<PAGE>
VAN KAMPEN
REAL ESTATE
SECURITIES FUND
Semi-Annual Report
June 30, 1998
[ARTWORK]
VAN KAMPEN
F U N D S
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter to Shareholders................. 1
Performance Results.................... 3
Glossary of Terms...................... 4
Portfolio Management Review............ 5
Portfolio Highlights................... 7
Portfolio of Investments............... 8
Statement of Assets and Liabilities.... 11
Statement of Operations................ 12
Statement of Changes in Net Assets..... 13
Financial Highlights................... 14
Notes to Financial Statements.......... 17
</TABLE>
REAL SAR 8/98
<PAGE>
Letter to Shareholders
[Photo of Dennis J. McDonnell and Don G. Powell]
July 16, 1998
Dear Shareholder,
As you may know, Van Kampen American Capital is consolidating all of the
retail mutual funds that we distribute under the single name of Van Kampen
Funds. This move accompanies the change in our legal name to Van Kampen Funds
Inc.
You can be assured that the change in your fund's name will not affect its
management or daily operations. You will begin seeing the application of this
change with this report. In addition, as of August 31, your fund will be listed
in the daily newspapers by share class under the heading "Van Kampen Funds." For
your convenience, we have enclosed a separate brochure that covers additional
details related to these changes.
Also, on April 23, 1998, the Board of Trustees approved a subadvisory
agreement with Morgan Stanley Asset Management Inc. (the "Subadvisor") to
provide advisory services to the Fund and Van Kampen Asset Management Inc. (the
"Adviser") with respect to the Fund's investments. The Adviser will pay 50
percent of its advisory fee to the Subadviser. This subadvisory agreement will
become effective October 1, 1998.
Economic Review
The U.S. economy continued to expand at a robust pace despite a deepening
recession in a number of Asian nations. The nation's inflation-adjusted output
of goods and services ran at 5.4 percent during the first quarter, an annualized
rate considered by many economists to be virtually unsustainable without leading
to inflation. As the reporting period ended, however, there were indications
that the Asian financial crisis was finally having a moderating impact on the
economy. Also, the Conference Board's index of leading indicators points toward
a slowdown in economic growth later this year.
Despite the generally solid pace of economic activity, inflation remained
benign. Consumer prices rose by 1.7 percent during the 12 months through June,
while producer prices actually declined during the same period. Falling
commodity prices and the impact of the strong dollar helped to offset the
inflationary implications of a tight labor market and strong consumer spending.
While the Federal Reserve kept short-term interest rates steady at 5.5
percent during the reporting period, minutes from the central bank's May policy
meeting indicated growing sentiment for tightening monetary policy if the drag
from Asia does not slow the American economy on its own.
Market Review
U.S. stocks continued to post gains during the period, but the sharp
variation in returns across industry groups reflected the growing impact of the
Asian financial crisis on corporate profits. The Wilshire 5000 Index, consisting
of all publicly traded U.S. companies, gained
1
<PAGE>
14.68 percent during the first six months of 1998. Once again, most of the
strength was concentrated in large-capitalization companies, as the S&P 500
Index of large stocks returned 17.67 percent during the period compared to 4.93
percent for the Russell 2000 Index of small-cap issues. Even large stocks,
however, fell back significantly beginning in April as the Asian crisis
intensified.
Companies with heavy exposure to domestic consumers benefited from a strong
American economy, especially during the latter stages of the reporting period.
Consumer cyclical stocks returned 28.94 percent during the first six months of
1998, compared to 6.35 percent for basic materials and 3.01 percent for energy
issues. Eight of the ten top-performing industry groups during the second
quarter were from consumer-related sectors. Meanwhile, the steep decline in
energy and agricultural prices-a consequence of reduced demand from
Asia-undermined the performance of commodity-related stocks. During the three
months through June, five of the ten worst-performing industry sectors were from
either energy, metals, or commodity-based industries.
Outlook
We believe economic growth in the United States is likely to slow in coming
months as the impact of the Asian crisis becomes more apparent. As growth
decelerates, corporate profits will come under pressure, especially among larger
companies. Given the difficult year-over-year earnings comparisons that will
begin to appear in coming quarters, we caution investors not to expect a
continuation of the large gains that have become almost routine for U.S. stocks
in recent years. The high valuations and decelerating profit growth could limit
returns in the equity market over the near term.
Still, the overall environment for equities remains positive. Inflation is
low, the economy continues to grow, the bond market is healthy, and monetary
policy is stable. These characteristics usually support relatively high
valuations in the stock market. We remain confident that the domestic equity
asset class will continue to provide solid growth for investors with a long-term
time horizon.
Additional details about your fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to serve you and your family through our
diverse menu of quality investments.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen Asset Management Inc. Van Kampen Asset Management Inc.
2
<PAGE>
Performance Results for the Period Ended June 30, 1998
Van Kampen Real Estate Securities Fund
<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Total Returns
Six-month total return based on NAV/1/........ (4.93%) (5.29%) (5.29%)
Six-month total return/2/..................... (9.46%) (8.97%) (6.22%)
One-year total return/2/...................... 2.87% 3.46% 6.27%
Life-of-Fund average annual total return/2*/.. 14.54% 14.65% 15.10%
Commencement Date............................. 06/09/94 06/09/94 06/09/94
</TABLE>
/1/ Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for A shares) or contingent
deferred sales charge for early withdrawal (4% for B shares and 1% for C
shares).
/2/ Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).
/*/ Total return is calculated from June 30, 1994 (the date the Fund's
investment strategy was implemented) through the end of the period.
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. This performance was achieved during generally
rising stock prices. Fund shares, when redeemed, may be worth more or less than
their original cost.
Investing in REITs involves unique risks in addition to those risks associated
with investing in the real estate industry in general. Equity REITs may be
affected by changes in the value of the underlying property owned by the REITs,
while mortgage REITs may be affected by the quality of any credit extended.
REITs are dependent upon management skills, are not diversified and are subject
to the risks of financing projects. REITs are subject to heavy cash flow
dependency, default by borrowers, self-liquidation and the possibilities of
failing to qualify for tax-exempt status under the Internal Revenue Code of
1986, as amended. REITs, especially mortgage REITs, are also subject to some
interest rate risk (e.g., as interest rates rise, the value of REITs may
decline).
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE>
Glossary of Terms
Dow Jones Industrial Average:
The oldest and most widely recognized stock market average, which reflects the
performance of 30 actively traded stocks of well-established, blue-chip
companies.
Federal Reserve Board (the Fed):
The governing body of the Federal Reserve System, which is the central bank
system of the United States. Its policy-making committee, called the Federal
Open Market Committee, meets eight times a year to establish monetary policy
and monitor the economic pulse of the U.S.
Growth investing:
An investment strategy that seeks to identify stocks that tend to offer
greater-than-average earnings growth. Growth stocks typically trade at higher
prices than value stocks, due to their higher expected earnings growth.
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.
P/E ratio:
The price-to-earnings ratio shows the "multiple" of earnings at which a stock
is selling. The P/E ratio is calculated by dividing a stock's current price by
its current earnings per share. A high multiple means that investors are
optimistic about future growth and have bid up the stock's price.
Real estate investment trusts (REITs):
Publicly traded companies that own, develop, and operate apartment complexes,
hotels, office buildings, and other commercial properties.
Standard & Poor's 500-Stock Index:
A broad-based measurement of changes in stock-market conditions based on the
average performance of 500 widely held common stocks. The index, which tracks
industrial, transportation, financial, and utility stocks, provides a guide to
the overall health of the U.S. stock market. The S&P 500 is a much broader
index than the Dow Jones Industrial Average and reflects the stock market more
accurately.
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.
Value investing:
A strategy that seeks to identify stocks that are sound investments but are
temporarily out of favor in the marketplace. As a result, the stocks trade at
prices below the value that value investors believe they are actually worth.
4
<PAGE>
Portfolio Management Review
Van Kampen Real Estate Securities Fund
We recently spoke with the management team of the Van Kampen Real Estate
Securities Fund about the key events and economic forces that shaped the markets
during the past six months. The team is led by portfolio managers Russell C.
Platt and Theodore R. Bigman. The following excerpts reflect their views on the
Fund's performance during the reporting period ended June 30, 1998.
Q What were the market conditions in which the Fund operated during the
reporting period?
A The past six months presented a difficult environment for REIT investors. In
the first quarter, continued strength in the U.S. equity market led non-
dedicated real estate investors, or general growth and income investors, to move
funds to the broad market from the REIT sector. The second quarter provided very
little to cheer REIT investors as the continuation of price weakness led to a
greater focus on real estate fundamentals in the near term. The NAREIT (National
Association of Real Estate Investment Trusts) Equity Index declined -5.95
percent for the quarter and was down -7.60 percent for the six month period
ended June 30, 1998.
As the U.S. real estate market cycle continued to move into equilibrium, the
level of new construction began to raise concerns that supply would soon surpass
demand. Although this did not occur during the period, we expect the price to
earnings ratios to contract in anticipation of deteriorating fundamentals. The
multifamily and industrial markets already achieved equilibrium with limited
pockets of current supply problems.
Despite a rapidly accelerating pace of new office development, the potential
for occupancy pressure does not appear on the horizon until 1999. New
development is only in the early stages in a number of central business
locations. In the hotel sector, although recent concerns focused on the limited
service segment of the market, the cautionary yellow flag is now being waved for
each of the categories. Potential oversupply in the hotel sector creates greater
concern than other sectors because the typical lease in a hotel is only one
night and, as a result, the economic picture can deteriorate rapidly. In light
of the strong economy, retail sales were buoyant, resulting in strong results
for retailers and greater demand to open new stores. We expect new development
to meet this demand.
Q How did you position the portfolio during this time?
A We continued to shape the portfolio with companies that we feel offered
attractive fundamental valuations relative to their underlying real estate
value. As a result, we added a number of large-capitalization companies that
faced the largest price compression. From a top-down perspective, we
significantly added to the office companies sector as a result of price
decreases. We had attempted to overweight the office sector previously due to
favorable fundamentals, but the lofty prices caused us to temper that decision.
These high prices were the result of external growth expectations, which are in
the process of being reevaluated. Despite the price pressure in the hotel
sector, we modestly decreased our exposure due to the concerns discussed above.
In order to pay for the addition to the portfolio's office holdings, we
decreased our exposure to both the multi-family and health-care sectors. These
sectors did not suffer the same declines in share price. For additional Fund
portfolio highlights, please refer to page seven.
5
<PAGE>
Q What was the Fund's performance at the end of the six-month period?
A The Fund achieved a total return of -4.93 percent/1/ (Class A shares at net
asset value) for the six-month period ended June 30, 1998. This performance
compares favorably to the total return of the NAREIT Equity REIT Index of -7.60
percent over the same period. The NAREIT Index is an unmanaged index that
reflects the performance of a broad range of equity REITs of all property types.
By comparison, the Standard & Poor's 500-Stock Index registered a total return
of 17.67 percent in the six months ended June 30, 1998. The S&P 500-Stock Index
is a broad-based, unmanaged index that reflects the general performance of the
stock market. These indices are unmanaged statistical composites that do not
reflect any commissions, fees, or sales charges that would be incurred by an
investor purchasing the securities they represent. Please refer to the chart on
page three for additional Fund performance results.
Q What is your outlook for the real estate market and for the Fund?
A After three years of strong performance, the sector is faced with the
competing rally cries of REIT bulls and bears. Bullish analysts point to the
large disparity between the relative average multiple of the S&P versus REITs.
These analysts also applaud REITs for their defensive characteristics and for
providing portfolio diversification. Bears indicate the cyclical nature of the
real estate asset class and argue that multiples have begun to contract in
anticipation of a slowdown in the rate of return in U.S. commercial real estate
and an eventual downturn in capital values. Other criticisms from the bears
include the notion that REITs' reliance on raising equity capital for growth
provides a ceiling on share prices, and that the supply-and-demand imbalance for
REIT shares may continue. This opinion reflects the idea that current non-
dedicated investors will continue to exit the sector; in addition, it is not
clear how much demand will be provided by value-oriented investors or those
investors searching for defensive vehicles.
It is not surprising that the equity offering calendar was very light in the
second quarter, and the few deals that were completed were priced at far lower
levels than were desired by issuers. We expect that, given current valuations, a
number of planned initial public offerings, or IPOs, will be postponed until the
market can recover. In addition, a number of companies that have completed
acquisitions and had expected to complete equity follow-on offerings need to
study their alternatives carefully. Clearly, if current pricing levels are to
persist, the rapid pace of equity securitization will slow as companies will be
reluctant (or unable) to raise equity capital to finance their growth. This
should apply to both acquisitions financed by cash as well as the trend of
trading property for shares with institutional investors and private companies.
Finally, we expect that the merger environment may heat up as some companies are
trading at and below valuation levels that approximate their private real estate
value.
/s/ Russell C. Platt /s/ Theodore R. Bigman
Russell C. Platt Theodore R. Bigman
Portfolio Manager Portfolio Manager
6
Please see footnotes on page three
<PAGE>
Portfolio Highlights
Van Kampen Real Estate Securities Fund
<TABLE>
<CAPTION>
Portfolio Holdings as a Percentage of Long-Term Investments
Percentage of
Top Ten Holdings These Investments
as of June 30, 1998 Six Months Ago
<S> <C> <C>
Arden Realty Group, Inc.................................. 5.3% ..................... 4.7%
CarrAmerica Realty Corp.................................. 5.2% ..................... 3.3%
Starwood Hotels and Resorts.............................. 4.8% ..................... N/A
Chateau Properties, Inc.................................. 4.7% ..................... 4.8%
Brookfield Properties Corp............................... 4.5% ..................... 2.6%
Taubman Centers, Inc..................................... 4.3% ..................... 5.5%
Federal Realty Investment Trust.......................... 4.3% ..................... 3.4%
Avalon Bay Community, Inc................................ 4.2% ..................... 2.6%
Brandywine Realty Trust.................................. 4.1% ..................... 3.6%
Essex Property Trust, Inc................................ 3.6% ..................... 4.0%
N/A = Not Applicable
</TABLE>
Top Five Portfolio Sectors as a Percentage of Long-Term Investments
As of June 30, 1998
Office/Industrial............................... 40.2%
Apartments...................................... 15.9%
Shopping Centers................................ 12.2%
Hotel & Lodging................................. 8.1%
Shopping Malls.................................. 7.3%
As of December 31, 1997
Office/Industrial............................... 28.9%
Apartments...................................... 19.5%
Hotel & Lodging.................................. 11.3%
Shopping Malls.................................. 10.7%
Shopping Centers................................ 7.4%
7
<PAGE>
Portfolio of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
===============================================================================================
Description Shares Market Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Common and Preferred Stocks 93.8%
Apartments 15.1%
Avalon Bay Community Inc............................................... 154,100 $ 5,855,800
Equity Residential Properties Trust.................................... 38,700 1,835,830
Essex Property Trust, Inc.............................................. 162,400 5,034,400
Irvine Apartment Communities, Inc...................................... 81,500 2,358,406
Pennsylvania Real Estate Investment.................................... 104,600 2,320,813
Security Capital Atlantic, Inc......................................... 190,058 4,240,669
Security Capital Pacific Trust......................................... 14,300 321,750
Smith (Charles E.) Residential Realty.................................. 7,100 227,200
------------
22,194,868
------------
Casino Operators 0.5%
Station Casinos Inc.................................................... 53,400 784,313
------------
Development 4.2%
Atlantic Gulf Communities Corp. (a)................................... 188,680 389,152
Atlantic Gulf Communities Corp. - Convertible
Preferred Ser B (a).................................................... 24,741 167,002
Atlantic Gulf Communities Corp. - Convertible
Preferred Ser B, 144A - Private Placement (a) (b)...................... 35,402 238,964
Atlantic Gulf Communities Corp. Warrants, 16,494 shares of each
Classes A, B and C, expiring 06/23/04 (a).............................. 49,482 24,741
Atlantic Gulf Communities Corp. Warrants, 33,397 shares of each
Classes A, B and C, expiring 06/24/01 144A - Private Placement (a) (b). 100,191 50,097
Brookfield Properties Corp............................................. 388,700 5,367,947
------------
6,237,903
------------
Hotel & Lodging 7.6%
Capstar Hotel Co. (a).................................................. 76,300 2,136,400
Host Marriott Corp. (a)................................................ 136,800 2,436,750
Starwood Hotels and Resorts............................................ 137,830 6,658,911
------------
11,232,061
------------
Manufactured Home Communities 5.8%
Chateau Properties, Inc................................................ 228,994 6,583,578
Manufactured Home Communities, Inc..................................... 10,400 250,900
Sun Communties, Inc.................................................... 52,500 1,739,062
------------
8,573,540
------------
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
==============================================================================================
Description Shares Market Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Motor Vehicle Facilities 0.3%
Capital Automotive.................................................. 28,000 $ 397,250
-----------
Office/Industrial 37.9%
Arden Realty Group, Inc............................................. 284,900 7,371,788
Beacon Capital Partners Inc., 144A - Private Placement (b).......... 140,800 2,816,000
Bedford Property Investors, Inc..................................... 36,000 657,000
Brandywine Realty Trust............................................. 252,700 5,654,162
CarrAmerica Realty Corp............................................. 252,700 7,170,362
Crescent Real Estate Equities Trust................................. 5,600 188,300
Equity Office Properties Trust...................................... 175,986 4,993,603
Great Lakes REIT, Inc............................................... 187,200 3,264,300
Kilroy Realty Corp.................................................. 69,000 1,725,000
Mack California Realty Corp......................................... 65,000 2,234,375
Meridan Industrial Trust, Inc....................................... 32,800 754,400
Pacific Gulf Properties, Inc........................................ 182,000 3,935,750
Prime Group Realty Trust............................................ 182,100 3,118,463
Reckson Associates Realty Corp...................................... 72,500 1,712,813
Reckson Service Inds Inc. (a)....................................... 11,600 38,425
SL Green Realty Corp................................................ 115,900 2,607,750
Spieker Properties, Inc............................................. 70,400 2,728,000
Trizec Hahn Corp.................................................... 98,100 2,103,018
Wellsford Real Properties, Inc., 144A - Private Placement (a) (b)... 199,020 2,811,157
-----------
55,884,666
-----------
Self-Storage 4.0%
PS Business Parks Inc. California................................... 132,674 3,117,839
Public Storage, Inc................................................. 44,700 1,251,600
Shurgard Storage Centers, Inc., Class A............................. 57,300 1,590,075
-----------
5,959,514
-----------
Shopping Centers 11.5%
Burnham Pacific Properties, Inc..................................... 323,600 4,591,075
Federal Realty Investment Trust..................................... 246,400 5,929,000
First Washington Realty Trust, Inc. - Preferred Ser A
(Convertible into 28,589 common shares)............................. 22,300 642,519
Pan Pacific Retail Properties, Inc.................................. 90,000 1,743,750
</TABLE>
9
See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
================================================================================================
Description Shares Market Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Shopping Centers (Continued)
Ramco-Gershenson Properties Trust ................................... 800 $ 15,200
Regency Realty Corp. ................................................ 87,400 2,195,925
Vornado Realty Trust ................................................ 46,200 1,833,563
------------
16,951,032
------------
Shopping Malls 6.9%
CBL & Associates Properties, Inc. ................................... 68,700 1,665,975
Taubman Centers, Inc. ............................................... 422,900 6,026,325
Urban Shopping Centers, Inc. ........................................ 76,300 2,403,450
------------
10,095,750
------------
Total Common and Preferred Stocks 93.8% ........................................ 138,310,897
------------
Convertible Corporate Obligations 0.6%
Brookfield Properties Corp. - Installment Receipts Representing
Subordinated Debenture ($868,400 par, 6.00% coupon, 02/14/07 maturity)
Convertible to 57,893 common shares ............................................ 858,413
------------
Total Long-Term Investments 94.4%
(Cost $137,229,235) .......................................................... 139,169,310
Repurchase Agreement 1.9%
BA Securities ($2,730,000 par, collateralized by U.S. Government obligations
in a pooled cash account, dated 06/30/98, to be sold on 07/01/98 at $2,730,459)
(Cost $2,730,000) ............................................................ 2,730,000
------------
Total Investments 96.3%
(Cost $139,959,235) .......................................................... 141,899,310
Other Assets in Excess of Liabilities 3.7% ..................................... 5,483,405
------------
Net Assets 100.0% .............................................................. $147,382,715
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) 144A securities are those which are exempt from registration under Rule
144A of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
10 See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
================================================================================================
Assets:
<S> <C>
Total Investments (Cost $139,959,235)............................................ $141,899,310
Cash............................................................................. 4,646
Receivables:
Investments Sold............................................................ 4,438,161
Dividends................................................................... 1,225,088
Fund Shares Sold............................................................ 1,115,593
Interest.................................................................... 17,463
Unamortized Organizational Costs................................................. 2,861
Other............................................................................ 13,612
------------
Total Assets................................................................ 148,716,734
------------
Liabilities:
Payables:
Investments Purchased....................................................... 806,035
Fund Shares Repurchased..................................................... 259,972
Investment Advisory Fee..................................................... 120,033
Distributor and Affiliates.................................................. 106,102
Income Distributions........................................................ 8,933
Trustees' Deferred Compensation and Retirement Plans............................. 28,819
Accrued Expenses................................................................. 4,125
------------
Total Liabilities........................................................... 1,334,019
------------
Net Assets....................................................................... $147,382,715
============
Net Assets Consist of:
Capital.......................................................................... $142,327,931
Accumulated Net Realized Gain.................................................... 2,370,319
Net Unrealized Appreciation...................................................... 1,940,075
Accumulated Undistributed Net Investment Income.................................. 744,390
------------
Net Assets....................................................................... $147,382,715
============
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$51,860,346 and 4,079,655 shares of beneficial interest issued and
outstanding)........................................................... $ 12.71
Maximum sales charge (4.75%* of offering price)........................ .63
------------
Maximum offering price to public....................................... $ 13.34
============
Class B Shares:
Net asset value and offering price per share (Based on net assets of
$76,871,703 and 6,051,600 shares of beneficial interest issued and
outstanding)........................................................... $ 12.70
============
Class C Shares:
Net asset value and offering price per share (Based on net assets of
$18,650,666 and 1,469,322 shares of beneficial interest issued and
outstanding)........................................................... $ 12.69
============
</TABLE>
*On sales of $100,000 or more, the sales charge will be reduced.
11 See Notes to Financial Statements
<PAGE>
Statement of Operations
For the Six Months Ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
==================================================================================================
Investment Income:
<S> <C>
Dividends.......................................................................... $ 3,855,914
Interest........................................................................... 191,931
-------------
Total Income.................................................................. 4,047,845
-------------
Expenses:
Investment Advisory Fee............................................................ 725,689
Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $64,710,
$378,152 and $88,122, respectively)........................................... 530,984
Shareholder Services............................................................... 125,837
Registration and Filing Fees....................................................... 33,517
Trustees' Fees and Expenses........................................................ 7,509
Legal.............................................................................. 2,353
Amortization of Organizational Costs............................................... 1,542
Other.............................................................................. 74,528
-------------
Total Expenses................................................................ 1,501,959
-------------
Net Investment Income.............................................................. $ 2,545,886
=============
Realized and Unrealized Gain/Loss:
Net Realized Gain.................................................................. $ 2,529,165
-------------
Unrealized Appreciation/Depreciation
Beginning of the Period....................................................... 14,796,761
End of the Period............................................................. 1,940,075
-------------
Net Unrealized Depreciation During the Period...................................... (12,856,686)
-------------
Net Realized and Unrealized Loss................................................... $(10,327,521)
=============
Net Decrease in Net Assets From Operations......................................... $ (7,781,635)
=============
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
For the Six Months Ended June 30, 1998 and
the Year Ended December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
=================================================================================================
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income......................................... $ 2,545,886 $ 2,323,557
Net Realized Gain............................................. 2,529,165 15,177,147
Net Unrealized Appreciation/Depreciation During the Period.... (12,856,686) 2,900,169
------------- -------------
Change in Net Assets from Operations.......................... (7,781,635) 20,400,873
------------- -------------
Distributions from Net Investment Income...................... (1,779,595) (2,323,557)
Distributions in Excess of Net Investment Income.............. -0- (152,383)
------------- -------------
Distributions from and in Excess of Net Investment Income*.... (1,779,595) (2,475,940)
Distributions from Net Realized Gain*......................... (2,425,051) (12,883,431)
------------- -------------
Total Distributions........................................... (4,204,646) (15,359,371)
------------- -------------
Net Change in Net Assets from Investment Activities........... (11,986,281) 5,041,502
------------- -------------
From Capital Transactions:
Proceeds from Shares Sold..................................... 85,374,574 130,239,448
Net Asset Value of Shares Issued Through
Dividend Reinvestment....................................... 3,504,224 12,862,961
Cost of Shares Repurchased.................................... (71,457,408) (63,666,603)
------------- -------------
Net Change in Net Assets from Capital Transactions............ 17,421,390 79,435,806
------------- -------------
Total Increase in Net Assets.................................. 5,435,109 84,477,308
Net Assets:
Beginning of the Period....................................... 141,947,606 57,470,298
------------- -------------
End of the Period
(Including accumulated undistributed net investment
income of $744,390 and ($21,901) respectively)............ $ 147,382,715 $ 141,947,606
============= =============
Six Months Ended Year Ended
*Distributions by Class June 30, 1998 December 31, 1997
=====================================================================================
Distributions from and in Excess of
Net Investment Income:
Class A Shares............................. $ (754,964) $ (1,094,042)
Class B Shares............................. (829,394) (1,102,759)
Class C Shares............................. (195,237) (279,139)
------------ ------------
$ (1,779,595) $ (2,475,940)
============ ============
Distributions from Net Realized Gain:
Class A Shares............................. $ (868,204) $ (4,664,049)
Class B Shares............................. (1,263,468) (6,626,846)
Class C Shares............................. (293,379) (1,592,536)
------------ ------------
$ (2,425,051) $(12,883,431)
============ ============
</TABLE>
13 See Notes to Financial Statements
<PAGE>
Financial Highlights
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
====================================================================================================================
June 9, 1994
(Commencement of
Six Months Investment
Ended Year Ended December 31, Operations) to
June 30, ------------------------------ December 31,
Class A Shares 1998 1997 1996 1995 (a) 1994 (a)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period..... $ 13.810 $13.008 $ 10.00 $ 9.27 $ 9.43
--------- ------- ------- ------ ------
Net Investment Income.................... .258 .364 .351 .27 .23
Net Realized and Unrealized Gain/Loss.... (.944) 2.220 3.514 .85 (.18)
--------- ------- ------- ------ ------
Total from Investment Operations............. (.686) 2.584 3.865 1.12 .05
--------- ------- ------- ------ ------
Less:
Distributions from and in Excess of Net
Investment Income...................... .190 .380 .380 .2456 .153
Return of Capital Distribution........... -0- -0- -0- .1444 .057
Distributions from Net Realized Gain..... .222 1.402 .477 -0- -0-
--------- ------- ------- ------ ------
Total Distributions.......................... .412 1.782 .857 .39 .21
--------- ------- ------- ------ ------
Net Asset Value, End of the Period........... $ 12.712 $13.810 $13.008 $10.00 $ 9.27
========= ======= ======= ====== ======
Total Return (b)............................. (4.93%)* 20.66% 39.82% 12.39% .24%(c)
Net Assets at End of the Period (In millions) $ 51.9 $ 51.3 $ 23.3 $ 8.5 $ 4.6
Ratio of Expenses to Average Net Assets** 1.58% 1.77% 2.60% 2.67% 1.26%
Ratio of Net Investment Income to Average
Net Assets**............................... 3.98% 2.77% 3.21% 2.92% 4.28%
Portfolio Turnover........................... 65%* 159% 97% 94% 28%*
</TABLE>
*Non-Annualized
**If certain expenses had not been assumed by Van Kampen, total return would
have been lower and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratio of Expenses to Average Net Assets N/A N/A 2.61% 3.16% 3.03%
Ratio of Net Investment Income to Average
Net Assets................................. N/A N/A 3.19% 2.44% 2.52%
</TABLE>
N/A = Not Applicable
(a) Based on average shares outstanding.
(b) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) Total return calculated from June 30, 1994 (date the Fund's investment
strategy was implemented) through December 31, 1994, non-annualized.
14 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
============================================================================================================================
June 9, 1994
(Commencement of
Six Months Year Ended Investment
Ended December 31, Operations) to
June 30, ---------------------------------- December 31,
Class B Shares 1998 1997 1996 1995 (a) 1994 (a)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........... $ 13.800 $13.008 $ 10.00 $ 9.28 $ 9.43
--------- ------- ------- ------ ------
Net Investment Income............................ .208 .272 .266 .19 .20
Net Realized and Unrealized Gain/Loss............ (.941) 2.206 3.519 .843 (.176)
--------- ------- ------- ------ ------
Total from Investment Operations.................. (.733) 2.478 3.785 1.033 .024
--------- ------- ------- ------ ------
Less:
Distributions from and in Excess of
Net Investment Income.......................... .142 .284 .300 .197 .1268
Return of Capital Distribution.................. -0- -0- -0- .116 .0472
Distributions from Net Realized Gain............ .222 1.402 .477 -0- -0-
--------- ------- ------- ------ ------
Total Distributions............................... .364 1.686 .777 .313 .174
--------- ------- ------- ------ ------
Net Asset Value, End of the Period................ $ 12.703 $13.800 $13.008 $10.00 $ 9.28
========= ======= ======= ====== ======
Total Return (b).................................. (5.29%)* 19.76% 38.82% 11.37% (.04%)(c)
Net Assets at End of the Period (In millions)..... $ 76.9 $ 73.2 $ 26.5 $ 12.0 $ 9.1
Ratio of Expenses to Average Net Assets**......... 2.34% 2.52% 3.37% 3.50% 1.84%
Ratio of Net Investment Income to
Average Net Assets**............................ 3.25% 2.03% 2.39% 2.07% 3.81%
Portfolio Turnover................................ 65%* 159% 97% 94% 28%*
*Non-Annualized
**If certain expenses had not been assumed by Van Kampen, total return would
have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets............ N/A N/A 3.39% 3.99% 3.60%
Ratio of Net Investment Income to
Average Net Assets............................... N/A N/A 2.37% 1.58% 2.05%
N/A = Not Applicable
</TABLE>
(a) Based on average shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) Total return calculated from June 30, 1994 (date the Fund's investment
strategy was implemented) through December 31, 1994, non-annualized.
15 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
==================================================================================================================
June 9, 1994
(Commencement of
Six Months Investment
Ended Year Ended Operations) to
June 30, December 31, December 31,
Class C Shares 1998 1997 1996 1995 (a) 1994 (a)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period..... $13.790 $12.999 $ 9.99 $ 9.28 $ 9.43
------- ------- ------ ------ -------
Net Investment Income................... .206 .271 .266 .20 .22
Net Realized and Unrealized Gain/Loss... (.939) 2.206 3.520 .823 (.178)
------- ------- ------ ------ -------
Total from Investment Operations............. (.733) 2.477 3.786 1.023 .042
------- ------- ------ ------ -------
Less:
Distributions from and in Excess of
Net Investment Income.............. .142 .284 .300 .197 .1399
Return of Capital Distribution.......... -0- -0- -0- .116 .0521
Distributions from Net Realized Gain.... .222 1.402 .477 -0- -0-
------- ------- ------ ------ -------
Total Distribution........................... .364 1.686 .777 .313 .192
------- ------- ------ ------ -------
Net Asset Value, End of the Period........... $12.693 $13.790 $12.999 $ 9.99 $ 9.28
======= ======= ======= ====== =======
Total Return (b)............................. (5.29%)/*/ 19.78% 38.86% 11.26% .15%(c)
Net Assets at End of the Period (In
millions)............................... $ 18.6 $ 17.4 $ 7.7 $ 3.1 $ 1.3
Ratio of Expenses to Average Net Assets/**/.. 2.34% 2.52% 3.38% 3.54% 1.62%
Ratio of Net Investment Income to
Average Net Assets/**/.................. 3.27% 2.00% 2.39% 2.11% 3.92%
Portfolio Turnover........................... 65%/*/ 159% 97% 94% 28%/*/
</TABLE>
/*/ Non-Annualized.
/**/ If certain expenses had not been assumed by Van Kampen, total return would
have been lower and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratio of Expenses to Average Net Assets...... N/A N/A 3.40% 4.03% 3.38%
Ratio of Net Investment Income to
Average Net Assets...................... N/A N/A 2.38% 1.62% 2.15%
</TABLE>
N/A = Not Applicable
(a) Based on average shares outstanding
(b) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) Total return calculated from June 30, 1994 (date the FundOs investment
strategy was implemented) through December 31, 1994, non-annualized.
See Notes to Financial Statements
16
<PAGE>
Notes to Financial Statements
June 30, 1998 (Unaudited)
================================================================================
1. Significant Accounting Policies
Van Kampen Real Estate Securities Fund, formerly known as Van Kampen American
Capital Real Estate Securities Fund, (the "Fund") is organized as a Delaware
business trust, and is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's primary investment objective is to seek long-term growth of capital by
investing principally in securities of companies operating in the real estate
industry. The Fund commenced investment operations on June 9, 1994.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuation-Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Unlisted securities and listed securities for which the last sales price is not
available are valued at the last bid price. For those securities where
quotations or prices are not available, valuations are determined in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. Security Transactions-Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. The Fund may
invest independently in repurchase agreements, or transfer uninvested cash
balances into a pooled cash account along with other investment companies
advised by Van Kampen Asset Management Inc. (the "Adviser") or its affiliates,
the daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are fully collateralized by the underlying debt security. The Fund
will make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is required
to maintain the value of the underlying security at not less than the repurchase
proceeds due the Fund.
C. Income and Expenses-Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class of
shares.
17
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1998 (Unaudited)
================================================================================
D. Organizational Costs-The Fund has reimbursed Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $16,000. These costs are being amortized on
a straight line basis over the 60 month period ending May 31, 1999. The Adviser
has agreed that in the event any of the initial shares of the Fund originally
purchased by Van Kampen are redeemed by the Fund during the amortization period,
the Fund will be reimbursed for any unamortized organizational costs in the same
proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.
E. Federal Income Taxes-It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of the deferral of losses for tax purposes
resulting from wash sales.
At June 30, 1998, for federal income tax purposes cost of long- and short-term
investments is $140,070,146; the aggregate gross unrealized appreciation is
$6,215,988 and the aggregate gross unrealized depreciation is $4,386,824,
resulting in net unrealized appreciation of $1,829,164.
F. Distribution of Income and Gains-The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains. All short-term capital gains are included
in ordinary income for tax purposes.
The Fund distributes the return of capital it receives from the Real Estate
Investment Trusts (the "REITs") in which the Fund invests. The REITs pay
distributions based on cash flow, without regard to depreciation and
amortization. As a result, a portion of the distributions paid to the Fund and
subsequently distributed to shareholders may be a return of capital.
2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee equal to
1.00% of the average net assets of the Fund. This fee is payable monthly. On
April 23, 1998, the Board of Trustees approved a subadvisory agreement with
Morgan Stanley Asset Management Inc. (the "Subadviser") to provide advisory
services to the Fund and the Adviser with respect to the Fund's investments. The
Adviser will pay 50% of its advisory fee to the Subadviser. This subadvisory
agreement will become effective October 1, 1998.
For the six months ended June 30, 1998, the Fund recognized expenses of
approximately $2,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended June 30, 1998, the Fund recognized expenses of
approximately $36,800 representing Van Kampen's cost of providing accounting
services to the Fund.
18
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1998 (Unaudited)
================================================================================
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
June 30, 1998, the Fund recognized expenses of approximately $91,100. Beginning
in 1998, the transfer agency fees are determined through negotiations with the
Fund's Board of Trustees and are based on competetive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees 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 trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
At June 30, 1998, Van Kampen owned 10,605 Class A shares and 53 Class B
shares, respectively.
3. Capital Transactions
The Fund has outstanding three classes of shares of beneficial interest,
Classes A, B and C, each with a par value of $.01 per share. There are an
unlimited number of shares of each class authorized.
At June 30, 1998, capital aggregated $49,501,666, $74,950,271 and $17,875,994
for Classes A, B, and C, respectively. For the six months ended June 30, 1998,
transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
=======================================================================================
<S> <C> <C>
Sales:
Class A............................................. 4,792,340 $ 63,229,710
Class B............................................. 1,367,088 18,125,621
Class C............................................. 306,062 4,019,243
----------- ------------
Total Sales........................................... 6,465,490 $ 85,374,574
=========== ============
Dividend Reinvestment:
Class A............................................. 109,654 $ 1,412,368
Class B............................................. 131,823 1,699,964
Class C............................................. 30,418 391,892
----------- ------------
Total Dividend Reinvestment........................... 271,895 $ 3,504,224
=========== ============
Repurchases:
Class A............................................. (4,538,005) $(59,819,823)
Class B............................................. (751,559) (9,900,695)
Class C............................................. (131,554) (1,736,890)
----------- ------------
Total Repurchases..................................... (5,421,118) $(71,457,408)
=========== ============
</TABLE>
19
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1998 (Unaudited)
================================================================================
At December 31, 1997, capital aggregated $44,679,411, $65,025,381 and
$15,201,749 for Classes A, B, and C, respectively. For the year ended December
31, 1997, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
================================================================================
<S> <C> <C>
Sales:
Class A..................................... 5,170,889 $ 72,826,990
Class B..................................... 3,529,184 48,022,266
Class C..................................... 692,679 9,390,192
----------- -------------
Total Sales................................... 9,392,752 $130,239,448
=========== =============
Dividend Reinvestment:
Class A..................................... 393,875 $ 5,266,583
Class B..................................... 458,508 6,117,855
Class C..................................... 110,872 1,478,523
----------- -------------
Total Dividend Reinvestment................... 963,255 $ 12,862,961
=========== =============
Repurchases:
Class A..................................... (3,640,808) $(52,082,516)
Class B..................................... (721,539) (9,824,495)
Class C..................................... (127,832) (1,759,592)
----------- -------------
Total Repurchases............................. (4,490,179) $(63,666,603)
=========== =============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC for Class B and C shares will be imposed on most redemptions
made within five years of the purchase for Class B and one year of the purchase
for Class C 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
Sixth and Thereafter................................... None None
</TABLE>
20
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1998 (Unaudited)
================================================================================
For the six month ended June 30, 1998, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $29,500 and CDSC on the redeemed shares of approximately $97,600.
Sales charges do not represent expenses of the Fund.
4. Investment Transactions
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $103,839,058 and $90,892,291,
respectively.
5. Distribution and Service Plans
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the six month ended June 30, 1998, are payments retained by Van Kampen of
approximately $336,100.
21
<PAGE>
Van Kampen Funds
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
U.S. Real Estate
Utility
Value
International /Global
Asian Growth
Emerging Markets
Global Equity
Global Equity Allocation
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation and
Senior Loan Funds
Prime Rate Income Trust
Reserve
Senior Floating Rate
Tax Free Money
To find out more about any of these funds, ask your financial adviser 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.van-kampen.com -- to view prospectuses, select Investor's Place, then
Download a Prospectus
. call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central
time (Telecommunications Device for the Deaf users, call 1-800-421-2833)
. e-mail us by visiting
www.van-kampen.com and selecting Investor's Place
22
<PAGE>
Van Kampen Real Estate Securities Fund
Board of Trustees
J. Miles Branagan
Richard M. DeMartini*
Linda Hutton Heagy
R. Craig Kennedy
Jack E. Nelson
Don G. Powell*
Phillip B. Rooney
Fernando Sisto
Wayne W. Whalen* -- Chairman
Officers
Dennis J. McDonnell*
President
Ronald A. Nyberg*
Vice President and Secretary
Edward C. Wood, III*
Vice President and Chief Financial Officer
Curtis W. Morell*
Vice President and Chief Accounting Officer
John L. Sullivan*
Treasurer
Tanya M. Loden*
Controller
Peter W. Hegel*
Paul R. Wolkenberg*
Vice Presidents
Investment Adviser
Van Kampen
Asset Management Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Distributor
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Shareholder Servicing Agent
Van Kampen
Investor Services Inc.
P.O. Box 418256
Kansas City, Missouri 64141-9256
Custodian
State Street Bank
and Trust Company
225 Franklin Street,
P.O. Box 1713
Boston, Massachusetts 02105
Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Independent Accountants
PricewaterhouseCoopers LLP
200 East Randolph Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1998 All rights reserved.
/SM/ denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares and other pertinent
data. After December 31, 1998 the report must, if used with prospective
investors, be accompanied by a quarterly performance update.
23
<PAGE>
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> REAL ESTATE A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 139,959,235 <F1>
<INVESTMENTS-AT-VALUE> 141,899,310 <F1>
<RECEIVABLES> 6,796,305 <F1>
<ASSETS-OTHER> 2,861 <F1>
<OTHER-ITEMS-ASSETS> 18,258 <F1>
<TOTAL-ASSETS> 148,716,734 <F1>
<PAYABLE-FOR-SECURITIES> 806,035 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 527,984 <F1>
<TOTAL-LIABILITIES> 1,334,019 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 49,501,666
<SHARES-COMMON-STOCK> 4,079,655
<SHARES-COMMON-PRIOR> 3,715,666
<ACCUMULATED-NII-CURRENT> 744,390 <F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> 2,370,319 <F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 1,940,075 <F1>
<NET-ASSETS> 51,860,346
<DIVIDEND-INCOME> 3,855,914 <F1>
<INTEREST-INCOME> 191,931 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (1,501,959)<F1>
<NET-INVESTMENT-INCOME> 2,545,886 <F1>
<REALIZED-GAINS-CURRENT> 2,529,165 <F1>
<APPREC-INCREASE-CURRENT> (12,856,686)<F1>
<NET-CHANGE-FROM-OPS> (7,781,635)<F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> (754,964)
<DISTRIBUTIONS-OF-GAINS> (868,204)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,792,340
<NUMBER-OF-SHARES-REDEEMED> (4,538,005)
<SHARES-REINVESTED> 109,654
<NET-CHANGE-IN-ASSETS> 546,778
<ACCUMULATED-NII-PRIOR> (21,901)<F1>
<ACCUMULATED-GAINS-PRIOR> 2,266,205 <F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 725,689 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 1,501,959 <F1>
<AVERAGE-NET-ASSETS> 52,275,024
<PER-SHARE-NAV-BEGIN> 13.810
<PER-SHARE-NII> 0.258
<PER-SHARE-GAIN-APPREC> (0.944)
<PER-SHARE-DIVIDEND> (0.190)
<PER-SHARE-DISTRIBUTIONS> (0.222)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.712
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
<FN>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> REAL ESTATE B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 139,959,235 <F1>
<INVESTMENTS-AT-VALUE> 141,899,310 <F1>
<RECEIVABLES> 6,796,305 <F1>
<ASSETS-OTHER> 2,861 <F1>
<OTHER-ITEMS-ASSETS> 18,258 <F1>
<TOTAL-ASSETS> 148,716,734 <F1>
<PAYABLE-FOR-SECURITIES> 806,035 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 527,984 <F1>
<TOTAL-LIABILITIES> 1,334,019 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 74,950,271
<SHARES-COMMON-STOCK> 6,051,600
<SHARES-COMMON-PRIOR> 5,304,248
<ACCUMULATED-NII-CURRENT> 744,390 <F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> 2,370,319 <F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 1,940,075 <F1>
<NET-ASSETS> 76,871,703
<DIVIDEND-INCOME> 3,855,914 <F1>
<INTEREST-INCOME> 191,931 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (1,501,959)<F1>
<NET-INVESTMENT-INCOME> 2,545,886 <F1>
<REALIZED-GAINS-CURRENT> 2,529,165 <F1>
<APPREC-INCREASE-CURRENT> (12,856,686)<F1>
<NET-CHANGE-FROM-OPS> (7,781,635)<F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> (829,394)
<DISTRIBUTIONS-OF-GAINS> (1,263,468)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,367,088
<NUMBER-OF-SHARES-REDEEMED> (751,559)
<SHARES-REINVESTED> 131,823
<NET-CHANGE-IN-ASSETS> 3,673,145
<ACCUMULATED-NII-PRIOR> (21,901)<F1>
<ACCUMULATED-GAINS-PRIOR> 2,266,205 <F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 725,689 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 1,501,959 <F1>
<AVERAGE-NET-ASSETS> 76,224,847
<PER-SHARE-NAV-BEGIN> 13.800
<PER-SHARE-NII> 0.208
<PER-SHARE-GAIN-APPREC> (0.941)
<PER-SHARE-DIVIDEND> (0.142)
<PER-SHARE-DISTRIBUTIONS> (0.222)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.703
<EXPENSE-RATIO> 2.34
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
<FN>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> REAL ESTATE C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 139,959,235 <F1>
<INVESTMENTS-AT-VALUE> 141,899,310 <F1>
<RECEIVABLES> 6,796,305 <F1>
<ASSETS-OTHER> 2,861 <F1>
<OTHER-ITEMS-ASSETS> 18,258 <F1>
<TOTAL-ASSETS> 148,716,734 <F1>
<PAYABLE-FOR-SECURITIES> 806,035 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 527,984 <F1>
<TOTAL-LIABILITIES> 1,334,019 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 74,875,994
<SHARES-COMMON-STOCK> 1,469,322
<SHARES-COMMON-PRIOR> 1,264,396
<ACCUMULATED-NII-CURRENT> 744,390 <F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> 2,370,319 <F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 1,940,075 <F1>
<NET-ASSETS> 18,650,666
<DIVIDEND-INCOME> 3,855,914 <F1>
<INTEREST-INCOME> 191,931 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (1,501,959)<F1>
<NET-INVESTMENT-INCOME> 2,545,886 <F1>
<REALIZED-GAINS-CURRENT> 2,529,165 <F1>
<APPREC-INCREASE-CURRENT> (12,856,686)<F1>
<NET-CHANGE-FROM-OPS> (7,781,635)<F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> (195,237)
<DISTRIBUTIONS-OF-GAINS> (293,379)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 306,062
<NUMBER-OF-SHARES-REDEEMED> (131,554)
<SHARES-REINVESTED> 30,418
<NET-CHANGE-IN-ASSETS> 1,215,186
<ACCUMULATED-NII-PRIOR> (21,901)<F1>
<ACCUMULATED-GAINS-PRIOR> 2,266,205 <F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 725,689 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 1,501,959 <F1>
<AVERAGE-NET-ASSETS> 17,762,665
<PER-SHARE-NAV-BEGIN> 13.790
<PER-SHARE-NII> 0.206
<PER-SHARE-GAIN-APPREC> (0.939)
<PER-SHARE-DIVIDEND> (0.142)
<PER-SHARE-DISTRIBUTIONS> (0.222)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.693
<EXPENSE-RATIO> 2.34
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
<FN>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</FN>
</TABLE>
