha Printing Co., Ltd. ............................... 20,000 138,113
NTT Corp. ............................................... 87 1,155,683
Ono Pharmaceutical Co., Ltd. ............................ 17,000 728,720
Ricoh Co., Ltd. ......................................... 55,000 1,163,267
Rinnai Corp. ............................................ 13,900 309,704
Rohm Co. ................................................ 3,000 876,160
Ryosan Co. .............................................. 15,000 339,159
Sangetsu Co., Ltd. ...................................... 9,000 148,382
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS. F-193
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
JAPAN (CONTINUED)
Sankyo Co., Ltd. ........................................ 30,000 $ 676,904
Sanwa Shutter Corp. ..................................... 55,000 178,247
Sekisui Chemical Co. .................................... 61,000 234,472
Sekisui House Ltd. ...................................... 55,000 508,314
Shin-Etsu Polymer Co., Ltd. ............................. 51,000 421,857
Sony Corp. .............................................. 14,200 1,324,415
Suzuki Motor Co., Ltd. .................................. 42,000 541,297
TDK Corp. ............................................... 9,000 1,292,195
Tokyo Electric Power Co. ................................ 15,000 365,302
Toshiba Corp. ........................................... 119,000 1,341,966
Toyota Motor Corp. ...................................... 16,000 728,061
Tsubakimoto Chain Co. ................................... 76,000 386,641
Yamaha Corp. ............................................ 36,000 393,085
Yamanouchi Pharmaceutical Co., Ltd. ..................... 20,000 1,090,960
-----------
37,474,695
-----------
NETHERLANDS 4.7%
ABN Amro Holding N.V. ................................... 9,830 240,584
Akzo Nobel N.V. ......................................... 15,965 677,619
ASM Lithography Holding N.V. (a) ........................ 4,040 173,478
Buhrmann N.V. ........................................... 11,055 315,800
Fortis (NL) N.V. ........................................ 9,470 275,400
Getronics N.V. .......................................... 13,660 210,416
Heineken N.V. ........................................... 3,450 209,776
ING Groep N.V. .......................................... 12,502 844,246
Koninklijke (Royal) Philips Electronics N.V. ............ 42,350 1,995,431
Koninklijke KPN N.V. (a) ................................ 8,280 369,996
Laurus N.V. ............................................. 28,610 342,466
Royal Dutch Petroleum Co. ............................... 7,620 473,143
United Pan-Europe Communications N.V. 'A' (a) ........... 6,700 175,034
-----------
6,303,389
-----------
NEW ZEALAND 0.1%
Telecom Corp. of New Zealand Ltd. ....................... 28,500 99,612
-----------

PORTUGAL 0.4%
Banco Comercial Portugues S.A. (Registered) ............. 48,650 252,893
Telecel-Comunicacaoes Pessoais S.A. (a) ................. 18,570 281,621
-----------
534,514
-----------
SINGAPORE 1.4%
Chartered Semiconductor Manufacturing Ltd. (a) .......... 12,000 104,892
Chartered Semiconductor Manufacturing Ltd. ADR (a) ...... 300 27,000
City Developments Ltd. .................................. 21,900 84,938
DBS Group Holdings Ltd. ................................. 26,564 341,372
Keppel Corp. Ltd. ....................................... 23,000 49,795

</TABLE>

F-194 SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
SINGAPORE (CONTINUED)
NatSteel Electronics Ltd. ............................... 21,000 $ 64,428
Neptune Orient Lines Ltd. (a) ........................... 59,000 54,645
Oversea-Chinese Banking Corp., Ltd. (Foreign) ........... 15,800 108,839
Overseas Union Bank Ltd. (Foreign) ...................... 11,124 43,144
Sembcorp Logistics Ltd. ................................. 20,000 112,301
Singapore Airlines Ltd. (Foreign) ....................... 12,000 118,784
Singapore Press Holdings Ltd. ........................... 12,000 187,554
Singapore Telecommunications Ltd. ....................... 69,000 101,054
ST Assembly Test Services Ltd. (a) ...................... 37,000 95,097
United Overseas Bank Ltd. (Foreign) ..................... 18,896 123,603
Venture Manufacturing Ltd. .............................. 20,000 203,763
-----------
1,821,209
-----------
SPAIN 2.2%
Amadeus Global Travel Distribution S.A. 'A' (a) ......... 27,490 313,328
Banco Bilbao Vizcaya S.A. ............................... 32,290 481,991
Banco Popular Espanol S.A. .............................. 9,470 292,652
Endesa S.A. ............................................. 23,440 453,624
Telefonica Publicidad e Informacion S.A. (a) ............ 4,470 42,165
Telefonica S.A. (a) ..................................... 62,553 1,342,416
-----------
2,926,176
-----------

SWEDEN 4.1%
Assa Abloy AB 'B' ....................................... 26,914 539,622
Autoliv, Inc. SDR ....................................... 17,500 428,183
Ericsson LM AB 'B' ...................................... 42,980 849,571
ForeningsSparbanken AB 'A' .............................. 24,230 354,063
Nordic Baltic Holding AB ............................... 138,587 1,043,955
Scandic Hotels AB ....................................... 22,260 267,281
Securitas AB 'B' ........................................ 32,310 684,410
Skandia Forsakrings AB (a) .............................. 7,400 195,310
Svedala Industri AB ..................................... 19,830 377,372
Svenska Cellulosa Free AB 'B' ........................... 11,720 222,372
Svenska Handelsbanken 'A' ............................... 32,740 474,708
Tele1 Europe Holding AB (a) ............................. 4,350 53,217
-----------
5,490,064
-----------
SWITZERLAND 6.1%
Adecco S.A. (Registered) ................................ 450 381,912
Cie Financiere Richemont AG 'A' ......................... 605 1,628,177
Givaudan (Registered) (a) ............................... 436 132,554
Holderbank Financiere Glarus AG 'B' (Bearer) ............ 476 582,940
Nestle S.A. (Registered) ................................ 1,215 2,429,107
Novartis AG (Registered) ................................ 680 1,075,941
Roche Holding AG (Registered) ........................... 46 447,297
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS. F-195
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
SWITZERLAND (CONTINUED)
Schindler Holding AG (Registered) ....................... 224 $ 342,906
UBS AG (Registered) ..................................... 7,370 1,078,581
-----------
8,099,415
-----------
UNITED KINGDOM 23.1%
Allied Domecq plc ....................................... 247,800 1,311,964
Allied Zurich plc ....................................... 29,300 346,377
AstraZeneca Group plc ................................... 16,185 755,302
AstraZeneca Group plc ................................... 14,370 667,388
BAA plc ................................................. 42,900 343,942
BAE SYSTEMS plc ......................................... 60,700 378,302
Bank of Scotland ........................................ 30,903 293,805
Barclays plc ............................................ 42,400 1,053,795
BBA Group plc ........................................... 40,100 262,655
BG Group plc ............................................ 94,958 613,355
Blue Circle Industries plc .............................. 60,300 389,035
BOC Group plc ........................................... 23,950 344,177
BP Amoco plc ............................................ 77,700 745,183
British American Tobacco plc ............................ 72,000 480,312
British Telecom plc ..................................... 124,000 1,601,888
Cadbury Schweppes plc ................................... 109,200 716,910
Capital Radio plc ....................................... 3,500 81,799
Centrica plc ............................................ 74,440 248,295
Diageo plc .............................................. 112,337 1,007,697
Egg plc (a) ............................................. 63,300 164,697
EMAP plc ................................................ 12,100 194,568
GKN plc ................................................. 20,200 257,591
Glaxo Wellcome plc ...................................... 50,900 1,483,720
Granada Group plc ....................................... 119,400 1,192,067
Great Universal Stores plc .............................. 89,020 572,307
Halma plc ............................................... 93,300 143,958
Imperial Tobacco Group plc .............................. 83,600 800,502
Kingfisher plc .......................................... 19,200 174,699
Lloyds TSB Group plc .................................... 30,100 284,121
Marconi plc ............................................. 36,900 480,040
Prudential Corp. plc .................................... 102,100 1,495,043
Reckitt Benckiser plc ................................... 144,629 1,618,973
Reed International plc .................................. 38,700 336,613
Rentokil Initial plc .................................... 126,200 286,354
RMC Group plc ........................................... 16,400 213,351
Rolls-Royce plc ......................................... 139,700 495,555
Sainsbury (J) plc ....................................... 26,700 121,167
Scottish & Southern Energy plc .......................... 61,100 560,101
Shell Transport & Trading Co. plc ....................... 159,365 1,329,508

</TABLE>

F-196 SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Smith & Nephew plc ...................................... 34,444 $ 127,132
SmithKline Beecham plc .................................. 47,000 614,988
Smiths Industries plc ................................... 22,700 295,309
SSL International plc ................................... 65,000 703,027
Telewest Communications plc (a) ......................... 82,834 285,691
Tesco plc ............................................... 80,300 249,620
Vodafone AirTouch plc ................................... 792,338 3,200,179
Wolseley plc ............................................ 49,600 266,356
Woolwich plc ............................................ 51,100 216,244
WPP Group plc ........................................... 74,000 1,080,218
-----------
30,885,880
-----------

TOTAL COMMON STOCKS
(Cost $103,149,339) .......................................... 120,706,155
-----------
PREFERRED STOCKS 1.3%
GERMANY 1.3%
Fresenius AG ............................................ 3,085 706,486
Henkel KGaA ............................................. 11,987 685,991
Hugo Boss AG ............................................ 2,134 370,444
-----------

TOTAL PREFERRED STOCKS
(Cost $1,629,153) ............................................ 1,762,921
-----------

TOTAL LONG-TERM INVESTMENTS 91.7%
(Cost $104,778,492) .......................................... 122,469,076
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS. F-197
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <C> <C>
SHORT-TERM INVESTMENT 7.9%
REPURCHASE AGREEMENT 7.9%

Chase Securities, Inc. 6.15%, dated $10,533,000
6/30/00, due 7/3/00, to be repurchased at $10,538,398,
collateralized by $11,760,000 U.S. Treasury Notes
4.75%, due 11/15/08, valued at $10,753,050
(Cost $10,533,000) .............................. $ 10,533,000
------------

TOTAL INVESTMENTS IN SECURITIES 99.6%
(Cost $115,311,492) .......................................... 133,002,076

FOREIGN CURRENCY 0.1%
(Cost $78,492) ............................................... 78,444
------------

TOTAL INVESTMENTS 99.7%
(Cost $115,389,984) .......................................... 133,080,520

OTHER ASSETS IN EXCESS OF LIABILITIES 0.3% ...................... 426,328
------------

NET ASSETS (100%) ................................................ $133,506,848
------------
------------
</TABLE>

(a) - NON-INCOME PRODUCING SECURITY

ADR - AMERICAN DEPOSITARY RECEIPT

SDR - SWEDISH DEPOSITARY RECEIPT

F-198 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION

<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
Consumer Discretionary ........... $ 20,334,678 15.2%
Information Technology ........... 18,586,534 13.9
Financials ....................... 18,020,331 13.5
Industrials ...................... 13,594,940 10.2
Consumer Staples ................. 13,347,467 10.0
Telecommunication Services ....... 12,361,271 9.2
Health Care ...................... 12,088,747 9.1
Materials ........................ 6,228,093 4.6
Energy ........................... 5,556,339 4.2
Utilities ........................ 2,350,676 1.8
------------ ----
$122,469,076 91.7%
------------ ----
------------ ----
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-199
<PAGE>

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
JUNE 30, 2000
<TABLE>
<S> <C>
ASSETS:
Investments at Value (Cost $115,311,492) ................................ $133,002,076
Foreign Currency (Cost $78,492) ......................................... 78,444
Margin Deposit on Futures ............................................... 1,063,546
Receivable for:
Fund Shares Sold ...................................................... 1,814,379
Investments Sold ...................................................... 473,173
Dividends ............................................................. 203,582
Foreign Withholding Tax Reclaim ....................................... 62,476
Interest .............................................................. 1,842
Net Unrealized Gain on Foreign Currency Exchange Contracts .............. 25,377
Other ................................................................... 10,141
------------
Total Assets ........................................................ 136,735,036
------------

LIABILITIES:
Payable for:
Investments Purchased ................................................. 1,873,449
Fund Shares Redeemed .................................................. 635,771
Bank Overdraft ........................................................ 199,178
Investment Advisory Fees .............................................. 112,966
Distribution Fees ..................................................... 103,573
Variation Margin of Futures Contracts ................................. 92,038
Custody Fees .......................................................... 56,408
Shareholder Reporting Expense ......................................... 44,933
Professional Fees ..................................................... 33,662
Directors' Fees and Expenses .......................................... 31,789
Administrative Fees ................................................... 30,704
Transfer Agent Fees ................................................... 12,521
Other ................................................................... 1,196
------------
Total Liabilities ................................................... 3,228,188
------------
NET ASSETS .............................................................. $133,506,848
------------
------------

NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized 2,625,000,000).. $ 8,631
Paid in Capital in Excess of Par ........................................ 116,238,154
Net Unrealized Appreciation on Investments,
Foreign Currency Translations and Futures ............................. 17,603,066
Accumulated Net Realized Gain ........................................... 163,162
Accumulated Net Investment Loss ......................................... (506,165)
------------
NET ASSETS .............................................................. $133,506,848
------------
------------

Class A Shares:
Net Asset Value and Redemption Price Per Share (Based on Net Assets
of $62,699,511 and 4,023,896 Shares Outstanding) .................... $ 15.58
------------
------------
Maximum Sales Charge ................................................ 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100/ (100% - maximum sales charge)) ......................... $ 16.53
------------
------------

Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets
of $55,572,512 and 3,619,532 Shares Outstanding)* ................... $ 15.35
------------
------------

Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets
of $15,234,825 and 987,453 Shares Outstanding)* ..................... $ 15.43
------------
------------
</TABLE>
* REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

F-200 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Statement of Operations
YEAR ENDED JUNE 30, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ............................................................... $ 1,873,752
Interest ................................................................ 408,240
Less Foreign Taxes Withheld ............................................. (106,022)
------------
Total Income ........................................................ 2,175,970
------------
EXPENSES:
Investment Advisory Fees ................................................ 930,786
Distribution Fees (Attributed to Classes A, B and C of $124,816, $514,434
and $149,447, respectively) ........................................... 788,697
Administrative Fees ..................................................... 316,241
Shareholder Reports ..................................................... 122,977
Custodian Fees .......................................................... 106,507
Transfer Agent Fees ..................................................... 66,942
Professional Fees ....................................................... 43,974
Filing and Registration Fees ............................................ 37,789
Directors' Fees and Expenses ............................................ 25,219
Amortization of Organizational Costs .................................... 6,890
Other ................................................................... 4,211
------------
Total Expenses ...................................................... 2,450,233
Less Expense Reductions ............................................. (22,526)
------------
Net Expenses ........................................................ 2,427,707
------------
NET INVESTMENT LOSS ..................................................... $ (251,737)
------------
------------
NET REALIZED GAIN/LOSS ON:
Investments ............................................................. $ 6,400,555
Foreign Currency Transactions ........................................... (263,408)
Futures ................................................................. 189,505
------------
Net Realized Gain ....................................................... 6,326,652
------------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period ............................................... 8,067,691
------------
End of the Period:
Investments ......................................................... 17,690,584
Foreign Currency Translations ....................................... (5,139)
Futures ............................................................. (82,379)
------------
17,603,066
------------
Net Change in Unrealized Appreciation/Depreciation During the Period .... 9,535,375
------------
NET REALIZED GAIN/LOSS AND NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ............................................. $15,862,027
------------
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................... $15,610,290
------------
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-201
<PAGE>

Statement of Changes in Net Assets
YEAR ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
------------- --------------
<S> <C> <C>
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss ............................ $ (251,737) $ 6,000
Net Realized Gain/Loss ................................ 6,326,652 (6,851,000)
Net Change in Unrealized Appreciation/Depreciation .... 9,535,375 (2,182,000)
------------ ------------
Net Increase/Decrease in Net Assets
Resulting from Operations .......................... 15,610,290 (9,027,000)
------------ ------------
DISTRIBUTIONS:
Net Investment Income:
Class A ............................................. -- (1,075,000)
Class B ............................................. -- (551,000)
Class C ............................................. -- (161,000)
In Excess of Net Investment Income:
Class A ............................................. -- (14,000)
Class B ............................................. -- (7,000)
Class C ............................................. -- (2,000)
------------ ------------
-- (1,810,000)
------------ ------------
IN EXCESS OF NET REALIZED GAIN:
Class A ............................................. -- (709,000)
Class B ............................................. -- (611,000)
Class C ............................................. -- (179,000)
------------ ------------
-- (1,499,000)
------------ ------------
Net Decrease in Net Assets Resulting from Distributions -- (3,309,000)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Subscribed ............................................ 122,915,121 79,794,000
Distributions Reinvested .............................. -- 2,837,000
Redeemed .............................................. (112,874,498) (96,317,000)
------------ ------------
Net Increase/Decrease in Net Assets Resulting from
Capital Share Transactions .......................... 10,040,623 (13,686,000)
------------ ------------
Total Increase/Decrease in Net Assets ................. 25,650,913 (26,022,000)
NET ASSETS--Beginning of Period ....................... 107,855,935 133,878,000
------------ ------------
NET ASSETS--End of Period (Including accumulated/
distributions in excess of net investment
income/loss of $(506,165) and $(23,000),
respectively) ....................................... $ 133,506,848 $107,856,000
------------ ------------
------------ ------------
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

F-202 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
Financial Highlights HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------- JULY 1, 1996* TO
Class A Shares 2000# 1999# 1998# JUNE 30, 1997
--------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD .................. $ 13.57 $ 14.85 $ 13.91 $ 12.00
--------- -------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income ...... 0.04 0.05 0.17 0.17
Net Realized and
Unrealized Gain/Loss 1.97 (0.91) 0.96 1.88
--------- -------- -------- ---------

Total From Investment Operations ... 2.01 (0.86) 1.13 2.05
--------- -------- -------- ---------
DISTRIBUTIONS
Net Investment Income ...... -- (0.25) (0.18) (0.13)
In Excess of Net Investment
Income ............. -- (0.01) -- --
Net Realized Gain .......... -- -- (0.01) (0.01)
In Excess of Net Realized Gain -- (0.16) -- --
--------- -------- -------- ---------
Total Distributions ................ -- (0.42) (0.19) (0.14)
--------- -------- -------- ---------
NET ASSET VALUE, END OF PERIOD ..... $ 15.58 $ 13.57 $ 14.85 $ 13.91
--------- -------- -------- ---------
--------- -------- -------- ---------
TOTAL RETURN (1) ................... 14.81% (5.54%) 8.32% 17.30%**
--------- -------- -------- ---------
--------- -------- -------- ---------

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .. $ 62,699 $45,573 $66,817 $ 21,961
Ratio of Expenses to Average
Net Assets ................. 1.65% 1.65% 1.65% 1.65%
Ratio of Net Investment Income
to Average Net Assets ...... 0.26% 0.37% 1.19% 1.39%
Portfolio Turnover Rate ............ 66% 70% 35% 22%**
--------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to
Net Investment Income $0.00+ $0.00+ $0.02 $0.11
Ratios Before Expense Reductions:
Expenses to Average Net Assets 1.68% 1.71% 1.82% 2.50%
Net Investment Income to
Average Net Assets.. 0.23% 0.33% 1.02% 0.52%
--------------------------------------------------------------------------------------------------
</TABLE>
* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
+ AMOUNT IS LESS THAN $0.01 PER SHARE.
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-203
<PAGE>

NET ASSET VALUE, BEGINNING
OF PERIOD ..................... $ 13.47 $ 14.72 $ 13.84 $ 12.00
--------- -------- -------- ---------

INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss .... (0.08) (0.04) 0.05 0.10
Net Realized and
Unrealized Gain/Loss .. 1.96 (0.90) 0.97 1.85
--------- -------- -------- ---------

Total From Investment Operations ...... 1.88 (0.94) 1.02 1.95
--------- -------- -------- ---------

DISTRIBUTIONS
Net Investment Income ......... -- (0.15) (0.13) (0.10)
In Excess of Net Investment
Income ................ -- (0.00)+ -- --
Net Realized Gain ............. -- -- (0.01) (0.01)
In Excess of Net Realized Gain -- (0.16) -- --
--------- -------- -------- ---------
Total Distributions ................... -- (0.31) (0.14) (0.11)
--------- -------- -------- ---------
NET ASSET VALUE, END OF PERIOD ........ $ 15.35 $ 13.47 $ 14.72 $ 13.84
--------- -------- -------- ---------
--------- -------- -------- ---------
TOTAL RETURN (1) ...................... 14.12% (6.28%) 7.55% 16.40%**
--------- -------- -------- ---------
--------- -------- -------- ---------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ..... $ 55,573 $48,096 $51,541 $ 18,215
Ratio of Expenses to Average
Net Assets .................... 2.40% 2.40% 2.40% 2.40%
Ratio of Net Investment Income/
Loss to Average Net Assets .... (0.55%) (0.33%) 0.40% 0.54%
Portfolio Turnover Rate ............... 66% 70% 35% 22%**
--------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net
Investment Income/Loss $0.00+ $0.00+ $0.02 $0.17
Ratios Before Expense Reductions:
Expenses to Average Net Assets 2.43% 2.46% 2.57% 3.34%
Net Investment Income/Loss to
Average Net Assets..... (0.58%) (0.37%) 0.23% (0.42%)
--------------------------------------------------------------------------------------------------
</TABLE>

F-204 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

NET ASSET VALUE, BEGINNING
OF PERIOD .................... $ 13.52 $ 14.78 $ 13.83 $ 12.00
--------- -------- -------- ---------

INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss ... (0.09) (0.03) 0.05 0.06
Net Realized and
Unrealized Gain/Loss . 2.00 (0.92) 0.99 1.88
--------- -------- -------- ---------
Total From Investment Operations ..... 1.91 (0.95) 1.04 1.94
--------- -------- -------- ---------
DISTRIBUTIONS
Net Investment Income ........ -- (0.15) (0.08) (0.10)
In Excess of Net Investment
Income ............... -- (0.00)+ -- --
Net Realized Gain ............ -- -- (0.01) (0.01)
In Excess of Net Realized Gain -- (0.16) -- --
--------- -------- -------- ---------
Total Distributions .................. -- (0.31) (0.09) (0.11)
--------- -------- -------- ---------
NET ASSET VALUE, END OF PERIOD ....... $ 15.43 $ 13.52 $ 14.78 $ 13.83
--------- -------- -------- ---------
--------- -------- -------- ---------
TOTAL RETURN (1) ..................... 14.13% (6.25%) 7.55% 16.27%**
--------- -------- -------- ---------
--------- -------- -------- ---------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .... $ 15,235 $14,187 $15,520 $ 9,156
Ratio of Expenses to Average
Net Assets ................... 2.40% 2.40% 2.40% 2.40%
Ratio of Net Investment Income/
Loss to Average Net Assets ... (0.58%) (0.26%) 0.36% 0.29%
Portfolio Turnover Rate .............. 66% 70% 35% 22%**
--------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net
Investment Income/Loss $0.00+ $0.00+ $0.02 $0.21
Ratios Before Expense Reductions:
Expenses to Average Net Assets 2.43% 2.46% 2.56% 3.45%
Net Investment Income/Loss to
Average Net Assets ... (0.61%) (0.30%) 0.20% (0.77%)
--------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-205
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen International Magnum Fund (the "Fund") is organized as a
separate non-diversified fund of Van Kampen Series Fund, Inc., a Maryland
corporation, which is registered as an open-end management company under the
Investment Company Act of 1940, as amended. The Fund's investment objective
seeks long-term capital appreciation by investing primarily in a portfolio of
equity securities of non-U.S. issuers in accordance with the Morgan Stanley
Capital International EAFE country weightings determined by the Fund's
investment adviser. The Fund commenced operations on July 1, 1996.

1. SIGNIFICANT ACCOUNTING POLICIES

A. SECURITY VALUATION Securities listed on a foreign exchange are valued at
their closing price. Unlisted securities and listed securities not traded on
the valuation date for which market quotations are readily available are
valued at the average between the bid and asked prices obtained from
reputable brokers. All other securities and assets for which market
quotations are not readily available are valued at fair value as determined
in good faith using procedures approved by the Board of Directors.

B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.

The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified
price. The Fund may invest independently in repurchase agreements, or
transfer uninvested cash balances into a pooled cash account along with other
investment companies advised by Van Kampen Investment Advisory Corp. or its
affiliates, the daily aggregate of which is invested in repurchase
agreements. Repurchase agreements are fully collateralized by the underlying
debt security. A bank as custodian for the Fund takes possession of the
underlying securities, with a market value at least equal to the amount of
the repurchase transaction, including principal and accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value of
the collateral is marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Fund has the right to liquidate the collateral and

F-206
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

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.

D. ORGANIZATIONAL COSTS The organizational costs of the Fund are being
amortized on a straight line basis over the 60 month period ending June 30,
2001 beginning with the Fund's commencement of operations. The Adviser has
agreed that in the event any of the initial shares of the Fund originally
purchased by Van Kampen are redeemed by the Fund during the amortization
period, the Fund will be reimbursed for any unamortized organizational costs
in the same proportion as the number of shares redeemed bears to the number
of initial shares held at the time of redemption.

E. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required. The Fund may be
subject to taxes imposed by countries in which it invests. Such taxes are
generally based on income earned or gains realized or repatriated. Taxes are
accrued and applied to net investment income, net realized capital gains and net
unrealized appreciation, as applicable, as the income is earned or capital gains
are recorded.

Net realized gains or losses may differ for financial and tax reporting
purposes as a result of losses relating to wash sale transactions.

At June 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $116,762,301, the aggregate gross unrealized
appreciation is $22,098,804 and the aggregate gross unrealized depreciation
is $5,859,029, resulting in net unrealized appreciation on long- and
short-term investments of $16,239,775.

F-207
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

G. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS Assets and
liabilities denominated in foreign currencies and commitments under forward
currency contracts are translated into U.S. dollars at the mean of the quoted
bid and asked prices of such currencies against the U.S. dollar. Purchases
and sales of portfolio securities are translated at the rate of exchange
prevailing when such securities were acquired or sold. Income and expenses
are translated at rates prevailing when accrued. Realized and unrealized
gains and losses on securities resulting from changes in exchange rates are
not segregated for financial reporting purposes from amounts arising from
changes in the market prices of securities. Realized gains and losses on
foreign currency transactions includes the net realized amount from the sale
of the currency and the amount realized between trade date and settlement
date on security and income transactions.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $500 million ............................................ .80 of 1%
Next $500 million ............................................. .75 of 1%
Over $1 billion ............................................... .70 of 1%
</TABLE>

F-208
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
EXPENSE RATIO EXPENSE RATIO
<S> <C>
1.65% 2.40%
</TABLE>

For the period ended June 30, 2000, the Adviser voluntarily waived
$22,526 of its investment advisory fees. This waiver is voluntary in nature
and can be discontinued at the Adviser's discretion.

For the period ended June 30, 2000, the Fund recognized expenses of
$7,646 representing legal services provided by Skadden, Arps, Slate, Meagher
& Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.

For the period ended June 30, 2000, the Fund recognized expenses of
$7,069 representing Van Kampen's cost of providing legal services to the Fund.

Van Kampen Investment Advisory Corp. (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.25% of the average daily
net assets of the Fund, plus reimbursement of out-of-pocket expenses. Under
an agreement between the Adviser and The Chase Manhattan Bank ("Chase"),
through its corporate affiliate Chase Global Funds Services Company
("CGFSC"), Chase provides certain administrative services to the Fund. Chase
is compensated for such services by the Adviser from the fee it receives from
the Fund. Transfer Agency services are provided to the Fund by Van Kampen
Investor Services Inc., an affiliate of the Adviser.

Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of
Van Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co., serves as the Distributor of the Fund's shares.
The Distributor is entitled to receive from the Fund a distribution fee,
which is accrued daily and paid quarterly, of an amount of up to 0.25% of the
Class A shares and up to 1.00% of the Class B and Class C shares of the Fund,
on an annualized basis, of the average daily net assets attributable to each
Class.

The Distributor may receive a front end sales charge for purchases of
Class A shares. In addition, the Distributor may receive a contingent
deferred sales charge for certain redemptions of Class B and Class C shares
of the Fund redeemed within one to five years following such purchase. For
the period ended June 30, 2000, the Distributor has advised the Fund that it
earned initial sales charges of $377,770 for Class A shares and deferred
sales charges of $158,844 and $1,943 for Class B shares and Class C shares,
respectively.

F-209
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

Certain officers and directors of the Fund are also officers and
directors of Van Kampen. The Fund does not compensate its officers or
directors who are officers of Van Kampen.

The Fund provides deferred compensation and retirement plans for its
directors who are not officers of Van Kampen. Under the deferred compensation
plan, directors may elect to defer all or a portion of their compensation to
a later date. Benefits under the retirement plan are payable for a ten-year
period and are based upon each director's years of service to the Fund. The
maximum annual benefit per director under the plan is $2,500.

For the period ended June 30, 2000, the Fund incurred $14,525 as
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/dealer.

3. CAPITAL TRANSACTIONS

The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. All three classes of shares have identical voting, dividend,
liquidation and other rights. 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 ("CDSC") of
1.00% imposed in the event of certain redemptions within one year of the
purchase. Class B and Class C shares are offered without a front end sales
charge, but are subject to a CDSC. Class B shares purchased on or after June
1, 1996, and any dividend reinvestment plan Class B shares received on such
shares, automatically convert to Class A shares eight years after the end of
the calendar month in which the shares were purchased. For the period ended
June 30, 2000, no Class B shares converted to Class A shares. The CDSC will
be imposed on most redemptions made within five years of the purchase for
Class B shares and one year of the purchase for Class C shares as detailed in
the following schedule:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
---------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First ............................................. 5.00% 1.00%
Second ............................................ 4.00% None
Third ............................................. 3.00% None
Fourth ............................................ 2.50% None
Fifth ............................................. 1.50% None
Thereafter ........................................ None None
</TABLE>

F-210
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

Dollars:
Subscribed .......................................... $ 100,786,852 $ 24,712,000
Distributions Reinvested ............................ -- 1,503,000
Redeemed ............................................ (90,737,489) (40,959,000)
------------- -------------
Net Increase/Decrease ................................. $ 10,049,363 $ (14,744,000)
------------- -------------
------------- -------------
Ending Paid in Capital ................................ $ 55,629,922+ $ 46,134,000+
------------- -------------
------------- -------------
CLASS B:
Shares:
Subscribed .......................................... 1,037,074 1,344,000
Distributions Reinvested ............................ -- 84,000
Redeemed ............................................ (989,365) (1,357,000)
------------ -------------
Net Increase in Class B Shares Outstanding ............ 47,709 71,000
------------ -------------
------------ -------------
Dollars:
Subscribed .......................................... $ 15,371,099 $ $ 17,633,000
Distributions Reinvested ............................ -- 1,048,000
Redeemed ............................................ (14,491,163) (17,469,000)
------------ -------------
Net Increase .......................................... $ 879,936 $ 1,212,000
------------ -------------
------------ -------------
Ending Paid in Capital ................................ $ 48,343,566+ $ 48,048,000+
------------ -------------
------------ -------------
CLASS C:
Shares:
Subscribed .......................................... 459,208 2,928,000
Distributions Reinvested ............................ -- 23,000
Redeemed ............................................ (521,018) (2,952,000)
------------ -------------
Net Decrease in Class C Shares Outstanding ............ (61,810) (1,000)
------------ -------------
------------ -------------
Dollars:
Subscribed .......................................... $ 6,757,170 $ 37,449,000
Distributions Reinvested ............................ -- 286,000
Redeemed ............................................ (7,645,846) (37,889,000)
------------ -------------
Net Decrease .......................................... $ (888,676) $ (154,000)
------------ -------------
------------ -------------
Ending Paid in Capital ................................ $ 12,301,179+ $ 13,362,000+
------------ -------------
------------ -------------
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

+ ENDING PAID IN CAPITAL AMOUNTS DO NOT REFLECT PERMANENT BOOK TO TAX
DIFFERENCES--SEE NOTE 1F.

4. INVESTMENT TRANSACTIONS

For the period ended June 30, 2000, the Portfolio made purchases of
$70,908,077 and sales of $71,880,451 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.

F-211
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

5. DERIVATIVE FINANCIAL INSTRUMENTS

A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference
rate or index.

The Fund has a variety of reasons to use derivative instruments, such as
to attempt to protect the Fund against possible changes in the market value
of its portfolio and to manage the portfolio's foreign currency exposure or
generate potential gain. All of the Fund's portfolio holdings, including
derivative instruments, are marked-to-market each day with the change in
value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when exercising a
call option contract or taking delivery of a security underlying a futures or
forward contract. In these instances, the recognition of gain or loss is
postponed until the disposal of the security underlying the option or forward
contract. Risks may arise as a result of the potential inability of the
counterparties to meet the terms of their contracts.

Summarized below are the specific types of derivative financial
instruments used by the Fund.

At June 30, 2000, the Fund has outstanding forward currency contracts as
follows:

<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
FORWARD CURRENCY CONTRACTS VALUE DEPRECIATION
<S> <C> <C>
LONG CONTRACTS:
British Pound, 1,371,070,
expiring 9/18/00 $2,077,158 $ 8,927
Euro, 2,302,507,
expiring 9/18/00 2,207,094 25,604
Japanese Yen, 158,969,000,
expiring 9/18/00 1,519,682 (9,154)
---------- --------
$5,803,934 $25,377
---------- --------
---------- --------
</TABLE>

B. FUTURES CONTRACTS A futures contract is an agreement involving the
delivery of a particular asset on a specified future date at an agreed upon
price. The Fund generally invests in foreign futures and typically closes the
contract prior to the delivery date. These contracts are generally used to
manage the porfolio's effective maturity and duration.

F-212
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

Upon entering into futures contracts, the Fund maintains, in a
segregated account with its custodian, cash or liquid securities with a value
equal to its obligation under the futures contracts. During the period the
futures contract is open, payments are received from or made to the broker
based upon changes in the value of the contract (the variation margin). The
potential risk of realized gain or loss associated with a futures contract
may exceed the variation margin reflected on the Statement of Assets and
Liabilities. The cost of securities acquired through delivery under a
contract is adjusted by the unrealized gain or loss on the contract.

Transactions in futures contracts for the period ended June 30, 2000,
were as follows:

<TABLE>
<CAPTION>
CONTRACTS
<S> <C>
Outstanding at June 30, 1999 .................................. 0
Futures Opened ................................................ 380
Futures Closed ................................................ (326)
------
Outstanding at June 30, 2000 .................................. 54
------
------
</TABLE>

The futures contracts outstanding as of June 30, 2000, and the
descriptions and the unrealized appreciation/depreciation are as follows:

<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
<S> <C> <C>
LONG CONTRACTS:
CAC 40 Index - September 2000
(Current notional value
$6,492 per contract) 16 $(24,570)
DAX Index - September 2000
(Current notional value
$6,950 per contract) 6 (46,056)
FTSE 100 Index - September 2000
(Current notional value
$6,357 per contract) 21 (44,642)
MIB 30 Index - September 2000
(Current notional value
$46,950 per contract) 2 (2,407)
TOPIX Index - September 2000
(Current notional value
$6,357 per contract) 9 35,296
--- --------
54 $(82,379)
--- --------
--- --------
</TABLE>

F-213
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

6. BORROWINGS

F-214
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and
Shareholders of Van Kampen Latin American Fund

We have audited the accompanying statement of assets and liabilities of Van
Kampen Latin American Fund (the "Fund"), a fund of Van Kampen Series Fund, Inc.,
including the portfolio of investments, as of June 30, 2000, and the related
statements of operations, changes in net assets and the financial highlights for
the year then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The Fund's financial statements and financial highlights for the periods
ended prior to June 30, 2000, were audited by other auditors whose report, dated
August 6, 1999, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2000, by correspondence with the Fund's
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Latin American Fund as of June 30, 2000, the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-215
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS THE FOLLOWING PAGES DETAIL YOUR FUND'S
JUNE 30, 2000 PORTFOLIO OF INVESTMENTS AT THE END OF THE
REPORTING PERIOD.

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <S> <C>
COMMON STOCKS 74.1%
ARGENTINA 3.5%
Banco Rio de La Plata ADR............................. 20,015 $ 292,719
Quilmes Industrial (Quinsa) ADR....................... 70,595 785,369
Telecom Argentina ADR................................. 48,603 1,336,583
-----------
2,414,671
-----------
BRAZIL 19.1%
Aracruz Celulose S.A. ADR............................. 38,725 747,877
Banco Bradesco ADR.................................... 19,300 167,970
CEMIG ADR (c)......................................... 835 14,446
CEMIG ADR............................................. 16,753 289,842
Cia Cervejaria Brahma ADR............................. 27,648 470,016
Cia Electric de Est Rio Janeiro (a)................... 1,649,059,000 640,056
Cia Paranaense de Energia ADR......................... 170 1,583
Cia Siderurgica Nacional.............................. 25,798,300 809,353
Cia Siderurgica Nacional ADR.......................... 4,800 147,900
Coteminas............................................. 2,457,800 142,957
Coteminas ADR (c)..................................... 22,545 65,547
CVRD 'A'.............................................. 5,000 124,730
CVRD ADR.............................................. 34,190 965,867
Eletrobras ADR........................................ 50,545 557,577
Eletrobras ADR........................................ 5,440 55,336
Eletrobras S.A........................................ 14,772,463 303,067
Embratel Participacoes 'A' ADR........................ 48,120 1,136,835
Gerdau ADR............................................ 6,200 78,663
Lojas Arapau S.A. ADR (a)............................. 10,410 --
Petrobras............................................. 9,400 273,113
Petrobras ADR......................................... 40,958 1,237,403
Rossi Residencial S.A. GDR (c)........................ 226,692 226,692
Tele Centro Sul ADR................................... 2,580 188,501
Tele Leste Celular ADR................................ 960 42,480
Tele Nordeste Celular ADR............................. 1,500 103,875
Tele Norte Leste ADR.................................. 58,957 1,392,859
Telesp Celular ADR.................................... 42,215 1,894,398
Unibanco GDR.......................................... 28,130 808,737
Usiminas ADR.......................................... 550 2,546
Vale Do Rio Doce ADR (a).............................. 31,997 --
Votorantim Celulose e Papel S.A. ADR.................. 15,740 289,223
-----------
13,179,449
-----------

SEE NOTES TO FINANCIAL STATEMENTS F-216
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <S> <C>
CHILE 6.5%
Banco de A. Edwards ADR (a)........................... 31,152 $ 420,552
Banco Santander ADR................................... 5,599 89,584
Banco Santiago ADR.................................... 12,350 220,756
CCU ADR............................................... 25,386 575,945
Chilectra ADR......................................... 48,376 765,042
Cia Telecom ADR....................................... 51,370 931,081
D & S ADR............................................. 17,180 298,502
Endesa ADR............................................ 22,107 244,559
Enersis ADR (a)....................................... 30,260 603,309
Quinenco ADR.......................................... 22,909 223,363
Santa Isabel ADR...................................... 17,778 138,891
-----------
4,511,584
-----------
COLOMBIA 0.2%
Bavaria............................................... 39,991 125,904
Valores Bavaria....................................... 1 1
-----------
125,905
-----------
MEXICO 43.4%
Alfa S.A. 'A'......................................... 360,751 826,595
Banacci 'L' (a)....................................... 154,310 624,045
Banacci 'O' (a)....................................... 179,978 768,082
Carso Global Telecom 'A1' (a)......................... 365,368 1,039,507
Cemex CPO............................................. 266,286 1,248,702
Cemex CPO ADR......................................... 67,614 1,580,477
Corp.Interamericana de Entretenimiento S.A. 'B' (a)... 80,800 316,090
Empresas ICA S.A. (a)................................. 116,665 32,955
Empresas ICA S.A. ADR (a)............................. 31,771 53,614
FEMSA (a)............................................. 165,762 707,413
FEMSA ADR (a)......................................... 37,241 1,603,690
Grupo Carso 'A1' (a).................................. 202,825 719,259
Grupo Financiero Bancomer S.A. de C.V. 'O' (a)........ 1,458,700 741,096
Grupo Financiero Banorte S.A. de C.V. 'O' (a)......... 284,298 392,872
Grupo Industrial Bimbo S.A. de C.V. 'A'............... 69,595 109,610
Grupo Mexico S.A. 'B' (a)............................. 73,020 205,523
Grupo Modelo S.A. 'C'................................. 218,788 490,197
Grupo Sanborns S.A. 'B1' (a).......................... 79,975 128,396
Grupo Televisa S.A. GDR (a)........................... 42,685 2,942,597
Kimberly 'A'.......................................... 572,346 1,628,379
Panamerican Beverages, Inc. 'A'....................... 14,200 212,112
Pepsi-Gemex S.A. GDR (a).............................. 15,000 66,562
Seminis, Inc. 'A' (a)................................. 21,145 55,506
Soriana 'B' (a)....................................... 126,735 504,802

F-217 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <S> <C>
MEXICO (CONTINUED)
StarMedia Network, Inc. (a)........................... 13,775 $ 260,003
TAMSA ADR............................................. 18,882 261,988
Telmex ADR............................................ 176,288 10,070,452
Vitro ADR............................................. 45,458 144,897
Wal-Mart de Mexico S.A. de C.V. ADR (a)............... 7,448 174,790
Wal-Mart de Mexico S.A. de C.V. 'C'................... 436,105 1,005,902
Wal-Mart de Mexico S.A. de C.V. 'V'................... 418,878 983,192
-----------
29,899,305
-----------
VENEZUELA 1.4%
CANTV ADR............................................. 35,535 966,108
-----------
TOTAL COMMON STOCKS (Cost $50,702,815)................ 51,097,022
-----------
PREFERRED STOCKS 22.5%
BRAZIL 22.5%
Banco Bradesco........................................ 88,206,017 767,860
Banco Nacional S.A. (a,b)............................. 8,115,000 225
Brahma................................................ 278,000 235,841
Celular CRT 'A'....................................... 4,918,074 2,154,299
CEMIG................................................. 23,251,919 406,119
Copel 'B'............................................. 90,459,450 852,681
CRT (a)............................................... 2,248,974 760,673
CVRD ................................................. 36,762 1,037,530
Eletrobras `B'........................................ 11,536,500 255,230
Embratel Participacoes 'A'............................ 46,647,000 1,114,769
Gerdau................................................ 48,843,134 595,813
Globex Utilidades S.A................................. 6,576 61,986
Itaubanco............................................. 8,835,410 776,497
Itausa S.A............................................ 506,225 491,208
Lojas Arapua S.A. (a)................................. 19,195,300 --
Petrobras............................................. 55,820 1,686,826
Tele Centro Sul....................................... 28,311,454 409,719
Tele Leste Celular (a)................................ 273,142,034 242,322
Tele Norte Celular.................................... 241,743,800 245,297
Tele Norte Leste...................................... 49,552,602 1,160,853
Telebras ADR.......................................... 17,450 1,694,831
Telesp Celular........................................ 18,519,589 334,759
Usiminas 'A'.......................................... 43,700 202,083
-----------
TOTAL PREFERRED STOCKS (Cost $11,964,894) .............................. 15,487,421
-----------
TOTAL LONG-TERM INVESTMENTS 96.6%
(Cost $62,667,709) ................................................. 66,584,443
-----------

SEE NOTES TO FINANCIAL STATEMENTS F-218
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <S> <C>

SHORT-TERM INVESTMENT 1.6%
REPURCHASE AGREEMENT 1.6%
Chase Securities, Inc. 6.15%, dated 6/30/00, due 7/3/00, $1,125,000
to be repurchased at $1,125,577, collateralized by
$1,195,000 U.S. Treasury Notes 5.50%, due 5/15/09,
valued at $1,151,681
(Cost $1,125,000).................................................... $ 1,125,000
-----------
TOTAL INVESTMENTS IN SECURITIES 98.2%
(Cost $63,792,709)................................................... 67,709,443
FOREIGN CURRENCY 0.3%
(Cost $166,445)...................................................... 167,810
-----------
TOTAL INVESTMENTS 98.5%
(Cost $63,959,154)................................................... 67,877,253
OTHER ASSETS IN EXCESS OF LIABILITIES 1.5%.............................. 1,054,850
-----------
NET ASSETS 100%......................................................... $68,932,103
===========
</TABLE>

(a) NON-INCOME PRODUCING SECURITY

(b) SECURITY VALUED AT FAIR VALUE--SEE NOTE 1A TO FINANCIAL STATEMENTS.

ADR AMERICAN DEPOSITARY RECEIPT

CPO CERTIFICATE OF PARTICIPATION

GDR GLOBAL DEPOSITARY RECEIPT

SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+

<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
Telecommunication Services............ $27,220,199 39.5%
Materials............................. 9,809,562 14.2
Consumer Discretionary................ 6,326,259 9.2
Finance............................... 6,297,688 9.1
Consumer Staples...................... 5,875,561 8.5
Utilities............................. 4,988,847 7.2
Energy................................ 3,197,342 4.7
Industrials........................... 2,608,982 3.8
Information Technology................ 260,003 0.4
----------- ----
$66,584,443 96.6%
=========== ====
</TABLE>

+ CLASSIFIED BY SECTORS WHICH REPRESENT BROAD GROUPINGS OF RELATED INDUSTRIES.

F-219 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
JUNE 30, 2000

<TABLE>
<S> <C>
ASSETS:
Investments in Securities, at Value (Cost $63,792,709)....... $ 67,709,443
Foreign Currency (Cost $166,445)............................. 167,810
Cash......................................................... 230,046
Receivable for:
Investments Sold........................................... 1,624,296
Dividends.................................................. 149,495
Fund Shares Sold........................................... 46,904
Interest................................................... 192
Other........................................................ 12,728
------------
Total Assets............................................. 69,940,914
------------
LIABILITIES:
Payable for:
Investments Purchased...................................... 621,092
Fund Shares Redeemed....................................... 82,990
Investment Advisory Fees................................... 63,582
Distribution Fees.......................................... 60,447
Shareholder Reporting Expense.............................. 44,184
Custody Fees............................................... 42,582
Professional Fees.......................................... 34,707
Directors' Fees and Expenses............................... 30,549
Administrative Fees........................................ 14,875
Transfer Agent Fees........................................ 8,279
Deferred Country Tax....................................... 5,524
------------
Total Liabilities........................................ 1,008,811
------------
NET ASSETS................................................... $ 68,932,103
============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares
Authorized 2,625,000,000).................................. $ 4,926
Paid in Capital in Excess of Par............................. 86,406,340
Net Unrealized Appreciation on Investments
and Foreign Currency Translations.......................... 3,911,624
Accumulated Net Investment Loss.............................. (132,846)
Accumulated Net Realized Loss................................ (21,257,941)
------------
NET ASSETS................................................... $ 68,932,103
============
Class A Shares:
Net Asset Value and Redemption Price Per Share
(Based on Net Assets of $38,524,877 and 2,704,916
Shares Outstanding)...................................... $ 14.24
============
Maximum Sales Charge..................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value
Per Share x 100/ (100% - maximum sales charge)).......... $ 15.11
============
Class B Shares:
Net Asset Value and Offering Price Per Share
(Based on Net Assets of $19,635,121 and 1,433,708
Shares Outstanding)*..................................... $ 13.70
============
Class C Shares:
Net Asset Value and Offering Price Per Share
(Based on Net Assets of $10,772,105 and 786,981
Shares Outstanding)*..................................... $ 13.69
============
</TABLE>

* REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

SEE NOTES TO FINANCIAL STATEMENTS F-220
<PAGE>

Statement of Operations
YEAR ENDED JUNE 30, 2000

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends..................................................... $1,385,231
Interest...................................................... 115,664
Less Foreign Taxes Withheld................................... (2,633)
----------
Total Income.............................................. 1,498,262
----------
EXPENSES:
Investment Advisory Fees...................................... 759,197
Distribution Fees (Attributed to Classes A, B and C of
$79,172, $188,684 and $103,001, respectively)............... 370,857
Administrative Fees........................................... 160,375
Shareholder Reports........................................... 112,978
Custodian Fees................................................ 69,767
Transfer Agent Fees........................................... 48,126
Country Tax Expense........................................... 41,417
Professional Fees............................................. 38,775
Filing and Registration Fees.................................. 35,244
Directors' Fees and Expenses.................................. 24,306
Other......................................................... 3,024
----------
Total Expenses............................................ 1,664,066
Less Expense Reductions................................... (125,821)
----------
Net Expenses.............................................. 1,538,245
----------
NET INVESTMENT LOSS........................................... $ (39,983)
==========
NET REALIZED GAIN/LOSS ON:
Investments................................................... $7,162,580
Foreign Currency Transactions................................. (119,165)
----------
Net Realized Gain............................................. 7,043,415
----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period..................................... 1,156,193
----------
End of the Period:
Investments............................................... 3,916,734
Foreign Currency Translations............................. (5,110)
----------
3,911,624
----------
Net Change in Unrealized Appreciation/Depreciation............ 2,755,431
----------
NET REALIZED GAIN/LOSS AND NET CHANGE IN
UNREALIZED APPRECIATION/DEPRECIATION........................ $9,798,846
==========
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $9,758,863
==========
</TABLE>

F-221 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Statement of Changes in Net Assets

YEAR ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
------------- --------------
<S> <C> <C>
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss..................... $ (39,983) $ 353,000
Net Realized Gain/Loss......................... 7,043,415 (18,696,000)
Net Change in Unrealized
Appreciation/Depreciation.................... 2,755,431 14,496,000
------------ ------------
Net Increase/Decrease in Net Assets
Resulting from Operations.................... 9,758,863 (3,847,000)
------------ ------------
DISTRIBUTIONS:
Net Investment Income:
Class A...................................... -- (120,000)
Class B...................................... -- (17,000)
Class C...................................... -- (10,000)
In Excess of Net Investment Income:
Class A...................................... -- (182,000)
Class B...................................... -- (26,000)
Class C...................................... -- (15,000)
------------ ------------
-- (370,000)
------------ ------------
In Excess of Net Realized Gain:
Class A...................................... -- (153,000)
Class B...................................... -- (100,000)
Class C...................................... -- (57,000)
------------ ------------
-- (310,000)
------------ ------------
Net Decrease in Net Assets Resulting from
Distributions................................ -- (680,000)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Subscribed................................... 36,177,962 37,085,000
Distributions Reinvested..................... -- 580,000
Redeemed..................................... (40,100,838) (53,264,000)
------------ ------------
Net Decrease in Net Assets Resulting from
Capital Share Transactions................. (3,922,876) (15,599,000)
------------ ------------
Total Increase/Decrease in Net Assets........ 5,835,987 (20,126,000)
NET ASSETS--Beginning of Period................ 63,096,116 83,222,000
------------ ------------
NET ASSETS--End of Period (Including
accumulated/distributions in excess
of net investment income/loss of
$(132,846) and $(158,000), respectively)..... $ 68,932,103 $ 63,096,000
============ ============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

SEE NOTES TO FINANCIAL STATEMENTS F-222
<PAGE>

Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------
CLASS A SHARES 2000# 1999# 1998# 1997 1996
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD............................... $ 11.54 $ 11.42 $ 17.39 $ 12.63 $ 9.08
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss.............. 0.04 0.09 (0.01) 0.02 0.10
Net Realized and Unrealized Gain/Loss... 2.66 0.19 (2.73) 6.46 3.47
------- ------- ------- ------- -------
Total From Investment Operations.......... 2.70 0.28 (2.74) 6.48 3.57
------- ------- ------- ------- -------

DISTRIBUTIONS
Net Investment Income................... -- (0.04) -- -- (0.02)
In Excess of Net Investment Income...... -- (0.07) -- (0.09) --
Net Realized Gain....................... -- -- (1.92) (1.63) --
In Excess of Net Realized Gain.......... -- (0.05) (1.31) -- --
------- ------- ------- ------- -------
Total Distributions....................... -- (0.16) (3.23) (1.72) (0.02)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............ $ 14.24 $ 11.54 $ 11.42 $ 17.39 $ 12.63
======= ======= ======= ======= =======
TOTAL RETURN (1).......................... 23.29% 3.00% (17.37%) 57.32% 39.35%
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)......... $38,525 $34,139 $44,439 $84,401 $18,701
Ratio of Expenses to Average
Net Assets.............................. 2.17% 2.20% 2.25% 2.24% 2.11%
Ratio of Net Investment Income/Loss
to Average Net Assets................... 0.31% 0.98% (0.09%) (0.08%) 1.18%
Portfolio Turnover Rate................... 78% 163% 249% 241% 131%
---------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss........................... $0.03 $0.02 $0.02 $0.10 $0.09
Ratios Before Expense Reductions:
Expenses to Average Net Assets.......... 2.38% 2.44% 2.41% 2.77% 3.28%
Net Investment Income/Loss to
Average Net Assets.................... 0.10% 0.74% (0.24%) (0.61%) 0.01%
Ratio of Expenses to Average Net
Assets excluding country tax
expense and interest expense............ 2.10% 2.10% 2.10% 2.10% 2.10%
---------------------------------------------------------------------------------------------
</TABLE>

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-223 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
AUGUST 1,
YEAR ENDED JUNE 30, 1995+ TO
-------------------------------------- JUNE 30,
CLASS B SHARES 2000# 1999# 1998# 1997 1996
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD.............................. $ 11.19 $ 11.03 $ 16.99 $ 12.45 $ 9.58
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............. (0.06) 0.02 (0.08) (0.03) 0.03
Net Realized and Unrealized Gain/Loss.. 2.57 0.22 (2.65) 6.28 2.84
------- ------- ------- ------- -------
Total From Investment Operations......... 2.51 0.24 (2.73) 6.25 2.87
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income.................. -- (0.01) -- -- --
In Excess of Net Investment Income..... -- (0.02) -- (0.08) --
Net Realized Gain...................... -- -- (1.92) (1.63) --
In Excess of Net Realized Gain......... -- (0.05) (1.31) -- --
------- ------- ------- ------- -------
Total Distributions...................... -- (0.08) (3.23) (1.71) --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD........... $ 13.70 $ 11.19 $ 11.03 $ 16.99 $ 12.45
======= ======= ======= ======= =======
TOTAL RETURN (1)......................... 22.32% 2.47% (17.82%) 56.17% 29.26%*
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........ $19,635 $18,570 $24,206 $14,314 $ 2,041
Ratio of Expenses to Average
Net Assets............................. 2.92% 2.96% 2.99% 2.99% 2.87%
Ratio of Net Investment Income/Loss
to Average Net Assets.................. (0.47%) 0.20% (0.58%) (0.78%) 0.88%
Portfolio Turnover Rate.................. 78% 163% 249% 241% 131%*
----------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss.......................... $0.03 $0.02 $0.02 $0.02 $0.04
Ratios Before Expense Reductions:
Expenses to Average Net Assets......... 3.13% 3.20% 3.16% 3.55% 3.89%
Net Investment Income/Loss to
Average Net Assets................... (0.68%) (0.04%) (0.73%) (1.34%) (0.14%)
Ratio of Expenses to Average Net
Assets excluding country tax
expense and interest expense........... 2.85% 2.85% 2.85% 2.85% 2.85%
----------------------------------------------------------------------------------------------
</TABLE>

* NON-ANNUALIZED

+ THE FUND BEGAN OFFERING CLASS B SHARES ON AUGUST 1, 1995

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-224
<PAGE>

Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------
CLASS C SHARES 2000# 1999# 1998# 1997 1996
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 11.18 $ 11.04 $ 17.01 $ 12.43 $ 8.99
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............. (0.06) 0.02 (0.11) (0.07) 0.04
Net Realized and Unrealized Gain/Loss.. 2.57 0.20 (2.63) 6.31 3.40
------- ------- ------- ------- -------
Total From Investment Operations......... 2.51 0.22 (2.74) 6.24 3.44
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income.................. -- (0.01) -- -- --
In Excess of Net Investment Income..... -- (0.02) -- (0.03) --
Net Realized Gain...................... -- -- (1.92) (1.63) --
In Excess of Net Realized Gain......... -- (0.05) (1.31) -- --
------- ------- ------- ------- -------
Total Distributions...................... -- (0.08) (3.23) (1.66) --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD........... $ 13.69 $ 11.18 $ 11.04 $ 17.01 $ 12.43
======= ======= ======= ======= =======
TOTAL RETURN (1)......................... 22.34% 2.28% (17.86%) 56.04% 38.26%
======= ======= ======= ======= =======
Ratios and Supplemental Data
Net Assets, End of Period (000's)........ $10,772 $10,387 $14,577 $20,345 $ 6,780
Ratio of Expenses to Average
Net Assets............................. 2.92% 2.96% 3.00% 2.99% 2.86%
Ratio of Net Investment Income/Loss
to Average Net Assets.................. (0.47%) 0.23% (0.77%) (0.79%) 0.42%
Portfolio Turnover Rate.................. 78% 163% 249% 241% 131%
----------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income/Loss.......................... $0.03 $0.02 $0.02 $0.05 $0.12
Ratios Before Expense Reductions:
Expenses to Average Net Assets......... 3.13% 3.20% 3.16% 3.56% 4.06%
Net Investment Income/Loss to
Average Net Assets................... (0.68%) (0.01%) (0.93%) (1.36%) (0.78%)
Ratio of Expenses to Average Net
Assets excluding country tax
expense and interest expense........... 2.85% 2.85% 2.85% 2.85% 2.85%
----------------------------------------------------------------------------------------------
</TABLE>

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-225 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen Latin American Fund (the "Fund") is organized as a
separate non-diversified fund of Van Kampen Series Fund, Inc., a Maryland
corporation which is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective seeks long-term capital appreciation by investing primarily in
equity securities of Latin American issuers and investing in debt securities
issued or guaranteed by Latin American governments or governmental entities.
Any income received from the investment of portfolio securities is incidental
to the Fund's investment objective. The Fund commenced operations on July 6,
1994. 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. 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 bid and asked prices obtained from reputable brokers.
Debt securities purchased with remaining maturities of 60 days or less are
valued at amortized cost, which approximates market value. All other securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith using procedures approved by the Board of
Directors.

F-226
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

lying debt security. A bank as custodian for the Fund takes possession of the
underlying securities, with a market value at least equal to the amount of the
repurchase transaction, including principal and accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value of
the collateral is marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. In the event of default or bankruptcy by the
counterparty to the agreement, realization and/or retention of the collateral
or proceeds may be subject to legal proceedings.

D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required. 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.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At June 30, 2000, the Fund had an accumulated capital loss carryforward
for tax purposes of $17,769,993, which will expire between June 30, 2007 and
June 30, 2008. Net realized gains or losses may differ for financial and tax
reporting purposes as a result of losses relating to wash sale transactions.
At June 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $67,280,659, the aggregate gross unrealized
appreciation is $10,008,191 and the aggregate gross unrealized depreciation is
$9,579,407, resulting in net unrealized appreciation on long- and short-term
investments of $428,784.

F-227
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

F-228
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Van Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary
of Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc., 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 indicated as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $500 million 1.25 of 1%
Next $500 million 1.20 of 1%
Over $1 billion 1.15 of 1%
</TABLE>

<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
EXPENSE RATIO EXPENSE RATIO
<S> <C>
2.10% 2.85%
</TABLE>

For the period ended June 30, 2000, the Adviser voluntarily waived $125,821
of its investment advisory fees. This waiver is voluntary in nature and can be
discontinued at the Adviser's discretion.
For the period ended June 30, 2000, the Fund recognized expenses of $4,775
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
For the period ended June 30, 2000, the Fund recognized expenses of $6,546
representing Van Kampen's cost of providing legal services to the Fund.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of
Van Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan
Stanley

F-229
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund,
on an annualized basis, of the average daily net assets attributable to each
Class.
The Distributor may receive a front end sales charge for purchases of Class
A shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
June 30, 2000, the Distributor has advised the Fund that it earned initial sales
charges of $59,102 for Class A shares and deferred sales charges of $94,375 and
$11,810 for Class B shares and Class C shares, respectively.
Certain officers and directors of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
directors who are not officers of Van Kampen. Under the deferred compensation
plan, directors may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each director's years of service to the Fund. The maximum
annual benefit per director under the plan is $2,500.
For the period ended June 30, 2000, the Fund incurred $696 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.

F-230
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

made within five years of the purchase for Class B shares and one year of the
purchase for Class C shares as detailed in the following schedule:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
---------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First............................................ 5.00% 1.00%
Second........................................... 4.00% None
Third............................................ 3.00% None
Fourth........................................... 2.50% None
Fifth............................................ 1.50% None
Thereafter....................................... None None
</TABLE>

F-231
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
------------- --------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS
CLASS A:
Shares:
Subscribed ............................. 2,253,909 2,939,000
Distributions Reinvested................ -- 46,000
Redeemed................................ (2,506,657) (3,917,000)
------------ ------------
Net Decrease in Class A Shares
Outstanding............................ (252,748) (932,000)
============ ============
Dollars:
Subscribed.............................. $ 29,534,280 $ 28,926,000
Distributions Reinvested................ -- 389,000
Redeemed................................ (29,421,115) (37,394,000)
------------ ------------
Net Increase/Decrease $ 113,165 $ (8,079,000)
============ ============
Ending Paid in Capital $ 46,117,225+ $ 46,039,000+
============ ============
CLASS B:
Shares:
Subscribed.............................. 276,063 386,000
Distributions Reinvested................ -- 15,000
Redeemed................................ (502,008) (936,000)
------------ ------------
Net Decrease in Class B Shares
Outstanding............................. (225,945) (535,000)
============ ============
Dollars:
Subscribed.............................. $ 3,511,416 $ 3,651,000
Distributions Reinvested................ -- 124,000
Redeemed................................ (6,134,553) (8,006,000)
------------ ------------
Net Decrease.............................. $ (2,623,137) $ (4,231,000)
============ ============
Ending Paid in Capital.................... $ 26,423,794+ $ 29,066,000+
============ ============
CLASS C:
Shares:
Subscribed.............................. 234,457 508,000
Distributions Reinvested................ -- 8,000
Redeemed................................ (376,362) (908,000)
------------ ------------
Net Decrease in Class C Shares
Outstanding.............................. (141,905) (392,000)
============ ============
Dollars:
Subscribed.............................. $ 3,132,266 $ 4,508,000
Distributions Reinvested................ -- 67,000
Redeemed................................ (4,545,170) (7,864,000)
------------ ------------
Net Decrease.............................. $ (1,412,904) $ (3,289,000)
============ ============
Ending Paid in Capital.................... $ 14,054,141+ $ 15,478,000+
============ ============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

+ ENDING PAID IN CAPITAL AMOUNTS DO NOT REFLECT PERMANENT BOOK TO TAX
DIFFERENCES--SEE NOTE 1E.

4. INVESTMENT TRANSACTIONS
For the period ended June 30, 2000, the Fund made purchases of $45,783,070 and
sales of $51,366,967 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.

F-232
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

F-233
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and
Shareholders of Van Kampen
Mid Cap Growth Fund

We have audited the accompanying statement of assets and liabilities of Van
Kampen Mid Cap Growth Fund (the "Fund"), a fund of Van Kampen Series Fund, Inc.,
including the portfolio of investments, as of June 30, 2000, and the related
statements of operations, changes in net assets and the financial highlights for
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2000, by correspondence with the Fund's
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Mid Cap Growth Fund as of June 30, 2000, the results of its operations,
the changes in its net assets and the financial highlights for the period then
ended, in conformity with accounting principles generally accepted in the United
States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-234
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS THE FOLLOWING PAGES DETAIL YOUR FUND'S
JUNE 30, 2000 PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON STOCKS + 97.3%
BEVERAGES & PERSONAL PRODUCTS 1.2%
PERSONAL PRODUCTS 1.2%
Estee Lauder Cos. 'A' ........................... 23,300 $1,151,894
----------
CONSUMER DURABLES 0.9%
AUTOMOTIVE RELATED 0.9%
Harley-Davidson, Inc. ........................... 23,200 893,200
----------
CONSUMER SERVICES 13.8%
ENTERTAINMENT & LEISURE 4.1%
AT&T Corp. Liberty Media Group 'A' (a) .......... 51,500 1,248,875
Liberty Digital, Inc. 'A' (a) ................... 20,400 612,000
MGM Grand, Inc. ................................. 28,200 905,925
Premier Parks, Inc. (a) ......................... 37,300 848,575
Ticketmaster Online-CitySearch, Inc. 'B' (a) .... 29,800 474,937
----------
4,090,312
----------
OTHER 0.8%
Homestore.com, Inc. (a) ......................... 15,100 440,731
MyPoints.com, Inc. (a) .......................... 19,400 367,691
----------
808,422
----------
PUBLISHING & BROADCASTING 8.9%
Acxiom Corp. (a) ................................ 26,100 711,225
Cablevision Systems Corp. 'A' (a) ............... 14,800 1,004,550
Citadel Communications Corp. (a) ................ 26,300 918,856
Hispanic Broadcasting Corp. (a) ................. 24,800 821,500
Lamar Advertising Co. (a) ....................... 16,700 723,319
Reader's Digest Association, Inc. (The) 'A' ..... 29,800 1,184,550
TV Guide, Inc. (a) .............................. 33,900 1,161,075
Univision Communications, Inc. (a) .............. 9,200 952,200
Young & Rubicam, Inc. ........................... 23,300 1,332,469
----------
8,809,744
----------
TOTAL CONSUMER SERVICES ......................... 13,708,478
----------
ENERGY 6.8%
NATURAL GAS 0.9%
Dynegy, Inc. 'A' ................................ 12,655 864,495
----------
OIL--DOMESTIC & CRUDE 1.2%
Noble Affiliates, Inc. .......................... 25,100 934,975
Triton Energy Ltd. (a) .......................... 7,000 275,187
----------
1,210,162
----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-235
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
OIL--OFFSHORE DRILLING 2.3%
<S> <C> <C>
Global Marine, Inc. (a) ......................... 34,600 $ 975,288
Nabors Industries, Inc. (a) ..................... 30,900 1,284,281
----------
2,259,569
----------
OIL--WELL EQUIPMENT & SERVICES 2.4%
BJ Services Co. (a) ............................. 12,300 768,750
Smith International, Inc. (a) ................... 10,400 757,250
Varco International, Inc. (a) ................... 36,408 846,486
----------
2,372,486
----------
TOTAL ENERGY .................................... 6,706,712
----------
FINANCIAL SERVICES 1.3%
CREDIT & FINANCE 1.3%
Concord EFS, Inc. (a) ........................... 49,200 1,279,200
----------
HEALTH CARE 11.5%
DRUGS 5.7%
Biovail Corp. (a) ............................... 14,100 781,669
Celgene Corp. (a) ............................... 14,000 824,250
Forest Laboratories, Inc. 'A' (a) ............... 14,100 1,424,100
MedImmune, Inc. (a) ............................. 15,500 1,147,000
Millennium Pharmaceuticals, Inc. (a) ............ 12,700 1,420,812
----------
5,597,831
----------
HEALTH SERVICES 2.3%
Health Management Associates, Inc. 'A' (a) ...... 94,100 1,229,181
Lincare Holdings, Inc. (a) ...................... 43,000 1,058,875
----------
2,288,056
----------
HEALTH TECHNOLOGY 3.5%
Human Genome Sciences, Inc. (a) ................. 5,900 786,913
PerkinElmer, Inc. ............................... 17,700 1,170,412
QLT Phototherapeutics, Inc. (a) ................. 10,500 811,781
Waters Corp. (a) ................................ 5,500 686,469
----------
3,455,575
----------
TOTAL HEALTH CARE ............................... 11,341,462
----------
HEAVY INDUSTRY/TRANSPORTATION 14.2%
AEROSPACE 4.0%
Bombardier, Inc. 'B' ............................ 33,500 910,363
Gilat Satellite Networks Ltd. (a) ............... 9,400 652,125
Titan Corp. (a) ................................. 29,700 1,329,075
ViaSat, Inc. (a) ................................ 18,900 1,025,325
----------
3,916,888
----------
</TABLE>

F-236 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
AIR TRANSPORTATION 0.8%
<S> <C> <C>
Southwest Airlines Co. ........................ 43,600 $ 825,675
----------
BUSINESS SERVICES 8.6%
Crown Castle International Corp. (a) .......... 32,900 1,200,850
Dycom Industries, Inc. (a) .................... 22,850 1,051,100
Fiserv, Inc. (a) .............................. 28,400 1,228,300
Jabil Circuit, Inc. (a) ....................... 33,100 1,642,587
MasTec, Inc. (a) .............................. 24,500 935,594
Quanta Services, Inc. (a) ..................... 12,800 704,000
SCI Systems, Inc. (a) ......................... 25,300 991,444
TMP Worldwide, Inc. (a) ....................... 10,700 789,794
----------
8,543,669
----------
MISCELLANEOUS INDUSTRIALS 0.8%
Dover Corp. ................................... 20,000 811,250
----------
TOTAL HEAVY INDUSTRY/TRANSPORTATION ........... 14,097,482
----------
RETAIL 3.8%
RESTAURANTS 1.1%
Starbucks Corp. (a) ........................... 28,000 1,069,250
----------
SPECIALTY SHOPS 2.7%
CVS Corp. ..................................... 25,600 1,024,000
RadioShack Corp. (a) .......................... 15,800 748,525
Tiffany & Co. ................................. 13,200 891,000
----------
2,663,525
----------
TOTAL RETAIL .................................. 3,732,775
----------
TECHNOLOGY 33.1%
COMPUTERS & OFFICE EQUIPMENT 0.9%
QLogic Corp. (a) .............................. 13,400 885,238
----------
ELECTRONICS 9.6%
Applied Micro Circuits Corp. (a) .............. 10,200 1,007,250
ATMI, Inc. (a) ................................ 19,700 916,050
Flextronics International Ltd. (a) ............ 16,700 1,147,603
GlobeSpan, Inc. (a) ........................... 8,600 1,049,872
Integrated Device Technology, Inc. (a) ........ 17,300 1,035,838
Lattice Semiconductor Corp. (a) ............... 19,100 1,320,287
LSI Logic Corp. (a) ........................... 23,500 1,271,937
Novellus Systems, Inc. (a) .................... 5,000 282,813
Vitesse Semiconductor Corp. (a) ............... 20,300 1,493,319
----------
9,524,969
----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-237
<PAGE>

SEE NOTES TO FINANCIAL STATEMENTS
YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
SOFTWARE & SERVICES 11.7%
<S> <C> <C>
Art Technology Group, Inc. (a) .................... 12,100 $ 1,221,344
Exodus Communications, Inc. (a) ................... 43,400 1,999,112
Genuity, Inc (a) .................................. 40,200 368,081
Inktomi Corp. (a) ................................. 11,100 1,312,575
ISS Group, Inc. (a) ............................... 13,700 1,352,661
Macromedia, Inc. (a) .............................. 11,300 1,092,569
Mercury Interactive Corp. (a) ..................... 14,300 1,383,525
Rational Software Corp. (a) ....................... 16,900 1,570,644
VeriSign, Inc. (a) ................................ 7,590 1,339,635
----------
11,640,146
----------
TELECOMMUNICATIONS EQUIPMENT 10.9%
ADC Telecommunications, Inc. (a) .................. 22,300 1,870,412
Alpha Industries, Inc. (a) ........................ 14,000 616,875
Andrew Corp. (a) .................................. 24,700 828,994
Bookham Technology plc ADR (a) .................... 13,900 823,575
CIENA Corp. (a) ................................... 7,800 1,300,162
Powerwave Technologies, Inc. (a)................... 19,700 866,800
RF Micro Devices, Inc. (a) ........................ 9,400 823,675
Scientific-Atlanta, Inc. .......................... 20,500 1,527,250
SDL, Inc. (a) ..................................... 7,300 2,081,869
----------
10,739,612
----------
TOTAL TECHNOLOGY .................................. 32,789,965
----------
UTILITIES 10.7%
ELECTRIC POWER 1.2%
Calpine Corp. (a) ................................. 18,500 1,216,375
----------
TELEPHONE SERVICES 9.5%
FLAG Telecom Holdings Ltd. (a) .................... 32,800 487,900
GT Group Telecom, Inc. 'B' (a) .................... 12,800 202,400
IDT Corp. (a) ..................................... 29,200 990,975
McLeodUSA, Inc. 'A' (a) ........................... 63,800 1,319,862
Microcell Telecommunications, Inc. (a) ............ 21,600 780,300
NEXTLINK Communications, Inc. (a) ................. 29,900 1,134,331
Time Warner Telecom, Inc. 'A' (a) ................. 10,700 688,813
Tritel, Inc. (a) .................................. 32,000 950,000
VoiceStream Wireless Corp. (a) .................... 12,554 1,459,991
Western Wireless Corp. 'A' (a) .................... 24,600 1,340,700
----------
9,355,272
----------
TOTAL UTILITIES ................................... 10,571,647
----------

TOTAL LONG-TERM INVESTMENTS 97.3%
(Cost $94,157,849) ............................ 96,272,815
------------
</TABLE>

F-238 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <C> <C>
SHORT-TERM INVESTMENT 3.0%
REPURCHASE AGREEMENT 3.0%
Chase Securities, Inc. 6.15%, dated 6/30/00, due
7/3/00, to be repurchased at $2,923,498, collateralized
by $3,100,000 U.S. Treasury Notes 5.50%, due
5/15/09, valued at $2,987,625
(Cost $2,922,000) ................................. $ 2,922,000 $ 2,922,000
------------

TOTAL INVESTMENTS 100.3%
(Cost $97,079,849) ................................ 99,194,815

LIABILITIES IN EXCESS OF OTHER ASSETS -0.3% ........... (248,783)
------------

NET ASSETS 100% ....................................... $ 98,946,032
============
</TABLE>

------------------

(a) NON-INCOME PRODUCING SECURITY

+ THE COMMON STOCKS ARE CLASSIFIED BY SECTORS WHICH REPRESENT BROAD GROUPINGS
OF RELATED INDUSTRIES.

SEE NOTES TO FINANCIAL STATEMENTS F-239
<PAGE>

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
JUNE 30, 2000

<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at Value (Cost $97,079,849) .................................. $ 99,194,815
Cash ..................................................................... 48
Receivable for:
Investments Sold ....................................................... 854,159
Fund Shares Sold ....................................................... 531,513
Dividends .............................................................. 2,575
Interest ............................................................... 499
--------------
Total Assets ......................................................... 100,583,609
--------------
LIABILITIES:
Payable for:
Investments Purchased .................................................. 1,366,934
Distribution Fees ...................................................... 105,520
Investment Advisory Fees ............................................... 59,640
Administrative Fees .................................................... 20,095
Custody Fees ........................................................... 17,500
Shareholder Reporting Expenses ......................................... 16,741
Fund Shares Redeemed ................................................... 15,146
Professional Fees ...................................................... 11,732
Transfer Agent Fees .................................................... 6,772
Directors' Fees and Expenses ........................................... 3,994
Other .................................................................... 13,503
--------------
Total Liabilities .................................................... 1,637,577
--------------
NET ASSETS ............................................................... $ 98,946,032
==============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized 2,625,000,000) .. $ 7,417
Paid in Capital in Excess of Par ......................................... 95,350,920
Net Unrealized Appreciation on Investments ............................... 2,114,966
Accumulated Net Realized Gain ............................................ 1,476,972
Accumulated Net Investment Loss .......................................... (4,243)
==============
NET ASSETS ............................................................... $ 98,946,032
==============
Class A Shares:
Net Asset Value and Redemption Price Per Share (Based on Net Assets of
$38,401,033 and 2,871,211 Shares Outstanding) ........................ $ 13.37
==============
Maximum Sales Charge ................................................. 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100/ (100% - maximum sales charge)) .......................... $ 14.19
==============
Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$40,499,159 and 3,041,628 Shares Outstanding)* ....................... $ 13.31
==============
Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$20,045,840 and 1,504,083 Shares Outstanding)* ....................... $ 13.33
==============
</TABLE>

* REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

F-240 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Statement of Operations
OCTOBER 25, 1999* TO JUNE 30, 2000

<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends ............................................ $ 28,552
Interest ............................................. 190,339
-----------
Total Income ....................... 218,891
-----------
EXPENSES:
Investment Advisory Fees ............................. 291,595
Distribution Fees (Attributed to Classes A, B and C of
$39,776, $140,729 and $86,826, respectively) ....... 267,331
Administrative Fees .................................. 98,702
Shareholder Reports .................................. 48,521
Filing and Registration Fees ......................... 29,626
Custodian Fees ....................................... 26,624
Transfer Agent Fees .................................. 16,218
Professional Fees .................................... 15,081
Directors' Fees and Expenses ......................... 6,986
Other ................................................ 1,166
-----------
Total Expenses ................................... 801,850
-----------
NET INVESTMENT LOSS .................................. $ (582,959)
===========
NET REALIZED GAIN/LOSS ON:
Investments .......................................... $ 2,055,688
-----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period ............................ --
-----------
End of the Period:
Investments ...................................... 2,114,966
-----------
Net Change in Unrealized Appreciation/Depreciation ... 2,114,966
-----------
NET REALIZED GAIN/LOSS AND NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION .......................... $ 4,170,654
===========
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . $ 3,587,695
===========
</TABLE>

* COMMENCEMENT OF OPERATIONS

SEE NOTES TO FINANCIAL STATEMENTS F-241
<PAGE>

Statement of Changes in Net Assets
OCTOBER 25, 1999* TO JUNE 30, 2000

<TABLE>
<CAPTION>
OCTOBER 25, 1999* TO
JUNE 30, 2000
---------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
<S> <C>
Net Investment Loss ................................................ $ (582,959)
Net Realized Gain .................................................. 2,055,688
Net Change in Unrealized Appreciation/Depreciation ................. 2,114,966
-------------
Net Increase in Net Assets Resulting from Operations ............... 3,587,695
-------------
CAPITAL SHARES TRANSACTIONS:
Subscribed ......................................................... 103,620,869
Redeemed ........................................................... (10,262,532)
-------------
Net Increase in Net Assets Resulting from Capital Share Transactions 93,358,337
-------------
Total Increase in Net Assets ....................................... 96,946,032
NET ASSETS--Beginning of Period .................................... 2,000,000
-------------
NET ASSETS--End of Period (Including accumulated net investment
loss of $(4,243) at June 30, 2000) .............................. $ 98,946,032
=============
</TABLE>

* COMMENCEMENT OF OPERATIONS

F-242 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
<TABLE>
<CAPTION>
OCTOBER 25, 1999* TO
CLASS A SHARES JUNE 30, 2000#
---------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 10.00
--------

INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss ............................ (0.09)
Net Realized and Unrealized Gain ............... 3.46
--------
Total From Investment Operations ................. 3.37
--------
NET ASSET VALUE, END OF PERIOD ................... $ 13.37
========
TOTAL RETURN (1) ................................. 33.70%**
========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ................ $ 38,401
Ratio of Expenses to Average Net Assets .......... 1.63%
Ratio of Net Investment Loss to Average Net Assets (1.04%)
Portfolio Turnover Rate .......................... 103%**
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-243
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
OCTOBER 25, 1999* TO
CLASS B SHARES JUNE 30, 2000#
---------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 10.00
----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss ............................ (0.16)
Net Realized and Unrealized Gain ............... 3.47
----------
Total From Investment Operations ................. 3.31
----------
NET ASSET VALUE, END OF PERIOD ................... $ 13.31
==========
TOTAL RETURN (1) ................................. 33.10%**
==========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ................ $ 40,499
Ratio of Expenses to Average Net Assets .......... 2.38%
Ratio of Net Investment Loss to Average Net Assets (1.83%)
Portfolio Turnover Rate .......................... 103%**
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-244 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
OCTOBER 25, 1999* TO
CLASS C SHARES JUNE 30, 2000#
---------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 10.00
----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss ............................ (0.16)
Net Realized and Unrealized Gain ............... 3.49
----------
Total From Investment Operations ................. 3.33
----------
NET ASSET VALUE, END OF PERIOD ................... $ 13.33
==========
TOTAL RETURN (1) ................................. 33.30%**
==========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) ................ $ 20,046
Ratio of Expenses to Average Net Assets .......... 2.38%
Ratio of Net Investment Loss to Average Net Assets (1.81%)
Portfolio Turnover Rate .......................... 103%**
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-245
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen Mid Cap Growth Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks to
achieve long-term growth. The Fund commenced operations on October 25, 1999.

A. SECURITY VALUATION Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on
the valuation date. Unlisted securities and listed securities not traded on
the valuation date for which market quotations are readily available are
valued at the average between the bid and asked prices obtained from
reputable brokers. Debt securities purchased with remaining maturities of 60
days or less are valued at amortized cost, which approximates market value.
All other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith using
procedures approved by the Board of Directors.

F-246
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

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.

C. INCOME AND EXPENSES Interest income is recorded on an accrual basis and
dividend income is recorded net of applicable withholding taxes on the
ex-dividend date. Income, expenses, and realized and unrealized gains or
losses are allocated on a pro rata basis to each class of shares except for
distribution and service fees which are unique to each class of shares.
Distributions from the Fund are recorded on the ex-distribution date.

F-247
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Van Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary
of Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Miller Anderson & Sherrerd LLP (a "Subadviser"),
a wholly owned subsidiary of Morgan Stanley Dean Witter & Co., provide the Fund
with investment advisory services paid monthly and calculated at the annual
rates based on average daily net assets indicated as follows:

AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $500 million .................. .75 of 1%
Next $500 million ................... .70 of 1%
Over $1 billion ..................... .65 of 1%
</TABLE>

For the period ended June 30, 2000, the Fund recognized expenses of $4,559
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
For the period ended June 30, 2000, the Fund recognized expenses of $1,500
representing Van Kampen's cost of providing legal services to the Fund.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
The Distributor may receive a front end sales charge for purchases of Class
A shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
June 30, 2000, the Distributor has advised the Fund that it earned initial sales
charges of $707,722 for Class A shares and deferred sales charges of $17,040 and
$5,028 for Class B shares and Class C shares, respectively.

F-248
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

Certain officers and directors of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
directors who are not officers of Van Kampen. Under the deferred compensation
plan, directors may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each director's years of service to the Fund. The maximum
annual benefit per director under the plan is $2,500.
For the period ended June 30, 2000, the Fund incurred $2,271 as brokerage
commissions with Morgan Stanley Co. Incorporated, an affiliated broker/dealer.

CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
----------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First 5.00% 1.00%
Second 4.00% None
Third 3.00% None
Fourth 2.50% None
Fifth 1.50% None
Thereafter None None
</TABLE>

F-249
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

OCTOBER 25, 1999*
TO JUNE 30, 2000
-------------------
CAPITAL SHARES TRANSACTIONS
CLASS A:
Shares:
<S> <C>
Subscribed (Initial Shares of 70,000) ...... 3,339,022
Redeemed ................................... (467,811)
-------------
Net Increase in Class A Shares Outstanding .......... 2,871,211
==============
Dollars:
Subscribed ................................. $ 42,433,265
Redeemed ................................... (6,006,453)
-------------
Net Increase ........................................ $ 36,426,812
==============
Beginning Paid in Capital ........................... $ 700,000
==============
Ending Paid in Capital .............................. $ 37,126,812
==============
CLASS B:
Shares:
Subscribed (Initial Shares of 70,000) ...... 3,237,074
Redeemed ................................... (195,446)
-------------
Net Increase in Class B Shares Outstanding ... 3,041,628
==============
Dollars:
Subscribed ................................. $ 41,534,880
Redeemed ................................... (2,566,709)
-------------
Net Increase ................................. $ 38,968,171
==============
Beginning Paid in Capital .................... $ 700,000
==============
Ending Paid in Capital ....................... $ 39,668,171
==============
CLASS C:
Shares:
Subscribed (Initial Shares of 60,000) 1,633,460
Redeemed ............................ (129,377)
-------------
Net Increase in Class C Shares Outstanding ... 1,504,083
==============
Dollars:
Subscribed .......................... $ 19,652,724
Redeemed ............................ (1,689,370)
-------------
Net Increase ................................. $ 17,963,354
==============
Beginning Paid in Capital .................... $ 600,000
==============
Ending Paid in Capital ....................... $ 18,563,354
==============
</TABLE>

* COMMENCEMENT OF OPERATIONS

F-250
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

4. INVESTMENT TRANSACTIONS
For the period ended June 30, 2000, the Fund made purchases of $149,684,420 and
sales of $48,553,779 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.

F-251
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and
Shareholders of Van Kampen Tax
Managed Global Franchise Fund

We have audited the accompanying statement of assets and liabilities of Van
Kampen Tax Managed Global Franchise Fund (the "Fund"), a fund of Van Kampen
Series Fund, Inc., including the portfolio of investments, as of June 30, 2000,
and the related statements of operations, changes in net assets and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The Fund's financial statements and
financial highlights for the period ended prior to June 30, 2000, were audited
by other auditors whose report, dated August 6, 1999, expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2000, by correspondence with the Fund's
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Tax Managed Global Franchise Fund as of June 30, 2000, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-252
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS THE FOLLOWING PAGES DETAIL YOUR FUND'S
JUNE 30, 2000 PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON STOCKS 91.6%
CANADA 3.0%
Torstar Corp. 'B' ............................. 14,480 $ 166,403
-------------
FINLAND 3.8%
Kone Corp. Oy 'B' ............................. 2,803 168,430
Rapala Normark Corp. .......................... 8,100 47,900
-------------
216,330
-------------
FRANCE 6.3%
Groupe Danone ................................. 1,514 200,723
Pernod-Ricard ................................. 2,820 153,314
-------------
354,037
-------------
ITALY 1.3%
Mediaset S.p.A ................................ 4,710 71,878
-------------
SPAIN 3.3%
Zardoya-Otis S.A. ............................. 20,935 185,301
-------------
SWITZERLAND 9.6%
Cie Financiere Richemont AG 'A' ............... 110 296,032
Nestle S.A. (Registered) ...................... 122 243,910
-------------
539,942
-------------
UNITED KINGDOM 39.5%
Allied Domecq plc ............................. 49,600 262,605
British American Tobacco plc .................. 38,100 254,165
Cadbury Schweppes plc ......................... 54,000 354,516
Capital Radio plc ............................. 3,400 79,462
Diageo plc .................................... 21,982 197,185
Great Universal Stores plc .................... 16,100 103,506
Imperial Tobacco Group plc .................... 24,787 237,345
Reckitt Benckiser plc ......................... 23,204 259,745
SMG plc (a) ................................... 36,808 198,497
Ulster Television plc ......................... 3,086 13,865
WPP Group plc ................................. 18,150 264,946
-------------
2,225,837
-------------
UNITED STATES 24.8%
Bestfoods ..................................... 3,950 273,537
Brown-Forman Corp. 'B' ........................ 4,425 237,844
Fortune Brands, Inc. .......................... 7,520 173,430
New York Times Co. 'A' ........................ 6,425 253,788
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-253
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
Philip Morris Cos., Inc. ...................... 4,710 $ 125,109
Ralston-Ralston Purina Group .................. 12,730 253,804
WD-40 Co. ..................................... 3,890 80,718
-------------
1,398,230
-------------
TOTAL LONG-TERM INVESTMENTS 91.6%
(Cost $4,728,446) ........................................ 5,157,958
-------------

<CAPTION>
PAR
VALUE
<S> <C> <C>
SHORT-TERM INVESTMENT 10.1%
REPURCHASE AGREEMENT 10.1%
Chase Securities, Inc. 6.15%, dated ........... $ 566,000
6/30/00, due due 7/3/00, to be
repurchased at $566,290
collateralized by $600,000 U.S.
Treasury Notes 5.50%, due 5/15/09,
valued at $578,250
(Cost $566,000) .......................................... 566,000
-------------
TOTAL INVESTMENTS IN SECURITIES 101.7%
(Cost $5,294,446) ........................................ 5,723,958

FOREIGN CURRENCY 0.0%
(Cost $1,206) ............................................ 1,207
-------------
TOTAL INVESTMENTS 101.7%
(Cost $5,295,652) ........................................ 5,725,165

LIABILITIES IN EXCESS OF OTHER ASSETS -1.7% .................. (95,194)
-------------
NET ASSETS 100% .............................................. $5,629,971
=============
</TABLE>
(a) NON-INCOME PRODUCING SECURITY

SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+

<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
Consumer Staples ............. $3,349,835 59.5%
Consumer Discretionary ....... 1,373,674 24.4
Industrials .................. 353,731 6.3
Materials .................... 80,718 1.4
---------- ----
$5,157,958 91.6%
========== ====
</TABLE>
+ THE COMMON STOCKS ARE CLASSIFIED BY SECTORS WHICH REPRESENT BROAD GROUPINGS OF
RELATED INDUSTRIES

F-254 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
JUNE 30, 2000

<TABLE>
<S> <C>
ASSETS:
Investments at Value (Cost $5,294,446) (Including repurchase
agreement of $566,000) ......................................... $5,723,958
Foreign Currency (Cost $1,206) ................................... 1,207
Cash ............................................................. 753
Receivable for:
Fund Shares Sold ............................................... 63,642
Dividends ...................................................... 8,062
Foreign Withholding Tax Reclaim ................................ 1,452
Interest ....................................................... 97
Receivable from Investment Adviser ............................... 38,105
Net Unrealized Gain on Foreign Currency Exchange Contracts ....... 2,855
Other ............................................................ 38,515
----------
Total Assets ................................................. 5,878,646
----------
LIABILITIES:
Payable for:
Investments Purchased .......................................... 164,864
Professional Fees .............................................. 45,589
Directors' Fees and Expenses ................................... 22,703
Distribution Fees .............................................. 6,180
Custody Fees ................................................... 4,306
Administrative Fees ............................................ 2,511
Transfer Agent Fees ............................................ 1,087
Fund Shares Redeemed ........................................... 1,076
Other ............................................................ 359
----------
Total Liabilities ............................................ 248,675
----------
NET ASSETS ....................................................... $5,629,971
==========
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares
Authorized 2,625,000,000) ...................................... $ 409
Paid in Capital in Excess of Par ................................. 4,691,711
Accumulated Net Realized Gain .................................... 460,818
Net Unrealized Appreciation on Investments
and Foreign Currency Translations .............................. 431,340
Accumulated Net Investment Income ................................ 45,693
----------
NET ASSETS ....................................................... $5,629,971
==========
Class A Shares:
Net Asset Value and Redemption Price Per Share (Based on Net
Assets of $1,902,238 and 138,012 Shares Outstanding) ......... $ 13.78
==========
Maximum Sales Charge ......................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value
Per Share x 100/ (100% - maximum sales charge)) .............. $ 14.62
==========
Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $1,949,477 and 142,027 Shares Outstanding)* ........ $ 13.73
==========
Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $1,778,256 and 128,616 Shares Outstanding)* ........ $ 13.83
==========
</TABLE>
* REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

SEE NOTES TO FINANCIAL STATEMENTS F-255
<PAGE>

Statement of Operations
YEAR ENDED JUNE 30, 2000

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ........................................................ $ 89,979
Interest ......................................................... 10,622
Less Foreign Taxes Withheld ...................................... (7,299)
----------
Total Income ................................................. 93,302
----------
EXPENSES:
Filing and Registration Fees ..................................... 67,744
Shareholder Reports .............................................. 50,215
Professional Fees ................................................ 48,293
Investment Advisory Fees ......................................... 36,821
Distribution Fees (Attributed to Classes A, B and C
of $3,434, $9,909 and $13,179, respectively) ................... 26,522
Directors' Fees and Expenses ..................................... 22,542
Administrative Fees .............................................. 13,674
Custodian Fees ................................................... 7,330
Other ............................................................ 768
----------
Total Expenses ............................................... 273,909
Less Expense Reductions ...................................... (189,166)
----------
Net Expenses ................................................. 84,743
----------
NET INVESTMENT INCOME ............................................ $ 8,559
==========
NET REALIZED GAIN/LOSS ON:
Investments ...................................................... $ 483,286
Foreign Currency Transactions .................................... 49,912
----------
Net Realized Gain ................................................ 533,198
----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period ........................................ 252,540
----------
End of the Period:
Investments .................................................. 429,512
Foreign Currency Translations ................................ 1,828
----------
431,340
----------
Net Change in Unrealized Appreciation/Depreciation ............... 178,800
----------
NET REALIZED GAIN/LOSS AND NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ...................................... $ 711,998
==========
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $ 720,557
==========
</TABLE>

F-256 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Statement of Changes in Net Assets
YEAR ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 25, 1998*
JUNE 30, 2000 TO JUNE 30, 1999**
------------- -------------------
<S> <C> <C>
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income ..................................... $ 8,559 $ 14,000
Net Realized Gain ......................................... 533,198 22,000
Net Change in Unrealized Appreciation/Depreciation ........ 178,800 253,000
---------- ----------
Net Increase in Net Assets Resulting from Operations ...... 720,557 289,000
---------- ----------
DISTRIBUTIONS:
Net Investment Income:
Class A ................................................. (33,675) (7,000)
Class B ................................................. (16,964) (4,000)
Class C ................................................. (23,967) (5,000)
---------- ----------
(74,606) (16,000)
---------- ----------
Net Realized Gain:
Class A ................................................. (18,765) --
Class B ................................................. (13,405) --
Class C ................................................. (18,999) --
---------- ----------
(51,169) --
---------- ----------
Net Decrease in Net Assets Resulting
from Distributions ...................................... (125,775) (16,000)
---------- ----------
CAPITAL SHARES TRANSACTIONS:
Subscribed ................................................ 3,148,771 1,012,000
Distributions Reinvested .................................. 74,281 3,000
Redeemed ............................[caad 234]I...................... (471,121) (5,000)
---------- ----------
Net Increase in Net Assets Resulting from
Capital Share Transactions .............................. 2,751,931 1,010,000
---------- ----------
Total Increase in Net Assets .............................. 3,346,713 1,283,000
NET ASSETS--Beginning of Period ........................... 2,283,258 1,000,000
---------- ----------
NET ASSETS--End of Period (Including accumulated
net investment income of $45,693 and
$48,000, respectively) .................................. $5,629,971 $2,283,000
========== ==========
</TABLE>
* COMMENCEMENT OF OPERATIONS
** AMOUNTS ROUNDED TO THE NEAREST (000).

SEE NOTES TO FINANCIAL STATEMENTS F-257
<PAGE>

Financial Highlights THE FOLLOWING SCHEDULE PRESENTS
FINANCIAL HIGHLIGHTS FOR ONE SHARE OF
THE FUND OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.

<TABLE>
<CAPTION>
SEPTEMBER 25,
YEAR ENDED 1998* TO
JUNE 30, 2000# JUNE 30, 1999#
-------------- --------------
<S> <C> <C>
CLASS A SHARES
NET ASSET VALUE, BEGINNING OF PERIOD ....................... $ 11.98 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income .................................... 0.08 0.14
Net Realized and Unrealized Gain ......................... 2.22 1.97
------- -------
Total From Investment Operations ........................... 2.30 2.11
------- -------
DISTRIBUTIONS
Net Investment Income .................................... (0.32) (0.13)
Net Realized Gain ........................................ (0.18) --
------- -------
Total Distributions ........................................ (0.50) (0.13)
------- -------
NET ASSET VALUE, END OF PERIOD ............................. $ 13.78 $ 11.98
------- -------
TOTAL RETURN (1) ........................................... 19.83% 21.22%**
======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .......................... $1,902 $1,189
Ratio of Expenses to Average Net Assets .................... 1.80% 1.80%
Ratio of Net Investment Income to Average Net Assets ....... 0.70% 1.57%
Portfolio Turnover Rate .................................... 29% 9%**
----------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions During the Period
Per Share Benefit to Net Investment Income ............... $0.66 $1.02
Ratios Before Expense Reductions:
Expenses to Average Net Assets ........................... 7.17% 13.55%
Net Investment Income/Loss to Average Net Assets ......... (4.67%) (10.17%)
----------------------------------------------------------------------------------------------
</TABLE>
* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-258 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

Financial Highlights THE FOLLOWING SCHEDULE PRESENTS
FINANCIAL HIGHLIGHTS FOR ONE SHARE OF
THE FUND OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.

<TABLE>
<CAPTION>
SEPTEMBER 25,
YEAR ENDED 1998* TO
JUNE 30, 2000# JUNE 30, 1999#
-------------- --------------
<S> <C> <C>
CLASS B SHARES
NET ASSET VALUE, BEGINNING OF PERIOD ....................... $ 11.92 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss ............................... (0.01) 0.07
Net Realized and Unrealized Gain ......................... 2.22 1.96
------- -------
Total From Investment Operations ........................... 2.21 2.03
------- -------
DISTRIBUTIONS
Net Investment Income .................................... (0.22) (0.11)
Net Realized Gain ........................................ (0.18) --
------- -------
Total Distributions (0.40) (0.11)
------- -------
NET ASSET VALUE, END OF PERIOD ............................. $ 13.73 $ 11.92
------- -------
TOTAL RETURN (1) ........................................... 19.09% 20.40%**
======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .......................... $ 1,950 $ 614
Ratio of Expenses to Average Net Assets .................... 2.55% 2.55%
Ratio of Net Investment Income/Loss to Average Net Assets .. (0.04%) 0.77%
Portfolio Turnover Rate .................................... 29% 9%**
----------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions During the Period
Per Share Benefit to Net Investment Income/Loss .......... $0.69 $1.02
Ratios Before Expense Reductions:
Expenses to Average Net Assets ........................... 8.17% 14.45%
Net Investment Income/Loss to Average Net Assets ......... (5.93%) (11.12%)
----------------------------------------------------------------------------------------------
</TABLE>
* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-259
<PAGE>

Financial Highlights THE FOLLOWING SCHEDULE PRESENTS
FINANCIAL HIGHLIGHTS FOR ONE SHARE OF
THE FUND OUTSTANDING THROUGHOUT THE
PERIOD INDICATED.

<TABLE>
<CAPTION>
SEPTEMBER 25,
YEAR ENDED 1998* TO
JUNE 30, 2000# JUNE 30, 1999#
-------------- --------------
<S> <C> <C>
CLASS C SHARES
NET ASSET VALUE, BEGINNING OF PERIOD ....................... $ 12.02 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss ............................... 0.00+ 0.06
Net Realized and Unrealized Gain ......................... 2.21 2.07
------- -------
Total From Investment Operations ........................... 2.21 2.13
------- -------
DISTRIBUTIONS
Net Investment Income .................................... (0.22) (0.11)
Net Realized Gain ........................................ (0.18) --
------- -------
Total Distributions ........................................ (0.40) (0.11)
------- -------
NET ASSET VALUE, END OF PERIOD ............................. $ 13.83 $ 12.02
------- -------
TOTAL RETURN (1) ........................................... 18.92% 21.40%**
======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) .......................... $ 1,778 $ 480
Ratio of Expenses to Average Net Assets .................... 2.55% 2.55%
Ratio of Net Investment Income/Loss to Average Net Assets .. (0.02%) 0.69%
Portfolio Turnover Rate .................................... 29% 9%**
----------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions During the Period
Per Share Benefit to Net Investment Income/Loss .......... $0.57 $1.16
Ratios Before Expense Reductions:
Expenses to Average Net Assets ........................... 7.15% 16.07%
Net Investment Income/Loss to Average Net Assets ......... (4.59%) (12.83%)
----------------------------------------------------------------------------------------------
</TABLE>
* COMMENCEMENT OF OPERATIONS
** NON-ANNUALIZED
(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.
# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.
+ AMOUNT IS LESS THAN $0.01 PER SHARE.

F-260 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen Tax Managed Global Franchise Fund (formerly Van Kampen
Global Franchise Fund) (the "Fund") is organized as a separate diversified fund
of Van Kampen Series Fund, Inc., a Maryland corporation, which is registered as
an open-end management investment company under the Investment Company Act of
1940, as amended. The Fund's investment objective seeks long-term capital
appreciation. The Fund commenced operations on September 25, 1998. The Fund
added tax sensitive investment strategies on April 3, 2000.

A. 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 bid and asked prices obtained from reputable brokers.
Debt securities purchased with remaining maturities of 60 days or less are
valued at amortized cost, which approximates market value. All other securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith using procedures approved by the Board of
Directors.

F-261
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

tion, 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.

F-262
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Van Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary
of Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc., 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 indicated as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $500 million .............................................. 1.00 of 1%
Next $500 million ............................................... .95 of 1%
Over $1 billion ................................................. .90 of 1%
</TABLE>

The Adviser has agreed to reduce advisory fees payable to it and to
reimburse the Fund, if necessary, if the annual operating expenses, 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
EXPENSE RATIO EXPENSE RATIO
<S> <C>
1.80% 2.55%
</TABLE>
For the period ended June 30, 2000, the Adviser voluntarily waived $189,166
of its investment advisory fees. This waiver is voluntary in nature and can be
discontinued at the Adviser's discretion.

F-263
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

For the period ended June 30, 2000, the Fund recognized expenses of $43,782
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
For the period ended June 30, 2000, the Fund recognized expenses of $6,041
representing Van Kampen's cost of providing legal services to the Fund.
At June 30, 2000, Van Kampen Funds, Inc. owned 29%, 21%, and 23% of the
shares outstanding of each Class A, B, and C shares in the Fund.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
The Distributor may receive a front end sales charge for purchases of
Class A shares. In addition, the Distributor may receive a contingent deferred
sales charge for certain redemptions of Class B shares and Class C shares of the
Fund redeemed within one to five years following such purchase. For the period
ended June 30, 2000, the Distributor has advised the Fund that it earned initial
sales charges of $13,422 for Class A shares and a deferred sales charge of
$4,954 and $10 for Class B shares and Class C shares, respectively.
Certain officers and directors of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
directors who are not officers of Van Kampen. Under the deferred compensation
plan, Directors may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each Director's years of service to the Fund. The maximum
annual benefit per director under the plan is $2,500.
For the period ended June 30, 2000, the Fund incurred $1,664 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.

F-264
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

3. CAPITAL TRANSACTIONS
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. All three classes of shares have identical voting, dividend, liquidation
and other rights. 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 ("CDSC") of 1.00% imposed in
the event of certain redemptions within one year of the purchase. Class B and
Class C shares are offered without a front end sales charge, but are subject to
a CDSC. Class B shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B shares received on such shares, automatically convert
to Class A shares eight years after the end of the calendar month in which the
shares were purchased. Class B shares automatically convert to Class A shares
seven years after the end of the calendar month in which the shares were
purchased. For the period ended June 30, 2000, no Class B shares converted to
Class A shares. The CDSC will be imposed on most redemptions made within five
years of the purchase for Class B shares and one year of the purchase for
Class C shares as detailed in the following schedule:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
---------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First .......................................... 5.00% 1.00%
Second ......................................... 4.00% None
Third .......................................... 3.00% None
Fourth ......................................... 2.50% None
Fifth .......................................... 1.50% None
Thereafter ..................................... None None
</TABLE>

F-265
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 25, 1998*
JUNE 30, 2000 TO JUNE 30, 1999**
-------------- -------------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS
CLASS A:
Shares:
Subscribed (Initial Shares of 40,000) ................ 49,508 99,000
Distributions Reinvested ............................. 2,480 --
Redeemed ............................................. (13,256) --
---------- ----------
Net Increase in Class A Shares Outstanding .............. 38,732 99,000
========== ==========
Dollars:
Subscribed ........................................... $ 634,093 $ 667,000
Distributions Reinvested ............................. 29,563 2,000
Redeemed ............................................. (165,730) (2,000)
---------- ----------
Net Increase ............................................ $ 497,926 $ 667,000
========== ==========
Beginning Paid in Capital ............................... $1,067,082 $ 400,000
========== ==========
Ending Paid in Capital .................................. $1,535,322+ $1,067,000+
========== ==========
CLASS B:
Shares:
Subscribed (Initial Shares of 30,000) ................ 108,584 52,000
Distributions Reinvested ............................. 1,442 --
Redeemed ............................................. (19,521) --
---------- ----------
Net Increase in Class B Shares Outstanding .............. 90,505 52,000
========== ==========
Dollars:
Subscribed ........................................... $1,382,290 $ 242,000
Distributions Reinvested ............................. 17,184 1,000
Redeemed ............................................. (241,657) --
---------- ----------
Net Increase ............................................ $1,157,817 $ 243,000
========== ==========
Beginning Paid in Capital ............................... $ 543,685 $ 300,000
========== ==========
Ending Paid in Capital .................................. $1,686,169+ $ 543,000+
========== ==========
CLASS C:
Shares:
Subscribed (Initial Shares of 30,000) ................ 91,462 40,000
Distributions Reinvested ............................. 2,292 --
Redeemed ............................................. (5,052) --
---------- ----------
Net Increase in Class C Shares Outstanding .............. 88,702 40,000
========== ==========
Dollars:
Subscribed ........................................... $1,132,388 $ 103,000
Distributions Reinvested ............................. 27,534 --
Redeemed ............................................. (63,734) (3,000)
---------- ----------
Net Increase ............................................ $1,096,188 $ 100,000
========== ==========
Beginning Paid in Capital ............................... $ 399,839 $ 300,000
========== ==========
Ending Paid in Capital .................................. $1,484,054+ $ 400,000+
========== ==========
</TABLE>
* COMMENCEMENT OF OPERATIONS
** AMOUNTS ROUNDED TO THE NEAREST (000).
+ ENDING PAID IN CAPITAL AMOUNTS DO NOT REFLECT PERMANENT BOOK TO TAX
DIFFERENCES--SEE NOTE 1E.

F-266
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

4. INVESTMENT TRANSACTIONS
For the period ended June 30, 2000, the Fund made purchases of $3,189,508 and
sales of $1,001,603 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.

5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying
asset, reference rate or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's foreign currency exposure or generate
potential gain. All of the Fund's portfolio holdings, including derivative
instruments, are marked-to-market each day with the change in value reflected in
unrealized appreciation/depreciation. Upon disposition, a realized gain or loss
is recognized accordingly, except when exercising a call option contract or
taking delivery of a security underlying a futures or forward contract. In these
instances, the recognition of gain or loss is postponed until the disposal of
the security underlying the option or forward contract. Risks may arise as a
result of the potential inability of the counterparties to meet the terms of
their contracts.
Summarized below are the specific types of derivative financial instruments
used by the Fund.

F-267
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

F-268
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and
Shareholders of Van Kampen
Value Fund

We have audited the accompanying statement of assets and liabilities of Van
Kampen Value Fund (the "Fund"), a fund of Van Kampen Series Fund, Inc.,
including the portfolio of investments, as of June 30, 2000, and the related
statements of operations, changes in net assets and the financial highlights for
the year then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The Fund's financial statements and financial highlights for the periods
ended prior to June 30, 2000, were audited by other auditors whose report, dated
August 6, 1999, expressed an unqualified opinion on those statements.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Value Fund as of June 30, 2000, the results of its operations, the
changes in its net assets and the financial highlights for the year then ended,
in conformity with accounting principles generally accepted in the United States
of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-269
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS THE FOLLOWING PAGES DETAIL YOUR FUND'S
JUNE 30, 2000 PORTFOLIO OF INVESTMENTS AT THE END OF THE
REPORTING PERIOD.

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON STOCKS 99.7%
BASIC RESOURCES 6.8%
BASIC CHEMICALS 4.6%
Dow Chemical Co. ...................................... 42,000 $ 1,267,875
E.I. du Pont de Nemours & Co. ......................... 28,900 1,264,375
IMC Global, Inc. ...................................... 87,900 1,142,700
PPG Industries, Inc. .................................. 28,300 1,254,044
Praxair, Inc. ......................................... 37,100 1,388,931
-----------
6,317,925
-----------
SPECIALTY CHEMICALS 2.2%
Engelhard Corp. ....................................... 125,000 2,132,813
Lubrizol Corp. ........................................ 44,700 938,700
-----------
3,071,513
-----------
TOTAL BASIC RESOURCES ............................................ 9,389,438
-----------

BEVERAGES & PERSONAL PRODUCTS 1.4%
PERSONAL PRODUCTS 1.4%
Fortune Brands, Inc. .................................. 82,800 1,909,575
-----------

CONSUMER DURABLES 5.7%
AUTOMOBILES 1.9%
Ford Motor Co. ........................................ 58,130 2,499,590
General Motors Corp. .................................. 3,069 178,170
-----------
2,677,760
-----------
AUTOMOTIVE 0.5%
Delphi Automotive Systems Corp. ....................... 47,100 685,894
-----------
BUILDING & HOUSING 0.8%
Masco Corp. ........................................... 34,500 623,156
Owens Corning ......................................... 38,520 356,310
-----------
979,466
-----------
FURNISHING & APPLIANCES 2.5%
Maytag Corp. .......................................... 59,500 2,194,062
Whirlpool Corp. ....................................... 27,600 1,286,850
-----------
3,480,912
-----------
TOTAL CONSUMER DURABLES .......................................... 7,824,032
-----------
CONSUMER SERVICES 1.8%
ENTERTAINMENT & LEISURE 1.8%
Harrah's Entertainment, Inc. (a) ...................... 115,200 2,412,000
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-270
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
ENERGY 8.5%
OIL-DOMESTIC &
CRUDE 2.4%
Conoco, Inc.'B' ....................................... 35,600 $ 874,425
Tosco Corp. ........................................... 87,100 2,466,019
-----------
3,340,444
-----------
OIL-INTERNATIONAL 2.4%
Exxon Mobil Corp. ..................................... 21,100 1,656,350
Texaco, Inc. .......................................... 30,000 1,597,500
-----------
3,253,850
-----------
OIL-OFFSHORE DRILLING 2.7%
Nabors Industries, Inc. (a) ........................... 89,000 3,699,062
-----------
OIL-WELL EQUIPMENT & SERVICES 1.0%
Halliburton Co. ....................................... 29,000 1,368,438
-----------
TOTAL ENERGY ..................................................... 11,661,794
-----------
FINANCIAL SERVICES 18.2%
BANKS 12.2%
Chase Manhattan Corp. ................................. 61,860 2,849,426
First Union Corp. (N.C.) .............................. 44,800 1,111,600
Firstar Corp. ......................................... 37,200 783,525
FleetBoston Financial Corp. ........................... 77,197 2,624,698
PNC Bank Corp. ........................................ 69,700 3,267,188
Washington Mutual, Inc. ............................... 150,550 4,347,131
Wells Fargo Co. ....................................... 44,000 1,705,000
-----------
16,688,568
-----------
CREDIT & FINANCE 1.1%
Household International, Inc. ......................... 23,100 960,094
SLM Holding Corp. ..................................... 15,000 561,562
-----------
1,521,656
-----------
INSURANCE 4.9%
Allstate Corp. ........................................ 23,900 531,775
American General Corp. ................................ 50,000 3,050,000
AXA Financial, Inc. ................................... 45,400 1,543,600
Hartford Financial Services Group ..................... 29,340 1,641,205
-----------
6,766,580
-----------
TOTAL FINANCIAL SERVICES ......................................... 24,976,804
-----------
HEALTH CARE 20.7%
HEALTH SERVICES 18.7%
Cigna Corp. ........................................... 29,900 2,795,650
Foundation Health Systems 'A' (a) ...................... 424,100 5,513,300
HCA-The Healthcare Company ............................ 139,770 4,245,514
HEALTHSOUTH Corp. (a) ................................. 1,048,900 7,538,968
</TABLE>

F-271 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
HEALTH CARE (CONTINUED)
HEALTH SERVICES (CONTINUED)
Tenet Healthcare Corp. (a) ............................ 205,800 $ 5,556,600
Visteon Corp. (a) ..................................... 7,609 92,262
-----------
25,742,294
-----------
HEALTH TECHNOLOGY 2.0%
Beckman Coulter, Inc. ................................. 46,930 2,739,539
-----------
TOTAL HEALTH CARE ................................................ 28,481,833
-----------
HEAVY INDUSTRY/TRANSPORTATION 14.0%
AEROSPACE 0.1%
General Motors Corp.'H' (a) ........................... 1,077 94,521
-----------
AIR TRANSPORTATION 0.3%
Delta Airlines, Inc. .................................. 10,000 505,625
-----------
ELECTRICAL EQUIPMENT 2.5%
Honeywell International, Inc. ......................... 100,900 3,399,069
-----------
MACHINERY 8.4%
Cooper Industries, Inc. ............................... 36,700 1,195,044
Cummins Engine Co., Inc. .............................. 42,900 1,169,025
Deere & Co. ........................................... 38,600 1,428,200
Eaton Corp. ........................................... 54,700 3,664,900
Ingersoll-Rand Co. .................................... 34,100 1,372,525
Navistar International Corp. (a) ...................... 15,400 478,362
Parker-Hannifin Corp. ................................. 65,125 2,230,531
-----------
11,538,587
-----------
MISCELLANEOUS INDUSTRIALS 2.7%
Dover Corp. ........................................... 37,700 1,529,206
FMC Corp. (a) ......................................... 38,510 2,233,580
-----------
3,762,786
-----------
TOTAL HEAVY INDUSTRY/TRANSPORTATION............................... 19,300,588
-----------
RETAIL 0.7%
APPAREL 0.7%
VF Corp. .............................................. 43,400 1,033,463
-----------
TECHNOLOGY 9.2%
ELECTRONICS 3.6%
Arrow Electronics, Inc. (a) ........................... 43,000 1,333,000
Avnet, Inc. ........................................... 26,400 1,564,200
Motorola, Inc. ........................................ 70,700 2,054,718
-----------
4,951,918
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-272
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
TECHNOLOGY (CONTINUED)
COMPUTERS & OFFICE EQUIPMENT 2.5%
Compaq Computer Corp.................................... 42,700 $ 1,091,519
International Business Machines Corp.................... 14,000 1,533,875
Quantum Corp.-DLT & Storage Systems (a)................. 80,400 778,875
-----------
3,404,269
-----------
SOFTWARE & SERVICES 3.1%
Computer Associates International, Inc.................. 29,500 1,510,031
First Data Corp......................................... 57,300 2,843,513
-----------
4,353,544
-----------
TOTAL TECHNOLOGY........................................ 12,709,731
-----------
UTILITIES 12.7%
ELECTRIC POWER 4.7%
Cinergy Corp............................................ 35,200 895,400
Dominion Resources, Inc................................. 17,400 746,025
Duke Energy Corp........................................ 17,300 975,287
Edison International.................................... 39,600 811,800
FPL Group, Inc.......................................... 15,200 752,400
PG&E Corp............................................... 33,900 834,787
Southern Co............................................. 33,400 778,638
TXU Corp................................................ 22,400 660,800
-----------
6,455,137
-----------
NATURAL GAS PIPELINES 1.3%
Coastal Corp............................................ 29,900 1,820,163
-----------
TELEPHONE SERVICES 6.7%
Bell Atlantic Corp...................................... 52,100 2,647,331
BellSouth Corp.......................................... 24,700 1,052,838
GTE Corp................................................ 27,600 1,718,100
SBC Communications, Inc................................. 87,700 3,793,025
-----------
9,211,294
-----------
TOTAL UTILITIES........................................ 17,486,594
-----------
TOTAL LONG-TERM INVESTMENTS 99.7%
(Cost $140,473,535)................................ 137,185,852
-----------
</TABLE>

F-273 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <C> <C>
SHORT-TERM INVESTMENT 0.9%
REPURCHASE AGREEMENT 0.9%
Chase Securities, Inc. 6.15%, dated $1,199,000
6/30/00, due 7/3/00, to be repurchased at $1,199,614,
collateralized by $1,275,000 U.S. Treasury Notes 5.50%,
due 5/15/09, valued at $1,228,781
(Cost $1,199,000)................................. $ 1,199,000
-----------
TOTAL INVESTMENTS 100.6%
(Cost $141,672,535)............................... 138,384,852

LIABILITIES IN EXCESS OF OTHER ASSETS -0.6%.......... (835,760)
------------
NET ASSETS 100% ..................................... $137,549,092
============
</TABLE>

(a) NON-INCOME PRODUCING SECURITY

F-274 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000

<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at Value (Cost $141,672,535)............................ $138,384,852
Cash................................................................ 608
Receivable for:
Dividends......................................................... 144,359
Fund Shares Sold.................................................. 90,488
Interest.......................................................... 205
Deferred Organizational Costs....................................... 2,546
Other............................................................... 4,999
------------
Total Assets ..................................................... 138,628,057
------------
LIABILITIES:
Payable for:
Fund Shares Redeemed.............................................. 628,929
Distribution Fees................................................. 164,774
Investment Advisory Fees.......................................... 89,629
Shareholder Reporting Expenses.................................... 60,525
Professional Fees................................................. 38,201
Directors' Fees and Expenses...................................... 35,711
Administrative Fees............................................... 31,421
Transfer Agent Fees............................................... 17,956
Custody Fees...................................................... 11,819
------------
Total Liabilities................................................. 1,078,965
------------
NET ASSETS $137,549,092
============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized 2,625,000,000)$ 15,260
Paid in Capital in Excess of Par.................................... 170,952,250
Accumulated Net Investment Income................................... 4,600
Net Unrealized Depreciation on Investments.......................... (3,287,683)
Accumulated Net Realized Loss....................................... (30,135,335)
------------
NET ASSETS ......................................................... $137,549,092
============
Class A Shares:
Net Asset Value and Redemption Price Per Share (Based on Net Assets
of $52,610,696 and 5,799,087 Shares Outstanding)............... $ 9.07
============
Maximum Sales Charge .......................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100/ (100% - maximum sales charge)) ................... $ 9.62
============
Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets
of $70,353,310 and 7,836,108 Shares Outstanding)*.............. $ 8.98
============
Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets
of $14,585,086 and 1,625,121 Shares Outstanding)*.............. $ 8.97
============
</TABLE>

* REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

F-275 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends........................................................... $ 3,371,536
Interest............................................................ 171,875
------------
Total Income ..................................................... 3,543,411
------------
EXPENSES:
Investment Advisory Fees............................................ 1,462,823
Distribution Fees (Attributed to Classes A, B and C of $171,983, $939,141
and $202,723, respectively) ...................................... 1,313,847
Administrative Fees................................................. 463,813
Shareholder Reports................................................. 152,512
Transfer Agent Fees................................................. 107,170
Professional Fees................................................... 46,809
Filing and Registration Fees........................................ 33,251
Custodian Fees...................................................... 31,003
Directors' Fees and Expenses........................................ 23,862
Amortization of Organizational Costs................................ 1,266
Other............................................................... 10,342
------------
Total Expenses ................................................ 3,646,698
Less Expense Reductions........................................ (127,565)
------------
Net Expenses .................................................. 3,519,133
------------
NET INVESTMENT INCOME .............................................. $ 24,278
============
NET REALIZED GAIN/LOSS ON:
Investments......................................................... $(20,783,017)
------------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period........................................... 17,334,342
------------
End of the Period:
Investments.................................................... (3,287,683)
------------
Net Change in Unrealized
Appreciation/Depreciation........................................... (20,622,025)
------------
NET REALIZED GAIN/LOSS AND NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ..................................... $(41,405,042)
============
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $(41,380,764)
============
</TABLE>

F-276 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
------------- -------------
<S> <C> <C>
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income............................... $ 24,278 $ 758,000
Net Realized Loss................................... (20,783,017) (9,132,000)
Net Change in Unrealized Appreciation/Depreciation.. (20,622,025) 16,113,000
------------ -----------
Net Increase/Decrease in Net Assets Resulting
from Operations ................................. (41,380,764) 7,739,000
------------ -----------
DISTRIBUTIONS:
Net Investment Income:
Class A.......................................... (61,414) (601,000)
Class B.......................................... -- (91,000)
Class C.......................................... -- (23,000)
In Excess of Net Investment Income:
Class A.......................................... -- (1,000)
------------ -----------
(61,414) (716,000)
------------ -----------
In Excess of Net Realized Gain:
Class A.......................................... -- (2,049,000)
Class B.......................................... -- (2,409,000)
Class C.......................................... -- (584,000)
------------ -----------
-- (5,042,000)
------------ -----------
Net Decrease in Net Assets Resulting from
Distributions (61,414) (5,758,000)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Subscribed.......................................... 30,551,699 63,721,000
Distributions Reinvested............................ 57,035 5,042,000
Redeemed............................................ (103,874,481) (134,239,000)
------------ -----------
Net Decrease in Net Assets Resulting from
Capital Share Transactions ...................... (73,265,747) (65,476,000)
------------ -----------
Total Decrease in Net Assets ....................... (114,707,925) (63,495,000)
NET ASSETS--Beginning of Period..................... 252,257,017 315,752,000
------------ -----------
NET ASSETS--End of Period (Including accumulated/
distributions in excess of net investment
income/loss of $4,600 and $(1,000), respectively) $137,549,092 $252,257,000
============ ============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

F-277 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

FINANCIAL HIGHLIGHTS THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, JULY 7, 1997* TO
-------------------
CLASS A SHARES 2000# 1999# JUNE 30, 1998#
------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 10.88 $ 10.53 $ 10.00
------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income...................... 0.05 0.07 0.11
Net Realized and Unrealized Gain/Loss...... (1.85) 0.51 0.56
------- ------- --------
Total From Investment Operations............. (1.80) 0.58 0.67
------- ------- --------
DISTRIBUTIONS
Net Investment Income...................... (0.01) (0.06) (0.08)
In Excess of Net Investment Income......... -- (0.00)+ (0.01)
Net Realized Gain.......................... -- -- (0.05)
In Excess of Net Realized Gain............. -- (0.17) --
------- ------- --------
Total Distributions.......................... (0.01) (0.23) (0.14)
------- ------- --------
NET ASSET VALUE, END OF PERIOD............... $ 9.07 $ 10.88 $ 10.53
======= ======= ========
TOTAL RETURN (1)............................. (16.56%) 5.83% 6.74%**
======= ======= ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $52,611 $95,208 $137,447
Ratio of Expenses to Average Net Assets...... 1.45% 1.45% 1.45%
Ratio of Net Investment Income to
Average Net Assets ....................... 0.49% 0.74% 1.02%
Portfolio Turnover Rate...................... 104% 64% 38%**
-----------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment Income $0.01 $0.00+ $0.01
Ratios Before Expense Reductions:
Expenses to Average Net Assets............. 1.53% 1.48% 1.60%
Net Investment Income to Average Net Assets 0.41% 0.73% 0.88%
-----------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

+ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1)TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-278
<PAGE>

FINANCIAL HIGHLIGHTS THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, JULY 7, 1997* TO
--------------------
CLASS B SHARES 2000# 1999# JUNE 30, 1998#
------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 10.84 $ 10.51 $ 10.00
------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................. (0.03) (0.00)+ 0.03
Net Realized and Unrealized Gain/Loss...... (1.83) 0.51 0.56
------- ------- --------
Total From Investment Operations............. (1.86) 0.51 0.59
------- ------- --------
DISTRIBUTIONS
Net Investment Income...................... -- (0.01) (0.03)
In Excess of Net Investment Income......... -- -- (0.00)+
Net Realized Gain.......................... -- -- (0.05)
In Excess of Net Realized Gain............. -- (0.17) --
------- ------- --------
Total Distributions.......................... -- (0.18) (0.08)
------- ------- --------
NET ASSET VALUE, END OF PERIOD............... $ 8.98 $ 10.84 $ 10.51
======= ======= ========
TOTAL RETURN (1)............................. (17.16%) 5.02% 6.01%**
======= ======= ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $70,353 $127,978 $142,741
Ratio of Expenses to Average Net Assets...... 2.20% 2.20% 2.20%
Ratio of Net Investment Income/Loss to
Average Net Assets ........................ (0.26%) (0.03%) 0.28%
Portfolio Turnover Rate...................... 104% 64% 38%**
-----------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net
Investment Income/Loss................... $0.01 $0.00+ $0.01
Ratios Before Expense Reductions:
Expenses to Average Net Assets............. 2.28% 2.23% 2.35%
Net Investment Income/Loss to Average Net Assets (0.34%) (0.05%) 0.14%
-----------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

+ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1)TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-279 SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>

FINANCIAL HIGHLIGHTS THE FOLLOWING SCHEDULE PRESENTS FINANCIAL
HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, JULY 7, 1997* TO
--------------------
CLASS C SHARES 2000# 1999# JUNE 30, 1998#
------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 10.83 $ 10.50 $ 10.00
------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................. (0.03) (0.00)+ 0.03
Net Realized and Unrealized Gain/Loss...... (1.83) 0.51 0.55
------- ------- --------
Total From Investment Operations............. (1.86) 0.51 0.58
------- ------- --------
DISTRIBUTIONS
Net Investment Income...................... -- (0.01) (0.03)
In Excess of Net Investment Income......... -- -- (0.00)+
Net Realized Gain.......................... -- -- (0.05)
In Excess of Net Realized Gain............. -- (0.17) --
------- ------- --------
Total Distributions.......................... -- (0.18) (0.08)
------- ------- --------
NET ASSET VALUE, END OF PERIOD............... $ 8.97 $ 10.83 $ 10.50
======= ======= ========
TOTAL RETURN (1)............................. (17.17%) 5.13% 5.83%**
======= ======= ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $14,585 $29,071 $35,564
Ratio of Expenses to Average Net Assets...... 2.20% 2.20% 2.20%
Ratio of Net Investment Income/Loss to
Average Net Assets ........................ (0.29%) (0.02%) 0.29%
Portfolio Turnover Rate...................... 104% 64% 38%**
-----------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net
Investment Income/Loss................... $0.01 $0.00+ $0.01
Ratios Before Expense Reductions:
Expenses to Average Net Assets............. 2.28% 2.23% 2.35%
Net Investment Income/Loss to Average Net Assets (0.37%) (0.03%) 0.15%
-----------------------------------------------------------------------------------
</TABLE>
* COMMENCEMENT OF OPERATIONS

** NON-ANNUALIZED

+ AMOUNT IS LESS THAN $0.01 PER SHARE.

(1)TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-280
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

The Van Kampen Value Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks to
achieve above-average total return over a market cycle of three to five years,
consistent with reasonable risk, by investing primarily in a diversified
portfolio of common stocks and other equity securities which are deemed by the
Fund's investment adviser to be relatively undervalued based upon various
measures such as price-to-earnings ratios and price-to-book ratios. The Fund
commenced operations on July 7, 1997.

1. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of the financial statements in conformity with accounting principles
accepted in the United States of America (hereafter "generally accepted
accounting principles") requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.

B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.

F-281
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

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.

D. ORGANIZATIONAL COSTS The organizational costs of the Fund are being amortized
on a straight line basis over the 60 month period ending July 6, 2002 beginning
with the Fund's commencement of operations. The Adviser has agreed that in the
event any of its initial shares of the Fund originally purchased by Van Kampen
are redeemed by the Fund during the amortization period, the Fund will be
reimbursed for any unamortized organization costs in the same proportion as the
number of shares redeemed bears to the number of initial shares held at the time
of redemption.

The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At June 30, 2000, the Fund had an accumulated capital loss carryforward
for tax purposes of $11,748,872, which will expire between June 30, 2007 and
June 30, 2008. Net realized gains or losses may differ for financial and tax
reporting purposes as a result of post October 31 losses which are not
recognized for tax purposes until the first day of the following fiscal year and
losses relating to wash sale transactions.

At June 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $144,124,492, the aggregate gross unrealized
appreciation is $8,663,864 and the aggregate gross unrealized depreciation is
$14,403,504, resulting in net unrealized depreciation on long- and short-term
investments of $5,739,640.

F-282
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

F. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains which are included as ordinary income for
tax purposes.

Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Miller Anderson & Sherrerd LLP (a "Subadviser"),
a wholly owned subsidiary of Morgan Stanley Dean Witter & Co., provide the Fund
with investment advisory services at a fee paid monthly and calculated at the
annual rates based on average daily net assets indicated as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $500 million ....................... .80 of 1%
Next $500 million ........................ .75 of 1%
Over $1 billion .......................... .70 of 1%
</TABLE>

<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
EXPENSE RATIO EXPENSE RATIO
<S> <C>
1.45% 2.20%
</TABLE>

F-283
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

For the period ended June 30, 2000, the Adviser voluntarily waived $127,565
of its investment advisory fees. This waiver is voluntary in nature and can be
discontinued at the Adviser's discretion.

For the period ended June 30, 2000, the Fund recognized expenses of $13,113
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.

For the period ended June 30, 2000, the Fund recognized expenses of $8,301
representing Van Kampen's cost of providing legal services to the Fund.

Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.

The Distributor may receive a front end sales charge for purchases of Class
A shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
June 30, 2000, the Distributor has advised the Fund that it earned initial sales
charges of $188,000 for Class A shares and deferred sales charges of $650,399
and $5,595 for Class B shares and Class C shares, respectively.

Certain officers and directors of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.

F-284
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

For the period ended June 30, 2000, the Fund incurred $9,708 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
---------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First .......................................... 5.00% 1.00%
Second ......................................... 4.00% None
Third .......................................... 3.00% None
Fourth ......................................... 2.50% None
Fifth .......................................... 1.50% None
Thereafter ..................................... None None
</TABLE>

F-285
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
------------ -------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS
CLASS A:
Shares:
Subscribed ............................... 1,644,231 2,585,000
Distributions Reinvested ................. 6,323 259,000
Redeemed ................................. (4,598,654) (7,154,000)
------------ -------------
Net Decrease in Class A Shares Outstanding . (2,948,100) (4,310,000)
============ =============
Dollars:
Subscribed ............................... $ 15,329,439 $ 24,777,000
Distributions Reinvested ................. 57,035 2,427,000
Redeemed ................................. (42,747,253) (69,185,000)
------------ -------------
Net Decrease ............................... $(27,360,779) $ (41,981,000)
============ =============
Ending Paid in Capital ..................... $ 64,879,338+ $ 92,241,000+
============ =============
Class B:
Shares:
Subscribed ............................... 1,248,877 3,052,000
Distributions Reinvested ................. -- 225,000
Redeemed ................................. (5,220,030) (5,046,000)
------------ -------------
Net Decrease in Class B Shares Outstanding . (3,971,153) (1,769,000)
============ =============
Dollars:
Subscribed ............................... $ 11,612,302 $ 29,487,000
Distributions Reinvested ................. -- 2,115,000
Redeemed ................................. (47,873,105) (48,333,000)
------------ -------------
Net Decrease ............................... $(36,260,803) $ (16,731,000)
============ =============
Ending Paid in Capital ..................... $ 87,382,253+ $ 123,644,000+
============ =============
Class C:
Shares:
Subscribed ............................... 382,726 988,000
Distributions Reinvested ................. -- 53,000
Redeemed ................................. (1,441,518) (1,743,000)
------------ -------------
Net Decrease in Class C Shares
Outstanding .............................. (1,058,792) (702,000)
============ =============
Dollars:
Subscribed ............................... $ 3,609,958 $ 9,457,000
Distributions Reinvested ................. -- 500,000
Redeemed ................................. (13,254,123) (16,721,000)
------------ -------------
Net Decrease ............................... $ (9,644,165) $ (6,764,000)
============ =============
Ending Paid in Capital ..................... $ 18,707,242+ $ 28,352,000+
============ =============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

+ ENDING PAID IN CAPITAL AMOUNTS DO NOT REFLECT PERMANENT BOOK TO TAX
DIFFERENCES--SEE NOTE 1F.

F-286
<PAGE>

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 2000

4. INVESTMENT TRANSACTIONS
For the period ended June 30, 2000, the Fund made purchases of $189,112,672 and
sales of $261,414,406 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.

F-287
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and
Shareholders of Van Kampen Worldwide
High Income Fund

We have audited the accompanying statement of assets and liabilities of Van
Kampen Worldwide High Income Fund (the "Fund"), a fund of Van Kampen Series
Fund, Inc., including the portfolio of investments, as of June 30, 2000, and the
related statements of operations, changes in net assets and the financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit. The Fund's financial statements and financial highlights for
the periods ended prior to June 30, 2000, were audited by other auditors whose
report, dated August 6, 1999, expressed an unqualified opinion on those
statements.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Worldwide High Income Fund as of June 30, 2000, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
August 11, 2000

F-288
<PAGE>

BY THE NUMBERS

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.

<TABLE>
<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <C> <C>
CORPORATE BONDS & NOTES 59.7%
ARGENTINA 4.0%
Acindar Industry Argentina 11.25%, 2/15/04 ........... $1,170,000 $ 772,200
Cablevision S.A. 13.75%, 5/1/09 (b) .................. 1,100,000 1,003,750
CIA International Telecommunications
10.375%, 8/1/04 .................................. ARP3,842,000 3,373,177
CTI Holdings 0.00%, 4/15/08 .......................... $1,275,000 734,719
Multicanal S.A. 13.125%, 4/15/09 ..................... 945,000 916,282
-----------
6,800,128
-----------
AUSTRALIA 0.5%
Glencore Nickel Property Ltd. 9.00%, 12/1/14 ......... 220,000 185,900
Murrin Murrin Holdings 9.375%, 8/31/07 ............... 745,000 648,150
-----------
834,050
-----------
BRAZIL 1.8%
Banco Nacional Desenv Econo 12.554%, 6/16/08 (c) ..... 3,300,000 3,102,000
-----------
CANADA 0.3%
GT Group Telecom 0.00%, 2/1/10 (b,d) ................. 950,000 527,250
-----------
COLOMBIA 0.8%
Occidente Y Caribe 0.00%, 3/15/04 (d) ................ 2,000,000 1,420,000
-----------
DENMARK 0.7%
Callahan Nordrhein Corp. 14.00%, 7/15/10 (b) ......... 1,200,000 1,200,000
-----------
INDIA 0.2%
Reliance Industries, Inc. 10.50%, 8/6/46 (b) ......... 400,000 369,800
-----------
INDONESIA 1.2%
Indah Kiat International, Series B, 11.875%, 6/15/02 . 300,000 243,000
Tjiwi Kimia International BV 13.25%, 8/1/01 .......... 2,000,000 1,760,000
-----------
2,003,000
-----------
KOREA 0.9%
Hyundai Semiconductor 8.625%, 5/15/07 (b) ............ 1,800,000 1,503,792
-----------
LUXEMBOURG 0.8%
PTC International Finance BV 11.25%, 12/1/09 (b) ..... EUR1,100,000 1,064,916
Sirona Dental Systems 9.125%, 7/15/08 (b) ............ 319,557 249,931
-----------
1,314,847
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-289
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <C> <C>
MEXICO 5.1%
Maxcom Telecomunicaciane 13.75%, 4/1/07 (b) .......... $ 675,000 $ 599,063
Nuevo Grupo Elektra S.A. 12.00%, 4/1/08 (b) .......... 1,750,000 1,592,500
Nueve Grupo Iusacell S.A. 14.25%, 12/1/06 ............ 1,100,000 1,133,000
Petro Mexicanos 9.50%, 9/15/27 ....................... 1,350,000 1,368,563
Sanluis Corp. S.A. 8.875%, 3/18/08 (b) ............... 2,850,000 2,607,750
TV Azteca S.A. 10.125%, 2/15/04 ...................... 1,500,000 1,389,375
-----------
8,690,251
-----------
NETHERLANDS 3.4%
Hermes Europe Railtel BV 10.375%, 1/15/09 ............ 500,000 416,250
Hermes Europe Railtel BV
11.50%, 8/15/07 Senior Notes ..................... 975,000 848,250
Netia Holdings II B.V. 13.50%, 6/15/09 ............... EUR1,900,000 1,812,216
Paiton Energy Funding 9.34%, 2/15/14 (b) ............. $1,100,000 220,000
Tele 1 Europe BV 13.00%, 5/15/09 (b) ................. EUR 875,000 847,092
United Pan-Europe Communications
10.875%, 8/1/09 .................................. $1,825,000 1,601,438
-----------
5,745,246
-----------
PHILIPPINES 1.0%
Bayan Telecommunications 13.50%, 7/15/06 (b) ......... 2,550,000 1,606,500
-----------
QUATAR 0.1%
Ras Laffan Liquid National Gas 8.294%, 3/15/14 (b) ... 250,000 233,815
-----------
TURKEY 0.7%
Cellco Finance 15.00%, 8/1/05 (b) .................... 1,040,000 1,118,000
-----------
UNITED KINGDOM 2.0%
Colt Telecom Group plc 7.625%, 7/31/08 ............... EUR 963,785 845,716
Dolphin Telecommunications plc 0.00%, 6/1/08 (d) ..... 940,000 322,765
Dolphin Telecommunications plc 0.00%, 5/15/09 (d) .... $1,350,000 479,250
Esprit Telecommunications Group plc
11.00%, 6/15/08 .................................. EUR 664,679 469,138
HMV Media Group, Inc., Series B,
10.875%, 5/15/08 ................................. GBP 620,000 656,511
RSL Communications plc 0.00%, 6/15/08 (d) ............ EUR1,610,569 652,867
-----------
3,426,247
-----------
UNITED STATES 36.2%
Adelphia Communications, Series B, 7.75%, 1/15/09 .... $ 750,000 631,875
Adelphia Communications, Series B, 8.375%, 2/1/08 .... 600,000 531,000
Adelphia Communications, Series B, 9.875%, 3/1/07 .... 800,000 768,000
AMSC ASQ Co., Inc., Series B, 12.25%, 4/1/08 ......... 885,000 668,175
CA FM Lease Trust 8.50%, 7/15/17 (b) ................. 896,900 827,202
Centex Corp. 9.75%, 6/15/05 .......................... 625,000 632,700
Chancellor Media Corp. 9.00%, 10/1/08 ................ 425,000 432,438
</TABLE>

F-290
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
Chancellor Media Corp., Series B, 8.125%, 12/15/07 ... $1,365,000 $ 1,371,825
Charter Communications Holdings 10.25%, 1/15/10 ...... 835,000 807,236
D.R. Horton, Inc. 8.00%, 2/1/09 ...................... 510,000 441,150
DR Securitized Lease Trust, Series 1993-K1, Class A1,
6.66%, 8/15/10 ................................... 716,486 599,341
DR Securitized Lease Trust, Series 1994-K1,
7.60%, 8/15/07 ................................... 812,579 741,088
DR Securitized Lease Trust, Series 1994-K1,
8.375%, 8/15/15 .................................. 250,000 204,723
Echostar DBS Corp. 9.375%, 2/1/09 .................... 800,000 774,000
EES Coke Battery Co., Inc. 9.382%, 4/15/07 (b) ....... 300,000 283,158
Exodus Communications, Inc. 11.625%, 7/15/10 (b) ..... 660,000 663,300
Global Crossing Holdings Ltd. 9.625%, 5/15/08 ........ 2,480,000 2,411,800
Globalstar LP/Capital 11.375%, 2/15/04 ............... 770,000 219,450
Globalstar LP/Capital 11.50%, 6/1/05 ................. 125,000 34,375
Globix Corp. 12.50%, 2/1/10 .......................... 575,000 477,250
Hayes Lemmerz International, Inc. 8.25%, 12/15/08 .... 2,115,000 1,787,175
HCA-The Healthcare Corp. 7.69%, 6/15/25 .............. 1,910,000 1,555,829
HCA-The Healthcare Corp. 8.13%, 8/4/03 ............... 85,000 82,636
HCA-The Healthcare Corp. 8.85%, 1/1/07 ............... 1,325,000 1,298,275
Hilton Hotels 7.95%, 4/15/07 ......................... 930,000 871,196
HMH Properties, Inc., Series A, 7.875%, 8/1/05 ....... 900,000 828,000
Horseshoe Gaming Holdings 8.625%, 5/15/09 ............ 2,100,000 1,974,000
Huntsman ICI Chemicals 10.125%, 7/1/09 (b) ........... EUR1,150,000 1,099,610
Intermedia Communications, Series B,
0.00%, 7/15/07 (d) ............................... $3,100,000 2,419,922
International Game Technology 8.375%, 5/15/09 ........ 950,000 903,004
Jet Equipment Trust, Series 1995-D,
11.44%, 11/1/14 (b) .............................. 300,000 330,729
Jet Equipment Trust, Series C-1,
11.79%, 6/15/13 (b) .............................. 300,000 336,843
Lennar Corp. 9.95%, 5/1/10 (b) ....................... 515,000 504,700
Level 3 Communications, Inc. 9.125%, 5/1/08 .......... 3,050,000 2,737,375
Lyondell Chemical Co. 9.625%, 5/1/07 ................. 530,000 524,700
Musicland Group, Inc. 9.00%, 6/15/03 ................. 500,000 455,000
Musicland Group, Inc. 9.875%, 3/15/08 ................ 950,000 793,250
Nextel Communications, Inc. 0.00%, 9/15/07 (d) ....... 6,355,000 4,980,731
NEXTLINK Communications, Inc.
0.00%, 4/15/08 (d) ............................... 3,425,000 2,157,750
NEXTLINK Communications, Inc. 10.75%, 11/15/08 ....... 735,000 731,325
NSM Steel, Ltd. 12.25%, 2/1/08 (b,f) ................. 525,000 525
NTL, Inc. 0.00%, 4/1/08 (d) .......................... GBP1,500,000 1,395,465
Oil Purchase Co. 7.10%, 4/30/02 (b) .................. $ 129,942 123,751
OnePoint Communications Corp. 14.50%, 6/1/08 ......... 735,000 367,500
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-291
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <C> <C>
UNITED STATES (CONTINUED)
Park Place Entertainment 7.875%, 12/15/05 ............ $ 640,000 $ 600,000
Park Place Entertainment 8.50%, 11/15/06 ............. 325,000 319,326
Primus Telecommunications Group 11.25%, 1/5/09 ....... 330,000 268,950
Primus Telecommunications Group, Series B,
9.875%, 5/15/08 .................................. 700,000 542,500
PSINet, Inc., Series B, 10.00%, 2/15/05 .............. 470,000 437,100
PSINet, Inc., Series B, 11.00%, 8/1/09 ............... 1,805,000 1,701,213
RCN Corp. 0.00%, 10/15/07 (d) ........................ 2,610,000 1,618,200
Rhythms Netconnections, Inc., Series B,
0.00%, 5/15/08 (b,d) ............................. 2,130,000 873,300
RSL Communications Ltd. 9.125%, 3/1/08 ............... 1,340,000 871,000
RSL Communications Ltd. 12.25%, 11/15/06 ............. 35,000 28,000
Station Casinos, Inc. 9.75%, 4/15/07 ................. 985,000 985,000
Station Casinos, Inc. 10.125%, 3/15/06 ............... 750,000 759,375
Tenet Healthcare Corp. 8.125%, 12/1/08 ............... 500,000 457,500
Tenet Healthcare Corp. 8.625%, 1/15/07 ............... 1,000,000 950,000
Tenneco, Inc. 11.625%, 10/15/09 ...................... 675,000 599,063
TNP Enterprises, Inc. 14.50%, 4/1/11 ................. 80,000 792,000
USA Waste Services 7.125%, 10/1/07 ................... 825,000 753,184
USA Waste Services 7.125%, 12/15/17 .................. 200,000 165,916
Viatel, Inc., Series A, 0.00%, 4/15/08 (d) ........... 1,900,000 874,000
Vintage Petroleum 8.625%, 2/1/09 ..................... 450,000 429,750
Wam!Net, Inc., Series B, 0.00%, 3/1/05 (d) ........... 1,890,000 1,058,400
Waste Management, Inc. 7.65%, 3/15/11 ................ 235,000 214,644
Winstar Communications, Inc. 0.00%, 4/15/10 (b) ...... 6,485,000 2,983,100
WMX Technologies, Inc. 7.00%, 10/15/06 ............... 535,000 493,522
XM Satellite Radio, Inc. 14.00%, 3/15/10 (b) ......... 700,000 612,500
-----------
61,166,920
-----------
TOTAL CORPORATE BONDS & NOTES
(Cost $114,158,454) ................................................. 101,061,846
-----------
ASSET BACKED SECURITIES 0.7%
UNITED STATES 0.7%
Commercial Financial Services, Inc., Series 1997-5,
Class A1, 7.72%, 6/15/05 ......................... 857,314 214,329
Long Beach Acceptance Auto Grantor Trust,
Series 1997-1, Class B, 14.22%, 10/26/03 ......... 111,409 110,878
OHA Grantor Trust 11.00%, 9/15/03 (b) ................ 895,291 855,084
-----------

TOTAL ASSET BACKED SECURITIES
(Cost $1,868,835) ................................................... 1,180,291
-----------
</TABLE>

F-292
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS 1.0%
UNITED STATES 1.0%
Aircraft Lease Portfolio Securitization Ltd.,
Series 1996-1, Class DX, 12.75%, 6/15/06 ......... $ 601,851 $ 577,801
DLJ Mortgage Acceptance Corp., Series 1997-CF2,
Class S, IO, 0.00%, 10/15/17 (c) ................. 35,928,783 718,935
DR Structured Finance, Series 1994-K2,
9.35%, 8/15/19 ................................... 150,000 130,872
Federal Mortgage Acceptance Corp.,
Series 1996-B, Class C, 7.883%, 11/1/18 (b) ...... 534,716 181,809
-----------

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $1,849,509) ................................................... 1,609,417
-----------
EUROBOND 1.3%
ARGENTINA 1.3%
Republic of Argentina, Series L, 0.00%, 3/31/05 (c)
(Cost $2,304,214) ................................ 2,472,000 2,256,936
-----------
FOREIGN GOVERNMENT & AGENCY OBLIGATIONS 31.3%
ARGENTINA 2.4%
Province of Buenos Aires 13.25%, 3/19/10 ............. 1,400,000 1,316,000
Republic of Argentina 11.75%, 4/7/09 ................. 2,090,000 1,947,358
Republic of Argentina 11.75%, 6/15/15 ................ 840,000 764,400
-----------
4,027,758
-----------
BRAZIL 9.1%
Federated Republic of Brazil 14.50%, 10/15/09 ........ 2,123,000 2,248,788
Federated Republic of Brazil 12.25%, 3/6/30 .......... 4,800,000 4,392,000
Federated Republic of Brazil Discount Bond,
7.375%, 4/15/24 (c) .............................. 2,300,000 1,819,875
Federated Republic of Brazil Debt Conversion Bond,
Series Z-L, 0.00%, 4/15/24 (d) ................... 700,000 457,844
Federated Republic of Brazil Debt Conversion Bond,
Series Z-L, 7.438%, 4/15/12 (c) .................. 2,280,000 1,680,788
Federated Republic of Brazil, Series C,
PIK, 8.00%, 4/15/14 .............................. 2,258,406 1,638,756
Federated Republic of Brazil, Series E1,
7.375%, 4/15/06 (c) .............................. 1,534,500 1,399,272
Federated Republic of Brazil, Series L,
8.00%, 4/15/14 ................................... 1,108,269 804,188
Federated Republic of Brazil, Series NMB-L,
7.438%, 4/15/09 (c) .............................. 1,200,000 1,005,000
-----------
15,446,511
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS F-293
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <C> <C>
BULGARIA 1.6%
Republic of Bulgaria 7.063%, 7/28/11 (c) ............. $1,750,000 $ 1,389,063
Republic of Bulgaria Discount Bond, Series A,
7.063%, 7/28/24 (c) .............................. 1,650,000 1,307,625
-----------
2,696,688
-----------
COLOMBIA 2.8%
Republic of Colombia 13.58%, 8/13/05 (c) ............. 626,000 597,830
Republic of Colombia 9.75%, 4/23/09 .................. 1,150,000 905,625
Republic of Colombia 11.75%, 2/25/20 ................. 4,000,000 3,290,000
-----------
4,793,455
-----------
ECUADOR 0.3%
Republic of Ecuador Discount Bond
6.75%, 2/28/25 (c,f) ............................. 1,230,000 488,925
-----------
IVORY COAST 0.2%
Ivory Coast 2.00%, 3/29/18 (c) ....................... 1,850,000 296,000
-----------
JORDAN 0.4%
Government of Jordan 7.75%, 12/23/23 (b,c) ........... 828,000 641,700
-----------
MEXICO 2.7%
United Mexican States 7.50%, 3/8/10 (b) .............. 800,000 736,332
United Mexican States Discount Bonds
0.00%, 12/31/19 (c) .............................. 3,900,000 3,831,750
-----------
4,568,082
-----------
PANAMA 0.2%
Republic of Panama Past Due Interest, PIK
7.063%, 7/17/16 (d) .............................. 492,053 406,558
-----------
PERU 1.6%
Republic of Peru Front Loaded Interest Reduction Bond
3.75%, 3/7/17 (b,d) .............................. 1,450,000 880,875
Republic of Peru Front Loaded Interest Reduction Bond
3.75%, 3/7/17 (d) ................................ 3,040,000 1,846,800
-----------
2,727,675
-----------
PHILIPPINES 3.0%
Republic of Philippines 9.875%, 1/15/19 .............. 2,000,000 1,640,000
Republic of Philippines 10.625%, 3/16/25 ............. 3,900,000 3,347,565
-----------
4,987,565
-----------
RUSSIA 5.7%
Government of Russia 10.00%, 6/26/07 ................. 4,800,000 3,714,000
Government of Russia 12.75%, 6/24/28 ................. 6,850,000 5,950,938
-----------
9,664,938
-----------
</TABLE>

F-294
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
PAR MARKET
DESCRIPTION VALUE VALUE
<S> <C> <C>
VENEZUELA 1.3%
Republic of Venezuela 6.75%, 3/31/20 ................. $1,200,000 $ 840,000
Republic of Venezuela 9.25%, 9/15/27 ................. 1,200,000 791,700
Republic of Venezuela Discount Bond, Series L,
0.00%, 12/18/07 (c) .............................. 714,280 580,576
-----------
2,212,276
-----------

TOTAL FOREIGN GOVERNMENT & AGENCY OBLIGATIONS
(Cost $51,281,626) .................................................. 52,958,131
-----------
LOAN AGREEMENTS 1.8%
ALGERIA 1.0%
Republic of Algeria 0.00%, 3/31/10 (c) ............... 300,000 247,125
Republic of Algeria 0.00%, 3/31/10 (c) ............... 1,950,000 1,516,125
-----------
1,763,250
-----------
MOROCCO 0.8%
Kingdom of Morocco 7.75%, 1/1/09 (c) ................. 1,514,105 1,362,695
-----------

TOTAL LOAN AGREEMENTS
(Cost $3,068,055) ................................................... 3,125,945
-----------

SHARES
<S> <C> <C>
COMMON STOCK 0.1%
SWEDEN 0.1%
Tele 1 Europe AB ADR (a) (Cost $0) ................... 16,443 198,344
-----------
PREFERRED STOCKS 1.5%
UNITED STATES 1.5%
IXC Communications, Inc. PIK 12.50% .................. 762 761,587
Kmart Financing 7.75% ................................ 9,350 341,275
NEXTLINK Communications, Inc. 10.75% (a) ............. 7,165 709,355
Paxson Communications 13.25% (a) ..................... 7,872 755,712
-----------

TOTAL PREFERRED STOCKS
(Cost $2,198,187) ................................................... 2,567,929
-----------

NO. OF
RIGHTS
<S> <C> <C>
RIGHTS 0.0%
MEXICO 0.0%
United Mexican States Par Bond
7.313%, 6/30/03 (a,c) (Cost $0) .................. 5,999,000 --
-----------

NO. OF
WARRANTS
<S> <C> <C>
WARRANTS 0.1%
COLOMBIA 0.0%
Occidente Y Caribe, expiring 3/15/04 (a,b) ........... 80,000 30,000
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS. F-295
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

<TABLE>
<CAPTION>
NO. OF MARKET
DESCRIPTION WARRANTS VALUE
<S> <C> <C>
UNITED STATES 0.1%
Motient Corp., expiring 4/1/08 (a,b) ............... 8,850 $ 30,975
NSM Steel, Inc., expiring 2/1/08 (a,b) ............. 3,323,743 3,324
OnePoint Communications Corp., expiring 6/1/08 (a).. 7,350 14,700
Wam!Net, Inc., expiring 3/1/05 (a) ................. 22,500 24,750
-----------
73,749
-----------

TOTAL WARRANTS
(Cost $52,000) ...................................................... 103,749
-----------

TOTAL LONG-TERM INVESTMENTS 97.5%
(Cost $176,780,880) ................................................. 165,062,588
-----------
<CAPTION>

PAR
VALUE
<S> <C> <C>
SHORT-TERM INVESTMENTS 3.2%
REPURCHASE AGREEMENT 1.6%
Chase Securities, Inc. 6.15%, $ 2,622,000
dated 6/30/00, due 7/3/00, to be repurchased
at $2,623,344, collateralized by $2,780,000
U.S. Treasury Notes 5.50%, due 5/15/09,
valued at $2,679,225 .................................................... 2,622,000
-----------
STRUCTURED INVESTMENT 0.6% - SEE NOTE 5C
Turkey Linked Structured Note, 8/7/00 .............. 1,000,000 1,042,500
-----------

Treasury Bills 1.0%
Republic of Turkey, Series 14T, 8/23/00 ............ TRL1,124,150,000,000 1,601,861
United States Treasury Bill, 7/27/00 (e) ........... $ 100,000 99,641
-----------
1,701,502
-----------

TOTAL SHORT-TERM INVESTMENTS
(Cost $5,627,334) ................................................... 5,366,002
-----------

TOTAL INVESTMENTS 100.7%
(Cost $182,408,214) ................................................. 170,428,590

LIABILITIES IN EXCESS OF OTHER ASSETS - 0.7% ........................... (1,150,097)
-----------

NET ASSETS 100% ........................................................ $169,278,493
============
</TABLE>

(a) NON-INCOME PRODUCING SECURITY

(b) 144A SECURITY-CERTAIN CONDITIONS FOR PUBLIC SALE MAY EXIST.

(d) STEP BOND-COUPON RATE INCREASES IN INCREMENTS TO MATURITY. RATE DISCLOSED
IS AS OF JUNE 30, 2000. MATURITY DATE DISCLOSED IS THE ULTIMATE MATURITY
DATE.

F-296
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

(e) SECURITY SEGREGATED AS COLLATERAL FOR OUTSTANDING FUTURES CONTRACTS.

(f) BOND IS IN DEFAULT.

ADR--AMERICAN DEPOSITARY RECEIPT

ARP--ARGENTINE PESO

EUR--EURO

GBP--BRITISH POUND

IO--INTEREST ONLY

PIK--PAYMENT-IN-KIND. INCOME MAY BE RECEIVED IN ADDITIONAL SECURITIES OR CASH AT
THE DISCRETION OF THE ISSUER.

TRL--TURKISH LIRA

SEE NOTES TO FINANCIAL STATEMENTS F-297
<PAGE>

YOUR FUND'S INVESTMENTS
JUNE 30, 2000

SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+

<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
Foreign Government &
Agency Obligations ................ $52,958,131 31.3%
Telecommunications .................. 47,867,667 28.3
Media & Entertainment ............... 11,453,804 6.8
Finance ............................. 6,853,657 4.0
Industrial .......................... 5,921,670 3.5
Cable Television .................... 5,246,371 3.1
Retail .............................. 4,407,987 2.6
Health Care ......................... 4,344,240 2.5
Capital Equipment ................... 4,111,542 2.4
Loan Agreements ..................... 3,125,945 1.8
Collateralized Mortgage Obligations &
Asset Backed Securities ........... 2,789,708 1.7
Eurobond ............................ 2,256,936 1.3
Metals .............................. 1,893,257 1.1
Packaging ........................... 1,760,000 1.0
Hotel/Lodging ....................... 1,699,196 1.0
Chemicals ........................... 1,624,310 1.0
Consumer Services ................... 1,592,500 0.9
Multi-Industry ...................... 1,200,000 0.7
Materials ........................... 1,137,400 0.7
Energy .............................. 1,007,316 0.6
Utilities ........................... 792,000 0.5
Transportation ...................... 577,801 0.4
Real Estate ......................... 441,150 0.3
------------ ----
$165,062,588 97.5%
============ ====
</TABLE>

+ CLASSIFIED BY SECTORS WHICH REPRESENT BROAD GROUPINGS OF RELATED INDUSTRIES.

F-298
<PAGE>

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
JUNE 30, 2000

<TABLE>
<S> <C>
ASSETS:
Investments at Value (Cost $182,408,214) ..................................................... $170,428,590
Margin Deposit on Futures .................................................................... 114,681
Cash ......................................................................................... 29,746
Receivable for:
Interest .................................................................................. 3,539,749
Investments Sold .......................................................................... 3,059,026
Fund Shares Sold .......................................................................... 457,829
Variation Margin of Futures Contracts ..................................................... 24,555
Foreign Withholding Tax Reclaim ........................................................... 8,865
Other ........................................................................................ 9,333
------------
Total Assets ........................................................................... 177,672,374
------------

LIABILITIES:
Payable for:
Investments Purchased ..................................................................... 6,200,162
Dividends Declared ........................................................................ 1,459,141
Distribution Fees ......................................................................... 222,508
Fund Shares Redeemed ...................................................................... 162,719
Investment Advisory Fees .................................................................. 103,265
Shareholder Reporting Expenses ............................................................ 54,420
Professional Fees ......................................................................... 47,963
Administrative Fees ....................................................................... 35,614
Directors' Fees and Expenses .............................................................. 35,248
Custody Fees .............................................................................. 17,009
Transfer Agent Fees ....................................................................... 13,671
Net Realized Loss on Foreign Currency Exchange Contracts ..................................... 41,602
Other ........................................................................................ 559
------------
Total Liabilities ...................................................................... 8,393,881
------------
NET ASSETS ................................................................................... $169,278,493
============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized 2,625,000,000) ...................... $ 17,097
Paid in Capital in Excess of Par ............................................................. 245,910,432
Accumulated Net Investment Income ............................................................ 1,381,930
Net Unrealized Depreciation on Investments, Foreign
Currency Translations and Futures ......................................................... (11,940,145)
Accumulated Net Realized Loss ................................................................ (66,090,821)
-------------
NET ASSETS ................................................................................... $169,278,493
============
Class A Shares:
Net Asset Value and Redemption Price Per Share (Based on Net Assets
of $44,932,193 and 4,524,584 Shares Outstanding) ....................................... $ 9.93
============
Maximum Sales Charge.................................................................... 4.75%
Maximum Offering Price Per Share (Net Asset Value
Per Share x 100/(100% - maximum sales charge)) ........................................ $ 10.43
============
Class B Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$90,872,413 and 9,188,545 Shares Outstanding)* ......................................... $ 9.89
============
Class C Shares:
Net Asset Value and Offering Price Per Share (Based on Net Assets of
$33,473,887 and 3,384,036 Shares Outstanding)* ......................................... $ 9.89
============
</TABLE>

* REDEMPTION PRICE MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.

SEE NOTES TO FINANCIAL STATEMENTS F-299
<PAGE>

Statement of Operations
YEAR ENDED JUNE 30, 2000

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ................................................................... $ 64,922
Interest .................................................................... 24,148,962
-----------
24,213,884
-----------

EXPENSES:
Distribution Fees (Attributed to Classes A, B and C of
$125,696, $996,735 and $363,072, respectively) ........................... 1,485,503
Investment Advisory Fees .................................................... 1,396,416
Administrative Fees ......................................................... 473,300
Country Tax Expense ......................................................... 243,144
Shareholder Reports ......................................................... 146,361
Transfer Agent Fees ......................................................... 73,911
Professional Fees ........................................................... 59,857
Filing and Registration Fees ................................................ 42,513
Custodian Fees .............................................................. 41,705
Directors' Fees and Expenses ................................................ 26,883
Other ....................................................................... 9,983
-----------
Total Expenses ........................................................ 3,999,576
-----------
NET INVESTMENT INCOME ....................................................... $20,214,308
===========
NET REALIZED GAIN/LOSS ON:
Investments ................................................................. $ 8,379,886
Foreign Currency Transactions ............................................... (370,652)
Futures ..................................................................... 117,593
-----------
Net Realized Gain ........................................................... 8,126,827
-----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period .................................................. (3,139,531)
-----------
End of the Period:
Investments ........................................................... (11,979,624)
Foreign Currency Translations ......................................... (42,816)
Futures ............................................................... 82,295
-----------
(11,940,145)
-----------
Net Change in Unrealized Appreciation/Depreciation
During the Period ........................................................ (8,800,614)
-----------
NET REALIZED GAIN/LOSS AND NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ................................................ $ (673,787)
===========
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................ $19,540,521
===========
</TABLE>

F-300
<PAGE>

Statement of Changes In Net Assets
YEAR ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999*
------------- --------------
<S> <C> <C>
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income ..................................................... $ 20,214,308 $ 23,252,000
Net Realized Gain/Loss .................................................... 8,126,827 (75,712,000)
Net Change in Unrealized Appreciation/Depreciation ....................... (8,800,614) 11,553,000
------------ -------------
Net Increase/Decrease in Net Assets Resulting from
Operations ............................................................ 19,540,521 (40,907,000)
------------ -------------

DISTRIBUTIONS:
Net Investment Income:
Class A ............................................................... (5,203,356) (7,573,000)
Class B ............................................................... (9,648,540) (11,681,000)
Class C ............................................................... (3,503,053) (4,723,000)
------------ -------------
(18,354,949) (23,977,000)
------------ -------------

In Excess of Net Realized Gain:
Class A ............................................................... -- (42,000)
Class B ............................................................... -- (70,000)
Class C ............................................................... -- (29,000)
------------ -------------
-- (141,000)
------------ -------------
Net Decrease in Net Assets Resulting from Distributions ................... (18,354,949) (24,118,000)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Subscribed ................................................................ 31,012,606 83,177,000
Distributions Reinvested .................................................. 10,327,074 13,759,000
Redeemed .................................................................. (79,382,125) (123,953,000)
------------ -------------
Net Decrease in Net Assets Resulting from
Capital Share Transactions ............................................ (38,042,445) (27,017,000)
------------ -------------

Total Decrease in Net Assets .............................................. (36,856,873) (92,042,000)
NET ASSETS--Beginning of Period ........................................... 206,135,366 298,177,000
------------ -------------
NET ASSETS--End of Period (Including accumulated net
investment income of $1,381,930 and $357,000,
respectively) ............................................................. $169,278,493 $206,135,000
============ ============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).

SEE NOTES TO FINANCIAL STATEMENTS F-301
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------
CLASS A SHARES 2000# 1999# 1998# 1997 1996
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ............................... $ 9.90 $ 12.46 $ 14.26 $ 12.47 $ 11.57
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income ...................... 1.14 1.06 1.15 1.25 1.36
Net Realized and
Unrealized Gain/Loss .................... (0.06) (2.51) (0.67) 2.30 0.80
------- ------- ------- ------- -------
Total From Investment Operations.............. 1.08 (1.45) 0.48 3.55 2.16
------- ------- ------- ------- -------

DISTRIBUTIONS
Net Investment Income....................... (1.05) (1.10) (1.09) (1.25) (1.26)
Net Realized Gain........................... -- -- (1.19) (0.51) --
In Excess of Net Realized Gain.............. -- (0.01) -- -- --
------- ------- ------- ------- -------
Total Distributions........................... (1.05) (1.11) (2.28) (1.76) (1.26)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD................ $ 9.93 $ 9.90 $ 12.46 $ 14.26 $ 12.47
======= ======= ======= ======= =======
TOTAL RETURN (1).............................. 11.39% (11.14%) 3.40% 30.29% 19.61%
======= ======= ======= ======= =======

RATIOS AND SUPPLEMENTAL DATA
Net assets, End of Period (000's)............. $44,932 $58,506 $91,579 $76,439 $41,493
Ratio of Expenses to Average
Net Assets ................................. 1.60% 1.45% 1.45% 1.52% 1.55%
Ratio of Net Investment Income to
Average Net Assets ......................... 11.41% 10.55% 8.36% 9.73% 11.95%
Portfolio Turnover Rate ...................... 119% 121% 156% 157% 220%
--------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income ................................... $ -- $ -- $ -- $ -- $ 0.02
Ratios Before Expense Reductions:
Expenses to Average Net Assets ............. -- -- -- -- 1.69%
Net Investment Income to
Average Net Assets ....................... -- -- -- -- 11.81%
Ratio of Net Expenses to Average
Net Assets excluding country tax
expense and interest expense ............... 1.46% -- -- -- --
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-302
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
AUGUST 1,
YEAR ENDED JUNE 30, 1995+ TO
---------------------------------------------- JUNE 30,
CLASS B SHARES 2000# 1999# 1998# 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................................... $ 9.86 $ 12.40 $ 14.20 $ 12.44 $ 11.63
------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................... 1.06 0.98 1.04 1.07 1.18
Net Realized and
Unrealized Gain/Loss...................... (0.06) (2.50) (0.65) 2.35 0.72
------- -------- -------- ------- -------
Total From Investment Operations.............. 1.00 (1.52) 0.39 3.42 1.90
------- -------- -------- ------- -------
DISTRIBUTIONS
Net Investment Income....................... (0.97) (1.01) (1.00) (1.15) (1.09)
Net Realized Gain........................... -- -- (1.19) (0.51) --
In Excess of Net Realized Gain.............. -- (0.01) -- -- --
------- -------- -------- ------- -------
Total Distributions........................... (0.97) (1.02) (2.19) (1.66) (1.09)
------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD................ $ 9.89 $ 9.86 $ 12.40 $ 14.20 $ 12.44
======= ======== ======== ======= =======
TOTAL RETURN (1).............................. 10.58% (11.82%) 2.63% 29.14% 17.07%*
======= ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net assets, End of Period (000's)............. $90,872 $107,013 $146,401 $78,340 $26,174
Ratio of Expenses to Average
Net Assets.................................. 2.35% 2.20% 2.20% 2.27% 2.30%
Ratio of Net Investment Income to
Average Net Assets.......................... 10.65% 9.81% 7.64% 8.86% 12.06%
Portfolio Turnover Rate....................... 119% 121% 156% 157% 220%*
------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income.................................... $ -- $ -- $ -- $ -- $0.02
Ratios Before Expense Reductions:
Expenses to Average Net Assets.............. -- -- -- -- 2.47%
Net Investment Income to
Average Net Assets........................ -- -- -- -- 11.89%
Ratio of Net Expenses to Average
Net Assets excluding country tax
expense and interest expense.............. 2.21% -- -- -- --
------------------------------------------------------------------------------------------------------------------
</TABLE>

* NON-ANNUALIZED

+ THE FUND BEGAN OFFERING CLASS B SHARES ON AUGUST 1, 1995.

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

SEE NOTES TO FINANCIAL STATEMENTS F-303
<PAGE>

Financial Highlights

THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------
CLASS C SHARES 2000# 1999# 1998# 1997 1996
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................................... $ 9.87 $ 12.40 $ 14.21 $ 12.45 $ 11.58
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................... 1.06 0.98 1.04 1.16 1.30
Net Realized and
Unrealized Gain/Loss...................... (0.07) (2.49) (0.66) 2.26 0.77
------- ------- ------- ------- -------
Total From Investment Operations.............. 0.99 (1.51) 0.38 3.42 2.07
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income....................... (0.97) (1.01) (1.00) (1.15) (1.20)
Net Realized Gain........................... -- -- (1.19) (0.51) --
In Excess of Net Realized Gain.............. -- (0.01) -- -- --
------- ------- ------- ------- -------
Total Distributions........................... (0.97) (1.02) (2.19) (1.66) (1.20)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD................ $ 9.89 $ 9.87 $ 12.40 $ 14.21 $ 12.45
======= ======= ======= ======= =======
TOTAL RETURN (1).............................. 10.57% (11.83%) 2.55% 29.12% 18.71%
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net assets, End of Period (000's)............. $33,474 $40,616 $60,197 $41,709 $28,094
Ratio of Expenses to Average
Net Assets.................................. 2.35% 2.20% 2.20% 2.27% 2.30%
Ratio of Net Investment Income to
Average Net Assets.......................... 10.65% 9.81% 7.62% 9.04% 11.40%
Portfolio Turnover Rate....................... 119% 121% 156% 157% 220%
--------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Reductions
During the Period
Per Share Benefit to Net Investment
Income.................................... $ -- $ -- $ -- $ -- $0.04
Ratios Before Expense Reductions:
Expenses to Average Net Assets.............. -- -- -- -- 2.44%
Net Investment Income to
Average Net Assets........................ -- -- -- -- 11.26%
Ratio of Net Expenses to Average
Net Assets excluding country tax
expense and interest expense................ 2.21% -- -- -- --
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) TOTAL RETURN IS CALCULATED EXCLUSIVE OF SALES CHARGES OR DEFERRED SALES
CHARGES.

# CHANGES PER SHARE ARE BASED UPON DAILY AVERAGE SHARES OUTSTANDING.

F-304
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

JUNE 30, 2000

The Van Kampen Worldwide High Income Fund (the "Fund") is organized as a
separate non-diversified fund of Van Kampen Series Fund, Inc., a Maryland
corporation, which is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective seeks high current income consistent with relative stability of
principal and, secondarily, capital appreciation by investing primarily in a
portfolio of high yielding, high risk fixed income securities of issuers located
throughout the world. The Fund commenced operations on April 21, 1994. 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. 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 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, which approximates market value. All other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith using procedures approved by
the Board of Directors.

At June 30, 2000, approximately 84% of the net assets of the Worldwide High
Income Fund consisted of high yield securities rated below investment grade.
Investments in high yield securities are accompanied by a greater degree of
credit risk, and the securities tend to be more sensitive to economic conditions
than higher rated securities. Certain securities may be valued on the basis of
bid prices provided by one principal market maker.

F-305
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

JUNE 30, 2000

B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.

The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At September 30, 1999, the Fund had an accumulated capital loss
carryforward for tax purposes of $55,413,637, which will expire September 30,
2007. Net realized gains or losses may differ for financial and tax reporting
purposes as a result of losses relating to wash sale transactions and the
difference in the Fund's tax year end.

F-306
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

JUNE 30, 2000

At June 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $182,408,214, the aggregate gross unrealized
appreciation is $3,012,247 and the aggregate gross unrealized depreciation is
$14,991,871, resulting in net unrealized depreciation on long- and short-term
investments of $11,979,624.

E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains which are included as ordinary income for
tax purposes.

Due to inherent differences in the recognition of income and expenses under
generally accepted accounting principles and federal income tax purposes,
permanent differences between book and tax basis reporting for the current
fiscal year have been identified and appropriately reclassified. A permanent
difference related to the recognition of net realized losses on foreign currency
transactions totaling $824,555 was reclassified from accumulated net investment
income to accumulated net realized loss. A permanent difference related to the
recognition of net realized gains on paydowns of mortgage pool obligations
totaling $17,726 was reclassified from accumulated net realized loss to
accumulated net investment income. A permanent difference of $29,829 related to
partnership investments was reclassified from accumulated net investment income
to accumulated net realized loss. A permanent difference related to the
recognition of certain expenses that are not deductible for tax purposes
totaling $1,746 were reclassified from paid in capital in excess of par to
accumulated net investment income.

Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.

F-307
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

JUNE 30, 2000

and potentially less publicly available information. Emerging markets may be
subject to a greater degree of government involvement in the economy and greater
economic and political uncertainty, which has the potential to extend to
government imposed restrictions on exchange traded transactions and currency
transactions. These restrictions may impact the Fund's ability to buy or sell
certain securities or to repatriate certain currencies to U.S. dollars.
Additionally, changes in currency exchange rates will affect the value of and
investment income from such securities.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Van Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary
of Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets indicated as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $500 million..................................... .75 of 1%
Next $500 million...................................... .70 of 1%
Over $1 billion........................................ .65 of 1%
</TABLE>

<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
EXPENSE RATIO EXPENSE RATIO
<S> <C>
1.55% 2.30%
</TABLE>

For the period ended June 30, 2000, the Fund recognized expenses of $12,192
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.

For the period ended June 30, 2000, the Fund recognized expenses of $8,016
representing Van Kampen's cost of providing legal services to the Fund.

F-308
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

JUNE 30, 2000

Van Kampen Funds Inc. (the "Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund on
an annualized basis, of the average daily net assets attributable to each Class.

The Distributor may receive a front end sales charge for purchases of Class
A shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
June 30, 2000, the Distributor has advised the Fund that it earned initial sales
charges of $92,451 for Class A shares and deferred sales charges of $527,530 and
$5,741 for Class B shares and Class C shares, respectively. Certain officers and
directors of the Fund are also officers and directors of Van Kampen. The Fund
does not compensate its officers or directors who are officers of Van Kampen.

The Fund provides deferred compensation and retirement plans for its
directors who are not officers of Van Kampen. 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 10 year period
and are based upon each director's years of service to the Fund. The maximum
annual benefit per director under the plan is $2,500.

F-309
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

JUNE 30, 2000

3. CAPITAL TRANSACTIONS
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. All three classes of shares have identical voting, dividend, liquidation
and other rights. Class A shares are sold with a front-end sales charge of up to
4.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("CDSC") of 1.00% imposed in
the event of certain redemptions within one year of the purchase. Class B and
Class C shares are offered without a front end sales charge, but are subject to
a CDSC. Class B shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B shares received on such shares, automatically convert
to Class A shares eight years after the end of the calendar month in which the
shares were purchased. Class B shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B shares received on such shares, automatically
convert to Class A shares seven years after the end of the calendar month in
which the shares were purchased. For the period ended June 30, 2000, no Class B
shares converted to Class A shares. The CDSC will be imposed on most redemptions
made within five years of the purchase for Class B shares and one year of the
purchase for Class C shares as detailed in the following schedule:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE ON ASSETS SUBJECT TO
SALES CHARGE
---------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First............................................. 4.00% 1.00%
Second............................................ 4.00% None
Third............................................. 3.00% None
Fourth............................................ 2.50% None
Fifth............................................. 1.50% None
Thereafter........................................ None None
</TABLE>

F-310
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

JUNE 30, 2000

Ending Paid in Capital......................... $ 66,725,638+ $ 80,677,000+
============ ============
CLASS B:
Shares:
Subscribed .................................. 1,060,856 3,007,000
Distributions Reinvested..................... 487,220 619,000
Redeemed..................................... (3,209,185) (4,586,000)
------------ ------------
Net Decrease in Class B Shares Outstanding..... (1,661,109) (960,000)
============ ============
Dollars:
Subscribed .................................. $ 10,592,179 $ 31,134,000
Distributions Reinvested..................... 4,844,540 6,179,000
Redeemed..................................... (32,147,709) (45,561,000)
------------ ------------
Net Decrease................................... $(16,710,990) $ (8,248,000)
============ ============

Ending Paid in Capital......................... $131,144,566+ $147,844,000+
============ ============
CLASS C:
Shares:
Subscribed .................................. 558,763 1,545,000
Distributions Reinvested..................... 200,016 270,000
Redeemed..................................... (1,491,227) (2,552,000)
------------ ------------
Net Decrease in Class C Shares Outstanding..... (732,448) (737,000)
============ ============
Dollars:
Subscribed................................... $ 5,581,731 $ 15,873,000
Distributions Reinvested..................... 1,988,930 2,707,000
Redeemed..................................... (14,970,374) (25,134,000)
------------ ------------
Net Decrease................................... $ (7,399,713) $ (6,554,000)
============ ============

Ending Paid in Capital......................... $ 48,059,071+ $ 55,455,000+
============ ============
</TABLE>

* AMOUNTS ROUNDED TO THE NEAREST (000).
+ ENDING PAID IN CAPITAL AMOUNTS DO NOT REFLECT PERMANENT BOOK TO TAX
DIFFERENCES--SEE NOTE 1E.

4. INVESTMENT TRANSACTIONS
For the period ended June 30, 2000, the Fund made purchases of $212,748,084 and
sales of $246,133,571 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.

F-311
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

JUNE 30, 2000

The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, foreign currency
exposure, maturity and duration, or generate potential gain. All of the Fund's
portfolio holdings, including derivative instruments, are marked-to-market each
day with the change in value reflected in unrealized appreciation/depreciation.
Upon disposition, a realized gain or loss is recognized accordingly, except when
exercising a call option contract or taking delivery of a security underlying a
futures or forward contract. In these instances, the recognition of gain or loss
is postponed until the disposal of the security underlying the option or forward
contract. Risks may arise as a result of the potential inability of the
counterparties to meet the terms of their contracts.

Summarized below are the specific types of derivative financial instruments
used by the Fund.

At June 30, 2000, the Fund has outstanding forward currency contracts as
follows:

<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
FORWARD CURRENCY CONTRACTS VALUE DEPRECIATION
<S> <C> <C>
SHORT CONTRACTS:
British Pound, 1,595,000
expiring 8/3/00 $ 2,414,289 $ 64,740
Euro, 9,238,348
expiring 7/26/00-8/10/00 8,828,868 (114,697)
----------- ----------
$11,243,157 $ (49,957)
----------- ----------
LONG CONTRACTS:
British Pound, 115,000
expiring 8/3/00 $ 174,071 $ (660)
Euro, 805,000
expiring 7/28/00-8/3/00 833,449 9,015
----------- ----------
$ 1,007,520 $ 8,355
----------- ----------
$12,250,677 $ (41,602)
=========== ==========
</TABLE>

F-312
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

JUNE 30, 2000

B. FUTURES CONTRACTS A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in futures of foreign government bonds and typically
closes the contract prior to the delivery date. These contracts are generally
used to manage the portfolio's effective maturity and duration.

Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, cash or liquid securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin). The potential risk of realized
gain or loss associated with a futures contract may exceed the variation margin
reflected on the Statement of Assets and Liabilities. The cost of securities
acquired through delivery under a contract is adjusted by the unrealized gain or
loss on the contract.

Transactions in futures contracts for the period ended June 30, 2000, were
as follows:

<TABLE>
<CAPTION>
CONTRACTS
<S> <C>
Outstanding at June 30, 1999......... 13
Futures Opened....................... 137
Futures Closed....................... (115)
---------
Outstanding at June 30, 2000......... 35
=========
</TABLE>

The futures contracts outstanding as of June 30, 2000, and the descriptions
and the unrealized appreciation/depreciation are as follows:

<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
<S> <C> <C>
SHORT CONTRACTS:
U.S. Long Gilt Index--September 2000
(Current notional value $114 per contract) 10 $ 6,614

LONG CONTRACTS:
U.S. 10 Year Note--September 2000
(Current notional value $98 per contract) 25 75,681
--- -------
35 $82,295
=== =======
</TABLE>

F-313
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

JUNE 30, 2000

C. STRUCTURED SECURITIES The Fund may invest in interests in entities organized
and operated solely for the purpose of restructuring the investment
characteristics of sovereign debt obligations. This type of restructuring
involves the deposit with or purchase by an entity of specified instruments and
the issuance by that entity of one or more classes of securities ("Structured
Securities") backed by, or representing interests in, the underlying
instruments. Structured Securities generally will expose the 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.

F-314
<PAGE>
PART C: OTHER INFORMATION

ITEM 23. EXHIBITS

<TABLE>
<C> <S> <C>
(a) (1) Articles of Amendment and Restatement(1)

(2) Articles Supplementary (adding Registrant's Japanese Equity Fund) to
the Amended and Restated Articles of Incorporation(2)

(3) Articles Supplementary (adding Registrant's Global Equity, Emerging
Market Debt, Mid Cap Growth, Equity Growth and Value Funds) to the
Amended and Restated Articles of Incorporation(3)

(4) Articles Supplementary (changing the name of Morgan Stanley Equity
Growth to Van Kampen Equity Growth) to the Amended and Restated
Articles of Incorporation(7)

(5) Articles Supplementary (adding Registrant's Global Franchise Fund)
to the Amended and Restated Articles of Incorporation(7)

(6) Articles of Amendment (changing the corporate name from Morgan
Stanley Fund, Inc. to Van Kampen Series Fund, Inc.)(8)

(7) Articles Supplementary (changing the name of each fund)(8)

(8) Articles Supplementary (changing the name of Van Kampen Aggressive
Equity Fund to Van Kampen Focus Equity Fund)(10)

(9) Articles Supplementary (changing the name of Van Kampen Global
Franchise Fund to Van Kampen Tax Managed Global Franchise Fund)(11)

(b) Amended and Restated By-Laws(1)

(d) (1) Investment Advisory Agreement+

(2) Investment Sub-Advisory Agreement, Morgan Stanley Dean Witter
Investment Management Inc., formerly, Morgan Stanley Asset
Management Inc.(5)

(3) (i) Investment Sub-Advisory Agreement, Miller Anderson & Sherrerd,
LLP(5)

(ii) Amendment No. 1 to the Investment Sub-Advisory Agreement,
Miller Anderson & Sherrerd, LLP+

(e) (1) Distribution Agreement(3)

(2) Form of Dealer Agreement(9)

(3) Form of Broker Fully Disclosed Clearing Agreement(9)

(4) Form of Bank Fully Disclosed Clearing Agreement(9)

(f) (1) Form of Trustee Deferred Compensation Agreement(6)

(2) Form of Trustee Retirement Plan(6)

(g) Custody Agreement, The Chase Manhattan Bank, N.A.(4)

(h) (1) Transfer Agency and Service Agreements:

(i) Sub-Transfer Agency Agreement between Morgan Stanley Dean
Witter Investment Management Inc., formerly, Morgan Stanley
Asset Management Inc. and Van Kampen Investor
Services Inc.(3)

(ii) Assignment and Assumption Agreement for Sub-Transfer Agency
Agreement between Van Kampen Investment Advisory Corp. and
Morgan Stanley Dean Witter Investment Management Inc.,
formerly, Morgan Stanley Asset Management Inc.(5)
</TABLE>

C-1
<PAGE>

<TABLE>
<C> <S> <C>
(iii) Sub-Transfer Agency Agreement between Miller Anderson &
Sherrerd, LLP and Van Kampen Investor Services Inc.(3)

(iv) Assignment and Assumption Agreement (Sub-Transfer Agency
Agreement) between Van Kampen Investment Advisory Corp. and
Miller Anderson & Sherrerd, LLP(5)

(v) Amended Schedule for Sub-Transfer Agency Agreement between
Morgan Stanley Dean Witter Investment Management Inc.,
formerly, Morgan Stanley Asset Management Inc., and Van
Kampen Investor Services Inc. (Tax Managed Global Franchise
Fund)(8)

(2) Administration Agreements:

(i) Administration Agreement between Registrant and Morgan
Stanley Dean Witter Investment Management Inc., formerly,
Morgan Stanley Asset Management Inc.(4) and as amended by
Addendum to such Agreement(1)

(ii) Assignment and Assumption Agreement (Administration
Agreement) between Van Kampen Investment Advisory Inc. and
Morgan Stanley Dean Witter Investment Management Inc.,
formerly, Morgan Stanley Asset Management Inc.(5)

(iii) Administration Agreement between Registrant and Miller
Anderson & Sherrerd, LLP(3)

(iv) Assignment and Assumption Agreement (Administration
Agreement) between Van Kampen Investment Advisory Corp. and
Miller Anderson & Sherrerd, LLP(5)

(v) Sub-Administration Agreement between Morgan Stanley Dean
Witter Investment Management Inc., formerly, Morgan Stanley
Asset Management Inc. and The Chase Manhattan Bank(3)

(vi) Assignment and Assumption Agreement (Sub-Administration
Agreement) between Van Kampen Investment Advisory Corp. and
Morgan Stanley Dean Witter Investment Management Inc.,
formerly, Morgan Stanley Asset Management Inc.(5)

(vii) Sub-Administration Agreement between Miller Anderson &
Sherrerd, LLP and The Chase Manhattan Bank(3)

(viii) Assignment and Assumption Agreement (Sub-Administration
Agreement) between Van Kampen Investment Advisory Corp. and
Miller Anderson & Sherrerd, LLP(5)

(ix) Amended Administration Agreement between Registrant and
Morgan Stanley Dean Witter Investment Management Inc.,
formerly, Morgan Stanley Asset Management Inc.(4)

(3) Amended and Restated Legal Services Agreement(8)

(i) (1) Opinion of Skadden, Arps, Slate, Meagher & Flom (Illinois)(8)

(2) Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)+

(j) (1) Consent of PriceWaterhouseCoopers LLP+

(2) Consent of Deloitte and Touche LLP+

(k) Not applicable

(l) Purchase Agreement(4)

(m) (1) Distribution Plan Pursuant to Rule 12b-1:

(i) Plan of Distribution for Class A Shares of the Asian Growth,
American Value, Worldwide High Income, Emerging Markets, Latin
American, Global Equity Allocation, International Magnum and
Focus Equity (formerly Aggressive Equity) Funds(3)
</TABLE>

C-2
<PAGE>

<TABLE>
<C> <S> <C>
(ii) Plan of Distribution of the Japanese Equity, European
Equity, Growth and Income II, Global Equity, Emerging
Markets Debt, Mid Cap Growth, Equity Growth, Value and Tax
Managed Global Franchise Funds(3)

(iii) Amended and Restated Plan of Distribution for Class B and
Class C Shares of the Asian Growth, American Value, Worldwide
High Income, Emerging Markets, Latin American, Global Equity
Allocation, International Magnum, Focus Equity (formerly
Aggressive Equity), Global Equity, Emerging Markets Debt,
Mid Cap Growth, Equity Growth, Value and Tax Managed Global
Franchise Funds(3)

(iv) Plan of Distribution for Class B and Class C Shares of the
Japanese Equity, European Equity and Growth and Income II
Funds(3)

(2) Service Plans for each fund in the Series(10)

(n) Amended Multiple Class Plan+

(p) (1) Form of Code of Ethics for Funds, investment adviser and
distributor+

(p) (2) Form of Code of Ethics for subadvisers(11)

(q) Power of Attorney+

(z) (1) List of certain investment companies in response to Item 27(a)+

(2) List of officers and directors of Van Kampen Funds Inc. in response
to Item 27(b)+
</TABLE>

------------------------

(1) Incorporated herein by reference to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (File Nos. 33-51294 and
811-7140), as filed with the SEC via EDGAR on October 4, 1995.

(2) Incorporated herein by reference to Post-Effective Amendment No. 16 to
Registrant's Registration Statement on Form N-1A (File Nos. 33-51294 and
811-7140), as filed with the SEC via EDGAR on October 18, 1996.

(3) Incorporated herein by reference to Post-Effective Amendment No. 18 to
Registrant's Registration Statement on Form N-1A (File Nos. 33-51294 and
811-7140), as filed with the SEC via EDGAR on December 31, 1996.

(4) Incorporated herein by reference to Post-Effective Amendment No. 11 to
Registrant's Registration Statement on Form N-1A (File Nos. 33-51294 and
811-7140), as filed with the SEC via EDGAR on October 30, 1995.

(5) Incorporated herein by reference to Post-Effective Amendment No. 20 to
Registrant's Registration statement on Form N-1A (File Nos. 33-51294 and
811-7140), as filed with the SEC via EDGAR on August 29, 1997.

(6) Incorporated herein by reference to Post-Effective 81 to Van Kampen Harbor
Fund's Registration Statement on Form N-1A (File Nos. 2-12685 and 811-734),
as filed with the SEC via EDGAR on April 29, 1999.

(7) Incorporated herein by reference to Post-Effective Amendment No. 24 to
Registrant's Registration Statement on Form N-1A (File Nos. 33-51294 and
811-7140), as filed with the SEC via EDGAR on July 1, 1998.

(8) Incorporated herein by reference to Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1A (File Nos. 33-51294 and
811-7140), as filed with the SEC via EDGAR on September 28, 1998.

C-3
<PAGE>
(9) Incorporated herein by reference to Pre-Effective Amendment No. 1 to Van
Kampen Equity Trust II Registration Statement on Form N-1A (File Nos.
333-75493 and 811-9279), as filed with the SEC via EDGAR on June 4, 1999.

(10) Incorporated herein by reference to Post-Effective Amendment No. 27 to
Registrant's Registration Statement on Form N-1A (File No. 33-51294 and
811-7140), as filed with the SEC via EDGAR on October 28, 1999.

(11) Incorporated herein by reference to Post-Effective Amendment No. 29 to
the Registrant's Registration Statement on Form N-1A (File No. 3351294
and 811-7140), as filed with the SEC via EDGAR on March 7, 2000.

+ Filed herewith.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

See the Statement of Additional Information

ITEM 25. INDEMNIFICATION

Pursuant to Maryland General Corporate Law ("MGCL") Code Ann. Article III
Section 2-418, a Maryland corporation may provide in its governing instrument
for the indemnification of its officers and directors from and against any and
all claims and demands whatsoever.

Reference is made to Article Seventh, Section 2 of the Registrant's Articles
of Amendment and Restatement. Article Seventh of the Articles of Amendment and
Restatement provides that each officer and director of the Registrant shall be
indemnified by the Registrant against all expenses incurred in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, administrative or investigative in which the officer or
director may be or may have been involved by reason of being or having been an
officer or director, except that such indemnity shall not protect any such
person against a liability to the Registrant or any shareholder thereof to which
such person would otherwise be subject by reason of willful malfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct Conditional advancing of indemnification monies may be made if the
director or officer undertakes to repay the advance unless it is ultimately
determined that he or she is entitled to the indemnification.

The Registrant has purchased insurance on behalf of its officers and
directors protecting such persons from liability arising from their activities
as officers or directors of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officers or directors would otherwise be subject by
reason of willful malfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "1933 Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefor unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by the director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.

Pursuant to Section 6 of the Distribution Agreement, the Registrant agrees
to indemnify, defend and hold Van Kampen Funds Inc. (the "Distributor"), its
directors and officers and any person who controls the Distributor within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending any such claims, demands, or liabilities and any
counsel fees incurred in connection therewith arising by reason of

C-4
<PAGE>
any person acquiring any shares, based upon the ground that the Registration
Statement, prospectus, shareholder reports or other information filed or made
public by the Registrant (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact required to be
stated or necessary in order to make the statements not misleading under the
1933 Act, or any other statute or the common law. The Registrant does not agree
to indemnify the Distributor or hold it harmless to the extent that the
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Registrant by or on behalf of the Distributor. In
no case in the indemnity of the Registrant in favor of the Distributor or any
person indemnified to be deemed to protect the Distributor or any person against
any liability to the Fund or its security holders to which the Distributor or
such person would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under the agreement. The
Registrant's agreement to indemnify the Distributor, its officers and directors
and any such controlling person is expressly conditioned upon the Registrant's
being promptly notified of any action brought against any such persons.

See also "Investment Advisory Agreement" in the Statement of Additional
Information.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER AND INVESTMENT
SUBADVISERS

See "Investment Advisory Services" in each Prospectus and "Investment
Advisory Agreement," "Other Agreements," and "Directors and Officers" in the
Statement of Additional Information for information regarding the business of
Van Kampen Investment Advisory Corp. (the "Adviser"). For information as to the
business, profession, vocation and employment of a substantial nature of
directors and officers of the Adviser, reference is made to the Adviser's
current Form ADV (SEC File No. 801-1669) filed under the Investment Advisers Act
of 1940, as amended, incorporated herein by reference.

See "Investment Advisory Services" in each Prospectus and "Investment
Advisory Agreement," "Other Agreements" and "Directors and Officers" in the
Statement of Additional Information for information regarding the business of
Morgan Stanley Dean Witter Investment Management Inc., formerly, Morgan Stanley
Asset Management Inc. (a "Subadviser"). For information as to the business,
profession, vocation and employment of a substantial nature of directors and
officers of the Subadviser, reference is made to the Subadviser's current
Form ADV (SEC File No. 801-15757) filed under the Investment Advisers Act of
1940, as amended, incorporated herein by reference.

See "Investment Advisory Services" in each Prospectus and "Investment
Advisory Agreement," "Other Agreements" and "Directors and Officers" in the
Statement of Additional Information for information regarding the business of
Miller Anderson & Sherrerd, LLP (a "Subadviser"). For information as to the
business, profession, vocation and employment of a substantial nature of
directors and officers of the Subadviser, reference is made to the Subadviser's
current Form ADV (SEC File No. 801-10437) filed under the Investment Advisers
Act of 1940, as amended, incorporated herein by reference.

ITEM 27. PRINCIPAL UNDERWRITERS

(a) The sole principal underwriter is Van Kampen Funds Inc. which acts as
principal underwriter for certain investment companies and unit investment
trusts. See Exhibit (z)(1) incorporated by reference herein.

(b) Van Kampen Funds Inc., is an affiliated person of the Registrant and is
the only principal underwriter for the Registrant. The name, principal business
address and positions and offices with Van Kampen Funds Inc. of each of its
directors and officers of the Registrant are disclosed in Exhibit (z)(2). Except
as disclosed under the heading, "Directors and Officers" in Part B of this
Registration Statement, none of such persons has any position or office with the
Registrant.

C-5
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books and other documents of the Registrant required by
Section 31(a) of the Investment Company Act of 1940, as amended, and the
rules promulgated thereunder to be maintained (i) by Registrant, will be
maintained at its offices located at 1 Parkview Plaza, Oakbrook Terrace,
Illinois 60181-5555, Van Kampen Investor Services Inc., 7501 Tiffany Springs
Parkway, Kansas City, Missouri 64153 or The Chase Manhattan Bank, 3 MetroTech
Center, Brooklyn, New York 11245; (ii) by the Adviser, will be maintained at
its offices located at 1 Parkview Plaza, Oakbrook Terrace, Illinois
60181-5555; (iii) by the Subadvisers, will be maintained at Morgan Stanley
Dean Witter Investment Management Inc., formerly, Morgan Stanley Asset
Management Inc., 1221 Avenue of the Americas, New York, New York 10020, and
Miller Anderson & Sherrerd, LLP, One Tower Bridge, West Conshohocken,
Pennsylvania 19428; (iv) by Van Kampen Funds Inc., the principal underwriter,
will be maintained at its offices located at 1 Parkview Plaza, Oakbrook
Terrace, Illinois 60181-5555.

ITEM 29. MANAGEMENT SERVICES

Not applicable

ITEM 30. UNDERTAKINGS

Not applicable

C-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, Van Kampen
Series Fund, Inc. certifies that it meets all of the requirements for
effectiveness of this Amendment to the Registration Statement pursuant to
Rule 485(b) under the 1933 Act and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oakbrook Terrace and State of Illinois, on the
27th of October, 2000.

<TABLE>
<S> <C> <C>
VAN KAMPEN SERIES FUND, INC.

By: /s/ A. THOMAS SMITH III
-----------------------------------------
A. Thomas Smith III, Secretary
</TABLE>

Pursuant to the requirements of the 1933 Act, this Amendment to the
Registration Statement has been signed on October 27, 2000 by the following
persons in the capacities indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
Principal Executive Officer:
/s/ RICHARD F. POWERS, III* President and Director
--------------------------------------
Richard F. Powers, III
Principal Financial Officer:
/s/ JOHN L. SULLIVAN* Vice President, Chief Financial Officer and
-------------------------------------- Treasurer
John L. Sullivan
Directors:
/s/ WAYNE W. WHALEN* Director (Chairman)
--------------------------------------
Wayne W. Whalen
/s/ J. MILES BRANAGAN* Director
--------------------------------------
J. Miles Branagan
/s/ JERRY D. CHOATE* Director
--------------------------------------
Jerry D. Choate
/s/ LINDA HUTTON HEAGY* Director
--------------------------------------
Linda Hutton Heagy
/s/ R. CRAIG KENNEDY* Director
--------------------------------------
R. Craig Kennedy
/s/ MITCHELL M. MERIN* Director
--------------------------------------
Mitchell M. Merin
/s/ JACK E. NELSON* Director
--------------------------------------
Jack E. Nelson
/s/ PHILLIP B. ROONEY* Director
--------------------------------------
Phillip B. Rooney
/s/ FERNANDO SISTO* Director
--------------------------------------
Fernando Sisto
/s/ SUZANNE H. WOOLSEY* Director
--------------------------------------
Suzanne H. Woolsey
--------------------------------------
</TABLE>

------------------------

* Signed by A. Thomas Smith III pursuant to a power of attorney filed herewith.

<TABLE>
<S> <C> <C> <C>
/s/ A. THOMAS SMITH III
---------------------------------
A. Thomas Smith III October 27, 2000
ATTORNEY-IN-FACT
</TABLE>

<PAGE>

SCHEDULE OF EXHIBITS TO
POST-EFFECTIVE AMENDMENT 30 TO FORM N-1A

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------ -------
<C> <S>
(d)(1) Investment Advisory Agreement
(d)(3)(ii) Amendment No. 1 to the Investment Sub-Advisory
Agreement, Miller Anderson & Sherrerd, LLP
(i)(2) Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)
(j)(1) Consent of PricewaterhouseCoopers LLP
(2) Consent of Deloitte and Touche LLP
(n) Amended Multi-Class Plan
(p)(1) Form of Code of Ethics for Funds, investment adviser and
distributor
(q) Power of Attorney
(z) (1) List of certain investment companies in response to
Item 29(a)
(2) List of officers and directors of Van Kampen Funds Inc.
in response to Item 29(b)
</TABLE>