<PAGE>
VAN KAMPEN
AMERICAN VALUE FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders.......................... 1
Economic Snapshot............................... 2
Investment Overview............................. 3
Portfolio of Investments........................ 6
Statement of Assets and Liabilities............. 9
Statement of Operations......................... 10
Statement of Changes in Net Assets.............. 11
Financial Highlights ........................... 12
Notes to Financial Statements................... 14
Additional Information.......................... 17
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Other 31.2%
Computers 15.6%
Technology 8.9%
Capital Goods 7.1%
Communications 7.0%
Industrial 6.0%
Consumer-Retail 5.1%
Energy 4.8%
Banking 4.4%
Health Care 4.4%
Consumer-Durables 3.8%
Short-Term Investment 1.7%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C RUSSELL 2500
SHARES SHARES SHARES SMALL COMPANY INDEX
-------- ------- -------- -------------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*.............................. 0.65% 1.42% 5.35% N/A
Without Sales Charge***......................... 6.80% 6.39% 6.34% 11.96%
One Year
With Sales Charge*.............................. 18.46% 19.71% 23.70% N/A
Without Sales Charge***......................... 25.68% 24.71% 24.70% 24.14%
Average Annual Five Year
With Sales Charge*.............................. 20.95% N/A 21.45% N/A
Without Sales Charge***......................... 22.38% N/A 21.45% 19.43%
Average Annual Since Inception
With Sales Charge*.............................. 16.98% 20.55% 17.18% N/A
Without Sales Charge***......................... 18.10% 20.73% 17.18% 15.22%
Commencement Date................................. 10/18/93 8/1/95 10/18/93 N/A
</TABLE>
The Russell 2500 Small Company Index is an unmanaged index of common stocks.
* The returns above are calculated using the maximum sales charge for Class A
shares (5.75%) and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS(1)
PERCENT OF
SECURITY SECTOR NET ASSETS
- -------- -------------- ----------
<S> <C> <C>
Digital Microwave Corp. Communications 2.4%
Adelphia Business Solutions,
Inc. Communications 1.9%
Bally Total Fitness Holdings Co. Entertainment 1.9%
SanDisk Corp. Computers 1.6%
Unify Corp. Computers 1.6%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ------------ ----------
<S> <C> <C>
Computers $157,458,394 15.6%
Technology 89,468,379 8.9%
Capital Goods 71,810,200 7.1%
Communications 70,368,425 7.0%
Industrial 60,217,887 6.0%
</TABLE>
(1) excludes Short-Term Investment
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGERS OF THE VAN KAMPEN AMERICAN VALUE
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE
PAST SIX MONTHS. THE MANAGERS INCLUDE WILLIAM B. GERLACH, CHRIS LEAVY, AND GARY
G. SCHLARBAUM, PORTFOLIO MANAGERS, MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT. MR. GERLACH HAS MANAGED THE FUND SINCE 1996, WHILE MR. SCHLARBAUM
AND MR. LEAVY JOINED THE FUND AS COMANAGERS IN 1997. THE FOLLOWING DISCUSSION
REFLECTS THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE SIX-MONTH REPORTING
PERIOD ENDED DECEMBER 31, 1999.
Q. WHAT MARKET FACTORS AFFECTED THE FUND DURING THE REPORTING PERIOD?
A. The Dow Jones Industrial Average--perhaps the most widely recognized stock
market index--endured a difficult third quarter of 1999, losing more than 6
percent of its value. But the Dow recovered dramatically in the fourth quarter,
rising more than 11 percent to a record high on December 31. Other stock market
indices, such as NASDAQ, fared even better. For value-oriented portfolios such
as the American Value Fund, the reporting period was challenging because
investors continued to prefer growth stocks to value. This preference is
reflected in the differences between the returns of the Russell 2500 Growth and
the Russell 2500 Value indices: 34.53 percent versus -4.91 percent, for the six
months ended December 31.
Q. HOW DID MARKET CONDITIONS AFFECT HOW YOU MANAGED THE FUND, AND WHAT IMPACT
DID YOUR MANAGEMENT HAVE ON PERFORMANCE?
A. Market conditions typically have a secondary impact on our management,
because we consistently use a "bottom up" stock selection strategy. In other
words, we choose stocks by analyzing individual companies, not by assessing
broad market conditions. The Fund's performance is based largely on how the
stocks in the portfolio perform overall. During the reporting period, the Fund's
return lagged that of our benchmark, the Russell 2500 Small Company Index,
primarily because a number of stocks that we selected for the Fund--and, in many
cases, continue to own--were not rewarded by the market.
Q. WHICH STOCKS MOST HELPED THE FUND'S PERFORMANCE?
A. The big story during the reporting period was the outstanding performance of
many technology-related stocks. As a result, most of the top contributors to the
Fund's performance were stocks in this area. In particular, we looked for ways
to benefit from the Internet's remarkable growth while seeking to moderate the
risk associated with investing in this volatile sector. When possible, we sought
to invest INDIRECTLY in the Internet--in other words, looking for companies that
supply the products and services fueling on-line growth.
In terms of its contribution to the Fund's performance, our most successful
investment during the reporting period was Unify Corporation, a company that
helps businesses develop electronic-commerce systems. The Fund also benefited
from our holdings in SanDisk, a maker of computer-memory storage devices;
Pinnacle Systems, which develops computer-based video editing tools; and Entrust
Technologies, a developer of software that enhances security over computer
networks.
Companies specializing in communications services also performed very well. Some
of these stocks that boosted Fund performance during the reporting period were
Digital Microwave, Titan, and Adelphia Business Solutions. Not all stocks in the
portfolio performed as favorably, and there is no guarantee these stocks will
continue to do so in the future.
Q. DID ANY OF YOUR INVESTMENTS DISAPPOINT YOU?
A. The stock that most hurt performance was Sunglass Hut International, the
world's largest specialty retailer of sunglasses. Sunglass Hut, the Fund's
second-largest holding during much of the reporting period, lost nearly 40
percent of its value in the third quarter of 1999. During the fourth quarter it
recovered modestly but still finished the reporting period down 35 percent for
the six months.
Another significant disappointment was Quanta Services, which provides services
for electric utilities and telecommunications operators. As with Sunglass Hut,
the stock endured a very difficult third quarter but regained some of its losses
in the final three months of the year.
- -----------------------
4
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Other stocks whose performance detracted from the Fund's return included Tower
Automotive, which designs and manufactures automotive components; BEA Systems, a
provider of computer-networking software products; and VeriSign, a company that
verifies the legitimacy of on-line transactions and communications.
Q. HOW DID THE FUND PERFORM DURING THE LAST HALF OF 1999?
A. In general, stock selection had a negative impact on the Fund's performance
during the reporting period, as some of the Fund's largest holdings experienced
stock-price declines in the second half of 1999. For the six-month period ended
December 31, 1999, the Fund's total return was 6.80 percent (Class A shares at
net asset value). By comparison, the Russell 2500 Small Company Index, an
unmanaged index of common stocks, returned 11.96 percent. Keep in mind that this
index is a statistical composite that does not include any commissions or sales
charges that would be paid by an investor purchasing the securities it
represents. Such costs would lower the performance of the index. An investment
cannot be made directly in an index.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. Because of dramatic market gains in recent years, stock valuations are at
unprecedented levels. As the valuations of growth stocks continue to increase
relative to those of value stocks, we are hopeful that an eventual return to
historical norms may occur and that value investments may begin to catch up to
growth--although when this might happen in this growth-driven market is
uncertain. In the meantime, we will continue to focus on our "bottom up"
stock-selection process, seeking to identify undervalued stocks that meet the
Fund's investment criteria.
------------------
5
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
COMMON STOCKS (98.7%)
AEROSPACE (1.4%)
(a)Alliant TechSystems, Inc..... 29,800 $ 1,856,913
(a)Litton Industries, Inc....... 62,500 3,117,187
(a)Titan Corp................... 202,000 9,519,250
--------------
14,493,350
--------------
BANKING (4.4%)
Bank United Corp. 'A'........... 213,100 5,806,975
Comerica, Inc................... 93,900 4,383,956
Hibernia Corp. 'A'.............. 506,100 5,377,312
Hudson United Bancorp........... 286,649 7,327,465
(a)Imperial Bancorp, Inc........ 152,000 3,667,000
Roslyn Bancorp, Inc............. 254,600 4,710,100
(a)Silicon Valley Bancshares.... 186,400 9,226,800
TCF Financial Corp.............. 116,500 2,897,938
(a)Wit Capital Group, Inc....... 83,200 1,414,400
--------------
44,811,946
--------------
BUILDING (0.0%)
Centex Corp..................... 19,500 481,406
--------------
CAPITAL GOODS (7.1%)
AGCO Corp....................... 299,600 4,025,875
(a)Electronics for Imaging,
Inc........................... 64,900 3,772,313
(a)Exar Corp.................... 98,200 5,781,525
(a)Gasonics International
Corp.......................... 233,900 4,619,525
(a)Gentex Corp.................. 91,100 2,528,025
(a)Harmonic, Inc................ 80,000 7,595,000
Manitowoc Co., Inc.............. 59,050 2,007,700
(a)Mentor Graphics Corp......... 277,200 3,655,575
PRI Automation, Inc............. 147,700 9,914,362
(a)Republic Services, Inc.
'A'........................... 325,100 4,673,313
Stewart & Stevenson Services,
Inc........................... 1,167,000 13,821,656
(a)Tower Automotive, Inc........ 609,900 9,415,331
--------------
71,810,200
--------------
CHEMICALS (3.0%)
Engelhard Corp.................. 380,700 7,185,712
Lubrizol Corp................... 105,800 3,266,575
M.A. Hanna Co................... 71,300 779,844
(a)Maxygen, Inc................. 38,400 2,726,400
Quaker Chemical Corp............ 17,400 247,950
RPM, Inc........................ 161,000 1,640,188
(a)W.R. Grace & Co.............. 405,400 5,624,925
Wellman, Inc.................... 479,200 8,925,100
--------------
30,396,694
--------------
COMMUNICATIONS (7.0%)
(a)Adelphia Business Solutions,
Inc........................... 405,300 19,454,400
(a)Adelphia Communications...... 40,700 2,670,938
(a)ADTRAN, Inc.................. 67,700 3,482,319
(a)ANTEC Corp................... 41,700 1,522,050
(a)Caprock Communications
Corp.......................... 43,500 1,411,031
(a)Charter Communications,
Inc........................... 170,300 3,725,312
Copper Mountain Networks........ 38,700 1,886,625
(a)Digital Microwave Corp....... 1,017,800 23,854,687
(a)Efficient Networks, Inc...... 35,300 2,400,400
(a)ITC DeltaCom, Inc............ 70,200 1,939,275
(a)PE Corporation-Celera
Genomics Group................ 10,200 1,519,800
(a)Powerwave Technologies,
Inc........................... 50,900 2,971,288
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
(a)Westell Technologies, Inc.... 328,400 $ 3,530,300
--------------
70,368,425
--------------
COMPUTERS (15.6%)
(a)Advantage Learning Systems,
Inc........................... 126,900 1,419,694
(a)Complete Business
Solutions..................... 356,900 8,967,113
(a)Computer Network Technology
Corp.......................... 184,400 4,229,675
(a)Corel Corp................... 347,400 5,254,425
(a)Digital River, Inc........... 198,900 6,625,856
(a)eSPEED, Inc. 'A'............. 66,000 2,347,125
(a)Exodus Communications,
Inc........................... 48,800 4,334,050
(a)Filenet Corp................. 190,300 4,852,650
(a)GenRad, Inc.................. 522,000 8,417,250
(a)Legato Systems, Inc.......... 27,200 1,871,700
(a)Maxtor Corp.................. 468,600 3,397,350
(a)MicroStrategy, Inc........... 19,900 4,179,000
(a)Networks Associates, Inc..... 85,900 2,292,456
(a)NetZero, Inc................. 78,700 2,119,981
(a)New Era of Networks, Inc..... 65,800 3,133,725
(a)Pinnacle Systems, Inc........ 354,300 14,415,581
(a)PSINet, Inc.................. 254,400 15,709,200
(a)Quantum Corp.-Hard Disk
Drive......................... 717,700 4,979,044
(a)Rational Software Corp....... 64,000 3,144,000
(a)SanDisk Corp................. 172,000 16,555,000
(a)Seagate Technology, Inc...... 76,400 3,557,375
(a)Sybase, Inc.................. 186,400 3,168,800
(a)Unify Corp................... 587,800 16,091,025
(a)Verity, Inc.................. 53,200 2,264,325
(a)VerticalNet, Inc............. 15,900 2,607,600
(a)WorldGate Communications,
Inc........................... 242,300 11,524,394
--------------
157,458,394
--------------
CONSUMER-DURABLES (3.8%)
(a)Celgene Corp................. 38,700 2,709,000
(a)Cell Pathways, Inc........... 481,100 4,450,175
Earthgrains Co.................. 143,500 2,313,937
(a)Human Genome Sciences,
Inc........................... 16,900 2,579,362
(a)IDEC Pharmaceuticals Corp.... 24,200 2,377,650
(a)Incyte Pharmaceuticals,
Inc........................... 56,600 3,396,000
(a)Medco Research, Inc.......... 64,100 1,927,006
(a)Medquist, Inc................ 65,000 1,677,813
(a)Millennium Pharmaceuticals,
Inc........................... 16,000 1,952,000
(a)Progenics Pharmaceuticals,
Inc........................... 89,000 4,349,875
(a)Protein Design Labs, Inc..... 16,400 1,148,000
(a)Sepracor, Inc................ 14,100 1,398,544
(a)Sybron International Corp.... 133,800 3,303,187
(a)Vans, Inc.................... 193,700 2,372,825
(a)Wesley Jessen VisionCare,
Inc........................... 56,300 2,132,363
--------------
38,087,737
--------------
CONSUMER-RETAIL (5.1%)
American National Can Group,
Inc........................... 419,800 5,457,400
(a)Ann Taylor Stores Corp....... 112,800 3,884,550
Callaway Golf Co................ 541,600 9,579,550
(a)Dress Barn, Inc.............. 115,600 1,921,850
(a)Fatbrain.com, Inc............ 75,300 1,887,206
(a)Fresh Del Monte Produce,
Inc........................... 483,500 4,351,500
IBP, Inc........................ 133,800 2,408,400
Reader's Digest Association,
Inc. (The) 'A'................ 69,600 2,035,800
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
CONSUMER-RETAIL (CONT.)
(a)Sunglass Hut International,
Inc........................... 1,210,200 $ 13,614,750
(a)Yankee Cnadle Co., Inc....... 92,500 1,508,906
(a)Zale Corp.................... 105,700 5,113,238
--------------
51,763,150
--------------
CONSUMER-SERVICE & GROWTH (0.3%)
(a)MP3.com, Inc................. 100,800 3,194,100
--------------
CONSUMER STAPLES (1.2%)
Alpharma, Inc................... 158,100 4,861,575
(a)Alza Corp., 'A'.............. 155,800 5,394,575
(a)800-JR Cigar, Inc............ 101,400 880,913
(a)General Cigar Holdings,
Inc........................... 121,400 1,009,137
--------------
12,146,200
--------------
DATA PROCESSING & MANAGEMENT (1.1%)
(a)Documentum, Inc.............. 55,100 3,299,113
(a)Informix Corp................ 246,600 2,805,075
(a)VeriSign, Inc................ 27,400 5,226,550
--------------
11,330,738
--------------
ELECTRIC (2.8%)
(a)Celestica, Inc............... 123,400 6,848,700
(a)Cherry Corp.................. 2,600 27,625
DPL, Inc........................ 152,600 2,641,887
(a)Fairchild Semiconductor, Inc.
'A'........................... 190,300 5,661,425
Potomac Electric Power Co....... 564,000 12,936,750
--------------
28,116,387
--------------
ENERGY (4.8%)
(a)American Power Conversion
Corp.......................... 75,500 1,991,313
(a)BJ Services Co............... 226,800 9,483,075
Black Hills Corp................ 2,700 59,906
(a)Calpine Corp................. 43,500 2,784,000
Energy East Corp................ 129,700 2,699,381
(a)Global Marine, Inc........... 501,100 8,330,787
(a)Grey Wolf, Inc............... 134,400 386,400
Illinova Corp................... 36,400 1,264,900
(a)Ocean Energy, Inc............ 277,224 2,148,486
(a)Patterson Energy, Inc........ 193,500 2,515,500
(a)Smith International, Inc..... 230,400 11,448,000
Valero Energy Corp.............. 245,200 4,873,350
Wisconsin Energy Corp........... 36,700 706,475
--------------
48,691,573
--------------
ENTERTAINMENT (2.0%)
(a)Bally Total Fitness Holdings
Co............................ 709,600 18,937,450
(a)Electronic Boutique Holdings
Corp.......................... 86,300 1,553,400
--------------
20,490,850
--------------
FINANCIAL-DIVERSIFIED (1.2%)
A.G. Edwards, Inc............... 54,200 1,737,787
CIT Group, Inc. 'A'............. 89,400 1,888,575
FINOVA Group, Inc............... 168,100 5,967,550
PMI Group, Inc.................. 44,300 2,162,394
--------------
11,756,306
--------------
FINANCIAL SERVICES (2.7%)
Heller Financial, Inc........... 359,000 7,202,437
Hospitality Properties, Inc..... 316,500 6,033,281
Investors Financial Services
Corp.......................... 50,200 2,309,200
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
Nationwide Financial Services,
Inc. 'A'...................... 104,500 $ 2,919,469
Reliastar Financial Corp........ 115,300 4,518,319
(a)USWeb Corp................... 100,000 4,443,750
--------------
27,426,456
--------------
HEALTH CARE (4.4%)
(a)Caremark Rx, Inc............. 368,500 1,865,531
(a)Del Global Technologies
Corp.......................... 491,300 3,807,575
(a)eBenX, Inc................... 9,900 447,975
(a)Guilford Pharmaceuticals,
Inc........................... 281,700 4,788,900
(a)Healtheon/WebMD Corp......... 78,900 2,958,750
ICN Pharmaceuticals, Inc........ 75,500 1,911,094
(a)King Pharmaceuticals, Inc.... 48,900 2,741,456
(a)Lincare Holdings, Inc........ 162,200 5,626,313
(a)MedImmune, Inc............... 29,000 4,810,375
(a)Tenet Healthcare Corp........ 133,300 3,132,550
Teva Pharmaceutical Industries
Ltd. ADR...................... 118,800 8,516,475
(a)Trigon Healthcare, Inc....... 120,500 3,554,750
--------------
44,161,744
--------------
INDUSTRIAL (6.0%)
(a)Cooper Cameron Corp.......... 146,900 7,188,919
(a)Global Industries, Ltd....... 913,800 7,881,525
(a)ImClone Systems, Inc......... 65,100 2,579,587
(a)Invitrogen Corp.............. 13,400 804,000
(a)Lear Corp.................... 204,300 6,537,600
Martin Marietta Corp............ 350,700 14,378,700
(a)Nabors Industries, Inc....... 194,400 6,014,250
(a)Oak Industries, Inc.......... 37,100 3,937,237
(a)PerkinElmer, Inc............. 59,900 2,497,081
(a)Precision Drilling Corp...... 97,900 2,514,806
(a)Quest Diagnostics, Inc....... 58,200 1,778,738
(a)Rowan Cos., Inc.............. 189,300 4,105,444
--------------
60,217,887
--------------
INSURANCE (0.9%)
Allmerica Financial Corp........ 113,000 6,285,625
Everest Reinsurance Holdings,
Inc........................... 110,800 2,472,225
HSB Group, Inc.................. 24,500 828,406
--------------
9,586,256
--------------
METALS (3.6%)
Agnico-Eagle Mines Ltd.......... 394,700 2,910,913
AK Steel Holding Corp........... 109,600 2,068,700
Barrick Gold Corp............... 83,200 1,471,600
(a)Freeport-McMoRan Copper &
Gold, Inc..................... 453,900 9,588,637
(a)Lone Star Technologies,
Inc........................... 98,500 2,745,688
(a)Mueller Industries, Inc...... 88,100 3,193,625
(a)Steel Dynamics, Inc.......... 292,600 4,663,312
Tosco Corp...................... 187,500 5,097,656
USX-U.S. Steel Group, Inc....... 155,600 5,134,800
--------------
36,874,931
--------------
PAPER & PACKAGING (1.4%)
Boise Cascade Corp.............. 63,600 2,575,800
Valassis Communications, Inc.... 179,450 7,581,763
Westvaco Corp................... 126,200 4,117,275
--------------
14,274,838
--------------
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE (3.6%)
AMB Property Corp............... 598,900 $ 11,940,569
Cousins Properties, Inc......... 50,500 1,713,844
Developers Diversified Realty
Corp.......................... 157,000 2,021,375
Duke Realty Investment, Inc.
REIT.......................... 207,900 4,054,050
Glenborough Realty Trust,
Inc........................... 26,500 354,437
JDN Realty Corp................. 57,500 927,187
Lasalle Hotel Properties REIT... 36,100 421,919
Liberty Property Trust REIT..... 49,000 1,188,250
(a)NBTY, Inc.................... 595,500 6,885,469
Radian Group, Inc............... 113,600 5,424,400
Simon Property Group, Inc....... 49,700 1,139,994
(a)Wellsford Properties, Inc.... 5,250 44,625
--------------
36,116,119
--------------
RESTAURANTS (0.1%)
(a)Friendly Ice Cream Corp...... 152,700 677,606
--------------
SERVICES (0.9%)
(a)Corinthian Colleges, Inc..... 28,300 675,663
(a)Modis Professional Services,
Inc........................... 94,100 1,340,925
Newport News Shipbuilding,
Inc........................... 117,700 3,236,750
(a)Tetra Technologies, Inc...... 525,900 3,812,775
--------------
9,066,113
--------------
TECHNOLOGY (8.9%)
(a)AVT Corp..................... 185,700 8,727,900
(a)BroadVision, Inc............. 25,900 4,404,619
(a)ChromaVision Medical Systems,
Inc........................... 235,315 3,588,554
(a)Circle.com................... 80,100 986,231
CNH Global N.V.................. 912,900 12,152,981
Cohu, Inc....................... 119,200 3,695,200
(a)Entrust Technologies, Inc.... 143,900 8,625,006
(a)Go2Net, Inc.................. 34,000 2,958,000
(a)Integrated Device Technology,
Inc........................... 93,900 2,723,100
(a)InterVU, Inc................. 16,800 1,764,000
(a)National Semiconductor
Corp.......................... 90,800 3,887,375
(a)Rare Medium Group, Inc....... 97,300 3,320,363
(a)Sapient Corp................. 35,200 4,961,000
Shared Medical Systems Corp..... 40,700 2,073,156
(a)TALK.com, Inc................ 109,700 1,947,175
(a)Verio, Inc................... 241,300 11,145,044
(a)Veritas DGC, Inc............. 39,300 550,200
(a)Viador, Inc.................. 38,200 1,618,725
(a)Viant Corp................... 32,300 3,197,700
(a)Vignette Corp................ 34,800 5,672,400
(a)Z-Tel Technologies, Inc...... 36,400 1,469,650
--------------
89,468,379
--------------
TRANSPORTATION (3.0%)
CNF Transportation, Inc......... 78,200 2,697,900
(a)Gaylord Container Corp.
'A'........................... 843,600 5,747,025
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
(a)Navistar International
Corp.......................... 72,000 $ 3,411,000
Oshkosh Truck Corp.............. 169,300 4,962,606
SkyWest, Inc.................... 125,400 3,511,200
(a)United Rentals, Inc.......... 269,700 4,618,613
Wabash National Corp............ 372,800 5,592,000
--------------
30,540,344
--------------
UTILITIES (2.4%)
Allegheny Energy, Inc........... 84,100 2,265,444
CalEnergy Co., Inc.............. 441,200 14,862,925
(a)Cephalon, Inc................ 88,300 3,051,869
(a)Chartered Semiconductor
Manufacturing Ltd.ADR......... 32,950 2,405,350
Public Service Co. of New
Mexico........................ 45,600 741,000
SJW Corp........................ 5,300 637,325
--------------
23,963,913
--------------
TOTAL COMMON STOCKS................................ 997,772,042
--------------
<CAPTION>
NO. OF
WARRANTS
-----------
WARRANTS (0.0%)
<S> <C> <C>
CONSUMER-DURABLES (0.0%)
(a)Cell Pathways, Inc........... 477,000 --
--------------
TOTAL LONG-TERM INVESTMENTS (98.7%)
(COST $876,027,497)............................ 997,772,042
--------------
<CAPTION>
PAR
VALUE
-----------
SHORT-TERM INVESTMENT (1.7%)
<S> <C> <C>
REPURCHASE AGREEMENT (1.7%)
Chase Securities, Inc., 2.60%, $17,289,000
dated 12/31/99, due 1/3/00, to
be repurchased at $17,292,746,
collateralized by $17,644,088
U.S. Treasury Notes, 6.125%,
due 12/31/01, valued
at $17,644,088 (COST $17,289,000)............ 17,289,000
--------------
TOTAL INVESTMENTS (100.4%) (COST $893,316,497)..... 1,015,061,042
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.4%)...... (4,479,483)
--------------
NET ASSETS (100%).................................. $1,010,581,559
==============
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(a) -- Non-income producing security
ADR -- American Depositary Receipt
REIT -- Real Estate Investment Trust
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------
ASSETS:
Investments at Value (Cost $893,316,497).................. $ 1,015,061,042
Cash...................................................... 2,692,475
Receivable for:
Fund Shares Sold........................................ 1,822,383
Investments Sold........................................ 887,744
Dividends............................................... 219,060
Interest................................................ 1,249
Other..................................................... 25,733
-----------------
Total Assets............................................ 1,020,709,686
-----------------
LIABILITIES:
Payable for:
Investments Purchased................................... 6,588,422
Fund Shares Redeemed.................................... 1,442,726
Distribution Fees....................................... 1,029,318
Investment Advisory Fees................................ 686,465
Administrative Fees..................................... 203,895
Transfer Agent Fees..................................... 63,589
Shareholder Reporting Expenses.......................... 50,986
Directors' Fees and Expenses............................ 29,717
Professional Fees....................................... 23,524
Custody Fees............................................ 6,813
Other..................................................... 2,672
-----------------
Total Liabilities....................................... 10,128,127
-----------------
NET ASSETS.................................................. $ 1,010,581,559
=================
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 43,455
Paid in Capital in Excess of Par.......................... 889,033,292
Net Unrealized Appreciation on Investments................ 121,744,545
Accumulated Net Realized Gain............................. 1,717,676
Accumulated Net Investment Loss........................... (1,957,409)
-----------------
NET ASSETS.................................................. $ 1,010,581,559
=================
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $433,387,987 and 18,419,797
Shares Outstanding)..................................... $ 23.53
=================
Maximum Sales Charge...................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100 / (100 - maximum sales charge))............. $ 24.97
=================
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $380,096,339 and 16,489,415
Shares Outstanding)*.................................... $ 23.05
=================
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $197,097,233 and 8,545,916
Shares Outstanding)*.................................... $ 23.06
=================
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 4,775,307
Interest.................................................. 1,846,821
------------
Total Income............................................. 6,622,128
------------
EXPENSES:
Investment Advisory Fees.................................. 3,859,908
Distribution Fees (Attributed to Classes A, B and C of
$477,313, $1,745,927 and $888,160, respectively)........ 3,111,400
Administrative Fees....................................... 1,141,661
Transfer Agent Fees....................................... 188,275
Shareholder Reports....................................... 115,586
Professional Fees......................................... 57,839
Filing and Registration Fees.............................. 31,157
Custodian Fees............................................ 28,641
Directors' Fees and Expenses.............................. 15,220
Other..................................................... 7,679
------------
Total Expenses........................................... 8,557,366
------------
Net Investment Income/Loss.................................. (1,935,238)
------------
NET REALIZED GAIN/LOSS ON:
Investments............................................... 26,841,359
------------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... 81,599,541
------------
End of the Period:
Investments............................................. 121,744,545
------------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 40,145,004
------------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. 66,986,363
------------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 65,051,125
============
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ (1,935,238) $ (2,941,000)
Net Realized Gain/Loss.................................... 26,841,359 44,491,000
Net Unrealized Appreciation/Depreciation.................. 40,145,004 64,853,000
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 65,051,125 106,403,000
----------------- -------------
DISTRIBUTIONS:
Net Realized Gain:
Class A................................................... (27,076,766) (12,659,000)
Class B................................................... (24,202,545) (17,437,000)
Class C................................................... (12,447,392) (7,981,000)
----------------- -------------
Net Decrease in Net Assets Resulting from Distributions... (63,726,703) (38,077,000)
----------------- -------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed................................................ 230,818,272 344,367,000
Distributions Reinvested.................................. 46,273,947 31,597,000
Redeemed.................................................. (118,098,360) (211,364,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... 158,993,859 164,600,000
----------------- -------------
Total Increase/Decrease in Net Assets..................... 160,318,281 232,926,000
NET ASSETS--Beginning of Period............................. 850,263,278 617,337,000
----------------- -------------
NET ASSETS--End of Period (Including accumulated net
investment income/loss of $(1,957,409) and $(22,000),
respectively)............................................. $ 1,010,581,559 $ 850,263,000
================= =============
- ---------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
--------
Shares:
Subscribed............................................. 6,264,990 8,979,000
Distributions Reinvested............................... 777,244 579,000
Redeemed............................................... (3,167,757) (5,327,000)
----------------- -------------
Net Increase/Decrease in Class A Shares Outstanding...... 3,874,477 4,231,000
================= =============
Dollars:
Subscribed............................................. $ 141,979,066 $ 190,079,000
Distributions Reinvested............................... 17,309,218 11,025,000
Redeemed............................................... (71,641,496) (104,033,000)
----------------- -------------
Net Increase/Decrease.................................... $ 87,646,788 $ 97,071,000
================= =============
Ending Paid in Capital................................... $ 382,660,231 $ 295,061,000+
================= =============
Class B:
---------
Shares:
Subscribed............................................. 2,184,050 4,895,000
Distributions Reinvested............................... 903,072 769,000
Redeemed............................................... (1,319,214) (3,673,000)
----------------- -------------
Net Increase/Decrease in Class B Shares Outstanding...... 1,767,908 1,991,000
================= =============
Dollars:
Subscribed............................................. $ 49,021,132 $ 98,965,000
Distributions Reinvested............................... 19,714,070 14,494,000
Redeemed............................................... (29,348,966) (70,265,000)
----------------- -------------
Net Increase/Decrease.................................... $ 39,386,236 $ 43,194,000
================= =============
Ending Paid in Capital................................... $ 340,423,653 $ 301,083,000+
================= =============
Class C:
---------
Shares:
Subscribed............................................. 1,768,495 2,707,000
Distributions Reinvested............................... 423,565 322,000
Redeemed............................................... (762,308) (1,921,000)
----------------- -------------
Net Increase/Decrease in Class C Shares Outstanding...... 1,429,752 1,108,000
================= =============
Dollars:
Subscribed............................................. $ 39,818,073 $ 55,323,000
Distributions Reinvested............................... 9,250,659 6,078,000
Redeemed............................................... (17,107,898) (37,066,000)
----------------- -------------
Net Increase/Decrease.................................... $ 31,960,834 $ 24,335,000
================= =============
Ending Paid in Capital................................... $ 165,992,863 $ 134,054,000+
================= =============
</TABLE>
- ---------------
<TABLE>
<S> <C>
+ Ending Paid in Capital amounts do not reflect permanent book
to tax differences.
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 -------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD.............................. $ 23.582 $ 21.339 $ 17.59 $ 14.63 $ 12.89 $ 11.70
----------------- -------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss.......... -- 0.006 (0.02) 0.20 0.27 0.27
Net Realized and Unrealized
Gain/Loss......................... 1.502 3.437 4.84 4.05 1.94 1.44
----------------- -------- -------- ------- ------- -------
Total from Investment Operations.... 1.502 3.443 4.82 4.25 2.21 1.71
----------------- -------- -------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income............... -- -- (0.03) (0.20) (0.27) (0.28)
In Excess of Net Investment
Income............................ -- -- (0.00)++ (0.00)++ (0.01) --
Net Realized Gain................... (1.556) (1.200) (1.04) (1.09) (0.19) (0.24)
----------------- -------- -------- ------- ------- -------
Total Distributions................. (1.556) (1.200) (1.07) (1.29) (0.47) (0.52)
----------------- -------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD........ $ 23.528 $ 23.582 $ 21.34 $ 17.59 $ 14.63 $ 12.89
================= ======== ======== ======= ======= =======
TOTAL RETURN (1)...................... 6.80%* 17.41% 28.26% 30.68% 17.41% 15.01%
================= ======== ======== ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)..... $ 433,388 $343,004 $220,100 $34,331 $19,674 $20,675
Ratio of Expenses to Average Net
Assets.............................. 1.45% 1.49% 1.50% 1.50% 1.50% 1.50%
Ratio of Net Investment Income/Loss to
Average Net Assets.................. 0.01% 0.03% (0.09)% 1.25% 1.90% 2.29%
Portfolio Turnover Rate............... 100%* 283% 207% 73% 41% 23%
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss....................... $ -- $ -- $ 0.02 $ 0.04 $ 0.04 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net Assets...... -- -- 1.58% 1.76% 1.81% 1.96%
Net Investment Income/Loss to
Average Net Assets................ -- -- (0.18)% 0.98% 1.59% 1.83%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 ----------------------------------- AUGUST 1, 1995+ TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD... $ 23.225 $ 21.196 $ 17.59 $ 14.63 $ 13.37
----------------- -------- -------- ------- -----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss........... (0.083) (0.142) (0.17) 0.09 0.15
Net Realized and Unrealized
Gain/Loss.......................... 1.465 3.371 4.83 4.05 1.46
----------------- -------- -------- ------- -----------------
Total from Investment Operations..... 1.382 3.229 4.66 4.14 1.61
----------------- -------- -------- ------- -----------------
DISTRIBUTIONS
Net Investment Income................ -- -- (0.01) (0.09) (0.15)
In Excess of Net Investment Income... -- -- (0.00)++ (0.00)++ (0.01)
Net Realized Gain.................... (1.556) (1.200) (1.04) (1.09) (0.19)
----------------- -------- -------- ------- -----------------
Total Distributions.................. (1.556) (1.200) (1.05) (1.18) (0.35)
----------------- -------- -------- ------- -----------------
NET ASSET VALUE, END OF PERIOD......... $ 23.051 $ 23.225 $ 21.20 $ 17.59 $ 14.63
================= ======== ======== ======= =================
TOTAL RETURN (1)....................... 6.39%* 16.50% 27.30% 29.77% 12.29%*
================= ======== ======== ======= =================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)...... $ 380,096 $341,908 $269,836 $15,331 $ 2,485
Ratio of Expenses to Average Net
Assets............................... 2.20% 2.24% 2.25% 2.25% 2.25%
Ratio of Net Investment Income/Loss to
Average Net Assets................... (0.74)% (0.72)% (0.84)% 0.40% 1.18%
Portfolio Turnover Rate................ 100%* 283% 207% 73% 41%*
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss........................ $ -- $ -- $ 0.02 $ 0.06 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets....... -- -- 2.33% 2.48% 2.61%
Net Investment Income/Loss to Average
Net Assets......................... -- -- (0.93)% 0.14% 0.82%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Non-Annualized
+ The Fund began offering Class B shares on August 1, 1995.
++ Amount is less than $0.01 per share.
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
- --------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
FINANCIAL HIGHLIGHTS (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 -------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 23.236 $ 21.205 $ 17.59 $ 14.64 $ 12.89 $ 11.69
----------------- -------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss.............. (0.083) (0.142) (0.17) 0.08 0.16 0.17
Net Realized and Unrealized Gain/Loss... 1.466 3.373 4.83 4.05 1.94 1.44
----------------- -------- -------- ------- ------- -------
Total from Investment Operations........ 1.383 3.231 4.66 4.13 2.10 1.61
----------------- -------- -------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income................... -- -- (0.01) (0.09) (0.15) (0.17)
In Excess of Net Investment Income...... -- -- (0.00)++ (0.00)++ (0.01) --
Net Realized Gain....................... (1.556) (1.200) (1.04) (1.09) (0.19) (0.24)
----------------- -------- -------- ------- ------- -------
Total Distributions..................... (1.556) (1.200) (1.05) (1.18) (0.35) (0.41)
----------------- -------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............ $ 23.063 $ 23.236 $ 21.20 $ 17.59 $ 14.64 $ 12.89
================= ======== ======== ======= ======= =======
TOTAL RETURN (1).......................... 6.34%* 16.55% 27.28% 29.67% 16.50% 14.13%
================= ======== ======== ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)......... $ 197,097 $165,351 $127,401 $32,425 $21,193 $13,867
Ratio of Expenses to Average Net Assets... 2.20% 2.24% 2.25% 2.25% 2.25% 2.25%
Ratio of Net Investment Income/Loss to
Average Net Assets...................... (0.74)% (0.72)% (0.84)% 0.49% 1.17% 1.54%
Portfolio Turnover Rate................... 100%* 283% 207% 73% 41% 23%
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss........................... $ -- $ -- $ 0.02 $ 0.04 $ 0.04 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net Assets.......... -- -- 2.33% 2.47% 2.58% 2.71%
Net Investment Income/Loss to Average
Net Assets............................ -- -- (0.92)% 0.22% 0.84% 1.08%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Non-Annualized
++ Amount is less than $0.01 per share.
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
-----------------------
13
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen American Value Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks high
total return by investing in equity securities of small-to medium-sized
corporations. The Fund commenced operations on October 18, 1993.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. Class A shares are sold with a front-end sales charge of up to
5.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights. The Fund began offering the current Class B shares on August 1,
1995. Class B shares held prior to May 1, 1995 were renamed Class C shares.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
Interest income is recognized on an accrual basis except where collection is in
doubt. Income, expenses (other than class specific expenses), and realized and
unrealized gains or losses are allocated to each class of shares based upon
their relative net assets. Distributions from the Fund are recorded on the
ex-distribution date.
4. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
Net capital losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of
- -----------------------
14
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
the Fund's next taxable year. For the period from November 1, 1998 to June 30,
1999 the Fund incurred and elected to defer until July 1, 1999, for U.S. Federal
income tax purposes, net capital losses of approximately $599,000.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- --------------------- ------------ ------------- -------------
<S> <C> <C> <C>
$893,316,497 $184,035,539 $(62,290,994) $121,744,545
</TABLE>
5. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
0.85% 1.50% 2.25%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $27,509
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
The Distributor may receive a front end sales charge for purchases of Class A
shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $631,841 for Class A shares and deferred sales charges of
$484,065 and $14,137 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.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $1,017,746,923 and sales of $842,060,242 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.
------------------
15
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
D. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
- -----------------------
16
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the American Value Fund (the
Fund) was held on December 15,1999.
The description of each proposal and number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
---------- --------
<S> <C> <C>
J. Miles Branagan........................................... 29,364,025 276,578
Jerry D. Choate............................................. 29,364,369 276,234
Linda Hutton Heagy.......................................... 29,363,616 276,987
R. Craig Kennedy............................................ 29,361,100 279,504
Mitchell M. Merin........................................... 29,363,765 276,839
Jack E. Nelson.............................................. 29,359,852 280,752
Richard F. Powers, III...................................... 29,365,512 275,092
Phillip B. Rooney........................................... 29,393,069 277,535
Fernando Sisto.............................................. 29,351,251 289,353
Wayne W. Whalen............................................. 29,358,710 281,894
Suzanne H. Woolsey.......................................... 29,360,174 280,430
Paul G. Yovovich............................................ 29,364,822 275,782
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C>
29,162,296 126,248 352,059
</TABLE>
------------------
17
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at www.vankampen.com --
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting www.vankampen.com
and selecting CONTACT US
* Closed to new investors
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management of
Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
For information on how to invest, please contact your financial advisor or the
investor services department at 1-800-341-2911.
This report is authorized for distribution only when preceded or accompanied by
a prospectus of Van Kampen Funds Inc. which describes in detail the fund's
investment policies, fees, and expenses. Please read the prospectus carefully
before you invest or send money.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555
/ /www.vankampen.com
MSAV SAR 02/00 -C- Van Kampen Funds Inc. 2000
453 555 653
<PAGE>
VAN KAMPEN
FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Investment Overview.............................. 3
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 7
Statement of Operations.......................... 8
Statement of Changes in Net Assets............... 9
Financial Highlights ............................ 10
Notes to Financial Statements.................... 12
Additional Information........................... 15
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TECHNOLOGY 32.0%
<S> <C>
Capital Goods 17.2%
Consumer Staples 12.3%
Communication Services 10.7%
Health Care 10.5%
Consumer Cyclicals 7.4%
Other 4.7%
Financial 3.4%
Utilities 1.8%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C S&P 500
SHARES SHARES SHARES INDEX
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*...................................... 11.09% 12.44% 16.45% N/A
Without Sales Charge***................................. 17.85% 17.44% 17.45% 7.70%
One Year
With Sales Charge*...................................... 37.33% 39.49% 43.60% N/A
Without Sales Charge***................................. 45.67% 44.49% 44.60% 21.04%
Average Annual Since Inception
With Sales Charge*...................................... 29.82% 30.52% 30.80% N/A
Without Sales Charge***................................. 31.75% 30.80% 30.80% 26.18%
Commencement Date......................................... 1/2/96 1/2/96 1/2/96 N/A
</TABLE>
The Standard & Poor's 500 Index is an unmanaged index of common stocks. The S&P
500 Index assumes dividends are reinvested.
* The returns above are calculated using the maximum sales charge for Class A
shares (5.75%) and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS(1)
PERCENT OF
SECURITY SECTOR NET ASSETS
- -------- --------------------------- ----------
<S> <C> <C>
Tyco International Ltd. Manufacturing (Diversified) 5.7%
Microsoft Corp. Computers
(Software & Services) 5.6%
Cisco Systems, Inc. Computers (Networking) 5.2%
General Electric Co. Electrical Equipment 5.2%
Clear Channel Broadcasting
Communications, Inc. (TV, Radio & Cable) 4.4%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS+
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ------------ ----------
<S> <C> <C>
Technology $122,018,875 32.0%
Capital Goods 65,453,287 17.2%
Consumer Staples 46,872,325 12.3%
Communication Services 40,713,363 10.7%
Health Care 39,972,906 10.5%
</TABLE>
+ These sectors represent broad groupings of related industries.
(1) excludes Short-Term Investment
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGERS OF THE VAN KAMPEN FOCUS EQUITY
FUND (FORMERLY CALLED THE VAN KAMPEN AGGRESSIVE EQUITY FUND) ABOUT THE KEY
EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE PAST SIX MONTHS.
SINCE 1998 THE FUND HAS BEEN MANAGED BY PHILIP W. FRIEDMAN AND WILLIAM S.
AUSLANDER, PORTFOLIO MANAGERS, MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT.
THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S PERFORMANCE DURING
THE SIX-MONTH REPORTING PERIOD ENDED DECEMBER 31, 1999.
Q. WHAT MARKET FACTORS AFFECTED THE FUND DURING THE REPORTING PERIOD?
A: The Dow Jones Industrial Average--perhaps the most widely recognized stock
market index--endured a difficult third quarter of 1999, losing more than 6
percent of its value. But the Dow recovered dramatically in the fourth quarter,
rising more than 11 percent to a record high on December 31. The big story,
however, continued to be the outstanding performance of growth stocks. The
NASDAQ stock market, with its higher concentration of companies in technology
and other burgeoning industries, rose almost without interruption in the last
half of 1999. It climbed an impressive 51 percent during the period, and the
vast majority of that gain came in the fourth quarter.
Q. DID RECENT MARKET CONDITIONS AFFECT HOW YOU MANAGED THE FUND?
A: No, because we consistently use a "bottom up" stock selection strategy. In
other words, we choose stocks by analyzing individual companies, not by
assessing broad market conditions. We believe that the best way of managing
through stock market volatility--such as what we encountered during the
reporting period--is to conduct even more extensive research and strengthen our
"information edge."
Q. HOW DID YOU SELECT THE INVESTMENTS IN THE FUND?
A: As always, we took advantage of the Fund's flexibility, which enables us to
place as much as 25 percent of the Fund's total assets in a particular stock if
we have a great deal of conviction that it may perform well. In practice, we
rarely concentrate the Fund's assets to this extent. For example, in all of 1999
the Fund's top position accounted for less than 8 percent of total assets.
Because of our ability to concentrate the Fund's holdings stocks in which we
have the most conviction, the performance of a small number of securities can
have more of an impact on the Fund's overall return during the reporting period.
In other words, the more we own of a company, the more that company's stock
performance will affect the Fund's performance.
Q. WHAT WERE SOME OF THE STOCKS THAT HAD THE MOST FAVORABLE IMPACT ON THE FUND'S
RETURN?
A: As the valuations of many Internet companies soar, we are especially mindful
of the high risk associated with investing in this area. To attempt to moderate
this risk, we continued to focus on strong, healthy, and, at times, even
traditional growth companies that are indirectly benefiting from the Internet's
rapid expansion. While Internet companies may come and go, we are extremely
optimistic about businesses that supply the products and services fueling
on-line growth.
For example, the Fund's performance was greatly helped by its investment in
Cisco Systems. Cisco, which makes the devices that enable computers on the
Internet to communicate with each other, is becoming known as "the" Internet
company because of its dominant role in the industry. The stock was an
impressive performer during the period, appreciating 64 percent and contributing
to the Fund's return more than any other stock. We were also pleased with the
performance of Intel, maker of the computer chips that drive most of the world's
personal computers. Another successful investment during the reporting period
was JDS Uniphase. This company helps accelerate data transmission for the
telecommunications and cable industries.
Although technology stocks generally experienced the largest gains during the
reporting period, General Electric (a diversified conglomerate that includes
businesses in electronics, broadcasting, and financial services) and
Warner-Lambert (a pharmaceutical and consumer-products company), by virtue of
their large positions in the Fund, also contributed significantly to the Fund's
return.
Keep in mind that not all securities in the Fund performed as well as those
mentioned, nor is there any guarantee they will continue to do so in the future.
- -----------------------
4
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q. WHICH STOCKS MOST DETRACTED FROM THE FUND'S PERFORMANCE?
A: As with the Fund's positive performers, detractors to total return were on a
stock-by-stock basis. These disappointments included
- Pitney Bowes, which makes postage meters and other business equipment;
- Abercrombie & Fitch, a clothing retailer popular with college students;
and
- General Dynamics, a contractor specializing in developing defense and
information systems for the U.S. Department of Defense.
The Fund's performance was also weakened by its investment in Tyco, another
diversified conglomerate and the largest holding (5.7 percent of the portfolio
as of December 31).
Q. WHAT HAPPENED WITH TYCO?
A: During the first half of the period, Tyco was one of the Fund's top
contributors to overall return, as the company generated healthy cash flows and
earnings. The stock's strong performance reversed itself in early October when
the author of a short-selling newsletter questioned Tyco's accounting
methods--specifically, how the company accounted for its corporate acquisitions.
Despite Tyco's vehement denials of wrongdoing, this allegation spurred rumors
that scared some investors, and the company's stock fell by nearly half in the
ensuing weeks. In response to the rumors, the Securities and Exchange Commission
said that, while not alleging any impropriety, it would conduct an informal
investigation of Tyco. The stock did recover some of its losses in December but,
overall, declined nearly 23 percent during the second half of 1999.
Q. GIVEN THESE FACTORS, ARE YOU TEMPTED TO SCALE BACK YOUR POSITION IN THE
STOCK?
A: No. Shortly after the allegations surfaced, Tyco's financial officers held a
large meeting at which stock analysts were invited to ask questions about the
company's accounting practices. This impressed us as a powerful statement of
confidence in the legitimacy of Tyco's business dealings. Moreover, after
dissecting the company's financial statements, we believe that Tyco is
fundamentally very strong, especially with regard to cash flows, in our opinion
one of the most important measures of a business's health. We are very
optimistic about Tyco's potential and believe that it may contribute positively
to the Fund's results in 2000.
Q. HOW DID THE FUND PERFORM DURING THE LAST HALF OF 1999?
A: The Fund performed well during the reporting period, despite Tyco's troubles.
The Fund achieved a six-month total return of 17.85 percent (Class A shares at
net asset value) as of December 31, 1999. By comparison, the Standard & Poor's
500 Index returned 7.70 percent. Past performance doesn't guarantee future
results. This index is a statistical composite that does not include any
commissions or sales charges that would be paid by an investor purchasing the
securities or investments it represents. Such costs would lower the performance
of the index. An investment cannot be made directly in an index.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A: Market conditions may serve as a backdrop for the Fund's performance, but
it's really our bottom-up approach to stock selection that governs whether the
Fund performs well or poorly in a given period. We readily admit that we don't
know what the market will bring in the first six months of 2000. We do know that
we'll continue to rely on our research staff to find out as much as we can about
the investments we already own in the Fund's portfolio, as well as the ones we'd
like to add. Not all investments will be successes, of course, but we believe
that the more we know, the greater the potential for the stocks we select to
outperform--and the smaller the risk of a favorite stock providing an unpleasant
surprise.
------------------
5
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
COMMON STOCKS+ (95.3%)
CAPITAL GOODS (17.2%)
AEROSPACE/DEFENSE (1.0%)
General Dynamics Corp.......... 69,700 $ 3,676,675
------------
ELECTRICAL EQUIPMENT (5.2%)
General Electric Co............ 128,000 19,808,000
------------
MANUFACTURING (DIVERSIFIED) (11.0%)
Textron, Inc................... 66,400 5,092,050
Tyco International Ltd......... 555,500 21,595,062
United Technologies Corp....... 235,100 15,281,500
------------
41,968,612
------------
TOTAL CAPITAL GOODS................................ 65,453,287
------------
COMMUNICATION SERVICES (10.7%)
TELECOMMUNICATIONS (CELLULAR/WIRELESS) (4.9%)
(a)Associated Group, Inc.
'A'.......................... 28,900 2,637,125
(a)Associated Group, Inc.
'B'.......................... 173,800 15,989,600
------------
18,626,725
------------
TELECOMMUNICATIONS (LONG DISTANCE) (3.1%)
Sprint Corp.................... 173,100 11,651,794
------------
TELEPHONE (2.7%)
Bell Atlantic Corp............. 169,500 10,434,844
------------
TOTAL COMMUNICATION SERVICES....................... 40,713,363
------------
CONSUMER CYCLICALS (7.4%)
RETAIL (BUILDING SUPPLIES) (4.0%)
Home Depot, Inc................ 219,500 15,049,469
------------
RETAIL (GENERAL MERCHANDISE) (2.4%)
(a)Costco Wholesale Corp....... 101,200 9,234,500
------------
RETAIL (SPECIALTY) (1.0%)
Intimate Brands, Inc........... 89,500 3,859,687
------------
TOTAL CONSUMER CYCLICALS........................... 28,143,656
------------
CONSUMER STAPLES (12.3%)
BROADCASTING (TV, RADIO & CABLE) (7.8%)
(a)AMFM, Inc................... 64,700 5,062,775
(a)AT&T Corp. Liberty Media
Group 'A'.................... 65,300 3,705,775
(a)Clear Channel
Communications, Inc.......... 187,100 16,698,675
(a)MediaOne Group, Inc......... 53,300 4,094,106
------------
29,561,331
------------
ENTERTAINMENT (2.1%)
Time Warner, Inc............... 111,700 8,091,269
------------
FOODS (0.7%)
(a)Keebler Foods Co............ 93,300 2,624,063
------------
HOUSEHOLD PRODUCTS (NON-DURABLES) (1.7%)
Procter & Gamble Co............ 60,200 6,595,662
------------
TOTAL CONSUMER STAPLES............................. 46,872,325
------------
FINANCIAL (3.4%)
BANKS (MAJOR REGIONAL) (1.8%)
Bank of New York Co., Inc...... 169,700 6,788,000
------------
FINANCIAL (DIVERSIFIED) (1.6%)
American Express Co............ 36,500 6,068,125
------------
TOTAL FINANCIAL.................................... 12,856,125
------------
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE (10.5%)
HEALTH CARE (DIVERSIFIED) (7.4%)
American Home Products Corp.... 98,100 $ 3,868,819
Bristol-Myers Squibb Co........ 164,700 10,571,681
Warner-Lambert Co.............. 167,100 13,691,756
------------
28,132,256
------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS) (3.1%)
Merck & Co., Inc............... 73,100 4,902,269
Pfizer, Inc.................... 213,900 6,938,381
------------
11,840,650
------------
TOTAL HEALTH CARE.................................. 39,972,906
------------
TECHNOLOGY (32.0%)
COMMUNICATION EQUIPMENT (10.9%)
(a)American Tower Corp. 'A'.... 203,900 6,231,694
(a)JDS Uniphase Corp........... 27,700 4,468,356
Lucent Technologies, Inc....... 69,200 5,177,025
Motorola, Inc.................. 93,300 13,738,425
Nortel Networks Corp........... 116,600 11,776,600
------------
41,392,100
------------
COMPUTERS (HARDWARE) (1.3%)
(a)Sun Microsystems, Inc....... 64,000 4,956,000
------------
COMPUTERS (NETWORKING) (5.2%)
(a)Cisco Systems, Inc.......... 185,000 19,818,125
------------
COMPUTERS (SOFTWARE & SERVICES) (6.9%)
(a)America Online, Inc......... 64,200 4,843,087
(a)Microsoft Corp.............. 183,800 21,458,650
------------
26,301,737
------------
ELECTRONICS (SEMICONDUCTORS) (6.3%)
Intel Corp..................... 125,300 10,313,757
(a)Maxim Integrated
Products, Inc................ 209,100 9,866,906
Texas Instruments, Inc......... 41,800 4,049,375
------------
24,230,038
------------
EQUIPMENT (SEMICONDUCTORS) (1.4%)
(a)Applied Materials, Inc...... 42,000 5,320,875
------------
TOTAL TECHNOLOGY................................... 122,018,875
------------
UTILITIES (1.8%)
ELECTRIC COMPANIES (1.8%)
Montana Power Co............... 193,100 6,963,669
------------
TOTAL LONG-TERM INVESTMENTS (95.3%) (COST
$289,487,016)........................................ 362,994,206
------------
<CAPTION>
PAR
VALUE
-----------
SHORT-TERM INVESTMENT (5.0%)
<S> <C> <C>
REPURCHASE AGREEMENT (5.0%)
Chase Securities, Inc., 2.60%,
dated $18,844,000
12/31/99, due 1/3/00, to be repurchased
at $18,848,083 collateralized by
$19,230,858 U.S. Treasury Notes, 6.125%,
due 12/31/01, valued at $19,230,858
(COST $18,844,000)............................. 18,844,000
------------
TOTAL INVESTMENTS (100.3%) (COST $308,331,016)....... 381,838,206
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.3%)........ (997,208)
------------
NET ASSETS (100%).................................... $380,840,998
============
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(a) -- Non-income producing security
+ -- The common stocks are classified by sectors which represent
broad groupings of related industries.
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------
ASSETS:
Investments at Value (Cost $308,331,016).................. $ 381,838,206
Receivable for:
Fund Shares Sold........................................ 3,827,952
Dividends............................................... 118,757
Interest................................................ 1,361
Deferred Organizational Costs............................. 10,832
Other..................................................... 9,145
-------------
Total Assets............................................ 385,806,253
-------------
LIABILITIES:
Payable for:
Investments Purchased................................... 3,784,069
Distribution Fees....................................... 428,799
Fund Shares Redeemed.................................... 319,192
Investment Advisory Fees................................ 241,153
Administrative Fees..................................... 74,593
Shareholder Reporting Expenses.......................... 34,691
Transfer Agent Fees..................................... 30,501
Directors' Fees and Expenses............................ 22,130
Professional Fees....................................... 18,479
Bank Overdraft.......................................... 5,665
Custody Fees............................................ 3,631
Other..................................................... 2,352
-------------
Total Liabilities....................................... 4,965,255
-------------
NET ASSETS.................................................. $ 380,840,998
=============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 15,247
Paid in Capital in Excess of Par.......................... 290,178,519
Net Unrealized Appreciation on Investments................ 73,507,190
Accumulated Net Realized Gain............................. 19,090,732
Accumulated Net Investment Loss........................... (1,950,690)
-------------
NET ASSETS.................................................. $ 380,840,998
=============
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $109,845,926 and 4,297,911 Shares
Outstanding)............................................ $ 25.56
=============
Maximum Sales Charge...................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100/ (100 - maximum sales charge)).............. $ 27.12
=============
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $230,109,027 and 9,296,880 Shares
Outstanding)*........................................... $ 24.75
=============
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $40,886,045 and 1,652,506 Shares
Outstanding)*........................................... $ 24.74
=============
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 924,150
Interest.................................................. 266,436
-----------
Total Income............................................. 1,190,586
-----------
EXPENSES:
Investment Advisory Fees.................................. 1,375,910
Distribution Fees (Attributed to Classes A, B and C of
$104,390, $954,183 and $156,305, respectively).......... 1,214,878
Administrative Fees....................................... 384,274
Transfer Agent Fees....................................... 93,898
Shareholder Reports....................................... 50,607
Filing and Registration Fees.............................. 39,692
Professional Fees......................................... 31,511
Directors' Fees and Expenses.............................. 12,120
Custodian Fees............................................ 6,599
Amortization of Organizational Costs...................... 4,409
Other..................................................... 5,408
-----------
Total Expenses........................................... 3,219,306
Less Expense Reductions.................................. (93,002)
-----------
Net Expenses............................................. 3,126,304
-----------
Net Investment Income/Loss.................................. (1,935,718)
-----------
NET REALIZED GAIN/LOSS ON:
Investments............................................... 21,381,649
-----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... 38,496,198
-----------
End of the Period:
Investments............................................. 73,507,190
-----------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 35,010,992
-----------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. 56,392,641
-----------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $54,456,923
===========
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ (1,935,718) $ (2,961,000)
Net Realized Gain/Loss.................................... 21,381,649 24,593,000
Net Unrealized Appreciation/Depreciation.................. 35,010,992 32,373,000
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 54,456,923 54,005,000
----------------- -------------
DISTRIBUTIONS:
Net Realized Gain:
Class A................................................... (5,402,875) (4,962,000)
Class B................................................... (12,406,790) (11,751,000)
Class C................................................... (2,124,638) (2,021,000)
----------------- -------------
Net Decrease in Net Assets Resulting from Distributions... (19,934,303) (18,734,000)
----------------- -------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed................................................ 111,015,884 95,378,000
Distributions Reinvested.................................. 18,264,016 17,353,000
Redeemed.................................................. (60,168,039) (90,199,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... 69,111,861 22,532,000
----------------- -------------
Total Increase/Decrease in Net Assets..................... 103,634,481 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 $(1,950,690) and $(15,000),
respectively)............................................. $ 380,840,998 $ 277,207,000
================= =============
- ------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
Shares:
Subscribed............................................. 2,334,736 1,623,000
Distributions Reinvested............................... 201,931 266,000
Redeemed............................................... (1,450,938) (1,877,000)
----------------- -------------
Net Increase/Decrease in Class A Shares Outstanding...... 1,085,729 12,000
================= =============
Dollars:
Subscribed............................................. $ 55,812,271 $ 31,396,000
Distributions Reinvested............................... 4,868,559 4,594,000
Redeemed............................................... (34,730,067) (34,991,000)
----------------- -------------
Net Increase/Decrease.................................... $ 25,950,763 $ 999,000
================= =============
Ending Paid in Capital................................... $ 83,415,812 $ 57,462,000+
================= =============
Class B:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 1,513,024 2,694,000
Distributions Reinvested............................... 491,266 650,000
Redeemed............................................... (579,882) (2,106,000)
----------------- -------------
Net Increase/Decrease in Class B Shares Outstanding...... 1,424,408 1,238,000
================= =============
Dollars:
Subscribed............................................. $ 34,950,455 $ 50,034,000
Distributions Reinvested............................... 11,475,970 10,965,000
Redeemed............................................... (13,354,126) (38,411,000)
----------------- -------------
Net Increase/Decrease.................................... $ 33,072,299 $ 22,588,000
================= =============
Ending Paid in Capital................................... $ 175,759,876 $ 142,680,000+
================= =============
Class C:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 881,516 744,000
Distributions Reinvested............................... 82,205 106,000
Redeemed............................................... (527,036) (900,000)
----------------- -------------
Net Increase/Decrease in Class C Shares Outstanding...... 436,685 (50,000)
================= =============
Dollars:
Subscribed............................................. $ 20,253,158 $ 13,948,000
Distributions Reinvested............................... 1,919,487 1,794,000
Redeemed............................................... (12,083,846) (16,797,000)
----------------- -------------
Net Increase/Decrease.................................... $ 10,088,799 $ (1,055,000)
================= =============
Ending Paid in Capital................................... $ 31,018,078 $ 20,928,000+
================= =============
</TABLE>
- -----------------
<TABLE>
<S> <C>
+ Ending Paid in Capital amounts do not reflect permanent book
to tax differences.
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 --------------------------------- JANUARY 2, 1996*
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 22.984 $20.007 $ 16.98 $ 14.40 $ 12.00
----------------- ------- ------- ------- ---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................. (0.086) (0.141) (0.07) 0.01 0.06
Net Realized and Unrealized Gain/Loss...... 4.107 4.712 5.03 3.95 2.40
----------------- ------- ------- ------- ---------------
Total From Investment Operations........... 4.021 4.571 4.96 3.96 2.46
----------------- ------- ------- ------- ---------------
DISTRIBUTIONS
Net Investment Income...................... -- -- -- (0.03) (0.06)
Net Realized Gain.......................... (1.447) (1.594) (1.93) (1.35) --
----------------- ------- ------- ------- ---------------
Total Distributions........................ (1.447) (1.594) (1.93) (1.38) (0.06)
----------------- ------- ------- ------- ---------------
NET ASSET VALUE, END OF PERIOD............... $ 25.558 $22.984 $ 20.01 $ 16.98 $ 14.40
================= ======= ======= ======= ===============
TOTAL RETURN (1)............................. 17.85%** 25.57% 30.93% 28.93% 20.52%**
================= ======= ======= ======= ===============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $ 109,846 $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......................... (0.67)% (0.73)% (0.37)% (0.04)% 1.22%
Portfolio Turnover Rate...................... 71%** 282% 308% 241% 204%**
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation During
the Period
Per Share Benefit to Net Investment
Income/Loss.............................. $ 0.01 $ 0.02 $ 0.04 $ 0.02 $ 0.06
Ratios Before Expense Limitation:
Expenses to Average Net Assets............. 1.59% 1.61% 1.71% 2.38% 3.26%
Net Investment Income/Loss to Average Net
Assets................................... (0.78)% (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>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 ----------------------------------- JANUARY 2, 1996*
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD....... $ 22.380 $ 19.670 $ 16.85 $ 14.38 $ 12.00
----------------- -------- -------- ------- ---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............... (0.170) (0.282) (0.21) (0.02) 0.03
Net Realized and Unrealized Gain/Loss.... 3.988 4.586 4.96 3.86 2.39
----------------- -------- -------- ------- ---------------
Total From Investment Operations......... 3.818 4.304 4.75 3.84 2.42
----------------- -------- -------- ------- ---------------
DISTRIBUTIONS
Net Investment Income.................... -- -- -- (0.02) (0.04)
Net Realized Gain........................ (1.447) (1.594) (1.93) (1.35) --
----------------- -------- -------- ------- ---------------
Total Distributions...................... (1.447) (1.594) (1.93) (1.37) (0.04)
----------------- -------- -------- ------- ---------------
NET ASSET VALUE, END OF PERIOD............. $ 24.751 $ 22.380 $ 19.67 $ 16.85 $ 14.38
================= ======== ======== ======= ===============
TOTAL RETURN (1)........................... 17.44%** 24.59% 29.94% 28.01% 20.18%**
================= ======== ======== ======= ===============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).......... $ 230,109 $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....................... (1.42)% (1.50)% (1.11)% (0.83)% 0.43%
Portfolio Turnover Rate.................... 71%** 282% 308% 241% 204%**
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss............................ $ 0.01 $ 0.02 $ 0.04 $ 0.02 $ 0.07
Ratios Before Expense Limitation:
Expenses to Average Net Assets........... 2.34% 2.36% 2.47% 2.88% 3.79%
Net Investment Income/Loss to Average Net
Assets................................. (1.53)% (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>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
FINANCIAL HIGHLIGHTS (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 -------------------------------- JANUARY 2, 1996*
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.......... $ 22.363 $19.655 $ 16.83 $14.37 $ 12.00
----------------- ------- ------- ------ ---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss.................. (0.170) (0.278) (0.21) (0.06) 0.03
Net Realized and Unrealized Gain/Loss....... 3.996 4.580 4.97 3.89 2.38
----------------- ------- ------- ------ ---------------
Total From Investment Operations............ 3.826 4.302 4.76 3.83 2.41
----------------- ------- ------- ------ ---------------
DISTRIBUTIONS
Net Investment Income....................... -- -- -- (0.02) (0.04)
Net Realized Gain........................... (1.447) (1.594) (1.93) (1.35) --
----------------- ------- ------- ------ ---------------
Total Distributions......................... (1.447) (1.594) (1.93) (1.37) (0.04)
----------------- ------- ------- ------ ---------------
NET ASSET VALUE, END OF PERIOD................ $ 24.742 $22.363 $ 19.66 $16.83 $ 14.37
================= ======= ======= ====== ===============
TOTAL RETURN (1).............................. 17.45%** 24.67% 29.90% 28.04% 20.10%**
================= ======= ======= ====== ===============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............. $ 40,886 $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.................................. (1.42)% (1.48)% (1.13)% (0.77)% 0.44%
Portfolio Turnover Rate....................... 71%** 282% 308% 241% 204%**
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss............................... $ 0.01 $ 0.02 $ 0.04 $ 0.02 $ 0.07
Ratios Before Expense Limitation:
Expenses to Average Net Assets.............. 2.34% 2.36% 2.25% 3.23% 3.80%
Net Investment Income/Loss to Average Net
Assets.................................... (1.53)% (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>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen Focus Equity Fund (the "Fund") is organized as a separate
non-diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation,
which is registered as an open-end management investment corporation, under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to seek capital appreciation by investing primarily in a non-diversified
portfolio of corporate equity and equity linked securities. The Fund commenced
operations on January 2, 1996.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
For certain purchases of Class A shares, the front-end sales charge may be
waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
Interest income is recognized on an accrual basis except where collection is in
doubt. Income, expenses (other than class specific expenses), and realized and
unrealized gains or losses are allocated to each class of shares based upon
their relative net assets. Distributions from the Fund are recorded on the
ex-distribution date.
4. SHORT SALES: The Fund may sell securities short. A short sale is a
transaction in which the Fund sells securities it may or may not own, but has
borrowed, in anticipation of a decline in the market price of the securities.
The Fund is obligated to purchase securities at the market price to replace the
borrowed securities at the time of replacement. The Fund may have to pay a
premium to borrow the
- -----------------------
12
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
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.
5. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's commencement of operations. The Adviser has agreed that in the event
any of the initial shares of the Fund originally purchased by Van Kampen are
redeemed by the Fund during the amortization period, the Fund will be reimbursed
for any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
6. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ------------ ----------- ------------ -------------
<S> <C> <C> <C>
$308,331,016 $78,258,726 $(4,751,536) $73,507,190
</TABLE>
7. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
0.90% 1.50% 2.25%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $9,840
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
------------------
13
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
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
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $496,301 for Class A shares and deferred sales charges of
$229,651 and $3,502 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 December 31, 1999, the Fund incurred $36,475 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $246,636,599 and sales of $207,337,441 of investment
securities other than long-term U.S. government securities and short-term
investments. There were no purchases or sales of long-term U.S. government
securities.
D. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
- -----------------------
14
<PAGE>
VAN KAMPEN FOCUS EQUITY FUND
(FORMERLY VAN KAMPEN AGGRESSIVE EQUITY FUND)
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the Focus Equity Fund (the
"Fund") was held on December 15, 1999.
The description of each proposal and number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
---------- --------
<S> <C> <C>
J. Miles Branagan........................................... 10,452,339 49,081
Jerry D. Choate............................................. 10,451,838 49,582
Linda Hutton Heagy.......................................... 10,451,617 49,804
R. Craig Kennedy............................................ 10,452,490 48,931
Mitchell M. Merin........................................... 10,453,787 47,634
Jack E. Nelson.............................................. 10,452,122 49,298
Richard F. Powers, III...................................... 10,453,067 48,354
Phillip B. Rooney........................................... 10,451,718 49,703
Fernando Sisto.............................................. 10,448,403 53,018
Wayne W. Whalen............................................. 10,452,243 49,177
Suzanne H. Woolsey.......................................... 10,450,887 50,534
Paul G. Yovovich............................................ 10,452,523 48,897
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C>
10,415,463 25,838 60,120
</TABLE>
------------------
15
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM
and selecting CONTACT US
* Closed to new investors
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management of
Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555/
/www.vankampen.com
MSAE SAR 02/00 -C- Van Kampen Funds Inc. 2000
474 574 674
<PAGE>
VAN KAMPEN
MID CAP GROWTH FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN MID CAP GROWTH FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders.......................... 1
Economic Snapshot............................... 2
Investment Overview............................. 3
Portfolio of Investments........................ 6
Statement of Assets and Liabilities............. 8
Statement of Operations......................... 9
Statement of Changes in Net Assets.............. 10
Financial Highlights ........................... 11
Notes to Financial Statements................... 12
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN MID CAP GROWTH FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Services 31.9%
Consumer Products-Miscellaneous 15.4%
Short-Term Investment 15.3%
Capital Equipment 13.6%
Materials 6.5%
Other 5.5%
Finance 5.3%
Health Care 4.4%
Energy 1.5%
Capital Goods 0.6%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C S&P MIDCAP
SHARES SHARES SHARES 400 INDEX
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
Since Inception (October 25, 1999)
With Sales Charge*................................... 20.45% 22.70% 26.80% N/A
Without Sales Charge***.............................. 27.80% 27.70% 27.80% 16.42%
Commencement Date...................................... 10/25/99 10/25/99 10/25/99 N/A
</TABLE>
The Standard & Poor's MidCap 400 Index is a broad-based index that reflects the
general performance of 400 domestic mid-cap stocks.
* The returns above are calculated using the maximum sales charge for Class A
shares (5.75%) and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS(1)
PERCENT OF
SECURITY SECTOR NET ASSETS
- -------- ------------------------------ ----------
<S> <C> <C>
VERITAS Software Corp. Computers/Software 3.1%
McLeodUSA, Inc. Telecommunications 1.5%
Omnipoint Corp. Telecommunications
(Cellular/Wireless) 1.5%
MedImmune, Inc. HealthCare (Drugs-Generic & %
Others) 1.5
QLogic Corp. Electronic Components - %
Miscellaneous 1.5
</TABLE>
(1) excludes Short-Term Investment
<TABLE>
<CAPTION>
TOP FIVE SECTORS+
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ---------- ----------
<S> <C> <C>
Services $9,481,512 31.9%
Consumer Products - Miscellaneous 4,592,650 15.4%
Capital Equipment 4,053,991 13.6%
Materials 1,943,412 6.5%
Finance 1,580,950 5.3%
</TABLE>
+ These sectors represent broad groupings of related industries.
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN MID CAP GROWTH FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGERS OF THE VAN KAMPEN MID CAP GROWTH
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS SINCE THE
FUND'S INCEPTION ON OCTOBER 25, 1999. SINCE THAT DATE THE FUND HAS BEEN MANAGED
BY ARDEN C. ARMSTRONG, DAVID P. CHU, AND STEVE B. CHULIK, PORTFOLIO MANAGERS,
MILLER ANDERSON & SHERRERD, LLP. THE FOLLOWING EXCERPTS REFLECT THEIR VIEWS ON
THE FUND'S PERFORMANCE DURING THE PERIOD FROM INCEPTION TO DECEMBER 31, 1999.
Q. HOW WAS THE FUND AFFECTED BY MARKET CONDITIONS SINCE ITS INCEPTION?
A. The Fund launched its operations in the midst of a stock-market rally driven
primarily by technology stocks. While the Dow Jones Industrial Average--perhaps
the most widely recognized stock market index--performed well during the final
months of the year, it was the technology-heavy NASDAQ stock index that stole
the show, returning a phenomenal 45 percent between October 25 and December 31.
Q. GIVEN THESE CONDITIONS, WHAT STRATEGIES DID YOU USE TO SELECT STOCKS FOR THE
FUND?
A. While market conditions provide the backdrop for our investment decisions,
they don't have a direct impact on how we manage the Fund. In all types of
market environments, we apply a four-step process when deciding which stocks to
add to the portfolio. First, objective research helps us screen out companies
that don't meet our investment criteria--including such factors as market
capitalization and earnings growth rates. Then we examine each stock's
fundamentals by analyzing quantitative factors such as sales growth or profit
margins and more subjective measures such as our assessment of a company's
management quality and strategic position. We then use valuation analysis to
eliminate from consideration the stocks that we believe are the most overvalued.
Finally, to increase the Fund's diversification, we look to invest in companies
representing a variety of industries.
Our goal is to invest in companies in which we believe business is good and
getting better. This approach benefited the Fund during the brief reporting
period, as many of our individual stock picks--especially in the technology
area--enjoyed excellent results.
Q. COULD YOU GIVE SOME EXAMPLES OF TECHNOLOGY STOCKS THAT PARTICULARLY HELPED
THE FUND?
A. Sure. In the area of wireless communications, the Fund benefited greatly from
its investment in Qualcomm. Qualcomm has pioneered CDMA (code division multiple
access) technology, which is rapidly becoming a standard used in wireless phones
worldwide. This stock performed exceptionally well for the Fund, but we sold it
late in the reporting period because the stock's valuation had vaulted it beyond
the market capitalization range in which we typically invest. Other stocks in
the wireless-communications area that helped the Fund's return included service
providers Omnipoint, Voicestream, and Western Wireless; and RF Micro Devices,
which, among other businesses, makes essential components for cellular phones.
The Fund's results were also boosted by its holdings in the data-storage area.
As the Internet becomes an increasingly important part of daily life, it's
necessary to develop systems to store all of the information being generated.
Along those lines, we invested successfully in Veritas, a software company that
helps businesses manage and store large amounts of data, and QLogic, which
develops products that connect storage devices to computers.
Q. DID ANY NONTECHNOLOGY STOCKS HELP THE FUND?
A. Yes, we were pleased with the Fund's investments in media stocks. For
example, Univision, the nation's largest Spanish-language television network,
has been able to capitalize on the increasing economic influence of Spanish
speakers in the United States, as has radio broadcaster Hispanic Broadcasting.
We benefited from owning both of these stocks during the reporting period. Other
media stocks that helped our results were TV Guide, advertising firm Young and
Rubicam, and cable company Jones Intercable. Also, although most electric
utility companies performed poorly in recent months, we were very pleased with
our investment in Calpine, which proved to be an exception to that trend.
Keep in mind that not all stocks in the Fund performed as favorably, nor is
there any guarantee they will continue to do so in the future.
- -----------------------
4
<PAGE>
VAN KAMPEN MID CAP GROWTH FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q. WHAT ARE SOME STOCKS THAT HURT THE FUND'S PERFORMANCE?
A. The Fund's disappointments during the reporting period were generally on a
stock-by-stock basis, rather than a particular industry as a whole. Cheap
Tickets, a leading retail seller of discount tickets for domestic air travel,
saw its stock price decline throughout the reporting period--the company's
earnings suffered in the midst of an airline price war. Meanwhile, Medquist,
which provides document-management services to the health care industry, also
performed poorly, as many health care stocks struggled in the face of
uncertainty about how political reforms may affect the industry's profitability.
The Fund was also negatively affected by our investment in barnesandnoble.com,
the Internet arm of the bookselling chain, proving that not all Internet
companies thrived during the fourth quarter of 1999.
Q. HOW DID THE FUND PERFORM OVERALL?
A. Very well, thanks to the excellent results of many individual holdings in the
Fund's portfolio. The Fund achieved a total return of 27.80 percent (Class A
shares at net asset value) during the period from inception on October 28, 1999,
to December 31, 1999. By comparison, the Standard & Poor's MidCap 400 Index, an
unmanaged capitalization-weighted measure of 400 stocks in the midrange sector
of the market, returned 16.42 percent. Keep in mind that this index is a
statistical composite that does not include any commissions or sales charges
that would be paid by an investor purchasing the securities it represents. Such
costs would lower the performance of this index. It's not possible to invest
directly in an index. Past performance doesn't guarantee future results.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. Barring any unforeseen events, we envision continued worldwide economic
health, low inflation, and strong earnings growth. Of course, this outlook may
in part depend on whether the Federal Reserve again increases interest rates
soon. Although recent rate increases haven't had a substantially adverse effect
on stock prices, another one could be more consequential. We're also keeping our
eye on stock valuations, because the higher they get, the greater the negative
reaction that could result if investors were to lose their enthusiasm for growth
stocks. Regardless of the short-term market environment, however, we believe
that our best long-term course of action is to stick with our investment
discipline and continue to identify those stocks we believe will provide the
best long-term results for the Fund.
------------------
5
<PAGE>
VAN KAMPEN MID CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
COMMON STOCKS+ (79.2%)
CAPITAL EQUIPMENT (13.6%)
ELECTRICAL & ELECTRONICS (9.6%)
(a)Applied Micro Circuits
Corp........................... 2,700 $ 343,575
(a)Atmel Corp.................... 6,000 177,375
(a)Broadcom Corp................. 1,000 272,375
(a)DII Group, Inc................ 2,500 177,422
(a)KLA-Tencor Corp............... 1,800 200,475
Linear Technology Corp........... 3,900 279,094
(a)Maxim Integrated
Products, Inc.................. 7,800 368,062
Novellus Systems, Inc............ 3,000 367,594
(a)Samina Corp................... 1,600 159,800
(a)SDL, Inc...................... 1,200 261,600
(a)Vitesse Semiconductor......... 4,600 241,213
-----------
2,848,585
-----------
ELECTRONIC COMPONENTS-MISCELLANEOUS (1.5%)
(a)QLogic Corp................... 2,800 447,650
-----------
ENERGY EQUIPMENT & SERVICES (2.5%)
(a)BJ Services Co................ 7,800 326,137
Global Marine, Inc............... 9,400 156,275
(a)Nabors Industries, Inc........ 8,900 275,344
-----------
757,756
-----------
TOTAL CAPITAL EQUIPMENT............................. 4,053,991
-----------
CAPITAL GOODS (0.6%)
MULTI-INDUSTRY (0.6%)
Danaher Corp..................... 3,300 159,225
-----------
CONSUMER PRODUCTS-MISCELLANEOUS (15.4%)
APPLIANCES & HOUSEHOLD DURABLES (0.7%)
Dial Corp........................ 8,200 199,363
-----------
BEVERAGES & TOBACCO (0.6%)
(a)Beringer Wine Estates
Holdings, Inc.................. 4,200 167,475
-----------
COMPUTERS/SOFTWARE (12.1%)
Adobe Systems, Inc............... 2,800 188,300
(a)At Home Corp. `A'............. 5,400 231,525
(a)CheckFree Holdings Corp....... 2,400 250,800
(a)Digex, Inc.................... 700 48,125
(a)Digital Island, Inc........... 1,500 142,687
Electronics for Imaging, Inc..... 3,500 294,000
(a)Exodus
Communications, Inc............ 2,000 177,625
(a)Inktomi Corp.................. 2,800 248,500
(a)NaviSite, Inc................. 200 20,000
(a)Portal Software, Inc.......... 1,300 133,738
(a)PSINet, Inc................... 4,300 265,525
(a)Rational Software Corp........ 5,900 289,837
(a)Siebel Systems, Inc........... 4,600 386,400
(a)VERITAS Software Corp......... 6,550 937,469
-----------
3,614,531
-----------
RETAIL-GENERAL (2.0%)
(a)barnesandnoble.com, Inc....... 8,500 120,594
(a)Ticketmaster
Online-CitySearch, Inc......... 5,800 222,937
Tiffany & Co..................... 3,000 267,750
-----------
611,281
-----------
TOTAL CONSUMER PRODUCTS-MISCELLANEOUS............... 4,592,650
-----------
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
ENERGY (1.5%)
ENERGY SOURCES (1.5%)
(a)Calpine Corp.................. 5,300 $ 339,200
Devon Energy Corp................ 3,400 111,775
-----------
TOTAL ENERGY........................................ 450,975
-----------
FINANCE (5.3%)
BANKING (1.8%)
National Commerce Bancorp........ 9,800 222,338
Zions Bancorp.................... 5,100 301,856
-----------
524,194
-----------
FINANCIAL SERVICES (3.5%)
Allied Capital Corp. II.......... 6,200 113,538
(a)Concord EFS, Inc.............. 7,200 185,400
(a)DLJdirect, Inc................ 8,900 120,706
(a)E*TRADE Group, Inc............ 6,600 172,425
Heller Financial, Inc............ 7,800 156,487
(a)Knight/Trimark Group, Inc..... 6,700 308,200
-----------
1,056,756
-----------
TOTAL FINANCE....................................... 1,580,950
-----------
HEALTH CARE (4.4%)
HEALTH CARE (DRUGS-GENERIC & OTHERS) (4.4%)
(a)Biogen, Inc................... 2,600 219,700
(a)Biovail Corporation
International.................. 3,100 290,625
(a)Chiron Corp................... 5,900 250,013
(a)Forest Laboratories, Inc.
`A'............................ 1,800 110,588
MedImmune, Inc................... 2,700 447,862
-----------
TOTAL HEALTH CARE................................... 1,318,788
-----------
MATERIALS (6.5%)
SATELLITE TELECOMMUNICATIONS (1.8%)
(a)Gilat Satellite Networks
Ltd............................ 1,500 178,125
(a)Globalstar Telecommunications
Ltd............................ 4,700 206,800
(a)Loral Space &
Communications................. 6,900 167,756
-----------
552,681
-----------
TELECOMMUNICATIONS EQUIPMENT (4.7%)
ANTEC Corp....................... 3,300 120,450
(a)CIENA Corp.................... 3,600 207,000
(a)Harmonic, Inc................. 4,000 379,750
Optical Coating
Laboratory, Inc................ 1,500 444,000
(a)RF Micro Devices, Inc......... 3,500 239,531
-----------
1,390,731
-----------
TOTAL MATERIALS..................................... 1,943,412
-----------
SERVICES (31.9%)
ADVERTISING SERVICES (4.6%)
DoubleClick, Inc................. 1,500 379,594
(a)Lamar Advertising Co.......... 3,300 199,856
(a)TMP Worldwide, Inc............ 3,000 426,000
Young & Rubicam, Inc............. 5,200 367,900
-----------
1,373,350
-----------
BROADCASTING & PUBLISHING (10.2%)
(a)Cablevision Systems Corp...... 2,300 173,650
(a)Charter
Communications, Inc............ 7,500 164,063
(a)Citadel Communications
Corp........................... 4,300 278,962
(a)Hispanic Broadcasting Corp.... 2,600 239,769
(a)Imax Corp..................... 7,000 191,625
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN MID CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
(a)Jones Intercable, Inc......... 2,800 $ 194,075
BROADCASTING & PUBLISHING (CONT.)
(a)Liberty Digital, Inc.......... 5,200 386,100
(a)MGM Grand, Inc................ 3,900 196,219
(a)Premier Parks, Inc............ 7,200 207,900
Reader's Digest
Association, Inc. (The) `A'.... 4,600 134,550
(a)TV Guide, Inc................. 8,600 369,800
(a)Univision
Communications, Inc............ 2,700 275,906
(a)Valassis
Communications, Inc............ 5,600 236,600
-----------
3,049,219
-----------
BUSINESS & PUBLIC SERVICES (3.6%)
(a)Dycom Industries, Inc......... 5,300 233,531
(a)Entrust Technologies, Inc..... 3,600 215,775
(a)FISERV, Inc................... 7,400 283,512
(a)USWeb Corp.................... 7,700 342,169
-----------
1,074,987
-----------
COMMERCIAL SERVICES (3.2%)
(a)Network Solutions, Inc. `A'... 1,100 239,319
(a)Sapient Corp.................. 3,000 422,812
(a)Verio, Inc.................... 6,000 277,125
-----------
939,256
-----------
HEALTHCARE SUPPLIES & SERVICES (3.3%)
(a)Health Management
Associates, Inc. `A'........... 15,300 204,637
(a)Lincare Holdings, Inc......... 11,700 405,844
(a)Medquist, Inc................. 5,200 134,225
(a)MiniMed, Inc.................. 3,100 227,075
-----------
971,781
-----------
SERVICES-MISCELLANEOUS/DIVERSIFIED (0.6%)
(a)Edison Schools, Inc........... 2,000 31,500
(a)United Rentals, Inc........... 7,800 133,575
-----------
165,075
-----------
TELECOMMUNICATIONS (2.8%)
(a)McLeodUSA, Inc................ 7,800 459,225
(a)NEXTLINK
Communications, Inc............ 4,600 382,088
-----------
841,313
-----------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) (3.6%)
(a)Omnipoint Corp................ 3,800 458,375
(a)Tritel, Inc................... 5,500 174,281
(a)Western Wireless Corp......... 6,500 433,875
-----------
1,066,531
-----------
TOTAL SERVICES...................................... 9,481,512
-----------
TOTAL LONG-TERM INVESTMENTS (79.2%)
(COST $20,462,787)................................ 23,581,503
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
SHORT-TERM INVESTMENT (15.3%)
REPURCHASE AGREEMENT (15.3%)
Chase Securities, Inc., 2.60%, dated $4,549,000
12/31/99, due 1/3/00, to be repurchased
at $4,549,986 collateralized by $4,539,760
U.S. Treasury Notes, 6.125%,
due 12/31/01, valued at $4,539,760
(COST $4,549,000)............................... $ 4,549,000
-----------
TOTAL INVESTMENTS (94.5%) (COST $25,011,787).......... 28,130,503
OTHER ASSETS IN EXCESS OF LIABILITIES (5.5%).......... 1,635,004
-----------
NET ASSETS (100%)..................................... $29,765,507
===========
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(a) -- Non-income producing security
+ -- The common stocks are classified by sectors which represent
broad groupings of related industries.
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN MID CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------
ASSETS:
Investments at Value (Cost $25,011,787) (including
repurchase agreement of $4,549,000)..................... $ 28,130,503
Cash...................................................... 594
Receivable for:
Fund Shares Sold........................................ 1,687,492
Investments Sold........................................ 2,471
Dividends............................................... 1,692
Interest................................................ 503
-----------------
Total Assets............................................ 29,823,255
-----------------
LIABILITIES:
Payable for:
Distribution Fees....................................... 16,498
Investment Advisory Fees................................ 13,172
Fund Shares Redeemed.................................... 8,888
Shareholder Reporting Expenses.......................... 8,168
Professional Fees....................................... 5,455
Administrative Fees..................................... 4,837
Custody Fees............................................ 371
Directors' Fees and Expenses............................ 353
Other..................................................... 6
-----------------
Total Liabilities....................................... 57,748
-----------------
NET ASSETS.................................................. $ 29,765,507
=================
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 2,330
Paid in Capital in Excess of Par.......................... 26,240,704
Net Unrealized Appreciation on Investments................ 3,118,716
Accumulated Net Realized Gain............................. 444,373
Accumulated Net Investment Loss........................... (40,616)
-----------------
NET ASSETS.................................................. $ 29,765,507
=================
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $12,854,276 and 1,006,022
Shares Outstanding)..................................... $ 12.78
=================
Maximum Sales Charge...................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100/ (100 - maximum sales charge)).............. $ 13.56
=================
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $8,308,938 and 650,792 Shares Outstanding)*... $ 12.77
=================
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $8,602,293 and 673,557 Shares Outstanding)*... $ 12.77
=================
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN MID CAP GROWTH FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
OCTOBER 25, 1999* TO DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 3,713
Interest.................................................. 23,974
----------
Total Income............................................. 27,687
----------
EXPENSES:
Investment Advisory Fees.................................. 18,837
Distribution Fees (Attributed to Classes A, B and C of
$2,617, $6,269 and $7,899, respectively)................ 16,785
Filing and Registration Fees.............................. 11,225
Shareholder Reports....................................... 8,168
Administrative Fees....................................... 6,725
Professional Fees......................................... 5,811
Custodian Fees............................................ 371
Directors' Fees and Expenses.............................. 353
Transfer Agent Fees....................................... 23
Other..................................................... 5
----------
Total Expenses........................................... 68,303
----------
Net Investment Income/Loss.................................. (40,616)
----------
NET REALIZED GAIN/LOSS ON:
Investments............................................... 444,373
----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... --
----------
End of the Period:
Investments............................................. 3,118,716
----------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 3,118,716
----------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. 3,563,089
----------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $3,522,473
==========
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Commencement of operations
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN MID CAP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OCTOBER 25, 1999* TO
DECEMBER 31, 1999
(UNAUDITED)
<S> <C>
- ---------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ (40,616)
Net Realized Gain/Loss.................................... 444,373
Net Unrealized Appreciation/Depreciation.................. 3,118,716
-------------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 3,522,473
-------------------
CAPITAL SHARES TRANSACTIONS (1):
Subscribed................................................ 24,821,486
Redeemed.................................................. (578,452)
-------------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... 24,243,034
-------------------
Total Increase/Decrease in Net Assets..................... 27,765,507
NET ASSETS--Beginning of Period............................. 2,000,000
-------------------
NET ASSETS--End of Period (Including accumulated net
investment loss of $(40,616) at December 31, 1999)........ $ 29,765,507
===================
- ---------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
Shares:
Subscribed (Initial Shares of 70,000).................. 1,021,486
Redeemed............................................... (15,464)
-------------------
Net Increase/Decrease in Class A Shares Outstanding...... 1,006,022
===================
Dollars:
Subscribed............................................. $ 10,821,433
Redeemed............................................... (181,822)
-------------------
Net Increase/Decrease.................................... $ 10,639,611
===================
Beginning Paid in Capital................................ $ 700,000
===================
Ending Paid in Capital................................... $ 11,339,611
===================
Class B:
- ------------------------------------------------------------
Shares:
Subscribed (Initial Shares of 70,000).................. 659,143
Redeemed............................................... (8,351)
-------------------
Net Increase/Decrease in Class B Shares Outstanding...... 650,792
===================
Dollars:
Subscribed............................................. $ 6,783,005
Redeemed............................................... (96,524)
-------------------
Net Increase/Decrease.................................... $ 6,686,481
===================
Beginning Paid in Capital................................ $ 700,000
===================
Ending Paid in Capital................................... $ 7,386,481
===================
Class C:
- ------------------------------------------------------------
Shares:
Subscribed (Initial Shares of 60,000).................. 697,723
Redeemed............................................... (24,166)
-------------------
Net Increase/Decrease in Class C Shares Outstanding...... 673,557
===================
Dollars:
Subscribed............................................. $ 7,217,048
Redeemed............................................... (300,106)
-------------------
Net Increase/Decrease.................................... $ 6,916,942
===================
Beginning Paid in Capital................................ $ 600,000
===================
Ending Paid in Capital................................... $ 7,516,942
===================
</TABLE>
- -----------------
<TABLE>
<S> <C>
* Commencement of operations
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN MID CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------- -------------------- --------------------
OCTOBER 25, 1999* TO OCTOBER 25, 1999* TO OCTOBER 25, 1999* TO
DECEMBER 31, 1999 DECEMBER 31, 1999 DECEMBER 31, 1999
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# (UNAUDITED)# (UNAUDITED)#
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD............... $ 10.000 $ 10.000 $ 10.000
------------------- ------------------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss....................... (0.025) (0.042) (0.040)
Net Realized and Unrealized Gain/Loss............ 2.802 2.809 2.811
------------------- ------------------- -------------------
Total From Investment Operations................. 2.777 2.767 2.771
------------------- ------------------- -------------------
NET ASSET VALUE, END OF PERIOD..................... $ 12.777 $ 12.767 $ 12.771
=================== =================== ===================
TOTAL RETURN (1)................................... 27.80%** 27.70%** 27.80%**
=================== =================== ===================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).................. $ 12,854 $ 8,309 $ 8,602
Ratio of Expenses to Average Net Assets............ 2.22% 2.98% 2.98%
Ratio of Net Investment Income/Loss to Average Net
Assets........................................... (1.15)% (1.90)% (1.90)%
Portfolio Turnover Rate............................ 44%** 44%** 44%**
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN MID CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
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.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. Class A shares are sold with a front-end sales charge of up to
5.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
Interest income is recognized on an accrual basis except where collection is in
doubt. Income, expenses (other than class specific expenses), and realized and
unrealized gains or losses are allocated to each class of shares based upon
their relative net assets. Distributions from the Fund are recorded on the
ex-distribution date.
4. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
Net capital losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ----------- ---------- --------- -------------
<S> <C> <C> <C>
$25,011,787 $3,511,790 $(393,074) $3,118,716
</TABLE>
5. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid
- -----------------------
12
<PAGE>
VAN KAMPEN MID CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
by the Fund are determined in accordance with Federal income tax regulations
which may differ from generally accepted accounting principles.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Miller Anderson & Sherrerd LLP (a "Subadviser"),
a wholly owned subsidiary of Morgan Stanley Dean Witter & Co., provide the Fund
with investment advisory services at 0.75% paid monthly and calculated at the
annual rates based on average daily net assets.
For the period ended December 31, 1999, the Fund recognized expenses of $44
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
At December 31, 1999, Van Kampen Funds, Inc. owned 7%, 11%, and 9% 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
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $196,629 for Class A shares and deferred sales charges of $531
for Class B shares.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $24,066,772 and sales of $4,048,358 of investment securities
other than long-term U.S. government securities and short-term investments.
There were no purchases or sales of long-term U.S. government securities.
D. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
------------------
13
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM
and selecting CONTACT US
* Closed to new investors
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management of
Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, Pennsylvania 19428
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555
/ /www.vankampen.com
MCG ANR 02/00 -C- Van Kampen Funds Inc. 2000
74 174 274
<PAGE>
VAN KAMPEN
GLOBAL EQUITY FUND
[GRAPHIC]
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Investment Overview.............................. 3
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 8
Statement of Operations.......................... 9
Statement of Changes in Net Assets............... 10
Financial Highlights ............................ 11
Notes to Financial Statements.................... 12
Additional Information........................... 15
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
United States 31.7%
United Kingdom 11.6%
Japan 10.2%
France 8.8%
Other 8.1%
Switzerland 8.1%
Germany 5.3%
Spain 4.0%
Italy 3.7%
Netherlands 3.4%
Ireland 2.7%
Short-Term Investment 2.4%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C MSCI WORLD NET
SHARES SHARES SHARES DIVIDENDS INDEX
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*............................ -5.35% -4.69% -1.03% N/A
Without Sales Charge***....................... 0.43% 0.00% -0.09% 15.14%
One Year
With Sales Charge*............................ -2.63% -2.21% 1.55% N/A
Without Sales Charge***....................... 3.32% 2.60% 2.51% 24.94%
Average Annual Since Inception
With Sales Charge*............................ 4.35% 5.14% 6.38% N/A
Without Sales Charge***....................... 7.24% 6.43% 6.38% 24.78%
Commencement Date............................... 10/29/97 10/29/97 10/29/97 N/A
</TABLE>
The Morgan Stanley Capital International (MSCI) World Net Dividends Index is an
unmanaged index that includes securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand, and the Far East and
assumes dividends are reinvested net of withholding tax.
* The returns above are calculated using the maximum sales charge for Class A
shares (5.75%) and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS(1)
PERCENT OF
SECURITY COUNTRY NET ASSETS
- -------- -------------- ----------
<S> <C> <C>
Cie Financiere Richemont AG Switzerland 3.2%
Nippon Telegraph & Telephone
Corp. Japan 3.1%
Nestle S.A. (Registered) Switzerland 2.8%
Telefonica S.A. Spain 2.5%
Philip Morris Cos., Inc. United States 2.3%
</TABLE>
(1) excludes Short-Term Investment
<TABLE>
<CAPTION>
TOP FIVE SECTORS+
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ------------ ----------
<S> <C> <C>
Consumer Goods $197,386,109 30.3%
Services 150,552,133 23.1%
Finance 130,401,656 20.0%
Materials 64,005,693 9.8%
Energy 53,632,950 8.2%
</TABLE>
+ These sectors represent broad groupings of related industries.
THE COUNTRY-SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MSCI WORLD NET DIVIDENDS INDEX AND ARE FOR INFORMATIONAL
PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGERS OF THE VAN KAMPEN GLOBAL EQUITY
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE
PAST SIX MONTHS. THE FUND IS MANAGED BY PORTFOLIO MANAGERS RICHARD BOON, PAUL
BOYNE, AND FRANCES CAMPION OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT.
MR. BOON, MR. BOYNE, AND MS. CAMPION HAVE BEEN INVOLVED IN THE FUND'S MANAGEMENT
SINCE ITS INCEPTION IN 1996. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON
THE FUND'S PERFORMANCE DURING THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1999.
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST SIX MONTHS?
A: The second half of 1999 was characterized by extraordinary investor
excitement about technology and the next generation of data transfer
applications over cellular phones. As a result, global leadership resided among
a handful of technology companies and an even smaller group of telecom
businesses. While a high-tech "contagion" spread from the United States to Japan
and then to Europe, many non-technology stocks actually declined in value.
From an economic standpoint, it became clear as the year unfolded that growth
was accelerating in Europe and Japan. In the United States, the Federal Reserve
raised interest rates by 0.75 percent in a preemptive strike against inflation.
Despite the higher interest rates, liquidity remained abundant, largely because
central banks wanted to provide a cash cushion in the event of year 2000-related
disruptions to the global financial system. Global stocks rallied late in the
year as it became clear that such disruptions were unlikely.
Q: WHAT STRATEGIES DID YOU PURSUE IN THIS ENVIRONMENT?
A: As value managers, we take a disciplined approach to selecting solid
franchises that are trading at a discount to what we believe are their fair
value. However, investor euphoria over tech and telecom issues stretched most
valuations within this group to levels that we consider imprudent. Consequently,
we struggled to find value in the global technology sector in this environment.
While we believe that many technology companies--particularly those in the
United States--are attractive businesses, it is equally obvious to us that
investors already recognize the potential of those businesses.
Q: IN WHICH INDUSTRIES ARE YOU FINDING THE BEST RELATIVE VALUES?
A: We have identified solid value in the cyclical side of the world
economy--those industries where performance is closely tied to the strength of
the economy. For example, we uncovered value in cement and building-materials
companies that are benefiting from an upturn in global infrastructure spending.
Europe has lagged in the building out of its infrastructure due to concerns
about reaching fiscal targets as a condition of monetary union. Also, we have
identified value in several chemical companies that are trying to unlock value
by spinning off their commodity chemical or agriculture businesses and focusing
on their faster-growing pharmaceutical units. Such companies allow the Fund
access to the pharmaceutical sector at what we consider to be more reasonable
prices.
On a very selective basis, we have purchased shares of technology companies for
the Fund that we deem to be reasonably valued. For example, the Fund holds NTT,
a Tokyo-based fixed-line telecom that owns an important mobile franchise in
Japan. We also are finding value in consumer industries like beverages, food,
tobacco, and household products. Valuations within the consumer-staple group
have become even more attractive as capital has poured into tech and telecom
stocks.
Q: HOW IS THE FUND POSITIONED GEOGRAPHICALLY?
A: The Fund has been significantly underweighted in the United States for the
past two years. In particular, we have avoided the mega-cap tech and telecom
stocks that carry the highest valuations. As of year-end, the Fund had about
one-third of its assets invested in the United States, compared to the
fifty-percent weighting found in most global equity indices.
It is important to keep in mind that the country weightings used in managing the
Fund are a direct result of bottom-up stock picking. As such, we do not make
bets on the fortunes of a given nation's economy. Rather, we look for
high-quality businesses that are trading at significant discounts to their
- -----------------------
4
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
intrinsic values, regardless of where they are located. Currently, we are
finding more of those values in Europe, where businesses are becoming
increasingly shareholder-friendly in this new era of a common European currency.
Q: HOW DID THE FUND'S STRATEGIES CONTRIBUTE TO PERFORMANCE?
A: Several factors caused the Fund to underperform during the six-month
reporting period. The Fund was absent from the technology sector in the United
States, which has been an important global driver of performance. In addition,
the Fund had a very significant overweighting in consumer-staples companies, a
sector that has been out of favor in the market's rush to embrace technology and
telecom stocks at virtually any price.
Also, relative performance was negatively affected by our decision to avoid
Japanese bank stocks, which performed well during the second half of the year
amid stirrings of an economic revival in that country. From a company-specific
standpoint, performance was hurt by continuing weakness in Philip Morris, a
major Fund holding that we believe now trades at levels that fully discount all
pending litigation.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: The Fund's returns suffered during the period due to its underweighted
position in mega-cap stocks and growth-oriented investments, which outperformed
the Fund's value-oriented strategy. For Class A shares at net asset value, the
Fund generated a total return of 0.43 percent for the six months and 3.32
percent for the 12 months ended December 31, 1999. By comparison, the Morgan
Stanley Capital International (MSCI) World Net Dividends Index generated total
returns of 15.14 percent and 24.94 percent for the same respective periods. This
broad-based index is composed of securities 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. This index does not reflect any
commissions or sales charges that would be paid by an investor purchasing the
securities it represents. Past performance does not guarantee future results.
Q: WHAT IS YOUR OUTLOOK FOR THE FUND IN THE MONTHS AHEAD?
A: The biggest risk to the global economy stems from the possibility that
high-flying technology and telecom stocks could fall back to earth, causing a
reversal of the wealth effect that has driven economic growth in the United
States. Already, the pronounced increase in volatility among tech shares seems
based on a combination of fundamental, psychological, and technical factors,
including the withdrawal of liquidity by central banks in the wake of the smooth
transition into year 2000. Higher U.S. interest rates, which we believe are on
the horizon, will represent a significant obstacle to the mega-cap growth
sector, historically the most interest-rate sensitive portion of the American
equity market.
We feel comfortable with how the Fund is positioned going into the new year. The
Fund holds a portfolio of defensive stocks that trade at attractive valuations.
In our view, these valuations provide significant downside protection and also
allow the portfolio to benefit from a rotation of capital into these relatively
undervalued sectors. Also, as a result of the Fund's overweighting in Europe, we
feel the Fund is positioned to benefit from a recovery in the euro. We believe
that such a rebound is likely, given the acceleration of growth in Europe at a
time when the U.S. economy is beginning to slow under the burden of higher
interest rates.
------------------
5
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
COMMON STOCKS (96.7%)
AUSTRALIA (1.8%)
CSR Ltd........................... 1,412,400 $ 3,428,178
Westpac Banking Corp., Ltd........ 1,181,400 8,142,909
------------
11,571,087
------------
BELGIUM (0.8%)
Delhaize Freres et Cie 'Le Lion'
S.A............................. 67,150 5,064,756
------------
CANADA (2.2%)
BCT.Telus Communications, Inc..... 281,524 6,849,092
BCT.Telus Communications, Inc. 'A'
(Non-Voting).................... 76,941 1,855,893
Potash Corp. of
Saskatchewan, Inc............... 113,200 5,406,146
------------
14,111,131
------------
DENMARK (0.5%)
Danisco A/S....................... 82,550 3,220,809
------------
FRANCE (8.8%)
Aventis S.A....................... 221,500 12,887,256
Groupe Danone..................... 54,800 12,930,263
Michelin (C.G.D.E.) 'B'
(Registered).................... 82,420 3,241,217
Pernod-Ricard..................... 149,800 8,579,680
Scor.............................. 140,880 6,222,063
Total Fina S.A. 'B'............... 101,750 13,594,437
------------
57,454,916
------------
GERMANY (4.5%)
BASF AG........................... 232,850 12,185,814
Bayer AG.......................... 138,100 6,572,742
Schering AG....................... 34,550 4,180,615
Veba AG........................... 131,300 6,421,218
------------
29,360,389
------------
HONG KONG (1.1%)
Hong Kong Electric Holdings
Ltd............................. 2,239,000 6,999,125
------------
IRELAND (2.7%)
Bank of Ireland................... 1,584,365 12,620,986
Green Property plc................ 931,200 5,305,207
------------
17,926,193
------------
ITALY (3.7%)
Mediaset S.p.A.................... 657,800 10,241,229
Telecom Italia S.p.A. Risp........ 2,326,400 14,192,232
------------
24,433,461
------------
JAPAN (10.2%)
Canon, Inc........................ 5,000 198,572
Daiichi Pharmaceutical Co.,
Ltd............................. 457,000 5,941,045
Fuji Photo Film Co................ 285,000 10,398,611
Hitachi Ltd....................... 542,000 8,694,903
KAO Corp.......................... 111,000 3,165,069
Mitsubishi Electric Corp.......... 218,000 1,407,415
Mitsui & Co....................... 127,000 888,242
Nippon Telegraph & Telephone
Corp............................ 1,196 20,473,442
Pioneer Electronic Corp........... 270,000 7,130,979
Sumitomo Marine & Fire Insurance
Co.............................. 470,000 2,896,410
Tokyo Gas Co...................... 168,000 409,195
Toppan Printing Co., Ltd.......... 289,000 2,883,498
Toshiba Corp...................... 316,000 2,411,034
------------
66,898,415
------------
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
NETHERLANDS (3.4%)
ABN Amro Holdings N.V............. 228,900 $ 5,724,116
ING Groep N.V..................... 161,680 9,772,011
Koninklijke Philips Electronics
N.V............................. 51,338 6,988,495
------------
22,484,622
------------
PORTUGAL (0.6%)
Cimpor-Cimentos de Portugal
S.A............................. 216,604 3,603,806
------------
SPAIN (4.0%)
Iberdrola S.A..................... 691,500 9,594,482
(a)Telefonica S.A................. 649,014 16,229,931
------------
25,824,413
------------
SWEDEN (1.0%)
Nordbanken Holding AB............. 1,120,650 6,599,046
------------
SWITZERLAND (8.1%)
Cie Financiere Richemont AG....... 8,885 21,214,578
Forbo Holding AG (Registered)..... 7,685 3,621,583
Holderbank Financiere Glarus AG
'B' (Bearer).................... 3,988 5,462,670
Nestle S.A. (Registered).......... 9,980 18,291,964
Swisscom AG (Registered).......... 10,500 4,248,822
------------
52,839,617
------------
UNITED KINGDOM (11.6%)
Allied Domecq plc................. 1,625,490 8,033,464
AstraZeneca Group plc............. 123,700 5,130,525
Blue Circle Industries plc........ 862,750 5,012,829
Burmah Castrol plc................ 290,487 5,301,542
Cadbury Schweppes plc............. 550,900 3,327,679
Great Universal Stores plc........ 706,100 4,128,306
Imperial Tobacco Group plc........ 597,400 4,920,764
Matthews (Bernard) plc............ 982,400 1,856,399
National Westminster Bank......... 185,600 3,986,821
Reckitt Benckiser plc............. 1,065,343 9,988,236
Royal & Sun Alliance Insurance
Group plc....................... 1,138,911 8,672,985
Sainsbury (J) plc (Registered).... 1,314,319 7,413,688
WPP Group plc..................... 499,600 7,915,686
------------
75,688,924
------------
UNITED STATES (31.7%)
Albertson's, Inc.................. 420,218 13,552,030
Alcoa, Inc........................ 110,400 9,163,200
(a)BJ's Wholesale Club, Inc....... 156,900 5,726,850
Boise Cascade Corp................ 135,900 5,503,950
Borg-Warner Automotive, Inc....... 170,450 6,903,225
(a)Cadiz, Inc..................... 403,898 3,837,031
Chase Manhattan Corp.............. 108,000 8,390,250
COMSAT Corp....................... 204,674 4,067,896
Enhance Financial Services
Group, Inc...................... 386,100 6,274,125
FINOVA Group, Inc. (The).......... 169,305 6,010,328
Fort James Corp................... 187,600 5,135,550
General Dynamics Corp............. 98,000 5,169,500
(a)GenRad, Inc.................... 256,100 4,129,613
Georgia-Pacific Corp.............. 79,700 4,044,775
Goodrich (B.F.) Co................ 190,900 5,249,750
GTE Corp.......................... 136,700 9,645,894
Houghton Mifflin Co............... 317,453 13,392,548
MBIA, Inc......................... 235,460 12,435,231
Mellon Financial Corp............. 318,900 10,862,531
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
NCR Corp.......................... 220,500 $ 8,351,437
(a)Noble Drilling Corp............ 136,500 4,470,375
Pharmacia & Upjohn, Inc........... 86,100 3,874,500
Philip Morris Cos., Inc........... 640,970 14,862,492
Rite Aid Corp..................... 172,900 1,934,319
Sears, Roebuck & Co............... 183,150 5,574,628
Terra Nova (Bermuda) Holdings Ltd.
'A'............................. 149,900 4,497,000
Tupperware Corp................... 246,610 4,176,957
Unicom Corp....................... 337,700 11,312,950
U.S. Bancorp...................... 176,900 4,212,431
UST Corp.......................... 124,100 3,940,175
------------
206,701,541
------------
TOTAL COMMON STOCKS.................................. 630,782,251
------------
PREFERRED STOCK (0.8%)
GERMANY (0.8%)
Volkswagen AG..................... 163,600 5,278,909
------------
TOTAL LONG-TERM INVESTMENTS (97.5%)
(COST $605,939,332)................................ 636,061,160
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
SHORT-TERM INVESTMENT (2.4%)
REPURCHASE AGREEMENT (2.4%)
Chase Securities, Inc., 2.60%,
dated $15,707,000
12/31/99, due due 1/3/00, to be
repurchased at $15,710,403
collateralized by $16,032,368
U.S. Treasury Notes 6.125%,
due 12/31/01, valued at
$16,032,368 (COST $15,707,000)................. $ 15,707,000
------------
TOTAL INVESTMENTS IN SECURITIES (99.9%)
(COST $621,646,332)................................ 651,768,160
FOREIGN CURRENCY (0.1%) (COST $935,393).............. 949,966
------------
TOTAL INVESTMENTS (100.0%) (COST $622,581,725)....... 652,718,126
LIABILITIES IN EXCESS OF OTHER ASSETS (0.0%)......... (220,884)
------------
NET ASSETS (100%).................................... $652,497,242
============
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(a) -- Non-income producing security
</TABLE>
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------- ------------ ----------
<S> <C> <C>
Consumer Goods................. $197,386,109 30.3%
Services....................... 150,552,133 23.1
Finance........................ 130,401,656 20.0
Materials...................... 64,005,693 9.8
Energy......................... 53,632,950 8.2
Capital Equipment.............. 40,082,619 6.1
------------ ----
$636,061,160 97.5%
============ ====
</TABLE>
- ---------------
+ The common and preferred stocks are classified by sectors which
represent broad groupings of related industries.
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------
ASSETS:
Investments in Securities, at Value (Cost $621,646,332)... $ 651,768,160
Foreign Currency (Cost $935,393).......................... 949,966
Cash...................................................... 525,444
Receivable for:
Dividends............................................... 2,024,169
Foreign Withholding Tax Reclaim......................... 443,281
Fund Shares Sold........................................ 222,036
Interest................................................ 3,403
Deferred Organizational Costs............................. 12,930
Other..................................................... 29,165
-----------------
Total Assets............................................ 655,978,554
-----------------
LIABILITIES:
Payable for:
Fund Shares Redeemed.................................... 1,420,251
Distribution Fees....................................... 1,011,385
Investment Advisory Fees................................ 588,989
Administrative Fees..................................... 149,264
Transfer Agent Fees..................................... 98,757
Custody Fees............................................ 90,885
Shareholder Reporting Expenses.......................... 55,505
Directors' Fees and Expenses............................ 33,247
Professional Fees....................................... 30,334
Other................................................... 2,695
-----------------
Total Liabilities..................................... 3,481,312
-----------------
NET ASSETS.................................................. $ 652,497,242
=================
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 60,833
Paid in Capital in Excess of Par.......................... 607,817,484
Net Unrealized Appreciation on Investments and Foreign
Currency Translations................................... 30,118,942
Accumulated Net Realized Gain............................. 16,762,529
Undistributed Net Investment Loss......................... (2,262,546)
-----------------
NET ASSETS.................................................. $ 652,497,242
=================
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $66,914,872 and 6,187,498
Shares Outstanding)..................................... $ 10.82
=================
Maximum Sales Charge...................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100 / (100 - maximum sales charge))............. $ 11.48
=================
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $530,716,269 and 49,524,568
Shares Outstanding)*.................................... $ 10.72
=================
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $54,866,101 and 5,120,514
Shares Outstanding)*.................................... $ 10.72
=================
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 5,674,504
Interest.................................................. 351,442
Less Foreign Taxes Withheld............................... (310,818)
------------
Total Income............................................. 5,715,128
------------
EXPENSES:
Investment Advisory Fees.................................. 3,547,108
Distribution Fees (Attributed to Classes A, B and C of
$91,351, $2,879,444 and $302,328, respectively)......... 3,273,123
Administrative Fees....................................... 892,944
Transfer Agent Fees....................................... 232,992
Custodian Fees............................................ 97,698
Shareholder Reports....................................... 38,676
Filing and Registration fees.............................. 35,936
Professional Fees......................................... 35,840
Amortization of Organizational Costs...................... 2,332
Other..................................................... 9,237
------------
Total Expenses........................................... 8,165,886
------------
Net Investment Income/Loss.................................. (2,450,758)
------------
NET REALIZED GAIN/LOSS ON:
Investments............................................... 31,558,546
Foreign Currency Transactions............................. 583,818
------------
Net Realized Gain/Loss...................................... 32,142,364
------------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... 61,356,214
------------
End of the Period:
Investments............................................. 30,121,828
Foreign Currency Translations........................... (2,886)
------------
30,118,942
------------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... (31,237,272)
------------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. 905,092
------------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ (1,545,666)
============
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ (2,450,758) $ (1,709,000)
Net Realized Gain/Loss.................................... 32,142,364 23,770,000
Change in Unrealized Appreciation/Depreciation............ (31,237,272) 1,000
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. (1,545,666) 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................................................... (32,260,821) (796,000)
Class C................................................... (3,351,236) (87,000)
----------------- -------------
(39,593,657) (980,000)
----------------- -------------
Net Decrease in Net Assets Resulting from Distributions... (39,593,657) (2,222,000)
----------------- -------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed................................................ 66,555,959 166,640,000
Distributions Reinvested.................................. 37,021,039 2,068,000
Redeemed.................................................. (146,150,369) (225,647,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... (42,573,371) (56,939,000)
----------------- -------------
Total Increase/Decrease in Net Assets..................... (83,712,694) (37,099,000)
NET ASSETS--Beginning of Period............................. 736,209,936 773,309,000
----------------- -------------
NET ASSETS--End of Period (Including undistributed net
investment income/loss of $(2,262,546) and $188,000,
respectively)............................................. $ 652,497,242 $ 736,210,000
================= =============
- --------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
--------
Shares:
Subscribed............................................. 4,719,511 7,057,000
Distributions Reinvested............................... 336,380 60,000
Redeemed............................................... (5,558,849) (7,666,000)
----------------- -------------
Net Increase/Decrease in Class A Shares Outstanding...... (502,958) (549,000)
================= =============
Dollars:
Subscribed............................................. $ 53,185,419 $ 76,578,000
Distributions Reinvested............................... 3,521,901 652,000
Redeemed............................................... (62,669,851) (82,720,000)
----------------- -------------
Net Increase/Decrease.................................... $ (5,962,531) $ (5,490,000)
================= =============
Ending Paid in Capital................................... $ 62,405,905 $ 68,606,000+
================= =============
Class B:
---------
Shares:
Subscribed............................................. 1,007,514 7,094,000
Distributions Reinvested............................... 2,931,584 118,000
Redeemed............................................... (6,615,421) (11,280,000)
----------------- -------------
Net Increase/Decrease in Class B Shares Outstanding...... (2,676,323) (4,068,000)
================= =============
Dollars:
Subscribed............................................. $ 11,332,175 $ 75,705,000
Distributions Reinvested............................... 30,429,833 1,280,000
Redeemed............................................... (73,629,058) (120,388,000)
----------------- -------------
Net Increase/Decrease.................................... $ (31,867,050) $ (43,403,000)
================= =============
Ending Paid in Capital................................... $ 494,137,342 $ 527,856,000+
================= =============
Class C:
---------
Shares:
Subscribed............................................. 181,187 1,344,000
Distributions Reinvested............................... 295,694 13,000
Redeemed............................................... (883,838) (2,112,000)
----------------- -------------
Net Increase/Decrease in Class C Shares Outstanding...... (406,957) (755,000)
================= =============
Dollars:
Subscribed............................................. $ 2,038,365 $ 14,357,000
Distributions Reinvested............................... 3,069,305 136,000
Redeemed............................................... (9,851,460) (22,539,000)
----------------- -------------
Net Increase/Decrease.................................... $ (4,743,790) $ (8,046,000)
================= =============
Ending Paid in Capital................................... $ 51,335,070 $ 56,274,000+
================= =============
</TABLE>
- -----------------
<TABLE>
<S> <C>
+ Ending Paid in Capital amounts do not reflect permanent book
to tax differences.
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------------------------- ------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
SELECTED PER SHARE DATA AND DECEMBER 31, 1999 YEAR ENDED OCTOBER 29, 1997* DECEMBER 31, 1999 YEAR ENDED
RATIOS (UNAUDITED)# JUNE 30, 1999# TO JUNE 30, 1998 (UNAUDITED)# JUNE 30, 1999#
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 11.469 $ 11.122 $ 10.00 $ 11.424 $ 11.076
----------------- -------------- ---------------- ----------------- --------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income/Loss............... 0.001 0.047 0.06 (0.044) (0.033)
Net Realized and Unrealized
Gain/Loss................. 0.023 0.404 1.08 0.014 0.405
----------------- -------------- ---------------- ----------------- --------------
Total From Investment
Operations................ 0.024 0.451 1.14 (0.030) 0.372
----------------- -------------- ---------------- ----------------- --------------
DISTRIBUTIONS
Net Investment Income....... -- (0.076) (0.02) -- (0.008)
In Excess of Net Investment
Income.................... -- (0.014) -- -- (0.002)
Net Realized Gain........... (0.678) (0.014) -- (0.678) (0.014)
----------------- -------------- ---------------- ----------------- --------------
Total Distributions......... (0.678) (0.104) (0.02) (0.678) (0.024)
----------------- -------------- ---------------- ----------------- --------------
NET ASSET VALUE, END OF
PERIOD...................... $ 10.815 $ 11.469 $ 11.12 $ 10.716 $ 11.424
================= ============== ================ ================= ==============
TOTAL RETURN (1).............. 0.43%** 4.05% 11.38%** 0.00%** 3.29%
================= ============== ================ ================= ==============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's)..................... $ 66,915 $ 76,731 $ 80,508 $ 530,716 $ 596,339
Ratio of Expenses to Average
Net Assets.................. 1.65% 1.65% 1.70% 2.40% 2.40%
Ratio of Net Investment
Income/ Loss to Average Net
Assets...................... 0.02% 0.44% 0.88% (0.77)% (0.31)%
Portfolio Turnover Rate....... 18%** 40% 4%** 18%** 40%
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
------------------
SELECTED PER SHARE DATA AND OCTOBER 29, 1997*
RATIOS TO JUNE 30, 1998
<S> <C>
- ------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 10.00
----------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income/Loss............... 0.01
Net Realized and Unrealized
Gain/Loss................. 1.07
----------------
Total From Investment
Operations................ 1.08
----------------
DISTRIBUTIONS
Net Investment Income....... --
In Excess of Net Investment
Income.................... --
Net Realized Gain........... --
----------------
Total Distributions......... --
----------------
NET ASSET VALUE, END OF
PERIOD...................... $ 11.08
================
TOTAL RETURN (1).............. 10.84%**
================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's)..................... $ 623,229
Ratio of Expenses to Average
Net Assets.................. 2.45%
Ratio of Net Investment
Income/ Loss to Average Net
Assets...................... 0.12%
Portfolio Turnover Rate....... 4%**
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED OCTOBER 29, 1997*
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# JUNE 30, 1999# TO JUNE 30, 1998
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 11.423 $ 11.075 $ 10.00
----------------- -------------- ----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................................ (0.044) (0.034) 0.01
Net Realized and Unrealized Gain/Loss..................... 0.014 0.406 1.06
----------------- -------------- ----------------
Total From Investment Operations.......................... (0.030) 0.372 1.07
----------------- -------------- ----------------
DISTRIBUTIONS
Net Investment Income..................................... -- (0.008) --
In Excess of Net Investment Income........................ -- (0.002) --
Net Realized Gain......................................... (0.678) (0.014) --
----------------- -------------- ----------------
Total Distributions....................................... (0.678) (0.024) --
----------------- -------------- ----------------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.715 $ 11.423 $ 11.07
================= ============== ================
TOTAL RETURN (1)............................................ (0.09)%** 3.39% 10.74%**
================= ============== ================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................... $ 54,866 $ 63,140 $ 69,572
Ratio of Expenses to Average Net Assets..................... 2.40% 2.40% 2.45%
Ratio of Net Investment Income/Loss to Average Net Assets... (0.77)% (0.32)% 0.13%
Portfolio Turnover Rate..................................... 18%** 40% 4%**
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen Global Equity Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks long-term
capital appreciation by investing primarily in equity securities of issuers
throughout the world, including U.S. issuers. The Fund commenced operations on
October 29, 1997.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. Class A shares are sold with a front-end sales charge of up to
5.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Securities listed on a foreign exchange are valued at their
closing price. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. Income, expenses (other than class specific expenses),
and realized and unrealized gains or losses are allocated to each class of
shares based upon their relative net assets. Distributions from the Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are
- -----------------------
12
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
translated at rates prevailing when accrued. Realized and unrealized gains and
losses on securities are not segregated for financial reporting purposes from
amounts arising from changes in the market prices of securities. Realized gains
and losses on foreign currency includes the net realized amount from the sale of
the currency and the amount realized between trade date and settlement date on
security and income and expenses transactions. However, the foreign currency
portion of gains and losses realized on sales and maturities of foreign
denominated debt securities is treated as ordinary income for U.S. Federal
income tax purposes.
The net assets of the Fund may include issuers located in emerging markets.
There are certain risks inherent in these investments not typically associated
with investments in the United States, including the smaller size of the markets
themselves, lesser liquidity, greater volatility, and potentially less publicly
available information. Emerging markets may be subject to a greater degree of
government involvement in the economy and greater economic and political
uncertainty, which has the potential to extend to government imposed
restrictions on exchange traded transactions and currency transactions. These
restrictions may impact the Fund's ability to buy or sell certain securities or
to repatriate certain currencies to U.S. dollars. Additionally, changes in
currency exchange rates will affect the value of and investment income from such
securities.
5. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's commencement of operations. The Adviser has agreed that in the event
any of the initial shares of the Fund originally purchased by Van Kampen are
redeemed by the Fund during the amortization period, the Fund will be reimbursed
for any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
6. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
A portfolio may be subject to taxes imposed by countries in which it invests.
Such taxes are generally based on income earned or gains realized or
repatriated. Taxes are accrued and applied to net investment income, net
realized capital gains, and net unrealized appreciation, as applicable, as the
income is earned or capital gains are recorded.
Net capital and net currency losses incurred after October 31 and within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. For the period from November 1, 1998 to June 30, 1999 the Fund
incurred and elected to defer until July 1, 1999 for U.S. Federal income tax
purposes, net currency losses of approximately $147,000.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ------------ ------------ ------------- -------------
<S> <C> <C> <C>
$621,646,332 $100,043,534 $(69,921,706) $30,121,828
</TABLE>
7. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing book and
tax treatment for foreign currency transactions, net operating losses, foreign
taxes on net realized gains, and gains on certain securities of corporations
designated as "passive foreign investment companies."
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among undistributed net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of presenting net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
1.00% 1.80% 2.55%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $20,560
representing legal services
------------------
13
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
provided by Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the
Fund, of which a director of the Fund is an affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
The Distributor may receive a front end sales charge for purchases of Class A
shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $85,001 for Class A shares and deferred sales charges of
$1,145,689 and $3,186 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 December 31, 1999, the Fund incurred $3,435 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker dealer.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $124,500,596 and sales of $204,692,036 of investment
securities other than long-term U.S. government securities and short-term
investments. There were no purchases or sales of long-term U.S. government
securities.
D. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
- -----------------------
14
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the Global Equity Fund (the
"Fund") was held on December 15, 1999.
The description of each proposal and number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
---------- --------
<S> <C> <C>
J. Miles Branagan........................................... 57,530,972 415,686
Jerry D. Choate............................................. 57,543,818 402,841
Linda Hutton Heagy.......................................... 57,546,835 399,824
R. Craig Kennedy............................................ 57,575,042 371,617
Mitchell M. Merin........................................... 57,547,642 399,017
Jack E. Nelson.............................................. 57,612,065 334,594
Richard F. Powers, III...................................... 57,556,796 389,863
Phillip B. Rooney........................................... 57,592,160 354,499
Fernando Sisto.............................................. 57,513,240 433,419
Wayne W. Whalen............................................. 57,617,426 329,233
Suzanne H. Woolsey.......................................... 57,566,351 380,307
Paul G. Yovovich............................................ 57,550,244 396,415
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C> <C>
57,322,157 123,774 500,728
</TABLE>
------------------
15
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at www.vankampen.com --
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting www.vankampen.com
and selecting CONTACT US
* Closed to new investors
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management of
Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of
Sciences/National Research Council, and former Chairman of
the German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555/
/www.vankampen.com
MSGL SAR 02/00 -C- Van Kampen Funds Inc. 2000
465 565 665
<PAGE>
VAN KAMPEN
VALUE FUND
[GRAPHIC]
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN VALUE FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders.......................... 1
Economic Snapshot............................... 2
Investment Overview............................. 3
Portfolio of Investments........................ 6
Statement of Assets and Liabilities............. 8
Statement of Operations......................... 9
Statement of Changes in Net Assets.............. 10
Financial Highlights ........................... 11
Notes to Financial Statements................... 12
Additional Information.......................... 15
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN VALUE FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Consumer Products-Miscellaneous 24.5%
Services 23.7%
Capital Equipment 19.7%
Finance 18.6%
Energy 7.1%
Materials 6.2%
Other 0.2%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES S&P 500 INDEX
------- ------- ------- -------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*........................... -18.38% -18.06% -14.62% N/A
Without Sales Charge***...................... -13.43% -13.75% -13.76% 7.70%
One Year
With Sales Charge*........................... -7.35% -7.18% -3.38% N/A
Without Sales Charge***...................... -1.65% -2.30% -2.40% 21.04%
Average Annual Since Inception
With Sales Charge*........................... -3.23% -2.78% -1.65% N/A
Without Sales Charge***...................... -0.90% -1.62% -1.65% 22.90%
Commencement Date.............................. 7/7/97 7/7/97 7/7/97 N/A
</TABLE>
The Standard & Poor's 500 Index is an unmanaged index of common stocks. The S&P
500 Index assumes dividends are reinvested.
* The returns above are calculated using the applicable sales charge for
Class A shares and the applicable deferred sales charge for Class B and
Class C shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY SECTOR NET ASSETS
- -------- ------------------- ----------
<S> <C> <C>
General Motors Corp. Automobiles 4.3%
Chase Manhattan Corp. Banking 3.4%
HEALTHSOUTH Corp. Healthcare Supplies
& Services 3.4%
Tenet Healthcare Corp. Healthcare Supplies
& Services 3.3%
Quantum Corp. Computers/ Software 2.9%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ----------- ----------
<S> <C> <C>
Consumer Products-
Miscellaneous $43,691,420 24.5%
Services 42,216,007 23.7%
Capital Equipment 35,210,398 19.7%
Finance 33,177,050 18.6%
Energy 12,781,614 7.1%
</TABLE>
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN VALUE FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE TO THE PORTFOLIO MANAGERS OF THE VAN KAMPEN VALUE FUND ABOUT
THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE PAST SIX
MONTHS. THE MANAGERS INCLUDE RICHARD BEHLER, NICHOLAS KOVICH, AND ROBERT MARCIN,
PORTFOLIO MANAGERS, MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. THEY HAVE
MANAGED THE FUND SINCE ITS INCEPTION IN 1997. THE FOLLOWING DISCUSSION REFLECTS
THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE SIX-MONTH REPORTING PERIOD
ENDED DECEMBER 31, 1999.
Q: WHAT WAS THE MARKET ENVIRONMENT IN WHICH THE FUND OPERATED?
A: The Dow Jones Industrial Average--perhaps the country's most widely
recognized stock market index--endured a difficult third quarter of 1999, losing
more than 6 percent of its value. But the Dow recovered dramatically in the
fourth quarter, rising more than 11 percent to a record high on December 31.
Other stock indices, such as the technology-heavy NASDAQ, fared even better.
For value-oriented portfolios such as the Value Fund, the period was challenging
because investors continued to prefer growth stocks to value. This preference is
reflected in the differences between the returns of the S&P Barra Growth and the
S&P Barra Value indices: 15.32 percent versus -1.09 percent, during the six
months ended December 31, 1999.
Q: COULD YOU DESCRIBE YOUR APPROACH TO MANAGING THE VALUE FUND?
A: We adhere to a strict investment approach, constructing a broadly diversified
portfolio of stocks with low price-to-earnings (P/E) ratios. We sell a stock if
its price rises to the point when we believe its perceived value is achieved. We
view a low P/E ratio as the best single indicator of attractive valuations and
believe that we can achieve favorable long-term results for the Fund by
investing in companies with low P/Es and holding them until their valuations
return to what we believe are more normal levels.
Q: WHAT IMPACT DID THIS APPROACH HAVE ON PERFORMANCE DURING THE REPORTING
PERIOD?
A: The Fund continued to operate in an unfavorable market environment for value
funds, as investors avoided stocks with low absolute and relative valuations.
This was the case even during the first three months of the reporting period,
when economic conditions were favorable for a rebound of value stocks. Because
of our strict adherence to the Fund's low-P/E investment discipline, we lacked
the flexibility to invest in the types of stocks that were being rewarded by the
market--especially technology companies. Although remaining true to the Fund's
investment philosophy came at a short-term price, we believed--and continue to
believe--that doing so should be rewarding in the long run.
Q: HOW DID YOU STRUCTURE THE FUND'S PORTFOLIO?
A: Stock selection and, to a lesser extent, sector allocation contributed to the
Fund's weak performance during the reporting period. Poor stock
selection--especially in technology (as mentioned, we had only limited
opportunity to invest in this area), financial services, heavy industry, and
retail--hurt the Fund's results relative to its benchmark, the Standard & Poor's
500 Index. Meanwhile, the Fund's overweighting of out-of-favor sectors--such as
financial services, consumer durables, transportation, and heavy industry--also
hurt performance. As we mentioned, the Fund's investment discipline precluded us
from buying companies in growth industries, which generally appreciated
dramatically, especially in the fourth quarter.
During the reporting period we added significantly to the Fund's position in the
health-care services sector. We believe that this sector, which has been
unpopular with investors because of legal and political concerns, represents
exceptional value in a constant, growing, and necessary part of the economy. In
our belief that the industry will eventually return to favor, we initiated or
added to holdings in the hospital-management and managed-care industries,
including HealthSouth, Tenet Healthcare, and Foundation Health Systems.
We also purchased or added to the Fund's holdings in a number of stocks that met
our value criteria. These stocks included new positions in Aetna, a provider of
insurance and financial services, and International Paper, the world's leading
producer and distributor of paper products. Additions to the Fund's existing
positions included Whirlpool (household-appliances manufacturing), Eaton
(auto-parts manufacturing), and Owens Corning (a maker of building materials).
- -----------------------
4
<PAGE>
VAN KAMPEN VALUE FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Conversely, we eliminated the Fund's holdings in funeral-services company
Service Corporation International, banking company KeyCorp, and cigarette maker
RJR Reynolds Tobacco. We also pared the Fund's position in General Motors, the
Fund's largest investment throughout the reporting period.
Q: HOW DID THE FUND PERFORM?
A: For the six-month period ended December 31, 1999, the Fund achieved a total
return of -13.43 percent (Class A shares at net asset value). By comparison, the
Standard & Poor's 500 Index returned 7.70 percent. The S&P 500 is a broad-based,
unmanaged index that reflects the general performance of the stock market. This
index is a statistical composite that doesn't include any commissions or sales
charges that would be paid by an investor purchasing the securities it
represents. Such costs would lower the performance of the index. It is
impossible to invest directly in an index. Past performance doesn't guarantee
future results.
Q: WHAT DO YOU SEE AHEAD FOR THE FUND?
A: We continue to believe that, because of their attractive relative valuations
and favorable business dynamics, the companies the Fund owns will in time attain
what we believe are their true worth. Many of the stocks in the Fund today are
selling at prices equal to those of 10 or more years ago, while the underlying
companies' revenue and earnings growth have doubled or tripled. We don't believe
that the market can continue to ignore the compelling valuations represented by
value stocks with low P/E ratios. In the meantime, we will continue to focus on
our stock-selection discipline in hopes that better days lie ahead.
------------------
5
<PAGE>
VAN KAMPEN VALUE FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------
COMMON STOCKS (99.8%)
CAPITAL EQUIPMENT (19.7%)
CHEMICALS-DIVERSIFIED (1.8%)
Lubrizol Corp.................................... 106,100 $ 3,275,837
------------
CONSTRUCTION & HOUSING (2.5%)
Owens Corning.................................... 228,420 4,411,361
------------
ELECTRICAL & ELECTRONICS (1.4%)
Cooper Industries, Inc........................... 39,100 1,581,106
Entergy Corp..................................... 36,690 944,768
------------
2,525,874
------------
ELECTRONIC COMPONENTS--MISCELLANEOUS (2.6%)
(a)Arrow Electronics, Inc........................ 81,960 2,079,735
Avnet, Inc....................................... 43,200 2,613,600
------------
4,693,335
------------
ENERGY EQUIPMENT & SERVICES (1.6%)
GTE Corp......................................... 29,400 2,074,538
Peco Energy Co................................... 22,500 781,875
------------
2,856,413
------------
MACHINERY & ENGINEERING (4.7%)
Cummins Engine Co., Inc.......................... 101,500 4,903,719
Deere & Co....................................... 300 13,012
Parker-Hannifin Corp............................. 69,325 3,557,239
------------
8,473,970
------------
MANUFACTURING (3.9%)
Eaton Corp....................................... 36,300 2,636,287
(a)FMC Corp...................................... 41,010 2,350,386
Tecumseh Products Co. 'A'........................ 40,470 1,909,678
------------
6,896,351
------------
OFFICE EQUIPMENT (0.6%)
Xerox Corp....................................... 43,300 982,369
------------
PAPER & RELATED PRODUCTS (0.6%)
International Paper Co........................... 19,400 1,094,888
------------
TOTAL CAPITAL EQUIPMENT........................................... 35,210,398
------------
CONSUMER PRODUCTS--MISCELLANEOUS (24.5%)
APPLIANCES & HOUSEHOLD DURABLES (2.1%)
Whirlpool Corp................................... 55,600 3,617,475
------------
AUTOMOBILES (10.8%)
Dana Corp........................................ 67,390 2,017,488
Ford Motor Co.................................... 95,030 5,078,166
General Motors Corp.............................. 105,580 7,674,346
(a)Navistar International Corp................... 38,200 1,809,725
TRW, Inc......................................... 52,360 2,719,448
------------
19,299,173
------------
COMPUTERS/SOFTWARE (6.0%)
First Data Corp.................................. 80,100 3,949,931
International Business Machines Corp............. 15,700 1,695,600
(a)Quantum Corp.................................. 336,600 5,091,075
------------
10,736,606
------------
RETAIL--GENERAL (0.6%)
(a)Office Depot, Inc............................. 95,600 1,045,625
------------
RETAIL--MAJOR DEPARTMENT STORES (0.8%)
Liz Claiborne, Inc............................... 102,600 $ 3,860,325
------------
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
TEXTILES & APPAREL (4.2%)
(a)Toys 'R' Us, Inc.............................. 101,940 1,459,016
VF Corp.......................................... 122,440 3,673,200
------------
5,132,216
------------
TOTAL CONSUMER PRODUCTS--MISCELLANEOUS............................ 43,691,420
------------
ENERGY (7.1%)
ELECTRIC--INTERGRATED (0.5%)
GPU, Inc......................................... 29,240 875,372
------------
OIL & GAS (4.8%)
Coastal Corp..................................... 31,800 1,126,912
(a)Nabors Industries, Inc........................ 113,700 3,517,594
Tosco Corp....................................... 27,200 739,500
Transocean Offshore, Inc......................... 38,800 1,307,075
Ultramar Diamond Shamrock Corp................... 88,670 2,011,701
------------
8,702,782
------------
UTILITIES--ELECTRICAL & GAS (1.8%)
DTE Energy Co.................................... 36,080 1,132,010
Duke Power Co.................................... 18,400 922,300
Southern Co...................................... 48,900 1,149,150
------------
3,203,460
------------
TOTAL ENERGY...................................................... 12,781,614
------------
FINANCE (18.6%)
BANKING (5.4%)
Bank of America Corp............................. 40,100 2,012,519
Chase Manhattan Corp............................. 78,440 6,093,807
Fleet Boston Financial Corp...................... 41,797 1,455,058
------------
9,561,384
------------
INSURANCE (7.5%)
ACE Ltd.......................................... 105,400 1,758,862
AETNA, Inc....................................... 33,500 1,869,719
Allstate Corp.................................... 77,080 1,849,920
American General Corp............................ 18,940 1,437,073
Hartford Financial Services Group................ 49,540 2,346,957
Washington Mutual, Inc........................... 160,350 4,169,100
------------
13,431,631
------------
LIFE/HEALTH INSURANCE (1.3%)
Reliastar Financial Corp......................... 58,480 2,291,685
------------
REINSURANCE (0.7%)
Everest Reinsurance Holdings, Inc................ 55,110 1,229,642
------------
SUPER--REGIONAL BANKS-U.S. (3.7%)
Bank One Corp.................................... 70,000 2,244,375
First Union Corp. (N.C.)......................... 33,889 1,111,983
PNC Bank Corp.................................... 74,300 3,306,350
------------
6,662,708
------------
TOTAL FINANCE..................................................... 33,177,050
------------
MATERIALS (6.2%)
CHEMICALS (3.8%)
Engelhard Corp................................... 133,200 2,514,150
IMC Global, Inc.................................. 93,600 1,532,700
Solutia, Inc..................................... 82,500 1,273,594
</TABLE>
- --------------
6
The accompanying financials are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
CHEMICALS (CONT.)
(a)W.R. Grace & Co............................... 106,000 $ 1,470,750
------------
6,791,194
------------
FOREST PRODUCTS & PAPER (0.6%)
Weyerhaeuser Co.................................. 15,100 1,084,369
------------
TELECOMMUNICATIONS EQUIPMENT (1.8%)
U.S. West, Inc................................... 44,700 3,218,400
------------
TOTAL MATERIALS................................................... 11,093,963
------------
SERVICES (23.7%)
BUSINESS & PUBLIC SERVICES (0.7%)
Waste Management, Inc............................ 72,800 1,251,250
------------
FOOD--MISCELLANEOUS/DIVERSIFIED (2.4%)
IBP, Inc......................................... 52,710 948,780
Nabisco Group Holdings Corp...................... 130,140 1,382,737
Universal Foods Corp............................. 93,120 1,897,320
------------
4,228,837
------------
HEALTHCARE SUPPLIES & SERVICES (12.2%)
Beckman Coulter, Inc............................. 50,030 2,545,276
Columbia HCA/Healthcare Corp..................... 53,070 1,555,614
(a)Foundation Health Systems 'A'................. 213,600 2,122,650
(a)Health Management Associates, Inc. 'A'........ 79,200 1,059,300
(a)HEALTHSOUTH Corp.............................. 1,117,400 6,006,025
(a)Tenet Healthcare Corp......................... 248,700 5,844,450
United HealthCare Corp........................... 34,700 1,843,438
(a)Wellpoint Health Networks, Inc................ 13,300 876,969
------------
21,853,722
------------
TELECOMMUNICATIONS (4.3%)
(a)AMR Corp...................................... 62,480 4,186,160
Bell Atlantic Corp............................... 55,500 3,416,719
------------
7,602,879
------------
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION--AIRLINES (2.9%)
CNF Transportation, Inc.......................... 50,900 $ 1,756,050
Delta Airlines, Inc.............................. 69,700 3,471,931
------------
5,227,981
------------
TRANSPORTATION--RAIL (0.5%)
Burlington Northern Railroad Co.................. 33,600 814,800
------------
TRANSPORTATION--TRUCKING (0.7%)
Ryder Systems, Inc............................... 50,600 1,236,538
------------
TOTAL SERVICES.................................................... 42,216,007
------------
TOTAL LONG-TERM INVESTMENTS (99.8%)
(COST $187,299,843)............................................. 178,170,452
------------
<CAPTION>
PAR
VALUE
-----------
SHORT-TERM INVESTMENT (0.5%)
<S> <C> <C>
REPURCHASE AGREEMENT (0.5%)
Chase Securities, Inc., 2.60%, dated $ 813,000
12/31/99, due 1/3/00, to be repurchased
at $813,176 collateralized by $833,304
U.S. Treasury Notes, 6.125%, due
12/31/01, valued at $833,304
(COST $813,000)............................................. 813,000
------------
TOTAL INVESTMENTS (100.3%) (COST $188,112,843)...................... 178,983,452
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.3%)....................... (520,746)
------------
NET ASSETS (100%)................................................... $178,462,706
============
</TABLE>
- ---------------
(a) -- Non-income producing security
-----------------------
7
The accompanying financials are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------
ASSETS:
Investments at Value (Cost $188,112,843).................. $ 178,983,452
Cash...................................................... 438
Receivable for:
Dividends............................................... 194,925
Fund Shares Sold........................................ 174,024
Interest................................................ 176
Deferred Organizational Costs............................. 3,169
Other Assets.............................................. 8,726
-----------------
Total Assets............................................ 179,364,910
-----------------
LIABILITIES:
Payable for:
Fund Shares Redeemed.................................... 466,473
Distribution Fees....................................... 209,606
Investment Advisory Fees................................ 83,035
Administrative Fees..................................... 38,932
Shareholder Reporting Expenses.......................... 34,752
Transfer Agent Fees..................................... 23,366
Directors' Fees and Expenses............................ 23,205
Professional Fees....................................... 17,148
Custody Fees............................................ 3,033
Other..................................................... 2,654
-----------------
Total Liabilities....................................... 902,204
-----------------
NET ASSETS.................................................. $ 178,462,706
=================
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 19,042
Paid in Capital in Excess of Par.......................... 204,690,358
Accumulated Net Investment Loss........................... (7,840)
Net Unrealized Depreciation on Investments................ (9,129,391)
Accumulated Net Realized Loss............................. (17,109,463)
-----------------
NET ASSETS.................................................. $ 178,462,706
=================
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $67,300,291 and 7,150,056
Shares Outstanding)..................................... $ 9.41
=================
Maximum Sales Charge...................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100 / (100 - maximum sales charge))............. $ 9.98
=================
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $91,944,969 and 9,834,958
Shares Outstanding)*.................................... $ 9.35
=================
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $19,217,446 and 2,057,442
Shares Outstanding)*.................................... $ 9.34
=================
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 1,996,037
Interest.................................................. 113,983
------------
Total Income............................................. 2,110,020
------------
EXPENSES:
Investment Advisory Fees.................................. 854,777
Distribution Fees (Attributed to Classes A, B and C of
$99,992, $546,878 and $121,743, respectively)........... 768,613
Administrative Fees....................................... 270,251
Transfer Agent Fees....................................... 66,502
Shareholder Reports....................................... 56,171
Filing and Registration Fees.............................. 26,842
Professional Fees......................................... 22,575
Custodian Fees............................................ 12,063
Directors' Fees and Expenses.............................. 8,435
Amortization of Organizational Costs...................... 637
Other..................................................... 6,686
------------
Total Expenses........................................... 2,093,552
Less Expense Reductions.................................. (38,298)
------------
Net Expenses............................................. 2,055,254
------------
Net Investment Income/Loss.................................. 54,766
------------
NET REALIZED GAIN/LOSS ON:
Investments............................................... (7,798,750)
------------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... 17,334,342
------------
End of the Period:
Investments............................................. (9,129,391)
------------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... (26,463,733)
------------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. (34,262,483)
------------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $(34,207,717)
============
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ 54,766 $ 758,000
Net Realized Gain/Loss.................................... (7,798,750) (9,132,000)
Net Unrealized Appreciation/Depreciation.................. (26,463,733) 16,113,000
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. (34,207,717) 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 (1):
Subscribed................................................ 13,228,327 63,721,000
Distributions Reinvested.................................. 57,035 5,042,000
Redeemed.................................................. (52,810,542) (134,239,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... (39,525,180) (65,476,000)
----------------- -------------
Total Increase/Decrease in Net Assets..................... (73,794,311) (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 $(7,840) and $(1,000), respectively)....... $ 178,462,706 $ 252,257,000
================= =============
- ---------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 668,062 2,585,000
Distributions Reinvested............................... 6,323 259,000
Redeemed............................................... (2,271,516) (7,154,000)
----------------- -------------
Net Increase/Decrease in Class A Shares Outstanding...... (1,597,131) (4,310,000)
================= =============
Dollars:
Subscribed............................................. $ 6,442,702 $ 24,777,000
Distributions Reinvested............................... 57,035 2,427,000
Redeemed............................................... (21,792,748) (69,185,000)
----------------- -------------
Net Increase/Decrease.................................... $ (15,293,011) $ (41,981,000)
================= =============
Ending Paid in Capital................................... $ 76,947,106 $ 92,241,000+
================= =============
Class B:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 512,961 3,052,000
Distributions Reinvested............................... -- 225,000
Redeemed............................................... (2,485,264) (5,046,000)
----------------- -------------
Net Increase/Decrease in Class B Shares Outstanding...... (1,972,303) (1,769,000)
================= =============
Dollars:
Subscribed............................................. $ 5,014,947 $ 29,487,000
Distributions Reinvested............................... -- 2,115,000
Redeemed............................................... (23,420,528) (48,333,000)
----------------- -------------
Net Increase/Decrease.................................... $ (18,405,581) $ (16,731,000)
================= =============
Ending Paid in Capital................................... $ 105,237,465 $ 123,644,000+
================= =============
Class C:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 178,705 988,000
Distributions Reinvested............................... -- 53,000
Redeemed............................................... (805,176) (1,743,000)
----------------- -------------
Net Increase/Decrease in Class C Shares Outstanding...... (626,471) (702,000)
================= =============
Dollars:
Subscribed............................................. $ 1,770,678 $ 9,457,000
Distributions Reinvested............................... -- 500,000
Redeemed............................................... (7,597,266) (16,721,000)
----------------- -------------
Net Increase/Decrease.................................... $ (5,826,588) $ (6,764,000)
================= =============
Ending Paid in Capital................................... $ 22,524,829 $ 28,352,000+
================= =============
</TABLE>
- ---------------
<TABLE>
<S> <C>
+ Ending Paid in Capital amounts do not reflect permanent book
to tax differences.
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------------------- ------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
SELECTED PER SHARE DATA AND DECEMBER 31, 1999 YEAR ENDED JULY 7, 1997* TO DECEMBER 31, 1999 YEAR ENDED
RATIOS (UNAUDITED)# JUNE 30, 1999# JUNE 30, 1998# (UNAUDITED)# JUNE 30, 1999#
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 10.884 $ 10.526 $ 10.00 $ 10.839 $ 10.514
----------------- -------------- -------------- ----------------- --------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income/Loss.............. 0.026 0.072 0.11 (0.011) (0.003)
Net Realized and Unrealized
Gain/Loss................ (1.475) 0.512 0.56 (1.479) 0.509
----------------- -------------- -------------- ----------------- --------------
Total From Investment
Operations............... (1.449) 0.584 0.67 (1.490) 0.506
----------------- -------------- -------------- ----------------- --------------
DISTRIBUTIONS
Net Investment Income...... (0.022) (0.052) (0.08) -- (0.007)
In Excess of Net Investment
Income................... -- (0.000)+ (0.01) -- --
Net Realized Gain.......... -- -- (0.05) -- --
In Excess of Net Realized
Gain..................... -- (0.174) -- -- (0.174)
----------------- -------------- -------------- ----------------- --------------
Total Distributions........ (0.022) (0.226) (0.14) -- (0.181)
----------------- -------------- -------------- ----------------- --------------
NET ASSET VALUE, END OF
PERIOD..................... $ 9.413 $ 10.884 $ 10.53 $ 9.349 $ 10.839
================= ============== ============== ================= ==============
TOTAL RETURN (1)............. (13.43)%** 5.83% 6.74%** (13.75)%** 5.02%
================= ============== ============== ================= ==============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's).................... $ 67,300 $ 95,208 $ 137,447 $ 91,945 $ 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..................... 0.52% 0.74% 1.02% (0.23)% (0.03)%
Portfolio Turnover Rate...... 19%** 64% 38%** 19%** 64%
- -------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation
During the Period
Per Share Benefit to Net
Investment Income/Loss... $ 0.00+ $ 0.00+ $ 0.01 $ 0.00+ $ 0.00+
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets................... 1.50% 1.48% 1.60% 2.25% 2.23%
Net Investment Income/Loss
to Average Net Assets.... 0.47% 0.73% 0.88% (0.28)% (0.05)%
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
-----------------
SELECTED PER SHARE DATA AND JULY 7, 1997* TO
RATIOS JUNE 30, 1998#
<S> <C>
- -----------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 10.00
--------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income/Loss.............. 0.03
Net Realized and Unrealized
Gain/Loss................ 0.56
--------------
Total From Investment
Operations............... 0.59
--------------
DISTRIBUTIONS
Net Investment Income...... (0.03)
In Excess of Net Investment
Income................... (0.00)+
Net Realized Gain.......... (0.05)
In Excess of Net Realized
Gain..................... --
--------------
Total Distributions........ (0.08)
--------------
NET ASSET VALUE, END OF
PERIOD..................... $ 10.51
==============
TOTAL RETURN (1)............. 6.01%**
==============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's).................... $ 142,741
Ratio of Expenses to Average
Net Assets................. 2.20%
Ratio of Net Investment
Income/Loss to Average Net
Assets..................... 0.28%
Portfolio Turnover Rate...... 38%**
- --------------------------------------------------------------------
Effect of Voluntary Expense
Limitation
During the Period
Per Share Benefit to Net
Investment Income/Loss... $ 0.01
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets................... 2.35%
Net Investment Income/Loss
to Average Net Assets.... 0.14%
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED JULY 7, 1997* TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# JUNE 30, 1999# JUNE 30, 1998#
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.832 $ 10.503 $ 10.00
----------------- -------------- --------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................................ (0.011) (0.002) 0.03
Net Realized and Unrealized Gain/Loss..................... (1.481) 0.512 0.55
----------------- -------------- --------------
Total From Investment Operations.......................... (1.492) 0.510 0.58
----------------- -------------- --------------
DISTRIBUTIONS
Net Investment Income..................................... -- (0.007) (0.03)
In Excess of Net Investment Income........................ -- -- (0.00)+
Net Realized Gain......................................... -- -- (0.05)
In Excess of Net Realized Gain............................ -- (0.174) --
----------------- -------------- --------------
Total Distributions....................................... -- (0.181) (0.08)
----------------- -------------- --------------
NET ASSET VALUE, END OF PERIOD.............................. $ 9.340 $ 10.832 $ 10.50
================= ============== ==============
TOTAL RETURN (1)............................................ (13.76)%** 5.13% 5.83%**
================= ============== ==============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................... $ 19,218 $ 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... (0.23)% (0.02)% 0.29%
Portfolio Turnover Rate..................................... 19%** 64% 38%**
- ----------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment Income/Loss........... $ 0.00+ $ 0.00+ $ 0.01
Ratios Before Expense Limitation:
Expenses to Average Net Assets............................ 2.25% 2.23% 2.35%
Net Investment Income/Loss to Average Net Assets.......... (0.28)% (0.03)% 0.15%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Commencement of operations
** Non-Annualized
+ Amount is less than $0.01 per share.
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen Value Fund (the "Fund") is organized as a separate diversified
fund of Van Kampen Series Fund, Inc., a Maryland corporation, which is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks to
achieve above-average total return over a market cycle of three to five years,
consistent with reasonable risk. The Fund commenced operations on July 7, 1997.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. Class A shares are sold with a front-end sales charge of up to
5.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements which are short-term investments in
which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt securities. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
Interest income is recognized on an accrual basis except where collection is in
doubt. Income, expenses (other than class specific expenses), and realized and
unrealized gains or losses are allocated to each class of shares based upon
their relative net assets. Distributions from the Fund are recorded on the
ex-distribution date.
4. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's commencement of operations. The Adviser has agreed that in the event
any of its initial shares of the Fund originally purchased by Van Kampen are
redeemed by the Fund during the amortization period, the Fund will be reimbursed
for any unamortized organization costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
- -----------------------
12
<PAGE>
VAN KAMPEN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
At June 30, 1999, the Fund had a capital loss carryforward for U.S. Federal
Income tax purposes of approximately $4,433,000 which will expire June 30, 2007.
To the extent that capital loss carryforwards are used to offset any future net
capital gains realized during the carryforward period as provided by U.S.
Federal income tax regulations, no capital gains tax liability will be incurred
by the Fund for gains realized and not distributed. To the extent that capital
gains are so offset, such gains will not be distributed to shareholders.
Net capital losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 to June 30, 1999 the Fund incurred and elected
to defer until July 1, 1999, for U.S. Federal income tax purposes, net capital
losses of approximately $1,606,000.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ------------ ----------- ------------ -------------
<S> <C> <C> <C>
$188,112,843 $16,701,194 $(25,830,585) $(9,129,391)
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and 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 as indicated below. The Adviser
has agreed to reduce advisory fees payable to it and to reimburse the Fund, if
necessary, if the annual operating expenses, as defined, expressed as a
percentage of average daily net assets, exceed the maximum ratios indicated as
follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
0.80% 1.45% 2.20%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $6,380
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
The Distributor may receive a front end sales charge for purchases of Class A
shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $91,995 for Class A shares and deferred sales charges of
$369,973 and $2,805 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.
------------------
13
<PAGE>
VAN KAMPEN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $40,114,843 and sales of $78,574,536 of investment securities
other than long-term U.S. government securities and short-term investments.
There were no purchases or sales of long-term U.S. government securities.
D. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
- -----------------------
14
<PAGE>
VAN KAMPEN VALUE FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the Value Fund (the "Fund") was
held on December 15, 1999.
The description of each proposal and number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
---------- --------
<S> <C> <C>
J. Miles Branagan........................................... 14,157,042 136,356
Jerry D. Choate............................................. 14,155,562 137,836
Linda Hutton Heagy.......................................... 14,155,863 137,535
R. Craig Kennedy............................................ 14,157,042 136,356
Mitchell M. Merin........................................... 14,155,381 138,017
Jack E. Nelson.............................................. 14,157,042 136,356
Richard F. Powers, III...................................... 14,156,977 136,421
Phillip B. Rooney........................................... 14,157,042 136,356
Fernando Sisto.............................................. 14,157,042 136,356
Wayne W. Whalen............................................. 14,157,042 136,356
Suzanne H. Woolsey.......................................... 14,154,855 138,543
Paul G. Yovovich............................................ 14,157,042 136,356
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C> <C>
14,194,436 34,072 64,889
</TABLE>
------------------
15
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at www.vankampen.com--
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired, call 1-800-421-2833.
- - e-mail us by visiting www.vankampen.com
and selecting CONTACT US
* Closed to new investors
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
Chairman of the Board
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management of
Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of
Sciences/National Research Council, and former Chairman
of the German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Miller Andersen & Sherrerd, LLP
One Tower Bridge
West Conshohocken, Pennsylvania 19428
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555/ /
www.vankampen.com
MSVL SAR 02/00 -C- Van Kampen Funds Inc. 2000
467 567 667
<PAGE>
VAN KAMPEN
ASIAN GROWTH FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders.......................... 1
Economic Snapshot............................... 2
Investment Overview............................. 3
Portfolio of Investments........................ 6
Statement of Assets and Liabilities............. 8
Statement of Operations......................... 9
Statement of Changes in Net Assets.............. 10
Financial Highlights ........................... 11
Notes to Financial Statements................... 13
Additional Information.......................... 16
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Hong Kong 30.4%
Korea 22.7%
Taiwan 17.5%
Singapore 13.8%
Malaysia 3.8%
Thailand 3.1%
Short-Term Investment 2.7%
Other 2.5%
Indonesia 1.9%
Philippines 1.0%
India 0.6%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C MSCI CFEF
SHARES SHARES SHARES EX-JAPAN INDEX
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*.......................... 18.38% 20.16% 24.25% N/A
Without Sales Charge***..................... 25.59% 25.16% 25.25% 11.18%
One Year
With Sales Charge*.......................... 73.86% 78.00% 82.20% N/A
Without Sales Charge***..................... 84.56% 83.00% 83.20% 59.40%
Average Annual Five Year
With Sales Charge*.......................... -1.84% N/A -1.43% N/A
Without Sales Charge***..................... -0.67% N/A -1.43% -1.26%
Average Annual Since Inception
With Sales Charge*.......................... 2.81% -3.13% 2.98% N/A
Without Sales Charge***..................... 3.75% -2.82% 2.98% 3.52%
Commencement Date............................. 6/23/93 8/1/95 6/23/93 N/A
</TABLE>
The Morgan Stanley Capital International (MSCI) All Country Far East Free (CFEF)
ex-Japan Index is an unmanaged index of common stocks and includes Indonesia,
Hong Kong, the Philippines, Korea, Taiwan, and Thailand (assumes dividends are
reinvested).
* The returns above are calculated using the maximum sales charge for Class A
(5.75%) shares and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY COUNTRY NET ASSETS
- -------- -------------- ----------
<S> <C> <C>
Samsung Electronics Co. Korea 7.9%
Hutchison Whampoa Ltd. Hong Kong 7.0%
Cheung Kong Holdings Ltd. Hong Kong 4.9%
Taiwan Semiconductor Co. Taiwan 3.6%
Sun Hung Kai Properties Ltd. Hong Kong 3.1%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS+
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ----------- ----------
<S> <C> <C>
Capital Equipment $55,850,562 28.2%
Finance 46,167,007 23.3%
Services 43,087,788 21.7%
Multi-Industry 16,537,960 8.4%
Materials 10,081,908 5.1%
</TABLE>
+These sectors represent broad groupings of related industries.
THE COUNTRY SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MSCI CFEF EX-JAPAN INDEX AND ARE FOR INFORMATIONAL PURPOSES ONLY
AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE PERFORMANCE.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGERS OF THE VAN KAMPEN ASIAN GROWTH
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE
PAST SIX MONTHS. THE FUND IS MANAGED BY PORTFOLIO MANAGERS TIM JENSEN AND
ASHUTOSH SINHA OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. MR. JENSEN
AND MR. SINHA HAVE MANAGED THE FUND SINCE 1998. THE FOLLOWING EXCERPTS REFLECT
THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE SIX-MONTH PERIOD ENDED DECEMBER
31, 1999.
Q: CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED DURING THE
REPORTING PERIOD.
A: The environment for Asian stocks during the third quarter was mixed.
Initially, most markets declined as investors took profits following the sharp
increase in stock prices earlier in the year. Beginning in October, however,
global strength in telecommunications and technology stocks spilled over into
Asia, igniting powerful rallies in the region.
In addition, Asian equity markets were helped by a number of country-specific
factors. In particular, strong economic growth in Korea, coupled with the Korean
government's plan to deal with the lingering debt problems of Daewoo
Corporation, helped propel the Seoul market higher during the fourth quarter.
Stocks in Hong Kong also rallied amid growing indications of economic recovery
and stock market demand. Finally, liquidity conditions in Asia remained
favorable as interest rates declined and trade balances improved. As the year
ended, liquidity in Asian banks was higher than at any time in the last 10
years.
Q: BESIDES STRENGTH IN TECHNOLOGY AND TELECOMMUNICATIONS STOCKS, WAS THERE ANY
OTHER PATTERN TO THE PERFORMANCE OF ASIAN EQUITY MARKETS?
A: Yes. During the period, large markets tended to outperform small markets, and
large stocks generally beat their smaller-capitalization cousins. Part of the
explanation for this "bigger is better" pattern lies in the fact that most
telecom and tech companies fall within the large-cap sector. But investors also
generally avoided smaller stocks and markets out of concern over possible year
2000-related disruptions.
Q: WHAT STRATEGIES DID YOU PURSUE IN THIS ENVIRONMENT?
A: As always, we followed a bottom-up process of picking what we consider to be
the best companies regardless of industry or country. During the second half of
1999, that company-specific strategy resulted in overweight positions for the
Fund in technology and telecommunications businesses. Although we pared back the
Fund's positions in tech and telecom in December, the Fund remains modestly
overweight in these two industries. Conversely, our strategy uncovered
relatively meager opportunities in some of the smaller countries in the region.
Q: DISCUSS HOW THESE STRATEGIES CONTRIBUTED TO THE FUND'S PERFORMANCE.
A: Strong gains in the Fund's technology and telecommunications stocks led to
solid outperformance during the second half of the year. Among the Fund's
largest holdings, Korea-based Samsung Electronics continued to benefit from
robust demand for semiconductors as well as from management's efforts to build
solid businesses in high-growth sectors like communications and digital
appliances. We also enjoyed strong performance from China Telecom, the leading
cellular-phone operator in China. The company has consistently exceeded
expectations for cellular subscriber growth, and the Chinese government has made
notable progress in reforming its telecom industry. The Fund's overweight
position in Taiwan Semiconductor also contributed to the Fund's outperformance.
The company is a leading manufacturer of outsourced high-end semiconductors.
Q: HOW IMPORTANT IS OUTSOURCING TO ASIA'S PARTICIPATION IN THE TECHNOLOGY
REVOLUTION?
A: We believe many of Asia's best tech and telecom businesses benefit from
outsourcing. Increasingly, computer companies in the United States have chosen
to contract with businesses overseas to manufacture high-end technology and
telecom products. This strategy allows U.S. companies to focus on broader
strategic concepts without tying up large amounts of capital in plant and
equipment.
- -----------------------
4
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
We have identified several Asian companies that we believe should benefit from
the global trend towards outsourcing in technology and telecommunications
applications. Over time, we expect outsourcing of technology to provide an
important growth potential to the Fund's holdings.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: We are pleased with the Fund's performance during the past six months, as the
Fund continued to benefit from holdings in technology and telecommunications.
For Class A shares at net asset value, the Fund generated a total return of
25.59 percent for the six months ended December 31, 1999. By comparison, the
MSCI All Country Far East Free ex-Japan Index generated a total return of
11.18 percent for the same period. This broad-based, unmanaged index is composed
of common stocks from Indonesia, Hong Kong, the Philippines, Korea, Taiwan, and
Thailand and assumes dividends are reinvested. This index does not reflect any
commissions or sales charges that would be paid by an investor purchasing the
securities it represents. It's not possible to invest directly in an index. If
charges or commissions had been included, the total return would have been
lower. Past performance does not guarantee future results.
Q: ARE YOU SATISFIED WITH THE PACE OF ECONOMIC REFORM IN ASIA?
A: Progress has been uneven, and market performance has reflected that
variability. However, while no country has solved all of its structural
problems, there has been notable progress, particularly in Korea, where the
birth of a new securities market--the Kosdaq--is transforming the nation's
corporate culture.
Modeled after the NASDAQ market in the United States, Kosdaq-traded businesses
in Korea are generally more streamlined, shareholder friendly, and
incentive-laden than the traditional chaebols (conglomerates) for which the
country is well known. In fact, the influence of the chaebols is clearly
diminishing in Korea, to the long-term benefit of that country's economy. We
also have seen substantial progress towards reform in China and Taiwan.
Conversely, reforms appear to be lagging in Thailand, the Philippines, and
Indonesia, where the list of problems is daunting.
Q: WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A: Our outlook for Asian stocks is generally positive, primarily because of the
ongoing economic recovery in the region. Korea grew by almost 10 percent in
1999, and we believe that Korean GDP growth could reach 7 percent or more in
2000. Led by exports, Taiwan posted strong GDP growth despite a crippling
earthquake in September. All of the economies in Asia are now expanding, and
growth in Hong Kong and China has accelerated markedly in recent months. Faster
economic growth should underpin a generally favorable environment for corporate
profits, particularly in Korea and Taiwan, where the Fund retains overweighted
positions. We also believe that liquidity in the region will remain positive,
even if the U.S. Federal Reserve raises interest rates. In addition, we expect
Asian businesses to benefit from the productivity-enhancing effects of the
Internet, and from the relatively rapid penetration of wireless telecom
networks.
We caution, however, that correlations between stocks in Asia and the United
States have increased in recent years. Accordingly, any sharp or prolonged
sell-off on Wall Street would likely cause weakness in most Asian markets as
well. Over the longer-term, however, we are optimistic about the future of Asian
business, and we are confident that we have positioned the Fund to benefit from
the region's continued growth.
------------------
5
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
COMMON STOCKS (94.4%)
HONG KONG (30.3%)
Asia Satellite Telecommunications
Holdings Ltd................... 376,000 $ 1,187,470
Cathay Pacific Airways Ltd....... 482,000 858,777
Cheung Kong Holdings Ltd......... 770,000 9,781,630
China Telecom Ltd................ 751,000 4,695,259
(a)Great Wall Technology Co.,
Ltd............................ 426,000 413,752
Hang Seng Bank Ltd............... 155,400 1,774,201
Hengan International Group Co.,
Ltd............................ 1,172,000 324,153
Hong Kong & China Gas Co., Ltd... 1,265,000 1,733,100
Hong Kong Land Holdings Ltd...... 237,000 350,760
Hong Kong Telecommunications
Ltd............................ 1,927,700 5,567,230
Huaneng Power
International, Inc. `H'........ 932,400 221,900
Hutchison Whampoa Ltd............ 948,300 13,785,026
Jardine International Motor
Holdings Ltd................... 374,000 187,637
Johnson Electric Holdings Ltd.... 142,000 911,533
Kerry Properties Ltd............. 246,000 344,941
(a)Li & Fung Ltd................. 734,000 1,841,256
New World China Land Ltd......... 833,400 308,230
New World Development Co.,
Ltd............................ 396,000 891,490
Sino Land Co..................... 1,495,000 860,632
SmarTone Telecommunications
Holdings Ltd................... 197,900 954,686
Sun Hung Kai Properties Ltd...... 589,000 6,137,390
Swire Pacific Ltd. `A'........... 431,000 2,544,915
Television Broadcasts Ltd........ 329,000 2,243,134
(a)Timeless Software Ltd......... 578,000 334,598
Wing Hang Bank Ltd............... 255,000 872,580
Yanzhou Coal Mining Co., Ltd..... 1,981,000 547,906
(a)Yue Yuen Industrial
Holdings....................... 104,000 248,845
Zhehuang Expressway Co., Ltd.
`H'............................ 1,090,000 165,460
------------
60,088,491
------------
INDIA (0.6%)
(a)HCL Technologies Ltd.......... 20,750 276,667
Hero Honda Motors Ltd............ 1,477 38,334
(a)Moser-Baer (India) Ltd........ 56,000 449,287
Reckitt & Coleman of India
Ltd............................ 100 736
SmithKline Beecham Consumer
Healthcare Ltd................. 50 595
Software Solution Integrated
Ltd............................ 6,500 329,841
Tata Infotech Ltd................ 1,326 26,984
------------
1,122,444
------------
INDONESIA (1.9%)
(a)Gulf Indonesia Resources
Ltd............................ 5,700 46,312
PT Aneka Tambang Tbk............. 1,355,000 271,485
PT Gudang Garam Tbk (Foreign).... 275,000 739,893
PT Indofood Sukses Makmur Tbk.... 439,500 550,358
PT Semen Gresik Tbk.............. 420,500 666,481
PT Telekomunikasi Indonesia ADR.. 133,184 1,465,024
------------
3,739,553
------------
KOREA (22.7%)
Cheil Jedang Corp................ 10,140 1,169,828
(a)Dae Duck Electronics Co....... 33,000 392,338
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
Dongwon Securities Co............ 23,450 $ 505,967
Good Morning Securities Co.,
Ltd............................ 99,760 477,056
Hana Bank........................ 55,860 435,369
Hankuk Glass Industry Co.,
Ltd............................ 14,860 281,365
Housing & Commercial Bank........ 53,540 1,697,437
(a)Humax Co., Ltd................ 27,800 470,066
Hyundai Electronics Industries
Co............................. 43,077 914,272
(a)Hyundai Motor Co. GDR......... 165,682 1,781,082
(a)Insung Information............ 11,570 395,347
Kookmin Bank..................... 125,055 1,960,351
Korea Chemical Co., Ltd.......... 7,800 508,322
Korea Electric Power Corp. ADR... 201,810 3,380,317
(a)Korea Technology Banking
Co............................. 26,130 253,131
Korea Telecom Corp. ADR.......... 45,830 3,425,792
LG Chemical Ltd.................. 34,310 1,084,746
Mirae Co......................... 67,180 522,413
(a)Pantech Co., Ltd.............. 21,680 486,869
Pohang Iron & Steel Co., Ltd.
ADR............................ 84,800 2,968,000
Samsung Electro-Mechanics Co..... 18,131 1,205,540
Samsung Electronics Co........... 66,526 15,584,250
SK Telecom Co., Ltd. ADR......... 129,564 4,972,007
------------
44,871,865
------------
MALAYSIA (3.8%)
Carlsberg Brewery Malaysia
Bhd............................ 230,000 708,149
Malayan Banking Bhd.............. 502,400 1,784,819
Public Bank Bhd.................. 866,000 756,601
Rothmans of Pall Mall Bhd........ 318,000 2,426,810
Sime Darby Bhd................... 164,000 208,018
Tanjong Bhd...................... 205,000 453,152
Telekom Malaysia Bhd............. 267,000 1,032,855
Unisem (M) Bhd................... 15,000 96,314
------------
7,466,718
------------
PHILIPPINES (0.9%)
(a)ABS-CBN Broadcasting Corp.
ADR............................ 204,000 253,102
Philippine Long Distance
Telephone Co. `B' ADR.......... 36,250 921,991
San Miguel Corp. `B'............. 292,155 413,222
SM Prime Holdings, Inc. `B'...... 1,542,140 290,825
------------
1,879,140
------------
SINGAPORE (13.8%)
(a)Chartered Semiconductor
Manufacturing Ltd.............. 223,000 1,218,433
City Developments Ltd............ 214,000 1,252,777
(a)DBS Group Holdings Ltd........ 232,661 3,813,657
DBS Land Ltd..................... 365,000 718,823
Gul Technologies................. 515,000 568,958
NatSteel Electronics Ltd......... 256,000 1,352,627
Neptune Orient Lines Ltd......... 427,000 571,726
Omni Industries Ltd.............. 492,000 892,129
Oversea-Chinese Banking
Corp., Ltd. (Foreign).......... 377,150 3,464,662
(a)Overseas Union Bank Ltd.
(Foreign)...................... 184,300 1,078,910
Sembcorp Logistics Ltd........... 211,900 858,796
Singapore Airlines Ltd.
(Foreign)...................... 241,000 2,734,854
Singapore Press Holdings Ltd..... 100,200 2,171,852
Singapore Technology Engineering
Ltd............................ 871,000 1,349,253
Singapore Telecommunications
Ltd............................ 792,000 1,635,833
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
SINGAPORE (CONT.)
United Overseas Bank Ltd.
(Foreign)...................... 164,624 $ 1,453,001
Venture Manufacturing Ltd........ 198,800 2,279,844
------------
27,416,135
------------
TAIWAN (17.5%)
(a)Acer Peripherals, Inc......... 35,480 146,962
(a)Acer Peripherals, Inc. GDR.... 24,288 1,006,034
(a)Acer, Inc..................... 652,550 1,964,823
(a)Advanced Semiconductor
Engineering, Inc............... 344,219 1,228,374
(a)Ambit Microsystems Corp....... 36,000 267,261
(a)ASE Test Ltd.................. 12,400 302,250
(a)ASE Test Ltd.................. 1,100 26,400
Asustek Computer, Inc............ 179,661 1,894,784
China Steel Corp................. 1,887,100 1,394,957
(a)Chinatrust Commercial Bank.... 658,560 765,889
Compal Electronics, Inc.......... 122,407 411,469
(a)Compeq Manufacturing Co.,
Ltd............................ 179,700 979,089
Delta Electronics, Inc........... 181,000 784,324
(a)Evergreen Marine Corp......... 555,560 456,697
(a)Far Eastern Textile Ltd....... 459,805 1,098,785
(a)Far Eastern Textile Ltd.
GDR............................ 8,400 201,600
(a)First Commercial Bank......... 379,000 472,165
Formosa Plastics Corp............ 293,000 583,479
(a)Hon Hai Precision Industry.... 267,760 1,996,363
International Commercial Bank of
China.......................... 590,600 662,390
Nan Ya Plastics Corp............. 623,340 1,370,415
President Chain Store Corp....... 182,360 804,743
(a)Ritek, Inc.................... 59,000 357,177
Siliconware Precision Industries
Co............................. 441,695 1,125,875
(a)Taishin International Bank.... 750,600 420,920
(a)Taiwan Semiconductor Co....... 1,338,934 7,124,486
(a)United Micro Electronics
Corp., Ltd..................... 1,496,650 5,340,921
United World Chinese Commercial
Bank........................... 516,640 623,886
(a)Universal Scientific
Industrial Co., Ltd............ 134,000 422,686
WYSE Technology Taiwan Ltd....... 201,000 390,664
------------
34,625,868
------------
THAILAND (2.9%)
Advanced Information Services
Public
Co., Ltd. (Foreign)............ 103,400 1,735,001
BEC World Public Co., Ltd.
(Foreign)...................... 102,900 726,706
Delta Electronics Public Co.,
Ltd. (Foreign)................. 69,455 826,121
Golden Land Property Development
Public Co., Ltd................ 606,600 314,050
Siam City Cement Public Co., Ltd.
(Foreign)...................... 177,633 952,658
Thai Farmer's Bank Public Co.,
Ltd. (Foreign)................. 697,600 1,166,834
------------
5,721,370
------------
TOTAL COMMON STOCKS.................................. 186,931,584
------------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
RIGHTS VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
RIGHTS (0.1%)
HONG KONG (0.1%)
Li & Fung Ltd...................... 46,000 $ 115,392
------------
<CAPTION>
NO. OF
WARRANTS
----------
WARRANTS (0.3%)
<S> <C> <C>
PHILIPPINES (0.1%)
(a)Jollibee Food, expiring
3/24/03........................ 456,400 192,526
------------
THAILAND (0.2%)
(a)Siam Commercial Bank Public
Co., Ltd, expiring 5/10/02..... 1,023,700 475,634
------------
TOTAL WARRANTS....................................... 668,160
------------
TOTAL LONG-TERM INVESTMENTS (94.8%)
(COST $133,402,794).................................. 187,715,136
------------
<CAPTION>
PAR
VALUE
----------
SHORT-TERM INVESTMENT (2.7%)
<S> <C> <C>
REPURCHASE AGREEMENT (2.7%)
Chase Securities, Inc., 2.60%,
dated $5,292,000
12/31/99, due 1/3/00, to be
repurchased at $5,293,147
collateralized by $5,404,001
U.S. Treasury Notes, 6.125%,
due 12/31/01, valued at
$5,404,001
(COST $5,292,000).............. 5,292,000
------------
TOTAL INVESTMENTS IN SECURITIES (97.5%) (COST
$138,694,794)...................................... 193,007,136
FOREIGN CURRENCY (0.4%) (COST $849,428).............. 854,670
------------
TOTAL INVESTMENTS (97.9%) (COST $139,544,222)........ 193,861,806
OTHER ASSETS IN EXCESS OF LIABILITIES (2.1%)......... 4,202,724
------------
NET ASSETS (100%).................................... $198,064,530
============
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(a) -- Non-income producing security
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
</TABLE>
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------- ------------ ----------
<S> <C> <C>
Capital Equipment.............. $ 55,850,562 28.2%
Finance........................ 46,167,007 23.3
Services....................... 43,087,788 21.7
Multi-Industry................. 16,537,960 8.4
Materials...................... 10,081,908 5.1
Consumer Goods................. 9,894,915 5.0
Energy......................... 6,094,996 3.1
------------ ----
$187,715,136 94.8%
============ ====
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
+ -- Classified by sectors which represent broad groupings of
related industries.
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------
ASSETS:
Investments in Securities, at Value (Investments at Cost
$138,694,794)........................................... $ 193,007,136
Foreign Currency (Cost $849,428).......................... 854,670
Cash...................................................... 4,926,726
Receivable for:
Investments Sold........................................ 5,292,048
Fund Shares Sold........................................ 577,015
Dividends............................................... 192,499
Foreign Withholding Tax Reclaim......................... 3,659
Interest................................................ 382
Other..................................................... 46,733
-------------
Total Assets............................................ 204,900,868
-------------
LIABILITIES:
Payable for:
Investments Purchased................................... 5,322,817
Fund Shares Redeemed.................................... 1,005,510
Distribution Fees....................................... 177,418
Investment Advisory Fees................................ 150,360
Administrative Fees..................................... 41,159
Shareholder Reporting Expenses.......................... 39,773
Transfer Agent Fees..................................... 27,445
Directors' Fees and Expenses............................ 20,393
Deferred Country Tax.................................... 19,292
Professional Fees....................................... 18,262
Custody Fees............................................ 1,548
Other..................................................... 12,361
-------------
Total Liabilities....................................... 6,836,338
-------------
NET ASSETS.................................................. $ 198,064,530
=============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 14,043
Paid in Capital in Excess of Par.......................... 239,264,521
Net Unrealized Appreciation on Investments and Foreign
Currency Translations*.................................. 54,317,584
Accumulated Net Investment Loss........................... (1,055,479)
Accumulated Net Realized Loss............................. (94,476,139)
-------------
NET ASSETS.................................................. $ 198,064,530
=============
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $97,778,870 and 6,765,180
Shares Outstanding)..................................... $ 14.45
=============
Maximum Sales Charge...................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100 / (100 - maximum sales charge))............. $ 15.33
=============
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $53,048,700 and 3,843,802
Shares Outstanding)**................................... $ 13.80
=============
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $47,236,960 and 3,433,982
Shares Outstanding)**................................... $ 13.76
=============
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Net of accrual for deferred country tax of approximately
U.S. $10,226.
** Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 841,523
Interest.................................................. 76,974
Less Foreign Taxes Withheld............................... (64,918)
-----------
Total Income............................................. 853,579
-----------
EXPENSES:
Investment Advisory Fees.................................. 817,501
Distribution Fees (Attributed to Classes A, B and C of
$99,203, $220,838 and $200,979, respectively)........... 521,020
Administrative Fees....................................... 209,700
Custodian Fees............................................ 146,942
Transfer Agent Fees....................................... 67,983
Shareholder Reports....................................... 56,252
Filing and Registration Fees.............................. 32,338
Professional Fees......................................... 19,382
Directors' Fees and Expenses.............................. 11,115
Country Tax Expense....................................... 215
Other..................................................... 15,110
-----------
Total Expenses........................................... 1,897,558
Less Expense Reductions.................................. (13,360)
-----------
Net Expenses............................................. 1,884,198
-----------
Net Investment Income/Loss.................................. (1,030,619)
-----------
NET REALIZED GAIN/LOSS ON:
Investments............................................... 32,285,636
Foreign Currency Transactions............................. (166,025)
-----------
Net Realized Gain/Loss...................................... 32,119,611
-----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... 44,849,761
-----------
End of the Period:
Investments............................................. 54,312,342
Foreign Currency Translations........................... 5,242
-----------
54,317,584
-----------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 9,467,823
-----------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. 41,587,434
-----------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $40,556,815
===========
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30,1999
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ (1,030,619) $ (125,000)
Net Realized Gain/Loss.................................... 32,119,611 (5,000)
Net Unrealized Appreciation/Depreciation.................. 9,467,823 68,333,000
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 40,556,815 68,203,000
----------------- -------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed................................................ 91,708,853 84,305,000
Redeemed.................................................. (106,620,324) (82,166,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... (14,911,471) 2,139,000
----------------- -------------
Total Increase/Decrease in Net Assets..................... 25,645,344 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 $(1,055,479) and $(25,000),
respectively)............................................. $ 198,064,530 $ 172,419,000
================= =============
- -------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) CLASS A:
Shares:
Subscribed............................................. 6,743,870 8,906,000
Redeemed............................................... (7,711,901) (8,391,000)
----------------- -------------
Net Increase/Decrease in Class A Shares Outstanding...... (968,031) 515,000
================= =============
Dollars:
Subscribed............................................. $ 79,226,397 $ 70,587,000
Redeemed............................................... (90,544,061) (61,673,000)
----------------- -------------
Net Increase/Decrease.................................... $ (11,317,664) $ 8,914,000
================= =============
Ending Paid in Capital................................... $ 109,795,596 $ 121,936,000+
================= =============
CLASS B:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 718,798 944,000
Redeemed............................................... (772,894) (1,189,000)
----------------- -------------
Net Increase/Decrease in Class B Shares Outstanding...... (54,096) (245,000)
================= =============
Dollars:
Subscribed............................................. $ 8,102,105 $ 7,734,000
Redeemed............................................... (8,562,374) (8,813,000)
----------------- -------------
Net Increase/Decrease.................................... $ (460,269) $ (1,079,000)
================= =============
Ending Paid in Capital................................... $ 62,052,179 $ 62,911,000+
================= =============
CLASS C:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 378,119 807,000
Redeemed............................................... (653,836) (1,680,000)
----------------- -------------
Net Increase/Decrease in Class C Shares Outstanding...... (275,717) (873,000)
================= =============
Dollars:
Subscribed............................................. $ 4,380,351 $ 5,984,000
Redeemed............................................... (7,513,889) (11,680,000)
----------------- -------------
Net Increase/Decrease.................................... $ (3,133,538) $ (5,696,000)
================= =============
Ending Paid in Capital................................... $ 67,430,789 $ 70,942,000+
================= =============
</TABLE>
- ---------------
<TABLE>
<S> <C>
+ Ending Paid in Capital amounts do not reflect permanent book
to tax differences.
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 ----------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 11.484 $ 6.529 $ 16.62 $ 17.15 $ 16.42 $ 15.50
----------------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss....... (0.051) 0.022 (0.04) (0.06) (0.04) --
Net Realized and Unrealized
Gain/Loss...................... 3.020 4.933 (10.03) (0.14) 0.77 1.43
----------------- -------- -------- -------- -------- --------
Total from Investment
Operations..................... 2.969 4.955 (10.07) (0.20) 0.73 1.43
----------------- -------- -------- -------- -------- --------
DISTRIBUTIONS
Net Realized Gain................ -- -- -- -- -- (0.49)
In Excess of Net Realized Gain... -- -- (0.02) (0.33) -- (0.02)
----------------- -------- -------- -------- -------- --------
Total Distributions.............. -- -- (0.02) (0.33) -- (0.51)
----------------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD..... $ 14.453 $ 11.484 $ 6.53 $ 16.62 $ 17.15 $ 16.42
================= ======== ======== ======== ======== ========
TOTAL RETURN (1)................... 25.59%* 75.69% (60.57)% (1.10)% 4.45% 9.50%
================= ======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's).......................... $ 97,779 $ 88,808 $ 47,128 $175,440 $248,009 $178,667
Ratio of Expenses to Average Net
Assets........................... 1.92% 1.95% 1.90% 1.84% 1.88% 1.90%
Ratio of Net Investment Income/Loss
to Average Net Assets............ (0.86)% 0.28% (0.39)% (0.31)% (0.16)% 0.04%
Portfolio Turnover Rate............ 66%* 138% 130% 74% 38% 34%
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net
Investment Income/Loss......... $ -- $ 0.01 $ 0.01 $ -- $ -- $ --
Ratios Before Expense Limitation:
Expenses to Average Net Assets... 1.93% 2.03% 2.21% -- -- --
Net Investment Income/Loss to
Average Net Assets............. (0.87)% 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>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 --------------------------------- AUGUST 1, 1995+ TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 11.007 $ 6.306 $ 16.17 $ 16.81 $ 16.51
----------------- ------- ------- ------- -----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............. (0.093) (0.033) (0.10) (0.16) (0.03)
Net Realized and Unrealized
Gain/Loss............................ 2.887 4.734 (9.74) (0.15) 0.33
----------------- ------- ------- ------- -----------------
Total from Investment Operations....... 2.794 4.701 (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........... $ 13.801 $11.007 $ 6.31 $ 16.17 $ 16.81
================= ======= ======= ======= =================
TOTAL RETURN (1)......................... 25.16%* 74.48% (60.89)% (1.79)% 1.82%*
================= ======= ======= ======= =================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........ $ 53,049 $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..................... (1.63)% (0.44)% (1.01)% (1.04)% (0.52)%
Portfolio Turnover Rate.................. 66%* 138% 130% 74% 38%*
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss.......................... $ -- $ 0.01 $ 0.02 $ -- $ --
Ratios Before Expense Limitation:
Expenses to Average Net Assets......... 2.68% 2.78% 2.96% -- --
Net Investment Income/Loss to Average
Net Assets........................... (1.64)% (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>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Non-Annualized
+ The Fund began offering Class B shares on August 1, 1995.
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
FINANCIAL HIGHLIGHTS (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31,1999 --------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD.............................. $ 10.973 $ 6.290 $ 16.14 $ 16.78 $ 16.19 $ 15.40
----------------- ------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss.......... (0.092) (0.035) (0.12) (0.21) (0.13) (0.12)
Net Realized and Unrealized
Gain/Loss......................... 2.875 4.718 (9.71) (0.10) 0.72 1.42
----------------- ------- ------- -------- -------- --------
Total from Investment Operations.... 2.783 4.683 (9.83) (0.31) 0.59 1.30
----------------- ------- ------- -------- -------- --------
DISTRIBUTIONS
Net Realized Gain................... -- -- -- -- -- (0.49)
In Excess of Net Realized Gain...... -- -- (0.02) (0.33) -- (0.02)
----------------- ------- ------- -------- -------- --------
Total Distributions................. -- -- (0.02) (0.33) -- (0.51)
----------------- ------- ------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD........ $ 13.756 $10.973 $ 6.29 $ 16.14 $ 16.78 $ 16.19
================= ======= ======= ======== ======== ========
TOTAL RETURN (1)...................... 25.25%* 74.13% (60.88)% (1.79)% 3.64% 8.71%
================= ======= ======= ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)..... $ 47,237 $40,706 $28,823 $114,460 $168,070 $139,497
Ratio of Expenses to Average Net
Assets.............................. 2.67% 2.70% 2.65% 2.59% 2.63% 2.63%
Ratio of Net Investment Income/Loss to
Average Net Assets.................. (1.63)% (0.48)% (1.17)% (1.06)% (0.94)% (0.77)%
Portfolio Turnover Rate............... 66%* 138% 130% 74% 38% 34%
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Investment Net
Income/Loss....................... $ -- $ 0.01 $ 0.01 $ -- $ -- $ --
Ratios Before Expense Limitation:
Expenses to Average Net Assets...... 2.68% 2.78% 2.96% -- -- --
Net Investment Income/Loss to
Average Net Assets................ (1.64)% (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>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Non-Annualized
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
- --------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen Asian Growth Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks long-term
capital appreciation through investment primarily in equity securities of Asian
issuers, excluding Japan. The Fund commenced operations on June 23, 1993.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. Class A shares are sold with a front-end sales charge of up to
5.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights. The Fund began offering the current Class B shares on August 1,
1995. Class B shares held prior to May 1, 1995 were renamed Class C shares.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Securities listed on a foreign exchange are valued at their
closing price. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Bonds and other fixed income securities may be valued according to the
broadest and most representative market. In addition, bonds and other fixed
income securities may be valued on the basis of prices provided by a pricing
service which takes into account institutional size trading in similar groups of
securities. Debt securities purchased with remaining maturities of 60 days or
less are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date, net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. Income, expenses (other than class specific expenses),
and realized and unrealized gains or
------------------
13
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
losses are allocated to each class of shares based upon their relative net
assets. Distributions from the Fund are recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized between
trade date and settlement date on security and income transactions. However, the
foreign currency portion of gains and losses realized on sales and maturities of
foreign denominated debt securities is treated as ordinary income for U.S.
Federal income tax purposes.
The net assets of the Fund may include issuers located in emerging markets.
There are certain risks inherent in these investments not typically associated
with investments in the United States, including the smaller size of the markets
themselves, lesser liquidity, greater volatility, and potentially less publicly
available information. Emerging markets may be subject to a greater degree of
government involvement in the economy and greater economic and political
uncertainty, which has the potential to extend to government imposed
restrictions on exchange traded transactions and currency transactions. These
restrictions may impact the Fund's ability to buy or sell certain securities or
to repatriate certain currencies to U.S. dollars. Additionally, changes in
currency exchange rates will affect the value of and investment income from such
securities.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains, and net unrealized appreciation, as applicable, as the income is earned
or capital gains are recorded.
At December 31, 1999, the Fund had available capital loss carryforwards to
offset future net capital gains, to the extent provided by U.S. Federal income
tax regulations, of approximately $53,293,000 and $69,761,000 which will expire
on June 30, 2006 and June 30, 2007, respectively.
To the extent that capital loss carryforwards are used to offset any future net
capital gains realized during the carryforward period as provided by U.S.
Federal income tax regulations, no capital gains tax liability will be incurred
by the Fund for gains realized and not distributed. To the extent that capital
gains are so offset, such gains will not be distributed to shareholders.
Net capital losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 to June 30, 1999, the Fund incurred and elected
to defer until July 1, 1999, for U.S. Federal income tax purposes, net capital
losses of approximately $999,000.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ------------ ----------- ------------ -------------
<S> <C> <C> <C>
$138,694,794 $57,063,401 $(2,751,059) $54,312,342
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing book and
tax treatment for foreign currency transactions, net operating losses, and
foreign taxes on net realized gains.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if
- -----------------------
14
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
necessary, if the annual operating expenses, as defined, expressed as a
percentage of average daily net assets, exceed the maximum ratios indicated as
follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
1.00% 1.90% 2.65%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $5,097
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the 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
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $106,144 for Class A shares and deferred sales charges of
$115,337 and $12,323 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 December 31, 1999, the Fund incurred $91,113 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $105,318,106 and sales of $119,829,677 of investment
securities other than long-term U.S. government securities and short-term
investments. There were no purchases or sales of long-term U.S. government
securities.
D. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
------------------
15
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the Asian Growth Fund ("the
Fund") was held on December 15, 1999. The description of each proposal and
number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
--------- --------
<S> <C> <C>
J. Miles Branagan........................................... 9,696,423 73,083
Jerry D. Choate............................................. 9,700,789 68,717
Linda Hutton Heagy.......................................... 9,696,555 72,951
R. Craig Kennedy............................................ 9,699,888 69,618
Mitchell M. Merin........................................... 9,695,883 73,622
Jack E. Nelson.............................................. 9,700,707 68,799
Richard F. Powers, III...................................... 9,701,033 68,473
Phillip B. Rooney........................................... 9,699,096 70,409
Fernando Sisto.............................................. 9,686,581 82,925
Wayne W. Whalen............................................. 9,697,829 71,676
Suzanne H. Woolsey.......................................... 9,694,695 74,810
Paul G. Yovovich............................................ 9,695,273 74,233
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C> <C>
9,695,334 18,967 55,204
</TABLE>
- -----------------------
16
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
* Closed to new investors
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at www.vankampen.com--
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting www.vankampen.com
and selecting CONTACT US
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
Chairman of the Board
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management of
Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555
/ /www.vankampen.com
MSAG SAR 02/00 -C- Van Kampen Funds Inc. 2000
452 552 652
<PAGE>
VAN KAMPEN
EUROPEAN EQUITY FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 8
Statement of Operations............................................... 9
Statement of Changes in Net Assets.................................... 10
Financial Highlights ................................................. 11
Notes to Financial Statements......................................... 12
Additional Information................................................ 15
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Finland 2.6%
France 15.5%
Germany 9.5%
Italy 6.4%
Netherlands 6.3%
Portugal 2.7%
Short-Term Investment 4.2%
Spain 4.2%
Sweden 5.2%
Switzerland 10.4%
United Kingdom 30.3%
Other 2.7%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES MSCI EUROPE INDEX
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*................................. 4.74% 5.71% 9.74% N/A
Without Sales Charge***............................ 11.14% 10.71% 10.74% 18.76%
One Year
With Sales Charge*................................. 3.73% 4.27% 8.19% N/A
Without Sales Charge***............................ 10.10% 9.27% 9.19% 15.89%
Average Annual Since Inception
With Sales Charge*................................. 9.23% 10.63% 13.46% N/A
Without Sales Charge***............................ 14.46% 13.69% 13.46% 27.18%
Commencement Date.................................... 9/25/98 9/25/98 9/25/98 N/A
</TABLE>
The MSCI Europe Index is an unmanaged market value weighted index of common
stocks listed on the stock exchanges of countries in Europe (assumes dividends
are reinvested).
* The returns above are calculated using the maximum sales charge for Class A
shares (5.75%) and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS(1)
PERCENT OF
SECURITY COUNTRY NET ASSETS
- -------- -------------- ----------
<S> <C> <C>
Nestle S.A. (Registered) Switzerland 3.8%
Total Fina S.A. `B' France 3.1%
Aventis S.A. France 2.6%
Cie Financiere Richemont AG `A' Switzerland 2.3%
Reckitt Benckiser plc United Kingdom 2.2%
</TABLE>
(1) excludes Short-Term Investment
<TABLE>
<CAPTION>
TOP FIVE SECTORS+
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ---------- ----------
<S> <C> <C>
Consumer Goods $2,766,216 28.3%
Finance 2,099,308 21.5%
Services 1,895,037 19.4%
Energy 994,110 10.2%
Materials 946,156 9.7%
</TABLE>
+ These sectors represent broad groups of related industries.
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGERS OF THE VAN KAMPEN EUROPEAN EQUITY
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE
PAST SIX MONTHS. THE FUND IS MANAGED BY MARGARET NAYLOR, ALASTAIR ANDERSON, AND
AMR DIAB OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. THE FOLLOWING
DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE PERIOD
ENDED DECEMBER 31, 1999.
Q: DESCRIBE THE MARKET CONDITIONS THAT AFFECTED THE FUND DURING THE REPORTING
PERIOD.
A: European markets generally moved lower in the third quarter, then rebounded
during the final three months of the year amid a virtual buying frenzy in
technology and telecom stocks. Like conditions in the United States, market
leadership was focused among a narrow group of large-capitalization stocks,
especially telecommunications companies that stand to benefit from wireless data
transmission. Investors also piled into Internet stocks in the belief that
applications will soon become available to allow access to Web sites through a
display on a mobile phone. While the rally in the telecom sector received most
of the attention, the euro drifted gradually lower, helping the region's export
sector.
Q: WHAT DO YOU FEEL ACCOUNTS FOR THE RELATIVE WEAKNESS IN THE EURO SINCE ITS
LAUNCH IN JANUARY 1999?
A: Beginning in mid-1998, currencies of the Euro-11 nations began to appreciate
as investors basked in the glow of approaching monetary union. Over the next six
months, a mini-bubble developed in the euro, causing the currency to become
modestly overvalued relative to the dollar as 1999 began. A correction of this
overvaluation contributed to the decline in the euro during the reporting
period. In addition, global capital continued to pour into the United States due
to its relatively higher interest rates and soaring stock market. Also, Europe
is in a much earlier stage of its economic cycle than the United States,
generally causing European growth rates to lag behind those of the United States
in recent years.
Q: DO YOU BELIEVE THAT THOSE TRENDS WILL REVERSE IN COMING MONTHS?
A: There are several reasons why we expect the euro to gradually appreciate
relative to the U.S. dollar in 2000. First, the gap between interest rates in
Europe and the United States has begun to narrow. Second, Europe is building
economic momentum, while growth in the United States may have peaked. Finally,
Europe's current-account position is favorable relative to the United States,
which is running a massive trade deficit. Each of those factors should heighten
demand for euro-denominated assets relative to the dollar in coming months. A
higher euro, in turn, could boost returns for U.S. investors owning European
stocks.
Q: WHAT STRATEGIES DID YOU PURSUE FOR THE FUND IN THIS ENVIRONMENT?
A: We use a value-driven approach to try to identify individual stocks that we
believe are undervalued. Our primary indicator of value is price-to-cash flow,
and we select investments on a company-by-company basis, regardless of country
or sector. In addition, we assess management quality and the financial structure
of a company as well as analyze the market position or franchise of the business
within its competitive market.
We believe that investor euphoria over technology and cellular telecom companies
has pushed valuations in those sectors beyond reasonable levels. Accordingly,
the Fund remains underweight in the information technology group. However, we
have pursued indirect ways to take advantage of the growth story in the telecom
and Internet industries. For example, the Fund is slightly underweighted in
cellular telecommunications businesses, where valuations are more stretched.
Also, the Fund gained Internet exposure through Telefonica, a Spanish telecom
company that developed and floated a highly successful Internet Service Provider
business late in the year.
The Fund also owns several "old economy" companies, which stand to benefit from
"new economy" business. These include media companies that are experiencing
robust profitability as a result of the fundamental need of e-commerce firms to
advertise. Examples include WPP, a global advertising business; Capital Radio,
which owns the dominant radio franchise in the London market; and Mediaset, an
Italian television broadcaster. The Fund is also overweight in cyclical and
consumer-staples companies, given our view that economic growth is poised to
accelerate in the region.
- -----------------------
4
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q: HOW DID THIS STRATEGY AFFECT PERFORMANCE?
A: The valuation-focused nature of the Fund's portfolio helped relative
performance during the third quarter--a time in which markets generally trended
lower--but hurt returns during the fourth quarter. Still, the Fund benefited
from solid performance from several holdings, including Telefonica, WPP, and
Capital Radio.
Relative performance was undermined by our stock selection for the Fund within
the energy sector, which climbed during the year on the tide of rising oil
prices. Specifically, we focused on identifying strong relative values within
the group. However, the top performers during the second half of 1999 were
mega-cap companies like BP Amoco, which is accorded a valuation that we deem
excessive.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: The Fund's returns suffered during the period due to its underweight position
in European mega-cap stocks and growth-oriented investments, which outperformed
the Fund's value-oriented investments. The Fund achieved a total return of 11.14
percent (Class A shares at net asset value) for the six-month period ended
December 31, 1999. By comparison, the Morgan Stanley Capital International
(MSCI) Europe Index generated a total return of 18.76 percent. Past performance
does not guarantee future results.
Q: WHAT IS YOUR OUTLOOK FOR THE EUROPEAN MARKETS AND THE FUND'S PORTFOLIO IN THE
MONTHS AHEAD?
A: We are optimistic about Europe's economy and its financial markets. Monetary
union has unleashed a markedly improved business environment throughout the
region. Companies are restructuring in response to healthy competitive
pressures, and managements are becoming more attuned to shareholder value. In
addition, the new European Central Bank has behaved in a prudent and independent
fashion, while governments are becoming more business-friendly. Also, a growing
equity culture is increasing demand for equities and giving birth to new
securities markets. These factors all suggest that the long-term outlook for
European stocks is favorable.
Over the near term, liquidity conditions are likely to remain positive despite
modest upward pressure on interest rates in coming months. Meanwhile, the lower
euro is underpinning a recovery in core European nations like Germany and Italy.
Coupled with ongoing growth in peripheral Europe, the region seems on the verge
of a significant acceleration in economic output. We caution, however, that
valuations among technology and telecom stocks are stretched, and that any
correction in those groups could trigger a broader decline. We are confident,
however, that our value orientation has positioned the Fund to benefit from an
acceleration of economic growth in Europe and the possible broadening of market
leadership in coming months.
------------------
5
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCKS (91.8%)
DENMARK (0.6%)
Novo Nordisk A/S `B'.................. 430 $ 57,089
----------
FINLAND (2.6%)
KCI Konecranes International plc...... 810 31,184
(a)Kone Corp. Oy `B'.................. 1,365 67,306
Merita plc............................ 12,600 74,325
Sampo Insurance Co., Ltd. `A'......... 2,440 85,375
----------
258,190
----------
FRANCE (15.5%)
Alcatel............................... 325 74,719
Aventis S.A........................... 4,360 253,672
Axa S.A............................... 600 83,733
Banque Nationale de Paris............. 690 63,732
Cie de Saint-Gobain................... 250 47,065
CNP Assurances........................ 4,570 168,474
France Telecom S.A.................... 850 112,537
Groupe Danone (Registered)............ 400 94,381
Michelin (C.G.D.E.) `B'
(Registered)........................ 1,790 70,393
Pernod-Ricard......................... 1,620 92,784
Schneider S.A......................... 1,830 143,839
Total Fina S.A. `B'................... 2,278 304,417
----------
1,509,746
----------
GERMANY (6.5%)
Adidas-Salomon AG..................... 865 64,981
BASF AG............................... 2,015 105,453
Bayerische HypoVereinsbank AG......... 785 53,668
Deutsche Telekom AG................... 2,460 173,267
Mannesmann AG (Registered)............ 360 87,267
Schering AG........................... 730 88,332
Volkswagen AG......................... 1,090 61,550
----------
634,518
----------
IRELAND (1.2%)
Bank of Ireland....................... 14,510 115,586
----------
ITALY (6.4%)
Banca Popolare di Bergamo S.p.A....... 5,310 122,935
(a)Enel S.p.A......................... 5,900 24,749
Marzotto (Gaetano) S.p.A.............. 7,570 54,196
Mediaset S.p.A........................ 11,820 184,024
Telecom Italia Mobile S.p.A........... 7,805 87,280
Telecom Italia S.p.A.................. 7,040 99,383
Uni Credito Italiano S.p.A............ 11,410 56,146
----------
628,713
----------
NETHERLANDS (6.3%)
Akzo Nobel N.V........................ 3,400 170,734
ING Groep N.V......................... 2,635 159,260
KPN N.V............................... 650 63,511
Laurus N.V............................ 4,120 74,364
Philips Electronics N.V............... 1,061 144,431
----------
612,300
----------
PORTUGAL (2.7%)
Banco Comercial Portugues S.A.
(Registered)........................ 10,900 60,560
Electricidade de Portugal S.A......... 7,000 122,323
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
Telecel-Comunicacoes Pessoais S.A..... 4,400 $ 76,800
----------
259,683
----------
SPAIN (4.2%)
Banco Popular Espanol S.A............. 845 55,171
Banco Santander Central Hispano
S.A................................. 5,480 62,109
Endesa S.A............................ 5,600 111,298
(a)Telefonica S.A..................... 7,368 184,252
----------
412,830
----------
SWEDEN (5.2%)
Autoliv, Inc. SDR..................... 3,190 93,547
ForeningsSparbanken AB................ 7,340 108,056
Nordbanken Holding AB................. 5,900 34,743
SCA AB `B'............................ 1,480 43,924
Scandic Hotels AB..................... 2,020 18,794
Svedala Industri AB................... 5,070 93,148
Svenska Handelsbanken `A'............. 9,240 116,438
----------
508,650
----------
SWITZERLAND (10.4%)
Cie Financiere Richemont AG `A'....... 95 226,830
Holderbank Financiere Glarus AG `B'
(Bearer)............................ 90 123,280
Nestle S.A. (Registered).............. 203 372,071
Novartis AG (Registered).............. 97 142,498
Schindler Holding AG (Registered)..... 40 64,091
UBS AG (Registered)................... 335 90,512
----------
1,019,282
----------
UNITED KINGDOM (30.2%)
Allied Domecq plc..................... 21,230 104,923
Allied Zurich plc..................... 9,050 106,628
AstraZeneca Group plc................. 2,680 111,155
BAA plc............................... 4,800 33,723
Bank of Scotland Group plc............ 9,240 107,300
Barclays plc.......................... 2,590 74,543
(a)BG Group plc....................... 14,729 95,155
Blue Circle Industries plc............ 12,500 72,629
BOC Group plc......................... 5,130 110,196
British Telecommunications plc........ 8,500 207,709
Burmah Castrol plc.................... 3,401 62,070
Cadbury Schweppes plc................. 15,300 92,419
Capital Radio plc..................... 4,450 107,807
Centrica plc.......................... 15,400 43,651
Diageo plc............................ 12,500 100,539
Glaxo Wellcome plc.................... 1,750 49,462
Granada Group plc..................... 5,874 59,531
Great Universal Stores plc............ 18,570 108,572
Halma plc............................. 25,900 48,942
Imperial Tobacco Group plc............ 9,550 78,663
Lloyds TSB Group plc.................. 6,840 85,561
National Westminster Bank............. 2,370 50,909
Prudential plc........................ 8,300 163,544
Reckitt Benckiser plc................. 22,834 214,083
Sainsbury (J) plc (Registered)........ 11,400 64,304
Scottish & Southern Energy plc........ 12,590 100,501
Shell Transport & Trading Co. plc
(Registered)........................ 17,460 145,086
Smith & Nephew plc.................... 22,350 75,082
SSL International plc................. 8,340 105,637
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
WPP Group plc......................... 10,380 $ 164,461
----------
2,944,785
----------
TOTAL COMMON STOCKS................................... 8,961,372
----------
PREFERRED STOCKS (3.0%)
GERMANY (3.0%)
Fresenius AG.......................... 844 159,997
Henkel KGaA AG........................ 1,959 130,373
----------
TOTAL PREFERRED STOCKS................................ 290,370
----------
<CAPTION>
PAR
VALUE
--------
CORPORATE BONDS & NOTES (0.1%)
<S> <C> <C>
UNITED KINGDOM (0.1%)
(b)BG Transco Holdings plc 0.00%,
12/14/09............................ $ 2,000 3,250
(b)BG Transco Holdings plc 4.1875%,
12/14/22............................ 2,000 3,222
BG Transco Holdings plc 7.00%,
12/16/24............................ 2,000 3,138
----------
TOTAL CORPORATE BONDS & NOTES......................... 9,610
----------
TOTAL LONG-TERM INVESTMENTS (94.9%) (COST
$8,304,802)........................................... 9,261,352
----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE VALUE
<S> <C> <C>
- --------------------------------------------------------------------
SHORT-TERM INVESTMENT (4.2%)
REPURCHASE AGREEMENT (4.2%)
Chase Securities, Inc., 2.60%, dated $411,000
12/31/99, due 1/3/00, to be
repurchased at $411,089
collateralized by $424,137
U.S. Treasury Notes, 6.125%, due
12/31/01, valued at $424,137
(COST $411,000)................................. $ 411,000
----------
TOTAL INVESTMENTS IN SECURITIES (99.1%) (COST
$8,715,802)......................................... 9,672,352
FOREIGN CURRENCY (0.1%) (COST $17,237)................ 16,427
----------
TOTAL INVESTMENTS (99.2%) (COST $8,733,039)........... 9,688,779
OTHER ASSETS IN EXCESS OF LIABILITIES (0.8%).......... 73,934
----------
NET ASSETS (100%)..................................... $9,762,713
==========
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(a) -- Non-income producing security
(b) -- Variable/floating rate security--rate disclosed is as of
December 31, 1999.
SDR -- Swedish Depositary Receipt
</TABLE>
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
-------- ---------- ----------
<S> <C> <C>
Consumer Goods....................... $2,766,216 28.3%
Finance.............................. 2,099,308 21.5
Services............................. 1,895,037 19.4
Energy............................... 994,110 10.2
Materials............................ 946,156 9.7
Capital Equipment.................... 560,525 5.8
---------- ----
$9,261,352 94.9%
========== ====
</TABLE>
- ---------------
<TABLE>
<S> <C>
+ Classified by sectors which represent broad groupings of
related industries
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------
ASSETS:
Investments in Securities, at Value (Cost $8,715,802)..... $ 9,672,352
Foreign Currency (Cost $17,237)........................... 16,427
Receivable for:
Fund Shares Sold........................................ 97,934
Dividends............................................... 13,743
Foreign Withholding Tax Reclaim......................... 5,815
Interest................................................ 33
Receivable from Investment Adviser........................ 56,130
-------------
Total Assets.......................................... 9,862,434
-------------
LIABILITIES:
Payable for:
Shareholder Reporting Expenses.......................... 40,207
Custody Fees............................................ 20,121
Professional Fees....................................... 11,195
Distribution Fees....................................... 10,292
Directors' Fees and Expenses............................ 7,140
Bank Overdraft.......................................... 5,498
Administrative Fees..................................... 2,372
Transfer Agent Fees..................................... 825
Investments Purchased................................... 693
Fund Shares Redeemed.................................... 104
Other..................................................... 1,274
-------------
Total Liabilities......................................... 99,721
-------------
NET ASSETS.................................................. $ 9,762,713
=============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 843
Paid in Capital in Excess of Par.......................... 8,764,337
Net Unrealized Appreciation on Investments................ 955,133
Accumulated Net Realized Gain............................. 73,137
Accumulated Net Investment Loss........................... (30,737)
-------------
NET ASSETS.................................................. $ 9,762,713
=============
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $4,287,619 and 370,395 Shares
Outstanding)............................................ $ 11.58
=============
Maximum Sales Charge...................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100 / (100 - maximum sales charge))............. $ 12.28
=============
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $3,753,663 and 323,978 Shares Outstanding)*... $ 11.59
=============
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $1,721,431 and 148,959 Shares Outstanding)*... $ 11.56
=============
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 62,885
Interest.................................................. 10,134
Less Foreign Taxes Withheld............................... (6,726)
--------
Total Income............................................. 66,293
--------
EXPENSES:
Investment Advisory Fees.................................. 42,995
Shareholder Reports....................................... 36,126
Filing and Registration Fees.............................. 34,795
Distribution Fees (Attributed to Classes A, B and C of
$4,550, $16,883 and $7,952, respectively)............... 29,385
Custodian Fees............................................ 26,718
Administrative Fees....................................... 11,541
Directors' Fees and Expenses.............................. 6,241
Transfer Agent Fees....................................... 522
Other..................................................... 1,392
--------
Total Expenses........................................... 189,715
Less Expense Reductions.................................. (97,575)
--------
Net Expenses............................................. 92,140
--------
Net Investment Income/Loss.................................. (25,847)
--------
NET REALIZED GAIN/LOSS ON:
Investments............................................... 134,236
Foreign Currency Transactions............................. (283)
--------
Net Realized Gain/Loss...................................... 133,953
--------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... 168,193
--------
End of the Period:
Investments............................................. 956,550
Foreign Currency Translations........................... (1,417)
--------
955,133
--------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 786,940
--------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. 920,893
--------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $895,046
========
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 SEPTEMBER 25, 1998*
(UNAUDITED) TO JUNE 30, 1999
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ (25,847) $ 44,000
Net Realized Gain/Loss.................................... 133,953 11,000
Net Unrealized Appreciation/Depreciation.................. 786,940 169,000
----------------- -------------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 895,046 224,000
----------------- -------------------
DISTRIBUTIONS:
Net Investment Income:
Class A................................................. (50,832) (3,000)
Class B................................................. (18,316) (1,000)
Class C................................................. (8,828) (1,000)
----------------- -------------------
Net Decrease in Net Assets Resulting from Distributions... (77,976) (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... (158,797) (5,000)
----------------- -------------------
CAPITAL SHARES TRANSACTIONS (1):
Subscribed................................................ 3,131,821 4,084,000
Distributions Reinvested.................................. 97,500 1,000
Redeemed.................................................. (761,346) (745,000)
----------------- -------------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... 2,467,975 3,340,000
----------------- -------------------
Total Increase/Decrease in Net Assets..................... 3,204,224 3,559,000
NET ASSETS--Beginning of Period............................. 6,558,489 3,000,000
----------------- -------------------
NET ASSETS--End of Period (Including accumulated net
investment income/loss of $(30,737) and $73,000,
respectively)............................................. $ 9,762,713 $ 6,559,000
================= ===================
- ------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
Shares:
Subscribed (Initial Shares of 100,000)................. 184,029 205,000
Distributions Reinvested............................... 5,381 --
Redeemed............................................... (8,758) (15,000)
----------------- -------------------
Net Increase/Decrease in Class A Shares Outstanding...... 180,652 190,000
================= ===================
Dollars:
Subscribed............................................. $ 2,005,400 $ 1,098,000
Distributions Reinvested............................... 59,193 1,000
Redeemed............................................... (95,979) (157,000)
----------------- -------------------
Net Increase/Decrease.................................... $ 1,968,614 $ 942,000
================= ===================
Beginning Paid in Capital................................ $ 1,000,000 $ 1,000,000
================= ===================
Ending Paid in Capital................................... $ 3,897,546 $ 1,942,000+
================= ===================
Class B:
- ------------------------------------------------------------
Shares:
Subscribed (Initial Shares of 100,000)................. 74,718 305,000
Distributions Reinvested............................... 2,787 --
Redeemed............................................... (43,699) (15,000)
----------------- -------------------
Net Increase/Decrease in Class B Shares Outstanding...... 33,806 290,000
================= ===================
Dollars:
Subscribed............................................. $ 829,396 $ 2,142,000
Distributions Reinvested............................... 30,685 --
Redeemed............................................... (484,710) (152,000)
----------------- -------------------
Net Increase/Decrease.................................... $ 375,371 $ 1,990,000
================= ===================
Beginning Paid in Capital................................ $ 1,000,000 $ 1,000,000
================= ===================
Ending Paid in Capital................................... $ 3,345,216 $ 2,990,000+
================= ===================
Class C:
- ------------------------------------------------------------
Shares:
Subscribed (Initial Shares of 100,000)................. 27,341 179,000
Distributions Reinvested 694 --
Redeemed............................................... (16,569) (42,000)
----------------- -------------------
Net Increase/Decrease in Class C Shares Outstanding...... 11,466 137,000
================= ===================
Dollars:
Subscribed............................................. $ 297,025 $ 844,000
Distributions Reinvested............................... 7,622 --
Redeemed............................................... (180,657) (436,000)
----------------- -------------------
Net Increase/Decrease.................................... $ 123,990 $ 408,000
================= ===================
Beginning Paid in Capital................................ $ 1,000,000 $ 1,000,000
================= ===================
Ending Paid in Capital................................... $ 1,522,418 $ 1,408,000+
================= ===================
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Commencement of operations
+ Ending Paid in Capital amounts do not reflect permanent book
to tax differences.
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------------- -----------------
SIX MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1999 SEPTEMBER 25, 1998* TO DECEMBER 31, 1999
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# JUNE 30, 1999# (UNAUDITED)#
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD... $ 10.649 $ 10.000 $ 10.620
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss... (0.011) 0.133 (0.050)
Net Realized and Unrealized
Gain/ Loss... 1.182 0.541 1.175
------------ ------------ ------------
Total From Investment
Operations... 1.171 0.674 1.125
------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income... (0.144) (0.025) (0.059)
Net Realized Gain... (0.100) -- (0.100)
------------ ------------ ------------
Total Distributions... (0.244) (0.025) (0.159)
------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD... $ 11.576 $ 10.649 $ 11.586
============ ============ ============
TOTAL RETURN (1)... 11.14%** 6.75%** 10.71%**
============ ============ ============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's)... $ 4,288 $ 2,020 $ 3,754
Ratio of Expenses to Average Net
Assets... 1.70% 1.70% 2.45%
Ratio of Net Investment
Income/Loss to Average Net
Assets... (0.17)% 1.64% (0.92)%
Portfolio Turnover Rate... 25%** 51%** 25%**
- ------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net
Investment Income/ Loss... $ 0.13 $ 0.36 $ 0.13
Ratios Before Expense Limitation:
Expenses to Average Net
Assets... 3.98% 6.20% 4.73%
Net Investment Income/Loss to
Average Net Assets... (2.45)% (2.87)% (3.17)%
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
-----------------------
SEPTEMBER 25, 1998* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1999#
<S> <C>
- ----------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD... $ 10.000
-----------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss... 0.078
Net Realized and Unrealized
Gain/ Loss... 0.548
-----------------------
Total From Investment
Operations... 0.626
-----------------------
DISTRIBUTIONS
Net Investment Income... (0.006)
Net Realized Gain... --
-----------------------
Total Distributions... (0.006)
-----------------------
NET ASSET VALUE, END OF PERIOD... $ 10.620
=======================
TOTAL RETURN (1)... 6.26%**
=======================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's)... $ 3,082
Ratio of Expenses to Average Net
Assets... 2.45%
Ratio of Net Investment
Income/Loss to Average Net
Assets... 0.96%
Portfolio Turnover Rate... 51%**
- ---------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net
Investment Income/ Loss... $ 0.34
Ratios Before Expense Limitation:
Expenses to Average Net
Assets... 6.61%
Net Investment Income/Loss to
Average Net Assets... (3.20)%
- ------------------------------------------------------------------------------------------------------------ ---------------------
- --
</TABLE>
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1999 SEPTEMBER 25, 1998* TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# JUNE 30, 1999#
<S> <C> <C>
- ---------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 10.593 $ 10.000
--------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss... (0.049) 0.065
Net Realized and Unrealized
Gain/ Loss............... 1.171 0.534
--------- ---------
Total From Investment
Operations............... 1.122 0.599
--------- ---------
DISTRIBUTIONS
Net Investment Income...... (0.059) (0.006)
Net Realized Gain.......... (0.100) --
--------- ---------
Total Distributions........ (0.159) (0.006)
--------- ---------
NET ASSET VALUE, END OF PERIOD... $ 11.556 $ 10.593
========= =========
TOTAL RETURN (1)............. 10.74%** 5.96%**
========= =========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's).................... $ 1,721 $ 1,457
Ratio of Expenses to Average Net
Assets..................... 2.45% 2.45%
Ratio of Net Investment
Income/Loss to Average Net
Assets..................... (0.92)% 0.81%
Portfolio Turnover Rate...... 25%** 51%**
- ---------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net
Investment Income/Loss... $ 0.12 $ 0.40
Ratios Before Expense Limitation:
Expenses to Average Net
Assets................... 4.73% 7.33%
Net Investment Income/Loss to
Average Net Assets....... (3.15)% (4.13)%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen European Equity Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks long-term
capital appreciation. The Fund commenced operations on September 25, 1998.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
For certain purchases of Class A shares, the front-end sales charge may be
waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Securities listed on a foreign exchange are valued at their
closing price. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization, and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date, net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. Income, expenses (other than class specific expenses),
and realized and unrealized gains or losses are allocated to each class of
shares based upon their relative net assets. Distributions from the Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: The Fund may enter into
foreign currency exchange contracts to attempt to protect securities and related
receivables and payables against changes in future foreign currency exchange
rates. A currency exchange contract is an agreement between two parties to buy
or sell currency at a set price on a future date. The market value of the
contract will fluctuate with
- -----------------------
12
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
changes in currency exchange rates. The contract is marked-to-market daily and
the change in market value is recorded by the Fund as unrealized gain or loss on
foreign currency translation.
Assets and liabilities denominated in foreign currencies and commitments under
forward currency contracts are translated into U.S. dollars at the mean of the
quoted bid and asked prices. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were
purchased or sold. Income and expenses are translated at rates prevailing when
accrued. Realized and unrealized gains and losses on securities are not
segregated for financial reporting purposes from amounts arising from changes in
the market prices of securities. Realized gains and losses on foreign currency
includes the net realized amount from the sale of the currency and the amount
realized between trade date and settlement date on security and income
transactions. However, the foreign currency portion of gains and losses realized
on sales and maturities of foreign denominated debt securities is treated as
ordinary income for U.S. Federal income tax purposes. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts. Risks may also arise from the unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains, and net unrealized appreciation, as applicable, as the income is earned
or capital gains are recorded.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ---------- ---------- ---------- -------------
<S> <C> <C> <C>
$8,715,802 $1,372,127 $(415,577) $956,550
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.), and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
1.00% 1.70% 2.45%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $564
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
At December 31, 1999, Van Kampen Funds, Inc. owned 27%, 31%, and 67% 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
------------------
13
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
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
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $12,060 for Class A shares and deferred sales charges of $6,015
and $70 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 December 31, 1999, the Fund incurred $288 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $4,023,598 and sales of $2,039,762 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.
D. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
- -----------------------
14
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the European Equity Fund (the
"Fund") was held on December 15, 1999. The description of each proposal and
number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
--------- --------
<S> <C> <C>
J. Miles Branagan........................................... 612,971 1,434
Jerry D. Choate............................................. 612,971 1,434
Linda Hutton Heagy.......................................... 612,971 1,434
R. Craig Kennedy............................................ 612,971 1,434
Mitchell M. Merin........................................... 612,971 1,434
Jack E. Nelson.............................................. 612,971 1,434
Richard F. Powers, III...................................... 612,971 1,434
Phillip B. Rooney........................................... 612,971 1,434
Fernando Sisto.............................................. 612,971 1,434
Wayne W. Whalen............................................. 612,971 1,434
Suzanne H. Woolsey.......................................... 612,971 1,434
Paul G. Yovovich............................................ 612,971 1,434
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C> <C>
614,056 -- 349
</TABLE>
------------------
15
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at www.vankampen.com --
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting www.vankampen.com
and selecting CONTACT US
* Closed to new investors
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
Chairman of the Board
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management of
Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT,
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555
-/ /www.vankampen.com
EEQ SAR 02/00 -C- Van Kampen Funds Inc. 2000
472 572 672
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
[PHOTO]
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders.......................... 1
Economic Snapshot............................... 2
Investment Overview............................. 3
Portfolio of Investments........................ 7
Statement of Assets and Liabilities............. 21
Statement of Operations......................... 22
Statement of Changes in Net Assets.............. 23
Financial Highlights ........................... 24
Notes to Financial Statements................... 26
Additional Information.......................... 30
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
United States 33.1%
Japan 18.1%
Short-Term Investment 12.3%
Other 9.7%
United Kingdom 5.6%
Germany 5.3%
Hong Kong 3.2%
Netherlands 3.0%
Switzerland 3.0%
Italy 2.8%
Spain 2.0%
France 1.9%
</TABLE>
TOTAL RETURNS**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C MSCI WORLD
SHARES SHARES SHARES NET DIVIDENDS INDEX
------- ------- ------- -------------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*................................. 10.23% 11.59% 15.58% N/A
Without Sales Charge***............................ 16.96% 16.59% 16.58% 15.14%
One Year
With Sales Charge*................................. 16.41% 17.53% 21.62% N/A
Without Sales Charge***............................ 23.48% 22.53% 22.62% 24.94%
Average Annual Five Year
With Sales Charge*................................. 16.95% N/A 17.49% N/A
Without Sales Charge***............................ 18.34% N/A 17.49% 19.76%
Average Annual Since Inception
With Sales Charge*................................. 15.22% 17.37% 15.36% N/A
Without Sales Charge***............................ 16.20% 17.56% 15.36% 18.03%
Commencement Date.................................... 1/4/93 8/1/95 1/4/93 N/A
</TABLE>
The Morgan Stanley Capital International (MSCI) World Net Dividends Index is an
unmanaged index that includes securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand, and the Far East and
assumes dividends are reinvested net of withholding tax.
* The returns above are calculated using the maximum sales charge for Class A
(5.75%) shares and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS(1)
PERCENT OF
SECURITY COUNTRY NET ASSETS
- -------- -------------- ----------
<S> <C> <C>
Sony Corp. Japan 1.4%
Nokia Oyj Finland 1.3%
Deutsche Telekom AG Germany 1.1%
Nippon Telegraph &
Telephone Corp. ADR Japan 1.1%
Microsoft Corp. United States 1.0%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ------------ ----------
<S> <C> <C>
Services $142,017,545 22.2%
Capital Goods & Equipment 128,059,401 20.2%
Finance 103,157,666 16.1%
Consumer Goods 94,738,195 14.8%
Energy 37,326,942 5.8%
</TABLE>
(1) excludes Short-Term Investment
THE COUNTRY SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MSCI WORLD NET DIVIDENDS INDEX AND ARE FOR INFORMATIONAL
PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
INVESTMENT OVERVIEW
(CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGERS OF THE VAN KAMPEN GLOBAL EQUITY
ALLOCATION FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
DURING THE PAST SIX MONTHS. THE FUND IS MANAGED BY PORTFOLIO MANAGERS BARTON M.
BIGGS AND ANN D. THIVIERGE OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT.
MR. BIGGS HAS BEEN A PORTFOLIO MANAGER OF THE FUND SINCE ITS INCEPTION IN 1993.
SINCE 1995, MS. THIVIERGE AND MR. BIGGS HAVE SERVED AS CO-MANAGERS OF THE FUND.
THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S PERFORMANCE DURING
THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1999.
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST SIX MONTHS?
A: The growth of the U.S. economy continued to draw headlines as Wall Street
posted record-breaking highs, but the U.S. equity market was no longer a top
performer. Developed markets such as Japan, Finland, and France outperformed the
United States during the reporting period.
World economies looked brighter as Japan and Asia began to emerge from
devastating depressions and bear markets. Though Japan's recent stock market
performance was not as attractive as it was in the first half of the year, the
market posted positive returns. Europe appeared to enter the early stages of
what could be a prolonged period of growth, as corporate tax cuts, increased
merger-and-acquisition activity, buybacks, and corporate restructuring may be
indicators of growth to come.
In the second half of 1999, central banks worldwide provided significant
liquidity ahead of Y2K--loosening monetary policies and cutting interest rates.
This was powerful fuel for global equity markets.
Q: WHAT STRATEGIES DID YOU PURSUE IN THIS ENVIRONMENT?
A: During the reporting period, two themes dominated the management of the
portfolio. First, we continued to significantly overweight Japan relative to our
MSCI benchmark, which contributed positively to Fund performance. We think
economic growth in Japan will exceed most analysts' estimates. With a rising
stock market and stronger yen, we believe Japanese consumers will begin spending
again, especially in the technology sector. Secondly, we significantly
underweighted the United States, which helped the Fund's performance during the
past six months. Although fundamentals are strong, stocks appear overpriced and
therefore may be more vulnerable in a market downturn.
Since the third quarter of 1999, the Fund has been fully invested, meaning that
it no longer holds a significant cash position. The Fund's fully invested
position contributed to performance during the reporting period.
Q: HOW HAVE YOU POSITIONED THE FUND RECENTLY?
A: In Asia, we overweighted Singapore relative to the Fund's benchmark. The
leading economic indicators are higher than last year and point to even stronger
economic growth. Stock prices were reasonable and earnings growth and earnings
momentum were the highest in our investment universe during the reporting
period. We gave Singapore high marks for the government and corporate
environment. Additionally, while Singapore remains dependent on consumer
electronics and electronics exports, its economy is broadening into other areas,
which can help lessen the impact of any downturns in the electronics sector.
In Europe, we scaled back the Fund's U.K. weighting after the Bank of England
raised interest rates at the beginning of September. We expect more rate hikes
in the new year as the central bank aggressively attempts to smooth both
upswings and downswings in the economy. Germany is now overweight relative to
the Fund's benchmark. Although Germany lagged Europe during the year, we believe
recent tax reform proposals should unleash a massive corporate restructuring in
this largest of European economies, increasing capital efficiencies in Germany
and sending competitive shock waves across the continent. The fact that these
proposals came from the ruling party, SOZIALDEMOKRATISCHE PARTEI DEUSTCHLAND
(SPD), which 18 months ago proposed marking all corporate assets to market for
immediate tax assessments, illustrates the extent of cultural leadership change.
- -----------------------
4
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
INVESTMENT OVERVIEW
(CONT.)
- --------------------------------------------------------------------------------
Similarly, the negative local press resulting from the recent disclosure of
illegal funding (i.e. suitcases of cash) for Germany's Christian Democratic
Union (CDU)--former Chancellor Kohl's party--should help to expose and weaken
the unhealthy post-World War II based relationships between German politicians
and companies, banks and utilities. This weakening is important to the
continuation of privatization and deregulation. In our opinion, it is only
through dynamic reform that Europe's economy can finally enjoy a long cycle of
strong growth and low inflation. We believe that this change is occurring--and
at an accelerating pace.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: The Fund performed well as a result of its favorable asset and country
allocations in Japan and the United States and its less defensive strategy. For
Class A shares at net asset value, the Fund generated a total return of 16.96
percent for the six months ended December 31, 1999. By comparison, the MSCI
World Net Dividends Index generated a total return of 15.14 percent for the same
period. This broad-based index is composed of securities 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. This index does not
reflect any commissions or sales charges that would be paid by an investor
purchasing the securities it represents. Please refer to the chart and footnotes
on page 3 for additional Fund performance results. Past performance does not
guarantee future results.
Q: WHAT DO YOU SEE HAPPENING DURING THE NEXT SIX MONTHS?
A: We believe that consumer spending in Japan may experience a revival, which
would boost its gross domestic product (GDP) above consensus expectations next
year as investors continue to gain confidence in Japanese markets. The ongoing
recovery in the rest of Asia should aid Japan as well.
Our outlook for European equities is positive with the markets supported by
strong earnings growth, upward earnings estimates, and little threat in the
short-term from either interest rates or bond yields. For the third quarter,
earnings growth was strong and positive surprises outnumbered negative
surprises, and we believe these trends may continue. Liquidity remains powerful
with strong individual investor buying. Importantly, we expect the euro to
strengthen from current levels, which would provide a boost for U.S.
dollar-based investors.
We are cautious about the U.S. equity market due to expensive valuations and a
more compelling case for fundamental change in the international arena. As long
as the U.S. market remains relatively stable, we believe that many European and
Asian markets can perform well given the rising economic growth, continued
restructuring, and improving earnings of those markets. While we are encouraged
by the present lack of significant inflation in the U.S., we continue to monitor
the Federal Reserve Board, hoping that policy makers tap the brakes cautiously
without causing global reverberations. We expect the international markets to
outperform the United States not for months, but for years.
------------------
5
<PAGE>
GLOBAL EQUITY ALLOCATION
GLOSSARY
- --------------------------------------------------------------------------------
CLASS A SHARES: When Class A shares of a fund are purchased, the share price
includes the net asset value plus a one-time sales charge (or "load"). In most
cases, there is no redemption fee (contingent deferred sales charge).
EARNINGS ESTIMATES: A forecast for a company's net income during a given period.
Earnings estimates can come from the company's management as well as from
independent analysts.
DEFENSIVE INVESTMENT STRATEGY: A method of portfolio allocation and management
aimed at minimizing the risk of losing principal. Defensive investors place a
high percentage of their investable assets in bonds, cash equivalents, and
stocks that are less volatile than average.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee (FOMC), meets eight times
per year to establish monetary policy and monitor the economic pulse of the
United States.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
LIQUIDITY: The ease with which an investor can buy or sell a stock at a
reasonable price.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from its total assets and dividing this amount by the
number of shares outstanding. The NAV does not include any initial or contingent
deferred sales charge. If these charges were included, the NAV would decrease.
VALUATION: The estimated or determined worth of a stock, based on financial
measures such as the stock's current price relative to earnings, revenue, book
value, and cash flow.
- -----------------------
6
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
COMMON STOCKS (85.8%)
AUSTRALIA (0.8%)
Amcor Ltd......................... 18,349 $ 85,872
AMP Ltd........................... 25,811 284,966
Australian Gas Light Co., Ltd..... 10,369 60,810
Brambles Industries Ltd........... 5,938 164,083
Broken Hill Proprietary Co.,
Ltd............................. 29,039 381,011
Coca-Cola Amatil Ltd.............. 17,080 46,611
Coles Myer Ltd.................... 29,886 154,254
Colonial Ltd...................... 21,992 98,246
CSL Ltd........................... 2,883 41,418
Faulding (F.H.) & Co., Ltd........ 3,368 22,094
Fosters Brewing Ltd............... 48,278 138,400
General Property Trust............ 37,406 60,855
GIO Australia Holdings Ltd........ 6,522 9,969
Goodman Fielder Ltd............... 32,821 29,282
Leighton Holdings Ltd............. 7,422 28,726
Lend Lease Corp., Ltd............. 14,579 204,092
Mayne Nickless Ltd................ 10,013 25,814
National Australia Bank Ltd....... 37,819 578,056
News Corp., Ltd................... 51,025 495,057
Normandy Mining Ltd............... 34,106 24,163
North Broken Hill Peko Ltd........ 12,164 28,647
Orica Ltd......................... 3,109 16,744
Pacific Dunlop Ltd................ 29,155 41,235
QBE Insurance Group Ltd........... 11,103 51,713
Rio Tinto Ltd..................... 3,291 70,641
Santos Ltd........................ 16,387 44,612
Schroders plc..................... 10,659 16,432
Southcorp Holdings Ltd............ 17,372 61,197
Stockland Trust Group............. 8,848 18,574
Suncorp-Metway Ltd................ 8,600 46,318
TABCORP Holdings Ltd.............. 8,852 59,892
Telstra Corp., Ltd................ 123,397 670,253
Wesfarmers Ltd.................... 5,056 41,691
(a)Westfield Trust................ 1,229 2,370
(a)Westfield Trust................ 35,596 69,819
Westpac Banking Corp., Ltd........ 49,323 339,963
WMC Ltd........................... 48,914 269,536
Woolworths Ltd.................... 31,215 107,300
------------
4,890,716
------------
AUSTRIA (0.6%)
Austria Mikro Systems
International AG................ 503 16,028
Austria Tabakwerke AG............. 3,719 180,002
Bank Austria AG................... 19,144 1,081,015
Bau Holdings AG................... 795 30,061
Boehler-Udderholm AG.............. 1,232 56,897
BWT AG............................ 285 38,365
Flughafen Wein AG................. 3,589 124,890
Generali AG....................... 1,197 200,904
Lenzing AG........................ 211 11,489
Mayr-Melnhof Karton AG............ 2,026 93,974
Oesterreichische Brau-Beteiligungs
AG.............................. 1,548 62,437
Oesterreichish Elektrizitaets
'A'............................. 5,159 725,689
OMV AG............................ 4,517 439,530
VA Technologies AG................ 2,535 167,429
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
(a)Wienerberger Baustoffindustrie
AG.............................. 11,680 $ 254,277
------------
3,482,987
------------
CANADA (1.4%)
Abitibi-Consolidated, Inc......... 4,200 49,128
Agrium, Inc....................... 3,100 24,031
Alberta Energy Co., Ltd........... 2,400 74,751
Alcan Aluminum Ltd................ 4,900 201,454
Anderson Exploration Ltd.......... 2,800 33,430
Bank of Montreal.................. 5,600 191,085
Bank of Nova Scotia............... 10,100 217,058
Barrick Gold Corp................. 9,400 167,532
BCE, Inc.......................... 12,700 1,152,827
BCT.Telus Communications, Inc..... 1,465 35,641
BCT.Telus Communications, Inc.
'A'............................. 521 12,567
Bombardier, Inc. 'A'.............. 13,800 283,202
Burlington Resources
Canada, Inc..................... 800 26,633
Cameco Corp....................... 1,200 18,231
(a)Canadian Hunter Exploration
Ltd............................. 1,350 22,192
Canadian Imperial Bank of
Commerce........................ 8,400 200,581
(a)Canadian Natural Resources
Ltd............................. 2,100 51,236
Canadian Occidental Petroleum
Ltd............................. 3,000 59,178
Canadian Pacific Ltd.............. 7,300 156,883
Canadian Tire Corp. 'A'........... 2,000 47,619
Cominco Ltd....................... 1,900 39,912
Dofasco, Inc...................... 2,200 43,397
Edperbarascan Corp. 'A'........... 3,600 47,591
(a)Fairfax Financial Holdings
Ltd............................. 200 33,984
George Weston Ltd................. 2,900 110,898
(a)Gulf Canada Resources Ltd...... 19,900 65,424
Imasco Ltd........................ 9,000 248,858
Imperial Oil Ltd.................. 10,000 214,563
Inco Ltd.......................... 3,600 84,095
Laidlaw, Inc. 'B'................. 7,100 37,102
Loewen Group, Inc................. 1,600 676
Magna International, Inc. 'A'..... 1,600 68,106
MDS, Inc. 'B'..................... 1,300 26,543
National Bank of Canada........... 3,800 48,657
(a)Newbridge Networks Corp........ 3,600 81,105
Nexfor, Inc....................... 2,354 13,686
Noranda, Inc...................... 5,400 72,508
Northern Telecom Ltd.............. 27,200 2,745,792
NOVA Chemicals Corp............... 208 4,067
Petro-Canada...................... 6,200 87,756
Placer Dome, Inc.................. 5,900 62,888
Placer Dome, Inc.................. 16,660 179,095
Potash Corp. of
Saskatchewan, Inc............... 1,200 57,309
Power Corp. of Canada............. 3,600 61,669
Quebecor, Inc. 'B'................ 1,700 45,300
(a)Renaissance Energy Ltd......... 3,200 32,115
Rogers Communication, Inc. 'B'.... 3,700 90,400
Royal Bank of Canada.............. 6,500 285,680
Seagram Co., Ltd.................. 7,400 331,382
Suncor Energy, Inc................ 2,400 100,332
(a)Talisman Energy, Inc........... 2,300 58,742
Thomson Corp...................... 12,600 331,395
TransAlta Corp.................... 1,800 17,629
Transcanada Pipelines Ltd......... 10,344 89,493
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
CANADA (CONT.)
Westcoast Energy, Inc............. 2,600 $ 41,660
------------
8,885,068
------------
FINLAND (1.7%)
Hartwall Wind Systems A/S......... 2,587 37,564
Kesko Oyj......................... 7,181 91,236
Merita Ltd. 'A' plc............... 40,372 238,148
Metra Oyj 'B'..................... 2,750 51,300
Metso Oyj......................... 6,423 83,548
(a)Nokia Oyj...................... 45,361 8,233,150
Outokumpu Oyj..................... 5,090 72,112
Raisio Group plc.................. 6,660 26,392
Sampo Insurance Co., Ltd. 'A'..... 4,372 152,975
Sonera Group Oyj.................. 15,038 1,031,880
Tieto Corp........................ 2,951 184,490
UPM-Kymmene Corp.................. 11,107 447,989
------------
10,650,784
------------
FRANCE (1.9%)
Accor S.A......................... 1,980 95,774
Alcatel Alsthom................... 5,046 1,160,094
Aventis S.A....................... 7,709 448,523
Axa............................... 3,452 481,746
(a)Banque Nationale de Paris...... 4,822 445,383
BIC Corp.......................... 643 29,293
Bouygues.......................... 292 185,790
Canal Plus........................ 1,288 187,670
Cap Gemini S.A.................... 1,817 461,707
(a)Carrefour S.A.................. 3,594 663,556
Casino Guichard Perrachon......... 800 91,719
Cie de Saint-Gobain............... 1,041 195,977
Dassault Systemes S.A............. 3,172 206,942
Eridania Beghin-Say S.A........... 451 48,569
Essilor International............. 141 43,791
France Telecom S.A................ 9,620 1,273,652
Groupe Danone..................... 658 155,258
Klepierre......................... 4,378 423,797
L'air Liquide..................... 959 160,717
L'Oreal........................... 688 552,567
Lagardere S.C.A................... 1,495 81,404
LVMH Moet Hennessy Louis Vuitton.. 921 412,988
Lyonnaise des Eaux S.A............ 1,493 239,519
Michelin (C.G.D.E.) 'B'........... 2,247 88,365
Paribas........................... 6 671
Pernod-Ricard..................... 742 42,497
Pinault-Printemps-Redoute......... 1,235 326,271
PSA Peugeot Citroen S.A........... 329 74,776
(a)Sagem.......................... 75 52,182
(a)Sanofi-Synthelabo S.A.......... 4,528 188,750
Schneider S.A..................... 1,810 142,267
Simco S.A. (Registered)........... 5,130 415,637
Societe Fonciere Lyonnaise........ 2,435 318,947
Societe Generale.................. 1,008 234,792
Sodexho S.A....................... 650 115,158
(a)STMicroelectronics N.V......... 2,874 442,814
Thomson CSF S.A................... 1,735 57,366
Total Fina S.A. 'B'............... 6,947 928,163
Usinor Sacilor.................... 1,988 37,386
Valeo S.A......................... 935 72,219
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
(a)Vivendi........................ 4,941 $ 446,659
------------
12,031,356
------------
GERMANY (5.2%)
Adidas-Salomon AG................. 1,933 145,211
Allianz AG........................ 9,242 3,107,941
AMB Aachener & Muenchener
Beteiligungs AG................. 483 34,190
BASF AG........................... 9,850 515,483
Bayer AG.......................... 10,450 497,358
Beiersdorf AG..................... 7,200 486,428
Bilfinger & Berger Bau AG......... 2,550 48,855
(a)Buderus AG..................... 1,800 30,311
Continental AG.................... 4,633 93,200
Daimler-Chrysler AG............... 44,279 3,478,133
Daimler-Chrysler AG............... 1 78
Deutsche Bank AG.................. 20,150 1,707,748
Deutsche Telekom AG............... 99,826 7,031,063
Douglas Holding AG................ 3,600 152,825
Dresdner Bank AG.................. 14,567 791,717
FAG Kugelfischer Georg Schaefer
AG.............................. 5,850 53,679
HypoVereinsbank AG................ 15,875 1,085,311
(a)IVG Holding AG................. 10,992 177,230
(a)Karstadt AG.................... 1,000 40,737
(a)Linde AG....................... 3,580 197,822
MAN AG............................ 5,150 193,439
Mannesmann AG..................... 18,246 4,422,961
Metro AG.......................... 9,357 512,327
Muenchener Rueckversicherungs-
Gesellschaft AG (Registered).... 6,194 1,580,166
Preussag AG....................... 5,000 281,329
RWE AG............................ 16,954 675,274
SAP AG............................ 2,127 1,046,642
Siemens AG........................ 22,233 2,847,166
Thyssen AG........................ 10,710 332,082
VEBA AG........................... 19,433 950,370
(a)Viag AG........................ 29,220 545,967
Volkswagen AG..................... 6,930 391,320
------------
33,454,363
------------
HONG KONG (3.2%)
Bank of East Asia................. 121,200 336,775
Cheung Kong Holdings Ltd.......... 211,000 2,680,421
CLP Holdings Ltd.................. 160,500 739,165
Hang Lung Development Corp........ 191,000 216,222
Hang Seng Bank Ltd................ 186,000 2,123,561
Hong Kong & China Gas Co., Ltd.... 474,000 649,399
Hong Kong Shanghai Hotels......... 84,500 55,982
Hong Kong Telecommunications
Ltd............................. 1,019,200 2,943,467
Hopewell Holdings Ltd............. 130,000 77,346
Hutchison Whampoa Ltd............. 349,000 5,073,262
Hysan Development Co.............. 106,411 134,836
Johnson Electric Holdings Ltd..... 90,000 577,732
New World Development Co., Ltd.... 190,000 427,735
Sino Land Co...................... 306,000 176,156
Sun Hung Kai Properties Ltd....... 225,000 2,344,504
Swire Pacific Ltd. 'A'............ 144,000 850,273
Television Broadcasts Ltd......... 39,000 265,903
</TABLE>
- -----------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
HONG KONG (CONT.)
Wharf Holdings Ltd................ 215,000 $ 499,228
------------
20,171,967
------------
INDIA (0.5%)
Cipla Ltd......................... 8,175 261,224
Container Corp. of India Ltd...... 59,000 332,299
HDFC Bank Ltd..................... 94,000 348,988
Hero Honda Motors Ltd............. 14,000 363,356
Infosys Technologies Ltd.......... 1,700 567,302
Reliance Industries Ltd........... 73,500 386,255
Tata Engineering & Locomotive Co.,
Ltd............................. 51,750 239,121
Tata Tea Ltd...................... 31,000 374,138
Titan Industries Ltd.............. 52,000 172,915
------------
3,045,598
------------
ISRAEL (0.0%)
(a)Comverse Technology, Inc....... 1,950 282,262
------------
ITALY (2.8%)
Assicurazioni Generali S.p.A...... 44,229 1,462,823
Autogrill SpA..................... 9,498 119,716
Banca Commerciale Italiana........ 83,735 455,944
Banca di Roma..................... 196,437 252,746
Banco Ambrosiano Veneto........... 113,476 461,126
Banco Popolare di Milano.......... 15,504 120,847
Benetton Group S.p.A.............. 75,710 174,060
(a)Beni Stabili SPA............... 56,746 20,027
Burgo Cartiere S.p.A.............. 3,759 24,789
Credito Italiano S.p.A............ 191,244 941,063
(a)Enel S.p.A..................... 386,290 1,620,383
Ente Nazionale Idrocarburi
S.p.A........................... 310,933 1,711,868
(a)Fiat S.p.A..................... 9,136 261,168
Impreglio S.p.A................... 16,292 10,054
Istituto Nazionale delle
Assicurazioni (INA)............. 175,833 466,302
Italgas........................... 20,337 77,106
La Rinascente S.p.A............... 9,764 62,716
Mediaset S.p.A.................... 52,052 810,393
Mediobanca S.p.A.................. 24,805 253,373
(a)Montedison S.p.A............... 62,716 102,764
(a)Montedison S.p.A. di Risp
NCS............................. 50,628 48,498
(a)Olivetti Group................. 163,159 472,999
Parmalat Finanziaria S.p.A........ 77,198 98,860
Pirelli S.p.A..................... 98,315 270,145
R.A.S............................. 21,550 216,430
R.A.S. di Risp.................... 3 24
Reno de Medici S.p.A.............. 5,208 14,179
S.A.I............................. 2 10
S.A.I............................. 6,224 69,726
San Paolo-Imi S.p.A............... 56,746 771,895
Sirti S.p.A....................... 7,963 28,505
Snia BPD S.p.A.................... 15,975 17,204
Telecom Italia Mobile S.p.A....... 349,823 3,911,928
Telecom Italia Mobile S.p.A.
RNC............................. 80,695 384,874
Telecom Italia S.p.A.............. 34,659 211,438
Telecom Italia S.p.A.............. 136,805 1,931,261
Unione Immobiliare S.p.A.......... 202,963 94,142
------------
17,951,386
------------
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
JAPAN (18.1%)
Acom Co., Ltd..................... 4,400 $ 430,832
Advantest Corp.................... 4,700 1,241,319
Ajinomoto Co., Inc................ 45,800 477,130
Alps Electric Co., Ltd............ 8,000 121,999
Asahi Bank Ltd.................... 65,500 403,649
Asahi Breweries Ltd............... 26,000 284,339
Asahi Chemical Industry Co.,
Ltd............................. 35,400 181,796
Asahi Glass Co.................... 77,600 600,426
Bank of Fukuoka Ltd............... 1,000 6,935
Bank of Tokyo-Mitsubishi Ltd...... 170,600 2,376,351
Bank of Yokohama.................. 8,000 36,858
Benesse Corp...................... 1,700 409,078
Bridgestone Corp.................. 30,000 660,276
Canon, Inc........................ 68,800 2,732,349
Casio Computer Co., Ltd........... 19,000 157,977
Central Japan Railway Co.......... 63 395,021
Chugai Pharmaceutical Ltd......... 27,800 300,489
Credit Saison Co., Ltd............ 100 1,741
CSK Corp.......................... 2,900 470,899
Dai Nippon Printing Co., Ltd...... 30,800 491,089
Daiei, Inc........................ 29,800 118,057
Daikin Industries Ltd............. 27,800 377,991
(a)Dainippon Screen Manufacturing
Co., Ltd........................ 8,000 47,735
Daiwa Bank Ltd.................... 57,000 167,270
Daiwa House Industry.............. 28,800 214,105
Daiwa Securities Co., Ltd......... 69,000 1,079,243
Denso Corp........................ 12,600 300,734
East Japan Railway Co............. 158 851,590
Ebara Corp........................ 18,800 209,645
Fanuc Co.......................... 7,400 941,739
Fuji Bank......................... 148,000 1,437,582
Fuji Photo Film Co................ 17,000 620,268
Fuji Soft ABC, Inc. (First
Section)........................ 1,600 125,208
Fujitsu Ltd....................... 138,600 6,317,871
Furukawa Electric Co., Ltd........ 20,800 315,367
Gunma Bank Ltd.................... 21,000 136,604
Hirose Electric Co., Ltd.......... 1,700 380,974
Hitachi Ltd....................... 273,000 4,379,536
Honda Motor Co.................... 19,000 706,251
Hoya Corp......................... 5,000 393,720
Industrial Bank of Japan Ltd...... 76,000 732,270
Ito-Yokado Co., Ltd............... 13,000 1,411,523
Japan Airlines Co., Ltd........... 2,000 5,928
Japan Tobacco, Inc................ 63 481,913
Jusco Co.......................... 13,800 240,417
Kajima Corp....................... 55,600 165,881
Kansai Electric Power Co.......... 37,700 656,791
KAO Corp.......................... 34,800 992,292
Kawasaki Steel Corp............... 8,000 14,321
Kinki Nippon Railway Co., Ltd..... 63,600 255,072
Kirin Brewery Co., Ltd............ 55,600 584,662
Komatsu Ltd....................... 50,600 232,632
Konami Co., Ltd................... 2,300 410,594
Kubota Corp....................... 81,400 311,331
Kyocera Corp...................... 17,500 4,536,340
Kyowa Hakko Kogyo Co., Ltd........ 25,800 154,704
Marubeni Corp..................... 200 839
Marui Co., Ltd.................... 1,000 14,927
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONT.)
Matsushita Electric Industrial
Co., Ltd........................ 156,400 $ 4,329,571
Meitec Corp....................... 1,700 54,045
Mitsubishi Chemical Corp.......... 41,000 144,380
Mitsubishi Electric Corp.......... 185,400 1,196,948
Mitsubishi Estate Co., Ltd........ 25,000 243,813
Mitsubishi Heavy Industries
Ltd............................. 150,000 500,342
Mitsubishi Materials Corp......... 35,600 87,059
Mitsubishi Trust & Banking
Corp............................ 38,000 334,540
Mitsui & Co....................... 200 1,399
Mitsui Fudosan Co., Ltd........... 18,000 121,843
Mitsui Trust & Banking Co.,
Ltd............................. 8,000 18,077
Mitsukoshi Ltd.................... 28,800 101,418
Murata Manufacturing Co., Inc..... 23,000 5,399,589
Mycal Corp........................ 17,800 77,482
NEC Corp.......................... 116,600 2,777,277
New OJI Paper Co., Ltd............ 55,600 334,481
NGK Insulators Ltd................ 28,800 213,824
Nichiei Co., Ltd. (Kyoto)......... 2,100 45,603
Nidec Corp........................ 1,700 490,560
Nikon Corp........................ 16,000 469,529
Nintendo Co., Ltd................. 10,400 1,727,399
Nippon Express Co., Ltd........... 21,000 116,062
Nippon Meat Packers, Inc.......... 25,800 334,393
Nippon Oil Co..................... 77,600 341,583
Nippon Steel Corp................. 156,000 364,707
Nippon Telegraph & Telephone Corp.
ADR............................. 394 6,744,595
Nippon Yusen Kabushiki Kaisha..... 74,400 304,208
Nissan Fire & Marine Insurance
Co., Ltd........................ 50 155
Nissan Motor Co., Ltd............. 60,400 237,511
NKK Corp.......................... 110,000 74,244
Nomura Securities Co., Ltd........ 55,000 992,615
Omron Corp........................ 11,000 253,399
Oriental Land Co., Ltd............ 3,100 266,243
Orix Corp......................... 1,300 292,732
Osaka Gas Co...................... 113,200 272,398
Pioneer Electronic Corp........... 16,000 422,577
Promise Co., Ltd.................. 2,200 111,905
Rohm Co........................... 8,600 3,533,209
Sakura Bank Ltd................... 107,200 620,781
Sankyo Co., Ltd................... 21,800 447,814
Sanyo Electric Co., Ltd........... 111,400 452,225
Secom Co.......................... 12,800 1,408,588
Sega Enterprises Ltd.............. 1,000 31,791
Sekisui House Ltd................. 28,800 254,954
Sharp Corp........................ 89,600 2,291,930
Shimano, Inc...................... 8,000 140,859
Shimizu Corp...................... 41,800 138,202
Shin-Etsu Chemical Co............. 5,000 215,201
Shiseido Co., Ltd................. 12,000 174,900
Shizuoka Bank..................... 15,800 161,972
SMC Corp.......................... 2,100 464,453
Softbank Corp..................... 6,600 6,313,998
Sony Corp......................... 30,700 9,099,188
Sumitomo Bank Ltd................. 70,000 957,938
Sumitomo Chemical Co.............. 49,200 231,008
Sumitomo Corp..................... 400 3,878
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
Sumitomo Electric Industries...... 37,800 $ 436,680
Sumitomo Forestry Co., Ltd........ 17,000 131,370
(a)Sumitomo Metal Industries
Ltd............................. 66,400 50,013
Sumitomo Metal Mining Co.......... 19,000 42,375
Taisei Corp., Ltd................. 58,600 111,204
Taisho Pharmaceutical Co.......... 18,000 528,221
Taiyo Yuden Co., Ltd.............. 37,000 2,193,290
Takeda Chemical Industries........ 33,800 1,669,666
Takefuji Corp..................... 4,200 525,462
Teijin Ltd........................ 23,600 87,031
Terumo Corp....................... 8,000 213,636
The 77 Bank Ltd................... 11,000 115,240
Tobu Railway Co................... 37,800 110,926
Tohoku Electric Power Co., Ltd.... 18,700 278,040
Tokai Bank Ltd.................... 53,600 337,654
Tokio Marine & Fire Insurance
Co.............................. 24,400 285,220
Tokyo Broadcasting
System, Inc..................... 1,000 33,845
Tokyo Electric Power Co........... 47,700 1,278,470
Tokyo Electron Ltd................ 12,000 1,643,353
Tokyo Gas Co...................... 99,200 241,620
Tokyu Corp........................ 44,800 109,119
Toppan Printing Co., Ltd.......... 33,800 337,240
Toray Industries, Inc............. 34,500 133,640
Toshiba Corp...................... 226,000 1,724,347
Toto Ltd.......................... 28,800 174,102
Toyo Information Systems Co.,
Ltd............................. 2,000 140,859
Toyota Motor Corp................. 70,000 3,389,416
Ube Industries Ltd................ 53,600 111,678
Yamanouchi Pharmaceutical Co.,
Ltd............................. 2,000 69,842
Yokogawa Electric Corp............ 41,000 289,162
------------
115,638,596
------------
KOREA (0.9%)
Hyundai Motor Co., Ltd............ 18,340 290,727
Kookmin Bank...................... 19,310 302,702
Korea Electric Power Corp......... 29,960 928,747
LG Chemical Ltd................... 16,290 515,025
LG Electronics, Inc............... 7,450 308,366
Pohang Iron & Steel Co., Ltd...... 2,550 280,713
Samsung Electro-Mechanics Co...... 9,390 624,346
Samsung Electronics Co.
(Foreign)....................... 6,930 1,623,408
Samsung Securities Co., Ltd....... 12,342 373,901
Shinhan Bank...................... 42,950 465,244
SK Telecom Co., Ltd............... 60 215,060
------------
5,928,239
------------
NETHERLANDS (3.0%)
ABN Amro Holdings N.V............. 58,775 1,469,790
Aegon N.V......................... 7 669
Aegon N.V......................... 22,534 2,179,053
Akzo Nobel N.V.................... 5,223 262,277
Buhrmann N.V...................... 122 1,839
Elsevier N.V...................... 24,030 287,375
Getronics N.V..................... 2,861 228,483
Hagemeyer N.V..................... 4,384 101,630
Heineken N.V...................... 12,409 605,860
ING Groep N.V..................... 37,675 2,277,094
Koninklijke Ahold N.V............. 23,809 705,589
KPN N.V........................... 17,387 1,698,867
Oce N.V........................... 3,714 62,841
(a)Philips Electronics N.V........ 13,222 1,799,873
</TABLE>
- -----------------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
NETHERLANDS (CONT.)
Royal Dutch Petroleum............. 85,956 $ 5,274,092
Stork N.V......................... 120 1,755
TNT Post Group N.V................ 19,671 564,312
Unilever N.V...................... 1 54
Unilever N.V. CVA................. 23,294 1,288,108
Vedior N.V........................ 2,920 30,033
(a)Wolters Kluwer N.V............. 11,684 395,860
------------
19,235,454
------------
SINGAPORE (1.1%)
City Developments Ltd............. 46,000 269,289
Creative Technology Ltd........... 6,250 113,329
Cycle & Carriage Ltd.............. 19,000 58,751
(a)DBS Group Holdings Ltd......... 86,639 1,420,141
DBS Land Ltd...................... 87,750 172,813
First Capital Corp................ 20,000 26,659
Fraser & Neave Ltd................ 22,000 81,237
Hotel Properties Ltd.............. 58,000 52,237
Keppel Corp....................... 55,000 143,981
NatSteel Ltd...................... 31,000 61,795
Neptune Orient Lines Ltd.......... 45,000 60,252
Oversea-Chinese Banking Corp.,
Ltd. (Foreign).................. 82,050 753,747
Parkway Holdings Ltd.............. 29,000 65,818
Sembcorp Industries Ltd........... 124,235 169,327
Singapore Airlines Ltd.
(Foreign)....................... 82,000 930,531
Singapore Press Holdings.......... 25,000 541,879
Singapore Technology Engineering
Ltd............................. 205,000 317,562
Singapore Telecommunications
Ltd............................. 383,490 792,078
United Industrial Corp., Ltd...... 107,000 60,390
United Overseas Bank Ltd.
(Foreign)....................... 67,080 592,060
United Overseas Land Ltd.......... 41,000 38,403
Venture Manufacturing Ltd......... 17,000 194,956
------------
6,917,235
------------
SPAIN (2.0%)
Acerinox S.A...................... 2,484 99,188
ACS S.A........................... 2,802 66,538
Argentaria S.A.................... 26,319 619,149
Autopistas Concesionaria Espanola
S.A............................. 13,279 129,212
Azucarere Ebro Agricolas S.A...... 3,766 54,987
Banco Bilbao Vizcaya S.A.
(Registered).................... 104,767 1,493,774
Banco Santander Central Hispano
S.A............................. 179,712 2,036,828
Corporacion Financiera Alba
S.A............................. 4,518 154,712
Corporacion Mapfre S.A............ 3,696 60,822
Empresa Nacional de Cellulosas
S.A............................. 34 681
Endesa S.A........................ 49,484 983,473
Energia y Industrias Aragonesas
S.A............................. 12 56
Fomento de Construcciones y
Contratas S.A................... 7,528 153,335
Gas Natural SDG S.A. 'E'.......... 22,581 520,739
General de Aguas de Barcelona
S.A............................. 7,137 104,638
Gropo Dragados, S.A............... 8,955 79,101
Iberdrola S.A..................... 45,207 627,242
Immobiliaria Metropolitana Vasco
Central S.A..................... 5,305 92,008
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
Prima Inmobiliaria S.A............ 24,230 $ 210,118
Repsol S.A........................ 48,858 1,134,101
Sol Melia S.A..................... 4,941 56,050
Tabacalera S.A. 'A'............... 8,964 128,352
(a)Telefonica S.A................. 112,517 2,813,719
(a)Telefonica S.A................. 19,800 495,140
(a)TelePizza S.A.................. 10,943 46,344
Union Electrica Fenosa S.A........ 14,986 262,027
Vallehermoso S.A.................. 71,875 505,876
Viscofan Industria Navarra de
Envolturas Calulosicas S.A...... 68 529
Zardoya-Otis S.A.................. 2,528 24,905
------------
12,953,644
------------
SWEDEN (1.8%)
Atlas Copco AB 'A'................ 6,650 196,970
Atlas Copco AB 'B'................ 3,600 102,603
Castellum AB...................... 23,020 225,022
Diligentia AB..................... 36,366 299,802
Electrolux AB 'B'................. 15,900 400,730
Fastighets AB Tornet.............. 11,210 155,786
ForeningsSparbanken AB............ 27,450 404,104
(a)Hennes & Mauritz AB 'B'........ 42,400 1,423,154
NetCom Systems AB 'B'............. 4,410 310,585
OM Gruppen AB..................... 3,800 82,794
Sandvik AB 'A'.................... 10,200 320,139
Sandvik AB 'B'.................... 4,200 134,048
SCA AB 'B'........................ 11,500 341,303
Securitas AB 'B'.................. 20,200 366,364
Skandia Forsakrings AB............ 26,700 808,138
Skandinaviska Enskilda Banken
AB 'A'.......................... 31,100 314,992
Skanska AB 'B'.................... 6,500 242,669
SKF AB 'B'........................ 4,500 109,704
(a)Svenska Handelsbanken 'A'...... 33,600 423,413
Svenskt Stal AB 'A'............... 4,200 65,293
Telefonaktiebolaget LM Ericsson... 68,700 4,425,733
Trelleborg AB 'B'................. 7,600 68,473
Volvo AB 'A'...................... 4,600 116,476
Volvo AB 'B'...................... 9,500 246,143
Wm-Data AB 'B'.................... 2,700 167,260
------------
11,751,698
------------
SWITZERLAND (3.0%)
(a)ABB Ltd. (New)................. 10,571 1,293,561
Adecco S.A. (Registered).......... 670 522,023
Alusuisse-Lonza Holding AG
(Registered).................... 145 106,962
CS Holding AG (Registered)........ 9,750 1,938,973
Georg Fischer AG (Registered)..... 115 39,742
Nestle S.A. (Registered).......... 1,350 2,474,364
Novartis AG (Registered).......... 2,336 3,431,711
Roche Holding AG (Bearer)......... 51 833,176
Roche Holding AG-Genusshein....... 263 3,123,280
Schweizerische Rueckver
(Registered).................... 535 1,099,582
SMH AG (Bearer)................... 185 213,189
Sulzer AG (Registered)............ 150 97,549
Swisscom AG (Registered).......... 2,430 983,299
UBS AG (Registered)............... 7,411 2,002,344
Valora Holding AG................. 235 62,903
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
SWITZERLAND (CONT.)
Zurich Allied AG (New)............ 1,725 $ 984,166
------------
19,206,824
------------
UNITED KINGDOM (5.6%)
3I Group plc...................... 5,379 95,998
Abbey National plc................ 14,129 225,914
Albert Fisher Group plc........... 58,227 10,815
Alldays plc....................... 3,096 3,050
Allders plc....................... 4,039 8,089
Allied Zurich plc................. 14,047 165,503
Amec plc.......................... 11,811 46,736
Amvescap plc...................... 6,073 70,621
Anglian Water plc................. 31,573 288,112
Arjo Wiggins Appleton plc......... 10,942 39,763
(a)ARM Holdings plc............... 1,708 115,226
Associated British Ports Holdings
plc............................. 83,014 380,774
AstraZeneca Group plc............. 16,460 682,688
BAA plc........................... 12,317 86,535
Barclays plc...................... 15,785 454,307
Barrat Developments plc........... 16,890 78,563
Bass plc.......................... 8,507 105,863
BBA Group plc..................... 2,022 16,329
Beazer Group plc.................. 38,215 88,878
Berisford plc..................... 26,471 144,078
BG Group plc...................... 36,109 233,280
BICC plc.......................... 20,426 30,021
BOC Group plc..................... 16,708 358,900
Boots Co. plc..................... 10,715 104,180
BP Amoco plc...................... 180,314 1,812,867
BPB Industries plc................ 53,329 309,211
British Aerospace plc............. 33,274 220,336
British American Tobacco plc...... 1 6
British Land Co. plc.............. 234,573 1,553,313
British Sky Broadcasting Group
plc............................. 16,353 263,191
British Telecommunications plc.... 58,203 1,422,268
Burmah Castrol plc................ 29,931 546,257
Cable & Wireless plc.............. 53,860 912,513
Cadbury Schweppes plc............. 19,698 118,985
Canary Wharf Finance plc.......... 6,163 38,322
Capita Group plc.................. 1,858 33,759
Capital Shopping Centers plc...... 66,900 368,989
Caradon plc....................... 76,535 191,597
Carpetright plc................... 16,769 144,897
Centrica plc...................... 47,164 133,686
Cobham plc........................ 19,249 243,271
Commercial Union plc.............. 11,049 178,005
Compass Group plc................. 5,715 78,457
Corus Group plc................... 14,250 37,054
Delta plc......................... 3,953 7,981
Diageo plc........................ 33,906 272,711
Dialog Corporation plc............ 7,331 11,130
Dixons Group plc.................. 3,931 94,535
Emap plc.......................... 9,770 201,977
EMI Group plc..................... 67,699 664,241
Enterprise Oil plc................ 40,199 272,685
Firstgroup plc.................... 38,972 151,064
FKI plc........................... 31,227 121,043
GKN plc........................... 13,825 217,704
Glaxo Wellcome plc................ 33,713 952,868
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
Granada Group plc................. 15,448 $ 156,561
Grantchester Holdings plc......... 349,170 857,191
Great Portland Estates plc........ 119,190 369,605
Great Universal Stores plc........ 9,352 54,678
Halifax plc....................... 22,429 248,684
Hammerson plc..................... 45,680 316,136
Hanson plc........................ 38,638 323,876
Hays plc.......................... 8,015 127,637
Hilton Group plc.................. 16,186 51,826
House of Fraser plc............... 22,703 27,867
HSBC Holdings plc................. 77,020 1,073,523
Hyder plc......................... 39,193 183,571
IMI plc........................... 37,585 162,685
Imperial Chemical Industries
plc............................. 3,023 32,004
Invensys plc...................... 114,716 624,383
Jarvis plc........................ 21,676 77,019
Johnson Matthey plc............... 44,295 493,629
Kelda Group plc................... 29,111 164,559
Kingfisher plc.................... 15,045 166,934
Laird Group plc................... 10,539 41,192
Land Securities plc............... 129,525 1,451,811
Lasmo plc......................... 118,194 224,778
Legal & General Group plc......... 103,897 282,748
Lex Service plc................... 21,762 130,749
LIMIT plc......................... 87,179 209,795
Lloyds TSB Group plc.............. 56,883 711,543
Logica plc........................ 3,584 92,442
London Clubs International plc.... 31,795 62,649
London Forfaiting Co., plc........ 11,737 6,066
Lonmin plc........................ 28,198 285,551
Low & Bonar plc................... 3,132 7,284
Manchester United plc............. 3,027 10,022
Marconi plc....................... 29,032 513,673
Marks & Spencer plc............... 30,267 144,085
Mayflower Corporation plc......... 396 1,394
McKechnie plc..................... 3,630 19,758
Meggitt plc....................... 9,288 29,252
MEPC plc.......................... 161,296 1,211,361
Misys plc......................... 60,176 937,881
National Grid Group plc........... 10,299 78,345
National Power plc................ 14,860 86,041
Next plc.......................... 24,343 233,538
NFC plc........................... 64,004 253,262
Nycomed Amersham plc.............. 5,746 35,776
Ocean Group plc................... 1,489 27,776
Parity plc........................ 42,735 262,280
Pearson plc....................... 6,042 195,558
Peninsular & Oriental Steam
Navigation Co................... 6,878 114,752
Pennon Group plc.................. 17,778 151,892
Pilkington plc.................... 183,052 249,821
Prudential Corp. plc.............. 19,979 393,669
Psion plc......................... 697 30,394
Racal Electronic plc.............. 15,431 138,320
Railtrack Group plc............... 5,250 88,184
Rank Group plc.................... 52,215 165,291
Reed International plc............ 12,578 94,158
Rentokil Initial plc.............. 28,483 103,851
Reuters Holdings plc.............. 12,729 174,644
Rexam plc......................... 8,933 36,069
</TABLE>
- -----------------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (CONT.)
Rolls-Royce plc................... 56,619 $ 195,692
Rtz Corp. plc (Registered)........ 6,916 166,991
Rugby Group plc................... 20,156 44,273
Sainsbury (J) plc................. 18,316 103,315
Schroders Property Fund........... 1,775 35,720
Scotia Holdings plc............... 8,881 18,647
Scottish & Newcastle plc.......... 7,044 49,005
Scottish & Southern Energy plc.... 34,834 278,066
Scottish Power plc................ 14,090 106,729
SEMA Group plc.................... 4,172 75,063
Shire Pharmaceuticals Group plc
ADR............................. 7,715 224,699
Skillsgroup plc................... 2,700 13,082
Slough Estates plc................ 3,664 20,860
Smith & Nephew plc................ 10,109 33,960
SmithKline Beecham plc............ 50,436 643,524
Smiths Industries plc............. 8,351 124,761
Stagecoach Holdings plc........... 68,508 176,481
Taylor Woodrow plc................ 7,878 17,177
Tesco plc......................... 35,663 108,430
Thames Water plc.................. 4,525 56,420
The Berkeley Group plc............ 10,202 117,812
The Sage Group plc................ 10,990 134,100
TI Group plc...................... 5,966 45,769
Torotrac plc...................... 2,634 11,656
Trinity Mirror plc................ 10,582 112,971
Unilever plc...................... 28,775 211,690
United Utilities plc.............. 6,715 69,790
Vodafone Group plc................ 348,464 1,726,393
Wickes plc........................ 1,852 8,076
William Baird plc................. 25,635 23,600
WPP Group plc..................... 52,333 829,166
------------
35,993,087
------------
UNITED STATES (32.2%)
A.G. Edwards, Inc................. 2,500 80,156
A.H. Belo Corp., 'A'.............. 4,200 80,063
A.O. Smith Corp................... 6,800 148,750
AAR Corp.......................... 6,600 118,388
Abbott Laboratories............... 23,100 838,819
(a)Abercrombie & Fitch Co. 'A'.... 3,000 80,063
ABM Industries, Inc............... 4,600 93,725
(a)ACNielsen Corp................. 2,100 51,713
(a)Acxiom Corp.................... 14,500 348,000
Adac Laboratories, Inc............ 4,300 46,225
(a)ADC Telecom, Inc............... 3,900 282,994
Adobe Systems, Inc................ 3,800 255,550
Advo, Inc......................... 4,600 109,250
AFLAC, Inc........................ 7,400 349,187
AGL Resources, Inc................ 2,100 35,700
Air Express International Corp.... 8,100 261,731
Airborne Freight Corp............. 2,000 44,000
AK Steel Holding Corp............. 2,900 54,738
(a)Alaska Air Group, Inc.......... 1,100 38,638
Albertson's, Inc.................. 7,600 245,100
Alcoa, Inc........................ 12,100 1,004,300
Allegheny Energy, Inc............. 3,100 83,506
(a)Allegheny
Technologies, Inc............... 8,450 189,597
Alliant Energy Corp............... 3,800 104,500
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
(a)Alliant Techsystems, Inc....... 2,800 $ 174,475
(a)Allied Waste
Industries, Inc................. 5,400 47,588
Allstate Corp..................... 11,300 271,200
Alltel Corp....................... 1,005 83,101
Alpharma, Inc..................... 5,900 181,425
(a)Altera Corp.................... 5,600 277,550
(a)Alza Corp. 'A'................. 3,000 103,875
(a)Amazon.com, Inc................ 3,400 258,825
AMBAC Finacial Group, Inc......... 2,000 104,375
(a)America Online, Inc............ 23,200 1,750,150
American Express Co............... 5,700 947,625
American Financial Group, Inc..... 2,200 58,025
American Home Products Corp....... 17,400 686,212
American International
Group, Inc...................... 19,137 2,069,188
American Management
Systems, Inc.................... 8,500 266,687
(a)American Power Conversion
Corp............................ 9,500 250,562
(a)American Standard Cos, Inc..... 2,400 110,100
American Telephone & Telegraph
Co.............................. 43,745 2,220,059
American Water Works, Inc......... 2,400 51,000
(a)Americredit Corp............... 13,500 249,750
(a)AMR Corp....................... 4,100 274,700
(a)Analog Devices................. 5,000 465,000
Analogic Corp..................... 3,000 99,000
Analysts International Corp....... 5,200 65,000
Anchor Bancorp Wisconsin, Inc..... 3,500 52,938
Anheuser-Busch Cos., Inc. 'A'..... 7,500 531,562
(a)Anixter International, Inc..... 10,800 222,750
(a)Ann Taylor Stores Corp......... 4,800 165,300
Apogee Enterprises, Inc........... 9,400 47,588
(a)Apollo Group, Inc. 'A'......... 2,600 52,163
(a)Apple Computer, Inc............ 200 20,563
Applebee's International, Inc..... 6,400 188,800
Applied Industrial
Technologies, Inc............... 7,300 121,363
(a)Applied Materials, Inc......... 5,400 684,112
Applied Power, Inc. 'A'........... 8,300 305,025
Aptar Group, Inc.................. 8,500 213,562
Arch Chemicals, Inc............... 1,200 25,125
(a)Arrow Electronics, Inc......... 3,600 91,350
Arvin Industries, Inc............. 1,500 42,563
(a)Aspect Telecommunications
Corp............................ 11,200 438,200
Associated Banc-Corp.............. 2,400 82,200
Associates First Capital Corp.
'A'............................. 1 27
(a)Astec Industries, Inc.......... 4,200 79,013
Astoria Financial Corp............ 11,700 356,119
(a)AT&T Corp. Liberty Media Group
'A'............................. 27,476 1,559,263
(a)Atmel Corp..................... 8,200 242,412
Atmos Energy Corp................. 5,700 116,494
Automatic Data
Processing, Inc................. 7,500 404,062
(a)Avid Technology, Inc........... 5,500 71,844
Avnet, Inc........................ 6,898 417,329
Avon Products, Inc................ 7,200 237,600
Baker Hughes, Inc................. 8,500 179,031
Baldor Electric Co................ 9,500 172,187
Bank of America Corp.............. 22,700 1,139,256
Bank of New York Co., Inc......... 9,800 392,000
Bank One Corp..................... 15,000 480,937
Banknorth Group, Inc.............. 3,200 85,600
(a)Barnes & Noble, Inc............ 2,100 43,313
Barnes Group, Inc................. 5,000 81,563
(a)Barr Laboratories, Inc......... 4,700 147,462
</TABLE>
-----------------------
13
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONT.)
(a)Barrett Resources Corp......... 5,800 $ 170,737
Baxter International, Inc......... 3,400 213,562
(a)BE Aerospace, Inc.............. 5,200 43,875
Beckman Coulter, Inc.............. 1,200 61,050
(a)Bed Bath & Beyond, Inc......... 4,000 139,000
Belden, Inc....................... 8,900 186,900
Bell Atlantic Corp................ 27,100 1,668,344
BellSouth Corp.................... 22,500 1,053,281
Bergen Brunswig Corp. 'A'......... 3,000 24,938
(a)Best Buy Co., Inc.............. 6,000 301,125
(a)Billing Concepts Corp.......... 7,300 47,450
Bindley Western
Industries, Inc................. 6,666 100,407
(a)Biogen, Inc.................... 4,200 354,900
(a)BISYS Group, Inc............... 6,200 404,550
(a)BJ Services Co................. 2,700 112,894
(a)BJ's Wholesale Club, Inc....... 2,800 102,200
(a)Blout International, Inc.
'A'............................. 349 5,562
(a)BMC Software, Inc.............. 4,185 334,538
Boeing Co......................... 13,100 544,469
Borg-Warner Automotive, Inc....... 5,035 203,917
Bowater, Inc...................... 2,000 108,625
Bowne & Co........................ 8,500 114,750
Brady Corp. 'A'................... 4,900 166,294
(a)BREED Technologies, Inc........ 13,300 1,862
(a)Brightpoint, Inc............... 11,800 154,875
(a)Brinker International, Inc..... 2,500 60,000
Bristol-Myers Squibb Co........... 24,000 1,540,500
(a)Broadwing, Inc................. 4,500 165,937
Brush Wellman, Inc................ 6,100 102,556
(a)Buckeye Technologies, Inc...... 8,500 126,437
Burlington Northern Railroad
Co.............................. 8,900 215,825
(a)Burr-Brown Corp................ 12,000 433,500
(a)C-Cube Microsystems, Inc....... 8,400 522,900
(a)Cable Design Technologies
Corp............................ 6,900 158,700
Cabot Corp........................ 2,600 52,975
Cabot Oil & Gas Corp. 'A'......... 6,800 109,225
(a)Cadence Design
Systems, Inc.................... 6,500 156,000
Cambrex Corp...................... 6,300 216,956
(a)Cambridge Tech
Partner, Inc.................... 1,900 49,875
Campbell Soup Co.................. 6,900 266,944
(a)Canandaigua Brands, Inc. 'A'... 3,800 193,800
Capital Re Corp................... 7,700 105,875
Caraustar Industries, Inc......... 6,000 144,000
Cardinal Health, Inc.............. 1,058 50,652
Carlisle Cos., Inc................ 1,100 39,600
Carpenter Technology Corp......... 1,200 32,925
Caseys General Stores, Inc........ 12,000 125,250
(a)Catalina Marketing Corp........ 3,800 439,850
Caterpillar, Inc.................. 4,600 216,487
Cato Corp., 'A'................... 7,000 88,375
CBRL Group, Inc................... 2,500 24,258
(a)CBS, Inc....................... 3,800 242,962
CCB Financial Corp................ 1,300 56,631
(a)CDI Corp....................... 4,900 118,213
(a)CEC Entertainment, Inc......... 5,400 153,225
(a)Cendant Corp................... 11,700 310,781
Central Hudson Gas & Electric
Corp............................ 3,800 125,400
Central Parking Corp.............. 6,000 114,750
Centura Banks, Inc................ 4,900 216,212
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
Century Telephone
Enterprises, Inc................ 3,900 $ 184,762
(a)Cerner Corp.................... 6,400 126,000
(a)Champion Enterprises, Inc...... 10,000 85,625
Champion International Corp....... 2,400 148,650
Charter One Financial, Inc........ 11,741 224,547
Chase Manhattan Corp.............. 6,000 466,125
(a)Cheesecake Factory, Inc.
(The)........................... 4,600 161,000
Chemed Corp....................... 4,000 114,500
ChemFirst, Inc.................... 4,600 100,625
Chevron Corp...................... 8,000 693,000
Chiquita Brands
International, Inc.............. 13,900 66,025
(a)Chiron Corp.................... 5,500 233,062
Chris-Craft Industries, Inc....... 1,545 111,433
Chubb Corp........................ 3,705 208,638
(a)Ciber, Inc..................... 11,100 305,250
Cigna Corp........................ 8,400 676,725
Cintas Corp....................... 3,100 164,687
(a)Circle.com..................... 525 6,464
(a)Cisco Systems, Inc............. 35,900 3,845,787
Citigroup, Inc.................... 41,700 2,316,956
(a)Citrix Systems, Inc............ 2,600 319,800
City National Corp................ 1,500 49,406
CK Witco Corporation.............. 2,800 37,450
Cke Restaurants, Inc.............. 10,200 59,925
CLARCOR, Inc...................... 6,000 108,000
Clayton Homes, Inc................ 31,800 292,162
Clorox Co......................... 5,976 301,041
CMS Energy Corp................... 2,800 87,325
CNF Transportation, Inc........... 1,800 62,100
Coca-Cola Bottling Co............. 2,100 99,488
Coca-Cola Co...................... 29,300 1,706,725
(a)Cognex Corp.................... 8,000 312,000
Comdisco, Inc..................... 4,800 178,800
Commerce Bancorp, Inc............. 4,700 190,056
Commercial Federal Corp........... 12,700 226,219
Commercial Metals Co.............. 5,000 169,687
(a)CommScope, Inc................. 8,800 354,750
Computer Associates
International, Inc.............. 6,200 433,612
Computer Task Group, Inc.......... 4,700 69,619
Comsat Corp....................... 407 8,089
(a)Concord EFS, Inc............... 4,350 112,013
Conectiv, Inc..................... 4,100 68,931
Consolidated Edison, Inc.......... 3,900 124,069
(a)Consolidated Graphics, Inc..... 3,300 49,294
Constellation Energy Group........ 13,300 385,700
(a)Convergys Corp................. 4,400 135,300
Cooper Companies, Inc............. 4,400 132,550
Corn Products
International, Inc.............. 7,100 232,525
Corning, Inc...................... 3,900 502,856
(a)Covance, Inc................... 1,800 19,463
(a)Coventry Health Care, Inc...... 12,000 81,000
(a)COX Communications Inc......... 831 42,797
Cross Timbers Oil Co.............. 10,600 96,063
Crown Cork & Seal Co., Inc........ 8,400 187,950
CTS Corp.......................... 8,200 618,075
Cullen/Frost Bankers, Inc......... 10,600 272,950
CVS Corp.......................... 5,700 227,644
D.R. Horton, Inc.................. 12,000 165,750
Dallas Semiconductor Corp......... 6,700 431,731
</TABLE>
- -----------------------
14
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONT.)
Dayton Hudson Corp................ 7,200 $ 528,750
Dean Foods Co..................... 1,200 47,700
Deere & Co........................ 6,200 268,925
(a)Dell Computer Corp............. 27,300 1,392,300
Delphi Automotive Systems Corp.... 12,109 190,717
Delphi Financial Group, Inc.
'A'............................. 4,785 143,550
Delta & Pine Land Co.............. 8,000 139,000
DENTSPLY International, Inc....... 2,300 54,338
Devon Energy Corp................. 7,000 230,125
(a)DeVry, Inc..................... 13,800 257,025
Diagnostic Products Corp.......... 5,000 122,500
Dial Corp......................... 3,200 77,800
Diebold, Inc...................... 1,900 44,650
Dime Bancorp, Inc................. 2,500 37,813
Dimon, Inc........................ 9,100 29,575
(a)Dionex Corp.................... 5,000 205,937
(a)Discount Auto Parts, Inc....... 4,600 83,088
Dole Food Co., Inc................ 2,000 32,500
(a)Dollar Tree Stores, Inc........ 1,900 92,031
Donaldson Co., Inc................ 3,400 81,813
Dow Chemical Co................... 5,200 694,850
Downey Financial Corp............. 5,900 119,106
DPL, Inc.......................... 3,700 64,056
(a)Dress Barn, Inc................ 7,100 118,038
Du Pont (EI) de Nemours Co........ 12,100 797,087
Duke Power Co..................... 12,900 646,612
(a)E*TRADE Group, Inc............. 43,600 1,139,050
Earthgrains Co.................... 8,300 133,837
Eastern Utilities Association..... 5,600 169,750
Eastman Kodak Co.................. 2,200 145,750
Eaton Vance Corp.................. 6,100 231,800
(a)eBay, Inc...................... 2,000 250,375
El Paso Energy Corp............... 3,100 120,319
Electronic Data Systems Corp...... 9,700 649,294
Electronics For Imaging, Inc...... 2,000 168,000
Eli Lilly & Co.................... 14,100 937,650
(a)EMC Corp....................... 11,400 1,245,450
Energen Corp...................... 6,400 115,600
Energy East Corp.................. 3,600 74,925
Enhance Financial Services
Group, Inc...................... 8,100 131,625
Enron Corp........................ 6,300 279,562
Ensco International, Inc.......... 4,200 96,075
Enzo Biochem, Inc................. 9,800 441,612
Equity Office Properties Trust.... 8,000 197,000
(a)Etec Systems, Inc.............. 5,000 224,375
Ethan Allen Interiors, Inc........ 9,600 307,800
Expeditors International of
Washington, Inc................. 10,000 438,125
(a)Express Scripts, Inc. 'A'...... 6,700 428,800
Exxon Corp........................ 38,308 3,086,188
Fair, Issac & Co., Inc............ 3,600 190,800
Family Dollar Stores, Inc......... 5,400 88,088
(a)Family Golf Centers, Inc....... 5,800 8,156
Fannie Mae Corp................... 12,100 755,494
Fastenal Co....................... 1,400 62,913
(a)FDX Corp....................... 5,000 204,687
Federal Signal Corp............... 2,400 38,550
Federal-Mogul Corp................ 2,000 40,250
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
Fidelity National
Financial, Inc.................. 6,270 $ 90,131
Finova Group, Inc................. 1,700 60,350
First American Financial Corp..... 10,800 134,325
First Data Corp................... 7,100 350,119
First Midwest Bancorp, Inc........ 8,850 234,525
First Security Corp............... 5,100 130,209
First Tennessee National Corp..... 3,500 99,750
First Union Corp. (N.C.).......... 11,700 383,906
First Virginia Banks, Inc......... 1,500 64,500
Firstbancorp/Puerto Rico.......... 6,000 124,500
Firstmerit Corp................... 13,000 299,000
(a)Fiserv, Inc.................... 3,300 126,431
Fleming Cos., Inc................. 10,100 103,525
Florida Progress Corp............. 1,900 80,394
Florida Rock Industries, Inc...... 4,300 148,081
Flowers Industries, Inc........... 3,700 58,969
(a)Footstar, Inc.................. 5,500 167,750
Ford Motor Co..................... 12,900 689,344
(a)Forest Laboratories, Inc.
'A'............................. 2,500 153,594
(a)Foundation Health Systems
'A'............................. 6,600 65,588
(a)Franklin Covey Co.............. 6,700 50,250
Fremont General Corp.............. 13,700 101,038
Frontier Insurance Group, Inc..... 9,400 32,313
(a)Furniture Brands
International, Inc.............. 1,800 39,600
G & K Services Inc. 'A'........... 4,500 145,687
Gallagher (Arthur J.) & Co........ 3,200 207,200
Gannett Co., Inc.................. 6,500 530,156
Gap, Inc.......................... 14,825 681,950
Gatx Corp......................... 2,600 87,750
General Dynamics Corp............. 2,400 126,600
General Electric Co............... 38,900 6,019,775
General Motors Corp............... 7,200 523,350
(a)Genesis Health
Ventures, Inc................... 8,800 18,150
(a)Gentex Corp.................... 13,800 382,950
Genuine Parts Co.................. 11,400 282,862
Genzyme Corp...................... 2,400 108,000
(a)Genzyme Surgical Products...... 429 2,494
Geon Co........................... 5,200 169,000
Georgia-Pacific Corp.
(Timber Group).................. 3,100 76,338
Gerber Scientific, Inc............ 5,900 129,431
Gillette Co....................... 16,400 675,475
(a)Global Marine, Inc............. 5,800 96,425
Graco, Inc........................ 3,700 132,737
Greenpoint Financial Corp......... 2,400 57,150
Guilford Mills, Inc............... 9,500 68,875
H.J. Heinz Co..................... 8,700 346,369
(a)Ha-Lo Industries, Inc.......... 8,850 66,375
(a)Hadco Corp..................... 3,000 153,000
Halliburton Co.................... 28,400 1,143,100
Hannaford Brothers Co............. 1,900 131,694
Harley-Davidson, Inc.............. 4,700 301,094
Harman International
Industries, Inc................. 4,400 246,950
Harsco Corp....................... 1,500 47,625
(a)Health Management Associates,
Inc. 'A'........................ 7,400 98,975
(a)HEALTHSOUTH Corp............... 10,000 53,750
(a)Heartland Express, Inc......... 7,000 110,250
Henry (Jack) & Associates......... 4,100 220,119
Herman Miller, Inc................ 2,500 57,500
</TABLE>
-----------------------
15
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONT.)
Hewlett-Packard Co................ 12,200 $ 1,390,037
Hibernia Corp. 'A'................ 5,100 54,188
Hillenbrand Industries, Inc....... 2,200 69,713
Hilton Hotels Corp................ 11,235 108,137
(a)HNC Software, Inc.............. 5,200 549,900
Home Depot, Inc................... 22,200 1,522,087
HON INDUSTRIES, Inc............... 2,100 46,069
Hormel Foods Corp................. 2,400 97,500
Household Internaional, Inc....... 6,300 234,675
Hubbell Inc. 'B'.................. 2,900 79,025
Hudson United Bancorp............. 8,240 210,635
Hughes Supply, Inc................ 6,200 133,687
(a)Hutchinson Technology, Inc..... 5,700 121,125
(a)Hyperion Solutions Corp........ 6,000 261,000
IBP, Inc.......................... 3,200 57,600
ICN Pharmaceuticals, Inc.......... 2,800 70,875
(a)IDEXX Laboratories, Inc........ 8,100 130,612
(a)IHOP Corp...................... 5,200 86,775
Illinois Tool Works, Inc.......... 6,620 447,247
Illinova Corp..................... 2,900 100,775
IMC Global, Inc................... 4,000 65,500
(a)Inacom Corp.................... 6,272 45,864
(a)Incyte
Pharmaceuticals, Inc............ 6,300 378,000
(a)Informix Corp.................. 5,600 63,700
(a)Input/Output, Inc.............. 10,300 52,144
(a)Insituform Technologies, Inc.
'A'............................. 8,200 231,650
Integrated Health
Services, Inc................... 12,400 1,550
Intel Corp........................ 37,800 3,111,412
Inter-Tel, Inc.................... 6,100 152,500
Interface, Inc.................... 13,000 74,750
(a)Interim Services, Inc.......... 17,530 433,867
Intermet Corp..................... 6,000 69,750
International Business Machines
Corp............................ 20,300 2,192,400
International Game Technology..... 4,000 81,250
International Paper Co............ 5,600 316,050
(a)International Rectifier
Corp............................ 14,200 369,200
Interstate Bakeries Corp.......... 2,300 41,688
(a)Intuit, Inc.................... 5,100 305,681
(a)Ionics, Inc.................... 4,400 123,750
IPALCO Enterprises, Inc........... 3,400 58,013
Ivacare Corp...................... 6,800 136,425
(a)Jack in the Box, Inc........... 8,600 177,912
JLG Industries, Inc............... 9,500 150,812
John H. Harland Co................ 7,100 130,019
Johnson & Johnson................. 17,105 1,592,903
(a)Jones Apparel Group, Inc....... 3,300 89,513
Jones Pharma., Inc................ 9,300 403,969
JSB Financial..................... 1,800 93,375
(a,c)Just For Feet, Inc........... 7,300 456
Justin Industries................. 7,300 108,588
Kaman Corp. 'A'................... 7,600 97,850
Kansas City Southern
Industries, Inc................. 3,300 246,262
Kaydon Corp....................... 1,300 34,856
(a)Keane, Inc..................... 2,000 63,500
Kellwood Co....................... 5,600 108,850
Kelly Services Inc. 'A'........... 1,600 40,200
(a)Kemet Corp..................... 8,600 387,537
(a)Kent Electronics Corp.......... 8,300 188,825
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
Keyspan Energy Corp............... 4,100 $ 95,069
Keystone Financial, Inc........... 11,900 250,644
Kimberly-Clark Corp............... 11,240 733,410
Kinder Morgan, Inc................ 2,200 44,413
(a)Kirby Corp..................... 3,600 73,800
(a)Kroger Co...................... 11,300 213,287
(a)Kulicke & Soffa Industries..... 5,900 251,119
La-Z-Boy, Inc..................... 10,900 183,256
(a)Lakes Gaming, Inc.............. 2,950 23,416
Lancaster Colony Corp............. 1,900 62,938
(a)Landstar System, Inc........... 2,100 89,906
(a)Lattice Semiconductor Corp..... 10,000 471,250
(a)Lear Corp...................... 2,100 67,200
Lee Enterprises................... 2,700 86,231
(a)Legato Systems, Inc............ 2,200 151,387
Legg Mason, Inc................... 12,300 445,875
Leggett & Platt, Inc.............. 5,800 124,338
(a)Lexmark International
Group, Inc...................... 3,800 343,900
LG&E Energy Corp.................. 2,900 50,569
Libbey, Inc....................... 3,700 106,375
Lilly Industries, Inc. 'A'........ 5,200 69,875
(a)Lincare Holdings, Inc.......... 2,100 72,844
Linear Technology Corp............ 4,400 314,875
(a)Linens 'n Things, Inc.......... 7,800 231,075
(a)Litton Industries, Inc......... 1,500 74,813
Lowe's Cos., Inc.................. 3,840 229,440
Lubrizol Corp..................... 3,100 95,713
Luby's Cafeterias, Inc............ 8,800 100,100
Lucent Technologies, Inc.......... 33,845 2,532,029
Lyondell Petrochemical Co......... 2,900 36,975
Macdermid, Inc.................... 5,400 221,737
(a)Macromedia, Inc................ 8,300 606,937
Maf Bancorp, Inc.................. 2,800 58,625
(a)Mandalay Resort Group.......... 3,700 74,463
Manitowoc Co., Inc................ 5,550 188,700
Manpower, Inc..................... 2,700 101,588
Marsh & McLennan Cos., Inc........ 5,700 545,419
Marshall & Ilsley Corp............ 2,900 182,156
Martin Marietta Corp.............. 1,700 69,700
Masco Corp........................ 8,700 220,762
(a)Maxim Integrated
Products, Inc................... 7,600 358,625
MBNA Corp......................... 14,100 384,225
McCormick & Co., Inc.............. 2,900 86,275
McDonald's Corp................... 16,600 669,187
(a)MCI WorldCom, Inc.............. 30,600 1,623,712
Mckesson Corp..................... 6,299 142,121
MCN Corp.......................... 2,400 57,000
Media General, Inc. 'A'........... 1,400 72,800
(a)Medimmune, Inc................. 10,700 1,774,862
(a)Medquist, Inc.................. 4,900 126,481
(a)Men's Warehouse, Inc........... 6,800 199,750
Mercantile Bankshares Corp........ 2,600 83,038
Merck & Co., Inc.................. 25,600 1,716,800
(a)Mercury Interactive............ 7,600 820,325
Merrill Lynch & Co., Inc.......... 8,500 709,750
Methode Electronics 'A'........... 8,600 276,275
(a)Michaels Stores, Inc........... 6,400 182,400
(a)Microchip Technology, Inc...... 1,600 109,500
Micron Technology, Inc............ 3,800 295,450
(a)Micros Systems, Inc............ 3,500 259,000
</TABLE>
- -----------------------
16
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONT.)
(a)Microsoft Corp................. 55,000 $ 6,421,250
MidAmerican Energy Holdings Co.... 2,300 77,481
Midas, Inc........................ 1 22
(a)Midway Games, Inc.............. 8,800 210,650
Minnesota Mining & Manufacturing
Co.............................. 6,200 606,825
Minnesota Power & Light Co........ 3,000 50,813
Mississippi Chemical Corp......... 7,300 45,169
(a)Modis Professional
Services, Inc................... 3,800 54,150
(a)Mohawk Industries, Inc......... 10,600 279,575
Molex, Inc........................ 4,800 272,100
Monsanto Co....................... 20,200 719,625
Montana Power Co.................. 3,000 108,188
Morgan (J.P.) & Co., Inc.......... 8,800 1,114,300
(a)Morrison Knudsen Corp.......... 13,600 106,250
Motorola, Inc..................... 9,000 1,325,250
(a)MS Carriers.................... 4,700 112,213
(a)Mueller Industries, Inc........ 8,800 319,000
Murphy Oil Corp................... 2,500 143,437
Mutual Risk Management Ltd........ 7,700 129,456
Myers Industries, Inc............. 5,500 86,625
Mylan Laboratories, Inc........... 3,900 98,231
(a)Nabors Industries, Inc......... 3,400 105,188
National City Corp................ 11,500 272,406
National Computer
Systems, Inc.................... 6,500 244,562
National Data Corp................ 8,300 281,681
National Fuel Gas Co.............. 1,400 65,100
(a)National Instruments Corp...... 9,900 378,675
(a)Nautica Enterprises, Inc....... 8,500 96,156
(a)NBTY, Inc...................... 13,900 160,719
NCR Corp.......................... 3,100 117,413
(a)NCS Healthcare, Inc............ 5,300 12,753
(a)Networks Associates, Inc....... 3,700 98,744
New England Business
Services, Inc................... 3,500 85,531
New England Electric System....... 2,100 108,675
New Jersey Resources Corp......... 4,100 160,156
(a)Newfield Exploration Co........ 7,600 203,300
Newmont Mining Corp............... 9,400 230,300
(a)NFO Worldwide, Inc............. 12,600 281,925
Nike, Inc. 'B'.................... 4,300 213,119
NiSource Inc...................... 2,500 44,688
Noble Affiliates, Inc............. 2,300 49,306
(a)Noble Drilling Corp............ 4,000 131,000
(a)North American
Vaccine, Inc.................... 6,400 28,800
North Fork Bancorp, Inc........... 2,900 50,750
Northeast Utilities............... 4,000 82,250
Northwest Natural Gas Co.......... 5,500 120,656
(a)Nova Corp/Georgia.............. 2,200 69,438
(a)Novellus Systems, Inc.......... 7,700 943,491
NSTAR............................. 4,410 178,605
(a)O'Reilly Automotive, Inc....... 9,600 206,400
(a)Oak Industries, Inc............ 4,300 456,337
Oakwood Homes Corp................ 10,100 32,194
(a)Office Depot, Inc.............. 11,250 123,047
Ogden Corp........................ 2,000 23,875
OGE Energy Corp................... 4,400 83,600
Old Kent Financial Corp........... 3,045 107,717
Old Republic International
Corp............................ 3,100 42,238
Olin Corp......................... 2,400 47,550
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
Om Group, Inc..................... 5,600 $ 192,850
Omnicare, Inc..................... 2,800 33,600
Omnicon Group, Inc................ 3,600 360,000
(a)Oracle System Corp............. 16,400 1,837,825
(a)Orbital Sciences Corp.......... 7,700 142,931
(a)Orthodontic Centers of
America......................... 11,500 137,281
(a)Outback Steakhouse, Inc........ 2,400 62,250
Owens & Minor, Inc................ 8,800 78,650
(a)Oxford Health Plans, Inc....... 2,600 32,988
Pacific Century Financial Corp.... 3,400 63,538
(a)Pacific Sunwear of
California...................... 6,000 193,125
(a)Pacificare Health Systems...... 1,400 74,200
Paine Webber Group, Inc........... 4,000 155,250
(a)Parexel International Corp..... 4,700 55,519
(a)Park Place Entertainment
Corp............................ 11,800 147,500
(a)Patterson Dental Co............ 6,200 264,275
(a)Paxar.......................... 11,100 93,656
PE Corp.-PE Biosystems Group...... 2,200 264,687
(a)Pediatrix Medical
Group, Inc...................... 3,400 23,800
Pentair, Inc...................... 1,500 57,750
(a)PeopleSoft, Inc................ 3,600 76,725
Pfizer, Inc....................... 40,300 1,307,231
(a)Pharmaceutical Product
Development..................... 4,900 58,188
Philadelphia Suburban Corp........ 6,300 130,331
Philip Morris Cos., Inc........... 26,400 612,150
Phillips-Van Heusen Corp.......... 9,800 81,463
(a)Photronics, Inc................ 5,900 168,887
(a)Phycor, Inc.................... 16,500 30,938
Piedmont Natural Gas Co........... 4,800 145,200
Pier 1 Imports, Inc............... 21,800 138,975
Pillowtex Corp.................... 3,900 24,131
Pinnacle West Capital Corp........ 2,300 70,294
(a)Pioneer Group, Inc............. 6,400 100,800
Pittston Brinks Group............. 1,800 39,600
(a)Plains Resources, Inc.......... 5,900 73,750
PMI Group, Inc.................... 1,500 73,219
PNC Bank Corp..................... 5,500 244,750
Pogo Producing Co................. 10,800 221,400
Polaris Industries, Inc........... 5,300 192,125
(a)Policy Management Systems
Corp............................ 1,200 30,675
Potomac Electric Power Co......... 3,000 68,813
(a)Prepaid Legal
Services, Inc................... 5,400 129,600
(a)Pride International, Inc....... 10,900 159,412
(a)Primark Corp................... 5,600 155,750
(a)Prime Hospitality Corp......... 14,200 125,138
(a)Priority Healthcare Corp....... 3,426 99,140
Procter & Gamble Co............... 13,800 1,511,962
(a)Progress Software Corp......... 3,700 209,975
Protective Life Corp.............. 2,300 73,169
(a)Protein Design Labs, Inc....... 3,800 266,000
Provident Financial Group......... 1,400 50,225
Public Service Co. of New
Mexico.......................... 2,600 42,250
Puget Sound Energy, Inc........... 3,000 58,125
(a)Qualcomm, Inc.................. 16,800 2,961,000
(a)Quantum Corp................... 5,300 80,163
(a)Quantum Corp.-Hard Disk
Drive........................... 2,650 18,384
Queens County Bancorp, Inc........ 4,400 119,350
Questar Corp...................... 2,900 43,500
(a)Quintiles Transnational
Corp............................ 7,996 149,425
(a)Ralcorp Holdings, Inc.......... 7,000 139,562
</TABLE>
-----------------------
17
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONT.)
Raymond James Financial, Inc...... 10,100 $ 188,744
Rayonier, Inc..................... 1,400 67,638
(a)Read-Rite Corp................. 10,800 51,300
Reader's Digest Association, Inc.
(The) 'A'....................... 4,000 117,000
Regal Beloit...................... 4,900 101,063
Regis Corp........................ 7,650 144,394
Reliance Steel & Aluminum......... 6,000 140,625
Reliastar Financial Corp.......... 2,300 90,131
(a)Renal Care Group, Inc.......... 9,200 215,050
(a)Respironics, Inc............... 7,000 55,781
Reynolds & Reynolds Co. 'A'....... 2,700 60,750
Riggs National Corp. of Washington
D.C............................. 5,800 76,488
(a)Robert Half
International, Inc.............. 2,800 79,975
Rollins Truck Leasing Corp........ 12,600 150,412
Roper Industries, Inc............. 8,000 302,500
Ross Stores, Inc.................. 2,800 50,225
RPM, Inc.......................... 4,700 47,881
Ruby Tuesday, Inc................. 7,300 132,769
Russ Berrie & Co., Inc............ 5,600 147,000
(a)Ryan's Family Steak
Houses, Inc..................... 11,400 96,900
(a)Safe Skin Corp................. 11,000 133,375
(a)Saks, Inc...................... 4,100 63,806
(a)Samina Corp.................... 8,500 848,937
Santa Fe Snyder Corp.............. 36,455 291,640
Sara Lee Corp..................... 16,900 372,856
SBC Communications, Inc........... 16,798 818,902
Scana Corp........................ 2,500 67,188
Schwab (Charles) Corp............. 10,100 387,587
(a)SCI Systems, Inc............... 1,900 156,156
Sears, Roebuck & Co............... 6,800 206,975
SEI Corp.......................... 3,700 440,358
Selective Insurance
Group, Inc...................... 7,200 123,750
(a)Sepracor, Inc.................. 800 79,350
(a)Service Experts, Inc........... 4,300 24,994
Shaw Industries, Inc.............. 4,400 67,925
Shopko Stores, Inc................ 5,900 135,700
(a)Shorewood Packaging............ 6,200 117,413
(a)Siebel Systems, Inc............ 5,000 420,000
(a)Sierra Health
Services, Inc................... 6,700 44,806
(a)Silicon Valley Bancshares...... 4,900 242,550
Skywest, Inc...................... 4,900 137,200
(a)Smith International, Inc....... 1,700 84,469
(a)Smithfield Foods, Inc.......... 7,700 184,800
(a)Snyder Communications, Inc..... 2,100 40,425
(a)Sola International, Inc........ 6,400 88,800
Solutia, Inc...................... 3,400 52,488
Sonoco Products Co................ 3,100 70,525
Sotheby's Holdings, Inc. 'A'...... 2,100 63,000
Southdown, Inc.................... 1,500 77,438
Southern Co....................... 13,600 319,600
(a)Southern Union Company......... 6,360 121,635
Southtrust Corp................... 4,600 173,937
Southwest Gas Corp................ 6,400 147,200
Southwestern Energy Co............ 8,500 55,781
Sovereign Bancorp, Inc............ 5,800 43,228
(a)SPS Technologies, Inc.......... 2,900 92,619
SPX Corp.......................... 1,200 96,975
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
St. Paul Cos., Inc................ 1 $ 34
Standard Motor Products........... 3,700 59,663
(a)Staples, Inc................... 2,450 50,838
(a)Starbucks Corp................. 5,400 130,950
Starwood Hotels & Resorts
Worldwide Inc................... 4,000 94,000
(a)Steris Corp.................... 2,100 21,656
(a)Sterling Commerce, Inc......... 2,600 88,563
(a)Sterling Software, Inc......... 2,500 78,750
Stewart Enterprises, Inc. 'A'..... 3,600 17,100
(a)Stillwater Mining Co........... 7,200 229,500
Stone & Webster, Inc.............. 3,700 62,206
(a)Storage Technology Corp........ 3,000 55,313
Stride Rite Corp.................. 9,700 63,050
Stryker Corp...................... 2,800 194,950
Sturm Ruger & Co., Inc............ 6,700 59,463
(a)Sunguard Data Systems, Inc..... 3,000 71,250
(a)Sunrise Medical, Inc........... 7,900 48,881
Suntrust Banks, Inc............... 6,500 447,281
SUPERVALU, Inc.................... 89 1,780
Susquehanna Bancshares, Inc....... 6,100 96,838
(a)Sybron International Corp...... 3,300 81,469
Symbol Technologies, Inc.......... 2,700 171,619
(a)Synopsys, Inc.................. 2,000 133,500
T. Rowe Price Associates, Inc..... 3,500 129,281
(a)TALK.com, Inc.................. 15,000 266,250
TCF Financial Corp................ 2,500 62,188
(a)Technical Data Corp............ 1,600 43,400
Technitrol, Inc................... 4,300 191,350
(a)Technology Solutions Co........ 9,700 317,675
Teco Energy, Inc.................. 2,900 53,831
(a)Teledyne Technologies, Inc..... 2,414 22,782
Teleflex, Inc..................... 1,700 53,231
Telephone & Data Systems, Inc..... 2,100 264,600
(a)Tenet Healthcare Corp.......... 5,400 126,900
(a)Teradyne, Inc.................. 5,000 330,000
Texas Industries, Inc............. 4,600 195,787
Texas Instruments, Inc............ 12,469 1,207,934
The Marcus Corp................... 7,900 106,156
(a)The Scott Co................... 4,500 181,125
Thomas Industries, Inc............ 5,300 108,319
Tidewater, Inc.................... 2,000 72,000
Tiffany & Co...................... 2,600 232,050
(a)Timberland Co. 'A'............. 6,000 317,250
Time Warner, Inc.................. 15,000 1,086,562
TNP Enterprises, Inc.............. 3,300 136,125
(a)Toll Brothers, Inc............. 7,800 145,275
Tosco Corp........................ 4,600 125,063
(a)Total Renal Care
Holdings, Inc................... 2,600 17,388
Transocean Offshore, Inc.......... 2,900 95,519
Tredegar Industries, Inc.......... 7,100 146,881
Trenwick Group, Inc............... 3,000 50,813
Triarc Companies.................. 6,800 124,950
(a)Trigon Healthcare, Inc......... 1,600 47,200
Trinity Industries, Inc........... 1,500 42,656
True North
Communications, Inc............. 9,500 424,531
Trustco Bank Corp................. 10,000 132,500
(a)Tuboscope, Inc................. 10,900 173,037
Tyson Foods, Inc.................. 6,500 105,625
U.S. Bancorp...................... 6,200 147,637
</TABLE>
- -----------------------
18
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONT.)
(a)U.S. Foodservice, Inc.......... 3,000 $ 50,250
U.S. Freightways Corp............. 5,500 263,312
(a)U.S. Home Corp................. 3,700 94,581
(a)U.S. Onconlogy, Inc............ 7,000 34,563
U.S. Trust Corp................... 3,500 280,656
(a)UAL Corp....................... 900 69,806
Ultramar Diamond Shamrock Corp.... 2,900 65,794
(a)Ultratech Stepper, Inc......... 5,200 83,850
United Bankshares, Inc............ 7,400 176,675
United Illuminating Co............ 3,400 174,675
United Technologies Corp.......... 9,948 646,620
United Water Resources, Inc....... 8,600 294,012
Universal Corp.................... 1,500 34,219
Universal Foods Corp.............. 2,600 52,975
(a)Universal Health
Services, Inc................... 7,000 252,000
UnumProvident Corp................ 4,300 137,869
USX-Marathon Group................ 6,400 158,000
UtliCorp. United, Inc............. 3,750 72,891
(a)Valassis
Communications, Inc............. 10,950 462,637
Valmont Industries................ 5,700 91,556
(a)Ventiv Health Inc.............. 700 6,431
(a)Vertex
Pharmaceuticals, Inc............ 5,500 192,500
(a)Viacom, Inc., 'B'.............. 9,200 556,025
Viad Corp......................... 3,300 91,988
(a)Vicor Corp..................... 11,800 477,900
(a)Vintage Petroleum, Inc......... 13,000 156,812
(a)Visx, Inc...................... 12,400 641,700
(a)Vitesse Semiconductor.......... 29,000 1,520,687
Vulcan Materials Co............... 4,900 195,694
Wabash National Corp.............. 6,400 96,000
Wachovia Corp..................... 2,400 163,200
Wal-Mart Stores, Inc.............. 49,184 3,399,845
Walgreen Co....................... 12,500 365,625
Wallace Computer
Services, Inc................... 2,100 34,913
Walt Disney Co.................... 27,900 816,075
Warnaco Group..................... 2,100 25,856
Washington Mutual, Inc............ 6,000 156,000
Washington Post Co. 'B'........... 400 222,350
Waste Management, Inc............. 11,500 197,656
(a)Water Pik
Technologies, Inc............... 845 8,080
Watsoc, Inc....................... 5,200 60,125
(a)Watson
Pharmaceuticals, Inc............ 2,600 93,113
WD-40 Co.......................... 6,000 132,750
(a)Weatherford
International, Inc.............. 3,500 139,781
Wells Fargo Co.................... 21,000 849,187
Werner Enterprises, Inc........... 9,900 139,219
Westpoint Stevens, Inc............ 2,300 40,250
(a)Westwood One Inc............... 12,350 938,600
Weyerhaeuser Co................... 840 60,323
Whirlpool Corp.................... 1,700 110,606
Whitman Corp...................... 3,800 51,063
Whitney Holding Corp.............. 4,100 151,956
(a)Whittman-Hart, Inc............. 9,800 525,525
(a)Whole Foods Market, Inc........ 5,300 245,787
Wicor, Inc........................ 9,800 286,037
Williams Cos., Inc................ 4,700 143,644
(a)Williams-Sonoma, Inc........... 11,200 515,200
Wilmington Trust Corp............. 1,200 57,900
Wisconsin Energy.................. 3,100 59,675
Wolverine World Wide, Inc......... 11,800 129,062
Wynn's International Inc.......... 5,300 74,863
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
Xerox Corp........................ 10,900 $ 247,294
(a)Xilinx, Inc.................... 8,400 381,937
(a)Xircom, Inc.................... 4,700 352,500
XL Capital Ltd. 'A'............... 3,385 175,597
(a)Yahoo!, Inc.................... 4,000 1,730,751
(a)Yellow Corp.................... 6,400 107,600
York International Corp........... 2,200 60,363
(a)Zale Corp...................... 7,800 377,325
(a)Zebra Technologies Corp. 'A'... 6,700 391,950
Zenith National Insurance......... 4,000 82,500
Zions Bancorp..................... 2,200 130,212
------------
205,507,367
------------
TOTAL COMMON STOCKS.................................. 547,978,631
------------
PREFERRED STOCKS (0.2%)
AUSTRALIA (0.1%)
News Corp., Ltd................... 45,195 386,905
------------
AUSTRIA (0.0%)
Bau Holdings AG................... 5 181
------------
GERMANY (0.1%)
SAP AG............................ 1,476 901,180
Volkswagen AG..................... 2,200 70,988
------------
972,168
------------
ITALY (0.0%)
(a)Fiat S.p.A. (Privilegiate)..... 1,625 23,514
------------
NETHERLANDS (0.0%)
Unilever N.V...................... 26,089 132,323
------------
TOTAL PREFERRED STOCKS............................... 1,515,091
------------
INVESTMENT COMPANIES (0.9%)
UNITED STATES (0.9%)
(b)Latin American Discovery
Fund............................ 381,900 4,105,425
(b)Morgan Stanley Dean Witter
Asia-Pacific Fund............... 124,800 1,474,200
------------
TOTAL INVESTMENT COMPANIES........................... 5,579,625
------------
<CAPTION>
NO. OF
WARRANTS
-----------
WARRANTS (0.0%)
<S> <C> <C>
FRANCE (0.0%)
(a)Banque Nationale de Paris,
expiring 7/1/02................. 1,196 5,524
------------
UNITED STATES (0.0%)
(a)Golden State Bancorp, Inc.
expiring 1/1/01................. 1,000 875
------------
TOTAL WARRANTS....................................... 6,399
------------
<CAPTION>
PAR
VALUE
-----------
CORPORATE BONDS & NOTES (0.0%)
<S> <C> <C>
UNITED KINGDOM (0.0%)
(d)BG Transco Holdings plc 0.00%,
12/14/09........................ $ 5,000 8,125
(d)BG Transco Holdings plc 4.19%,
12/14/22........................ 5,000 8,056
BG Transco Holdings plc 7.00%,
12/16/24........................ 5,000 7,846
------------
TOTAL CORPORATE BONDS & NOTES........................ 24,027
------------
</TABLE>
-----------------------
19
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PAR
VALUE VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
CONVERTIBLE DEBENTURES (0.0%)
FRANCE (0.0%)
Casino Guich Perrachon 4.50%,
7/12/01......................... FRF 70,400 $ 70,988
Sodexho S.A., 6.00%, 6/7/04....... 76 3,958
------------
74,946
------------
PORTUGAL (0.0%)
(a)Jeromimo Martins............... $ 34,030 20,402
------------
TOTAL CONVERTIBLE DEBENTURES......................... 95,348
------------
TOTAL LONG-TERM INVESTMENTS (86.9%)
(COST $427,626,796)................................ 555,199,121
------------
SHORT-TERM INVESTMENT (12.3%)
REPURCHASE AGREEMENT (12.3%)
Chase Securities, Inc., 2.60%,
dated 78,736,000
12/31/99, due 1/3/00, to be
repurchased at $78,753,059
collateralized by $78,970,071
U.S. Treasury Inflation Index
Notes 3.625%, due 7/15/02,
valued at
$80,297,788 (COST $78,736,000)................. 78,736,000
------------
TOTAL INVESTMENTS IN SECURITIES (99.2%)
(COST $506,362,796)................................ 633,935,121
FOREIGN CURRENCY (0.0%) (COST $35,644)............... 29,725
------------
TOTAL INVESTMENTS (99.2%) (COST $506,398,440)........ 633,964,846
OTHER ASSETS IN EXCESS OF LIABILITIES (0.8%)......... 4,976,473
------------
NET ASSETS (100%).................................... $638,941,319
============
</TABLE>
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------
(a) -- Non-income producing security
(b) -- The Fund is advised by an affiliate which earns a
management fee as advisor to the Fund.
(c) -- Security valued at fair value--see note A-1 to financial
statements.
(d) -- Variable/floating rate security--rate disclosed is as of
December 31, 1999.
ADR -- American Depositary Receipt
CVA -- Share Certificates
FRF -- French Franc
NCS -- Non-Convertible Shares
RNC -- Non-Convertible Savings Shares
</TABLE>
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------- ------------ ----------
<S> <C> <C>
Services....................... $142,017,545 22.2%
Capital Goods & Equipment...... 128,059,401 20.2
Finance........................ 103,157,666 16.1
Consumer Goods................. 94,738,195 14.8
Energy......................... 37,326,942 5.8
Materials...................... 26,076,708 4.1
Multi-Industry................. 17,925,686 2.8
Investment Companies........... 5,579,626 0.9
Gold Mines..................... 317,352 0.0
------------ ----
$555,199,121 86.9%
============ ====
</TABLE>
- -----------------------
20
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------
ASSETS:
Investments in Securities, at Value (Cost $506,362,796)
(including repurchase agreement of $78,736,000)......... $ 633,935,121
Foreign Currency (Cost $35,644)........................... 29,725
Margin Deposit on Futures................................. 3,498,878
Receivable for:
Investments Sold........................................ 78,764,467
Variation of Futures Contracts.......................... 6,835,894
Fund Shares Sold........................................ 1,039,703
Dividends............................................... 635,351
Foreign Withholding Tax Reclaim......................... 88,540
Interest................................................ 6,375
Other..................................................... 44,125
-------------
Total Assets............................................ 724,878,179
-------------
LIABILITIES:
Payable for:
Investments Purchased................................... 78,736,000
Bank Overdraft.......................................... 3,194,445
Distribution Fees....................................... 689,778
Fund Shares Redeemed.................................... 634,558
Investment Advisory Fees................................ 506,326
Custody Fees............................................ 265,041
Administrative Fees..................................... 141,064
Directors' Fees and Expenses............................ 60,675
Transfer Agent Fees..................................... 48,058
Shareholder Reporting Expenses.......................... 40,786
Professional Fees....................................... 26,100
Securities Lending Expense.............................. 4,487
Net Unrealized Loss on Foreign Currency Exchange
Contracts............................................... 1,529,220
Other..................................................... 60,322
-------------
Total Liabilities....................................... 85,936,860
-------------
NET ASSETS.................................................. $ 638,941,319
=============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 35,495
Paid in Capital in Excess of Par.......................... 488,125,522
Net Unrealized Appreciation on Investments, Foreign
Currency Translations and Futures....................... 133,438,459
Accumulated Net Realized Gain............................. 19,554,883
Accumulated Net Investment Loss........................... (2,213,040)
-------------
NET ASSETS.................................................. $ 638,941,319
=============
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $277,445,787 and 15,084,075
Shares Outstanding)..................................... $ 18.39
=============
Maximum Sales Charge...................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100 / (100 - maximum sales charge))............. $ 19.51
=============
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $251,017,129 and 14,223,217
Shares Outstanding)*.................................... $ 17.65
=============
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $110,478,403 and 6,187,700
Shares Outstanding)*.................................... $ 17.85
=============
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
-----------------------
21
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 2,978,569
Interest.................................................. 1,374,309
Less Foreign Taxes Withheld............................... (180,049)
------------
Total Income............................................. 4,172,829
------------
EXPENSES:
Investment Advisory....................................... 2,885,947
Distribution Fees (Attributed to Classes A, B and C of
$305,640, $1,171,550 and $506,692, respectively)........ 1,983,882
Administrative Fees....................................... 766,211
Transfer Agent Fees....................................... 189,199
Custodian Fees............................................ 175,486
Shareholder Reports....................................... 73,535
Professional Fees......................................... 43,434
Filing and Registration Fees.............................. 25,506
Directors' Fees and Expenses.............................. 17,749
Other..................................................... 6,860
------------
Total Expenses........................................... 6,167,809
------------
Net Investment Income/Loss.................................. (1,994,980)
------------
NET REALIZED GAIN/LOSS ON:
Investments............................................... 34,435,945
Foreign Currency Transactions............................. (1,970,486)
Futures................................................... 5,840,588
------------
Net Realized Gain/Loss...................................... 38,306,047
------------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... 77,821,678
------------
End of the Period:
Investments............................................. 127,572,325
Foreign Currency Translations........................... (1,548,314)
Futures................................................. 7,414,448
------------
133,438,459
------------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 55,616,781
------------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. 93,922,828
------------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 91,927,848
============
</TABLE>
- --------------
22
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ (1,994,980) $ 210,000
Net Realized Gain/Loss.................................... 38,306,047 40,543,000
Net Unrealized Appreciation/Depreciation.................. 55,616,781 (1,563,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 91,927,848 39,190,000
----------------- -------------
DISTRIBUTIONS:
Net Investment Income:
Class A................................................. (791) (1,038,000)
Class B................................................. (354) (488,000)
Class C................................................. (640) (217,000)
In Excess of Net Investment Income:
Class A................................................. -- (2,120,000)
Class B................................................. -- (996,000)
Class C................................................. -- (444,000)
----------------- -------------
(1,785) (5,303,000)
----------------- -------------
Net Realized Gain:
Class A................................................. (17,165,170) (12,336,000)
Class B................................................. (16,505,193) (12,000,000)
Class C................................................. (7,197,574) (5,364,000)
----------------- -------------
(40,867,937) (29,700,000)
----------------- -------------
Net Decrease in Net Assets Resulting from Distributions... (40,869,722) (35,003,000)
----------------- -------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed................................................ 82,372,698 172,653,000
Distributions Reinvested.................................. 37,345,275 31,543,000
Redeemed.................................................. (105,612,305) (230,685,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... 14,105,668 (26,489,000)
----------------- -------------
Total Increase/Decrease in Net Assets..................... 65,163,794 (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
income/loss of $(2,213,040) and $(217,000),
respectively)............................................. $ 638,941,319 $ 573,778,000
================= =============
- -------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) CLASS A:
Shares:
Subscribed............................................. 2,954,423 6,401,000
Distributions Reinvested............................... 939,649 953,000
Redeemed............................................... (3,052,653) (8,806,000)
----------------- -------------
Net Increase/Decrease in Class A Shares Outstanding...... 841,419 (1,452,000)
================= =============
Dollars:
Subscribed............................................. $ 50,721,915 $ 102,532,000
Distributions Reinvested............................... 16,039,804 14,538,000
Redeemed............................................... (52,263,019) (139,451,000)
----------------- -------------
Net Increase/Decrease.................................... $ 14,498,700 $ (22,381,000)
================= =============
Ending Paid in Capital................................... $ 207,376,915 $ 192,898,000+
================= =============
CLASS B:
Shares:
Subscribed............................................. 1,538,914 3,651,000
Distributions Reinvested............................... 902,307 790,000
Redeemed............................................... (2,505,128) (4,141,000)
----------------- -------------
Net Increase/Decrease in Class B Shares Outstanding...... (63,907) 300,000
================= =============
Dollars:
Subscribed............................................. $ 25,473,498 $ 56,414,000
Distributions Reinvested............................... 14,779,795 11,694,000
Redeemed............................................... (41,433,742) (64,043,000)
----------------- -------------
Net Increase/Decrease.................................... $ (1,180,449) $ 4,065,000
================= =============
Ending Paid in Capital................................... $ 201,802,246 $ 202,973,000+
================= =============
CLASS C:
Shares:
Subscribed............................................. 368,752 871,000
Distributions Reinvested............................... 393,587 355,000
Redeemed............................................... (711,253) (1,755,000)
----------------- -------------
Net Increase/Decrease in Class C Shares Outstanding...... 51,086 (529,000)
================= =============
Dollars:
Subscribed............................................. $ 6,177,285 $ 13,707,000
Distributions Reinvested............................... 6,525,676 5,311,000
Redeemed............................................... (11,915,544) (27,191,000)
----------------- -------------
Net Increase/Decrease.................................... $ 787,417 $ (8,173,000)
================= =============
Ending Paid in Capital................................... $ 78,981,856 $ 78,195,000+
================= =============
</TABLE>
- ---------------
<TABLE>
<S> <C>
+ Ending Paid in Capital amounts do not reflect permanent book
to tax differences.
</TABLE>
-----------------------
23
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 ----------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 16.859 $ 16.670 $ 16.57 $ 14.75 $ 12.60 $ 11.99
------------ ------------ --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss... (0.022) 0.075 0.21 0.10 0.19 0.12
Net Realized and Unrealized
Gain/Loss................ 2.791 1.211 2.07 2.76 2.82 0.67
------------ ------------ --------- --------- --------- ---------
Total From Investment
Operations............... 2.769 1.286 2.28 2.86 3.01 0.79
------------ ------------ --------- --------- --------- ---------
DISTRIBUTIONS
Net Investment Income...... -- (0.073) (0.35) (0.55) (0.39) --
In Excess of Net Investment
Income................... -- (0.150) -- -- -- (0.05)
Net Realized Gain.......... (1.235) (0.874) (1.83) (0.49) (0.47) (0.13)
------------ ------------ --------- --------- --------- ---------
Total Distributions........ (1.235) (1.097) (2.18) (1.04) (0.86) (0.18)
------------ ------------ --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD... $ 18.393 $ 16.859 $ 16.67 $ 16.57 $ 14.75 $ 12.60
============ ============ ========= ========= ========= =========
TOTAL RETURN (1)............ 16.96%* 8.41% 16.17% 20.61% 24.62% 6.69%
============ ============ ========= ========= ========= =========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's).................... $ 277,446 $ 240,121 $ 261,633 $ 72,704 $ 63,706 $ 42,586
Ratio of Expenses to Average Net
Assets..................... 1.70% 1.70% 1.61% 1.70% 1.70% 1.70%
Ratio of Net Investment
Income/Loss to Average Net
Assets..................... (0.26)% 0.47% 1.30% 0.59% 0.71% 1.01%
Portfolio Turnover Rate..... 34%* 84% 108% 45% 44% 39%
- ----------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net
Investment Income/Loss... $ -- $ 0.00++ $ 0.02 $ 0.03 $ 0.10 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net
Assets................... 1.70% 1.73% 1.62% 1.90% 2.06% 2.03%
Net Investment Income/Loss to
Average Net Assets....... (0.26)% 0.44% 1.30% 0.40% 0.35% 0.68%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
SIX MONTHS ENDED ------------------------------------------------------------
DECEMBER 31, 1999 AUGUST 1, 1995+
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 16.283 $ 16.144 $ 16.15 $ 14.46 $ 13.01
------------- ------------ --------- --------- ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss... (0.084) (0.043) 0.09 (0.05) 0.30
Net Realized and Unrealized
Gain/Loss................ 2.684 1.164 2.01 2.73 1.98
------------- ------------ --------- --------- ------------
Total From Investment
Operations............... 2.600 1.121 2.10 2.68 2.28
------------- ------------ --------- --------- ------------
DISTRIBUTIONS
Net Investment Income...... -- (0.035) (0.28) (0.50) (0.35)
In Excess of Net Investment
Income................... -- (0.073) -- -- --
Net Realized Gain.......... (1.235) (0.874) (1.83) (0.49) (0.48)
------------- ------------ --------- --------- ------------
Total Distributions........ (1.235) (0.982) (2.11) (0.99) (0.83)
------------- ------------ --------- --------- ------------
NET ASSET VALUE, END OF PERIOD... $ 17.648 $ 16.283 $ 16.14 $ 16.15 $ 14.46
============= ============ ========= ========= ============
TOTAL RETURN (1)............ 16.59%* 7.50% 15.33% 19.64% 18.08%*
============= ============ ========= ========= ============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's).................... $ 251,017 $ 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..................... (1.01)% (0.27)% 0.60% (0.11)% 0.45%
Portfolio Turnover Rate..... 34%* 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................... 2.45% 2.49% 2.36% 2.65% 2.81%
Net Investment Income/Loss to
Average Net Assets....... (1.01)%* (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 of sale charges or deferred sales
charges.
# Changes per share are based upon monthly average shares outstanding.
- --------------
24
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
FINANCIAL HIGHLIGHTS (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 ----------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 16.461 $ 16.298 $ 16.24 $ 14.49 $ 12.43 $ 11.90
------------ ------------ --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... (0.085) (0.043) 0.08 (0.03) 0.12 0.04
Net Realized and Unrealized
Gain/Loss........................ 2.714 1.187 2.05 2.73 2.75 0.65
------------ ------------ --------- --------- --------- ---------
Total From Investment Operations... 2.629 1.144 2.13 2.70 2.87 0.69
------------ ------------ --------- --------- --------- ---------
DISTRIBUTIONS
Net Investment Income.............. -- (0.035) (0.24) (0.46) (0.33) --
In Excess of Net Investment
Income........................... -- (0.072) -- -- -- (0.03)
Net Realized Gain.................. (1.235) (0.874) (1.83) (0.49) (0.48) (0.13)
------------ ------------ --------- --------- --------- ---------
Total Distributions................ (1.235) (0.981) (2.07) (0.95) (0.81) (0.16)
------------ ------------ --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD....... $ 17.855 $ 16.461 $ 16.30 $ 16.24 $ 14.49 $ 12.43
============ ============ ========= ========= ========= =========
TOTAL RETURN (1)..................... 16.58%* 7.61% 15.37% 19.69% 23.65% 5.84%
============ ============ ========= ========= ========= =========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $ 110,478 $ 101,013 $ 108,650 $ 78,199 $ 63,025 $ 40,460
Ratio of Expenses to Average Net
Assets............................. 2.45% 2.45% 2.55% 2.45% 2.45% 2.45%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (1.01)% (0.28)% 0.52% (0.16)% (0.04)% 0.25%
Portfolio Turnover Rate.............. 34%* 84% 108% 45% 44% 39%
- -------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ -- $ 0.00++ $ 0.02 $ 0.03 $ 1.16 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 2.45% 2.48% 2.56% 2.65% 2.81% 2.78%
Net Investment Income/Loss to
Average Net Assets............... (1.01)% (0.30)% 0.52% (0.34)% (0.40)% (0.08)%
</TABLE>
- --------------------------------------------------------------------------------
* Non-Annualized
++ Amount is less than $0.01 per share.
(1) Total return is calculated exclusive of sale charges or deferred sales
charges.
# Changes per share are based upon monthly average shares outstanding.
-----------------------
25
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen Global Equity Allocation Fund (the "Fund") is organized as a
separate diversified fund of Van Kampen Series Fund, Inc., a Maryland
corporation, which is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective seeks long-term capital appreciation by investing in equity securities
of U.S. and non-U.S. issuers in accordance with country weightings determined by
the Adviser and with stock selection within each country designed to replicate a
broad market index. The Fund commenced operations on January 4, 1993.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. Class A shares are sold with a front-end sales charge of up to
5.75%. For certain purchases of Class A shares, the front-end sales charges may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights. The Fund began offering the current Class B shares on August 1,
1995. Class B shares held prior to May 1, 1995 were renamed Class C shares.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Securities listed on a foreign exchange are valued at their
closing price. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Bonds and other fixed income securities may be valued according to the
broadest and most representative market. Debt securities purchased with
remaining maturities of 60 days or less are valued at amortized cost, if it
approximates market value. All other securities and assets for which market
values are not readily available are valued at fair value as determined in good
faith by the Board of Directors, although the actual calculations may be done by
others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. Income, expenses (other than class specific expenses),
and realized and unrealized gains or losses are allocated to each class of
shares based upon their relative net assets. Distributions from the Fund are
recorded on the ex-distribution date.
- -----------------------
26
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized between
trade date and settlement date on security and income transactions. However, the
foreign currency portion of gains and losses realized on sales and maturities of
foreign denominated debt securities is treated as ordinary income for U.S.
Federal income tax purposes.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains, and net unrealized appreciation, as applicable, as the income is earned
or capital gains are recorded.
Net currency losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 the Fund incurred and elected to defer until
July 1, 1999, for U.S. Federal income tax purposes, net currency losses of
approximately $3,539,000.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- --------------------- ------------ ------------- -------------
<S> <C> <C> <C>
$506,362,796 $159,027,051 $(31,454,726) $127,572,325
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing book and
tax treatment for foreign currency transactions, net operating losses, foreign
taxes on net realized gains and gains on certain securities of corporations
designated as "passive foreign investment companies."
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among undistributed net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of presenting net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
1.00% 1.70% 2.45%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $16,764
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution
------------------
27
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
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
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $423,099 for Class A shares and deferred sales charges of
$200,041 and $5,024 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 December 31, 1999, the Fund incurred $1,667 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/
dealer.
At December 31, 1999, the Fund owned shares of affiliated funds for which the
Fund earned dividend income of $26,128 during the period.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $178,144,677 and sales of $211,583,896 of investment
securities other than long-term U.S. government securities and short-term
investments. There were no purchases or sales of long-term U.S. government
securities.
D. DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in very
general terms refers to a security whose value is "derived" from the value of an
underlying asset, reference rate, or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the Fund's foreign currency exposure. All of the Fund's
portfolio holdings, including derivative instruments, are marked-to-market each
day with the change in value reflected in unrealized appreciation/depreciation.
Upon disposition, a realized gain or loss is recognized accordingly, except when
exercising a call option contract or taking delivery of a security underlying a
forward contract. In this instance, the recognition of gain or loss is postponed
until the disposal of the security underlying the option or forward contract.
Risks may arise as a result of the potential inability of the counterparties to
meet the terms of their contracts.
Summarized below are the specific types of derivative financial instruments used
by the Fund.
1. FORWARD CURRENCY CONTRACTS: These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The
gain/loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency transactions.
At December 31, 1999, 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, 15,703,000
expiring 3/24/00.......... $25,746,032 $ (383,432)
Euro, 37,756,708
expiring 3/7/00-3/10/00... 40,205,894 (1,939,462)
Japanese Yen, 1,785,108,090
expiring 3/17/00.......... 16,525,556 1,155,872
----------- -----------
$82,477,482 $(1,167,022)
=========== ===========
SHORT CONTRACTS:
British Pound, 15,908,283
expiring 3/24/00.......... $25,694,161 $ 343,188
Japanese Yen, 3,985,718,081
expiring 3/17/00.......... 39,478,386 (705,386)
----------- -----------
$65,172,547 $ (362,198)
=========== ===========
$(1,529,220)
===========
</TABLE>
2. FUTURES CONTRACTS: A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in futures of equity indices and typically closes the
contract prior to the delivery date.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, cash and/or securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin). The potential risk of loss
associated with a futures contract in excess of the variation margin is
reflected on the Statement of Assets and Liabilities. The cost of securities
acquired through delivery under a contract is adjusted by the unrealized gain or
loss on the contract.
- -----------------------
28
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
Transactions in futures contracts for the period ended December 31, 1999, were
as follows:
<TABLE>
<CAPTION>
CONTRACTS
---------
<S> <C>
Outstanding at June 30, 1999............... 515
Futures Opened............................. 1,778
Futures Closed............................. (1,195)
------
Outstanding at December 31, 1999........... 1,098
======
</TABLE>
The futures contracts outstanding as of December 31, 1999, 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--
(Current notional value
$30,762,003)......................... 509 $3,134,351
DAX Index--
(Current notional value
$6,148,182).......................... 34 962,579
MIB 30 Index--
(Current notional value
$7,551,046).......................... 344 987,764
TOPIX Index--
(Current notional value
$34,687,500)......................... 208 2,341,622
SHORT CONTRACTS:
FTSE 100 Index--
(Current notional value $340,002).... 3 (11,868)
----- ----------
1,098 $7,414,448
===== ==========
</TABLE>
E. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
------------------
29
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the Global Equity Allocation Fund
(the "Fund") was held on December 15, 1999.
The description of each proposal and number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
---------- --------
<S> <C> <C>
J. Miles Branagan........................................... 18,478,727 212,614
Jerry D. Choate............................................. 18,475,810 215,531
Linda Hutton Heagy.......................................... 18,481,724 209,617
R. Craig Kennedy............................................ 18,484,688 206,653
Mitchell M. Merin........................................... 18,475,639 215,702
Jack E. Nelson.............................................. 18,479,378 211,963
Richard F. Powers, III...................................... 18,475,487 215,854
Phillip B. Rooney........................................... 18,478,392 212,948
Fernando Sisto.............................................. 18,470,979 220,362
Wayne W. Whalen............................................. 18,480,021 211,319
Suzanne H. Woolsey.......................................... 18,465,385 225,956
Paul G. Yovovich............................................ 18,478,684 212,656
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C> <C>
18,369,368 67,639 254,334
</TABLE>
- -----------------------
30
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at www.vankampen.com--
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting www.vankampen.com
and selecting CONTACT US
* Closed to new investors
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management of
Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555
/ /www.vankampen.com
MSGE SAR 02/00 -C- Van Kampen Funds Inc. 2000
450 550 650
<PAGE>
VAN KAMPEN
GLOBAL FRANCHISE FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 7
Statement of Operations............................................... 8
Statement of Changes in Net Assets.................................... 9
Financial Highlights ................................................. 10
Notes to Financial Statements......................................... 11
Additional Information ............................................... 14
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
United Kingdom 36.8%
United States 22.5%
Switzerland 11.6%
France 10.2%
Italy 5.6%
Finland 3.9%
Short-Term Investment 3.2%
Canada 2.7%
Spain 2.2%
Other 1.3%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C MSCI WORLD NET
SHARES SHARES SHARES DIVIDENDS INDEX
------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*............ 2.29% 3.24% 7.08% N/A
Without Sales Charge***....... 8.53% 8.24% 8.08% 15.14%
One Year
With Sales Charge*............ 13.55% 14.69% 18.52% N/A
Without Sales Charge***....... 20.49% 19.69% 19.52% 24.94%
Average Annual Since Inception
With Sales Charge*............ 18.52% 20.28% 23.94% N/A
Without Sales Charge***....... 24.19% 23.27% 23.94% 36.54%
Commencement Date............... 9/25/98 9/25/98 9/25/98 N/A
</TABLE>
The Morgan Stanley Capital International (MSCI) World Net Dividends Index is an
unmanaged index that includes securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand, and the Far East and
assumes dividends are reinvested net of withholding tax.
* The returns above are calculated using the maximum sales charge for Class A
shares (5.75%) and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY COUNTRY NET ASSETS
- -------- -------------- ----------
<S> <C> <C>
WPP Group plc United Kingdom 8.4%
Cie Financiere Richemont AG 'A' Switzerland 7.7%
New York Times Co. 'A' United States 5.7%
Mediaset S.p.A. Italy 5.6%
Reckitt Benckiser plc United Kingdom 5.2%
</TABLE>
<TABLE>
<CAPTION>
TOP SECTORS+
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ---------- ----------
<S> <C> <C>
Consumer Goods $1,849,946 49.7%
Services 1,446,320 38.9%
Capital Equipment 197,871 5.3%
Energy 58,189 1.6%
</TABLE>
+These sectors represent broad groupings of related industries.
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGER OF THE VAN KAMPEN GLOBAL FRANCHISE
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE
PAST SIX MONTHS. THE FUND IS MANAGED BY ANDREW BROWN, MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT. THE FOLLOWING DISCUSSION REFLECTS HIS VIEWS ON THE FUND'S
PERFORMANCE DURING THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1999.
Q: DESCRIBE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED DURING THE PERIOD.
A: Global market leadership was concentrated among an exceptionally narrow group
of mega-capitalization growth companies over the last six months of 1999. In
particular, technology and telecommunications stocks rallied sharply during the
fourth quarter as investors increasingly came to believe that inflation would
remain under control in the United States, thus minimizing upward pressure on
interest rates. In addition, telecommunications companies in Europe benefited
from investor euphoria regarding prospects for the development of applications
that could allow for data transmission and Internet access over cellular phones.
But while technology and telecom stocks soared, many other stocks suffered from
a relative lack of investor interest.
Global economic growth accelerated as Japan and emerging markets continued their
recoveries. Meanwhile, there were clear signs of faster growth in Europe,
spurred by the impact of the moderately lower euro on the region's exporting
sector. Also, the U.S. economy remained in overdrive, defying all efforts by the
Federal Reserve to slow it down, including three quarter-point hikes in the key
federal funds lending rate.
Q: DESCRIBE THE STRATEGIES YOU USE TO MANAGE THE FUND.
A: As always, the Fund makes investments on the basis of time-tested valuation
criteria. Yet with the kind of euphoric and intensely forward-looking
perspective that many investors have assumed in recent years, the stock prices
of companies with little or no earnings--and scant prospects for earnings in the
near future--have climbed to extraordinary levels.
Time may yet prove such optimism to be warranted, but I prefer to invest the
Fund's assets in businesses that produce consumable products and make real
money. Admittedly, that strategy has kept the Fund out of the currently red-hot
tech and telecom sectors during the meteoric rise of those sectors. I am
confident, however, that my approach of investing the Fund's assets in a
concentrated portfolio of high-quality businesses will be rewarded over time.
Q: WHAT DO YOU LOOK FOR IN A BUSINESS?
A: I expect companies the Fund invests in to earn a consistently high return on
capital without requiring leverage. In other words, I seek businesses that are
profitable, both now and in the future, without the need to borrow money to
achieve that profitability. Typically, companies that can grow their bottom
lines rapidly and consistently over the long run offer products that enjoy a
high degree of repeat customers. That requirement alone rules out companies that
may be growing briskly at the moment but are not likely to be repeat-revenue
businesses over the long term.
The Fund strives to find companies whose major assets are intangible, and thus
not likely to be reproduced by a cash-rich competitor with access to the capital
markets. Examples of intangible assets include brand names, titles, and ideas. I
do not want to put the Fund's shareholders in the position of owning companies
whose businesses are vulnerable to replication by competitors willing to spend
money.
Q: CAN YOU PROVIDE AN EXAMPLE OF A COMPANY WITH AN INTANGIBLE ASSET THAT MAY BE
DIFFICULT TO REPLICATE?
A: The Fund owns The New York Times because that newspaper's competitors can
spend all the money they want on buildings and printing presses, but they can
never be The New York Times. Many publishers have tried, but no one has
succeeded in replicating the company's key asset. As a result, the Times has a
near-monopoly on higher-end advertising, which provides enormous pricing power.
No publisher can take away what The New York Times brand name means to consumers
and advertisers. That is the kind of business I want to own for the Fund's
shareholders.
- -----------------------
4
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q: HOW DID THIS STRATEGY AFFECT THE FUND'S PERFORMANCE DURING THE PERIOD?
A: In my view, the current market environment rewards potential more than
reality. I have no quarrel with that mind-set, but it simply does not describe
the kind of companies I prefer to invest the Fund's assets in. While the Fund's
holdings--which tend to be overweighted in consumer-goods and service
industries--have done reasonably well on an absolute basis, the Fund has
modestly underperformed its benchmark over the last six months of 1999.
Nonetheless, the Fund enjoyed solid returns from a number of its stocks,
including "old media" companies that are benefiting from "new economy" business.
For example, the Italian TV broadcaster Modesto and the U.K.-based WPP Group, an
advertising agency holding company, contributed positively to the Fund's
performance. Overall, the Fund was able to generate competitive performance
during this market environment without abandoning its commitment to the type of
businesses that I believe can stand the test of time.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: The Fund achieved a total return of 8.53 percent (Class A shares at net asset
value) for the six-month period ended December 31, 1999. By comparison, the
Morgan Stanley Capital International (MSCI) World Net Dividends Index generated
a total return 15.14 percent for the same period. Past performance does not
guarantee future results. Total return does not include sales charges or
commissions on securities held by the index. If charges or commissions had been
included, the total return would have been lower. An investment cannot be made
directly by an index.
Q: WHAT IS YOUR OUTLOOK FOR THE FUND IN THE MONTHS AHEAD?
A: It is impossible to predict when the current global market's embrace of the
future will shift back to valuing what is real today as opposed to unrealized
potential. History tells us, however, that over the long run, the equity market
tends to reward companies that earn a generous return on their capital. That
makes sense, of course, because the only reason to own a business is to make a
profit.
Still, the acceleration of worldwide economic growth that is likely to occur in
2000 could put enough upward pressure on interest rates to force investors to
reexamine the value of the future earnings on which the current technology
speculations are built. Regardless of when the high-flying sectors of the global
equity market return to earth, however, I believe that the Fund owns a
collection of resilient and financially healthy businesses that are not unduly
exposed to economic cycles. Over time, I have every confidence that the Fund's
shareholders will be rewarded by this approach.
------------------
5
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
COMMON STOCKS (95.5%)
CANADA (2.7%)
Torstar Corp. 'B'................ 9,230 $ 100,618
----------
FINLAND (3.9%)
Kone Corp. Oy 'B'................ 2,393 117,995
Rapala Normark Corp.............. 5,900 28,556
----------
146,551
----------
FRANCE (10.2%)
Groupe Danone.................... 527 124,348
Pernod-Ricard.................... 1,780 101,948
Societe Television Francaise 1... 291 152,583
----------
378,879
----------
ITALY (5.6%)
Mediaset S.p.A................... 13,380 208,312
----------
SPAIN (2.2%)
Zardoya-Otis S.A................. 8,108 79,877
----------
SWITZERLAND (11.6%)
Cie Financiere Richemont AG
'A'............................ 120 286,522
Nestle S.A. (Registered)......... 80 146,629
----------
433,151
----------
UNITED KINGDOM (36.8%)
Aegis Group plc.................. 21,050 76,495
Allied Domecq plc................ 29,670 146,634
Cadbury Schweppes plc............ 28,330 171,126
Capital Radio plc................ 7,110 172,249
Great Universal Stores plc....... 11,250 65,775
Imperial Tobacco Group plc....... 13,710 112,929
Reckitt Benckiser plc............ 20,524 192,425
Scottish Media Group plc......... 7,070 118,754
WPP Group plc.................... 19,660 311,494
----------
1,367,881
----------
UNITED STATES (22.5%)
Bestfoods........................ 3,340 175,559
Brown-Forman Corp. 'B'........... 2,410 137,972
Fortune Brands, Inc.............. 5,020 165,974
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------
<S> <C> <C>
New York Times Co. 'A'........... 4,305 $ 211,483
Philip Morris Cos., Inc.......... 3,790 87,880
WD-40 Co......................... 2,630 58,189
----------
837,057
----------
TOTAL LONG-TERM INVESTMENTS (95.5%) (COST
$3,126,275)...................................... 3,552,326
----------
<CAPTION>
PAR
VALUE
----------
SHORT-TERM INVESTMENT (3.2%)
<S> <C> <C>
REPURCHASE AGREEMENT (3.2%)
Chase Securities, Inc., 2.60%,
dated $ 120,000
12/31/99, due 1/3/00, to be repurchased at
$120,026 collateralized by $124,746
U.S. Treasury Notes, 6.125%, due 12/31/01,
valued at $124,746 (COST $120,000)......... 120,000
----------
TOTAL INVESTMENTS IN SECURITIES (98.7%) (COST
$3,246,275)...................................... 3,672,326
FOREIGN CURRENCY (0.0%) (COST $897).............. 897
----------
TOTAL INVESTMENTS (98.7%) (COST $3,247,172)...... 3,673,223
OTHER ASSETS IN EXCESS OF LIABILITIES (1.3%)..... 46,208
----------
NET ASSETS (100%)................................ $3,719,431
==========
</TABLE>
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------- ---------- ----------
<S> <C> <C>
Consumer Goods.................. $1,849,946 49.7%
Services........................ 1,446,320 38.9
Capital Equipment............... 197,871 5.3
Energy.......................... 58,189 1.6
---------- ----
$3,552,326 95.5%
========== ====
</TABLE>
- ---------------
+ The common stocks are classified by sectors which represent broad groupings of
related industries.
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------
ASSETS:
Investments at Value (Cost
$3,246,275)...................... $3,672,326
Foreign Currency (Cost $897)....... 897
Cash............................... 211,417
Receivable for:
Fund Shares Sold................. 27,911
Dividends........................ 10,283
Foreign Withholding Tax
Reclaim......................... 955
Receivable from Investment
Adviser.......................... 44,722
Net Unrealized Gain on Foreign
Currency Exchange Contracts...... 5,107
----------
Total Assets..................... 3,973,618
----------
LIABILITIES:
Payable for:
Investments Purchased............ 211,000
Professional Fees................ 13,415
Directors' Fees and Expenses..... 10,598
Shareholder Reporting Expenses... 8,610
Distribution Fees................ 4,251
Custody Fees..................... 3,339
Administrative Fees.............. 1,167
Transfer Agent Fees.............. 329
Other.............................. 1,478
----------
Total Liabilities................ 254,187
----------
NET ASSETS........................... $3,719,431
==========
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 297
Paid in Capital in Excess of Par... 3,255,444
Net Unrealized Appreciation on
Investments and Foreign Currency
Translations..................... 431,229
Accumulated Net Realized Gain...... 63,238
Accumulated Net Investment Loss.... (30,777)
----------
NET ASSETS........................... $3,719,431
==========
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $1,358,196 and 108,808
Shares Outstanding).............. $ 12.48
==========
Maximum Sales Charge............... 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share x 100/
(100 - maximum sales charge)).... $ 13.24
==========
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$965,844 and 77,414 Shares
Outstanding)*.................... $ 12.48
==========
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$1,395,391 and 110,992 Shares
Outstanding)*.................... $ 12.57
==========
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------
INVESTMENT INCOME:
Dividends.......................... $ 31,194
Interest........................... 2,252
Less Foreign Taxes Withheld........ (2,246)
--------
Total Income...................... 31,200
--------
EXPENSES:
Filing and Registration Fees....... 27,185
Investment Advisory Fees........... 15,843
Distribution Fees (Attributed to
Classes A, B and C of $1,567,
$3,939 and $5,676,
respectively).................... 11,182
Directors' Fees and Expenses....... 6,927
Administrative Fees................ 4,752
Shareholder Reports................ 4,306
Professional Fees.................. 2,849
Custodian Fees..................... 1,167
Other.............................. 1,069
--------
Total Expenses.................... 75,280
Less Expense Reductions........... (39,506)
--------
Net Expenses...................... 35,774
--------
Net Investment Income/Loss........... (4,574)
--------
NET REALIZED GAIN/LOSS ON:
Investments....................... 85,578
Foreign Currency Transactions..... 128
--------
Net Realized Gain/Loss............... 85,706
--------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ 252,540
--------
End of the Period:
Investments....................... 426,051
Foreign Currency Translations..... 5,178
--------
431,229
--------
Net Unrealized
Appreciation/Depreciation During
the Period......................... 178,689
--------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... 264,395
--------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $259,821
========
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 SEPTEMBER 25, 1998*
(UNAUDITED) TO JUNE 30, 1999
<S> <C> <C>
- --------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ (4,574) $ 14,000
Net Realized Gain/Loss.......................... 85,706 22,000
Net Unrealized Appreciation/Depreciation........ 178,689 253,000
----------------- -----------------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 259,821 289,000
----------------- -----------------
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 (1):
Subscribed...................................... 1,315,143 1,012,000
Distributions Reinvested........................ 74,281 3,000
Redeemed........................................ (87,297) (5,000)
----------------- -----------------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... 1,302,127 1,010,000
----------------- -----------------
Total Increase/Decrease in Net Assets........... 1,436,173 1,283,000
NET ASSETS--Beginning of Period................... 2,283,258 1,000,000
----------------- -----------------
NET ASSETS--End of Period (Including accumulated
net investment income/loss of $(30,777) and
$48,000, respectively).......................... $ 3,719,431 $ 2,283,000
================= =================
- --------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
- --------------------------------------------------
Shares:
Subscribed (Initial Shares of 40,000)........ 9,860 99,000
Distributions Reinvested..................... 2,480 --
Redeemed..................................... (2,812) --
----------------- -----------------
Net Increase/Decrease in Class A Shares
Outstanding.................................. 9,528 99,000
================= =================
Dollars:
Subscribed................................... $ 122,808 $ 667,000
Distributions Reinvested..................... 29,563 2,000
Redeemed..................................... (34,481) (2,000)
----------------- -----------------
Net Increase/Decrease.......................... $ 117,890 $ 667,000
================= =================
Beginning Paid in Capital...................... $ 1,067,000 $ 400,000
================= =================
Ending Paid in Capital......................... $ 1,155,286 $ 1,067,000+
================= =================
Class B:
- --------------------------------------------------
Shares:
Subscribed (Initial Shares of 30,000)........ 28,362 52,000
Distributions Reinvested..................... 1,441 --
Redeemed..................................... (3,911) --
----------------- -----------------
Net Increase/Decrease in Class B Shares
Outstanding.................................. 25,892 52,000
================= =================
Dollars:
Subscribed................................... $ 348,104 $ 242,000
Distributions Reinvested..................... 17,184 1,000
Redeemed..................................... (47,445) --
----------------- -----------------
Net Increase/Decrease.......................... $ 317,843 $ 243,000
================= =================
Beginning Paid in Capital...................... $ 543,000 $ 300,000
================= =================
Ending Paid in Capital......................... $ 846,195 $ 543,000+
================= =================
Class C:
- --------------------------------------------------
Shares:
Subscribed (Initial Shares of 30,000)........ 69,228 40,000
Distributions Reinvested..................... 2,293 --
Redeemed..................................... (443) --
----------------- -----------------
Net Increase/Decrease in Class C Shares
Outstanding.................................. 71,078 40,000
================= =================
Dollars:
Subscribed................................... $ 844,231 $ 103,000
Distributions Reinvested..................... 27,534 --
Redeemed..................................... (5,371) (3,000)
----------------- -----------------
Net Increase/Decrease.......................... $ 866,394 $ 100,000
================= =================
Beginning Paid in Capital...................... $ 400,000 $ 300,000
================= =================
Ending Paid in Capital......................... $ 1,254,260 $ 400,000+
================= =================
</TABLE>
- ---------------
* Commencement of operations
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------------- ---------------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1999 SEPTEMBER 25, 1998* TO DECEMBER 31, 1999 SEPTEMBER 25, 1998* TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# JUNE 30, 1999# (UNAUDITED)# JUNE 30, 1999#
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD......... $ 11.980 $ 10.000 $ 11.922 $ 10.000
------------ --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss... 0.008 0.136 (0.038) 0.066
Net Realized and Unrealized
Gain/Loss.... 0.993 1.969 0.996 1.962
------------ --------- --------- ---------
Total From Investment
Operations... 1.001 2.105 0.958 2.028
------------ --------- --------- ---------
DISTRIBUTIONS
Net Investment Income... (0.320) (0.125) (0.226) (0.106)
Net Realized Gain... (0.178) -- (0.178) --
------------ --------- --------- ---------
Total Distributions... (0.498) (0.125) (0.404) (0.106)
------------ --------- --------- ---------
NET ASSET VALUE, END OF PERIOD... $ 12.483 $ 11.980 $ 12.476 $ 11.922
============ ========= ========= =========
TOTAL RETURN (1)... 8.53%** 21.22%** 8.24%** 20.40%**
============ ========= ========= =========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's)........ $ 1,358 $ 1,189 $ 966 $ 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......... 0.16% 1.57% (0.59)% 0.77%
Portfolio Turnover Rate... 12%** 9%** 12%** 9%**
- ------------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation
During the Period
Per Share Benefit to Net
Investment Income/ Loss... $ 0.20 $ 1.02 $ 0.19 $ 1.02
Ratios Before Expense Limitation:
Expenses to Average Net
Assets....... 4.29% 13.55% 5.04% 14.45%
Net Investment Income/Loss to
Average Net Assets... (3.06)% (10.17)% (3.67)% (11.12)%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1999 SEPTEMBER 25, 1998* TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# JUNE 30, 1999#
<S> <C> <C>
- -----------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 12.018 $ 10.000
--------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss... (0.033) 0.059
Net Realized and Unrealized
Gain/Loss................ 0.990 2.065
--------- -------------
Total From Investment
Operations............... 0.957 2.124
--------- -------------
DISTRIBUTIONS
Net Investment Income...... (0.225) (0.106)
Net Realized Gain.......... (0.178) --
--------- -------------
Total Distributions........ (0.403) (0.106)
--------- -------------
NET ASSET VALUE, END OF PERIOD... $ 12.572 $ 12.018
========= =============
TOTAL RETURN (1)............. 8.08%** 21.40%**
========= =============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's).................... $ 1,395 $ 480
Ratio of Expenses to Average Net
Assets..................... 2.55% 2.55%
Ratio of Net Investment
Income/Loss to Average Net
Assets..................... (0.59)% 0.69%
Portfolio Turnover Rate...... 12%** 9%**
- -----------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net
Investment Income/Loss... $ 0.08 $ 1.16
Ratios Before Expense Limitation:
Expenses to Average Net
Assets................... 5.04% 16.07%
Net Investment Income/Loss to
Average Net Assets....... (1.83)% (12.83)%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen Global Franchise Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks long-term
capital appreciation. The Fund commenced operations on September 25, 1998.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. Class A shares are sold with a front-end sales charge of up to
5.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First................................ 5.00% 1.00%
Second............................... 4.00% None
Third................................ 3.00% None
Fourth............................... 2.50% None
Fifth................................ 1.50% None
Thereafter........................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Securities listed on a foreign exchange are valued at their
closing price. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date, net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. Income, expenses (other than class specific expenses),
and realized and unrealized gains or losses are allocated to each class of
shares based upon their relative net assets. Distributions from the Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are
------------------
11
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
translated at rates prevailing when accrued. Realized and unrealized gains and
losses on securities are not segregated for financial reporting purposes from
amounts arising from changes in the market prices of securities. Realized gains
and losses on foreign currency includes the net realized amount from the sale of
the currency and the amount realized between trade date and settlement date on
security and income transactions. However, the foreign currency portion of gains
and losses realized on sales and maturities of foreign denominated debt
securities is treated as ordinary income for U.S. Federal income tax purposes.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains, and net unrealized appreciation, as applicable, as the income is earned
or capital gains are recorded.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ------------------------------------- -------- ---------- -------------
<S> <C> <C> <C>
$3,246,275 $787,300 $(361,249) $426,051
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
Permanent book to tax basisdifferences relating to shareholder distributions may
result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ ---------------------- ----------------------
<S> <C> <C>
1.00% 1.80% 2.55%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $22,129
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
At December 31, 1999, Van Kampen Funds, Inc. owned 37%, 39%, and 27% 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
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $2,173 for Class A shares and a deferred sales charge of $578
for Class B shares.
- -----------------------
12
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
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 December 31, 1999, the Fund incurred $181 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $1,366,606 and sales of $383,164 of investment securities
other than long-term U.S. government securities and short-term investments.
There were no purchases or sales of long-term U.S. government securities.
D. DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in very
general terms refers to a security whose value is "derived" from the value of an
underlying asset, reference rate or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's foreign currency exposure. All of the
Fund's portfolio holdings, including derivative instruments, are
marked-to-market each day with the change in value reflected in unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when exercising a call option contract or taking
delivery of a security underlying a forward contract. In this instance, the
recognition of gain or loss is postponed until the disposal of the security
underlying the option or forward contract. Risks may arise as a result of the
potential inability of the counterparties to meet the terms of their contracts.
Summarized below are the specific types of derivative financial instruments used
by the Fund.
1. FORWARD CURRENCY CONTRACTS: These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency transactions.
At December 31, 1999, 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 Pounds,
330,000 expiring 6/12/00.............................. $537,923 $5,107
======== ======
</TABLE>
E. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
------------------
13
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the Global Franchise Fund (the
"Fund") was held on December 15, 1999. The description of each proposal and
number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
--------- --------
<S> <C> <C>
J. Miles Branagan........................................... 170,091 --
Jerry D. Choate............................................. 170,091 --
Linda Hutton Heagy.......................................... 170,091 --
R. Craig Kennedy............................................ 170,091 --
Mitchell M. Merin........................................... 170,091 --
Jack E. Nelson.............................................. 170,091 --
Richard F. Powers, III...................................... 170,091 --
Phillip B. Rooney........................................... 170,091 --
Fernando Sisto.............................................. 170,091 --
Wayne W. Whalen............................................. 170,091 --
Suzanne H. Woolsey.......................................... 170,091 --
Paul G. Yovovich............................................ 170,091 --
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C> <C>
166,858 2,280 953
</TABLE>
- -----------------------
14
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
* Closed to new investors
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management
of Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555/
/www.vankampen.com
GLF SAR 02/00 -C- Van Kampen Funds Inc. 2000
475 575 675
<PAGE>
VAN KAMPEN
HIGH YIELD & TOTAL RETURN FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders.......................... 1
Economic Snapshot............................... 2
Investment Overview............................. 3
Portfolio of Investments........................ 5
Statement of Assets and Liabilities............. 8
Statement of Operations......................... 9
Statement of Changes in Net Assets.............. 10
Financial Highlights ........................... 11
Notes to Financial Statements................... 12
Additional Information.......................... 15
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Telecommunications 29.7%
Other 25.5%
Gaming & Lodging 7.2%
Health Care Supplies & Services 7.2%
Cable Television 6.3%
Retail-General 5.5%
Broadcast-Radio & Television 4.4%
Chemicals 3.7%
Energy 3.2%
Multi-Industry 3.0%
Environmental Controls 2.8%
Short-Term Investment 1.5%
</TABLE>
TOTAL RETURNS**
<TABLE>
<CAPTION>
CS FIRST BOSTON
CLASS A CLASS B CLASS C HIGH YIELD
SHARES SHARES SHARES INDEX
--------- ---------------- -------- ---------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*..... -1.55% -1.08% 1.89% N/A
Without Sales Charge***.. 3.34% 2.88% 2.88% 0.45%
One Year
With Sales Charge*..... 0.50% 0.94% 3.77% N/A
Without Sales Charge***.. 5.49% 4.83% 4.74% 3.28%
Average Annual Since
Inception
With Sales Charge*..... 7.76% 7.85% 8.38% N/A
Without Sales Charge***.. 9.20% 8.38% 8.38% 6.97%
Commencement Date........ 5/1/96 5/1/96 5/1/96 N/A
</TABLE>
The CS First Boston High Yield Index is an unmanaged index of high yield
corporate bonds.
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (4% for Class B shares
and 1% for Class C shares).
<TABLE>
<CAPTION>
YIELD INFORMATION AS OF DECEMBER 31, 1999
30 DAY
CURRENT
YIELD+
------
<S> <C>
Class A.................................... 9.31%
Class B.................................... 8.55%
Class C.................................... 8.55%
</TABLE>
+ The current 30-day yield reflects the net investment income generated by the
Fund over the specified 30-day period expressed as an annual percentage.
Expenses accrued for the 30-day period include any fees charged to all
shareholders. Yields will fluctuate as market conditions change and are not
necessarily indicative of future performance.
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE ISSUERS
PERCENT OF
ISSUER SECTOR NET ASSETS
- ------ -------------------- ----------
<S> <C> <C>
Columbia/HCA Healthcare Health Care Supplies
& Services 3.9%
Nextel Communications, Inc. Telecommunications 2.7%
Tenet Healthcare Corp. Health Care Supplies
& Services 2.3%
RSL Communications plc Telecommunications 2.2%
Station Casinos, Inc. Gaming & Lodging 1.9%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS+
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ----------- ----------
<S> <C> <C>
Telecommunications $11,229,739 29.7%
Gaming & Lodging 2,732,056 7.2%
Health Care Supplies & Services 2,706,853 7.2%
Cable Television 2,376,832 6.3%
Retail-General 2,077,354 5.5%
+ These sectors represent broad groupings of related
industries.
</TABLE>
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING. YIELDS WILL FLUCTUATE AS MARKET
CONDITIONS CHANGE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGERS OF THE VAN KAMPEN HIGH YIELD &
TOTAL RETURN FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE
MARKETS DURING THE PAST SIX MONTHS. THE MANAGERS INCLUDE ROBERT ANGEVINE,
PORTFOLIO MANAGER, STEPHEN ESSER, PORTFOLIO MANAGER AND GORDON LOERY, PORTFOLIO
MANAGER. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S PERFORMANCE
DURING THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1999.
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST SIX MONTHS?
A: The second half of 1999 was marked by volatility, as the fixed-income market
was unsettled by a series of interest-rate hikes by the Federal Reserve Board.
Inflationary concerns that emerged in the second quarter were answered by a 0.25
percent interest-rate hike in June. Although investors initially assumed that
additional Fed action would prove unnecessary, two more hikes were approved by
the Fed in August and November. The last increase, as well as a more positive
outlook for the year 2000 transition, ushered in a relatively smooth ending to
this volatile period. As a result, yield spreads narrowed between Treasuries and
other fixed-income products, including high-yield/ high-risk securities*.
The high-yield market slightly underperformed higher-quality corporate bonds
during the latter half of the reporting period. A large new issuance calendar
led to fears of oversupply, which forced high-yield spreads wider. At the same
time, issuers and investors began to prepare for potential year 2000 computer
problems. These technical factors occurred at the same time that net cash flows
into high-yield/high-risk mutual funds became negative. High-yield spreads ended
the period approximately 573 basis points above Treasuries.
Q: HOW DID YOU MANAGE THE FUND IN LIGHT OF THESE CONDITIONS?
A: Thanks to a higher-quality portfolio than its benchmark, the Fund
outperformed during the period. Even as spreads widened throughout the
high-yield market, the Fund's weighting in BB rated securities performed better
than lower-quality bonds. We also experienced fewer defaults in the Fund's
portfolio than market averages.
The Fund's exposure to emerging markets was another contributor to performance;
emerging-market spreads generally tightened as worldwide economies improved and
commodity prices moved higher. At the end of the period, approximately 11
percent of the Fund's assets were held in the emerging-market sector. We
continue to see excellent value in this sector, and expect to maintain the
Fund's exposure at approximately 10 to 15 percent.
During the period, we continued to position the Fund with an overweighting in
the telecommunications sector. Merger and investment activity in this sector was
high this year, which contributed positively to the Fund's performance. Because
we expect this trend to continue in the near future, this sector will likely
continue to be an important component of our investment strategy.
Q: HOW DID THE FUND PERFORM DURING THE PERIOD AS A RESULT?
A: The Fund's six-month return of 3.34 percent (Class A shares at net asset
value) outperformed the 0.45 percent return of the unmanaged CS First Boston
High Yield Index. The Fund's exposure to non-U.S. issues and the
telecommunications and cable sectors had the largest positive impact on the
portfolio's results. Because the telecommunications sector has been a driving
force for the high-yield market for the past few years, we continued to focus on
this industry, selecting those issuers that we viewed as having fundamental
strength.
The CS First Boston High Yield Index is a broad-based, unmanaged index that
reflects the general performance of a wide range of selected bonds within the
public high-yield debt market. This index does not reflect any commissions or
fees that would be paid by an investor purchasing the securities it represents.
Such costs would lower the performance of the index. An investment cannot be
made directly in an index. Of course, past performance is no guarantee of future
results.
Q: WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A: Looking forward, we are very positive about the high-yield market. Even
accounting for the rebound we saw in the last two months of the year, spreads to
high-yield/high-risk bonds remain attractive. We believe the high-yield market
is undervalued at a time that the fundamental credit quality of most high-yield
issuers is quite strong and that the U.S. and global economies continue to show
strength. Consequently, we believe the high-yield market should perform well in
the coming year and we will continue to seek attractive investment opportunities
in this market using our strict valuation criteria.
* Investing in high-yield/high-risk securities is considered speculative and
involves greater risk of loss of principal and interest than investing in
investment-grade securities.
- -----------------------
4
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PAR
VALUE VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
CORPORATE BONDS & NOTES+ (92.5%)
AEROSPACE & DEFENSE (2.1%)
$ 200,000 Jet Equipment Trust, Series C-1, 11.79%,
6/15/13........................................ $ 230,354
(b)300,000 Jet Equipment Trust, Series 1995-D, 11.44%,
11/1/14........................................ 340,767
225,000 Sequa Corp. 9.00%, 8/1/09........................ 217,688
-----------
788,809
-----------
AUTOMOTIVE (2.0%)
(b)405,000 Hayes Lemmerz International 8.25%, 12/15/08...... 371,839
(b)385,000 Tenneco, Inc. 11.625%, 10/15/09.................. 392,700
-----------
764,539
-----------
BROADCAST--RADIO & TELEVISION (3.5%)
180,000 Chancellor Media Corp. 9.00%, 10/1/08............ 186,750
525,000 Chancellor Media Corp., Series B, 8.125%,
12/15/07....................................... 522,375
725,000 TV Azteca S.A. de C.V., Series B, 10.50%,
2/15/07........................................ 627,125
-----------
1,336,250
-----------
BUILDING MATERIALS & COMPONENTS (1.9%)
375,000 American Standard Cos., Inc. 7.375%, 2/1/08...... 342,705
(b)410,000 Nortek, Inc. 8.875%, 8/1/08...................... 391,550
-----------
734,255
-----------
CABLE TELEVISION (6.3%)
200,000 Adelphia Communications, Series B, 7.50%,
1/15/04........................................ 188,000
125,000 Adelphia Communications, Series B, 9.875%,
3/1/07......................................... 126,563
250,000 Adelphia Communications, Series B, 8.375%,
2/1/08......................................... 233,125
200,000 Adelphia Communications, Series B, 7.75%,
1/15/09........................................ 179,250
255,000 CSC Holdings, Inc. 9.875%, 5/15/06............... 268,387
125,000 CSC Holdings, Inc. 7.25%, 7/15/08................ 118,750
290,000 Lenfest Communications, Inc. 8.375%, 11/1/05..... 296,012
150,000 Lenfest Communications, Inc. 7.625%, 2/15/08..... 146,320
(b,c)700,000 Telewest Communications plc 0.00%, 4/15/09....... 436,625
380,000 United Pan-Europe Communications 10.875%,
8/1/09......................................... 383,800
-----------
2,376,832
-----------
CAPITAL GOODS/CONSTRUCTION (1.1%)
460,000 D.R. Horton, Inc. 8.00%, 2/1/09.................. 423,200
-----------
CHEMICALS (3.7%)
(b)400,000 Huntsman ICI Chemicals 10.125%, 7/1/09........... 413,000
600,000 ISP Holdings, Inc., Series B, 9.00%, 10/15/03.... 591,000
400,000 Lyondell Chemical Co 9.625%, 5/1/07.............. 409,000
-----------
1,413,000
-----------
COMPUTERS (0.5%)
(c)300,000 Wam!Net, Inc., Series B, 0.00%, 3/1/05........... 180,000
-----------
<CAPTION>
PAR
VALUE VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
CONSTRUCTION & MINING (1.2%)
$ 80,000 Glencore Nickel Property Ltd. 9.00%, 12/1/14..... $ 68,200
445,000 Murrin Murrin Holdings 9.375%, 8/31/07........... 398,275
-----------
466,475
-----------
ENERGY (3.2%)
395,000 CMS Energy 7.50%, 1/15/09........................ 360,228
(c)205,000 Husky Oil Ltd. 8.90%, 8/15/28.................... 193,213
440,000 Snyder Oil Corp. 8.75%, 6/15/28.................. 438,900
50,000 Vintage Petroleum 8.625%, 2/1/09................. 48,250
150,000 Vintage Petroleum 9.75%, 6/30/09................. 153,750
-----------
1,194,341
-----------
ENVIRONMENTAL CONTROLS (2.8%)
(c)345,000 Norcal Waste Systems, Series B, 13.50%,
11/15/05....................................... 365,700
305,000 Waste Management, Inc. 7.00%, 10/15/06........... 269,663
160,000 Waste Management, Inc. 7.125%, 10/1/07........... 139,936
(b)135,000 Waste Management, Inc. 6.875%, 5/15/09........... 114,129
85,000 Waste Management, Inc. 7.65%, 3/15/11............ 73,547
100,000 Waste Management, Inc. 7.125%, 12/15/17.......... 78,717
-----------
1,041,692
-----------
FINANCE (0.9%)
385,000 Golden State Holdings 7.125%, 8/1/05............. 343,162
-----------
FOOD (2.5%)
700,000 Smithfield Foods, Inc. 7.625%, 2/15/08........... 630,000
300,000 Stater Brothers Holdings 10.75%, 8/15/06......... 303,000
-----------
933,000
-----------
FOOD SERVICE & LODGING (1.9%)
400,000 Hilton Hotels 7.95%, 4/15/07..................... 376,000
335,000 Host Marriott Travel Plaza, Series B, 9.50%,
5/15/05........................................ 349,070
-----------
725,070
-----------
FOREST PRODUCTS & PAPER (1.4%)
140,000 Pindo Deli Fin Mauritius 10.75%, 10/1/07......... 102,900
305,000 SD Warren Co., Series B, 12.00%, 12/15/04........ 319,106
90,000 Tembec Industries, Inc. 8.625%, 6/30/09.......... 90,225
-----------
512,231
-----------
GAMING & LODGING (7.2%)
605,000 Harrahs Operating Co., Inc. 7.875%, 12/15/05..... 582,312
(b)460,000 Horseshoe Gaming Holdings 8.625%, 5/15/09........ 441,600
590,000 International Game Technology 8.375%, 5/15/09.... 565,450
425,000 Park Place Entertainment 7.875%, 12/15/05........ 404,812
405,000 Station Casinos, Inc. 10.125%, 3/15/06........... 412,594
60,000 Station Casinos, Inc. 9.75%, 4/15/07............. 60,600
275,000 Station Casinos, Inc. 8.875%, 12/1/08............ 264,688
-----------
2,732,056
-----------
HEALTH CARE SUPPLIES & SERVICES (7.2%)
130,000 Columbia/HCA Healthcare 8.13%, 8/4/03 MTN........ 127,159
490,000 Columbia/HCA Healthcare 6.91%, 6/15/05........... 446,209
525,000 Columbia/HCA Healthcare 6.91%, 6/15/05........... 518,574
</TABLE>
-----------------------
5
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PAR
VALUE VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
HEALTH CARE SUPPLIES & SERVICES (CONT.)
$ 200,000 Columbia/HCA Healthcare 7.00%, 7/1/07............ $ 177,632
275,000 Columbia/HCA Healthcare 7.69%, 6/15/25........... 224,854
350,000 Fresenius Medical Capital Trust II 7.875%,
2/1/08......................................... 324,625
920,000 Tenet Healthcare Corp. 8.625%, 1/15/07........... 887,800
-----------
2,706,853
-----------
MULTI-INDUSTRY (3.0%)
185,000 Applied Power, Inc. 8.75%, 4/1/09................ 179,912
150,000 Axia, Inc. 10.75%, 7/15/08....................... 137,625
550,000 Outdoor Systems, Inc. 8.875%, 6/15/07............ 569,250
(c)380,000 PTC International Finance BV 0.00%, 7/1/07....... 256,500
-----------
1,143,287
-----------
PAPER & PACKAGING (2.1%)
750,000 Indah Kiat Financial Mauritius 10.00%, 7/1/07.... 555,000
250,000 Norampac, Inc. 9.50%, 2/1/08..................... 256,250
-----------
811,250
-----------
REAL ESTATE (1.9%)
775,000 HMH Properties, Inc., Series A, 7.875%,
8/1/05......................................... 720,750
-----------
RETAIL--GENERAL (5.1%)
417,157 DR Securitized Lease Trust,
Series 1994-K1,Class A1, 7.60%, 8/15/07........ 390,797
100,000 DR Securitized Lease Trust,
Series 1994-K1,Class A2, 8.375%, 8/15/15....... 88,683
150,000 Fred Meyer, Inc. 7.375%, 3/1/05.................. 147,745
400,000 HMV Media Group plc 10.25%, 5/15/08.............. 352,000
375,000 Kmart Funding Corp., Series F, 8.80%, 7/1/10..... 359,385
150,000 Musicland Group, Inc. 9.00%, 6/15/03............. 144,750
500,000 Musicland Group, Inc. 9.875%, 3/15/08............ 455,000
-----------
1,938,360
-----------
STEEL (1.4%)
400,000 National Steel Corp., Series D, 9.875%,
3/1/09......................................... 411,000
(b)200,000 Republic Technology/RTI Capital 13.75%,
7/15/09........................................ 132,000
-----------
543,000
-----------
TECHNOLOGY (1.4%)
75,000 Entex Information Services 12.50%, 8/1/06........ 30,000
(b)325,000 Hyundai Semiconductor 8.625%, 5/15/07............ 271,973
(c)430,000 Rhythms Netconnections, Inc., Series B, 0.00%,
5/15/08........................................ 232,200
-----------
534,173
-----------
TELECOMMUNICATIONS (27.4%)
305,000 American Cellular Corp. 10.50%, 5/15/08.......... 336,262
300,000 AMSC Acquisition Co., Inc., Series B, 12.25%,
4/1/08......................................... 235,500
(b)410,000 Bayan Telecommunications 13.50%, 7/15/06......... 360,800
285,000 Centennial Cellular Holdings 10.75%, 12/15/08.... 304,950
275,000 Dobson Communications Corp. 11.75%, 4/15/07...... 317,625
<CAPTION>
PAR
VALUE VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
$ (c)405,000 Dolphin Telecommunications plc 0.00%, 6/1/08..... $ 197,438
(c)325,000 Dolphin Telecommunications plc 0.00%, 5/15/09.... 151,125
410,000 Echostar DBS Corp. 9.375%, 2/1/09................ 411,435
315,000 Global Crossing Holdings Ltd. 9.625%, 5/15/08.... 314,212
305,000 Globalstar LP/Capital 11.375%, 2/15/04........... 201,300
45,000 Globalstar LP/Capital 11.50%, 6/1/05............. 29,250
325,000 Hermes Europe Railtel BV 10.375%, 1/15/09........ 321,750
275,000 Hermes Europe Railtel BV 11.50%, 8/15/07......... 283,250
(c)520,000 Hyperion Telecommunications 0.00%, 4/15/03....... 462,150
(c)800,000 Intermedia Communications, Series B, 0.00%,
7/15/07........................................ 596,000
375,000 Iridium LLC/Capital Corp., Series A, 13.00%,
7/15/05........................................ 16,875
80,000 IXC Communications, Inc. 9.00%, 4/15/08.......... 80,800
205,000 Metromedia Fiber Network 10.00%, 11/15/08........ 207,460
445,000 Multicanal S.A. 10.50%, 2/1/07................... 384,511
(c)300,000 Nextel Communications, Inc. 0.00%, 8/15/04....... 309,000
(c)875,000 Nextel Communications, Inc. 0.00%, 9/15/07....... 656,250
(c)465,000 NEXTLINK Communications, Inc. 0.00%, 4/15/08..... 304,575
(b)90,000 NEXTLINK Communications, Inc. 10.75%,
11/15/08....................................... 92,700
(c)660,000 NTL, Inc. 0.00%, 4/1/08.......................... 453,750
(c)400,000 Occidente Y Caribe 0.00%, 3/15/04................ 200,000
195,000 OnePoint Communications Corp. 14.50%, 6/1/08..... 127,725
45,000 Primus Telecommunications Group 11.25%, 1/5/09... 43,538
370,000 Primus Telecommunications Group, Series B,
9.875%, 5/15/08................................ 340,400
225,000 PSINet, Inc. 10.00%, 2/15/05..................... 222,750
165,000 PSINet, Inc., Series B, 11.00%, 8/1/09........... 168,300
(c)150,000 RCN Corp. 0.00%, 10/15/07........................ 106,875
(b,c)370,000 RCN Corp. 0.00%, 2/15/03......................... 242,350
17,000 RSL Communications plc 12.25%, 11/15/06.......... 17,340
470,000 RSL Communications plc 9.125%, 3/1/08............ 418,300
(c)675,000 RSL Communications plc 0.00%, 3/1/08............. 415,125
280,000 Satelites Mexicanos S.A., Series B, 10.125%,
11/1/04........................................ 190,400
295,000 Tele1 Europe BV 13.00%, 5/15/09.................. 306,063
(b)180,000 Total Access Communications PCL 2.00%, 5/31/06... 174,600
(c)425,000 Viatel, Inc., Series A, 0.00%, 4/15/08........... 267,750
(b)110,000 Voicestream Wire Co. 10.375%, 11/15/09........... 113,300
-----------
10,383,784
-----------
UTILITIES (0.8%)
335,000 AES Corp. 8.50%, 11/1/07......................... 313,225
-----------
TOTAL CORPORATE BONDS & NOTES...................................... 35,059,594
-----------
ASSET BACKED SECURITIES+ (1.4%)
AEROSPACE & DEFENSE (0.4%)
150,463 Aircraft Lease Portfolio Securitization Ltd.,
Series 1996-1, Class D, 12.75%, 6/15/06........ 150,463
-----------
</TABLE>
- -----------------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PAR
VALUE VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (1.0%)
$ (b)228,665 CA FM Lease Trust 8.50%, 7/15/17................. $ 212,658
225,609 Commercial Financial Services, Inc., 1997-5,
Class A1, 7.72%, 6/15/05....................... 56,402
(b)121,526 Federal Mortgage Acceptance Corporation,
Series 1996-B, Class C, 7.929%, 11/1/18........ 42,532
53,900 Long Beach Acceptance Auto Grantor Trust,
Series 1997-1,Class B, 14.22%, 10/26/03........ 53,141
-----------
364,733
-----------
TOTAL ASSET BACKED SECURITES....................................... 515,196
-----------
FOREIGN GOVERNMENT BONDS+ (1.0%)
SOVEREIGN & EMERGING MARKETS (1.0%)
470,000 United Mexican States Par Bond 6.25%, 12/31/19... 370,419
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<C> <S> <C>
- ---------------
PREFERRED STOCKS+ (3.2%)
BROADCAST--RADIO & TELEVISION (0.9%)
3,412 Paxson Communications 11.625%.................... 348,877
-----------
RETAIL--GENERAL (0.4%)
3,150 Kmart Financing 7.75%............................ 138,994
-----------
TELECOMMUNICATIONS (1.9%)
(a)1,944 Concentric Network Corp. 13.50%.................. 192,456
(a)1,599 Dobson Communications Corp. 13.00%............... 174,280
(a)277 IXC Communications, Inc. PIK 9.00%............... 306,956
(a)50 Nextel Communications, Inc. 13.00%............... 54,000
-----------
727,692
-----------
TOTAL PREFERRED STOCKS............................................. 1,215,563
-----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS
<C> <S> <C>
- ---------------
WARRANTS+ (0.4%)
COMPUTERS (0.0%)
(a)9,000 Wam!Net, Inc., expiring 3/1/05................... 20,250
-----------
TELECOMMUNICATIONS (0.4%)
(a,b)3,000 American Mobile Satellite Corp., expiring
4/1/80......................................... 12,000
(a,b)210 Globalstar Telecom, expiring 2/15/04............. 31,500
(a,b)16,000 Occidente Y Caribe, expiring 3/15/04............. 24,000
(a,b)1,950 OnePoint Communications Corp., expiring 6/1/08... 195
(a,b)2,950 Tele1 Europe BV expiring 5/15/09................. 50,568
-----------
118,263
-----------
TOTAL WARRANTS..................................................... 138,513
-----------
TOTAL LONG-TERM INVESTMENTS (98.5%) (COST $39,342,830)............. 37,299,285
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (1.5%)
REPURCHASE AGREEMENT (1.5%)
$ 567,000 Chase Securities, Inc., 2.60%, dated 12/31/99,
due 1/3/00, to be repurchased at $568,229
collateralized by $578,822 U.S. Treasury Notes,
6.125%, due 12/31/01, valued at $578,822
(COST $567,000)................................ $ 567,000
-----------
TOTAL INVESTMENTS (100.0%) (COST $39,909,830)...................... 37,866,285
LIABILITIES IN EXCESS OF OTHER ASSETS (0.0%)....................... (8,468)
-----------
NET ASSETS (100%).................................................. $37,857,817
===========
</TABLE>
- --------------------------------------------------------------------------------
(a) -- Non-income producing security
(b) -- 144A Security--Certain conditions for public sale may exist.
(c) -- Step Bond--coupon rate increases in increments to maturity. Rate
disclosed is as of December 31, 1999. Maturity date disclosed is the
ultimate maturity date.
MTN -- Medium Term Note
PCL -- Public Company Limited
PIK -- Payment-In-Kind. Income may be received in additional securities or
cash at the discretion of the issuer.
+ -- Classified by sectors which represent broad groupings of related
industries.
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY COUNTRY
<TABLE>
<CAPTION>
PERCENT OF
COUNTRY VALUE NET ASSETS
- ------------------------------- ---------- -------------
<S> <C> <C>
United States.................. $30,640,838 80.9%
Netherlands.................... 1,601,931 4.2
Mexico......................... 1,187,944 3.1
United Kingdom................. 788,625 2.1
Indonesia...................... 555,000 1.5
Canada......................... 539,688 1.4
Australia...................... 466,475 1.2
Argentina...................... 384,511 1.0
Philippines.................... 360,800 1.0
Korea.......................... 271,973 0.7
Colombia....................... 224,000 0.6
Thailand....................... 174,600 0.5
Maurtius....................... 102,900 0.3
---------- ---------
$37,299,285 98.5%
========== =========
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------
ASSETS:
Investments at Value (Cost $39,909,830)................... $ 37,866,285
Cash...................................................... 8,587
Receivable for:
Interest................................................ 788,882
Fund Shares Sold........................................ 8,691
Deferred Organizational Costs............................. 6,764
-----------------
Total Assets............................................ 38,679,209
-----------------
LIABILITIES:
Payable for:
Fund Shares Redeemed.................................... 453,027
Dividends Declared...................................... 239,220
Distribution Fees....................................... 53,329
Shareholder Reporting Expense........................... 25,844
Directors' Fees and Expenses............................ 18,195
Professional Fees....................................... 15,109
Administrative Fees..................................... 8,599
Transfer Agent Fees..................................... 3,804
Investment Advisory Fees................................ 997
Custody Fees............................................ 579
Other..................................................... 2,689
-----------------
Total Liabilities....................................... 821,392
-----------------
NET ASSETS.................................................. $ 37,857,817
=================
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 3,273
Paid in Capital in Excess of Par.......................... 40,317,088
Accumulated Net Investment Income......................... 199,063
Accumulated Net Realized Loss............................. (618,062)
Net Unrealized Depreciation on Investments................ (2,043,545)
-----------------
NET ASSETS.................................................. $ 37,857,817
=================
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $8,376,655 and 722,909
Shares Outstanding)..................................... $ 11.59
=================
Maximum Sales Charge...................................... 4.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100 / (100 - maximum sales charge))............. $ 12.17
=================
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $22,173,616 and 1,917,928
Shares Outstanding)*.................................... $ 11.56
=================
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $7,307,546 and 631,964
Shares Outstanding)*.................................... $ 11.56
=================
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 1,889
Interest.................................................. 1,915,735
-----------
Total Income............................................. 1,917,624
-----------
EXPENSES:
Distribution Fees (Attributed to Classes A, B and C of
$10,276, $114,167 and $39,208, respectively)............ 163,651
Investment Advisory Fees.................................. 145,889
Administrative Fees....................................... 50,140
Shareholder Reports....................................... 32,177
Professional Fees......................................... 17,792
Filing and Registration Fees.............................. 14,637
Transfer Agent Fees....................................... 10,885
Directors' Fees and Expenses.............................. 10,100
Custodian Fees............................................ 1,923
Other..................................................... 6,805
-----------
Total Expenses........................................... 453,999
Less Expense Reductions.................................. (95,582)
-----------
Net Expenses............................................. 358,417
-----------
Net Investment Income/Loss.................................. 1,559,207
-----------
NET REALIZED GAIN/LOSS ON:
Investments............................................... (182,924)
-----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... (1,794,264)
-----------
End of the Period:
Investments............................................. (2,043,545)
-----------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... (249,281)
-----------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. (432,205)
-----------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 1,127,002
===========
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ 1,559,207 $ 2,996,000
Net Realized Gain/Loss.................................... (182,924) (344,000)
Net Unrealized Appreciation/Depreciation.................. (249,281) (2,004,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 1,127,002 648,000
----------------- -------------
DISTRIBUTIONS:
Net Investment Income:
Class A................................................. (331,647) (749,000)
Class B................................................. (836,543) (1,540,000)
Class C................................................. (287,109) (603,000)
----------------- -------------
(1,455,299) (2,892,000)
----------------- -------------
Net Realized Gain:
Class A................................................. -- (61,000)
Class B................................................. -- (152,000)
Class C................................................. -- (59,000)
In Excess of Net Realized Gain:
Class A................................................. -- (97,000)
Class B................................................. -- (244,000)
Class C................................................. -- (94,000)
----------------- -------------
-- (707,000)
----------------- -------------
Net Decrease in Net Assets Resulting from Distributions... (1,455,299) (3,599,000)
----------------- -------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed................................................ 7,305,630 27,018,000
Distributions Reinvested.................................. 807,377 2,061,000
Redeemed.................................................. (8,592,515) (21,840,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... (479,508) 7,239,000
----------------- -------------
Total Increase/Decrease in Net Assets..................... (807,805) 4,288,000
NET ASSETS--Beginning of Period............................. 38,665,622 34,378,000
----------------- -------------
NET ASSETS--End of Period (Including accumulated net
investment income of $199,063 and $95,000,
respectively)............................................. $ 37,857,817 $ 38,666,000
================= =============
- --------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
Shares:
Subscribed............................................. 343,333 1,215,000
Distributions Reinvested............................... 18,596 43,000
Redeemed............................................... (334,114) (1,180,000)
----------------- -------------
Net Increase/Decrease in Class A Shares Outstanding...... 27,815 78,000
================= =============
Dollars:
Subscribed............................................. $ 3,976,466 $ 14,702,000
Distributions Reinvested............................... 213,955 520,000
Redeemed............................................... (3,870,871) (14,249,000)
----------------- -------------
Net Increase/Decrease.................................... $ 319,550 $ 973,000
================= =============
Ending Paid in Capital................................... $ 8,705,288 $ 8,385,000+
================= =============
Class B:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 215,317 768,000
Distributions Reinvested............................... 36,050 89,000
Redeemed............................................... (278,190) (371,000)
----------------- -------------
Net Increase/Decrease in Class B Shares Outstanding...... (26,823) 486,000
================= =============
Dollars:
Subscribed............................................. $ 2,495,263 $ 9,251,000
Distributions Reinvested............................... 413,955 1,068,000
Redeemed............................................... (3,209,236) (4,454,000)
----------------- -------------
Net Increase/Decrease.................................... $ (300,018) $ 5,865,000
================= =============
Ending Paid in Capital................................... $ 23,886,253 $ 24,185,000+
================= =============
Class C:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 71,941 255,000
Distributions Reinvested............................... 15,627 40,000
Redeemed............................................... (131,302) (264,000)
----------------- -------------
Net Increase/Decrease in Class C Shares Outstanding...... (43,734) 31,000
================= =============
Dollars:
Subscribed............................................. $ 833,901 $ 3,065,000
Distributions Reinvested............................... 179,467 473,000
Redeemed............................................... (1,512,408) (3,137,000)
----------------- -------------
Net Increase/Decrease.................................... $ (499,040) $ 401,000
================= =============
Ending Paid in Capital................................... $ 7,728,820 $ 8,227,000+
================= =============
</TABLE>
- ---------------
<TABLE>
<S> <C>
+ Ending Paid in Capital amounts do not reflect permanent book
to tax differences.
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------------------------- -------------
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, YEAR ENDED JUNE 30, MAY 1, 1996* DECEMBER 31,
1999 --------------------------- TO 1999
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 JUNE 30, 1996 (UNAUDITED)#
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 11.682 $12.661 $ 12.86 $11.92 $ 12.00 $ 11.655
------------- ------- -------- ------ ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............ 0.499 1.006 0.97 1.07 0.13 0.454
Net Realized and Unrealized
Gain/Loss........................... (0.126) (0.790) 0.35 0.99 (0.09) (0.122)
------------- ------- -------- ------ ------------- -------------
Total From Investment Operations...... 0.373 0.216 1.32 2.06 0.04 0.332
------------- ------- -------- ------ ------------- -------------
DISTRIBUTIONS
Net Investment Income................. (0.468) (0.967) (0.97) (1.07) (0.12) (0.426)
Net Realized Gain..................... -- (0.088) (0.55) (0.05) -- --
In Excess of Net Realized Gain........ -- (0.140) -- -- -- --
------------- ------- -------- ------ ------------- -------------
Total Distributions................... (0.468) (1.195) (1.52) (1.12) (0.12) (0.426)
------------- ------- -------- ------ ------------- -------------
NET ASSET VALUE, END OF PERIOD.......... $ 11.587 $11.682 $ 12.66 $12.86 $ 11.92 $ 11.561
============= ======= ======== ====== ============= =============
TOTAL RETURN (1)........................ 3.34%** 1.90% 10.81% 18.12% 0.29%** 2.88%**
============= ======= ======== ====== ============= =============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)....... $ 8,377 $ 8,120 $ 7,813 $8,980 $ 3,907 $ 22,174
Ratio of Expenses to Average Net
Assets................................ 1.25% 1.25% 1.25% 1.25% 1.25% 2.00%
Ratio of Net Investment Income/Loss to
Average Net Assets.................... 8.61% 8.39% 7.42% 8.83% 6.85% 7.86%
Portfolio Turnover Rate................. 18%** 41% 81% 104% 10%** 18%**
- -----------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss......................... $ 0.03 $ 0.06 $ 0.08 $ 0.10 $ 0.04 $ 0.03
Ratios Before Expense Limitation:
Expenses to Average Net Assets........ 1.74% 1.72% 1.89% 2.04% 3.51% 2.49%
Net Investment Income/Loss to Average
Net Assets.......................... 8.11% 7.93% 6.78% 8.04% 4.59% 7.36%
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
-------------------------------------------
YEAR ENDED JUNE 30, MAY 1, 1996*
-------------------------- TO
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 JUNE 30, 1996
<S> <C> <C> <C> <C>
- ----------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... $12.630 $ 12.86 $11.93 $ 12.00
------- ------- ------ -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............ 0.912 0.87 0.98 0.12
Net Realized and Unrealized
Gain/Loss........................... (0.776) 0.34 0.99 (0.09)
------- ------- ------ -------------
Total From Investment Operations...... 0.136 1.21 1.97 0.03
------- ------- ------ -------------
DISTRIBUTIONS
Net Investment Income................. (0.883) (0.89) (0.99) (0.10)
Net Realized Gain..................... (0.088) (0.55) (0.05) --
In Excess of Net Realized Gain........ (0.140) -- -- --
------- ------- ------ -------------
Total Distributions................... (1.111) (1.44) (1.04) (0.10)
------- ------- ------ -------------
NET ASSET VALUE, END OF PERIOD.......... $11.655 $ 12.63 $12.86 $ 11.93
======= ======= ====== =============
TOTAL RETURN (1)........................ 1.28% 9.86% 17.22% 0.21%**
======= ======= ====== =============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)....... $22,667 $18,420 $8,617 $ 3,421
Ratio of Expenses to Average Net
Assets................................ 2.00% 2.00% 2.00% 2.00%
Ratio of Net Investment Income/Loss to
Average Net Assets.................... 7.63% 6.70% 7.99% 6.08%
Portfolio Turnover Rate................. 41% 81% 104% 10%**
- -------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss......................... $ 0.06 $ 0.08 $ 0.10 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets........ 2.48% 2.64% 2.82% 4.25%
Net Investment Income/Loss to Average
Net Assets.......................... 7.16% 6.04% 7.17% 3.83%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 --------------------------------- MAY 1, 1996* TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 11.660 $12.634 $ 12.86 $11.93 $ 12.00
----------------- ------- -------- ------ ---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................ 0.454 0.912 0.86 0.99 0.12
Net Realized and Unrealized Gain/Loss..... (0.125) (0.775) 0.35 0.98 (0.09)
----------------- ------- -------- ------ ---------------
Total From Investment Operations.......... 0.329 0.137 1.21 1.97 0.03
----------------- ------- -------- ------ ---------------
DISTRIBUTIONS
Net Investment Income..................... (0.426) (0.883) (0.89) (0.99) (0.10)
Net Realized Gain......................... -- (0.088) (0.55) (0.05) --
In Excess of Net Realized Gain............ -- (0.140) -- -- --
----------------- ------- -------- ------ ---------------
Total Distributions....................... (0.426) (1.111) (1.44) (1.04) (0.10)
----------------- ------- -------- ------ ---------------
NET ASSET VALUE, END OF PERIOD.............. $ 11.563 $11.660 $ 12.63 $12.86 $ 11.93
================= ======= ======== ====== ===============
TOTAL RETURN (1)............................ 2.88%** 1.28% 9.86% 17.21% 0.21%**
================= ======= ======== ====== ===============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........... $ 7,307 $ 7,879 $ 8,145 $4,970 $ 3,316
Ratio of Expenses to Average Net Assets..... 2.00% 2.00% 2.00% 2.00% 2.00%
Ratio of Net Investment Income/Loss to
Average Net Assets........................ 7.86% 7.61% 6.63% 8.03% 6.07%
Portfolio Turnover Rate..................... 18%** 41% 81% 104% 10%**
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss.............................. $ 0.03 $ 0.06 $ 0.08 $ 0.11 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets............ 2.49% 2.48% 2.64% 2.88% 4.25%
Net Investment Income/Loss to Average Net
Assets.................................. 7.36% 7.14% 6.01% 7.15% 3.82%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen High Yield & Total Return Fund (the "Fund") is organized as a
separate diversified fund of Van Kampen Series Fund, Inc., a Maryland
corporation, which is registered as an open-end management investment Company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective seeks to maximize total return by investing in a diversified portfolio
of high-yield, high-risk income that offer a yield above what is generally
available on debt securities in the four highest categories of the recognized
rating services. The Fund commenced operations on May 1, 1996.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. Class A shares are sold with a front-end sales charge of up to
4.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 4.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Bonds and other fixed income securities may be valued according to the
broadest and most representative market. In addition, bonds and other fixed
income securities may be valued on the basis of prices provided by a pricing
service which takes into account institutional size trading in similar groups of
securities. Debt securities purchased with remaining maturities of 60 days or
less are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
At December 31, 1999, approximately 85% of the net assets of the Fund consisted
of high-yield securities rated below investment grade. Investments in high-yield
securities are accompanied by a greater degree of credit risk and the risk tends
to be more sensitive to economic conditions than higher rated securities.
Certain securities may be valued on the basis of bid prices provided by one
principal market maker.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may invest in repurchase agreements, which are short-term investments in
which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
- -----------------------
12
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
Interest income is recognized on an accrual basis except where collection is in
doubt. Discounts and premiums on securities purchased are amortized according to
the effective yield method over their respective lives. Income, expenses (other
than class specific expenses), and realized and unrealized gains or losses are
allocated to each class of shares based upon their relative net assets.
Distributions from the Fund are recorded on the ex-distribution date.
4. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's commencement of operations. The Adviser has agreed that in the event
any of the initial shares of the Fund originally purchased by Van Kampen are
redeemed by the Fund during the amortization period, the Fund will be reimbursed
for any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the number of initial shares at the time of redemption.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
Net capital losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 to June 30, 1999 the Fund incurred and elected
to defer until July 1, 1999, for U.S. Federal income tax purposes, net capital
losses of approximately $435,000.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ------------ -------- ------------ -------------
<S> <C> <C> <C>
$39,909,830 $635,133 $(2,678,678) $(2,043,545)
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
0.75% 1.25% 2.00%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $1,464
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
------------------
13
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
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
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $23,009 for Class A shares and deferred sales charges of
$56,215 and $611 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.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $6,954,776 and sales of $6,685,094 of investment securities
other than long-term U.S. government securities and short-term investments.
There were no purchases or sales of long-term U.S. government securities.
D. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
- -----------------------
14
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the High Yield & Total Return
Fund (the "Fund") was held on December 15, 1999. The description of each
proposal and number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
--------- ---------
<S> <C> <C>
J. Miles Branagan........................................... 1,886,464 14,493
Jerry D. Choate............................................. 1,882,461 18,496
Linda Hutton Heagy.......................................... 1,887,121 13,836
R. Craig Kennedy............................................ 1,887,121 13,836
Mitchell M. Merin........................................... 1,882,432 18,524
Jack E. Nelson.............................................. 1,887,121 13,836
Richard F. Powers, III...................................... 1,882,466 18,491
Phillip B. Rooney........................................... 1,887,121 13,836
Fernando Sisto.............................................. 1,881,809 19,148
Wayne W. Whalen............................................. 1,887,121 13,836
Suzanne H. Woolsey.......................................... 1,887,116 13,841
Paul G. Yovovich............................................ 1,887,116 13,841
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C>
1,882,873 232 17,851
</TABLE>
------------------
15
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
* Closed to new investors
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM--
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired, call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management of
Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of
Sciences/National Research Council, and former Chairman
of the German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555/
/www.vankampen.com
MSHY SAR 02/00 -C- Van Kampen Funds Inc. 2000
456 556 656
<PAGE>
VAN KAMPEN
LATIN AMERICAN FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
[LOGO]
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders.......................... 1
Economic Snapshot............................... 2
Investment Overview............................. 3
Portfolio of Investments........................ 6
Statement of Assets and Liabilities............. 8
Statement of Operations......................... 9
Statement of Changes in Net Assets.............. 10
Financial Highlights ........................... 11
Notes to Financial Statements................... 13
Additional Information.......................... 16
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Mexico 42.8%
Brazil 36.6%
Chile 7.4%
Argentina 6.1%
Short-Term Investment 3.1%
Venezuela 1.6%
Peru 1.2%
Other 0.9%
Colombia 0.3%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
MSCI EMERGING
CLASS A CLASS B CLASS C MARKETS FREE
SHARES SHARES SHARES LATIN AMERICA INDEX
------- ------- ------- -------------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*................................ 16.41% 17.95% 21.97% N/A
Without Sales Charge***........................... 23.46% 22.95% 22.97% 21.26%
One Year
With Sales Charge*................................ 58.44% 61.91% 65.59% N/A
Without Sales Charge***........................... 68.16% 66.91% 66.59% 58.89%
Five Year
With Sales Charge*................................ 10.70% N/A 11.19% N/A
Without Sales Charge***........................... 12.02% N/A 11.19% 7.65%
Average Annual Since Inception
With Sales Charge*................................ 9.80% 18.13% 10.14% N/A
Without Sales Charge***........................... 10.99% 18.32% 10.14% 7.08%
Commencement Date................................... 7/6/94 8/1/95 7/6/94 N/A
</TABLE>
The MSCI Emerging Markets Free Latin America Index is a broad-based market cap
weighted composite index covering at least 60% of markets in Mexico, Argentina,
Brazil, Chile, Colombia, Peru and Venezuela (assumes dividends are reinvested).
* The returns above are calculated using the maximum sales charge for Class A
shares (5.75%) and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS (1)
PERCENT OF
SECURITY COUNTRY NET ASSETS
- -------- ------- ----------
<S> <C> <C>
Telmex ADR Mexico 12.7%
Televisa CPO GDR Mexico 4.3%
Kimberly 'A' Mexico 3.0%
Petrobras Brazil 2.8%
Telesp ADR Brazil 2.8%
</TABLE>
(1) Excludes Short-Term Investment
<TABLE>
<CAPTION>
TOP FIVE SECTORS+
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ----------- ----------
<S> <C> <C>
Services $30,508,386 47.0%
Materials 8,496,788 13.1%
Energy 7,552,369 11.6%
Consumer Goods 7,118,613 11.1%
Finance 5,372,974 8.3%
</TABLE>
+ These sectors represent broad groupings of related industries.
THE COUNTRY SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MSCI EMERGING MARKETS FREE LATIN AMERICA INDEX AND ARE FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE
FUND'S FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE
SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK
CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGERS OF THE VAN KAMPEN LATIN AMERICAN
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE
PAST SIX MONTHS. THE FUND IS MANAGED BY PORTFOLIO MANAGERS ROBERT L. MEYER,
MICHAEL PERL, AND ANDY SKOV OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT.
MR. MEYER AND MR. SKOV HAVE MANAGED THE FUND SINCE ITS INCEPTION IN 1994, WHILE
MR. PERL JOINED THE TEAM IN 1998. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS
ON THE FUND'S PERFORMANCE DURING THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1999.
Q: CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED DURING THE PAST
SIX MONTHS
A: A key driver to the recoveries in the region has been continued robust demand
for Latin American products in the United States. In fact, American consumers
account for roughly 80 percent of all Mexican exports. In addition to solid
growth in the United States, Latin American economies benefited from a sharp
rebound in commodity prices as growth revived in east Asia and accelerated in
Europe. Oil prices, for example, more than doubled during 1999.
Q: WHAT STRATEGIES DID YOU PURSUE FOR THE FUND IN THIS ENVIRONMENT?
A: The Fund continued to focus on identifying high-quality businesses in the two
largest Latin American markets--Brazil and Mexico. In each case, we found
attractive telecommunications companies that appear to offer exceptional growth
prospects in coming years. Fixed-line and cellular phone penetration remains low
in Latin America, and we expect that pent-up demand for telecommunications
services in the region will increasingly be met in coming years. We also sought
to capitalize on robust consumer activity in Mexico through the purchase of
stocks in that country's domestic media and retail sectors.
Q: DISCUSS HOW THESE STRATEGIES CONTRIBUTED TO THE FUND'S PERFORMANCE.
A: The Fund's emphasis on telecom and consumer companies in Mexico and Brazil
was rewarded with solid performance during the six-month reporting period.
Equity markets in Mexico and Brazil each posted strong gains in 1999, and we
expect strength in those countries to continue in the new year.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: After a disappointing first six months of 1999, the Fund's performance
rebounded with the recovery in Latin America during the reporting period. For
Class A shares at net asset value, the Fund generated a total return of 23.46
percent for the six months ended December 31, 1999. By comparison, the MSCI
Emerging Markets Free Latin America Index generated a total return of 21.26
percent for the same period. This broad-based index covers at least 60 percent
of markets in Mexico, Argentina, Brazil, Chile, Colombia, Peru, and Venezuela
and assumes dividends are reinvested. This index does not reflect any
commissions or sales charges that would be paid by an investor purchasing the
securities it represents. If charges or commissions had been included, the total
return would have been lower. It's not possible to invest directly in an index.
Past performance does not guarantee future results.
Q: WHAT IS THE STATUS OF ECONOMIC AND POLITICAL REFORM IN LATIN AMERICA?
A: The pace of reform in the region has been uneven. Positive steps include
Mexico's successful presidential primary in November, which bodes well for
political stability in that country and enhances the prospects for consensus
agreements on such issues as budgets and reforms.
Less inspiring has been Brazil's difficulty in reining in the social spending
that has hampered economic growth in the past. Certainly, President Cardoso's
commitment to reform remains strong. When Cardoso took office seven years ago,
inflation in Brazil was more than 7,000 percent. Today, prices are rising at
only single-digit rates. However, the pain of Brazil's recent recession has made
it more difficult for Cardoso's government to convince the political opposition
and the electorate that this is the best time to undertake reform measures that
might cause additional short-term pain. Despite the on-again, off-again pace of
economic reform in Brazil, however, we believe that Brazil's economic
fundamentals remain impressive.
- -----------------------
4
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q: ARE THERE ANY SIGNS THAT GLOBAL CONFIDENCE IN EMERGING MARKETS IS RETURNING?
A: Yes. Following large gains in the early 1990s, emerging markets went through
a lengthy and painful bear market. During that period, investor sentiment seemed
to range from excessive optimism to excessive pessimism. The sharp rebound in
emerging markets has started the process of restoring confidence in the asset
class, in Latin America as well as global emerging markets. While that process
still has a long way to go, we sense a shift in investors' attitudes toward
businesses and problems in developing economies. We believe investors are more
capable of differentiating between the individual markets and their significant
events and investment potential.
As recently as 1994, the devaluation of the Mexican peso set off a chain
reaction of currency weakness throughout Latin America. However, when Brazil
devalued in early 1999, the resulting 40 percent drop in the Brazilian real did
not create a domino-effect of currency weakness in the region. We believe
investors' ability to discriminate between countries and their individual issues
has strongly positive implications for the future of developing economies in
coming years.
Q: WHAT IS YOUR OUTLOOK FOR THE FUND IN THE MONTHS AHEAD?
A: We are optimistic about the Fund's prospects during the new year. While
equity markets in Latin America benefited from an early year 2000 rally during
the fourth quarter of 1999, we believe that the region is generally poised to
grow again in 2000. And while there are clearly pockets of weakness both on a
country and industry level, we are confident that the Fund is invested in
high-quality companies in the fastest-growing sectors of improving economies. We
believe these allocations bode well for the Fund's performance in coming months.
------------------
5
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
COMMON STOCKS (74.6%)
ARGENTINA (6.1%)
Banco Rio de La Plata ADR....... 20,015 $ 243,933
Quilmes Industrial ADR.......... 62,995 752,003
Telecom Argentina ADR........... 45,167 1,546,969
Telefonica de Argentina ADR..... 45,098 1,392,401
-----------
3,935,306
-----------
BRAZIL (15.2%)
Aracruz Celulose S.A. ADR....... 22,025 578,156
Banco Bradesco ADR.............. 1,300 10,271
CEMIG ADR....................... 17,588 395,730
Cia Cervejaria Brahma ADR....... 8,800 123,200
(a)Cia Electric de Est Rio
Janerio....................... 1,649,059,000 502,066
Cia Paranaense de Energia ADR... 21,970 204,596
Cia Siderurgica Nacional........ 15,936,300 617,515
Coteminas....................... 2,492,000 158,638
(b,c)Coteminas ADR.............. 22,545 62,851
CRT 'A'......................... 5,116,574 892,179
CVRD 'A'........................ 5,000 116,247
CVRD ADR........................ 24,440 675,155
Eletrobras ADR.................. 25,645 308,137
Eletrobras ADR.................. 5,440 60,520
Eletrobras S.A.................. 14,772,463 323,089
Embratel Participacoes 'A'
ADR........................... 710 19,348
(a)Lojas Arupau S.A. ADR........ 10,410 --
Petrobras ADR................... 11,315 290,207
(c)Petrobras ADR................ 22,943 587,914
(c)Rossi Residencial S.A. GDR... 44,287 52,702
Rossi Residencial S.A. GDS...... 187,805 223,488
Tele Centro Sul ADR............. 100 9,075
Tele Leste Celular ADR.......... 960 40,800
Tele Norte Leste ADR............ 24,303 619,726
Tele Sudeste Celular ADR........ 1,830 71,027
Telesp ADR...................... 74,502 1,820,643
Telesp Celular ADR.............. 15,715 665,923
Unibanco GDR.................... 14,480 436,210
Usiminas ADR.................... 550 3,005
(a)Vale Do Rio Doce ADR......... 31,997 --
-----------
9,868,418
-----------
CHILE (7.4%)
Banco Edwards ADR............... 26,152 434,777
Banco Santander ADR............. 5,599 85,385
Banco Santiago ADR.............. 12,350 263,981
CCU ADR......................... 23,186 743,401
Chilectra ADR................... 40,676 813,520
Cia Telecom ADR................. 53,670 979,477
D & S ADR....................... 14,580 284,310
Endesa ADR...................... 22,107 313,643
Enersis ADR..................... 19,260 452,610
Quinenco ADR.................... 22,909 254,863
(a)Santa Isabel ADR............. 17,778 173,336
-----------
4,799,303
-----------
COLOMBIA (0.3%)
Bavaria......................... 39,991 174,894
Valores Bavaria................. 34,287 29,258
-----------
204,152
-----------
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
MEXICO (42.8%)
(a)Alfa S.A. 'A'................ 172,891 $ 811,566
(a)Banacci 'L'.................. 154,310 594,126
(a)Banacci 'O'.................. 75,168 301,306
(a)Carso Global Telecom 'A1'.... 93,842 881,006
(a)Cemex CPO.................... 270,034 1,509,684
(a)Cemex CPO ADR................ 59,256 1,651,761
(a)Cifra 'C'.................... 302,005 574,701
(a)Cifra 'V'.................... 267,078 535,283
(a)Cifra 'V' ADR................ 7,448 149,274
Empresas ICA S.A................ 111,110 63,291
Empresas ICA S.A. ADR........... 31,771 103,256
FEMSA........................... 233,062 1,039,929
FEMSA ADR....................... 24,041 1,069,824
(a)Grupo Carso 'A1'............. 241,525 1,202,530
(a)Grupo Financiero Bancomer
S.A. de C.V. 'O'.............. 1,458,700 609,330
(a)Grupo Financiero Banorte S.A.
de C.V. 'O'................... 284,298 428,846
(a)Grupo Industrial Bimbo S.A.
de C.V. 'A'................... 69,595 155,267
Grupo Mexico S.A................ 132,920 658,291
Grupo Modelo 'C'................ 156,388 428,912
Kimberly 'A'.................... 494,476 1,929,917
(a)Nuevo Grupo Iusacell S.A.
ADR........................... 14,390 214,951
Panamerican Beverages, Inc...... 14,200 291,988
(a)Seminis, Inc. 'A'............ 27,370 172,773
(a)Soriana 'B'.................. 203,035 931,648
TAMSA ADR....................... 17,782 241,168
(a)Televisa CPO GDR............. 40,585 2,769,926
Telmex ADR...................... 72,994 8,211,825
Vitro ADR....................... 45,458 250,019
-----------
27,782,398
-----------
PERU (1.2%)
Tel Peru 'B' ADR................ 59,253 792,509
-----------
VENEZUELA (1.6%)
CANTV ADR....................... 42,135 1,037,574
-----------
TOTAL COMMON STOCKS................................... 48,419,660
-----------
PREFERRED STOCKS (21.3%)
BRAZIL (21.3%)
Banco Bradesco.................. 111,697,000 876,140
(a,b)Banco Nacional............. 8,115,000 225
Brahma.......................... 257,000 187,789
CEMIG........................... 16,745,919 375,427
Copel........................... 93,559,450 906,333
(a)CRT.......................... 3,770,974 1,168,971
CVRD............................ 49,027 1,356,961
Eletrobras 'B'.................. 7,494,500 178,806
Embratel Participacoes 'A'...... 41,522,000 1,068,792
Gerdau.......................... 25,221,567 670,155
Globex Utilidades S.A........... 8,000 64,213
Itaubanco....................... 8,835,410 758,089
Itausa S.A...................... 494,000 511,364
(a)Lojas Arapua S.A............. 19,195,300 --
Petrobras....................... 7,225,097 1,839,770
Tele Centro Sul................. 28,311,454 517,019
Tele Leste Celular.............. 304,596,700 249,545
Tele Norte Celular.............. 284,309,000 243,941
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
BRAZIL (CONT.)
Tele Norte Leste................ 32,958,800 $ 884,861
Tele Sudeste Celular............ 43,916,960 324,545
Telebras ADR.................... 2,600 334,100
Telesp.......................... 29,302,176 710,454
Telesp Celular.................. 18,518,530 328,034
Usiminas........................ 43,700 237,066
-----------
TOTAL PREFERRED STOCKS................................ 13,792,600
-----------
<CAPTION>
NO. OF
RIGHTS
--------------
RIGHTS (0.1%)
<S> <C> <C>
BRAZIL (0.1%)
(a)Banco Bradesco S.A.,
expiring 2/9/00............... 115,117,000 54,166
-----------
TOTAL LONG-TERM INVESTMENTS (96.0%) (COST
$52,457,410).......................................... 62,266,426
-----------
<CAPTION>
PAR
VALUE
--------------
SHORT-TERM INVESTMENT (3.1%)
<S> <C> <C>
REPURCHASE AGREEMENT (3.1%)
Chase Securities, Inc., 2.60%, $ 2,039,000
dated 12/31/99, due 1/3/00, to be
repurchased at $2,039,442
collateralized by $2,080,765
U.S. Treasury Notes, 6.125%, due 12/31/01,
valued at $2,080,765 (COST $2,039,000).......... 2,039,000
-----------
TOTAL INVESTMENTS IN SECURITIES (99.1%) (COST
$54,496,410)........................................ 64,305,426
FOREIGN CURRENCY (0.0%) (COST $9,597)................. 9,717
-----------
TOTAL INVESTMENTS (99.1%) (COST $54,506,007).......... 64,315,143
OTHER ASSETS IN EXCESS OF LIABILITIES (0.9%).......... 553,641
-----------
NET ASSETS (100%)..................................... $64,868,784
===========
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(a) -- Non-income producing security
(b) -- Security valued at fair value -- see note A-1 to
financial statements.
(c) -- 144A Security -- certain conditions for public sale may
exist
ADR -- American Depositary Receipt
CPO -- Certificate of Participation
GDR -- Global Depositary Receipt
GDS -- Global Depositary Shares
</TABLE>
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------- ----------- ----------
<S> <C> <C>
Services................................ $30,508,386 47.0%
Materials............................... 8,496,788 13.1
Energy.................................. 7,552,369 11.6
Consumer Goods.......................... 7,118,613 11.1
Finance................................. 5,372,974 8.3
Multi-Industry.......................... 2,809,581 4.3
Capital Equipment....................... 407,715 0.6
----------- ----
$62,266,426 96.0%
=========== ====
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
+Classified by sectors which represent broad groupings of related
industries.
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------------
ASSETS:
Investments in Securities, at Value (Cost $54,496,410).... $ 64,305,426
Foreign Currency (Cost $9,597)............................ 9,717
Cash...................................................... 37,462
Receivable for:
Fund Shares Sold........................................ 618,822
Dividends............................................... 184,580
Investments Sold........................................ 10,764
Foreign Witholding Tax Reclaim.......................... 2,634
Interest................................................ 272
Other..................................................... 5,772
----------------
Total Assets............................................ 65,175,449
----------------
LIABILITIES:
Payable for:
Fund Shares Redeemed.................................... 70,818
Distribution Fees....................................... 56,732
Investment Advisory Fees................................ 47,527
Shareholder Reporting Expense........................... 34,069
Custody Fees............................................ 25,120
Directors' Fees and Expenses............................ 19,226
Professional Fees....................................... 16,638
Administrative Fees..................................... 13,138
Transfer Agent Fees..................................... 9,934
Investments Purchased................................... 5,559
Deferred Country Tax.................................... 5,524
Other..................................................... 2,380
----------------
Total Liabilities....................................... 306,665
----------------
NET ASSETS.................................................. $ 64,868,784
================
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 4,629
Paid in Capital in Excess of Par.......................... 81,068,110
Net Unrealized Appreciation on Investments and Foreign
Currency Translations................................... 9,750,810
Accumulated Net Investment Loss........................... (215,323)
Accumulated Net Realized Loss............................. (25,739,442)
----------------
NET ASSETS.................................................. $ 64,868,784
================
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $32,954,945 and 2,310,994
Shares Outstanding)..................................... $ 14.26
================
Maximum Sales Charge...................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100 / (100 - maximum sales charge))............. $ 15.13
================
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $20,915,134 and 1,518,974 Shares
Outstanding)*........................................... $ 13.77
================
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $10,998,705 and 799,282 Shares
Outstanding)*........................................... $ 13.76
================
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 606,673
Interest.................................................. 35,758
Less Foreign Taxes Withheld............................... (2,632)
-----------
Total Income............................................. 639,799
-----------
EXPENSES:
Investment Advisory Fees.................................. 337,876
Distribution Fees (Attributed to Classes A, B and C of
$34,403, $86,610 and $46,624, respectively)............. 167,637
Administrative Fees....................................... 71,590
Shareholder Reports....................................... 43,980
Transfer Agent Fees....................................... 29,887
Custodian Fees............................................ 29,767
Country Tax Expense....................................... 24,814
Professional Fees......................................... 16,522
Filing and Registration Fees.............................. 13,903
Directors' Fees and Expenses.............................. 10,255
Other..................................................... 2,607
-----------
Total Expenses........................................... 748,838
Less Expense Reductions.................................. (51,308)
-----------
Net Expenses............................................. 697,530
-----------
Net Investment Income/Loss.................................. (57,731)
-----------
NET REALIZED GAIN/LOSS ON:
Investments............................................... 2,708,240
Foreign Currency Transactions............................. (27,161)
-----------
Net Realized Gain/Loss...................................... 2,681,079
-----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... 1,156,193
-----------
End of the Period:
Investments............................................. 9,809,016
Foreign Currency Translations........................... (58,206)
-----------
9,750,810
-----------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 8,594,617
-----------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. 11,275,696
-----------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $11,217,965
===========
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ (57,731) $ 353,000
Net Realized Gain/Loss.................................... 2,681,079 (18,696,000)
Net Unrealized Appreciation/Depreciation.................. 8,594,617 14,496,000
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 11,217,965 (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 (1):
Subscribed................................................ 15,700,741 37,085,000
Distributions Reinvested.................................. -- 580,000
Redeemed.................................................. (25,146,038) (53,264,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... (9,445,297) (15,599,000)
----------------- -------------
Total Increase/Decrease in Net Assets..................... 1,772,668 (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 $(215,323) and $(158,000), respectively)... $ 64,868,784 $ 63,096,000
================= =============
- --------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
-------
Shares:
Subscribed............................................. 1,211,820 2,939,000
Distributions Reinvested............................... -- 46,000
Redeemed............................................... (1,858,490) (3,917,000)
----------------- -------------
Net Increase/Decrease in Class A Shares Outstanding...... (646,670) (932,000)
================= =============
Dollars:
Subscribed............................................. $ 13,615,797 $ 28,926,000
Distributions Reinvested............................... -- 389,000
Redeemed............................................... (20,192,415) (37,394,000)
----------------- -------------
Net Increase/Decrease.................................... $ (6,576,618) $ (8,079,000)
================= =============
Ending Paid in Capital................................... $ 39,427,442 $ 46,039,000+
================= =============
Class B:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 114,627 386,000
Distributions Reinvested............................... -- 15,000
Redeemed............................................... (255,306) (936,000)
----------------- -------------
Net Increase/Decrease in Class B Shares Outstanding...... (140,679) (535,000)
================= =============
Dollars:
Subscribed............................................. $ 1,222,248 $ 3,651,000
Distributions Reinvested............................... -- 124,000
Redeemed............................................... (2,764,680) (8,006,000)
----------------- -------------
Net Increase/Decrease.................................... $ (1,542,432) $ (4,231,000)
================= =============
Ending Paid in Capital................................... $ 27,504,499 $ 29,066,000+
================= =============
Class C:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 78,509 508,000
Distributions Reinvested............................... -- 8,000
Redeemed............................................... (208,113) (908,000)
----------------- -------------
Net Increase/Decrease in Class C Shares Outstanding...... (129,604) (392,000)
================= =============
Dollars:
Subscribed............................................. $ 862,696 $ 4,508,000
Distributions Reinvested............................... -- 67,000
Redeemed............................................... (2,188,943) (7,864,000)
----------------- -------------
Net Increase/Decrease.................................... $ (1,326,247) $ (3,289,000)
================= =============
Ending Paid in Capital................................... $ 14,140,798 $ 15,478,000+
================= =============
</TABLE>
- ---------------
<TABLE>
<S> <C>
+ Ending Paid in Capital amounts do not reflect permanent book
to tax differences.
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 ---------------------------------------- JULY 6, 1994* TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 JUNE 30, 1995
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 11.543 $11.424 $ 17.39 $ 12.63 $ 9.08 $ 12.00
----------------- ------- ------- ------- ------- --------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss.............. 0.009 0.093 (0.01) 0.02 0.10 (0.02)
Net Realized and Unrealized Gain/Loss... 2.708 0.182 (2.73) 6.46 3.47 (2.70)
----------------- ------- ------- ------- ------- --------------
Total From Investment Operations........ 2.717 0.275 (2.74) 6.48 3.57 (2.72)
----------------- ------- ------- ------- ------- --------------
DISTRIBUTIONS
Net Investment Income................... -- (0.041) -- -- (0.02) --
In Excess of Net Investment Income...... -- (0.063) -- (0.09) -- --
Net Realized Gain....................... -- -- (1.92) (1.63) -- --
In Excess of Net Realized Gain.......... -- (0.052) (1.31) -- -- --
Return of Capital....................... -- -- -- -- -- (0.20)
----------------- ------- ------- ------- ------- --------------
Total Distributions..................... -- (0.156) (3.23) (1.72) (0.02) (0.20)
----------------- ------- ------- ------- ------- --------------
NET ASSET VALUE, END OF PERIOD............ $ 14.260 $11.543 $ 11.42 $ 17.39 $ 12.63 $ 9.08
================= ======= ======= ======= ======= ==============
TOTAL RETURN (1).......................... 23.46%** 3.00% (17.37)% 57.32% 39.35% (23.07)%**
================= ======= ======= ======= ======= ==============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)......... $ 32,955 $34,139 $44,439 $84,401 $18,701 $ 7,658
Ratio of Expenses to Average Net Assets... 2.22% 2.20% 2.25% 2.24% 2.11% 2.46%
Ratio of Net Investment Income/Loss to
Average Net Assets...................... 0.15% 0.98% (0.09)% (0.08)% 1.18% (0.44)%
Portfolio Turnover Rate................... 34%** 163% 249% 241% 131% 107%**
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss........................... $ 0.01 $ 0.02 $ 0.02 $ 0.10 $ 0.09 $ 0.13
Ratios Before Expense Limitation:
Expenses to Average Net Assets.......... 2.41% 2.44% 2.41% 2.77% 3.28% 4.30%
Net Investment Income/Loss to Average
Net Assets............................ (0.03)% 0.74% (0.24)% (0.61)% 0.01% (2.26)%
Ratio of Expenses to Average Net Assets
excluding country tax expense and
interest expense........................ 2.10% 2.10% 2.10% 2.10% 2.10% 2.10%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 ----------------------------- AUGUST 1, 1995+ TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD............... $ 11.189 $11.030 $ 16.99 $ 12.45 $ 9.58
----------------- ------- ------- ------- -----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss....................... (0.032) 0.019 (0.08) (0.03) 0.03
Net Realized and Unrealized Gain/Loss............ 2.612 0.215 (2.65) 6.28 2.84
----------------- ------- ------- ------- -----------------
Total From Investment Operations................. 2.580 0.234 (2.73) 6.25 2.87
----------------- ------- ------- ------- -----------------
DISTRIBUTIONS
Net Investment Income............................ -- (0.009) -- -- --
In Excess of Net Investment Income............... -- (0.014) -- (0.08) --
Net Realized Gain................................ -- -- (1.92) (1.63) --
In Excess of Net Realized Gain................... -- (0.052) (1.31) -- --
Return of Capital................................ -- -- -- -- --
----------------- ------- ------- ------- -----------------
Total Distributions.............................. -- (0.075) (3.23) (1.71) --
----------------- ------- ------- ------- -----------------
NET ASSET VALUE, END OF PERIOD..................... $ 13.769 $11.189 $ 11.03 $ 16.99 $ 12.45
================= ======= ======= ======= =================
TOTAL RETURN (1)................................... 22.95%** 2.47% (17.82)% 56.17% 29.26%**
================= ======= ======= ======= =================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).................. $ 20,915 $18,570 $24,206 $14,314 $ 2,041
Ratio of Expenses to Average Net Assets............ 2.97% 2.96% 2.99% 2.99% 2.87%
Ratio of Net Investment Income/Loss to Average Net
Assets........................................... (0.60)% 0.20% (0.58)% (0.78)% 0.88%
Portfolio Turnover Rate............................ 34%** 163% 249% 241% 131%**
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation During the
Period
Per Share Benefit to Net Investment
Income/Loss.................................... $ 0.01 $ 0.02 $ 0.02 $ 0.02 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets................... 3.16% 3.20% 3.16% 3.55% 3.89%
Net Investment Income/Loss to Average Net
Assets......................................... (0.78)% (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>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Commencement of operations
** Non-Annualized
+ The Fund began offering Class B shares on August 1, 1995
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
FINANCIAL HIGHLIGHTS (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 --------------------------------------- JULY 6, 1994* TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 JUNE 30, 1995
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD....... $ 11.182 $11.037 $ 17.01 $ 12.43 $ 8.99 $ 12.00
----------------- ------- ------- ------- ------ --------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............... (0.033) 0.021 (0.11) (0.07) 0.04 (0.08)
Net Realized and Unrealized Gain/Loss.... 2.612 0.199 (2.63) 6.31 3.40 (2.73)
----------------- ------- ------- ------- ------ --------------
Total From Investment Operations......... 2.579 0.220 (2.74) 6.24 3.44 (2.81)
----------------- ------- ------- ------- ------ --------------
DISTRIBUTIONS
Net Investment Income.................... -- (0.009) -- -- -- --
In Excess of Net Investment Income....... -- (0.014) -- (0.03) -- --
Net Realized Gain........................ -- -- (1.92) (1.63) -- --
In Excess of Net Realized Gain........... -- (0.052) (1.31) -- -- --
Return of Capital........................ -- -- -- -- -- (0.20)
----------------- ------- ------- ------- ------ --------------
Total Distributions...................... -- (0.075) (3.23) (1.66) -- (0.20)
----------------- ------- ------- ------- ------ --------------
NET ASSET VALUE, END OF PERIOD............. $ 13.761 $11.182 $ 11.04 $ 17.01 $12.43 $ 8.99
================= ======= ======= ======= ====== ==============
TOTAL RETURN (1)........................... 22.97%** 2.28% (17.86)% 56.04% 38.26% (23.83)%**
================= ======= ======= ======= ====== ==============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).......... $ 10,999 $10,387 $14,577 $20,345 $6,780 $ 4,085
Ratio of Expenses to Average Net Assets.... 2.97% 2.96% 3.00% 2.99% 2.86% 3.20%
Ratio of Net Investment Income/Loss to
Average Net Assets....................... (0.60)% 0.23% (0.77)% (0.79)% 0.42% (1.16)%
Portfolio Turnover Rate.................... 34%** 163% 249% 241% 131% 107%**
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss............................ $ 0.01 $ 0.02 $ 0.02 $ 0.05 $ 0.12 $ 0.12
Ratios Before Expense Limitation:
Expenses to Average Net Assets........... 3.16% 3.20% 3.16% 3.56% 4.06% 5.20%
Net Investment Income/Loss to Average Net
Assets................................. (0.78)% (0.01)% (0.93)% (1.36)% (0.78)% (3.16)%
Ratio of Expenses to Average Net Assets
excluding country tax expense and
interest expense......................... 2.85% 2.85% 2.85% 2.85% 2.85% 2.85%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
- --------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen Latin American Fund (the "Fund") is organized as a separate
non-diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation
which is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective
seeks long-term capital appreciation by investing primarily in equity securities
of Latin American issuers and investing in debt securities issued or guaranteed
by Latin American governments or governmental entities. The Fund commenced
operations on July 6, 1994.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. Class A shares are sold with a front-end sales charge of up to
5.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights. The Fund began offering the current Class B shares on August 1,
1995. Class B shares held prior to May 1, 1995 were renamed Class C shares.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Securities listed on a foreign exchange are valued at their
closing price. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date, net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. Income, expenses (other than class specific expenses),
and realized and unrealized gains or losses are allocated to each class of
shares based upon their relative net assets. Distributions from the Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
------------------
13
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized between
trade date and settlement date on security and income transactions. However, the
foreign currency portion of gains and losses realized on sales and maturities of
foreign denominated debt securities is treated as ordinary income for U.S.
Federal income tax purposes.
The net assets of the Fund include issuers located in emerging markets. There
are certain risks inherent in these investments not typically associated with
investments in the United States, including the smaller size of the markets
themselves, lesser liquidity, greater volatility and potentially less publicly
available information. Emerging markets may be subject to a greater degree of
government involvement in the economy and greater economic and political
uncertainty, which has the potential to extend to government imposed
restrictions on exchange traded transactions and currency transactions. These
restrictions may impact the Fund's ability to buy or sell certain securities or
to repatriate certain currencies to U.S. dollars. Additionally, changes in
currency exchange rates will affect the value of and investment income from such
securities.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains, and net unrealized appreciation, as applicable, as the income is earned
or capital gains are recorded.
At June 30, 1999, the Fund had a capital loss carryforward for U.S. Federal
income tax purposes of approximately $16,568,000 which will expire June 30,
2007.
To the extent that capital loss carryforwards are used to offset any future net
capital gains realized during the carryforward period as provided by U.S.
Federal income tax regulations, no capital gains tax liability will be incurred
by the Fund for gains realized and not distributed. To the extent that capital
gains are so offset, such gains will not be distributed to shareholders.
Net capital and net currency losses incurred after October 31 and within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. For the period from November 1, 1998 to June 30, 1999 the Fund
incurred and elected to defer until July 1, 1999, for U.S. Federal income tax
purposes, net currency and capital losses of approximately $6,068,000.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ----------- ----------- ------------ -------------
<S> <C> <C> <C>
$54,496,410 $15,376,172 $(5,567,156) $9,809,016
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing book and
tax treatment for foreign currency transactions, net operating losses, foreign
taxes on net realized gains, deductibility of interest expense on short sales
and gains on certain securities of corporations designated as "passive foreign
investment companies."
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss and paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
1.25% 2.10% 2.85%
</TABLE>
- -----------------------
14
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
For the period ended December 31, 1999, the Fund recognized expenses of $1,835
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
The Distributor may receive a front end sales charge for purchases of Class A
shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $34,577 for Class A shares and deferred sales charges of
$45,590 and $7,191 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 December 31, 1999, the Fund incurred $696 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.
D. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $18,277,021 and sales of $29,616,877 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.
E. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
------------------
15
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the Latin American Fund (the
"Fund") was held on December 15, 1999.
The description of each proposal and number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
---------- --------
<S> <C> <C>
J. Miles Branagan........................................... 2,820,708 35,403
Jerry D. Choate............................................. 2,820,667 35,445
Linda Hutton Heagy.......................................... 2,821,562 34,549
R. Craig Kennedy............................................ 2,821,366 34,745
Mitchell M. Merin........................................... 2,821,521 34,591
Jack E. Nelson.............................................. 2,821,396 34,715
Richard F. Powers, III...................................... 2,820,894 35,217
Phillip B. Rooney........................................... 2,821,533 34,579
Fernando Sisto.............................................. 2,821,278 34,834
Wayne W. Whalen............................................. 2,820,062 36,050
Suzanne H. Woolsey.......................................... 2,821,811 24,300
Paul G. Yovovich............................................ 2,821,645 34,467
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- --------
<S> <C> <C> <C>
2,825,233 12,067 18,811
</TABLE>
- -----------------------
16
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
* Closed to new investors
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management
of Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555/
/www.vankampen.com
MSLA SAR 02/00 -C- Van Kampen Funds Inc. 2000
459 559 659
<PAGE>
VAN KAMPEN
INTERNATIONAL MAGNUM FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders.......................... 1
Economic Snapshot............................... 2
Investment Overview............................. 3
Portfolio of Investments........................ 6
Statement of Assets and Liabilities............. 9
Statement of Operations......................... 10
Statement of Changes in Net Assets.............. 11
Financial Highlights ........................... 12
Notes to Financial Statements................... 13
Additional Information.......................... 17
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Japan 28.8%
United Kingdom 19.0%
Other 12.7%
France 9.5%
Switzerland 6.3%
Germany 6.0%
Italy 4.0%
Netherlands 4.0%
Sweden 3.2%
Australia 2.5%
Spain 2.5%
Short-Term Investment 1.5%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES MSCI EAFE INDEX
------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*.................................. 10.69% 12.16% 16.16% N/A
Without Sales Charge***............................. 17.46% 17.16% 17.16% 22.12%
One Year
With Sales Charge*.................................. 16.01% 17.34% 21.32% N/A
Without Sales Charge***............................. 23.09% 22.34% 22.32% 26.96%
Average Annual Since Inception
With Sales Charge*.................................. 8.46% 8.94% 9.51% N/A
Without Sales Charge***............................. 10.31% 9.51% 9.51% 13.79%
Commencement Date..................................... 7/1/96 7/1/96 7/1/96 N/A
</TABLE>
The Morgan Stanley International (MSCI) EAFE Index is an unmanaged index of
common stocks and includes Europe, Australasia, and the Far East (assumes
dividends are reinvested net of withholding taxes).
* The returns above are calculated using the maximum sales charge for Class A
(5.75%) shares and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
ISSUER COUNTRY NET ASSETS
- ------ -------------- ----------
<S> <C> <C>
Nestle S.A. (Registered) Switzerland 2.4%
Total Fina S.A. 'B' France 1.9%
Sony Corp. Japan 1.9%
Kyocera Corp. Japan 1.5%
Reckitt Benckiser plc United Kingdom 1.4%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS+
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ----------- ----------
<S> <C> <C>
Consumer Goods $30,198,422 25.5%
Capital Equipment 21,977,211 18.6%
Services 19,966,188 16.9%
Finance 19,037,318 16.1%
Materials 10,780,339 9.1%
</TABLE>
+ These sectors represent broad
groupings of related industries.
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH REPRESENTATIVE OF THE SUBADVISER OF THE VAN KAMPEN
INTERNATIONAL MAGNUM FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED
THE MARKETS DURING THE PAST SIX MONTHS. THE FUND IS MANAGED BY FRANCINE BOVICH
OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT.
MS. BOVICH HAS BEEN THE FUND'S PORTFOLIO MANAGER SINCE ITS INCEPTION IN 1996.
THE FOLLOWING DISCUSSION REFLECTS HER VIEWS ON THE FUND'S PERFORMANCE DURING THE
SIX MONTHS ENDED DECEMBER 31, 1999.
Q: DESCRIBE THE MARKET CONDITIONS THAT AFFECTED THE FUND DURING THE REPORTING
PERIOD.
A: During the past six months we witnessed recovery and renewed confidence in
the global economy. In response to faster-than-expected growth, central banks
worldwide reversed the interest-rate decreases of the previous 12 months.
Investor confidence in specific sectors led to significant rallies during the
period. Growth stocks--primarily technology and telecommunications companies--in
Europe, Japan, and non-Japan Asia rallied to unprecedented highs.
Japan was the best performing region for the six-month period--benefiting from
supportive fiscal policies, continued corporate restructuring, and positive
economic growth. In October, the announcement of several bank mergers in Japan
led to further investor optimism, which also helped to boost the stock market.
Despite the strength of the yen during the period, Japan's recovery continued
and appears to be firmly in place for 2000.
Q: DESCRIBE YOUR INVESTMENT STRATEGIES FOR THE FUND IN THIS ENVIRONMENT AND HOW
THESE STRATEGIES AFFECTED PERFORMANCE.
A: We use a value-driven approach and try to identify individual stocks that we
believe are undervalued. Because of our value-driven strategy, we maintained
significant positions in the Fund's portfolio in small- and mid-cap companies,
consumer staples (such as household goods, beverages, and tobacco), utilities,
and food retailing.
We maintained an underweighted position in the Fund's portfolio in Europe during
the period, which helped performance as Europe underperformed. Within Europe,
the Fund's performance benefited during the first half of the period from strong
stock selection in consumer goods and capital equipment industries, both of
which surged on signs of economic recovery. Unfortunately, this strategy
suffered during the second half of the period when growth stocks rose at the
expense of value stocks.
European stocks that helped the Fund's returns included WPP Group, the world's
largest advertising company, which benefited from its Internet-related business;
luxury-goods maker Richemont, which took advantage of resurging global demand
for its products thanks to continued economic recovery; and British Telecom,
which rode the wave of the telecommunications mania.
Overall, we maintained an overweighted position in Japan, primarily in
export-driven companies such as Sony and Nintendo. During the period, these
companies had unprecedented appreciation despite the strength of the yen, and
they were the top contributors to the Fund's performance.
The Fund began the period slightly overweighted in non-Japan Asia and we
increased the Fund's position in the region during the fourth quarter. The Fund
benefited as Asia ex-Japan outperformed all other EAFE regions during this time.
Hong Kong and Singapore saw continued local growth, low interest rates and
inflation, and increases in exports due to the Japanese yen's appreciation
compared to other currencies worldwide.
Q: WHAT HURT THE FUND'S PERFORMANCE DURING THE PERIOD?
A: The Fund's underperformance is attributable primarily to returns during the
fourth quarter, which was characterized by a "narrow" market favoring the
technology and telecom sectors, especially within Europe. Our focus on stock
valuations that we consider reasonable caused us to be underweight in these
sectors. Not owning "new economy" companies such as telecommunications giants
Nokia, Ericsson, and Siemens, which had extraordinary appreciation, negatively
affected results. Simultaneously, the Fund's significant investments in
beverages, tobacco, food, and household products also detracted from returns.
Several of the Fund's consumer-staples holdings detracted from results. For
example, Great Universal Stores suffered due to trends toward Internet shopping
as well as difficulty competing with discount stores, while Nestle and Diageo
suffered from disappointing earnings.
- -----------------------
4
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Another strategy that hurt performance was avoiding Japanese bank stocks, which
performed particularly well in October. Since the Fund's inception, we have not
held Japanese bank stocks because these banks have historically been plagued by
nonperforming loans. We have, however, seen signs of recovery in this sector and
plan to begin adding Japanese banks selectively to the Fund's portfolio.
Q: BASED ON STRONG RETURNS IN CERTAIN SECTORS, ARE YOU RECONSIDERING YOUR
STRATEGY?
A: Not exactly, we remain committed to our value philosophy. We believe that the
unparalleled returns and valuations of the "new economy" stocks cannot be
sustained indefinitely. Therefore, we expect to avoid the highly valued,
mega-cap stocks that we believe cannot continue to deliver the revenue growth
necessary to justify current valuations. Our plan is to emphasize sectors and
companies with attractive fundamentals that we believe the market has yet to
recognize. It's clear that technological innovations and their effect on
economies are not passing fads, and we look to capitalize on this growth. For
example, we are exploring opportunities in reasonably valued companies that we
believe will benefit from the continued prominence of the Internet. These
include media companies engaged in Internet advertising, infrastructure
companies, Internet service providers, and e-commerce enablers.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: The Fund enjoyed strong returns for the six-month period ending December 31,
1999, but failed to beat its benchmark, the Morgan Stanley Capital International
Europe, Australasia, and Far East (MSCI EAFE) Index, in what proved to be a
difficult environment for value investors. The Fund's total return of 17.46
percent (Class A shares at net asset value) underperformed the MSCI EAFE Index
total return of 22.12 percent. The MSCI EAFE Index is an unmanaged index of
common stocks from Europe, Australasia, and the Far East and assumes dividends
are reinvested net of withholding taxes. Keep in mind that this index is a
broad-based statistical composite that does not reflect any commissions or sales
charges that would be paid by an investor purchasing the securities it
represents. Past performance does not guarantee future results.
Q: WHAT IS YOUR OUTLOOK FOR THE FUND IN THE MONTHS AHEAD?
A: We expect strong performance from European stocks in early 2000 due to the
significant amount of corporate restructuring and merger-and-acquisition
activity that has occurred--and should continue. In addition, unemployment is
decreasing, and investor confidence in European markets is growing as an
increasing number of Europeans embrace equities as a viable long-term investment
option. We also expect to see an expansion of leadership beyond the technology
and telecommunications sectors, which should benefit the Fund.
In the long term, we look for Japan to lead international markets, as the
momentum-based recovery seen during 1999 seems to be turning into a lasting
recovery for 2000. Unemployment stemming from restructuring appears to have
stabilized, which will be positive for consumer demand in Japan. This demand,
combined with traditionally high savings rates, should drive domestic investors
into the market. Additionally, foreign buyers should continue to enter Japan
thanks to lower stock valuations relative to other developed markets.
We look for non-Japan Asia to transition from the liquidity-driven rally of the
past year into an earnings-driven phase as corporate restructuring and
government reforms continue. Consumers should begin to play an increasingly
active role due to hefty stock market gains, falling unemployment, and low
inflation and interest rates. In addition, Hong Kong and Singapore should be
able to take advantage of the recent global recovery by increasing their
exports.
Finally, as we begin the new millennium, we firmly believe that value investing
will outperform growth investing over the long term. Although the Fund did not
achieve the standout returns earned by companies in the technology and
telecommunications sectors, we will look for ways in which the Fund can
capitalize on this trend without compromising the Fund's objective to seek
long-term capital appreciation.
------------------
5
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
COMMON STOCKS (92.1%)
AUSTRALIA (2.5%)
AMP Ltd........................... 7,850 $ 86,668
Brambles Industries Ltd........... 3,600 99,478
Broken Hill Proprietary Co.,
Ltd............................. 19,750 259,133
Coca-Cola Amatil Ltd.............. 24,900 67,951
Commonwealth Bank of Australia.... 15,550 267,567
Fosters Brewing Group Ltd......... 71,100 203,824
Lend Lease Corp., Ltd............. 8,400 117,592
(a)Macquarie Corporate
Telecommunications Holdings
Ltd............................. 86,000 139,912
National Australia Bank Ltd....... 17,500 267,484
News Corp., Ltd................... 32,340 313,770
Normandy Mining Ltd............... 162,200 114,915
Quantas Airways Ltd............... 37,800 94,228
Rio Tinto Ltd..................... 14,850 318,755
Telstra Corp., Ltd................ 65,350 354,960
Westpac Banking Corp., Ltd........ 34,350 236,761
------------
2,942,998
------------
DENMARK (0.3%)
Novo Nordisk A/S 'B'.............. 3,145 417,544
------------
FINLAND (1.6%)
KCI Konecranes International
plc............................. 6,235 240,040
Kone Oyj 'B'...................... 9,730 479,769
Merita Ltd. plc `A'............... 85,370 503,584
Sampo Insurance Co., plc `A'...... 21,030 735,834
------------
1,959,227
------------
FRANCE (9.5%)
Alcatel........................... 2,600 597,749
(a)Aventis S.A.................... 32,841 1,903,149
AXA S.A........................... 4,080 569,386
Banque Nationale de Paris......... 4,550 420,260
Cie de Saint-Gobain............... 2,172 408,898
CNP Assurances.................... 33,090 1,219,871
France Telecom S.A................ 5,860 775,842
Groupe Danone..................... 2,700 637,075
Michelin (C.G.D.E.) 'B'........... 15,160 596,176
Pernod-Ricard..................... 12,720 728,528
Schneider S.A..................... 13,660 1,073,687
Total Fina S.A. 'B'............... 17,083 2,282,396
------------
11,213,017
------------
GERMANY (4.0%)
Adidas-Salomon AG................. 6,670 501,064
BASF AG........................... 14,795 774,272
Deutsche Telekom AG............... 18,060 1,272,023
HypoVereinsbank AG................ 5,840 399,258
Mannesmann AG..................... 2,420 586,625
Schering AG....................... 6,000 726,011
Volkswagen AG..................... 8,030 453,435
------------
4,712,688
------------
HONG KONG (2.0%)
Asia Satellite Telecommunications
Holdings Ltd.................... 37,000 116,852
Cable & Wireless Ltd.............. 76,600 221,222
Cathay Pacific Airways Ltd........ 59,000 105,120
Cheung Kong Holdings Ltd.......... 25,500 323,937
China Telecom Ltd................. 42,300 264,460
Hong Kong & China Gas Co., Ltd.... 84,000 115,083
HSBC Holdings plc................. 8,800 123,394
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
Hutchison Whampoa Ltd............. 33,600 $ 488,429
(a)Li & Fung Ltd.................. 46,400 116,395
SmarTone Telecommunications
Holdings Ltd.................... 15,300 73,808
Sun Hung Kai Properties Ltd....... 21,900 228,198
Swire Pacific Ltd. 'A'............ 10,200 60,228
Television Broadcasts Ltd......... 15,000 102,271
------------
2,339,397
------------
IRELAND (0.7%)
Bank of Ireland................... 102,648 817,690
------------
ITALY (4.0%)
Banca Popolare di Bergamo
S.p.A........................... 41,540 961,721
(a)Enel S.p.A..................... 43,800 183,729
Marzotto S.p.A.................... 48,600 347,941
Mediaset S.p.A.................... 84,640 1,317,753
Telecom Italia Mobile S.p.A....... 57,460 642,552
Telecom Italia S.p.A.............. 60,900 859,718
UniCredito Italiano S.p.A......... 85,460 420,527
------------
4,733,941
------------
JAPAN (28.8%)
Aiwa Co., Ltd..................... 8,000 165,900
Amada Co., Ltd.................... 42,000 229,659
Bank of Tokyo-Mitsubishi Ltd...... 9,000 125,364
Canon, Inc........................ 27,000 1,072,288
Casio Computer Co., Ltd........... 35,000 291,010
Dai Nippon Printing Co., Ltd...... 26,000 414,555
Daicel Chemical Industries Ltd.... 82,000 228,602
Daifuku Co., Ltd.................. 51,000 294,336
Daikin Industries Ltd............. 44,000 598,259
FamilyMart Co., Ltd............... 9,100 605,302
Fuji Machine Manufacturing Co..... 13,700 1,104,255
Fuji Photo Film Co................ 23,000 839,186
Fujitec Co. Ltd................... 29,000 290,766
Fujitsu Ltd....................... 36,000 1,641,006
Furukawa Electric Co., Ltd........ 36,000 545,828
Hitachi Credit Corp............... 27,700 562,237
Hitachi Ltd....................... 73,000 1,171,085
House Foods Corp.................. 6,000 90,971
Kaneka Corp....................... 60,000 767,094
Kurita Water Industries Ltd....... 20,000 317,715
Kyocera Corp...................... 6,800 1,762,692
Kyudenko Co., Ltd................. 25,000 88,037
Lintec Corp....................... 22,000 238,873
Matsushita Electric Industrial
Co., Ltd........................ 38,000 1,051,942
Minebea Co., Ltd.................. 38,000 651,609
Mitsubishi Chemical Corp.......... 61,000 214,810
Mitsubishi Estate Co., Ltd........ 30,000 292,576
Mitsubishi Heavy Industries
Ltd............................. 136,000 453,644
Mitsubishi Logistics Corp......... 6,000 38,267
Mitsumi Electric Co., Ltd......... 26,000 813,851
NEC Corp.......................... 59,000 1,405,311
Nifco, Inc........................ 26,000 310,281
Nintendo Co., Ltd................. 7,800 1,295,549
Nippon Meat Packers, Inc.......... 7,000 90,727
Nippon Telegraph & Telephone Corp.
(NTT) ADR....................... 74 1,266,751
Nissan Motor Co., Ltd............. 95,000 373,569
Nissei Sangyo Co., Ltd............ 8,000 110,339
Nissha Printing Co., Ltd.......... 20,000 119,339
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONT.)
Ono Pharmaceutical Co., Ltd....... 15,000 $ 402,035
Ricoh Co., Ltd.................... 55,000 1,036,193
Rinnai Corp....................... 13,900 258,339
Rohm Co........................... 3,000 1,232,515
Ryosan Co......................... 10,000 248,459
Sangetsu Co., Ltd................. 9,000 189,279
Sankyo Co., Ltd................... 30,000 616,257
Sanwa Shutter Corp................ 55,000 204,441
Sekisui Chemical Co............... 47,000 208,266
Sekisui House Ltd................. 45,000 398,366
Shin-Etsu Polymer Co., Ltd........ 44,000 258,241
Sony Corp......................... 7,700 2,282,207
Suzuki Motor Co., Ltd............. 29,000 422,958
TDK Corp.......................... 8,000 1,104,177
Tokyo Electric Power Co........... 12,500 335,029
Toshiba Corp...................... 119,000 907,953
Toyota Motor Corp................. 16,000 774,724
Tsubakimoto Chain Co.............. 76,000 278,783
Yamaha Corp....................... 36,000 233,826
Yamanouchi Pharmaceutical Co.,
Ltd............................. 20,000 698,425
------------
34,024,058
------------
NETHERLANDS (4.0%)
Akzo Nobel N.V.................... 24,565 1,233,551
ING Groep N.V..................... 19,713 1,191,462
Koninlijke KPN N.V................ 4,725 461,675
Koninlijke (Royal) Philips
Electonics N.V.................. 7,995 1,088,336
Laurus N.V........................ 39,810 718,549
------------
4,693,573
------------
NEW ZEALAND (0.1%)
Telecom Corp. of New Zealand
Ltd............................. 28,500 134,021
------------
PORTUGAL (1.7%)
Banco Comercial Portugues S.A.
(Registered).................... 74,950 416,422
Electricidade de Portugal S.A..... 54,150 946,255
Telecel Commincacaoes Pessoais
S.A............................. 35,300 616,145
------------
1,978,822
------------
SINGAPORE (2.0%)
(a)Chartered Semiconductor
Manufacturing Ltd. ADR.......... 300 21,900
(a)Chartered Semiconductor
Manufacturing Ltd............... 9,000 49,174
City Developments Ltd............. 18,900 110,642
(a)DBS Group Holdings Ltd......... 29,564 484,598
NatSteel Electronics Ltd.......... 38,000 200,781
Neptune Orient Lines Ltd.......... 67,000 89,709
Oversea-Chinese Banking Corp.,
Ltd. (Foreign).................. 16,800 154,332
Overseas Union Bank Ltd.
(Foreign)....................... 25,124 147,078
Sembcorp Logistics Ltd............ 18,000 72,951
Singapore Airlines Ltd.
(Foreign)....................... 18,000 204,263
Singapore Press Holdings Ltd...... 13,000 281,777
Singapore Telecommunications
Ltd............................. 71,000 146,647
United Overseas Bank Ltd.
(Foreign)....................... 16,896 149,127
Venture Manufacturing Ltd......... 23,000 263,765
------------
2,376,744
------------
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
SPAIN (2.5%)
Banco Popular Espanol S.A......... 6,185 $ 403,822
Banco Santander Central Hispano
S.A............................. 35,400 401,218
Endesa S.A........................ 41,210 819,031
(a)Telefonica S.A................. 53,713 1,343,204
------------
2,967,275
------------
SWEDEN (3.2%)
Autoliv, Inc. SDR................. 24,300 712,602
(a)ForeningsSparbanken AB......... 54,500 802,320
Nordbanken Holding AB............. 43,800 257,920
Scandic Hotels AB................. 15,660 145,700
Svedala Industri AB............... 35,830 658,283
Svenska Cellulosa Free AB 'B'..... 12,000 356,142
Svenska Handelsbanken 'A'......... 68,600 864,468
------------
3,797,435
------------
SWITZERLAND (6.3%)
Cie Financiere Richemont AG 'A'... 700 1,671,379
Holderbank Financiere Glarus AG
'B' (Bearer).................... 671 919,120
Nestle S.A. (Registered).......... 1,570 2,877,594
Novartis AG (Registered).......... 705 1,035,683
Schindler Holding AG
(Registered).................... 274 439,020
UBS AG (Registered)............... 1,940 524,160
------------
7,466,956
------------
UNITED KINGDOM (18.9%)
Allied Domecq plc................. 157,500 778,393
Allied Zurich plc................. 66,700 785,866
AstraZeneca Group plc............. 21,185 878,659
BAA plc........................... 41,700 292,970
Bank of Scotland plc.............. 70,962 824,047
Barclays plc...................... 19,600 564,106
(a)BG Group plc................... 109,358 706,493
Blue Circle Industries plc........ 92,800 539,195
BOC Group plc..................... 38,250 821,637
British Telecommunications plc.... 64,200 1,568,813
Burmah Castrol plc................ 26,357 481,029
Cadbury Schweppes plc............. 112,000 676,530
Capital Radio plc................. 36,100 874,572
Centrica plc...................... 114,640 324,945
Diageo plc........................ 91,800 738,362
Glaxo Wellcome plc................ 13,400 378,739
Granada Group plc................. 59,400 602,001
Great Universal Stores plc........ 137,020 801,105
Halma plc......................... 224,600 424,417
Imperial Tobacco Group plc........ 68,400 563,408
Lloyds TSB Group plc.............. 43,100 539,133
National Westminster Bank......... 19,200 412,430
Prudential Corp. plc.............. 61,300 1,207,862
Reckitt Benckiser plc............. 181,929 1,705,695
Sainsbury (J) plc................. 83,600 471,563
Scottish & Southern Energy plc.... 107,000 854,137
Shell Transport & Trading Co.
plc............................. 154,300 1,282,178
Smith & Nephew plc................ 60,950 204,755
SSL International plc............. 63,100 799,247
WPP Group plc..................... 77,900 1,234,251
------------
22,336,538
------------
TOTAL COMMON STOCKS.................................. 108,911,924
------------
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (2.0%)
GERMANY (2.0%)
Fresenius AG...................... 6,765 $ 1,282,438
Henkel KGaA AG.................... 16,127 1,073,269
------------
TOTAL PREFERRED STOCKS............................... 2,355,707
------------
<CAPTION>
PAR
VALUE
-----------
CORPORATE BONDS & NOTES (0.1%)
<S> <C> <C>
UNITED KINGDOM (0.1%)
(b)BG Transco Holdings plc 0.00%,
12/14/09........................ $ 15,000 24,376
(b)BG Transco Holdings plc
4.1875%, 12/14/22............... 15,000 24,166
BG Transco Holdings plc 7.00%,
12/16/24........................ 15,000 23,538
------------
TOTAL CORPORATE BONDS & NOTES........................ 72,080
------------
TOTAL LONG-TERM INVESTMENTS (94.2%) (COST
$90,054,694)......................................... 111,339,711
------------
SHORT-TERM INVESTMENT (1.5%)
REPURCHASE AGREEMENT (1.5%)
Chase Securities, Inc., 2.60%,
dated 1,750,000
12/31/99, due 1/3/00, to be
repurchased at $1,750,379,
collateralized by $1,786,364 U.S.
Treasury Notes, 6.125%, due 12/31/01,
valued at $1,786,364 (COST $1,750,000)......... 1,750,000
------------
TOTAL INVESTMENTS IN SECURITIES (95.7%)
(91,804,694)....................................... 113,089,711
FOREIGN CURRENCY (0.0%) (COST $52,766)............... 52,591
------------
TOTAL INVESTMENTS (95.7%) (COST $91,857,460)......... 113,142,302
OTHER ASSETS IN EXCESS OF LIABILITIES (4.3%)......... 5,098,768
------------
NET ASSETS (100%).................................... $118,241,070
============
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(a) -- Non-income producing security
(b) -- Variable/floating rate security-rate disclosed is as of
December 31, 1999.
ADR -- American Depositary Receipt
SDR -- Swedish Depositary Receipt
</TABLE>
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------- ------------- ----------
<S> <C> <C>
Consumer Goods............... $ 30,198,422 25.5%
Capital Equipment............ 21,977,211 18.6
Services..................... 19,966,188 16.9
Finance...................... 19,037,318 16.1
Materials.................... 10,780,339 9.1
Energy....................... 8,477,788 7.2
Multi-Industry............... 902,445 0.8
------------- ----
$ 111,339,711 94.2%
============= ====
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
+ Classified by sectors which represent broad groupings of related
industries.
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------
ASSETS:
Investments at Value (Cost $91,804,694)................... $ 113,089,711
Foreign Currency (Cost $52,766)........................... 52,591
Cash...................................................... 4,060,003
Margin Deposit on Futures................................. 520,791
Receivable for:
Fund Shares Sold........................................ 637,389
Variation of Futures Contracts.......................... 227,862
Dividends............................................... 195,055
Foreign Withholding Tax Reclaim......................... 49,295
Interest................................................ 146
Net Unrealized Gain on Foreign Currency Exchange
Contracts............................................... 5,170
Other..................................................... 14,352
-------------
Total Assets............................................ 118,852,365
-------------
LIABILITIES:
Payable for:
Fund Shares Redeemed.................................... 255,053
Distribution Fees....................................... 121,571
Investment Advisory Fees................................ 62,989
Custody Fees............................................ 58,090
Shareholder Reporting Expense........................... 34,267
Administrative Fees..................................... 27,808
Directors' Fees and Expenses............................ 20,061
Professional Fees....................................... 15,856
Transfer Agent Fees..................................... 12,449
Other..................................................... 3,151
-------------
Total Liabilities....................................... 611,295
-------------
NET ASSETS.................................................. $ 118,241,070
=============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 7,461
Paid in Capital in Excess of Par.......................... 98,782,772
Net Unrealized Appreciation on Investments, Foreign
Currency Translations and Futures....................... 21,496,362
Accumulated Net Investment Loss........................... (462,357)
Accumulated Net Realized Loss............................. (1,583,168)
-------------
NET ASSETS.................................................. $ 118,241,070
=============
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $47,679,564 and 2,990,150 Shares
Outstanding)............................................ $ 15.95
=============
Maximum Sales Charge...................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100 / (100 - maximum sales charge))............. $ 16.92
=============
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $54,147,000 and 3,434,447 Shares
Outstanding)*........................................... $ 15.77
=============
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $16,414,506 and 1,036,361 Shares
Outstanding)*........................................... $ 15.84
=============
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 709,370
Interest.................................................. 71,979
Less Foreign Taxes Withheld............................... (61,375)
-----------
Total Income............................................. 719,974
-----------
EXPENSES:
Investment Advisory Fees.................................. 442,116
Distribution Fees (Attributed to Classes A, B and C of
$57,289, $248,830 and $74,740, respectively)............ 380,859
Administrative Fees....................................... 150,280
Custodian Fees............................................ 60,441
Shareholder Reports....................................... 46,657
Transfer Agent Fees....................................... 38,351
Professional Fees......................................... 22,996
Filing and Registration Fees.............................. 16,210
Directors' Fees and Expenses.............................. 10,863
Amortization of Organizational Costs...................... 3,443
Other..................................................... 3,291
-----------
Total Expenses........................................... 1,175,507
Less Expense Reductions.................................. (16,196)
-----------
Net Expenses............................................. 1,159,311
-----------
Net Investment Income/Loss.................................. (439,337)
-----------
NET REALIZED GAIN/LOSS ON:
Investments............................................... 4,798,190
Foreign Currency Transactions............................. (104,249)
Futures................................................... 145,671
-----------
Net Realized Gain/Loss...................................... 4,839,612
-----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... 8,067,691
-----------
End of the Period:
Investments............................................. 21,285,017
Foreign Currency Translations........................... (16,517)
Futures................................................. 227,862
-----------
21,496,362
-----------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 13,428,671
-----------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. 18,268,283
-----------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $17,828,946
===========
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss $ (439,337) $ 6,000
Net Realized Gain/Loss.................................... 4,839,612 (6,851,000)
Net Unrealized Appreciation/Depreciation.................. 13,428,671 (2,182,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 17,828,946 (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 (1):
Subscribed................................................ 28,295,681 79,794,000
Distributions Reinvested.................................. -- 2,837,000
Redeemed.................................................. (35,739,492) (96,317,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... (7,443,811) (13,686,000)
----------------- -------------
Total Increase/Decrease in Net Assets..................... 10,385,135 (26,022,000)
NET ASSETS--Beginning of Period............................. 107,855,935 133,878,000
----------------- -------------
NET ASSETS--End of Period (Including
accumulated/distributions in excess net investment income
of $(462,357) and $(23,000), respectively)................ $ 118,241,070 $ 107,856,000
================= =============
- -------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
-------
Shares:
Subscribed............................................. 1,297,780 1,848,000
Distributions Reinvested............................... -- 120,000
Redeemed............................................... (1,666,208) (3,110,000)
----------------- -------------
Net Increase/Decrease in Class A Shares Outstanding...... (368,428) (1,142,000)
================= =============
Dollars:
Subscribed............................................. $ 18,927,908 $ 24,712,000
Distributions Reinvested............................... -- 1,503,000
Redeemed............................................... (24,279,447) (40,959,000)
----------------- -------------
Net Increase/Decrease.................................... $ (5,351,539) $ (14,744,000)
================= =============
Ending Paid in Capital................................... $ 40,229,020 $ 46,134,000+
================= =============
Class B:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 405,085 1,344,000
Distributions Reinvested............................... -- 84,000
Redeemed............................................... (542,461) (1,357,000)
----------------- -------------
Net Increase/Decrease in Class B Shares Outstanding...... (137,376) 71,000
================= =============
Dollars:
Subscribed............................................. $ 5,801,670 $ 17,633,000
Distributions Reinvested............................... -- 1,048,000
Redeemed............................................... (7,726,768) (17,469,000)
----------------- -------------
Net Increase/Decrease.................................... $ (1,925,098) $ 1,212,000
================= =============
Ending Paid in Capital................................... $ 45,538,532 $ 48,048,000+
================= =============
Class C:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 249,349 2,928,000
Distributions Reinvested............................... -- 23,000
Redeemed............................................... (262,251) (2,952,000)
----------------- -------------
Net Increase/Decrease in Class C Shares Outstanding...... (12,902) (1,000)
================= =============
Dollars:
Subscribed............................................. $ 3,566,103 $ 37,449,000
Distributions Reinvested............................... -- 286,000
Redeemed............................................... (3,733,277) (37,889,000)
----------------- -------------
Net Increase/Decrease.................................... $ (167,174) $ (154,000)
================= =============
Ending Paid in Capital................................... $ 13,022,681 $ 13,362,000+
================= =============
</TABLE>
- -----------------
<TABLE>
<S> <C>
+ Ending Paid in Capital amounts do not reflect permanent book
to tax differences.
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------------------- -------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED
DECEMBER 31, JUNE 30, DECEMBER 31,
1999 ----------------- JULY 1, 1996* TO 1999
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# JUNE 30, 1997 (UNAUDITED)#
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 13.569 $14.845 $ 13.91 $ 12.00 $ 13.465
------------- ------- ------- -------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............ (0.025) 0.049 0.17 0.17 (0.080)
Net Realized and Unrealized
Gain/Loss........................... 2.401 (0.910) 0.96 1.88 2.381
------------- ------- ------- -------------- -------------
Total From Investment Operations...... 2.376 (0.861) 1.13 2.05 2.301
------------- ------- ------- -------------- -------------
DISTRIBUTIONS
Net Investment Income................. -- (0.248) (0.18) (0.13) --
In Excess of Net Investment Income.... -- (0.003) -- -- --
Net Realized Gain..................... -- -- (0.01) (0.01) --
In Excess of Net Realized Gain........ -- (0.164) -- -- --
------------- ------- ------- -------------- -------------
Total Distributions................... -- (0.415) (0.19) (0.14) --
------------- ------- ------- -------------- -------------
NET ASSET VALUE, END OF PERIOD.......... $ 15.945 $13.569 $ 14.85 $ 13.91 $ 15.766
============= ======= ======= ============== =============
TOTAL RETURN (1)........................ 17.46%** (5.54)% 8.32% 17.30%** 17.16%**
============= ======= ======= ============== =============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)....... $ 47,680 $45,573 $66,817 $ 21,961 $ 54,147
Ratio of Expenses to Average Net
Assets................................ 1.65% 1.65% 1.65% 1.65% 2.40%
Ratio of Net Investment Income/Loss to
Average Net Assets.................... (0.36)% 0.37% 1.19% 1.39% (1.11)%
Portfolio Turnover Rate................. 20%** 70% 35% 22%** 20%**
- -----------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss......................... $ 0.00+ $ 0.00+ $ 0.02 $ 0.11 $ 0.00+
Ratios Before Expense Limitation:
Expenses to Average Net Assets........ 1.69% 1.71% 1.82% 2.50% 2.44%
Net Investment Income/Loss to Average
Net Assets.......................... (0.37)% 0.33% 1.02% 0.52% (1.14)%
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
----------------------------
YEAR ENDED JULY 1,
JUNE 30, 1996* TO
----------------- JUNE 30,
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997
<S> <C> <C> <C>
- ----------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... $14.724 $ 13.84 $ 12.00
------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............ (0.043) 0.05 0.10
Net Realized and Unrealized
Gain/Loss........................... (0.903) 0.97 1.85
------- ------- --------
Total From Investment Operations...... (0.946) 1.02 1.95
------- ------- --------
DISTRIBUTIONS
Net Investment Income................. (0.147) (0.13) (0.10)
In Excess of Net Investment Income.... (0.002) -- --
Net Realized Gain..................... -- (0.01) (0.01)
In Excess of Net Realized Gain........ (0.164) -- --
------- ------- --------
Total Distributions................... (0.313) (0.14) (0.11)
------- ------- --------
NET ASSET VALUE, END OF PERIOD.......... $13.465 $ 14.72 $ 13.84
======= ======= ========
TOTAL RETURN (1)........................ (6.28)% 7.55% 16.40%**
======= ======= ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)....... $48,096 $51,541 $ 18,215
Ratio of Expenses to Average Net
Assets................................ 2.40% 2.40% 2.40%
Ratio of Net Investment Income/Loss to
Average Net Assets.................... (0.33)% 0.40% 0.54%
Portfolio Turnover Rate................. 70% 35% 22%**
- -----------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss......................... $ 0.00+ $ 0.02 $ 0.17
Ratios Before Expense Limitation:
Expenses to Average Net Assets........ 2.46% 2.57% 3.34%
Net Investment Income/Loss to Average
Net Assets.......................... (0.37)% 0.23% (0.42)%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------
YEAR ENDED
SIX MONTHS ENDED JUNE 30,
DECEMBER 31, 1999 -------------------- JULY 1, 1996* TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# JUNE 30, 1997
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.521 $14.782 $ 13.83 $ 12.00
----------------- ------- ------- --------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............................. (0.081) (0.034) 0.05 0.06
Net Realized and Unrealized Gain/Loss.................. 2.399 (0.914) 0.99 1.88
----------------- ------- ------- --------------
Total From Investment Operations....................... 2.318 (0.948) 1.04 1.94
----------------- ------- ------- --------------
DISTRIBUTIONS
Net Investment Income.................................. -- (0.147) (0.08) (0.10)
In Excess of Net Investment Income..................... -- (0.002) -- --
Net Realized Gain...................................... -- -- (0.01) (0.01)
In Excess of Net Realized Gain......................... -- (0.164) -- --
----------------- ------- ------- --------------
Total Distributions.................................... -- (0.313) (0.09) (0.11)
----------------- ------- ------- --------------
NET ASSET VALUE, END OF PERIOD........................... $ 15.839 $13.521 $ 14.78 $ 13.83
================= ======= ======= ==============
TOTAL RETURN (1)......................................... 17.16%** (6.25)% 7.55% 16.27%**
================= ======= ======= ==============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................ $ 16,414 $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................................................. (1.11)% (0.26)% 0.36% 0.29%
Portfolio Turnover Rate.................................. 20%** 70% 35% 22%**
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation During the Period
Per Share Benefit to Net Investment Income/Loss........ $ 0.00+ $ 0.00+ $ 0.02 $ 0.21
Ratios Before Expense Limitation:
Expenses to Average Net Assets......................... 2.44% 2.46% 2.56% 3.45%
Net Investment Income/Loss to Average Net Assets....... (1.14)% (0.30)% 0.20% (0.77)%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Commencement of operations
** Non-Annualized
+ Amount is less than $0.01 per share.
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
- --------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen International Magnum Fund (the "Fund") is organized as a separate
non-diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation,
which is registered as an open-end management company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks long-term
capital appreciation by investing primarily in equity securities of non-U.S.
issuers in accordance with EAFE country weightings determined by the Adviser.
The Fund commenced operations on July 1, 1996.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
For certain purchases of Class A shares, the front-end sales charge may be
waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Securities listed on a foreign exchange are valued at
their closing price. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. All other securities and assets for which market values are not readily
available are valued at fair value as determined in good faith by the Board of
Directors, although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date, net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. Income, expenses (other than class specific expenses)
and realized and unrealized gains or losses are allocated to each class of
shares based upon their relative net assets. Distributions from the Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized
------------------
13
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
between trade date and settlement date on security and income transactions.
However, the foreign currency portion of gains and losses realized on sales and
maturities of foreign denominated debt securities is treated as ordinary income
for U.S. Federal income tax purposes.
5. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's commencement of operations. The Adviser has agreed that in the event
any of the initial shares of the Fund originally purchased by Van Kampen are
redeemed by the Fund during the amortization period, the Fund will be reimbursed
for any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
6. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains, and net unrealized appreciation, as applicable, as the income is earned
or capital gains are recorded.
To the extent that capital loss carryforwards are used to offset any future net
capital gains realized during the carryforward period as provided by U.S.
Federal income tax regulations, no capital gains tax liability will be incurred
by a Fund for gains realized and not distributed. To the extent that capital
gains are so offset, such gains will not be distributed to shareholders.
At June 30, 1999, the Fund had available capital loss carryforward for U.S.
Federal income tax purposes of approximately $2,624,000 which will expire
June 30, 2007.
Net capital losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 to June 30, 1999 the Fund incurred and elected
to defer until July 1, 1999, for U.S. Federal income tax purposes, net capital
losses of approximately $3,163,000.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ----------- ----------- ------------ -------------
<S> <C> <C> <C>
$91,804,694 $26,728,705 $(5,443,688) $21,285,017
</TABLE>
7. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing book and
tax treatment for foreign currency transactions, net operating losses, foreign
taxes on net realized gains, deductibility of interest expense on short sales
and gains on certain securities of corporations designated as "passive foreign
investment companies."
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss and paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
0.80% 1.65% 2.40%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $3,425
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the
- -----------------------
14
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
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 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
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $98,298 for Class A shares and deferred sales charges of
$71,878 and $1,069 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 December 31, 1999, the Fund incurred $9,016 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the
Portfolio made purchases of $21,024,474 and sales of $35,133,641 of investment
securities other than long-term U.S. government securities and short-term
investments. There were no purchases or sales of long-term U.S. government
securities.
D. DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in very
general terms refers to a security whose value is "derived" from the value of an
underlying asset, reference rate or index. The Fund has a variety of reasons to
use derivative instruments, such as to attempt to protect the Fund against
possible changes in the market value of its portfolio and to manage the
portfolio's foreign currency exposure. All of the Fund's portfolio holdings,
including derivative instruments, are marked-to-market each day with the change
in value reflected in unrealized appreciation/ depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when exercising a call
option contract or taking delivery of a security underlying a forward contract.
In this instance, the recognition of gain or loss is postponed until the
disposal of the security underlying the option or forward contract. Risks may
arise as a result of the potential inability of the counterparties to meet the
terms of their contracts.
Summarized below are the specific types of derivative financial instruments used
by the Fund.
1. FORWARD CURRENCY CONTRACTS: These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency transactions.
At December 31, 1999, the Fund has outstanding forward currency contracts as
follows::
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
FORWARD CURRENCY CONTRACTS VALUE DEPRECIATION
- -------------------------- ---------- -------------
<S> <C> <C>
LONG CONTRACTS:
Euro,
725,500, expiring 2/16/00........... $ 734,215 $(12,760)
British Pound,
268,500, expiring 2/16/00........... 433,666 (3,492)
Japanese Yen,
141,930,000, expiring 2/16/00....... 1,398,952 21,422
---------- --------
$2,566,833 $ 5,170
========== ========
</TABLE>
2. FUTURES CONTRACTS: A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in futures of U.S. Treasury Notes and typically closes
the contract prior to the delivery date.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin). The potential risk of loss associated
with a futures contract is in excess of the variation margin reflected on the
Statement of Assets and Liabilities. The cost of securities acquired through
delivery under a contract is adjusted by the unrealized gain or loss on the
contract.
------------------
15
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
Transactions in futures contracts for the period ended December 31, 1999, were
as follows:
<TABLE>
<CAPTION>
CONTRACTS
---------
<S> <C>
Outstanding at June 30, 1999............... 0
Futures Opened............................. 30
Futures Closed............................. (2)
---
Outstanding at December 31, 1999........... 28
===
</TABLE>
The futures contracts outstanding as of December 31, 1999, 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--
(Current notional value $246,982).... 4 $ 19,143
DAX Index--
(Current notional value $359,978).... 2 43,106
Hang Seng Index--
(Current notional value $873,085).... 8 30,377
MIB 30 Index--
(Current notional value $229,263).... 1 27,217
TOPIX Index--
(Current notional value
$1,499,771).......................... 9 90,831
FTSE 100 Index--
(Current notional value $453,534).... 4 17,188
-- --------
28 $227,862
== ========
</TABLE>
E. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
- -----------------------
16
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the International Magnum Fund
(the "Fund") was held on December 15, 1999.
The description of each proposal and number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
--------- --------
<S> <C> <C>
J. Miles Branagan........................................... 4,855,533 17,660
Jerry D. Choate............................................. 4,854,965 18,228
Linda Hutton Heagy.......................................... 4,854,810 18,383
R. Craig Kennedy............................................ 4,854,965 18,228
Mitchell M. Merin........................................... 4,854,269 18,924
Jack E. Nelson.............................................. 4,855,533 17,660
Richard F. Powers, III...................................... 4,855,533 17,660
Phillip B. Rooney........................................... 4,866,533 17,660
Fernando Sisto.............................................. 4,853,655 19,538
Wayne W. Whalen............................................. 4,855,533 17,660
Suzanne H. Woolsey.......................................... 4,854,810 18,383
Paul G. Yovovich............................................ 4,855,533 17,660
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C> <C>
4,834,758 8,053 30,381
</TABLE>
------------------
17
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
* Closed to new investors
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at www.vankampen.com --
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting www.vankampen.com
and selecting CONTACT US
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
Chairman of the Board
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management of
Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555/ /
www.vankampen.com
MSIM SAR 02/00 -C- Van Kampen Funds Inc. 2000
461 561 661
<PAGE>
VAN KAMPEN
EQUITY GROWTH FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders.......................... 1
Economic Snapshot............................... 2
Investment Overview............................. 3
Portfolio of Investments........................ 6
Statement of Assets and Liabilities............. 8
Statement of Operations......................... 9
Statement of Changes in Net Assets.............. 10
Financial Highlights ........................... 11
Notes to Financial Statements................... 12
Additional Information.......................... 15
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Technology 30.4%
Consumer Staples 17.8%
Capital Goods 17.1%
Health Care 11.6%
Consumer Cyclicals 9.3%
Financial 5.2%
Communication Services 4.3%
Other 4.3%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES S&P 500 INDEX
------- ------- ------- -------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*.................................... 13.29% 14.83% 18.77% N/A
Without Sales Charge***............................... 20.25% 19.83% 19.77% 7.70%
One Year
With Sales Charge*.................................... 30.44% 32.50% 36.32% N/A
Without Sales Charge***............................... 38.34% 37.50% 37.32% 21.04%
Average Annual Since Inception
With Sales Charge*.................................... 24.68% 26.37% 28.43% N/A
Without Sales Charge***............................... 29.40% 28.54% 28.43% 21.72%
Commencement Date....................................... 5/29/98 5/29/98 5/29/98 N/A
</TABLE>
Since Lipper Analytical Services has reclassified how it categorizes its
indices, we will no longer be using Lipper comparisons because we believe the
new system is less applicable. As result, the Lipper Growth Fund Index will not
appear in this or future reports. The Standard & Poor's 500 Index is an
unmanaged index of common stocks and assumes dividends are reinvested.
* The returns above are calculated using the maximum sales charge for Class A
(5.75%) shares and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY SECTOR NET ASSETS
- -------- --------------------------- ----------
<S> <C> <C>
Computers
(Software & Services) 5.2%
Microsoft Corp.
Tyco International Ltd. Manufacturing (Diversified) 5.0%
Cisco Systems, Inc. Computers (Networking) 5.0%
General Electric Co. Electrical Equipment 4.8%
Home Depot, Inc. Retail (Building Supplies) 3.6%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS+
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ----------- ----------
<S> <C> <C>
Technology $21,446,781 30.4%
Consumer Staples 12,589,169 17.8%
Capital Goods 12,074,706 17.1%
Health Care 8,215,094 11.6%
Consumer Cyclicals 6,608,484 9.3%
+These sectors represent broad groupings of related
industries.
</TABLE>
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGERS OF THE VAN KAMPEN EQUITY GROWTH
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE
PAST SIX MONTHS. SINCE 1998 THE FUND HAS BEEN MANAGED BY PHILIP W. FRIEDMAN,
MARGARET K. JOHNSON (SINCE INCEPTION), AND WILLIAM S. AUSLANDER, PORTFOLIO
MANAGERS, MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. THE FOLLOWING
DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE SIX-MONTH
REPORTING PERIOD ENDED DECEMBER 31, 1999.
Q. WHAT MARKET FACTORS AFFECTED THE FUND DURING THE REPORTING PERIOD?
A. The Dow Jones Industrial Average--perhaps the most widely recognized stock
market index--endured a difficult third quarter of 1999, losing more than 6
percent of its value. But the Dow recovered dramatically in the fourth quarter,
rising more than 11 percent to a record high on December 31. The big story,
however, continued to be the outstanding performance of growth stocks. The
NASDAQ stock market, with its high concentration of companies in technology and
other burgeoning industries, rose almost without interruption in the last half
of 1999. It climbed an impressive 51 percent during the period, and the vast
majority of that gain came in the fourth quarter.
Q. DID RECENT MARKET CONDITIONS AFFECT HOW YOU MANAGED THE FUND?
A. No, because we consistently use a "bottom up" stock selection strategy. In
other words, we choose stocks by analyzing individual companies, not by
assessing broad market conditions. We believe that the best way of managing
through stock market volatility--such as what we encountered during the
reporting period--is to conduct even more extensive research and strengthen our
"information edge."
Q. HOW DID YOU SELECT THE INVESTMENTS IN THE FUND?
A. As always, we continued to employ our management strategy of "opportunistic
concentration," or holding up to 10 percent of the portfolio in a particular
stock if we have a great deal of conviction that it may perform well. As a
result, the performance of a smaller number of securities can have more of an
impact on the Fund's overall return. In other words, the more we own of a
company, the more its stock performance will affect how the Fund performs.
Q. WHAT WERE SOME OF THE STOCKS THAT HAD THE MOST FAVORABLE IMPACT ON THE FUND'S
RETURN?
A. As the valuations of many Internet companies soar, we are especially mindful
of the high risk associated with investing in this area. To attempt to moderate
this risk, we continued to focus on strong, healthy, and, at times, even
traditional growth companies that are indirectly benefiting from the Internet's
rapid expansion. While Internet companies may come and go, we are extremely
optimistic about businesses that supply the products and services fueling
on-line growth.
For example, the Fund's performance was greatly helped by its investment in
Cisco Systems. Cisco, which makes the devices that enable computers on the
Internet to communicate with each other, is becoming known as "the" Internet
company because of its dominant role in the industry. The stock was an
impressive performer during the period, returning 64 percent and contributing to
the Fund's results more than any other stock. We were also pleased with the
performance of Intel, maker of the computer chips that drive most of the world's
personal computers. Another successful investment during the reporting period
was JDS Uniphase. This semiconductor company helps accelerate data transmission
for the telecommunications and cable industries.
Although technology stocks generally experienced the largest gains during the
reporting period, General Electric (a diversified conglomerate that includes
businesses in electronics, broadcasting, and financial services) and
Warner-Lambert (a pharmaceutical and consumer-products company), by virtue of
their large positions in the Fund, also contributed significantly to the Fund's
return.
Keep in mind that not all securities in the Fund performed as well as those
mentioned, nor is there any guarantee they will continue to do so in the future.
- -----------------------
4
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q. WHICH STOCKS MOST DETRACTED FROM THE FUND'S PERFORMANCE?
A. As with the Fund's positive performers, detractors to total return were on a
stock-by-stock basis. These disappointments included
- Pitney Bowes, which makes postage meters and other business equipment;
- Abercrombie & Fitch, a clothing retailer popular with college students;
and
- General Dynamics, a contractor specializing in developing defense and
information systems for the U.S. Department of Defense.
The Fund's performance was also weakened by its investment in Tyco, a holding
company that owns a wide variety of businesses and a large holding (5.0 percent
of the portfolio as of December 31).
Q. WHAT HAPPENED WITH TYCO?
A. During the first half of the period, Tyco was one of the Fund's top
contributors to overall return, as the company generated healthy cash flows and
earnings. The stock's strong performance reversed itself in early October when
the author of a short-selling newsletter questioned Tyco's accounting
methods--specifically, how the company accounted for its corporate acquisitions.
Despite Tyco's vehement denials of wrongdoing, this allegation spurred rumors
that scared some investors, and the company's stock fell by nearly half in the
ensuing weeks. In response to the rumors, the Securities and Exchange Commission
said that, while not alleging any impropriety, it would conduct an informal
inquiry of Tyco. The stock recovered some of its losses in December but,
overall, declined nearly 23 percent during the second half of 1999.
Q. GIVEN THESE FACTORS, WERE YOU TEMPTED TO SCALE BACK YOUR POSITION IN THE
STOCK?
A. No. Shortly after the allegations surfaced, Tyco's financial officers held a
large meeting at which stock analysts were invited to ask questions about the
company's accounting practices. This impressed us as a powerful statement of
confidence in the legitimacy of Tyco's business dealings. Moreover, after
dissecting the company's financial statements, we believe that Tyco is
fundamentally very strong, especially with regard to cash flows, in our opinion
one of the most important measures of a business's health. We are very
optimistic about Tyco's potential and believe that it may contribute positively
to the Fund's results in 2000.
Q. HOW DID THE FUND PERFORM DURING THE LAST HALF OF 1999?
A. The Fund performed very well during the reporting period, despite Tyco's
underperformance. The Fund achieved a six-month total return of 20.25 percent
(Class A shares at net asset value) as of December 31, 1999. By comparison, the
Standard & Poor's 500 Index returned 7.70 percent. Past performance doesn't
guarantee future results. This index is an unmanaged statistical composite that
does not include any commissions or sales charges that would be paid by an
investor purchasing the securities it represents. Such costs would lower the
performance of the index. An investment cannot be made directly in an index.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. Market conditions may serve as a backdrop for the Fund's performance, but
it's really our bottom-up approach to stock selection that governs whether the
Fund performs well or poorly in a given period. We readily admit that we don't
know what the market will bring in the first six months of 2000. We do know that
we'll continue to rely on our research staff to find out as much as we can about
the investments we already own in the Fund's portfolio, as well as the ones we'd
like to add. Not all investments will be successes, of course, but we believe
that the more we know, the greater the potential for the stocks we select to
outperform--and the smaller the risk of a favorite stock providing an unpleasant
surprise.
------------------
5
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
COMMON STOCKS+ (96.2%)
CAPITAL GOODS (17.1%)
AEROSPACE/DEFENSE (1.2%)
General Dynamics Corp............ 15,900 $ 838,725
-----------
ELECTRICAL EQUIPMENT (5.4%)
General Electric Co.............. 22,100 3,419,975
(a)Solectron Corp................ 4,400 418,550
-----------
3,838,525
-----------
MANUFACTURING (DIVERSIFIED) (9.3%)
Textron, Inc..................... 9,100 697,856
Tyco International Ltd........... 91,600 3,560,950
United Technologies Corp......... 35,800 2,327,000
-----------
6,585,806
-----------
OFFICE EQUIPMENT & SUPPLIES (1.2%)
Pitney Bowes, Inc................ 16,800 811,650
-----------
TOTAL CAPITAL GOODS................................. 12,074,706
-----------
COMMUNICATION SERVICES (4.3%)
TELECOMMUNICATIONS (LONG DISTANCE) (2.3%)
(a)MCI WorldCom, Inc............. 30,900 1,639,631
-----------
TELEPHONE (2.0%)
Bell Atlantic Corp............... 16,700 1,028,094
BellSouth Corp................... 2,200 102,988
(a)Pinnacle Holdings, Inc........ 3,300 139,837
SBC Communications, Inc.......... 2,800 136,500
-----------
1,407,419
-----------
TOTAL COMMUNICATION SERVICES........................ 3,047,050
-----------
CONSUMER CYCLICALS (9.3%)
RETAIL (BUILDING SUPPLIES) (3.6%)
Home Depot, Inc.................. 36,900 2,529,956
-----------
RETAIL (GENERAL MERCHANDISE) (3.5%)
(a)Costco Wholesale Corp......... 16,400 1,496,500
Wal-Mart Stores, Inc............. 14,800 1,023,050
-----------
2,519,550
-----------
RETAIL (SPECIALTY) (0.7%)
Intimate Brands, Inc............. 11,705 504,778
-----------
RETAIL (SPECIALTY/APPAREL) (0.3%)
Tiffany & Co..................... 2,400 214,200
-----------
SERVICES (ADVERTISING/MARKETING) (1.2%)
Omnicon Group, Inc............... 8,400 840,000
-----------
TOTAL CONSUMER CYCLICALS............................ 6,608,484
-----------
CONSUMER STAPLES (17.8%)
BEVERAGES (ALCOHOLIC) (0.8%)
Anheuser-Busch Cos., Inc. 'A'.... 8,500 602,438
-----------
BROADCASTING (TV, RADIO & CABLE) (11.5%)
(a)AMFM, Inc..................... 11,400 892,050
(a)AT&T Corp. Liberty Media
Group 'A'...................... 25,500 1,447,125
(a)CBS, Inc...................... 8,600 549,862
(a)Charter
Communications, Inc............ 11,800 258,125
(a)Clear Channel
Communications, Inc............ 28,100 2,507,925
Comcast Corp. 'A'................ 2,300 110,113
Comcast Corp. 'A' (Special)...... 22,100 1,110,525
(a)MediaOne Group, Inc........... 14,100 1,083,056
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
(a)Tivo, Inc..................... 3,100 $ 104,625
(a)TV Guide, Inc................. 2,000 86,000
-----------
8,149,406
-----------
ENTERTAINMENT (2.1%)
Time Warner, Inc................. 20,900 1,513,944
-----------
FOODS (0.8%)
(a)Keebler Foods Co.............. 9,400 264,375
Quaker Oats Co................... 4,300 282,188
-----------
546,563
-----------
HOUSEHOLD PRODUCTS (NON-DURABLES) (1.7%)
Estee Lauder Cos................. 1,600 80,700
Procter & Gamble Co.............. 10,100 1,106,581
-----------
1,187,281
-----------
RESTAURANTS (0.2%)
(a)Brinker
International, Inc............. 5,600 134,400
-----------
RETAIL (FOOD CHAINS) (0.3%)
(a)Safeway, Inc.................. 5,300 188,481
-----------
TOBACCO (0.4%)
Philip Morris Cos., Inc.......... 11,500 266,656
-----------
TOTAL CONSUMER STAPLES.............................. 12,589,169
-----------
FINANCIAL (5.2%)
BANKS (MAJOR REGIONAL) (1.2%)
Bank of New York Co., Inc........ 20,500 820,000
-----------
FINANCIAL (DIVERSIFIED) (3.4%)
American Express Co.............. 7,500 1,246,875
Citigroup, Inc................... 20,750 1,152,922
-----------
2,399,797
-----------
INSURANCE (MULTI-LINE) (0.6%)
American International
Group, Inc..................... 4,100 443,312
-----------
TOTAL FINANCIAL..................................... 3,663,109
-----------
HEALTH CARE (11.6%)
HEALTH CARE (DIVERSIFIED) (6.9%)
American Home Products Corp...... 16,200 638,888
Bristol-Myers Squibb Co.......... 23,000 1,476,312
Johnson & Johnson................ 10,500 977,812
Warner-Lambert Co................ 22,100 1,810,819
-----------
4,903,831
-----------
HEALTH CARE (DRUGS--GENERIC & OTHERS) (0.7%)
(a)Amgen, Inc.................... 8,000 480,500
(a)Tularik, Inc.................. 1,200 38,850
-----------
519,350
-----------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS) (3.5%)
Eli Lilly & Co................... 3,300 219,450
(a)Forest Laboratories, Inc.
'A'............................ 2,400 147,450
Merck & Co., Inc................. 13,900 932,169
Pfizer, Inc...................... 35,800 1,161,262
-----------
2,460,331
-----------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) (0.5%)
Medtronic, Inc................... 9,100 331,582
-----------
TOTAL HEALTH CARE................................... 8,215,094
-----------
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
MATERIALS (0.2%)
CHEMICALS (0.2%)
Monsanto Co...................... 4,100 $ 146,063
-----------
TECHNOLOGY (30.4%)
COMMUNICATION EQUIPMENT (7.5%)
(a)American Tower Corp. 'A'...... 20,800 635,700
(a)CIENA Corp.................... 6,300 362,250
(a)Finisar Corp.................. 1,100 98,862
(a)JDS Uniphase Corp............. 4,400 709,775
Lucent Technologies, Inc......... 11,500 860,344
Motorola, Inc.................... 13,900 2,046,775
Nortel Networks Corp............. 5,900 595,900
-----------
5,309,606
-----------
COMPUTERS (HARDWARE) (1.0%)
(a)Sun Microsystems, Inc......... 9,300 720,169
-----------
COMPUTERS (NETWORKING) (6.5%)
(a)Cisco Systems, Inc............ 32,700 3,502,987
(a)Cobalt Networks, Inc.......... 1,200 130,050
(a)Inktomi Corp.................. 2,400 213,000
(a)Juniper Networks, Inc......... 600 204,000
(a)Yahoo!, Inc................... 1,300 562,494
-----------
4,612,531
-----------
COMPUTERS (SOFTWARE & SERVICES) (8.7%)
(a)America Online, Inc........... 13,000 980,687
(a)Internet Capital Group LLC.... 1,400 238,000
(a)IXnet, Inc.................... 9,600 289,200
(a)Microsoft Corp................ 31,400 3,665,950
(a)Novell, Inc................... 5,800 230,913
(a)OpenTV Corp................... 1,100 88,275
(a)Oracle System Corp............ 4,300 481,869
(a)Va Linux Systems, Inc......... 600 123,975
-----------
6,098,869
-----------
ELECTRONICS (DEFENSE) (0.8%)
(a)General Motors Corp. 'H'...... 3,800 364,800
(a)Litton Industries, Inc........ 3,400 169,575
-----------
534,375
-----------
ELECTRONICS (SEMICONDUCTORS) (4.5%)
Intel Corp....................... 24,100 1,983,731
(a)Maxim Integrated
Products, Inc.................. 12,000 566,250
Texas Instruments, Inc........... 6,400 620,000
-----------
3,169,981
-----------
EQUIPMENT (SEMICONDUCTORS) (1.4%)
(a)Applied Materials, Inc........ 7,200 912,150
(a)KLA-Tencor Corp............... 800 89,100
-----------
1,001,250
-----------
TOTAL TECHNOLOGY.................................... 21,446,781
-----------
UTILITIES (0.3%)
ELECTRIC COMPANIES (0.3%)
Montana Power Co................. 5,000 180,313
-----------
TOTAL LONG-TERM INVESTMENTS (96.2%) (COST
$51,560,139).......................................... 67,970,769
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
SHORT-TERM INVESTMENT (3.1%)
REPURCHASE AGREEMENT (3.1%)
Chase Securities, Inc., 2.60%, dated $2,221,000
12/31/99, due 1/3/00, to be repurchased
at $2,221,481 collateralized by $2,270,379
U.S. Treasury Notes, 6.125%,
due 12/31/01, valued at $2,270,379
(COST $2,221,000)............................... $ 2,221,000
-----------
TOTAL INVESTMENTS (99.3%) (COST $53,781,139).......... 70,191,769
OTHER ASSETS IN EXCESS OF LIABILITIES (0.7%).......... 490,070
-----------
NET ASSETS (100%)..................................... $70,681,839
===========
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(a) -- Non-income producing security
+ -- The common stocks are classified by sectors which represent
broad groupings of related industries.
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------
ASSETS:
Investments at Value (Cost $53,781,139)................... $70,191,769
Cash...................................................... 139,884
Receivable for:
Investments Sold........................................ 3,698,486
Fund Shares Sold........................................ 730,566
Dividends............................................... 26,263
Interest................................................ 373
Deferred Organizational Costs............................. 4,028
Other..................................................... 7,713
-----------
Total Assets............................................ 74,799,082
-----------
LIABILITIES:
Payable for:
Investments Purchased................................... 3,838,769
Fund Shares Redeemed.................................... 102,588
Distribution Fees....................................... 74,713
Investment Advisory Fees................................ 29,975
Shareholder Reporting Expenses.......................... 24,524
Administrative Fees..................................... 14,652
Directors' Fees and Expenses............................ 12,752
Professional Fees....................................... 9,425
Transfer Agent Fees..................................... 5,691
Custody Fees............................................ 1,483
Other..................................................... 2,671
-----------
Total Liabilities....................................... 4,117,243
-----------
NET ASSETS.................................................. $70,681,839
===========
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 4,886
Paid in Capital in Excess of Par.......................... 52,360,433
Net Unrealized Appreciation on Investments................ 16,410,630
Accumulated Net Realized Gain............................. 2,258,051
Accumulated Net Investment Loss........................... (352,161)
-----------
NET ASSETS.................................................. $70,681,839
===========
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $25,235,965 and 1,731,481 Shares
Outstanding)............................................ $ 14.57
===========
Maximum Sales Charge...................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100 / (100 - maximum sales charge))............. $ 15.46
===========
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $34,095,592 and 2,366,316 Shares
Outstanding)*........................................... $ 14.41
===========
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $11,350,282 and 788,497 Shares
Outstanding)*........................................... $ 14.39
===========
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 154,048
Interest.................................................. 47,445
-----------
Total Income............................................. 201,493
-----------
EXPENSES:
Investment Advisory Fees.................................. 219,788
Distribution Fees (Attributed to Classes A, B and C of
$24,375, $135,275 and $41,978, respectively)............ 201,628
Administrative Fees....................................... 71,718
Shareholder Reports....................................... 31,232
Filing and Registration Fees.............................. 21,428
Transfer Agent Fees....................................... 18,011
Directors' Fees and Expenses.............................. 10,981
Amortization of Organizational Costs...................... 10,604
Professional Fees......................................... 7,593
Custodian Fees............................................ 6,686
Other..................................................... 1,944
-----------
Total Expenses........................................... 601,613
Less Expense Reductions.................................. (55,829)
-----------
Net Expenses............................................. 545,784
-----------
Net Investment Income/Loss.................................. (344,291)
-----------
NET REALIZED GAIN/LOSS ON:
Investments............................................... 4,282,593
-----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... 9,174,665
-----------
End of the Period:
Investments............................................. 16,410,630
-----------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 7,235,965
-----------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. 11,518,558
-----------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $11,174,267
===========
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ (344,291) $ (364,000)
Net Realized Gain/Loss.................................... 4,282,593 502,000
Net Unrealized Appreciation/Depreciation.................. 7,235,965 9,036,000
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 11,174,267 9,174,000
----------------- -------------
DISTRIBUTIONS:
Net Realized Gain:
Class A................................................. (772,590) (3,000)
Class B................................................. (1,057,337) (4,000)
Class C................................................. (337,012) (1,000)
----------------- -------------
Net Decrease in Net Assets Resulting from Distributions... (2,166,939) (8,000)
----------------- -------------
CAPITAL SHARES TRANSACTIONS (1):
Subscribed................................................ 16,738,547 47,489,000
Distributions Reinvested.................................. 1,959,132 8,000
Redeemed.................................................. (5,621,054) (13,208,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... 13,076,625 34,289,000
----------------- -------------
Total Increase/Decrease in Net Assets..................... 22,083,953 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 $(352,161) and $(8,000),
respectively)............................................. $ 70,681,839 $ 48,598,000
================= =============
- ------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
Shares:
Subscribed............................................. 463,902 1,629,000
Distributions Reinvested............................... 52,968 --
Redeemed............................................... (155,458) (459,000)
----------------- -------------
Net Increase/Decrease in Class A Shares Outstanding...... 361,412 1,170,000
================= =============
Dollars:
Subscribed............................................. $ 6,149,527 $ 16,596,000
Distributions Reinvested............................... 724,074 3,000
Redeemed............................................... (2,065,095) (4,778,000)
----------------- -------------
Net Increase/Decrease.................................... $ 4,808,506 $ 11,821,000
================= =============
Ending Paid in Capital................................... $ 18,629,683 $ 13,821,000
================= =============
Class B:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 587,971 2,258,000
Distributions Reinvested............................... 70,232 --
Redeemed............................................... (217,958) (482,000)
----------------- -------------
Net Increase/Decrease in Class B Shares Outstanding...... 440,245 1,776,000
================= =============
Dollars:
Subscribed............................................. $ 7,649,278 $ 23,038,000
Distributions Reinvested............................... 949,535 4,000
Redeemed............................................... (2,857,040) (5,054,000)
----------------- -------------
Net Increase/Decrease.................................... $ 5,741,773 $ 17,988,000
================= =============
Ending Paid in Capital................................... $ 25,229,012 $ 19,488,000
================= =============
Class C:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 223,805 788,000
Distributions Reinvested............................... 21,372 --
Redeemed............................................... (54,250) (340,000)
----------------- -------------
Net Increase/Decrease in Class C Shares Outstanding...... 190,927 448,000
================= =============
Dollars:
Subscribed............................................. $ 2,939,742 $ 7,855,000
Distributions Reinvested............................... 285,523 1,000
Redeemed............................................... (698,919) (3,376,000)
----------------- -------------
Net Increase/Decrease.................................... $ 2,526,346 $ 4,480,000
================= =============
Ending Paid in Capital................................... $ 8,506,624 $ 5,980,000
================= =============
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------------------------------- ----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED MAY 29, 1998* DECEMBER 31, 1999 YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# JUNE 30, 1999# TO JUNE 30, 1998 (UNAUDITED)# JUNE 30, 1999#
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD......................... $ 12.543 $ 10.291 $ 10.00 $ 12.449 $ 10.284
----------------- -------------- --------------- ----------------- --------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss..... (0.050) (0.062) -- (0.098) (0.144)
Net Realized and Unrealized
Gain/Loss.................... 2.560 2.317 0.29 2.536 2.312
----------------- -------------- --------------- ----------------- --------------
Total From Investment
Operations................... 2.510 2.255 0.29 2.438 2.168
----------------- -------------- --------------- ----------------- --------------
DISTRIBUTIONS
Net Realized Gain.............. (0.478) (0.003) -- (0.478) (0.003)
----------------- -------------- --------------- ----------------- --------------
NET ASSET VALUE, END OF PERIOD... $ 14.575 $ 12.543 $ 10.29 $ 14.409 $ 12.449
================= ============== =============== ================= ==============
TOTAL RETURN (1)................. 20.25%** 21.90% 2.90%** 19.83%** 21.14%
================= ============== =============== ================= ==============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's)........................ $ 25,236 $ 17,185 $ 2,057 $ 34,096 $ 23,978
Ratio of Expenses to Average Net
Assets......................... 1.50% 1.50% 1.50% 2.25% 2.25%
Ratio of Net Investment Income/
Loss to Average Net Assets..... (0.77)% (0.57)% 0.51% (1.52)% (1.34)%
Portfolio Turnover Rate.......... 37%** 126% 19%** 37%** 126%
- ------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation
During the Period
Per Share Benefit to Net
Investment Income/Loss....... $ 0.01 $ 0.05 $ 0.02 $ 0.01 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net
Assets....................... 1.70% 1.98% 4.06% 2.45% 2.72%
Net Investment Income/Loss to
Average Net Assets........... (0.97)% (1.05)% (2.05)% (1.72)% (1.81)%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
----------------
MAY 29, 1998*
SELECTED PER SHARE DATA AND RATIOS TO JUNE 30, 1998
<S> <C>
- ----------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD......................... $ 10.00
---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss..... --
Net Realized and Unrealized
Gain/Loss.................... 0.28
---------------
Total From Investment
Operations................... 0.28
---------------
DISTRIBUTIONS
Net Realized Gain.............. --
---------------
NET ASSET VALUE, END OF PERIOD... $ 10.28
===============
TOTAL RETURN (1)................. 2.80%**
===============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's)........................ $ 1,543
Ratio of Expenses to Average Net
Assets......................... 2.25%
Ratio of Net Investment Income/
Loss to Average Net Assets..... (0.25)%
Portfolio Turnover Rate.......... 19%**
- ------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation
During the Period
Per Share Benefit to Net
Investment Income/Loss....... $ 0.02
Ratios Before Expense Limitation:
Expenses to Average Net
Assets....................... 4.81%
Net Investment Income/Loss to
Average Net Assets........... (2.81)%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED MAY 29, 1998*
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# JUNE 30, 1999# TO JUNE 30, 1998
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 12.442 $ 10.284 $ 10.00
----------------- -------------- ---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................................ (0.098) (0.141) --
Net Realized and Unrealized Gain/Loss..................... 2.529 2.302 0.28
----------------- -------------- ---------------
Total From Investment Operations.......................... 2.431 2.161 0.28
----------------- -------------- ---------------
DISTRIBUTIONS
Net Realized Gain......................................... (0.478) (0.003) --
----------------- -------------- ---------------
NET ASSET VALUE, END OF PERIOD.............................. $ 14.395 $ 12.442 $ 10.28
================= ============== ===============
TOTAL RETURN (1)............................................ $ 19.77** $ 21.04 2.80%**
================= ============== ===============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................... $ 11,350 $ 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..................................... 37%** 126% 19%**
- -----------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment Income/Loss........... $ 0.01 $ 0.05 $ 0.02
Ratios Before Expense Limitation:
Expenses to Average Net Assets............................ 2.45% 2.75% 4.81%
Net Investment Income/Loss to Average Net Assets.......... (1.72)% (1.81)% (2.81)%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen Equity Growth Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to seek
long-term capital appreciation by investing primarily in growth-oriented equity
securities of medium and large capitalization companies. The Fund commenced
operations on May 29, 1998.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. Class A shares are sold with a front-end sales charge of up to
5.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization, and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis except where collection is in
doubt. Income, expenses (other than class specific expenses), and realized and
unrealized gains or losses are allocated to each class of shares based upon
their relative net assets. Distributions from the Fund are recorded on the
ex-distribution date.
4. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's commencement of operations. The Adviser has agreed that in the event
any of the initial shares of the Fund originally purchased by Van Kampen are
redeemed by the Fund during the amortization period, the Fund will be reimbursed
for any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
- -----------------------
12
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ------------ ----------- ------------ -------------
<S> <C> <C> <C>
$53,781,139 $17,610,818 $(1,200,188) $16,410,630
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
0.80% 1.50% 2.25%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $2,007
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B and Class C shares of the Fund, on an
annualized basis, of the average daily net assets attributable to each Class.
The Distributor may receive a front end sales charge for purchases of Class A
shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $107,558 for Class A shares and deferred sales charges of
$44,037 and $432 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 December 31, 1999, the Fund incurred $1,725 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $28,362,154 and sales of $19,622,293 of investment securities
other than
------------------
13
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
long-term U.S. government securities and short-term investments. There were no
purchases or sales of long-term U.S. government securities.
E. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
- -----------------------
14
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the Equity Growth Fund (the
"Fund") was held on December 15, 1999.
The description of each proposal and number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
--------- --------
<S> <C> <C>
J. Miles Branagan........................................... 3,598,779 15,722
Jerry D. Choate............................................. 2,598,276 16,226
Linda Hutton Heagy.......................................... 2,598,429 16,072
R. Craig Kennedy............................................ 2,598,781 15,720
Mitchell M. Merin........................................... 2,598,781 15,720
Jack E. Nelson.............................................. 2,598,781 15,720
Richard F. Powers, III...................................... 2,598,781 15,720
Phillip B. Rooney........................................... 2,596,679 17,822
Fernando Sisto.............................................. 2,598,429 16,072
Wayne W. Whalen............................................. 2,598,732 15,770
Suzanne H. Woolsey.......................................... 2,598,021 16,480
Paul G. Yovovich............................................ 2,598,781 15,720
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C> <C>
2,594,648 7,826 12,027
</TABLE>
------------------
15
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
* Closed to new investors
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management of
Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "INTERESTED PERSONS" OF THE FUND, AS DEFINED IN THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza -- P.O. Box 5555 -- Oakbrook Terrace, IL 60181-5555 --
www.vankampen.com
EQG SAR 02/00 -C- Van Kampen Funds Inc. 2000
468 568 668
<PAGE>
VAN KAMPEN
GLOBAL FIXED INCOME FUND
[PHOTO]
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders.......................... 1
Economic Snapshot............................... 2
Investment Overview............................. 3
Portfolio of Investments........................ 6
Statement of Assets and Liabilities............. 7
Statement of Operations......................... 8
Statement of Changes in Net Assets.............. 9
Financial Highlights ........................... 10
Notes to Financial Statements................... 12
Additional Information.......................... 15
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Euro 35.0%
United States Dollar 29.1%
Japanese Yen 12.9%
British Pound 7.2%
Danish Krone 5.2%
Swedish Krona 5.2%
Canadian Dollar 3.0%
Australian Dollar 2.0%
Other 0.4%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
J.P. MORGAN
CLASS A CLASS B CLASS C TRADED GLOBAL
SHARES SHARES SHARES BOND INDEX
--------- --------- -------- -------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*......... -4.48% -4.07% -1.26% N/A
Without Sales Charge***.... 0.26% -0.18% -0.28% 2.28%
One Year
With Sales Charge*......... -12.15% -12.13% -9.61% N/A
Without Sales Charge***.... -7.80% -8.63% -8.74% -5.08%
Average Annual Five Year
With Sales Charge*......... 4.39% N/A 4.57% N/A
Without Sales Charge***.... 5.41% N/A 4.57% 6.69%
Average Annual Since
Inception
With Sales Charge*......... 4.34% 2.37% 4.23% N/A
Without Sales Charge***.... 5.08% 2.65% 4.23% 6.73%
Commencement Date............ 1/4/93 8/1/95 1/4/93 N/A
</TABLE>
The J.P. Morgan Traded Global Bond Index is an unmanaged index of government
bond issues that includes Australia, Belgium, Canada, Denmark, France, Germany,
Italy, Japan, the Netherlands, Spain, Sweden, the United Kingdom, and the United
States excluding withholding tax.
* The returns above are calculated using the maximum sales charge for Class A
shares (4.75%) and the applicable deferred sales charge for Class B (4%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (4% for Class B shares
and 1% for Class C shares).
<TABLE>
<CAPTION>
YIELD INFORMATION AS OF DECEMBER 31, 1999
30 DAY
CURRENT
YIELD+
------
<S> <C>
Class A.................................... 3.51%
Class B.................................... 2.93
Class C.................................... 2.94
</TABLE>
+ The current 30-day yield reflects the new investment income generated by the
Fund over the specified 30-day period expressed as an annual percentage.
Expenses accrued for the 30-day period include any fees charged to all
shareholders. Yields will fluctuate as market conditions change and are not
necessarily indicative of future performance.
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY CURRENCY NET ASSETS
- -------- -------------- ----------
<S> <C> <C>
U.S. Treasury Bond 8.125%, 8/15/19 United States
Dollar 14.0%
Government of Japan 0.90%, 12/22/08 Japanese Yen 8.5%
U.S. Treasury Bond 6.25%, 2/15/07 United States
Dollar 5.9%
Kingdom of Denmark 8.00%, 3/15/06 Danish Krone 5.2%
Buoni Poliennali Del Tesoro 9.50%, Euro
2/1/06 4.6%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE CURRENCY DENOMINATIONS
PERCENT OF
CURRENCY VALUE NET ASSETS
- -------- ---------- ----------
<S> <C> <C>
Euro $1,856,466 35.0%
United States Dollar 1,543,659 29.1%
Japanese Yen 681,160 12.9%
British Pound 382,841 7.2%
Danish Krone 275,603 5.2%
</TABLE>
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING. YIELDS WILL FLUCTUATE AS MARKET
CONDITIONS CHANGE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH REPRESENTATIVES OF THE SUBADVISER OF THE VAN KAMPEN
GLOBAL FIXED INCOME FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED
THE MARKETS DURING THE PAST SIX MONTHS. THE PORTFOLIO MANAGERS INCLUDE J. DAVID
GERMANY, MICHAEL B. KUSHMA, PAUL F. O'BRIEN, RAM WILLNER, AND CHRISTIAN G. ROTH
OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT.
MR. KUSHMA HAS SHARED PRIMARY RESPONSIBILITY FOR THE FUND'S DAY-TO-DAY
MANAGEMENT SINCE 1995, JOINED BY MR. O'BRIEN IN 1996, MR. GERMANY IN 1997, AND
MR. WILLNER AND MR. ROTH IN 1998. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS
ON THE FUND'S PERFORMANCE DURING THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1999.
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST SIX MONTHS?
A: The past six months were terrible for global bond markets as long-term
interest rates rose in Europe, Japan, and the United States--the Fund's primary
investment regions. When long-term interest rates rise, bond prices go down,
making this a difficult environment for the Fund to achieve favorable returns.
The most disappointing bond market was Europe, where long-term interest rates
rose by more than one percent during the period in anticipation of sharp
interest-rate hikes by the European Central Bank (ECB) over the next 12 months.
Global economic growth was more robust than expected, particularly in regions of
the world that had struggled earlier in the year. Commodity prices, led by oil,
continued to march higher, while investor confidence finally started to rebound
from the shocks of the third quarter of 1998. Compared to the U.S. dollar, the
Japanese yen rose approximately 16 percent, and the European euro fell
approximately 3.5 percent.
Q: WHAT STRATEGIES DID YOU PURSUE IN THESE CONDITIONS?
A: We entered the period with an underweighted exposure to Japanese bonds and
currency. We didn't expect Japan to show strong signs of recovery, and we
believed that the Bank of Japan would keep interest rates near zero. We felt
this combination of low interest rates and a weak economy would keep the yen
neutral and offer minimal bond market opportunity.
The decision to be underweighted in Japan hurt performance as interest rates
decreased slightly, but more importantly we missed out on potential currency
appreciation from the increase in the Japanese yen, which hurt the Fund's
performance. We did increase our exposure to the yen later in the period, which
eventually helped returns, but we also maintained our exposure to Europe because
we believed that the European economy would outperform Japan.
Our significant exposure to Europe--approximately one-third of the Fund's
assets--and exposure to the euro hurt Fund performance more than any other
factor. We were greatly surprised by the market's reaction to stronger growth in
Europe. At the beginning of the period, the market expected the ECB to remain
neutral in its short-term monetary policy. However, accelerating economic
growth, rising commodity prices, and a weak euro led the market to expect sharp
interest-rate increases over the next 12 months. We held our exposure in Europe
because we felt the economic fundamentals were attractive. Unfortunately, the
Fund's performance was hurt by the market's expectations of rate increases, not
by a deterioration of economic fundamentals. Going into the period, we did not
anticipate the European economy would recover as fast as it did, and we did not
expect the weakness in the euro. Compared to the euro, the yen appreciated
nearly 20 percent during the period. The Fund benefited from its exposure to
other European currencies such as the Swedish krona, which appreciated
5 percent versus the euro.
In addition, the Fund benefited from exposure to the Australian and Canadian
dollars, which appreciated in value compared to the U.S. dollar during the
period.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: The price declines in global bond markets and the Fund's exposure to the euro
hurt its return during the period. For Class A shares at net asset value, the
Fund generated a total return of 0.26 percent for the six months ended
December 31, 1999. By comparison, the J.P. Morgan Global Traded Global Bond
Index generated a total return of 2.28 percent for the same period. This
- -----------------------
4
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
unmanaged, broad-based index of government bond issues includes Australia,
Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, Spain,
Sweden, the United Kingdom, and the United States, excluding withholding tax.
Past performance does not guarantee future results.
Q: WHAT DO YOU SEE HAPPENING DURING THE NEXT SIX MONTHS?
A: Today, we remain confident in the global bond markets. In October we began
decreasing our exposure to the United Kingdom in favor of German bonds because
the price differential between U.K. and German bonds was greater than we've seen
in approximately 20 years. During the period, the U.K. bond market performed
well, but we don't expect that to continue in the near future at elevated price
levels. In the short-term, we do not see signs of inflation in the United States
or Europe, and we don't expect the ECB or the Federal Reserve Board to raise
interest rates as much as the market has anticipated.
With regard to commodities, we expect oil and other energy prices to continue to
rise. We've seen a pattern among commodity-based economies in which economic
recovery generally leads to currency strength. As a result, we have currency
exposure to Canada and Australia, which are commodity-based economies.
Among the currencies of Europe, Japan and the United States, we expect the euro
to rebound versus the yen. Compared to the yen, it is significantly undervalued,
and the strong economic recovery in Europe should provide good fundamental
support. In addition, we believe a recovery in the global bond markets cannot
happen unless inflation and interest-rate fears subside.
------------------
5
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PAR
VALUE VALUE
<C> <S> <C>
- ------------------------------------------------------------------------------
FIXED INCOME SECURITIES (99.6%)
AUSTRALIAN DOLLAR (2.0%)
U.S. GOVERNMENT & AGENCY OBLIGATIONS--GLOBAL (2.0%)
$ 105,000 Federal National Mortgage Association 6.50%,
7/10/02........................................ $ 68,602
60,000 Federal National Mortgage Association 6.375%,
8/15/07........................................ 37,258
----------
105,860
----------
BRITISH POUND (7.2%)
GOVERNMENT BONDS (7.2%)
GBP 120,000 United Kingdom Treasury Gilt 8.00%, 12/7/00...... 196,137
100,000 United Kingdom Treasury Gilt 8.50%, 7/16/07...... 186,704
----------
382,841
----------
CANADIAN DOLLAR (3.0%)
GOVERNMENT BOND (3.0%)
CAD 200,000 Government of Canada 8.75%, 12/1/05.............. 155,247
----------
DANISH KRONE (5.2%)
GOVERNMENT BOND (5.2%)
DKK 1,800,000 Kingdom of Denmark 8.00%, 3/15/06................ 275,603
----------
EURO (35.0%)
GOVERNMENT BONDS (35.0%)
EUR 150,000 Bundesrepublik Deutschland 6.00%, 7/4/07......... 158,134
200,000 Buoni Poliennali Del Tesoro 9.50%, 2/1/06........ 246,037
100,000 Depfa Pfandbriefbank 5.50%, 1/15/10.............. 98,934
50,000 Deutsche Ausgleichbank 4.00%, 7/4/09............. 44,458
150,000 Deutschland Republic 8.375%, 5/21/01............. 159,783
200,000 Deutschland Republic 6.50%, 10/14/05............. 216,251
50,000 Deutschland Republic 6.50%, 7/4/27............... 53,856
150,000 Government of France 5.25%, 4/25/08.............. 150,042
200,000 Government of France 6.00%, 10/25/25............. 202,880
200,000 Government of Spain 5.15%, 7/30/09............... 196,197
200,000 Government of The Netherlands 8.25%, 2/15/02..... 217,199
100,000 Kingdom of Belgium 9.20%, 6/28/10................ 112,695
----------
1,856,466
----------
<CAPTION>
PAR
VALUE VALUE
- ------------------------------------------------------------------ ----------
JAPANESE YEN (12.9%)
<C> <S> <C>
GOVERNMENT BOND (8.5%)
JPY 50,000,000 Government of Japan 0.90%, 12/22/08.............. $ 448,841
----------
EUROBOND (4.4%)
20,000,000 IBRD 4.75%, 12/20/04............................. 232,319
----------
TOTAL JAPANESE YEN.............................................. 681,160
----------
SWEDISH KRONA (5.2%)
GOVERNMENT BONDS (5.2%)
SEK 1,000,000 Swedish Government 13.00%, 6/15/01............... 131,008
1,200,000 Swedish Government 6.00%, 2/9/05................. 144,576
----------
275,584
----------
UNITED STATES DOLLAR (29.1%)
CORPORATE BONDS (5.4%)
$ 25,000,000 KFW International Finance 1.00%, 12/20/04........ 245,195
(a)50,000 Monsanto Co. 6.60%, 12/1/28...................... 42,970
----------
288,165
----------
U.S. TREASURY BONDS (19.9%)
320,000 6.25%, 2/15/07................................... 314,900
650,000 8.125%, 8/15/19.................................. 740,594
----------
1,055,494
----------
U.S. TREASURY NOTE (3.8%)
200,000 6.25%, 10/31/01.................................. 200,000
----------
TOTAL UNITED STATES DOLLAR...................................... 1,543,659
----------
TOTAL LONG-TERM INVESTMENTS (99.6%) (COST $5,545,501)............. 5,276,420
FOREIGN CURRENCY (0.1%) (COST $5,111)............................. 5,119
----------
TOTAL INVESTMENTS (99.7%) (COST $5,550,612)....................... 5,281,539
OTHER ASSETS IN EXCESS OF LIABILITIES (0.3%)...................... 18,499
----------
NET ASSETS (100%)................................................. $5,300,038
==========
</TABLE>
- ---------------
(a) -- 144A Security--Certain conditions for public sale may exist.
- -----------------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------
ASSETS:
Investments at Value (Cost $5,545,501).................... $5,276,420
Foreign Currency (Cost $5,111)............................ 5,119
Receivable for:
Interest................................................ 134,207
Foreign Witholding Tax Reclaim.......................... 2,391
Fund Shares Sold........................................ 1,184
Receivable from Investment Advisor........................ 28,661
Net Unrealized Gain on Foreign Currency Contracts......... 12
----------
Total Assets............................................ 5,447,994
----------
LIABILITIES:
Payable for:
Dividends Declared...................................... 65,500
Shareholder Reporting Expenses.......................... 24,745
Directors' Fees and Expenses............................ 17,682
Professional Fees....................................... 14,082
Fund Shares Redeemed.................................... 7,506
Distribution Fees....................................... 5,026
Custody Fees............................................ 4,144
Bank Overdraft.......................................... 2,996
Administrative Fees..................................... 2,191
Transfer Agent Fees..................................... 1,478
Other..................................................... 2,606
----------
Total Liabilities....................................... 147,956
----------
NET ASSETS.................................................. $5,300,038
==========
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 577
Paid in Capital in Excess of Par.......................... 5,796,524
Accumulated Net Investment Loss........................... (113,066)
Accumulated Net Realized Loss............................. (113,713)
Net Unrealized Depreciation on Investments and Foreign
Currency Translations................................... (270,284)
----------
NET ASSETS.................................................. $5,300,038
==========
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $2,772,334 and 300,485 Shares
Outstanding)............................................ $ 9.23
==========
Maximum Sales Charge...................................... 4.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100/ (100 - maximum sales charge)).............. $ 9.69
==========
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $1,297,682 and 141,977 Shares Outstanding)*... $ 9.14
==========
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $1,230,022 and 134,848 Shares Outstanding)*... $ 9.12
==========
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------
INVESTMENT INCOME:
Interest.................................................. $ 130,221
Less Foreign Taxes Withheld............................... (995)
-----------
Total Income............................................. 129,226
-----------
EXPENSES:
Shareholder Reports....................................... 28,718
Investment Advisory Fees.................................. 22,723
Filing and Registration Fees.............................. 19,268
Distribution Fees (Attributed to Classes A, B and C of
$4,064, $7,236 and $6,738, respectively)................ 18,038
Professional Fees......................................... 13,722
Administrative Fees....................................... 10,811
Directors' Fees and Expenses.............................. 9,850
Transfer Agent Fees....................................... 7,436
Custodian Fees............................................ 5,506
Other..................................................... 1,776
-----------
Total Expenses........................................... 137,848
Less Expense Reductions.................................. (83,319)
-----------
Net Expenses............................................. 54,529
-----------
Net Investment Income/Loss.................................. 74,697
-----------
NET REALIZED GAIN/LOSS ON:
Investments............................................... (152,993)
Foreign Currency Transactions............................. (2,595)
-----------
Net Realized Gain/Loss...................................... (155,588)
-----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... (361,777)
-----------
End of the Period:
Investments.............................................. (269,081)
Foreign Currency Translations............................ (1,203)
-----------
(270,284)
-----------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 91,493
-----------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. (64,095)
-----------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 10,602
===========
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ 74,697 $ 219,000
Net Realized Gain/Loss.................................... (155,588) 451,000
Net Unrealized Appreciation/Depreciation.................. 91,493 (422,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 10,602 248,000
----------------- -------------
DISTRIBUTIONS:
Net Investment Income:
Class A................................................. (63,505) (124,000)
Class B................................................. (24,088) (38,000)
Class C................................................. (22,498) (41,000)
In Excess of Net Investment Income:
Class A................................................. -- (47,000)
Class B................................................. -- (15,000)
Class C................................................. -- (15,000)
----------------- -------------
(110,091) (280,000)
----------------- -------------
Net Realized Gain:
Class A................................................. (26,369) (144,000)
Class B................................................. (12,507) (50,000)
Class C................................................. (11,826) (52,000)
----------------- -------------
(50,702) (246,000)
----------------- -------------
Net Decrease in Net Assets Resulting from Distributions... (160,793) (526,000)
----------------- -------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed................................................ 386,749 5,081,000
Distributions Reinvested.................................. 96,151 449,000
Redeemed.................................................. (1,464,059) (6,547,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... (981,159) (1,017,000)
----------------- -------------
Total Increase/Decrease in Net Assets..................... (1,131,350) (1,295,000)
NET ASSETS--Beginning of Period............................. 6,431,388 7,726,000
----------------- -------------
NET ASSETS--End of Period (Including
accumulated/distributions in excess of net investment
income/loss of $(113,066) and $(78,000), respectively).... $ 5,300,038 $ 6,431,000
================= =============
- --------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 20,858 407,000
Distributions Reinvested............................... 6,159 28,000
Redeemed............................................... (84,350) (517,000)
----------------- -------------
Net Increase/Decrease in Class A Shares Outstanding...... (57,333) (82,000)
================= =============
Dollars:
Subscribed............................................. $ 198,308 $ 4,142,000
Distributions Reinvested............................... 58,628 285,000
Redeemed............................................... (799,070) (5,371,000)
----------------- -------------
Net Increase/Decrease.................................... $ (542,134) $ (944,000)
================= =============
Ending Paid in Capital................................... $ 2,965,785 $ 3,508,000
================= =============
Class B:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 11,547 69,000
Distributions Reinvested............................... 1,923 7,000
Redeemed............................................... (37,068) (53,000)
----------------- -------------
Net Increase/Decrease in Class B Shares Outstanding...... (23,598) 23,000
================= =============
Dollars:
Subscribed............................................. $ 108,914 $ 707,000
Distributions Reinvested............................... 18,147 74,000
Redeemed............................................... (347,991) (540,000)
----------------- -------------
Net Increase/Decrease.................................... $ (220,930) $ 241,000
================= =============
Ending Paid in Capital................................... $ 1,454,031 $ 1,675,000
================= =============
Class C:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 8,429 24,000
Distributions Reinvested............................... 2,057 8,000
Redeemed............................................... (33,659) (64,000)
----------------- -------------
Net Increase/Decrease in Class C Shares Outstanding...... (23,173) (32,000)
================= =============
Dollars:
Subscribed............................................. $ 79,527 $ 232,000
Distributions Reinvested............................... 19,376 90,000
Redeemed............................................... (316,998) (636,000)
----------------- -------------
Net Increase/Decrease.................................... $ (218,095) $ (314,000)
================= =============
Ending Paid in Capital................................... $ 1,377,285 $ 1,595,000
================= =============
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 ----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 9.478 $10.022 $ 9.95 $ 9.94 $10.23 $ 9.53
----------------- ------- -------- ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................................ 0.134 0.311 0.39 0.44 0.53 0.56
Net Realized and Unrealized Gain/Loss..................... (0.109) (0.181) 0.13 (0.02) (0.01) 0.50
----------------- ------- -------- ------ ------ -------
Total From Investment Operations.......................... 0.025 0.130 0.52 0.42 0.52 1.06
----------------- ------- -------- ------ ------ -------
DISTRIBUTIONS
Net Investment Income..................................... (0.189) (0.278) (0.39) (0.35) (0.79) (0.36)
In Excess of Net Investment Income........................ -- (0.106) (0.01) (0.06) (0.02) --
Net Realized Gain......................................... (0.088) (0.290) (0.05) -- -- --
----------------- ------- -------- ------ ------ -------
Total Distributions....................................... (0.277) (0.674) (0.45) (0.41) (0.81) (0.36)
----------------- ------- -------- ------ ------ -------
NET ASSET VALUE, END OF PERIOD.............................. $ 9.226 $ 9.478 $ 10.02 $ 9.95 $ 9.94 $ 10.23
================= ======= ======== ====== ====== =======
TOTAL RETURN (1)............................................ 0.26%* 0.95% 5.36% 4.27% 5.20% 11.41%
================= ======= ======== ====== ====== =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................... $ 2,772 $ 3,392 $ 4,413 $6,407 $7,432 $11,092
Ratio of Expenses to Average Net Assets..................... 1.45% 1.47% 1.45% 1.45% 1.45% 1.45%
Ratio of Net Investment Income/Loss to Average Net Assets... 2.81% 3.03% 3.94% 4.40% 5.02% 5.84%
Portfolio Turnover Rate..................................... 37%* 143% 78% 170% 223% 169%
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation During the Period
Per Share Benefit to Net Investment Income/Loss........... $ 0.13 $ 0.15 $ 0.15 $ 0.12 $ 0.07 $ 0.07
Ratios Before Expense Limitation:
Expenses to Average Net Assets............................ 4.21% 2.97% 3.00% 2.57% 2.16% 2.22%
Net Investment Income to Average Net Assets............... 0.05% 1.54% 2.42% 3.25% 4.31% 5.07%
Ratio of Expenses to Average Net Assets excluding country
tax expense
and interest expense...................................... 1.45% 1.45% 1.45% 1.45% 1.45% 1.45%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 ---------------------------- AUGUST 1, 1995+
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD................. $ 9.400 $ 9.971 $ 9.91 $ 9.91 $ 10.24
----------------- -------- -------- ------ ---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......................... 0.097 0.229 0.32 0.41 0.64
Net Realized and Unrealized Gain/Loss.............. (0.111) (0.186) 0.13 (0.07) (0.26)
----------------- -------- -------- ------ ---------------
Total From Investment Operations................... (0.014) 0.043 0.45 0.34 0.38
----------------- -------- -------- ------ ---------------
DISTRIBUTIONS
Net Investment Income.............................. (0.158) (0.234) (0.33) (0.29) (0.69)
In Excess of Net Investment Income................. -- (0.090) (0.01) (0.05) (0.02)
Net Realized Gain.................................. (0.088) (0.290) (0.05) -- --
----------------- -------- -------- ------ ---------------
Total Distributions................................ (0.246) (0.614) (0.39) (0.34) (0.71)
----------------- -------- -------- ------ ---------------
NET ASSET VALUE, END OF PERIOD....................... $ 9.140 $ 9.400 $ 9.97 $ 9.91 $ 9.91
================= ======== ======== ====== ===============
TOTAL RETURN (1)..................................... (0.18)%* 0.05% 4.65% 3.48% 3.76%*
================= ======== ======== ====== ===============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).................... $ 1,298 $ 1,556 $ 1,425 $1,716 $ 1,440
Ratio of Expenses to Average Net Assets.............. 2.20% 2.23% 2.20% 2.20% 2.20%
Ratio of Net Investment Income/Loss to Average Net
Assets............................................. 2.06% 2.21% 3.21% 3.65% 3.38%
Portfolio Turnover Rate.............................. 37%* 143% 78% 170% 223%*
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation During the
Period
Per Share Benefit to Net Investment Income/Loss.... $ 0.13 $ 0.15 $ 0.15 $ 0.13 $ 0.12
Ratios Before Expense Limitation:
Expenses to Average Net Assets..................... 4.96% 3.78% 3.75% 3.37% 3.57%
Net Investment Income to Average Net Assets........ (0.70)% (0.71) 1.65% 2.45% 2.01%
Ratio of Expenses to Average Net Assets excluding
country tax expense
and interest expense............................... 2.20% 2.20% 2.20% 2.20% 2.20%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Non-Annualized
+ The Fund began offering Class B shares on August 1, 1995.
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 ----------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 9.387 $ 9.962 $ 9.90 $ 9.90 $10.20 $ 9.54
----------------- -------- -------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................. 0.097 0.230 0.32 0.39 0.37 0.49
Net Realized and Unrealized Gain/Loss...... (0.116) (0.191) 0.13 (0.05) 0.08 0.47
----------------- -------- -------- ------ ------ ------
Total From Investment Operations........... (0.019) 0.039 0.45 0.34 0.45 0.96
----------------- -------- -------- ------ ------ ------
DISTRIBUTIONS
Net Investment Income...................... (0.158) (0.234) (0.33) (0.29) (0.73) (0.30)
In Excess of Net Investment Income......... -- (0.090) (0.01) (0.05) (0.02) --
Net Realized Gain.......................... (0.088) (0.290) (0.05) -- -- --
----------------- -------- -------- ------ ------ ------
Total Distributions........................ (0.246) (0.614) (0.39) (0.34) (0.75) (0.30)
----------------- -------- -------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD............... $ 9.122 $ 9.387 $ 9.96 $ 9.90 $ 9.90 $10.20
================= ======== ======== ====== ====== ======
TOTAL RETURN (1)............................. (0.28)%* 0.05% 4.65% 3.48% 4.47% 10.24%
================= ======== ======== ====== ====== ======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $ 1,230 $ 1,483 $ 1,888 $2,445 $2,844 $5,965
Ratio of Expenses to Average Net Assets...... 2.20% 2.23% 2.20% 2.20% 2.20% 2.20%
Ratio of Net Investment Income/Loss to
Average Net Assets......................... 2.06% 2.22% 3.21% 3.65% 4.35% 5.09%
Portfolio Turnover Rate...................... 37%* 143% 78% 170% 223% 169%
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss.............................. $ 0.13 $ 0.15 $ 0.15 $ 0.12 $ 0.06 $ 0.08
Ratios Before Expense Limitation:
Expenses to Average Net Assets............. 4.96% 3.74% 3.75% 3.35% 2.87% 2.97%
Net Investment Income/Loss to Average Net
Assets................................... (0.70)% 0.75% 1.67% 2.48% 3.68% 4.32%
Ratio of Expenses to Average Net Assets
excluding country tax expense and interest
expense.................................... 2.20% 2.20% 2.20% 2.20% 2.20% 2.20%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Non-Annualized
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen Global Fixed Income Fund (the "Fund") is organized as a separate
non-diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation,
which is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective
seeks to produce an attractive real rate of return by investing in fixed-income
securities of U.S. and foreign issuers denominated in U.S. dollars and in other
currencies. The Fund commenced operations on January 4, 1993.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. Class A shares are sold with a front-end sales charge of up to
4.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 4.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights. The Fund began offering the current Class B shares on August 1,
1995. Class B shares held prior to May 1, 1995 were renamed Class C shares.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Securities listed on a foreign exchange are valued at their
closing price. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Bonds and other fixed income securities may be valued according to the
broadest and most representative market. In addition, bonds and other fixed
income securities may be valued on the basis of prices provided by a pricing
service which takes into account institutional size trading in similar groups of
securities. Debt securities purchased with remaining maturities of 60 days or
less are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Interest income is recognized on the accrual basis
except where collection is in doubt. Discounts and premiums on securities
purchased are amortized according to the effective yield method over their
respective lives. Income, expenses (other than class specific expenses), and
realized and unrealized gains or losses are allocated to each class of shares
based upon their relative net assets. Distributions from the Fund are recorded
on the ex-distribution date.
- -----------------------
12
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized between
trade date and settlement date on security and income transactions. However, the
foreign currency portion of gains and losses realized on sales and maturities of
foreign denominated debt securities is treated as ordinary income for U.S.
Federal income tax purposes.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains, and net unrealized appreciation, as applicable, as the income is earned
or capital gains are recorded.
Net currency losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 to June 30, 1999 the Fund incurred and elected
to defer until July 1, 1999, for U.S. Federal income tax purposes, net currency
losses of approximately $27,000.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- --------------------- -------- ---------- -------------
<S> <C> <C> <C>
$5,545,501 $ 87,224 $(356,305) $(269,081)
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing book and
tax treatment for foreign currency transactions, net operating losses, foreign
taxes on net realized gains, and gains on certain securities of corporations
designated as "passive foreign investment companies."
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
0.75% 1.45% 2.20%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $446
representing Legal Services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois) counsel to the Fund, of which a director of the Fund, is an
affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the
------------------
13
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
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
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $2,035 for Class A shares and deferred sales charges of $5,236
and $547 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.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $2,148,462 and sales of $2,877,764 of investment securities
other than long-term U.S. government securities and short-term investments.
Purchases and sales of long-term U.S. government securities for the period ended
December 31, 1999 totaled $521,859 and $831,902, respectively.
D. DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in very
general terms refers to a security whose value is "derived" from the value of an
underlying asset, reference rate or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, foreign currency
exposure, maturity, and duration. All of the Fund's portfolio holdings,
including derivative instruments, are marked-to-market each day with the change
in value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when exercising a call
option contract or taking delivery of a security underlying a forward contract.
In this instance, the recognition of gain or loss is postponed until the
disposal of the security underlying the option or forward contract. Risks may
arise as a result of the potential inability of the counterparties to meet the
terms of their contracts.
Summarized below are the specific types of derivative financial instruments used
by the Fund.
1. FORWARD CURRENCY CONTRACTS: These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency transactions.
At December 31, 1999, 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,
20,000, expiring 3/1/00........... $ 32,302 $ (223)
Euro,
60,000, expiring 3/01/00.......... 60,775 235
------------ ------------
$ 93,077 $ 12
============ ============
</TABLE>
E. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
F. SUBSEQUENT EVENT: On January 27, 2000, the Board approved a Plan of
Liquidation for the Fund. The Plan of Liquidation will be presented to the
shareholders of the Fund for approval. As a result of the Board's approval, the
Fund is suspending the continuous offering of its shares to new investors of the
Fund effective at the close of business February 2, 2000. Currently, existing
shareholders of the Fund as of February 2, 2000 may continue to purchase shares
of the Fund. Dividends subject to automatic reinvestment in the Fund according
to previous instructions of existing shareholders will continue to be reinvested
in shares of the Fund.
- -----------------------
14
<PAGE>
VAN KAMPEN GLOBAL FIXED FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the Global Fixed Fund (the
"Fund") was held on December 15, 1999. The description of each proposal and
number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
--------- ---------
<S> <C> <C>
J. Miles Branagan........................................... 460,151 --
Jerry D. Choate............................................. 460,151 --
Linda Hutton Heagy.......................................... 460,151 --
R. Craig Kennedy............................................ 460,151 --
Mitchell M. Merin........................................... 460,151 --
Jack E. Nelson.............................................. 460,151 --
Richard F. Powers, III...................................... 460,151 --
Phillip B. Rooney........................................... 460,151 --
Fernando Sisto.............................................. 460,151 --
Wayne W. Whalen............................................. 460,151 --
Suzanne H. Woolsey.......................................... 460,151 --
Paul G. Yovovich............................................ 460,151 --
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C>
458,438 68 1,644
</TABLE>
------------------
15
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM
and selecting CONTACT US
* Closed to new investors
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management
of Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of
Sciences/National Research Council, and former Chairman
of the German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555/ /
www.vankampen.com
MSGF SAR 02/00 -C- Van Kampen Funds Inc. 2000
451 551 651
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 10
Statement of Operations............................................... 11
Statement of Changes in Net Assets.................................... 12
Financial Highlights ................................................. 13
Notes to Financial Statements......................................... 15
Additional Information................................................ 19
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Korea 19.5%
Other 13.0%
Taiwan 11.8%
Mexico 10.2%
India 8.9%
Brazil 8.0%
Turkey 7.8%
Israel 6.4%
South Africa 5.3%
Hong Kong 3.1%
Short-Term Investment 3.1%
Russia 2.9%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C IFC GLOBAL TOTAL
SHARES SHARES SHARES RETURN COMPOSITE INDEX
------- ------- ------- ----------------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*............ 33.72% 36.47% 40.38% N/A
Without Sales Charge***....... 41.84% 41.47% 41.38% 17.65%
One Year
With Sales Charge*............ 89.96% 95.15% 99.15% N/A
Without Sales Charge***....... 101.44% 100.15% 100.15% 62.69%
Average Annual Five Year
With Sales Charge*............ 6.26% N/A 6.76% N/A
Without Sales Charge***....... 7.52% N/A 6.76% 0.75%
Average Annual Since Inception
With Sales Charge*............ 4.11% 7.67% 4.49% N/A
Without Sales Charge***....... 5.24% 7.93% 4.49% 2.07%
Commencement Date............... 7/6/94 8/1/95 7/6/94 N/A
</TABLE>
The IFC Global Total Return Composite Index is an unmanaged index of common
stocks and includes developing countries in Latin America, East and South Asia,
Europe, the Middle East, and Africa (assumes dividends are reinvested).
* The returns above are calculated using the maximum sales charge for Class A
shares (5.75%) and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS(1)
PERCENT OF
SECURITY COUNTRY NET ASSETS
- -------- -------- ----------
<S> <C> <C>
Samsung Electronics Co. (Foreign) Korea 6.8%
Telmex ADR Mexico 3.6%
SK Telecom Co., Ltd. Korea 3.5%
Yapi Ve Kredi Bankasi A.S. Turkey 2.7%
Taiwan Semiconductor Manufacturing Co. Taiwan 2.5%
</TABLE>
(1) excludes Short-Term Investment
<TABLE>
<CAPTION>
TOP FIVE SECTORS+
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ----------- ----------
<S> <C> <C>
Services $54,012,329 30.5%
Capital Equipment 45,515,228 25.7%
Consumer Goods 26,060,467 14.7%
Finance 20,776,696 11.7%
Materials 12,115,579 6.8%
+ These sectors represent broad groupings of related
industries.
</TABLE>
THE COUNTRY SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EMERGING MARKETS
REGIONAL OR COUNTRY INDICES AND ARE FOR INFORMATIONAL PURPOSES ONLY AND SHOULD
NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE PERFORMANCE. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE SEE THE
PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS ASSOCIATED WITH
INTERNATIONAL INVESTING.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGERS OF THE VAN KAMPEN EMERGING MARKETS
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE
PAST SIX MONTHS. THE FUND IS MANAGED BY PORTFOLIO MANAGERS ROBERT MEYER AND
ANDY SKOV OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. MR. MEYER HAS
MANAGED THE FUND SINCE 1997, WHILE MR. SKOV JOINED THE FUND IN 1998. THE
FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE
SIX-MONTH PERIOD ENDED DECEMBER 31, 1999.
Q: CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED DURING THE
SECOND HALF OF 1999.
A: Recoveries in most developing economies actually began during the fourth
quarter of 1998. Prior to that time, however, emerging markets had been mired in
a five-year bear phase. During the six-month reporting period, the economic
recovery in emerging markets gathered steam, fueled by a supportive global
economic environment, a robust U.S. economy, economic recovery in Western
Europe, strong export growth--primarily in Asia--and strengthening commodity
prices. In particular, the rise in oil prices from approximately $10 per barrel
at the end of 1998 to about $26 at year-end 1999 helped energy-exporting
countries such as Argentina, Colombia, Mexico, Venezuela, and Russia.
Growth in emerging markets also was propelled by the global trend toward
outsourcing. Increasingly, companies in the United States and Japan have
contracted with businesses in emerging markets to provide a wide array of
products and services. In particular, South Korea, Taiwan, India, and Israel
have benefited from this trend. We believe that outsourcing is fundamentally
healthy because it fosters more efficient use of capital and resource
allocation.
Q: WHAT STRATEGIES DID YOU PURSUE FOR THE FUND IN THIS ENVIRONMENT?
A: The Fund owns several companies that are positioned to benefit from the
outsourcing of technology production. The Fund also is overweight in
telecommunications companies, particularly in Brazil, Mexico, Korea, China, and
Egypt. Currently, fixed-line and cellular phone penetration in emerging markets
is relatively low. However, demand for telecommunications services is growing
rapidly, and we expect that demand will increasingly be satisfied in coming
years. Accordingly, we believe that selected telecoms will enjoy strong
profitability as the communications infrastructure takes shape in emerging
economies during the early twenty-first century.
The Fund has been selectively buying bank securities to capitalize on the
widespread decline in interest rates in emerging markets over the last six to
twelve months. On a macro level, we are focusing on countries where governments
and electorates are showing a clear commitment to meaningful reform and where
declining inflation levels and fiscal discipline bode well for future interest
rate deductions. This is consistent with our view that, over time, the
best-performing emerging markets will be those that enjoy political stability
and transparency in their financial markets coupled with structural reforms and
more efficient capital and resource allocation.
Q: DISCUSS HOW THESE STRATEGIES CONTRIBUTED TO THE FUND'S PERFORMANCE.
A: The Fund's emphasis on stocks benefiting from trends in outsourcing,
telecommunications, banking, and political reform as well as those demonstrating
a commitment to reform, led to solid outperformance during the second half of
1999. Among outsourcing companies, Taiwan Semiconductor, a leading producer of
high-end technology products, was particularly strong. Within the banking
sector, Turkey-based Akbank produced solid returns. Meanwhile, the Fund's stocks
in India and Turkey posted strong gains following the election of reform-minded
governments and coalitions.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: For Class A shares at net asset value, the Fund generated a total return of
41.84 percent for the six months ended December 31, 1999, and 101.44 percent for
the 12 months ended December 31, 1999. By comparison, the IFC Global Total
Return Composite Index generated total returns of 17.65 percent and 62.69
percent for the same respective periods. This broad-based, unmanaged index is
composed of securities on stock exchanges in Latin America, East and South Asia,
Europe, the Middle East, and Africa and assumes dividends are reinvested. This
index does not reflect any
- -----------------------
4
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
commissions or sales charges that would be paid by an investor purchasing the
securities it represents. If charges or commissions had been included, the total
return would have been lower. Past performance does not guarantee future
results.
Q: IN YOUR OPINION, WILL CHINA DEVALUE ITS CURRENCY IN THE NEAR FUTURE? WHAT
IMPACT WOULD SUCH A DEVALUATION HAVE ON OTHER EMERGING MARKETS?
A: China was one of the few nations in emerging-Asia to avoid a devaluation of
its currency during the region's recent financial crisis. Given the competitive
disadvantage that the relative strength of the yuan poses to Chinese exports, we
would not be surprised to see a devaluation of the currency by the end of 2000.
In our view, however, the devaluation is likely to be modest and managed in a
way that has relatively little impact on other emerging economies.
In that regard, it is important to recognize that many emerging markets have
acquired their own identities in the perception of investors in recent years. In
1994, the devaluation of the Mexican peso set off a chain reaction of currency
weakness throughout Latin America. However, when Brazil devalued in early 1999,
the resulting 40 percent drop in its currency did not create a domino-effect of
currency weakness in the region. Similarly, neither the devastating earthquake
in Turkey nor the riots in Indonesia derailed the bull market in developing
economies last year. The fact that these isolated crises did not unnerve broader
investor sentiment is an indication that emerging markets are maturing as an
asset class, which has significantly positive implications for the future of
developing economies in coming years.
Q: DO YOU SEE ANY POTENTIAL TROUBLE SPOTS WITHIN EMERGING MARKETS IN COMING
MONTHS?
A: Emerging markets have posted solid gains over the last 15 months. The
recovery in Latin America could be negatively affected by a sharp slowdown in
U.S. economic growth. For example, roughly 80 percent of Mexican exports go to
the United States. However, most developing economies have returned to
free-floating exchange systems, and thus would not be severely impaired by
higher U.S. interest rates. We emphasize, however, that we believe a sharp
slowdown in economic growth in the United States is unlikely over the near term.
Q: WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A: Amidst the backdrop of global growth and sustainable commodity prices, we
believe those emerging markets benefiting from improving economic fundamentals
and structural reforms will fare well in 2000. The promising recovery in Japan
could provide a growing export market for neighboring Southeast Asian economies.
Emerging markets should also benefit from the economic recovery in Western
Europe and sustained strength in the United States. Given the pickup in
international growth rates, we believe that commodity prices will remain
relatively firm, boosting economic growth in many emerging markets.
We believe that equities in emerging markets will continue to benefit from the
many reforms underway, leading to increased private enterprise, more efficient
resource allocation, and greater focus on improving shareholder value.
Consequently, we are optimistic about the outlook for emerging markets both over
the near- and longer-term. We caution, however, that we believe volatility is
likely to remain high and that stock selection could be key to generating strong
performance in these markets.
------------------
5
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------
COMMON STOCKS (90.8%)
ARGENTINA (0.8%)
Telecom Argentina ADR.................... 27,784 $ 951,602
Telefonica de Argentina ADR.............. 15,475 477,791
------------
1,429,393
------------
BRAZIL (4.0%)
CEMIG ADR................................ 17,027 383,107
Coteminas................................ 1,384,100 88,110
(b,c)Coteminas ADR....................... 12,645 35,252
CRT 'A'.................................. 5,261,486 917,447
CVRD ADR................................. 31,619 873,475
(a)Lojas Arupau S.A. ADR................. 14,225 --
Petrobras ADR............................ 4,950 126,958
Tele Celular Sul ADR..................... 6,294 199,835
Tele Centro Sul ADR...................... 4,938 448,123
Tele Nordeste Celular ADR................ 1,095 55,298
Tele Norte Leste ADR..................... 28,749 733,099
Tele Sudeste Celular ADR................. 13,246 514,110
Telemig Celular ADR...................... 2,079 96,024
Telesp ADR............................... 980 23,949
Telesp Celular ADR....................... 17,967 761,352
Unibanco GDR............................. 58,976 1,776,652
------------
7,032,791
------------
CHILE (0.2%)
Endesa ADR............................... 9,384 133,136
Enersis ADR.............................. 8,563 201,230
(a)Santa Isabel ADR...................... 5,015 48,896
------------
383,262
------------
CHINA (0.4%)
Guangdong Kelon Electrical Holdings Co.
Ltd.................................... 115,000 87,284
Legend Holdings Ltd...................... 128,000 317,798
Yanzhou Coal Mining Co. ADR.............. 12,028 169,895
Zhenhai Refining & Chemical Co. 'H'...... 445,400 79,070
------------
654,047
------------
CZECH REPUBLIC (0.4%)
SPT Telecom a.s.......................... 31,663 509,809
(a)SPT Telecom a.s. GDR.................. 8,760 140,625
------------
650,434
------------
EGYPT (1.1%)
(a)Al-Ahram Beverages Co. S.A.E. GDR..... 11,976 235,927
Eastern Tobacco.......................... 4,998 131,191
Egypt Gas Co............................. 2,900 177,726
Egyptian Co. for Mobile Services......... 30,031 1,376,119
------------
1,920,963
------------
GREECE (1.1%)
Alpha Credit Bank S.A.................... 3,700 291,370
National Bank of Greece S.A.............. 4,140 306,039
(a)National Bank of Greece S.A. ADR...... 10,700 150,469
OTE S.A.................................. 14,041 334,330
OTE S.A. ADR............................. 34,116 407,260
Panafon Hellenic Telecom S.A............. 16,660 224,936
(a)Panafon Hellenic Telecom S.A. GDR..... 13,060 175,185
------------
1,889,589
------------
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
HONG KONG (3.1%)
China Telecom Ltd........................ 349,000 $ 2,181,951
(a)China Telecom Ltd. ADR................ 10,700 1,375,619
(a)Great Wall Technology Co., Ltd........ 753,100 731,447
(a)TCL International Holdings Ltd........ 1,098,000 769,808
(a)Timeless Software Ltd................. 174,000 100,727
(a)Yue Yuen Industrial Holdings.......... 106,000 253,631
------------
5,413,183
------------
HUNGARY (0.8%)
Matav Rt................................. 24,839 174,119
Matav Rt. ADR............................ 15,863 571,068
Matav Rt. ADR............................ 11,640 419,040
OTP Bank Rt.............................. 2,148 125,817
(a)OTP Bank Rt. GDR...................... 1,640 95,530
------------
1,385,574
------------
INDIA (8.9%)
(a)Associated Cement Cos., Ltd........... 39,250 223,996
Bank of Baroda........................... 23,750 34,861
Bharat Heavy Electricals Ltd............. 155,500 750,690
Container Corp. of India Ltd............. 109,500 616,724
Corporation Bank......................... 37,800 96,455
Dabur India Ltd.......................... 5,300 143,770
Gujarat Ambuja Cements Ltd............... 20,500 153,632
Gujarat Ambuja Cements Ltd............... 54,000 404,690
(a)HCL Technologies Ltd.................. 5,250 70,000
Hero Honda Motors Ltd.................... 44,780 1,162,221
Hindustan Lever Ltd...................... 17,574 909,000
Housing Development Finance Corp.,
Ltd.................................... 38,440 272,951
Indo Gulf Corp., Ltd..................... 54,750 79,293
Infosys Technologies Ltd................. 13,600 4,538,413
ITC Ltd.................................. 17,571 268,614
Larson & Tourbo Ltd. 'A'................. 50,200 641,521
(a)Lupin Laboratories Ltd................ 14,500 191,667
NIIT Ltd................................. 7,000 533,537
Oriental Bank of Commerce................ 61,750 65,299
Reliance Industries Ltd.................. 85,250 457,998
Reliance Industries Ltd. GDR............. 10,000 140,000
Satyam Computer Services Ltd............. 28,900 1,460,945
State Bank of India...................... 56,350 291,142
(a,c)Strides Arcolab Ltd................. 3,000 27,586
Tata Engineering & Locomotive Co.,
Ltd.................................... 94,500 436,655
Tata Tea Ltd............................. 18,600 224,483
Videsh Sanchar Nigam Ltd................. 4,250 176,741
Videsh Sanchar Nigam Ltd. GDR............ 3,000 73,800
Zee Telefilms Ltd........................ 53,500 1,344,018
------------
15,790,702
------------
INDONESIA (1.3%)
PT Gudang Garam Tbk (Foreign)............ 303,425 816,371
PT Indah Kiat Pulp & Paper Corp.
(Foreign).............................. 585,080 230,264
PT Indofood Sukses Makmur Tbk............ 313,000 391,950
PT Semen Gresik Tbk...................... 243,200 385,465
PT Telekomunikasi Indonesia ADR.......... 43,084 473,924
------------
2,297,974
------------
ISRAEL (6.4%)
(a)Amdocs Ltd............................ 19,770 682,065
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
ISRAEL (CONT.)
(a)BATM Advanced Communications Ltd...... 6,357 $ 525,677
(a)Check Point Software Technologies
Ltd.................................... 5,690 1,130,887
(a)Comverse Technology, Inc.............. 5,957 862,276
(a)DSP Group, Inc........................ 6,513 605,709
ECI Telecommunications Ltd............... 78,356 2,478,008
Elbit Systems Ltd........................ 1 16
(a)Galileo Technology Ltd................ 8,680 209,405
(a)Gilat Satellite Networks Ltd.......... 23,432 2,782,550
(a)Jacada Ltd............................ 2,280 63,555
(a)NICE-Systems Ltd...................... 2,802 136,426
(a)NICE-Systems Ltd. ADR................. 8,390 412,683
(a)Orbotech Ltd.......................... 8,264 640,460
(a)Orckit Communications Ltd............. 4,300 148,216
(a)RADWARE Ltd........................... 2,710 116,869
(a)Sapiens International Corp............ 9,010 148,102
(a)Tecnomatix Technologies Ltd........... 4,950 142,313
(a)TTI Team Telecom International Ltd.... 7,600 137,750
(a)Zoran Corp............................ 3,590 200,142
------------
11,423,109
------------
KOREA (19.5%)
Cheil Jedang Corp........................ 7,500 865,258
(a)Dacom Corp............................ 2,400 1,236,460
Daewoo Securities Co..................... 20,776 235,114
(a)Daou Technology, Inc.................. 11,586 403,036
(a)Digital Chosun Co., Ltd............... 850 169,925
Good Morning Securities Co., Ltd......... 63,180 302,129
Hana Bank................................ 23,160 180,507
Hankuk Glass Industry Co., Ltd........... 9,070 171,735
Hanvit Bank.............................. 96,070 324,887
(a)Hanvit Bank GDR....................... 37,750 243,487
Housing & Commercial Bank................ 13,610 431,493
(a)Humax Co., Ltd........................ 18,500 312,814
Hyundai Electronics Industries Co........ 30,529 647,951
Hyundai Securities Co.................... 10,420 203,720
(a)Insung Information.................... 7,650 261,400
Kookmin Bank............................. 43,917 688,439
Korea Electric Power Corp. ADR........... 39,650 664,137
(a)Korea Technology Banking Co........... 21,220 205,566
Korea Telecom Corp. ADR.................. 39,010 2,915,997
LG Electronics, Inc...................... 10,420 431,299
LG Securities Co......................... 12,140 206,343
Mirae Co................................. 39,060 303,743
(a)Pantech Co., Ltd...................... 20,340 456,777
Pohang Iron & Steel Co., Ltd............. 5,216 595,250
Samsung Electro-Mechanics Co............. 10,239 680,796
Samsung Electronics Co. (Foreign)........ 51,811 12,137,143
Samsung Securities Co., Ltd.............. 7,730 234,180
(a)Serome Technology, Inc................ 920 196,072
SK Telecom Co., Ltd...................... 1,743 6,247,477
SK Telecom Co., Ltd. ADR................. 39,830 1,528,480
(a)Telson Electronics Co., Ltd........... 20,880 408,222
Trigem Computer, Inc..................... 6,375 707,398
------------
34,597,235
------------
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
MALAYSIA (1.1%)
Commerce Asset-Holdings Bhd.............. 11,000 $ 28,223
Malayan Banking Bhd...................... 113,000 401,442
Nestle Bhd............................... 60,000 258,944
Public Bank Bhd.......................... 362,000 316,269
Rothmans of Pall Mall Bhd................ 37,000 282,365
Sime Darby Bhd........................... 148,000 187,724
Telekom Malaysia Bhd..................... 126,000 487,415
------------
1,962,382
------------
MEXICO (10.2%)
(a)Alfa 'A'.............................. 63,898 299,943
(a)Banacci 'L'........................... 177,316 682,704
Banacci 'O'.............................. 111,043 445,109
Cemex CPO................................ 233,250 1,304,035
Cemex CPO ADR............................ 50,470 1,406,851
(a)Cifra 'C'............................. 103,864 197,648
(a)Cifra 'V'............................. 5,793 11,610
(a)Cifra 'V' ADR......................... 9,780 196,012
FEMSA.................................... 328,611 1,466,271
FEMSA ADR................................ 22,251 990,169
(a)Grupo Carso 'A1'...................... 65,384 325,541
(a)Grupo Financiero Bancomer S.A. de C.V.
'O'.................................... 379,156 158,382
(a,c)Grupo Financiero Bancomer S.A. de
C.V. 'O' ADR........................... 31,915 267,288
Kimberly 'A'............................. 109,393 426,956
(a)Televisa CPO GDR...................... 52,227 3,564,493
Telmex ADR............................... 56,498 6,356,025
------------
18,099,037
------------
PAKISTAN (0.1%)
Pakistan State Oil Co., Ltd.............. 39,772 142,335
Pakistan Telecommunication Corp. 'A'..... 165,300 66,171
------------
208,506
------------
POLAND (1.3%)
(a)Elektrim S.A.......................... 32,995 327,157
(a)Polski Koncern Naftowy S.A. GDR....... 25,520 319,000
Prokom Software GDR...................... 4,983 77,735
Telekomunikacja Polska GDR............... 219,018 1,423,617
Wielkopolski Bank Kredytowy.............. 19,041 128,935
------------
2,276,444
------------
RUSSIA (2.9%)
Lukoil Oil Co. ADR....................... 27,103 1,368,702
(a,b)Mustcom............................. 8,129,779 1,604,005
(a,b,d)Storyfirst
Communications, Inc.................... 600 511,308
(a)Surgutneftegaz ADR.................... 94,289 1,638,271
------------
5,122,286
------------
SINGAPORE (0.5%)
(a)Chartered Semiconductor Manufacturing
Ltd.................................... 48,000 262,263
(a)Chartered Semiconductor Manufacturing
Ltd. ADR............................... 300 21,900
NatSteel Electronics Ltd................. 61,000 322,306
Venture Manufacturing Ltd................ 26,000 298,169
------------
904,638
------------
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
SOUTH AFRICA (5.3%)
Amalgamated Banks of South Africa........ 90,654 $ 406,837
Anglo American Platinum Corp. Ltd........ 14,580 443,327
Anglo American plc ADR................... 4 261
B.O.E. Corp., Ltd........................ 833,254 632,731
Bidvest Group Ltd........................ 143,436 1,401,708
Billiton plc............................. 8,000 47,193
Billiton plc............................. 96,800 556,403
De Beers Centenary AG.................... 49,030 1,427,052
De Beers Consolidated Mines ADR.......... 6,670 193,013
(a)Dimension Data Holdings Ltd........... 91,468 574,092
(a)Ellerine Holdings Ltd................. 60,710 320,825
Firstrand Ltd............................ 418,120 598,286
M-Cell Ltd............................... 91,930 355,762
Nedcor Ltd............................... 20,513 456,956
(a)New Africa Investments Ltd. 'N'....... 394,410 219,330
Persetel Holdings Ltd.................... 44,600 312,563
Rembrant Group Ltd....................... 63,120 601,436
Sappi Ltd................................ 31,800 314,381
Sasol Ltd................................ 48,800 400,715
The Education Investment Corp. Ltd....... 147,892 124,085
------------
9,386,956
------------
TAIWAN (11.8%)
(a)Accton Technology Corp................ 284,000 963,709
Acer Peripherals, Inc.................... 175,840 728,348
(a)Acer Peripherals, Inc. GDR............ 13,248 548,732
(a)Acer, Inc............................. 400,700 1,206,505
(a)Advanced Semiconductor
Engineering, Inc....................... 176,116 628,485
Ambit Microsystems Corp.................. 20,000 148,479
(a)ASE Test Ltd. ADR..................... 5,000 121,875
Asustek Computer, Inc.................... 142,185 1,499,545
China Steel Corp......................... 628,500 464,591
(a)Chinatrust Commercial Bank............ 128,640 149,605
Compal Electronics, Inc.................. 110,873 372,697
(a)Compeq Manufacturing Co., Ltd......... 105,000 572,089
D-Link Corp.............................. 122,000 264,330
Delta Electronics, Inc................... 145,000 628,326
(a)Dialer and Business................... 475,000 847,539
Far Eastern Textile Ltd.................. 410,320 980,532
(a,c)Far Eastern Textile Ltd. GDR........ 7,900 189,600
(a)Hon Hai Precision Industry............ 136,200 1,015,479
(a)Hon Hai Precision Industry GDR........ 14,100 272,482
International Commercial Bank of China... 124,500 139,634
President Chain Store Corp............... 119,000 525,139
(a)Ritek Corp............................ 17,000 102,915
(a)Ritek Corp. GDR....................... 25,700 297,477
(a)Siliconware Precision Industries Co... 233,350 594,807
(a)Taishin International Bank............ 204,800 114,847
(a)Taiwan Semiconductor Manufacturing
Co..................................... 840,750 4,473,642
(a)United Micro Electronics Corp. Ltd.... 790,000 2,819,181
(a)Universal Scientific Industrial Co.,
Ltd.................................... 61,000 192,417
WYSE Technology Taiwan Ltd............... 79,000 153,545
------------
21,016,552
------------
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
THAILAND (1.8%)
Advanced Info Service Co., Ltd.
(Foreign).............................. 45,300 $ 760,111
BEC World Public Co., Ltd. (Foreign)..... 42,500 300,146
Delta Electronics Public Co., Ltd.
(Foreign).............................. 50,237 597,536
Shinawatra Computer Co., Ltd.
(Foreign).............................. 49,180 464,837
Siam City Cement Public Co., Ltd.
(Foreign).............................. 130,933 702,203
Thai Farmer's Bank Public Co., Ltd.
(Foreign).............................. 234,500 392,234
------------
3,217,067
------------
TURKEY (7.8%)
Dogan Sirketler Grupo Holdings A.S....... 83,793,200 2,471,776
(a)Dogan Yayin Holdings A.S.............. 44,968,000 663,245
Ege Biracilik Ve Malt Sanayii............ 10,696,500 818,408
(a)Erciyas Biracilik Ve Malt Sanayii..... 1,555,488 74,563
(a)Eregli Demir ve Celik Fabrikalari
T.A.S.................................. 8,538,000 354,176
Haci Omer Sabanci Holding A.S............ 18,459,000 1,072,011
Migros Turk T.A.S........................ 307,000 198,101
(a)Turkiye Garanti Bankasi............... 52,741,400 797,344
Turkiye Is Bankasi 'C'................... 29,429,000 1,410,682
Turkiye Petrol Rafinerileri A.S.......... 3,162,000 355,608
(a)Vestel Elektronik Sanayii ve Ticaret
A.S.................................... 3,392,031 812,987
Yapi Ve Kredi Bankasi A.S................ 152,774,404 4,717,867
Yapi Ve Kredi Bankasi A.S. GDR........... 4,000 118,000
------------
13,864,768
------------
TOTAL COMMON STOCKS........................................ 160,926,892
------------
PREFERRED STOCKS (4.0%)
BRAZIL (4.0%)
(a,b)Banco Nacional...................... 11,156,000 309
CEMIG.................................... 23,883,581 535,447
(a)CRT................................... 3,809,145 1,180,803
CVRD 'A'................................. 28,383 785,580
(a)Lojas Arapua S.A...................... 12,437,000 --
Petrobras................................ 5,397,877 1,374,494
Tele Celular Sul ADR..................... 58,590,452 194,599
Tele Centro Oeste Sul.................... 2,622,764 5,517
Tele Centro Sul.......................... 35,723,952 652,385
Tele Nordeste Celular.................... 11,378,752 29,604
Tele Norte Leste......................... 7,395,552 198,552
Tele Sudeste Celular..................... 51,062,242 377,349
Telebras ADR............................. 3,070 394,495
Telemig Celular.......................... 76,699,752 167,708
Telerj Celular........................... 2,082,000 57,510
Telesp................................... 6,990,552 169,491
Telesp 'B'............................... 4,195,167 332,084
Telesp Celular........................... 35,130,452 622,294
------------
7,078,221
------------
COLOMBIA (0.0%)
BanColombia.............................. 7,150 7,627
------------
TOTAL PREFERRED STOCKS..................................... 7,085,848
------------
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANY (0.0%)
UNITED STATES (0.0%)
(e)Morgan Stanley Dean Witter Africa
Investment Fund, Inc................... 4,470 $ 46,376
------------
<CAPTION>
NO. OF
WARRANTS
------------
WARRANTS (0.2%)
<S> <C> <C>
THAILAND (0.2%)
(a)Siam Commercial Bank,
expiring 12/31/02...................... 111,466 45,871
(a)Siam Commercial Bank,
expiring 5/10/02....................... 658,000 305,722
------------
TOTAL WARRANTS............................................. 351,593
------------
TOTAL LONG-TERM INVESTMENTS (95.0%) (COST $118,631,167).... 168,410,709
------------
<CAPTION>
PAR
VALUE
------------
SHORT-TERM INVESTMENT (3.1%)
<S> <C> <C>
REPURCHASE AGREEMENT (3.1%)
Chase Securities, Inc., 2.60%, dated $ 5,448,000
12/31/99, due 1/3/00, to be
repurchased at $5,449,180
collateralized by $5,563,676
U.S. Treasury Notes, 6.125%,
due 12/31/01, valued at $5,563,676
(COST $5,448,000).................................... 5,448,000
------------
TOTAL INVESTMENTS IN SECURITIES (98.1%)
(COST $124,079,167)...................................... 173,858,709
FOREIGN CURRENCY (0.2%) (COST $380,808).................... 380,212
------------
TOTAL INVESTMENTS (98.3%) (COST $124,459,975).............. 174,238,921
OTHER ASSETS IN EXCESS OF LIABILITIES (1.7%)............... 3,077,491
------------
NET ASSETS (100%).......................................... $177,316,412
============
</TABLE>
- ---------------
(a) -- Non-income producing security
(b) -- Security valued at fair value-see note A-1 to financial statements
(c) -- 144A Security - Certain conditions for public sale may exist.
(d) -- Restricted as to public resale. Total value of restricted securities
at December 31,1999 was $511,308 or 0.29% of net assets (Total cost
$1,500,000).
(e) -- The Fund is advised by an affiliate which earns a management fee as
advisor to the Fund.
ADR -- American Depositary Receipt
CPO -- Certificate of Participation
GDR -- Global Depositary Receipt
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------- ------------ ----------
<S> <C> <C>
Services...................... $ 54,012,329 30.5%
Capital Equipment............. 45,515,228 25.7
Consumer Goods................ 26,060,467 14.7
Finance....................... 20,776,696 11.7
Materials..................... 12,115,579 6.8
Energy........................ 7,669,118 4.3
Multi-Industry................ 2,261,292 1.3
------------ ----
$168,410,709 95.0%
============ ====
</TABLE>
- ---------------
+ Classified by sectors which represent broad groupings of related industries.
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------
ASSETS:
Investments in Securities, at Value
(Cost $124,079,167).............. $ 173,858,709
Foreign Currency (Cost $380,808)... 380,212
Cash............................... 2,140,713
Receivable for:
Fund Shares Sold................. 2,264,269
Investments Sold................. 538,084
Dividends........................ 164,197
Foreign Witholding Tax Reclaim... 3,049
Interest......................... 718
Other.............................. 95,182
-------------
Total Assets..................... 179,445,133
-------------
LIABILITIES:
Payable for:
Deferred Country Tax............. 804,532
Investments Purchased............ 477,145
Fund Shares Redeemed............. 264,116
Distribution Fees................ 157,902
Investment Advisory Fees......... 145,440
Custody Fees..................... 144,560
Shareholder Reporting Expenses... 37,568
Administrative Fees.............. 35,040
Professional Fees................ 22,100
Directors' Fees and Expenses..... 20,474
Transfer Agent Fees.............. 16,592
Net Unrealized Loss on Foreign
Currency Exchange Contracts...... 274
Other.............................. 2,978
-------------
Total Liabilities................ 2,128,721
-------------
NET ASSETS........................... $ 177,316,412
=============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 12,836
Paid in Capital in Excess of Par... 175,500,350
Net Unrealized Appreciation on
Investments and Foreign Currency
Translations*.................... 49,017,700
Accumulated Net Investment Loss.... (2,562,549)
Accumulated Net Realized Loss...... (44,651,925)
-------------
NET ASSETS........................... $ 177,316,412
=============
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $90,320,585 and
6,424,822 Shares Outstanding).... $ 14.06
=============
Maximum Sales Charge............... 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share x
100/(100 - maximum sales
charge))......................... $ 14.92
=============
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$56,093,062 and 4,136,168 Shares
Outstanding)**................... $ 13.56
=============
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$30,902,765 and 2,274,563 Shares
Outstanding)**................... $ 13.59
=============
</TABLE>
- ---------------
* Net of accrual for deferred country tax of approximately U.S.
$713,750.
** Redemption price may be subject to a contingent deferred sales charge.
- ------------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------
INVESTMENT INCOME:
Dividends.......................... $ 128,126
Less Foreign Taxes Withheld........ (19,517)
-----------
Total Income...................... 108,609
-----------
EXPENSES:
Investment Advisory Fees........... 794,689
Country Tax Expense................ 507,652
Distribution Fees (Attributed to
Classes A, B and C of $79,683,
$202,746 and $114,439,
respectively).................... 396,868
Custodian Fees..................... 200,373
Administrative Fees................ 165,713
Shareholder Reports................ 53,654
Transfer Agent Fees................ 45,183
Professional Fees.................. 31,398
Filing and Registration Fees....... 16,207
Directors' Fees and Expenses....... 10,863
Other.............................. 3,132
-----------
Total Expenses.................... 2,225,732
Less Expense Reductions........... (108,572)
-----------
Net Expenses...................... 2,117,160
-----------
Net Investment Income/Loss........... (2,008,551)
-----------
NET REALIZED GAIN/LOSS ON:
Investments........................ 14,637,952
Foreign Currency Transactions...... (178,623)
-----------
Net Realized Gain/Loss............... 14,459,329
-----------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ 10,264,407
-----------
End of the Period:
Investments...................... 49,779,542
Foreign Currency Translations.... (761,842)
-----------
49,017,700
-----------
Net Unrealized
Appreciation/Depreciation During
the Peirod......................... 38,753,293
-----------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... 53,212,622
-----------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $51,204,071
===========
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
<S> <C> <C>
- -----------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ (2,008,551) $ 94,000
Net Realized Gain/Loss.......................... 14,459,329 (31,365,000)
Net Unrealized Appreciation/Depreciation........ 38,753,293 47,616,000
----------------- -----------------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 51,204,071 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 (1):
Subscribed...................................... 46,497,784 59,525,000
Distributions Reinvested........................ -- 54,000
Redeemed........................................ (43,853,687) (92,463,000)
----------------- -----------------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... 2,644,097 (32,884,000)
----------------- -----------------
Total Increase/Decrease in Net Assets........... 53,848,168 (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 $(2,562,549) and
$(554,000), respectively)....................... $ 177,316,412 $ 123,468,000
================= =================
- -----------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) CLASS A:
--------
Shares:
Subscribed................................... 3,390,128 6,660,000
Distributions Reinvested..................... -- 4,000
Redeemed..................................... (3,378,912) (9,639,000)
----------------- -----------------
Net Increase/Decrease in Class A Shares
Outstanding.................................. 11,216 (2,975,000)
================= =================
Dollars:
Subscribed................................... $ 36,077,112 $ 48,869,000
Distributions Reinvested..................... -- 30,000
Redeemed..................................... (34,765,394) (68,213,000)
----------------- -----------------
Net Increase/Decrease.......................... $ 1,311,718 $ (19,314,000)
================= =================
Ending Paid in Capital......................... $ 89,329,455 $ 88,430,000+
================= =================
CLASS B:
-----------
Shares:
Subscribed................................... 722,426 935,000
Distributions Reinvested..................... -- 2,000
Redeemed..................................... (597,022) (1,605,000)
----------------- -----------------
Net Increase/Decrease in Class B Shares
Outstanding.................................. 125,404 (668,000)
================= =================
Dollars:
Subscribed................................... $ 7,348,235 $ 7,223,000
Distributions Reinvested..................... -- 14,000
Redeemed..................................... (5,955,773) (11,281,000)
----------------- -----------------
Net Increase/Decrease.......................... $ 1,392,462 $ (4,044,000)
================= =================
Ending Paid in Capital......................... $ 53,551,129 $ 52,409,000+
================= =================
CLASS C
-----------
Shares:
Subscribed................................... 298,178 462,000
Distributions Reinvested..................... -- 1,000
Redeemed..................................... (310,386) (1,857,000)
----------------- -----------------
Net Increase/Decrease in Class C Shares
Outstanding.................................. (12,208) (1,394,000)
================= =================
Dollars:
Subscribed................................... $ 3,072,437 $ 3,433,000
Distributions Reinvested..................... -- 10,000
Redeemed..................................... (3,132,520) (12,969,000)
----------------- -----------------
Net Increase/Decrease.......................... $ (60,083) $ (9,526,000)
================= =================
Ending Paid in Capital......................... $ 32,632,602 $ 32,835,000+
================= =================
</TABLE>
- -----------------
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
- --------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
SIX MONTHS
ENDED JULY 6,
DECEMBER 31, YEAR ENDED JUNE 30, 1994* TO
1999 --------------------------------------------- JUNE 30,
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 9.865 $ 7.984 $ 13.47 $ 12.06 $ 10.61 $ 12.00
------------ ------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss... (0.145) 0.032 -- 0.01 0.05 0.05
Net Realized and Unrealized
Gain/Loss................ 4.338 1.853 (4.49) 1.57 1.44 (1.44)
------------ ------- ------- -------- -------- --------
Total From Investment
Operations............... 4.193 1.885 (4.49) 1.58 1.49 (1.39)
------------ ------- ------- -------- -------- --------
DISTRIBUTIONS
Net Investment Income...... -- -- -- -- (0.04) --
In Excess of Net Investment
Income................... -- -- -- (0.04) -- --
Net Realized Gain.......... -- -- (0.73) (0.13) -- --
In Excess of Net Realized
Gain..................... -- (0.004) (0.27) -- -- --
Return of Capital.......... -- (0.000)++ -- -- -- --
------------ ------- ------- -------- -------- --------
Total Distributions........ -- (0.004) (1.00) (0.17) (0.04) --
------------ ------- ------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD... $ 14.058 $ 9.865 $ 7.98 $ 13.47 $ 12.06 $ 10.61
============ ======= ======= ======== ======== ========
TOTAL RETURN (1)............ 41.84%** 23.92% (34.31)% 13.54% 14.16% (11.58)%**
============ ======= ======= ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's).................... $ 90,320 $63,273 $74,959 $119,022 $114,850 $ 26,091
Ratio of Expenses to Average Net
Assets..................... 2.15% 2.34% 2.27% 2.21% 2.16% 2.33%
Ratio of Net Investment
Income/Loss to Average Net
Assets..................... (2.82)% 0.44% 0.04% (0.06)% 0.93% 0.81%
Portfolio Turnover Rate...... 51%** 132% 99% 82% 42% 32%**
- ---------------------------------------------------------------------------------------------------------------------
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 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net
Assets................... 3.12% 2.56% 2.60% 2.41% 2.56% 3.10%
Net Investment Income/Loss to
Average Net Assets....... (2.94)% 0.22% (0.24)% (0.27)% 0.53% 0.04%
Ratio of Expenses to Average Net
Assets excluding country tax
expenses and interest
expenses................... 2.15% 2.15% 2.15% 2.15% 2.15% 2.15%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------
SIX MONTHS
ENDED AUGUST 1,
DECEMBER 31, YEAR ENDED JUNE 30, 1995+ TO
1999 ------------------------------- JUNE 30,
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 9.553 $ 7.784 $ 13.24 $ 11.94 $ 10.91
------------ ------- ------- ------- ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss... (0.178) (0.021) (0.07) (0.03) 0.01
Net Realized and Unrealized
Gain/Loss................ 4.187 1.794 (4.39) 1.50 1.02
------------ ------- ------- ------- ------------
Total From Investment
Operations............... 4.009 1.773 (4.46) 1.47 1.03
------------ ------- ------- ------- ------------
DISTRIBUTIONS
Net Investment Income...... -- -- -- --
In Excess of Net Investment
Income................... -- -- -- (0.04) --
Net Realized Gain.......... -- -- (0.73) (0.13) --
In Excess of Net Realized
Gain..................... -- (0.004) (0.27) -- --
Return of Capital.......... -- (0.000)++ -- -- --
------------ ------- ------- ------- ------------
Total Distributions........ -- (0.004) (1.00) (0.17) --
------------ ------- ------- ------- ------------
NET ASSET VALUE, END OF PERIOD... $ 13.562 $ 9.553 $ 7.78 $ 13.24 $ 11.94
============ ======= ======= ======= ============
TOTAL RETURN (1)............ 41.47%** 22.99% (34.76)% 12.67% 9.45%**
============ ======= ======= ======= ============
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's).................... $ 56,093 $38,313 $36,423 $35,966 $ 10,416
Ratio of Expenses to Average Net
Assets..................... 2.90% 3.09% 3.02% 2.96% 2.91%
Ratio of Net Investment
Income/Loss to Average Net
Assets..................... (3.57)% (0.29)% (0.67)% (0.64)% 0.30%
Portfolio Turnover Rate...... 51%** 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................... 3.87% 3.31% 3.35% 3.17% 3.31%
Net Investment Income/Loss to
Average Net Assets....... (3.69)% (0.51)% (0.97)% (0.87)% (0.10)%
Ratio of Expenses to Average Net
Assets excluding country tax
expenses and interest
expenses................... 2.90% 2.90% 2.90% 2.90% 2.90%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations.
** Non-Annualized.
+ The Fund began offering Class B shares on August 1, 1995.
++ Amount is less than $0.001 per share.
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
-----------------------
13
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 ------------------------------------------ JULY 6, 1994* TO
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 JUNE 30, 1995
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 9.569 $ 7.791 $ 13.26 $ 11.93 $ 10.53 $ 12.00
-------------------- ------- ------- ------- ------- -------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss... (0.178) (0.023) (0.08) (0.08) (0.01) --
Net Realized and Unrealized
Gain/Loss................ 4.195 1.805 (4.39) 1.55 1.41 (1.47)
-------------------- ------- ------- ------- ------- -------------------
Total From Investment
Operations............... 4.017 1.782 (4.47) 1.47 1.40 (1.47)
-------------------- ------- ------- ------- ------- -------------------
DISTRIBUTIONS
In Excess of Net Investment
Income................... -- -- -- (0.01) -- --
Realized Gain.............. -- -- (0.73) (0.13) -- --
In Excess of Net Realized
Gain..................... -- (0.004) (0.27) -- -- --
Return of Capital.......... -- (0.000)++ -- -- -- --
-------------------- ------- ------- ------- ------- -------------------
Total Distributions........ -- (0.004) (1.00) (0.14) -- --
-------------------- ------- ------- ------- ------- -------------------
NET ASSET VALUE, END OF PERIOD... $ 13.586 $ 9.569 $ 7.79 $ 13.26 $ 11.93 $ 10.53
==================== ======= ======= ======= ======= ===================
TOTAL RETURN (1)............ 41.38%** 23.09% (34.73)% 12.66% 13.30% (12.25)%**
==================== ======= ======= ======= ======= ===================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's).................... $ 30,903 $21,882 $28,680 $57,958 $43,601 $ 22,245
Ratio of Expenses to Average Net
Assets..................... 2.90% 3.09% 3.01% 2.96% 2.91% 3.08%
Ratio of Net Investment
Income/Loss to Average Net
Assets..................... (3.57)% (0.32)% (0.76)% (0.79)% (0.11)% 0.06%
Portfolio Turnover Rate...... 51%** 132% 99% 82% 42% 32%**
- ------------------------------------------------------------------------------------------------------------------------------
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 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net
Assets................... 3.87% 3.31% 3.34% 3.17% 3.34% 3.90%
Net Investment Income/Loss to
Average Net Assets....... (3.69)% (0.54)% (1.03)% (1.00)% (0.54)% (0.76)%
Ratio of Expenses to Average Net
Assets excluding country tax
expenses and interest
expenses................... 2.90% 2.90% 2.90% 2.90% 2.90% 2.90%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations.
** Non-Annualized.
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
- --------------
14
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen Emerging Markets Fund, (the "Fund") is organized as a separate
non-diversified fund of Van Kampen Series Fund, Inc., a Maryland corporation,
which is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective
seeks long-term capital appreciation by investing primarily in equity securities
of emerging country issues. The Fund commenced operations on July 6, 1994.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C shares. Class A shares are sold with a front-end sales charge of up to
5.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First................................ 5.00% 1.00%
Second............................... 4.00% None
Third................................ 3.00% None
Fourth............................... 2.50% None
Fifth................................ 1.50% None
Thereafter........................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights. The Fund began offering the current Class B shares on August 1,
1995. Class B shares held prior to May 1, 1995 were renamed Class C shares.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Securities listed on a foreign exchange are valued at their
closing price. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date, net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. Income, expenses (other than class specific expenses),
and realized and unrealized gains or losses are allocated to each class of
shares based upon their relative net assets. Distributions from the Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
------------------
15
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized between
trade date and settlement date on security and income transactions. However, the
foreign currency portion of gains and losses realized on sales and maturities of
foreign denominated debt securities is treated as ordinary income for U.S.
Federal income tax purposes.
The net assets of the Fund include issuers located in emerging markets. There
are certain risks inherent in these investments not typically associated with
investments in the United States, including the smaller size of the markets
themselves, lesser liquidity, greater volatility and potentially less publicly
available information. Emerging markets may be subject to a greater degree of
government involvement in the economy and greater economic and political
uncertainty, which has the potential to extend to government imposed
restrictions on exchange traded transactions and currency transactions. These
restrictions may impact the Fund's ability to buy or sell certain securities or
to repatriate certain currencies to U.S. dollars. Additionally, changes in
currency exchange rates will affect the value of and investment income from such
securities.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains and net unrealized appreciation, as applicable, as the income is earned or
capital gains are recorded.
At June 30, 1999, the Fund had a capital loss carryforward for U.S. Federal
income tax purposes of approximately $45,443,000 which will expire June 30,
2007.
To the extent that capital loss carryforwards are used to offset any future net
capital gains realized during the carryforward period as provided by U.S.
Federal income tax regulations, no capital gains tax liability will be incurred
by the Fund for gains realized and not distributed. To the extent that capital
gains are so offset, such gains will not be distributed to shareholders.
Net capital and net currency losses incurred after October 31 and within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. For the period from November 1, 1998 to June 30, 1999 the Fund
incurred and elected to defer until July 1, 1999, for U.S. Federal income tax
purposes, net currency and capital losses of approximately $10,331,000.
At December 31, 1999, cost and unrealized appreciation/ depreciation for the
U.S. Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ------------------------------------- ----------- ------------- -------------
<S> <C> <C> <C>
$124,079,167 $65,712,958 $(15,933,416) $49,779,542
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing book and
tax treatment for foreign currency transactions, net operating losses, foreign
taxes on net realized gains, deductibility of interest expense on short sales
and gains on certain securities of corporations designated as "passive foreign
investment companies".
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ ---------------------- ----------------------
<S> <C> <C>
1.25% 2.15% 2.90%
</TABLE>
- -----------------------
16
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
For the period ended December 31, 1999, the Fund recognized expenses of $3,774
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B 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
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $128,293 for Class A shares and deferred sales charges of
$69,756, and $936 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 December 31, 1999, the Fund incurred $6,736 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.
At December 31, 1999, the Fund owned shares of affiliated funds for which the
Fund earned dividend income of $1,098 during the period.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $64,070,733 and sales of $70,717,704 of investment securities
other than long-term U.S. government securities and short-term investments.
There were no purchases or sales of long-term U.S. government securities.
D. DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in very
general terms refers to security whose value is "derived" from the value of an
underlying asset, reference rate or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, foreign currency
exposure, maturity and duration. All of the Fund's portfolio holdings, including
derivative instruments, are marked-to-market each day with the change in value
reflected in unrealized appreciation/depreciation. Upon disposition, a realized
gain or loss is recognized accordingly, except when exercising a call option
contract or taking delivery of a security underlying a forward contract. In this
instance, the recognition of gain or loss is postponed until the disposal of the
security underlying the option or forward contract. Risks may arise as a result
of the potential inability of the counterparties to meet the terms of their
contracts.
Summarized below are the specific types of derivative financial instruments used
by the Fund.
1. FORWARD CURRENCY CONTRACTS: These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The
gain/loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency transactions.
------------------
17
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
At December 31, 1999, the Fund has outstanding forward currency contracts as
follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
FORWARD CURRENCY CONTRACTS VALUE DEPRECIATION
- -------------------------- -------- -------------
<S> <C> <C>
LONG CONTRACTS:
South African Rand,
910,010 expiring 1/5/00............................... $147,833 $(136)
======== =====
SHORT CONTRACTS:
Greek Drachma,
30,956,376 expiring 1/3/00............................ $ 94,561 $(138)
======== =====
$(274)
=====
</TABLE>
2. SWAP AGREEMENTS: The Fund may enter into total return swap agreements to
exchange the return generated by one security, instrument or basket of
instruments for the return generated by another security, instrument or basket
of instruments. Total return swaps involve commitments to pay interest in
exchange for a market-linked return based on a notional amount. To the extent
the total return of the security or index underlying the transactions exceeds or
falls short of the offsetting interest obligation, the Fund will receive a
payment from or make a payment to the counterparty, respectively. Total return
swaps are marked-to-market daily based upon quotations from market makers and
the change, if any, is recorded as unrealized gains or losses in the Statement
of Operations. Periodic payments received or made at the end of each measurement
period, but prior to termination, are recorded as realized gains or losses in
the Statement of Operations.
Realized gains or losses on maturity or termination of total return swaps are
presented in the Statement of Operations. Because there is no organized market
for these swap agreements, the value reported in the Statement of Net Assets may
differ from that which would be realized in the event the Fund terminated its
position in the agreement. Risks may arise upon entering into these agreements
from the potential inability of the counterparties to meet the terms of the
agreements and are generally limited to the amount of net interest payments to
be received and/or favorable movements in the value of the underlying security,
if any, at the date of default.
At December 31, 1999, the Fund had no open swap agreements.
E. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
- -----------------------
18
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the Emerging Markets Fund (the
"Fund") was held on December 15, 1999. The descriptin of each proposal and
number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
--------- --------
<S> <C> <C>
J. Miles Branagan........................................... 7,357,916 30,417
Jerry D. Choate............................................. 7,356,916 31,417
Linda Hutton Heagy.......................................... 7,356,916 31,417
R. Craig Kennedy............................................ 7,357,488 30,845
Mitchell M. Merin........................................... 7,355,909 32,424
Jack E. Nelson.............................................. 7,356,916 31,417
Richard F. Powers, III...................................... 7,355,909 32,424
Phillip B. Rooney........................................... 7,356,676 31,657
Fernando Sisto.............................................. 7,358,298 32,035
Wayne W. Whalen............................................. 7,356,744 31,589
Suzanne H. Woolsey.......................................... 7,354,715 33,618
Paul G. Yovovich............................................ 7,356,916 31,417
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C> <C>
7,350,180 12,611 25,532
</TABLE>
------------------
19
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at www.vankampen.com --
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing Impaired,
call 1-800-421-2833.
- - e-mail us by visiting www.vankampen.com
and selecting CONTACT US
* Closed to new investors
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management
of Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza -- P.O. Box 5555 -- Oakbrook Terrace, IL 60181-5555 --
www.vankampen.com
MSEM SAR 02/00 -C- Van Kampen Funds Inc. 2000
455 555 655
<PAGE>
VAN KAMPEN
WORLDWIDE HIGH INCOME FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders.......................... 1
Economic Snapshot............................... 2
Investment Overview............................. 3
Portfolio of Investments........................ 6
Statement of Assets and Liabilities............. 10
Statement of Operations......................... 11
Statement of Changes in Net Assets.............. 12
Financial Highlights ........................... 13
Notes to Financial Statements................... 15
Additional Information.......................... 19
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all mutual fund shareholders earmarked retirement as
their primary financial goal in 1998.
Through all the changes in the investment environment over the past century, the
general principles that have made generations of investors successful remain the
same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999, bringing
the United States to the verge of its longest economic expansion on record. High
levels of consumer spending, a host of new jobs, and increasing productivity
kept the economy strong. Gross domestic product, the primary measure of economic
growth, increased 4.2 percent for the year, including an impressive annualized
rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with 2.7 million U.S. jobs
created in 1999. In addition, unemployment dropped to 4.1 percent in
October--its lowest rate in three decades. With jobs plentiful and wages on the
rise, most Americans were optimistic about the future. At the end of the year
the consumer confidence index hit its highest level since 1968. Although wage
pressures caused some concerns about the potential erosion of corporate profits,
productivity gains helped keep those concerns muted through the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
THIRD QUARTER 1997 THROUGH FOURTH QUARTER 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
97Q3 4.0%
<S> <C>
97Q4 3.1%
98Q1 6.7%
98Q2 2.1%
98Q3 3.8%
98Q4 5.9%
99Q1 3.7%
99Q2 1.9%
99Q3 5.7%
99Q4 5.8%
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
United States 35.2%
Brazil 14.6%
Other 11.7%
Argentina 11.0%
Mexico 8.9%
Russia 4.5%
Venezula 3.1%
Netherlands 2.9%
United Kingdom 2.5%
Bulgaria 2.0%
Philippines 1.8%
Short-Term Investments 1.8%
</TABLE>
------------------------------------------------
TOTAL RETURNS**
<TABLE>
<CAPTION>
WORLDWIDE
CLASS A CLASS B CLASS C HIGH INCOME
SHARES SHARES SHARES BLENDED INDEX
-------- -------- -------- -------------
<S> <C> <C> <C> <C>
Six Months
With Sales Charge*.............. 4.81% 5.61% 8.61% N/A
Without Sales Charge***......... 10.00% 9.61% 9.61% 6.65%
One Year
With Sales Charge*.............. 12.37% 13.04% 15.92% N/A
Without Sales Charge***......... 18.02% 17.04% 16.92% 12.41%
Average Annual Five Year
With Sales Charge*.............. 10.24% N/A 10.46% N/A
Without Sales Charge***......... 11.31% N/A 10.46% 12.50%
Since Inception
With Sales Charge*.............. 9.16% 9.39% 9.26% N/A
Without Sales Charge***......... 10.10% 9.61% 9.26% 11.34%
Commencement Date................. 4/21/94 8/1/95 4/21/94 N/A
</TABLE>
The Worldwide High Income Blended Index is an unmanaged index composed of 50
percent CS First Boston High Yield Index, 25 percent J.P. Morgan Latin Eurobond
Index, and 25 percent J.P. Morgan Emerging Markets Bond Index Plus.
* The returns above are calculated using the maximum sales charge for Class A
shares (4.75%) and the applicable deferred sales charge for Class B (5%) and
Class C (1%) shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
<TABLE>
YIELD INFORMATION AS OF DECEMBER 31, 1999
30 DAY
CURRENT
YIELD+
-----
<S> <C>
Class A.................................... 12.97%
Class B.................................... 12.20%
Class C.................................... 12.20%
</TABLE>
+ The current 30-day yield reflects the net investment income generated by the
Fund over the specified 30-day period expressed as an annual percentage.
Expenses accrued for the 30-day period include any fees charged to all
shareholders. Yields will fluctuate as market conditions change and are not
necessarily indicative of future performance.
------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY COUNTRY NET ASSETS
- -------- --------- ----------
<S> <C> <C>
Federated Republic of Brazil, Series C,
PIK, 8.00%, 4/15/14 Brazil 5.3%
Federated Republic of Brazil 14.50%,
10/15/09 Brazil 5.2%
Government of Russia 11.00%, 7/24/18 Russia 4.5%
United Mexican States 10.375%, 2/17/09 Mexico 2.8%
Republic of Argentina 11.375%, 1/30/17 Argentina 2.4%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS+
PERCENT OF
SECTOR VALUE NET ASSETS
- ------ ----------- ----------
<S> <C> <C>
Foreign Government & Agency Obligations $64,155,319 34.0%
Telecommunications 42,507,361 22.5%
Broadcast-Radio & Television 12,905,912 6.8%
Services 12,484,090 6.6%
Multi-Industry 11,509,736 6.1%
+These sectors represent broad groupings of related industries.
</TABLE>
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING. YIELDS WILL FLUCTUATE AS MARKET
CONDITIONS CHANGE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE.
------------------
3
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH REPRESENTATIVES OF THE SUBADVISER OF THE VAN KAMPEN
WORLDWIDE HIGH INCOME FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED
THE MARKETS DURING THE PAST SIX MONTHS. THE FUND IS MANAGED BY ROBERT E.
ANGEVINE, GORDON W. LOERY, STEPHEN F. ESSER, AND ABIGAIL L. MCKENNA OF MORGAN
STANLEY DEAN WITTER INVESTMENT MANAGEMENT. THE FOLLOWING DISCUSSION REFLECTS
THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE SIX-MONTH PERIOD ENDED
DECEMBER 31, 1999.
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST SIX MONTHS?
A: Conditions were favorable for emerging-market debt and high-yield securities
in the second half of the year as investors regained confidence in the global
economy. Economic growth was more robust than expected, particularly in regions
of the world that had struggled earlier in the year. More importantly, it was
apparent that Europe and non-Japan Asia were beginning a recovery that would
allow both regions to help perpetuate world growth, much as the United States
had done during the Asian crisis of 1998.
Concurrent with global growth was a sharp increase in commodity prices. In
particular, oil prices went from $9.00 per barrel to $26.00 per barrel.
Furthermore, prices for other commodities such as wheat, zinc, nickel, pulp,
paper, and steel rose from all-time lows. Finally, concerns surrounding
potential year 2000 computer problems began to dissipate, and investors became
more comfortable with riskier asset classes, such as emerging markets and
high-yield securities.
Interest in European high-yield issues was particularly strong during the
period. The initial skepticism toward European high-yield issuers, which
generally lead to bond market inefficiencies, subsided as investors poured funds
into this new asset class. Overall, the high-yield market in Europe presented
more favorable investment opportunities than the United States. European high-
yield bonds were affordable, while the risk associated with U.S. high-yield
bonds didn't take into consideration the current default rates. Numerous
companies in the telecommunications, health-care, and energy sectors fell victim
to default, forcing an increase in U.S. high-yield risk premiums. In terms of
specific sectors, media and telecommunications performed well, paced by
increased investment and strong merger-and-acquisition activity.
Q: WHAT STRATEGIES DID YOU PURSUE IN THESE CONDITIONS?
A: We started the period with an overweighted position in emerging market debt
compared to high-yield securities. Within high-yield securities, we favored
European issues. The Fund benefited from our emerging-market debt overweight
strategy through the end of November as interest rates in emerging-market debt
tightened relative to those in high-yield securities. In particular, at the
beginning of the period emerging market debt generally offered an additional 2.5
percent in yield over high-yield securities, but by December the advantage had
declined to 0.65 percent. The Fund had significant sovereign and corporate
positions in Latin America, with big holdings in Argentina, Brazil, and Mexico.
Following a strong rally in December, we felt that prices of emerging market
debt had benefited from most of the global healing scenario, so we began to
reduce our significant overweighted position in favor of U.S. high-yield
securities, which had been significantly outpaced by European high-yield during
the period.
One decision that hurt the Fund's returns was an underweighted position in
Venezuela, which performed well during the period. We maintained this position
because we were uncomfortable with the sustainability of the rally in oil
prices. We felt that any negative change in oil prices would hurt our position
in Venezuela. Plus, we were concerned with the election of Hugo Chavez, who was
consolidating power and proposing major changes to the Venezuelan constitution.
Our caution remains.
Q: HOW DID THE FUND PERFORM DURING THE SIX-MONTH REPORTING PERIOD?
A: For Class A shares at net asset value, the Fund generated a total return of
10.00 percent for the six-month period ended December 31, 1999. By comparison,
the Worldwide High Income Blended Index generated a total return of 6.65 percent
for the same six-month period. This benchmark is
- -----------------------
4
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
comprised of 50 percent CS First Boston High Yield Index, 25 percent J.P. Morgan
Latin Eurobond Index, and 25 percent J.P. Morgan Emerging Markets Bond Index
Plus. Past performance does not guarantee future results.
Q: WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A: Looking into the new year, the outlook for emerging market debt remains
favorable and encouraging. The asset class is attractive both in terms of income
and prospects for price appreciation. Compared to U.S. Treasury rates, the J.P.
Morgan Emerging Markets Bond Index Plus offers approximately 8.5 percent higher
yield.
The global environment continues to be supportive. Emerging markets are facing a
world in which economic growth looks to be both higher and better synchronized
across regions. Moreover, the developing world is benefiting from evidence of
improved investor risk appetite, which should be visible in higher capital
inflows. Finally, commodity prices remain on an upward trend, which should help
key emerging countries.
We expect high-yield securities to continue their performance from the second
half of 1999. Due to increased default rates and the potential for higher
overall Treasury rates, we see high-yield interest rates beginning the year at
fair value. The widely quoted Merrill Lynch Master II index began the new year
yielding 4.5 percent higher than Treasuries. We are finally seeing double-digit
yields, which could translate into a low double-digit return for the high-yield
asset class. European high-yield indices performed well last year and are
showing lower starting yields than in 1999. Nevertheless, we believe the
fundamentals for this newer asset class continue to bode well for another year
of solid returns.
------------------
5
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PAR
VALUE VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------------
CORPORATES BONDS & NOTES (55.0%)
ARGENTINA (4.0%)
$ 1,270,000 Acindar Industry Argentina 11.25%, 2/15/04....... $ 996,950
(b)1,100,000 Cablevision S.A. 13.75%, 5/1/09.................. 1,075,250
ARP (b)5,392,000 CIA International
Telecommunications
10.375%, 8/1/04................................ 4,475,987
$ (b)945,000 Multicanal S.A. 13.125%, 4/15/09................. 926,544
------------
7,474,731
------------
AUSTRALIA (0.5%)
220,000 Glencore Nickel Property Ltd. 9.00%, 12/1/14..... 187,550
745,000 Murrin Murrin Holdings 9.375%, 8/31/07........... 666,775
------------
854,325
------------
BRAZIL (1.7%)
(b,c)3,500,000 Banco Nacional Deseny Econo 12.193%, 6/16/08..... 3,176,250
------------
CHILE (0.9%)
(b)1,650,000 Embotelladora Arica S.A. 9.875%, 3/15/06......... 1,724,250
------------
COLOMBIA (0.6%)
(d)2,000,000 Occidente Y Caribe 0.00%, 3/15/04................ 1,100,000
------------
INDIA (0.2%)
(b)400,000 Reliance Industries, Inc. 10.50%, 8/6/46......... 384,120
------------
INDONESIA (0.8%)
300,000 Indah Kiat International, Series B, 11.875%,
6/15/02........................................ 267,000
1,500,000 Tjiwi Kimia International BV 13.25%, 8/1/01...... 1,335,000
------------
1,602,000
------------
LUXEMBURG (0.2%)
EUR (b)485,727 Sirona Dental Systems 9.125%, 7/15/08............ 377,133
------------
MEXICO (4.1%)
$ (b)1,300,000 Nuevo Grupo Iusacell S.A. 14.25%, 12/1/06........ 1,355,250
(b)3,450,000 Sanluis Corp. S.A. 8.875%, 3/18/08............... 3,096,375
3,800,000 TV Azteca S.A. 10.125%, 2/15/04.................. 3,391,500
------------
7,843,125
------------
NETHERLANDS (2.8%)
500,000 Hermes Europe Railtel BV 10.375%, 1/15/09........ 495,000
975,000 Hermes Europe Railtel BV 11.50%, 8/15/07 Senior
Notes.......................................... 1,004,250
(b)1,100,000 PTC International Finance BV 11.25%, 12/1/09..... 1,085,614
EUR (b)875,000 Tele 1 Europe BV 13.00%, 5/15/09................. 935,243
$ 1,825,000 United Pan-Europe Communications 10.875%,
8/1/09......................................... 1,843,250
------------
5,363,357
------------
<CAPTION>
PAR
VALUE VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------------
PHILIPPINES (1.8%)
$ (b)2,550,000 Bayan Telecommunications 13.50%, 7/15/06......... $ 2,244,000
(b)1,025,000 Globe Telecom 13.00%, 8/1/09..................... 1,071,125
------------
3,315,125
------------
POLAND (1.0%)
EUR 1,900,000 Netia Holdings 13.50%, 6/15/09................... 1,982,918
------------
QUATAR (0.2%)
$ (b)375,000 Ras Laffan Liquid National Gas 8.294%, 3/15/14... 353,479
------------
TURKEY (1.4%)
(b)2,440,000 Cellco Finance 15.00%, 8/1/05.................... 2,647,400
------------
UNITED KINGDOM (2.5%)
EUR 963,785 Colt Telecom Group plc 7.625%, 7/31/08........... 966,973
$ (b,d)940,000 Dolphin Telecommunications plc 0.00%, 6/1/08..... 469,185
(b,d)1,350,000 Dolphin Telecommunications plc 0.00%, 5/15/09.... 627,750
EUR 664,679 Esprit Telecommunication Group plc 11.00%,
6/15/08........................................ 673,580
$ 620,000 HMV Media Group, Inc. 10.875%, 5/15/08........... 921,248
EUR (d)1,610,569 RSL Communications plc 0.00%, 3/1/08............. 1,031,250
------------
4,689,986
------------
UNITED STATES (32.3%)
$ 750,000 Adelphia Communications, Series B, 7.75%,
1/15/09........................................ 672,188
600,000 Adelphia Communications, Series B, 8.375%,
2/1/08......................................... 559,500
800,000 Adelphia Communications, Series B, 9.875%,
3/1/07......................................... 810,000
885,000 Adelphia Communications, Series B, 12.25%,
4/1/08......................................... 694,725
925,000 American Cellular Corp. 10.50%, 5/15/08.......... 1,019,812
(b)914,659 CA FM Lease Trust 8.50%, 7/15/17................. 850,633
350,000 Chancellor Media Corp. 9.00%, 10/1/08............ 363,125
1,365,000 Chancellor Media Corp., Series B, 8.125%,
12/15/07....................................... 1,358,175
600,000 CMS Energy 7.50%, 1/15/09........................ 547,182
2,500,000 Columbia/HCA Healthcare 7.69%, 6/15/25........... 2,044,125
85,000 Columbia/HCA Healthcare 8.13%, 8/4/03 MTN........ 83,143
1,325,000 Columbia/HCA Healthcare 8.85%, 1/1/07 MTN........ 1,308,782
660,000 Dobson Communications Corp. 11.75%, 4/15/07...... 762,300
700,000 D.R. Horton, Inc. 8.00%, 2/1/09.................. 644,000
739,644 DR Securitized Lease Trust, Series 1993-K1,
Class A1, 6.66%, 8/15/10....................... 645,088
</TABLE>
- -----------------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PAR
VALUE VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
UNITED STATES (CONT.)
$ 852,295 DR Securitized Lease Trust, Series 1994-K1,
Class A1, 7.60%, 8/15/07....................... $ 798,439
250,000 DR Securitized Lease Trust, Series 1994-K1,
Class A2, 8.375%, 8/15/15...................... 221,708
1,050,000 Echostar DBS Corp. 9.375%, 2/1/09................ 1,053,675
(b)300,000 EES Coke Battery Co., Inc. 9.382%, 4/15/07....... 286,674
165,000 Entex Information Services 12.50%, 8/1/06........ 66,000
1,600,000 Global Crossing Holdings Ltd. 9.625%, 5/15/08.... 1,596,000
770,000 Globalstar LP/Capital 11.375%, 2/15/04........... 508,200
125,000 Globalstar LP/Capital 11.50%, 6/1/05............. 81,250
1,330,000 Harrahs Operating Co., Inc. 7.875%, 12/15/05..... 1,280,125
1,400,000 Hayes Lemmerz International, Inc. 8.25%,
12/15/08....................................... 1,285,368
930,000 Hilton Hotels 7.95%, 4/15/07..................... 874,200
1,355,000 HMH Properties, Inc., Series A, 7.875%,
8/1/05......................................... 1,260,150
(b)1,060,000 Horseshoe Gaming Holdings 8.625%, 5/15/09........ 1,017,600
950,000 Host Marriott Travel Plaza, Series B, 9.50%,
5/15/05........................................ 989,900
(b)1,175,000 Huntsman ICI Chemicals 10.125%, 7/1/09........... 1,213,187
EUR (b)1,150,000 Huntsman ICI Chemicals 10.125%, 7/1/09........... 1,197,289
$ (d)3,100,000 Intermedia Communications, Series B, 0.00%,
7/15/07........................................ 2,309,500
(a,f)815,000 Iridium LLC/Capital Corp., Series A, 13.00%,
7/15/05........................................ 36,675
(b)300,000 Jet Equipment Trust, Series 1995-D, 11.44%,
11/1/14........................................ 340,767
300,000 Jet Equipment Trust, Series C-1, 11.79%,
6/15/13........................................ 345,531
4,045,000 Level 3 Communications, Inc. 9.125%, 5/1/08...... 3,832,637
815,000 Lyondell Chemical Co. 9.625%, 5/1/07............. 833,338
500,000 Musicland Group, Inc. 9.00%, 6/15/03............. 482,500
950,000 Musicland Group, Inc. 9.875%, 3/15/08............ 864,500
(d,e)4,125,000 Nextel Communications, Inc. 0.00%, 9/15/07....... 3,093,750
(d)3,425,000 NEXTLINK Communications, Inc. 0.00%, 4/15/08..... 2,243,376
(a,b,f)525,000 NSM Steel, Ltd. 12.25%, 2/1/08................... 525
GBP (d)1,800,000 NTL, Inc. 0.00%, 4/1/08.......................... 1,940,532
$ (b)159,669 Oil Purchase Co. 7.10%, 4/30/02.................. 152,256
(b)735,000 OnePoint Communications Corp. 14.50%, 6/1/08..... 481,425
(b)1,100,000 Paiton Energy Funding 9.34%, 2/15/14............. 220,000
970,000 Park Place Entertainment 7.875%, 12/15/05........ 923,925
<CAPTION>
PAR
VALUE VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------------
$ 330,000 Primus Telecommunications Group 11.25%,
1/15/09........................................ $ 319,275
700,000 Primus Telecommunications Group, Series B,
9.875%, 5/15/08................................ 644,000
515,000 PSINet, Inc., Series B, 10.00%, 2/15/05.......... 509,850
1,575,000 PSINet, Inc., Series B, 11.00%, 8/1/09........... 1,606,500
(d)1,325,000 RCN Corp. 0.00%, 10/15/07........................ 944,062
(d)1,300,000 Rhythms Netconnections, Inc., Series B, 0.00%,
5/15/08........................................ 702,000
1,340,000 RSL Communications Ltd. 9.125%, 3/1/08........... 1,192,600
35,000 RSL Communications Ltd. 12.25%, 11/15/06......... 35,700
800,000 SD Warren Co., Series B, 12.00%, 12/15/04........ 837,000
1,125,000 Snyder Oil Corp. 8.75%, 6/15/07.................. 1,122,187
985,000 Station Casinos, Inc. 9.75%, 4/15/07............. 994,850
960,000 Station Casinos, Inc. 10.125%, 3/15/06........... 978,000
500,000 Tenet Healthcare Corp. 8.125%, 12/1/08........... 467,500
1,480,000 Tenet Healthcare Corp. 8.625%, 1/15/07........... 1,428,200
(b)500,000 Tenneco, Inc. 11.625%, 10/15/09.................. 510,000
(d)1,900,000 Viatel, Inc., Series A, 0.00%, 4/15/08........... 1,197,000
450,000 Vintage Petroleum 8.625%, 2/1/09................. 434,250
(d)1,890,000 Wam!Net, Inc., Series B, 0.00%, 3/1/05........... 1,134,000
535,000 Waste Management, Inc. 7.00%, 10/15/06........... 473,015
1,100,000 Waste Management, Inc. 7.125%, 10/1/07........... 962,060
200,000 Waste Management, Inc. 7.125%, 12/15/17.......... 157,434
235,000 Waste Management, Inc. 7.65%, 3/15/11............ 203,336
------------
61,046,599
------------
TOTAL CORPORATE BONDS & NOTES........................................ 103,934,798
------------
ASSET BACKED SECURITIES (0.7%)
UNITED STATES (0.7%)
(b)857,314 Commercial Financial Services, Inc.,
Series 1997-5, Class A1, 7.72%, 6/15/05........ 214,328
(b)204,820 Long Beach Acceptance Auto Grantor Trust,
Series 1997-1, Class B, 14.22%, 10/26/03....... 201,935
911,962 OHA Grantor Trust 11.00%, 1/15/04................ 872,839
------------
TOTAL ASSET BACKED SECURITIES........................................ 1,289,102
------------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.9%)
UNITED STATES (0.9%)
601,851 Aircraft Lease Portfolio Securitization
Ltd.,Series 1996-1, Class DX, 12.75%,
6/15/06........................................ 601,851
(b,c)36,368,337 DLJ Mortgage Acceptance Corp.,Series 1997-CF2,
Class S, IO, 8.357%, 10/15/17.................. 714,274
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PAR
VALUE VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
UNITED STATES (CONT.)
$ (b)150,000 DR Structured Finance, Series 1994-K2, 9.35%,
8/15/19........................................ $ 137,168
(b)534,716 Federal Mortgage Acceptance Corp.,
Series 1996-B, Class C, 7.883%, 11/1/18........ 187,140
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS............................ 1,640,433
------------
EUROBONDS (3.8%)
ARGENTINA (3.8%)
(c)1,053,179 Republic of Argentina 2.868%, 4/1/07............. 729,201
4,550,000 Republic of Argentina 11.375%, 1/30/17........... 4,535,212
(c)2,191,200 Republic of Argentina, Series L, 6.8125%,
3/31/05........................................ 2,006,044
------------
TOTAL EUROBONDS...................................................... 7,270,457
------------
FOREIGN GOVERNMENT & AGENCY OBLIGATIONS (34.0%)
ARGENTINA (3.2%)
2,620,000 Bonos del Tesoro, Series BT02, 8.75%, 5/9/02..... 2,485,070
3,490,000 Republic of Argentina 11.75%, 4/7/09............. 3,483,020
------------
5,968,090
------------
BRAZIL (12.9%)
8,873,000 Federated Republic of Brazil 14.50%, 10/15/09.... 9,853,466
(c)3,780,000 Federated Republic of Brazil Debt Conversion
Bond, Series Z-L, 7.00%, 4/15/12............... 2,806,650
13,204,578 Federated Republic of Brazil, Series C, PIK,
8.00%, 4/15/14................................. 9,936,445
(c)2,200,000 Federated Republic of Brazil, Series NMB-L,
7.00%, 4/15/09................................. 1,773,063
------------
24,369,624
------------
BULGARIA (2.0%)
(d)4,130,000 Bulgaria Front Loaded Interest Reduction Bond
2.75%, 7/28/12................................. 2,983,925
(c)900,000 Republic of Bulgaria Discount Bond, Series A,
6.50%, 7/28/24................................. 722,813
------------
3,706,738
------------
CHILE (0.4%)
795,000 ENDESA 7.75%, 7/15/08............................ 754,224
------------
COLOMBIA (1.0%)
(c)626,000 Republic of Colombia 11.442%, 8/13/05............ 605,655
1,450,000 Republic of Colombia 9.75%, 4/23/09.............. 1,355,750
------------
1,961,405
------------
ECUADOR (0.3%)
(a,c,f)1,230,000 Republic of Ecuador Discount Bond 6.75%,
2/28/25........................................ 477,240
------------
<CAPTION>
PAR
VALUE VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------------
JORDAN (0.5%)
$ (c)496,000 Government of Jordan 7.00%, 12/23/23............. $ 355,880
(b,c)828,000 Government of Jordan 7.00%, 12/23/23............. 594,090
------------
949,970
------------
MEXICO (4.8%)
4,875,000 United Mexican States 10.375%, 2/17/09........... 5,216,250
3,430,000 United Mexican States 11.375%, 9/15/16 Global
Bond........................................... 3,891,506
------------
9,107,756
------------
PANAMA (0.4%)
450,000 Republic of Panama 8.875%, 9/30/27............... 379,350
(d)485,874 Republic of Panama Past Due Interest, PIK 6.50%,
7/17/16........................................ 384,448
------------
763,798
------------
PERU (0.9%)
(b,d)2,750,000 Republic of Peru Front Loaded Interest Reduction
Bond 3.25%, 3/7/17............................. 1,708,437
(d)90,000 Republic of Peru Front Loaded Interest Reduction
Bond 3.75%, 3/7/17............................. 55,913
------------
1,764,350
------------
RUSSIA (4.5%)
(b)14,170,000 Government of Russia 11.00%, 7/24/18............. 8,572,850
------------
VENEZUELA (3.1%)
6,350,000 Republic of Venezuela 9.25%, 9/15/27............. 4,254,500
(c)1,904,777 Republic of Venezuela Discount Bond, Series L,
7.00%, 12/18/07................................ 1,504,774
------------
5,759,274
------------
TOTAL FOREIGN GOVERNMENT & AGENCY OBLIGATIONS........................ 64,155,319
------------
LOAN AGREEMENTS (1.5%)
MOROCCO (1.5%)
(c)3,076,000 Kingdom of Morocco 6.844%, 1/1/09................ 2,806,850
------------
<CAPTION>
SHARES
- -----------------
<C> <S> <C>
PREFERRED STOCKS (1.3%)
UNITED STATES (1.3%)
(a)6,705 Concentric Network Corp. PIK 13.50%.............. 663,815
(a)722 IXC Communications, Inc. PIK 12.50%.............. 800,995
7,100 Kmart Financing 7.75%............................ 313,287
7,388 Paxson Communications 13.25%..................... 755,423
------------
TOTAL PREFERRED STOCKS............................................... 2,533,520
------------
</TABLE>
- -----------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
NO. OF
WARRANTS VALUE
- -----------------------------------------------------------------------------------
<C> <S> <C>
WARRANTS (0.2%)
ARGENTINA (0.0%)
(a)4,750 Republic of Argentina,
expiring 2/25/00............................... $ 10,094
------------
COLOMBIA (0.1%)
(a,b)80,000 Occidente Y Caribe, expiring 3/15/04............. 120,000
------------
NETHERLANDS (0.1%)
(a,b)8,750 Tele 1 Europe BV, expiring 5/15/09............... 149,992
------------
</TABLE>
<TABLE>
<C> <S> <C>
UNITED STATES (0.0%)
(a,b)8,850 American Mobile Satellite Corp., expiring
4/1/08......................................... 35,400
(a,b)3,323,743 NSM Steel, Inc., expiring 2/1/08................. 3,323
(a,b)7,350 OnePoint Communications Corp., expiring 6/1/08... 735
(a,b)22,500 Wam!Net, Inc., expiring 3/1/05................... 50,625
------------
90,083
------------
TOTAL WARRANTS....................................................... 370,169
------------
TOTAL LONG-TERM INVESTMENTS (97.4%) (COST $180,784,687).............. 184,000,648
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
- ---------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (1.8%)
TREASURY BILLS (1.8%)
TRL (b)1,146,669,000 Republic of Turkey, Series 14T, 2/9/00........... 1,945,384
(b)911,575,000 Republic of Turkey, Series 14T, 3/15/00.......... 1,477,830
------------
TOTAL SHORT-TERM INVESTMENTS (1.8%) (COST $3,873,944).................... 3,423,214
------------
TOTAL INVESTMENTS (99.2%) (COST $184,658,631)............................ 187,423,862
OTHER ASSETS IN EXCESS OF LIABILITIES (0.8%)............................. 1,601,462
------------
NET ASSETS (100%)........................................................ $189,025,324
============
</TABLE>
- ---------------
(a) -- Non-income producing security
(b) -- 144A Security--Certain conditions for public sale may exist.
(c) -- Variable/floating rate security--rate disclosed December 31, 1999.
(d) -- Step Bond--coupon rate increases in increments to maturity. Rate
disclosed is as of December 31,1999. Maturity date disclosed is the
ultimate maturity date.
(e) -- Security segregated as collateral for outstanding futures contracts.
(f) -- Bond is in default.
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.
MTN -- Medium Term Note
TRL -- Turkish Lira
----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION+
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------ ----------- -------------
<S> <C> <C>
Foreign Government & Agency
Obligations................... $64,155,319 34.0%
Telecommunications............ 42,507,361 22.5
Broadcast--Radio &
Television.................... 12,905,912 6.8
Services...................... 12,484,090 6.6
Multi-Industry................ 11,509,736 6.1
Eurobonds..................... 7,270,457 3.8
Finance....................... 6,960,689 3.7
Consumer Goods................ 4,921,283 2.6
Materials..................... 4,313,798 2.3
Chemicals..................... 3,243,814 1.7
Capital Goods................. 3,096,375 1.6
Collateralized Mortgage
Obligations & Asset Backed
Securities.................... 2,929,535 1.6
Loan Agreements............... 2,806,850 1.5
Energy........................ 2,282,172 1.2
Utilities..................... 1,301,406 0.7
Real Estate................... 644,000 0.4
Transportation................ 601,851 0.3
Technology.................... 66,000 0.0
----------- ---------
$184,000,648 97.4%
=========== =========
</TABLE>
- ---------------
+ Classified by sectors which represent broad groupings of related industries.
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------
ASSETS:
Investments at Value (Cost $184,658,631).................. $ 187,423,862
Margin Deposit on Futures................................. 157,330
Receivable for:
Interest................................................ 5,011,026
Investments Sold........................................ 928,636
Fund Shares Sold........................................ 122,348
Variation of Futures Contracts.......................... 51,651
Foreign Withholding Tax Reclaim......................... 26,030
Net Unrealized Gain on Foreign Currency Exchange
Contracts............................................... 89,537
Other..................................................... 9,341
-------------
Total Assets............................................ 193,819,761
-------------
LIABILITIES:
Payable for:
Bank Overdraft.......................................... 2,153,148
Dividends Declared...................................... 1,494,635
Fund Shares Redeemed.................................... 486,074
Distribution Fees....................................... 254,459
Investment Advisory Fees................................ 121,729
Administrative Fees..................................... 44,675
Shareholder Reporting Expenses.......................... 31,468
Transfer Agent Fees..................................... 22,821
Directors' Fees and Expenses............................ 22,687
Professional Fees....................................... 21,159
Custody Fees............................................ 10,736
Other..................................................... 130,846
-------------
Total Liabilities....................................... 4,794,437
-------------
NET ASSETS.................................................. $ 189,025,324
=============
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 18,338
Paid in Capital in Excess of Par.......................... 258,790,214
Net Unrealized Appreciation on Investments, Foreign
Currency Translations and Futures....................... 2,755,487
Accumulated Net Investment Income......................... 1,411,798
Accumulated Net Realized Loss............................. (73,950,513)
-------------
NET ASSETS.................................................. $ 189,025,324
=============
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $50,357,715 and 4,871,372 Shares
Outstanding)............................................ $ 10.34
=============
Maximum Sales Charge...................................... 4.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100 / (100 -- maximum sales charge))............ $ 10.86
=============
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $101,883,062 and 9,895,276 Shares
Outstanding)*........................................... $ 10.30
=============
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $36,784,547 and 3,571,432 Shares
Outstanding)*........................................... $ 10.30
=============
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Redemption price may be subject to a contingent deferred
sales charge.
</TABLE>
- ------------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------
INVESTMENT INCOME:
Interest.................................................. $12,601,242
-----------
EXPENSES:
Distribution Fees (Attributed to Classes A, B and C of
$67,542, $518,178 and $192,163, respectively)........... 777,883
Investment Advisory Fees.................................. 735,381
Administrative Fees....................................... 248,579
Shareholder Reports....................................... 52,029
Transfer Agent Fees....................................... 48,631
Filing and Registration Fees.............................. 32,817
Professional Fees......................................... 28,340
Custodian Fees............................................ 23,606
Directors' Fees and Expenses.............................. 11,453
Other..................................................... 3,201
-----------
Total Expenses........................................... 1,961,920
-----------
Net Investment Income/Loss.................................. 10,639,322
-----------
NET REALIZED GAIN/LOSS ON:
Investments............................................... 1,013,569
Foreign Currency Transactions............................. 36,280
Futures................................................... 53,944
-----------
Net Realized Gain/Loss...................................... 1,103,793
-----------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... (3,139,531)
-----------
End of the Period:
Investments............................................. 2,765,231
Foreign Currency Translations........................... (67,817)
Futures................................................. 58,073
-----------
2,755,487
-----------
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 5,895,018
-----------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. 6,998,811
-----------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $17,638,133
===========
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ 10,639,322 $ 23,252,000
Net Realized Gain/Loss.................................... 1,103,793 (75,712,000)
Net Unrealized Appreciation /Depreciation................. 5,895,018 11,553,000
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 17,638,133 (40,907,000)
----------------- -------------
DISTRIBUTIONS:
Net Investment Income:
Class A................................................. (2,783,836) (7,573,000)
Class B................................................. (4,965,220) (11,681,000)
Class C................................................. (1,835,951) (4,723,000)
----------------- -------------
(9,585,007) (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........................................... (9,585,007) (24,118,000)
----------------- -------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed................................................ 10,539,605 83,177,000
Distributions Reinvested.................................. 5,458,232 13,759,000
Redeemed.................................................. (41,161,005) (123,953,000)
----------------- -------------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... (25,163,168) (27,017,000)
----------------- -------------
Total Increase/Decrease in Net Assets..................... (17,110,042) (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 $1,411,798 and $357,000,
respectively)............................................. $ 189,025,324 $ 206,135,000
================= =============
- -----------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
-------
Shares:
Subscribed............................................. 323,502 3,413,000
Distributions Reinvested............................... 189,287 486,000
Redeemed............................................... (1,548,986) (5,339,000)
----------------- -------------
Net Increase/Decrease in Class A Shares Outstanding...... (1,036,197) (1,440,000)
================= =============
Dollars:
Subscribed............................................. $ 3,204,120 $ 36,170,000
Distributions Reinvested............................... 1,861,888 4,873,000
Redeemed............................................... (15,361,675) (53,258,000)
----------------- -------------
Net Increase/Decrease.................................... $ (10,295,667) $ (12,215,000)
================= =============
Ending Paid in Capital................................... $ 70,380,545 $ 80,677,000+
================= =============
Class B:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 544,072 3,007,000
Distributions Reinvested............................... 258,852 619,000
Redeemed............................................... (1,757,302) (4,586,000)
----------------- -------------
Net Increase/Decrease in Class B Shares Outstanding...... (954,378) (960,000)
================= =============
Dollars:
Subscribed............................................. $ 5,355,833 $ 31,134,000
Distributions Reinvested............................... 2,536,236 6,179,000
Redeemed............................................... (17,350,853) (45,561,000)
----------------- -------------
Net Increase/Decrease.................................... $ (9,458,784) $ (8,248,000)
================= =============
Ending Paid in Capital................................... $ 138,382,884 $ 147,844,000+
================= =============
Class C:
- ------------------------------------------------------------
Shares:
Subscribed............................................. 199,706 1,545,000
Distributions Reinvested............................... 108,178 270,000
Redeemed............................................... (852,936) (2,552,000)
----------------- -------------
Net Increase/Decrease in Class C Shares Outstanding...... (545,052) (737,000)
================= =============
Dollars:
Subscribed............................................. $ 1,979,652 $ 15,873,000
Distributions Reinvested............................... 1,060,108 2,707,000
Redeemed............................................... (8,448,477) (25,134,000)
----------------- -------------
Net Increase/Decrease.................................... $ (5,408,717) $ (6,554,000)
================= =============
Ending Paid in Capital................................... $ 50,045,123 $ 55,455,000+
================= =============
</TABLE>
- ---------------
<TABLE>
<S> <C>
+ Ending Paid in Capital amounts do not reflect permanent book
to tax differences.
</TABLE>
- --------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 -----------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD..... $ 9.904 $12.464 $ 14.26 $ 12.47 $ 11.57 $ 12.17
----------------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............. 0.566 1.062 1.15 1.25 1.36 1.26
Net Realized and Unrealized
Gain/Loss............................ 0.384 (2.516) (0.67) 2.30 0.80 (0.52)
----------------- ------- ------- ------- ------- -------
Total From Investment Operations....... 0.950 (1.454) 0.48 3.55 2.16 0.74
----------------- ------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income.................. (0.516) (1.100) (1.09) (1.25) (1.26) (1.22)
Net Realized Gain...................... -- -- (1.19) (0.51) -- (0.12)
In Excess of Net Realized Gain......... -- (0.006) -- -- -- --
----------------- ------- ------- ------- ------- -------
Total Distributions.................... (0.516) (1.106) (2.28) (1.76) (1.26) (1.34)
----------------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD........... $ 10.338 $ 9.904 $ 12.46 $ 14.26 $ 12.47 $ 11.57
================= ======= ======= ======= ======= =======
TOTAL RETURN (1)......................... 10.00%* (11.14)% 3.40% 30.29% 19.61% 6.87%
================= ======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net assets, End of Period (000's)........ $ 50,358 $58,506 $91,579 $76,439 $41,493 $14,819
Ratio of Expenses to Average Net
Assets................................. 1.45% 1.45% 1.45% 1.52% 1.55% 1.55%
Ratio of Net Investment Income/Loss to
Average Net Assets..................... 11.37% 10.55% 8.36% 9.73% 11.95% 11.53%
Portfolio Turnover Rate.................. 46%* 121% 156% 157% 220% 178%
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss.......................... $ -- $ -- $ -- $ -- $ 0.02 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net Assets......... -- -- -- -- 1.69% 1.97%
Net Investment Income/Loss to Average
Net Assets........................... -- -- -- -- 11.81% 11.11%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 ----------------------------------- AUGUST 1, 1995+
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD....... $ 9.863 $ 12.396 $ 14.20 $ 12.44 $ 11.63
----------------- -------- -------- ------- ---------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............... 0.527 0.982 1.04 1.07 1.18
Net Realized and Unrealized Gain/Loss.... 0.383 (2.497) (0.65) 2.35 0.72
----------------- -------- -------- ------- ---------------
Total From Investment Operations......... 0.910 (1.515) 0.39 3.42 1.90
----------------- -------- -------- ------- ---------------
DISTRIBUTIONS
Net Investment Income.................... (0.477) (1.012) (1.00) (1.15) (1.09)
Net Realized Gain........................ -- -- (1.19) (0.51) --
In Excess of Net Realized Gain........... -- (0.006) -- -- --
----------------- -------- -------- ------- ---------------
Total Distributions...................... (0.477) (1.018) (2.19) (1.66) (1.09)
----------------- -------- -------- ------- ---------------
NET ASSET VALUE, END OF PERIOD............. $ 10.296 $ 9.863 $ 12.40 $ 14.20 $ 12.44
================= ======== ======== ======= ===============
TOTAL RETURN (1)........................... 9.61%* (11.82)% 2.63% 29.14% 17.07%*
================= ======== ======== ======= ===============
RATIOS AND SUPPLEMENTAL DATA
Net assets, End of Period (000's).......... $ 101,883 $107,013 $146,401 $78,340 $ 26,174
Ratio of Expenses to Average Net Assets.... 2.20% 2.20% 2.20% 2.27% 2.30%
Ratio of Net Investment Income/Loss to
Average Net Assets....................... 10.61% 9.81% 7.64% 8.86% 12.06%
Portfolio Turnover Rate.................... 46%* 121% 156% 157% 220%*
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss............................ $ -- $ -- $ -- $ -- $ 0.02
Ratios Before Expense Limitation:
Expenses to Average Net Assets........... -- -- -- -- 2.47%
Net Investment Income/Loss to Average Net
Assets................................. -- -- -- -- 11.89%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Non-Annualized
+ The Fund began offering Class B shares on August 1, 1995.
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
-----------------------
13
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
FINANCIAL HIGHLIGHTS (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 -----------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)# 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 9.867 $12.403 $ 14.21 $ 12.45 $ 11.58 $ 12.16
----------------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................. 0.527 0.982 1.04 1.16 1.30 1.17
Net Realized and Unrealized Gain/Loss...... 0.383 (2.500) (0.66) 2.26 0.77 (0.50)
----------------- ------- ------- ------- ------- -------
Total From Investment Operations........... 0.910 (1.518) 0.38 3.42 2.07 0.67
----------------- ------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income...................... (0.477) (1.012) (1.00) (1.15) (1.20) (1.13)
Net Realized Gain.......................... -- -- (1.19) (0.51) -- (0.12)
In Excess of Net Realized Gain............. -- (0.006) -- -- -- --
----------------- ------- ------- ------- ------- -------
Total Distributions........................ (0.477) (1.018) (2.19) (1.66) (1.20) (1.25)
----------------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............... $ 10.300 $ 9.867 $ 12.40 $ 14.21 $ 12.45 $ 11.58
================= ======= ======= ======= ======= =======
TOTAL RETURN (1)............................. 9.61%* (11.83)% 2.55% 29.12% 18.71% 6.20%
================= ======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net assets, End of Period (000's)............ $ 36,785 $40,616 $60,197 $41,709 $28,094 $11,880
Ratio of Expenses to Average Net Assets...... 2.20% 2.20% 2.20% 2.27% 2.30% 2.30%
Ratio of Net Investment Income to Average Net
Assets..................................... 10.62% 9.81% 7.62% 9.04% 11.40% 10.72%
Portfolio Turnover Rate...................... 46%* 121% 156% 157% 220% 178%
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss.............................. $ -- $ -- $ -- $ -- $ 0.04 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net Assets............. -- -- -- -- 2.44% 2.74%
Net Investment Income/Loss to Average Net
Assets................................... -- -- -- -- 11.26% 10.28%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
* Non-Annualized
(1) Total return is calculated exclusive of sales charges or
deferred sales charges.
# Changes per share are based upon monthly average shares
outstanding.
</TABLE>
- --------------
14
The accompanying notes are an integral part of the financial statements.
<PAGE>
]
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
The Van Kampen Worldwide High Income Fund (the "Fund") is organized as a
separate non-diversified fund of Van Kampen Series Fund, Inc., a Maryland
corporation, which is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective seeks to offer investors high current income consistent with relative
stability of principal and potential for capital appreciation. The Fund
commenced operations on April 21, 1994.
The Fund currently offers three classes of shares, Class A, Class B, and
Class C Shares. Class A shares are sold with a front-end sales charge of up to
4.75%. For certain purchases of Class A shares, the front-end sales charge may
be waived and a contingent deferred sales charge ("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 six months ended December 31, 1999, 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
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ -------- --------
<S> <C> <C>
First........................................ 4.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights. The Fund began offering the current Class B shares on August 1,
1995. Class B shares held prior to May 1, 1995 were renamed Class C shares.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Securities listed on a foreign exchange are valued at their
closing price. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Bonds and other fixed income securities may be valued according to the
broadest and most representative market. In addition, bonds and other fixed
income securities may be valued on the basis of prices provided by a pricing
service which takes into account institutional size trading in similar groups of
securities. Debt securities purchased with remaining maturities of 60 days or
less are valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available are
valued at fair value as determined in good faith by the Board of Directors,
although the actual calculations may be done by others.
At December 31, 1999, approximately 89% of the net assets of the Worldwide High
Income Fund consisted of high yield securities rated below investment grade.
Investments in high yield securities are accompanied by a greater degree of
credit risk and the risk tends to be more sensitive to economic conditions than
higher rated securities. Certain securities may be valued on the basis of bid
prices provided by one principal market maker.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Fund takes possession of the underlying securities, with a
market value at least equal to the amount of the repurchase transaction,
including principal and accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
------------------
15
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis except where collection is in
doubt. Discounts and premiums on securities purchased are amortized according to
the effective yield method over their respective lives. Income, expenses (other
than class specific expenses), and realized and unrealized gains or losses are
allocated to each class of shares based upon their relative net assets.
Distributions from the Fund are recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized between
trade date and settlement date on security and income transactions. However, the
foreign currency portion of gains and losses realized on sales and maturities of
foreign denominated debt securities is treated as ordinary income for U.S.
Federal income tax purposes.
The net assets of the Fund may include issuers located in emerging markets.
There are certain risks inherent in these investments not typically associated
with investments in the United States, including the smaller size of the markets
themselves, lesser liquidity, greater volatility and potentially less publicly
available information. Emerging markets may be subject to a greater degree of
government involvement in the economy and greater economic and political
uncertainty, which has the potential to extend to government imposed
restrictions on exchange traded transactions and currency transactions. These
restrictions may impact the Fund's ability to buy or sell certain securities or
to repatriate certain currencies to U.S. dollars. Additionally, changes in
currency exchange rates will affect the value of and investment income from such
securities.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains and net unrealized appreciation, as applicable, as the income is earned or
capital gains are recorded.
The Fund designated and paid $140,009 as a 20% rate gain distribution.
Shareholders were sent a 1998 Form 1099-DIV in January, 1999 representing their
proportionate share of this capital gain distribution.
At December 31, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
- ------------ ----------- ------------ -------------
<S> <C> <C> <C>
$184,658,631 $11,674,501 $(8,909,270) $2,765,231
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Fund are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing book and
tax treatment for foreign currency transactions, net operating losses, foreign
taxes on net realized gains, and gains on certain securities of corporations
designated as "passive foreign investment companies."
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Fund with investment advisory services at a fee
paid monthly and calculated at the annual rates based on average daily net
assets as indicated below. The Adviser has agreed to reduce advisory fees
payable to it and to reimburse the Fund, if necessary, if the annual operating
expenses, as defined, expressed as a percentage of average daily net assets,
exceed the maximum ratios indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ -------------- --------------
<S> <C> <C>
0.75% 1.55% 2.30%
</TABLE>
For the period ended December 31, 1999, the Fund recognized expenses of $5,718
representing legal services
- -----------------------
16
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
provided by Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the
Fund, of which a director of the Fund is an affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Fund with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.25% of the average daily net
assets of the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser and The Chase Manhattan Bank ("Chase"), through
its corporate affiliate Chase Global Funds Services Company ("CGFSC"), Chase
provides certain administrative services to the Fund. Chase is compensated for
such services by the Adviser from the fee it receives from the Fund. Transfer
Agency services are provided to the Fund by Van Kampen Investor Services Inc.,
an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Fund's shares. The
Distributor is entitled to receive from the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund on
an annualized basis, of the average daily net assets attributable to each Class.
The Distributor may receive a front end sales charge for purchases of Class A
shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
December 31, 1999, the Distributor has advised the Fund that it earned initial
sales charges of $39,000 for Class A shares and deferred sales charges of
$281,310 and $3,223 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.
C. INVESTMENT TRANSACTIONS: For the period ended December 31, 1999, the Fund
made purchases of $85,702,742 and sales of $106,563,561 of investment securities
other than long-term U.S. government securities and short-term investments.
There were no purchases or sales of long-term U.S. government securities.
D. DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in very
general terms refers to a security whose value is "derived" from the value of an
underlying asset, reference rate or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, foreign currency
exposure, maturity and duration. All of the Fund's portfolio holdings, including
derivative instruments, are marked-to-market each day with the change in value
reflected in unrealized appreciation/depreciation. Upon disposition, a realized
gain or loss is recognized accordingly, except when exercising a call option
contract or taking delivery of a security underlying a forward contract. In this
instance, the recognition of gain or loss is postponed until the disposal of the
security underlying the option or forward contract. Risks may arise as a result
of the potential inability of the counterparties to meet the terms of their
contracts.
Summarized below are the specific types of derivative financial instruments used
by the Fund.
1. FORWARD CURRENCY CONTRACTS: These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency transactions.
At December 31, 1999, the Fund has outstanding forward currency contracts as
follows:
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
FORWARD CURRENCY CONTRACTS VALUE DEPRECIATION
- -------------------------- ----------- -------------
<S> <C> <C>
Euro,
2,350,000 expiring 1/26/00......... $ 2,374,313 $ 40,659
5,480,000 expiring 1/31/00......... 5,538,990 65,923
885,000 expiring 2/10/00........... 895,214 13,911
British Pound,
1,790,000 expiring 2/3/00.......... 2,891,107 (30,956)
----------- --------
$11,699,624 $ 89,537
=========== ========
</TABLE>
2. FUTURES CONTRACTS: A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in futures of foreign government bonds and typically
closes the contract prior to the delivery date. These contracts are generally
used to manage the portfolio's effective maturity and duration.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, cash or securities with a value equal to its
obligation under the futures
------------------
17
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
(UNAUDITED)
contracts. During the period the futures contract is open, payments are received
from or made to the broker based upon changes in the value of the contract (the
variation margin). The potential risk of loss associated with a futures contract
could be in excess of the variation margin reflected on the Statement of Assets
and Liabilities. The cost of securities acquired through delivery under a
contract is adjusted by the unrealized gain or loss on the contract.
Transactions in futures contracts for the period ended December 31, 1999, were
as follows:
<TABLE>
<CAPTION>
CONTRACTS
---------
<S> <C>
Outstanding at June 30, 1999............... 13
Futures Opened............................. 36
Futures Closed............................. (36)
---
Outstanding at December 31, 1999........... 13
===
</TABLE>
The futures contracts outstanding as of December 31, 1999, and the descriptions
and the unrealized appreciation/ depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
--------- -------------
<S> <C> <C>
SHORT CONTRACTS:
U.S. Long Gilt March 2000
(Current notional value
$2,352,848).......................... 13 $58,073
== =======
</TABLE>
E. LINE OF CREDIT: 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 in to a $650,000,000
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 made no
borrowings as of December 31, 1999.
- -----------------------
18
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING: (UNAUDITED)
A Joint Special Meeting of the Shareholders of the Worldwide High Income Fund
(the "Fund") was held on December 15, 1999. The description of each proposal and
number of shares voted are as follows:
1. To elect the following Trustees to serve the Fund.
<TABLE>
<CAPTION>
VOTED FOR WITHHELD
---------- --------
<S> <C> <C>
J. Miles Branagan........................................... 12,482,475 74,758
Jerry D. Choate............................................. 12,478,169 79,063
Linda Hutton Heagy.......................................... 12,480,106 77,127
R. Craig Kennedy............................................ 12,482,777 74,456
Mitchell M. Merin........................................... 12,482,777 74,456
Jack E. Nelson.............................................. 12,482,475 74,758
Richard F. Powers, III...................................... 12,480,118 77,115
Phillip B. Rooney........................................... 12,480,118 77,115
Fernando Sisto.............................................. 12,479,417 77,816
Wayne W. Whalen............................................. 12,481,848 75,385
Suzanne H. Woolsey.......................................... 12,480,257 76,976
Paul G. Yovovich............................................ 12,482,777 74,456
</TABLE>
2. To ratify PricewaterhouseCoopers LLP to act as independent public accountants
for the Fund.
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C> <C>
12,465,374 33,607 58,251
</TABLE>
------------------
19
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Growth*
American Value*
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Focus Equity
Growth*
Growth and Income
Harbor
Mid Cap Growth
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets*
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income*
Global Government Securities*
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
* Closed to new investors
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD A PROSPECTUS
- - call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Hearing
Impaired, call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen*
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Mitchell M. Merin*
President, Chief Financial Officer of Asset Management of
Morgan Stanley Dean Witter
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Richard F. Powers, III*
Chairman, Director, President
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey
Chief Operating Officer of the National Academy of
Sciences/National Research Council, and former Chairman
of the German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III*
CHAIRMAN, DIRECTOR, PRESIDENT
Dennis J. McDonnell*
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan*
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
A. Thomas Smith III*
VICE PRESIDENT AND SECRETARY
Stephen L. Boyd*
VICE PRESIDENT
Peter W. Hegel*
VICE PRESIDENT
Michael H. Santo*
VICE PRESIDENT
Joseph P. Stadler*
VICE PRESIDENT
Edward C. Wood, III*
VICE PRESIDENT
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A PROSPECTUS OF VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL THE FUND'S
INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza - P.O. Box 5555 - Oakbrook Terrace, IL 60181-5555 -
www.vankampen.com
MSWW SAR 02/00 -C- Van Kampen Funds Inc. 2000
454 554 654
