<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 19
</TABLE>
REAL SAR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Asset Management Inc.
[SIG]
Dennis J. McDonnell
President
Van Kampen Asset Management Inc.
1
<PAGE> 3
ECONOMIC SNAPSHOT
The strength of the domestic economy continued to defy expectations in the
first half of 1999, although it finally began to show signs of slowing down.
Strong growth, healthy employment, and low inflation all contributed to the
favorable economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3
percent during the first quarter of 1999, but fell to 2.3 percent in the second
quarter. The first-quarter expansion was fueled by an increase in consumer
spending, which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in
more than 30 years. Throughout the reporting period, unemployment remained low,
the number of jobs grew, and wages rose. The labor market remained especially
tight in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report (CPI). Following this up-tick, the Federal Reserve raised interest
rates 0.25 percent on June 30. Although the Fed had expressed a bias toward a
series of rate increases, May's tame CPI report prompted it to drop this bias
when announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may
continue, bringing the economy back to historically normal growth levels.
Healthy job growth, which has been supporting the consumer confidence and
spending levels, showed signs of faltering toward the end of the reporting
period. However, a renewed optimism for corporate earnings, low unemployment,
and a vibrant housing market should provide some balance against a slower job
growth rate.
INTEREST RATES AND INFLATION
June 30, 1997, through June 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 1997 6.5000 2.3000
6.0000 2.2000
5.5000 2.2000
Sep 1997 6.2500 2.2000
5.7500 2.1000
5.6875 1.8000
Dec 1997 6.5000 1.7000
5.5625 1.6000
5.6250 1.4000
Mar 1998 6.1250 1.4000
5.6250 1.4000
5.6875 1.7000
Jun 1998 6.0000 1.7000
5.5625 1.7000
5.9375 1.6000
Sep 1998 5.7500 1.5000
5.2500 1.5000
4.8750 1.5000
Dec 1998 4.0000 1.6000
4.8125 1.7000
4.8750 1.6000
Mar 1999 5.1250 1.7000
4.9375 2.3000
4.5000 2.1000
Jun 1999 4.0000 2.0000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1999
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)... 8.16% 7.71% 7.71%
Six-month total return(2)................ 3.00% 3.71% 6.71%
One-year total return(2)................. (4.60%) (4.51%) (1.60%)
Five-year average annual total
return(2).............................. 11.50% 11.54% 11.77%
Life-of-Fund average annual total
return(2)*............................. 11.50% 11.54% 11.77%
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 (4.00% for B and 1.00% 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 Comparative Performance section of the current prospectus. An investment
should be made with an understanding of the risks that an investment in equity
securities entails. These include the risk that the financial condition of the
issuers of the securities in the portfolio, or the condition of the stock market
in general, may worsen and therefore, the value of Fund shares may decline. Past
performance does not guarantee future results. Investment return and net asset
value will fluctuate with market conditions. 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> 5
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 manager Theodore R.
Bigman, Morgan Stanley Dean Witter Investment Management Inc. Mr. Bigman has
managed the Fund since January 1997 and worked in the investment industry since
1983. The following excerpts reflect his views on the Fund's performance during
the reporting period ended June 30, 1999.
Q WHAT WERE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED DURING THE
REPORTING PERIOD?
A After a difficult first quarter, in which we saw a continuation of the
negative market conditions from 1998, the REIT market finally experienced
recovery in the second quarter of 1999. The vast majority of this
turnaround was achieved from mid-April to mid-May due largely to a dramatic
change in leadership in the equity markets--investors finally turned away from
the richly valued large-cap growth and Internet stocks toward the beaten-down
cyclical and value stocks. This change was primarily the result of economic
consensus that the global economy had begun to recover. However, the real estate
market modestly regressed in the latter part of the reporting period due to
fears of a Federal Reserve tightening.
Unlike prior rallies, this REIT recovery was broad-based, lifting stocks in
all sectors. Even after this constructive period, REITs are still trading at a
slight discount to the underlying value of their assets. This means that it is
generally more attractive to buy real estate on Wall Street (through the
ownership of securities) than on Main Street (through the direct ownership of
properties).
Q HOW WERE THE FUNDAMENTALS OF THE REAL ESTATE MARKET AFFECTED?
A Although real estate cycles tend to move at a slow pace, the U.S. real
estate market has typically featured boom and bust cycles. Given the
increasing size of the public markets for real estate equity and debt,
there appears to be the opportunity for a muting of those cycles as the scrutiny
and attention on the potential for over-supplied markets has increased. We base
this belief on the current balance of supply and demand, as robust levels of
demand have served to mute any serious threat of oversupply. Specifically,
fundamentals in apartment and retail markets grew stronger during the period,
while the dramatic improvement in commercial markets showed signs of reaching a
plateau.
4
<PAGE> 6
Q HOW DID YOU POSITION THE PORTFOLIO DURING THIS TIME?
A We continued to shape the portfolio with companies that offer attractive
fundamental valuations relative to their underlying real estate value.
Throughout the year, we were encouraged by the undeniable strength of the
U.S. economy and became more optimistic that real estate fundamentals will
remain favorable. While the sector weightings remain very similar to the
portfolio's profile six months ago, we have been more willing to take
opportunistic positions in certain areas, including hotels and offices.
Generally, we took advantage of the REIT rally to upgrade the quality of the
portfolio. This is most notably evident in the office sector, where we sold some
of our holdings in the suburban office sector and added to the central business
district office sector.
The Fund's relative outperformance during the reporting period was driven
primarily by stock selection. Specifically, the Fund benefited from investments
in two West Coast apartment stocks and two retail companies--one focused on
grocery-anchored centers and the other on upscale malls. The Fund's return was
also supported by large positions in two office stocks trading at significant
discounts to their underlying asset value. For additional Fund portfolio
highlights, please refer to page 8.
Q AS A RESULT, WHAT WAS THE FUND'S PERFORMANCE FOR THE SIX-MONTH PERIOD?
A The Fund achieved a total return of 8.16 percent(1) (Class A shares at net
asset value) for the six-month period ended June 30, 1999. This
performance compares favorably to the total return of the NAREIT (National
Association of Real Estate Investment Trusts) Equity Index of 2.06 percent over
the same period. The NAREIT Equity Index reflects the performance of a broad
range of equity REITs of all property types.
By comparison, the Standard & Poor's 500 Index registered a total return of
12.36 percent in the six months ended June 30, 1999. The S&P 500 Index is a
broad-based index that reflects the general performance of the stock market.
Keep in mind that these indices are statistical composites that do not reflect
any commissions or sales charges that would be incurred by an investor
purchasing the securities they represent. Of course, past performance is no
guarantee of comparable future results. Please refer to the chart and footnotes
on page 3 for additional Fund performance results.
Q WHAT IS YOUR OUTLOOK FOR THE REAL ESTATE MARKET?
A We are encouraged by the general sentiment among industry investors that
the real estate market is stable, even bordering on boring. It's a nice
middle ground between the unsustainable euphoria of years past and the
more recent sense of depression. We can attribute this shift in attitude to two
key factors. First, most REITs have developed business plans that do not require
equity issuance in 1999. Generally, these business plans place an emphasis on
managing the existing portfolio, while any external growth is limited to core
competencies. REIT management companies are pleased with the recovery in their
share prices but have declined to issue new equity at current prices. Second, at
the end of the first-quarter earnings season, companies reported strong
5
<PAGE> 7
internal cash flow as a result of favorable property fundamentals. Because
fundamentals remain intact, we do not expect any significant variation in the
results for the second quarter.
We believe this return to stability will help calm current investors and
attract new investors looking for real estate exposure. It may also invite
non-dedicated investors looking for long-term growth of capital with only a
modest correlation to the broad equity markets.
[SIG]
Theodore R. Bigman
Portfolio Manager
6
<PAGE> 8
GLOSSARY OF TERMS
CYCLICAL STOCKS: Stocks within industries where earnings tend to rise quickly
when the economy strengthens and fall quickly when the economy weakens.
Examples of cyclical stocks include housing, automobile, and paper
companies. Noncyclical or defensive stocks are typically less sensitive to
changes in the economy. These include utilities, grocery stores, and
pharmaceutical companies.
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, meets eight times a
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.
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 relative to their earnings than value stocks, due to their
higher expected earnings growth.
MARKET CAPITALIZATION: The size of a company, as measured by the value of its
issued and outstanding stock.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from the total assets in its portfolio and dividing
this amount by the number of shares outstanding. The NAV does not include
any initial or contingent deferred sales charge.
REAL ESTATE INVESTMENT TRUSTS (REITS): Publicly traded companies that own,
develop, and operate apartment complexes, hotels, office buildings, and
other commercial properties.
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.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN REAL ESTATE SECURITIES FUND
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 1999*
<TABLE>
<S> <C>
CHATEAU COMMUNITIES owns and operates manufactured-home
communities across the United States........................ 6.0%
AVALONBAY COMMUNITIES owns and develops apartments in high
barrier-to-entry markets in the Pacific and Northeastern
United States............................................... 5.4%
ARDEN REALTY owns a concentrated portfolio of office
properties in Southern California........................... 5.2%
TAUBMAN CENTERS owns, develops, acquires, and operates
regional shopping centers in the United States.............. 4.8%
ESSEX PROPERTY TRUST owns a concentrated portfolio of
apartments on the West Coast................................ 4.2%
BURNHAM PACIFIC PROPERTIES owns and develops
grocery-anchored shopping centers in Southern California.... 4.1%
BROOKFIELD PROPERTIES owns and manages a portfolio of office
properties, with a concentration in Manhattan............... 3.8%
PUBLIC STORAGE owns and operates self-storage facilities and
commercial properties across the United States.............. 3.6%
FEDERAL REALTY INVESTMENT TRUST owns grocery-anchored
shopping centers, with a concentration in affluent areas of
the Mid-Atlantic United States.............................. 3.5%
PACIFIC GULF PROPERTIES has a concentrated portfolio of
apartment and industrial park properties in Southern
California and the Pacific Northwest........................ 3.5%
</TABLE>
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Office/Industrial 32.00 30.90
Apartments 21.20 24.20
Shopping Centers 10.50 11.70
Shopping Malls 9.30 7.80
Manufactured Home Communities 7.00 8.30
</TABLE>
* As a percentage of long-term investments
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 97.3%
APARTMENTS 20.7%
Amli Residential Properties Trust.................... 66,800 $ 1,494,650
Apartment Investment & Management Co., Class A....... 3,200 136,800
Archstone Communities Trust.......................... 111,290 2,441,424
Avalonbay Communities, Inc. ......................... 216,800 8,021,600
Berkshire Realty Company, Inc. ...................... 83,200 962,000
Equity Residential Properties Trust.................. 74,469 3,355,759
Essex Property Trust, Inc. .......................... 176,400 6,240,150
Gables Residential Trust............................. 9,900 238,837
Pennsylvania Real Estate Investment.................. 133,000 2,784,688
Smith (Charles E.) Residential Realty, Inc. ......... 134,500 4,564,594
Summit Properties, Inc. ............................. 65,500 1,293,625
------------
31,534,127
------------
DEVELOPMENT 5.3%
Atlantic Gulf Communities Corp. (a).................. 233,904 153,500
Atlantic Gulf Communities Corp. -- Convertible
Preferred Ser B (a)................................ 30,570 217,811
Atlantic Gulf Communities Corp. -- Convertible
Preferred Ser B,
144A -- Private Placement (a) (b).................. 43,609 310,714
Atlantic Gulf Communities Corp. Warrants, 16,494
shares of each Class A, B and C, expiring
06/23/04 (a)....................................... 49,482 15,462
Atlantic Gulf Communities Corp. Warrants, 43,007
shares of each Class A, B and C, expiring 06/24/01,
144A -- Private
Placement (a) (b).................................. 129,021 40,320
Brookfield Properties Corp. ......................... 433,253 5,666,949
Merry Land Properties, Inc. (a)...................... 12,365 61,052
Trizec Hahn Corp. ................................... 76,300 1,554,613
------------
8,020,421
------------
HEALTHCARE FACILITIES 0.1%
Meditrust Companies.................................. 9,000 117,563
------------
HOTEL & LODGING 6.7%
Candlewood Hotel Company, Inc. (a)................... 65,200 244,500
Crestline Capital Corp. (a).......................... 9,690 162,913
Hammons (John Q.) Hotels Inc., Class A (a).......... 12,100 50,669
Host Marriott Corp. ................................. 157,761 1,873,412
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
HOTEL & LODGING (CONTINUED)
Interstate Hotels Corp. (a).......................... 13,259 $ 54,693
Patriot American Hospitality, Inc. .................. 397,798 1,790,091
Promus Hotel Corp. (a)............................... 89,400 2,771,400
Starwood Hotels & Resorts, Class B................... 105,381 3,220,707
------------
10,168,385
------------
MANUFACTURED HOME COMMUNITIES 6.9%
Chateau Communities, Inc. ........................... 296,242 8,868,745
Manufactured Home Communities, Inc. ................. 32,400 842,400
Sun Communities, Inc. ............................... 20,300 720,650
------------
10,431,795
------------
OFFICE/INDUSTRIAL 31.3%
Arden Realty, Inc. .................................. 314,400 7,742,100
Beacon Capital Partners Inc., 144A -- Private
Placement (a) (b).................................. 177,900 3,558,000
Bedford Property Investors, Inc. .................... 7,200 128,700
Boston Properties, Inc. ............................. 24,900 893,287
Brandywine Realty Trust.............................. 229,666 4,550,258
CarrAmerica Realty Corp. ............................ 171,700 4,292,500
Cornerstone Properties, Inc. ........................ 7,700 122,238
Crescent Real Estate Equities Trust.................. 58,000 1,377,500
EastGroup Properties, Inc. .......................... 7,000 140,437
Equity Office Properties Trust....................... 177,992 4,561,045
Great Lakes REIT, Inc. .............................. 311,609 5,063,646
Pacific Gulf Properties, Inc. ....................... 228,500 5,169,812
Prime Group Realty Trust............................. 227,300 3,906,719
ProLogis Trust....................................... 67,660 1,370,115
SL Green Realty Corp. ............................... 3,500 71,531
Spieker Properties, Inc. ............................ 36,800 1,430,600
Wellsford Real Properties, Inc., 144A -- Private
Placement (a) (b).................................. 308,001 3,311,011
------------
47,689,499
------------
RESEARCH & MANAGEMENT 0.9%
Security Capital Group, Inc., Class B................ 92,700 1,349,944
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
SELF-STORAGE 6.0%
PS Business Parks Inc................................ 100,041 $ 2,438,499
Public Storage, Inc. ................................ 189,274 5,299,672
Shurgard Storage Centers, Inc., Class A.............. 51,000 1,383,375
------------
9,121,546
------------
SHOPPING CENTERS 10.3%
Acadia Realty Trust.................................. 32,200 173,075
Burnham Pacific Properties, Inc. .................... 492,381 6,062,441
Federal Realty Investment Trust...................... 228,400 5,238,925
First Washington Realty Trust, Inc. ................. 41,923 979,950
Pan Pacific Retail Properties, Inc. ................. 83,800 1,623,625
Philips International Realty Corp. .................. 5,300 89,437
Ramco-Gershenson Properties Trust.................... 1,000 16,250
Regency Realty Corp. ................................ 54,500 1,195,594
Vornado Realty Trust................................. 9,100 321,344
------------
15,700,641
------------
SHOPPING MALLS 9.1%
Rouse Co. ........................................... 13,700 347,637
Simon Property Group, Inc. .......................... 143,700 3,646,388
Taubman Centers, Inc. ............................... 547,045 7,214,156
Urban Shopping Centers, Inc. ........................ 85,700 2,699,550
------------
13,907,731
------------
TOTAL COMMON AND PREFERRED STOCKS 97.3%........................ 148,041,652
CONVERTIBLE CORPORATE OBLIGATIONS 0.7%
Brookfield Properties Corp. -- Installment Receipts Representing
Subordinated Debenture ($1,092,000 par, 6.00% coupon, 02/14/07
maturity) Convertible to 72,800 common shares................. 991,864
------------
TOTAL LONG-TERM INVESTMENTS 98.0%
(Cost $146,089,365)........................................... 149,033,516
REPURCHASE AGREEMENT 0.9%
BA Securities ($1,435,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 06/30/99, to be
sold on 07/01/99 at $1,435,201) (Cost $1,435,000)............. 1,435,000
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
- --------------------------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS 98.9%
(Cost $147,524,365)............................................. $150,468,516
OTHER ASSETS IN EXCESS OF LIABILITIES 1.1%..................... 1,694,857
------------
NET ASSETS 100.0%.............................................. $152,163,373
============
</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.
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $147,524,365)....................... $150,468,516
Receivables:
Dividends................................................. 1,276,436
Investments Sold.......................................... 1,186,550
Fund Shares Sold.......................................... 198,945
Interest.................................................. 21,840
Other....................................................... 7,679
------------
Total Assets.......................................... 153,159,966
------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 503,846
Distributor and Affiliates................................ 171,778
Investment Advisory Fee................................... 87,984
Income Distributions...................................... 13,982
Custodian Bank............................................ 435
Other..................................................... 65,615
Accrued Expenses............................................ 96,762
Trustees' Deferred Compensation and Retirement Plans........ 56,191
------------
Total Liabilities..................................... 996,593
------------
NET ASSETS.................................................. $152,163,373
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $153,664,220
Net Unrealized Appreciation................................. 2,944,151
Accumulated Undistributed Net Investment Income............. 837,377
Accumulated Net Realized Loss............................... (5,282,375)
------------
NET ASSETS.................................................. $152,163,373
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $58,971,363 and 4,787,414 shares of
beneficial interest issued and outstanding)........... $ 12.32
Maximum sales charge (4.75%* of offering price)......... .61
------------
Maximum offering price to public........................ $ 12.93
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $72,880,423 and 5,916,812 shares of
beneficial interest issued and outstanding)........... $ 12.32
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $20,311,587 and 1,649,913 shares of
beneficial interest issued and outstanding)........... $ 12.31
============
</TABLE>
*On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................... $ 3,070,403
Interest.................................................... 69,291
-----------
Total Income............................................ 3,139,694
-----------
EXPENSES:
Investment Advisory Fee..................................... 690,413
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $63,978, $341,628 and $92,700,
respectively)............................................. 498,306
Shareholder Services........................................ 230,663
Merger Costs................................................ 151,000
Custody..................................................... 15,650
Trustees' Fees and Related Expenses......................... 13,117
Legal....................................................... 5,830
Amortization of Organizational Costs........................ 1,293
Other....................................................... 122,618
-----------
Total Expenses.......................................... 1,728,890
Investment Advisory Fee Reduction....................... 124,912
Less Credits earned on Cash Balances.................... 677
-----------
Net Expenses............................................ 1,603,301
-----------
NET INVESTMENT INCOME....................................... $ 1,536,393
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $(1,156,104)
-----------
Unrealized Appreciation/Depreciation
Beginning of the Period................................... (5,268,127)
End of the Period......................................... 2,944,151
-----------
Net Unrealized Appreciation During the Period............... 8,212,278
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 7,056,174
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 8,592,567
===========
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1999
and the Year Ended December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 1,536,393 $ 4,830,523
Net Realized Loss................................ (1,156,104) (3,966,930)
Net Unrealized Appreciation/Depreciation During
the Period..................................... 8,212,278 (20,064,888)
------------ ------------
Change in Net Assets from Operations............. 8,592,567 (19,201,295)
------------ ------------
Distributions from Net Investment Income*........ (2,006,590) (3,501,048)
Distributions from Net Realized Gain*............ -0- (2,425,546)
------------ ------------
Total Distributions.............................. (2,006,590) (5,926,594)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... 6,585,977 (25,127,889)
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold........................ 53,113,947 121,798,900
Net Asset Value of Shares Issued Through
Dividend Reinvestment.......................... 1,677,535 4,935,762
Cost of Shares Repurchased....................... (32,343,615) (120,424,850)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................... 22,447,867 6,309,812
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS............ 29,033,844 (18,818,077)
NET ASSETS:
Beginning of the Period.......................... 123,129,529 141,947,606
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $837,377
and $1,307,574 respectively)................... $152,163,373 $123,129,529
============ ============
</TABLE>
<TABLE>
<CAPTION>
* Distributions by Class
- --------------------------------------------------------------------------------------
<S> <C> <C>
Distributions from Net Investment Income:
Class A Shares................................. $ (905,131) $ (1,462,168)
Class B Shares................................. (863,635) (1,638,689)
Class C Shares................................. (237,824) (400,191)
------------ ------------
$ (2,006,590) $ (3,501,048)
============ ============
Distributions from Net Realized Gain:
Class A Shares................................. $ -0- $ (868,860)
Class B Shares................................. -0- (1,263,337)
Class C Shares................................. -0- (293,349)
------------ ------------
$ -0- $ (2,425,546)
============ ============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended -------------------------------------
Class A Shares June 30, 1999 1998 1997 1996 1995(a)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $11.578 $13.810 $13.008 $ 10.00 $ 9.27
------- ------- ------- ------- -------
Net Investment Income........ .121 .509 .364 .351 .27
Net Realized and Unrealized
Gain/Loss.................. .809 (2.139) 2.220 3.514 .85
------- ------- ------- ------- -------
Total from Investment
Operations................... .930 (1.630) 2.584 3.865 1.12
------- ------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Investment
Income..................... .190 .380 .380 .380 .2456
Return of Capital
Distributions.............. -0- -0- -0- -0- .1444
Distributions from Net
Realized Gain.............. -0- .222 1.402 .477 -0-
------- ------- ------- ------- -------
Total Distributions............ .190 .602 1.782 .857 .39
------- ------- ------- ------- -------
Net Asset Value, End of the
Period....................... $12.318 $11.578 $13.810 $13.008 $ 10.00
======= ======= ======= ======= =======
Total Return (b)............... 8.16%* (11.99%) 20.66% 39.82% 12.39%
Net Assets at End of the Period
(In millions)................ $ 59.0 $ 41.7 $ 51.3 $ 23.3 $ 8.5
Ratio of Expenses to Average
Net Assets**................. 1.81% 1.76% 1.77% 2.60% 2.67%
Ratio of Net Investment Income
to Average Net Assets**...... 2.83% 3.98% 2.77% 3.21% 2.92%
Portfolio Turnover............. 27%* 113% 159% 97% 94%*
* 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................... 1.99% N/A N/A 2.61% 3.16%
Ratio of Net Investment Income
to Average Net Assets........ 2.65% N/A N/A 3.19% 2.44%
</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.
See Notes to Financial Statements
16
<PAGE> 18
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended -------------------------------------
Class B Shares June 30, 1999 1998 1997 1996 1995(a)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $11.574 $13.800 $13.008 $ 10.00 $ 9.28
------- ------- ------- ------- -------
Net Investment Income........ .096 .409 .272 .266 .19
Net Realized and Unrealized
Gain/Loss.................. .790 (2.129) 2.206 3.519 .843
------- ------- ------- ------- -------
Total from Investment
Operations................... .886 (1.720) 2.478 3.785 1.033
------- ------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Investment
Income..................... .142 .284 .284 .300 .197
Return of Capital
Distributions.............. -0- -0- -0- -0- .116
Distributions from Net
Realized Gain.............. -0- .222 1.402 .477 -0-
------- ------- ------- ------- -------
Total Distributions............ .142 .506 1.686 .777 .313
------- ------- ------- ------- -------
Net Asset Value, End of the
Period....................... $12.318 $11.574 $13.800 $13.008 $ 10.00
======= ======= ======= ======= =======
Total Return (b)............... 7.71%* (12.62%) 19.76% 38.82% 11.37%
Net Assets at End of the Period
(In millions)................ $ 72.9 $ 64.4 $ 73.2 $ 26.5 $ 12.0
Ratio of Expenses to Average
Net Assets**................. 2.61% 2.53% 2.52% 3.37% 3.50%
Ratio of Net Investment Income
to Average Net Assets**...... 1.85% 3.26% 2.03% 2.39% 2.07%
Portfolio Turnover............. 27%* 113% 159% 97% 94%
* 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................... 2.79% N/A N/A 3.39% 3.99%
Ratio of Net Investment Income
to Average Net Assets........ 1.67% N/A N/A 2.37% 1.58%
</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.
See Notes to Financial Statements
17
<PAGE> 19
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended -------------------------------------
Class C Shares June 30, 1999 1998(a) 1997 1996 1995(a)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $11.568 $13.790 $12.999 $ 9.99 $ 9.28
------- ------- ------- ------- -------
Net Investment Income......... .092 .409 .271 .266 .20
Net Realized and Unrealized
Gain/Loss................... .793 (2.125) 2.206 3.520 .823
------- ------- ------- ------- -------
Total from Investment
Operations.................... .885 (1.716) 2.477 3.786 1.023
------- ------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Investment
Income...................... .142 .284 .284 .300 .197
Return of Capital
Distributions............... -0- -0- -0- -0- .116
Distributions from Net
Realized Gain............... -0- .222 1.402 .477 -0-
------- ------- ------- ------- -------
Total Distribution.............. .142 .506 1.686 .777 .313
------- ------- ------- ------- -------
Net Asset Value, End of the
Period........................ $12.311 $11.568 $13.790 $12.999 $ 9.99
======= ======= ======= ======= =======
Total Return (b)................ 7.71%* (12.63%) 19.78% 38.86% 11.26%
Net Assets at End of the Period
(In millions)................. $ 20.3 $ 17.1 $ 17.4 $ 7.7 $ 3.1
Ratio of Expenses to
Average Net Assets**.......... 2.61% 2.54% 2.52% 3.38% 3.54%
Ratio of Net Investment Income
to Average Net Assets**....... 1.89% 3.31% 2.00% 2.39% 2.11%
Portfolio Turnover.............. 27%* 113% 159% 97% 94%
* 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........................ 2.79% N/A N/A 3.40% 4.03%
Ratio of Net Investment Income
to Average Net Assets......... 1.71% N/A N/A 2.38% 1.62%
</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.
See Notes to Financial Statements
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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 mean of the bid and asked prices. 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
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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. Income and 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.
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 have been amortized on
a straight line basis over the 60 month period ended May 31, 1999.
E. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of loss and offset such losses against any future realized capital gains.
At December 31, 1998, the Fund had an accumulated capital loss carryforward for
tax purposes of $2,357,933 which will expire on December 31, 2006.
At June 30, 1999, for federal income tax purposes the cost of long- and
short-term investments is $148,609,408, the aggregate gross unrealized
appreciation is $9,501,304 and the aggregate gross unrealized depreciation is
$7,642,196, resulting in net unrealized appreciation on long- and short-term
investments of $1,859,108. Net realized gains or losses may differ for financial
reporting and tax purposes primarily as a result of the deferral of losses
relating to wash sale transactions.
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 any return of capital it receives from the Real Estate
Investment Trusts (the "REITs") in which it invests. The REITs pay distributions
based on cash flow,
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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.
G. EXPENSE REDUCTIONS--During the six months ended June 30, 1999, the Fund's
custody fee was reduced by $677 as a result of credits earned on overnight cash
balances.
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. The
Adviser has entered into a subadvisory agreement with Morgan Stanley Dean Witter
Investment Management Inc. (the "Subadviser"), to provide advisory services to
the Fund and the Adviser with respect to the Fund's investments. The Adviser
pays 50% of its investment advisory fee to the Subadviser.
For the six months ended June 30, 1999, the Adviser voluntarily waived
$124,912 of its investment advisory fees. This waiver is voluntary in nature and
can be discontinued at the Adviser's discretion.
For the six months ended June 30, 1999, the Fund recognized expenses of
approximately $2,500 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, 1999, the Fund recognized expenses of
approximately $40,700 representing Van Kampen's cost of providing accounting and
legal services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the six months ended June 30,
1999, the Fund recognized expenses of approximately $176,400. Transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive 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
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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, 1999, Van Kampen owned 10,605 Class A shares, 53 Class B and 53
Class C shares.
3. CAPITAL TRANSACTIONS
At June 30, 1999, capital aggregated $58,891,515, $74,461,904, and $20,310,801
for Classes A, B, and C, respectively. For the six months ended June 30, 1999,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A...................................... 2,094,765 $ 25,466,519
Class B...................................... 1,723,853 20,916,825
Class C...................................... 559,569 6,730,603
---------- ------------
Total Sales.................................... 4,378,187 $ 53,113,947
========== ============
Dividend Reinvestment:
Class A...................................... 69,198 $ 795,218
Class B...................................... 59,877 687,614
Class C...................................... 16,916 194,703
---------- ------------
Total Dividend Reinvestment.................... 145,991 $ 1,677,535
========== ============
Repurchases:
Class A...................................... (977,723) $(11,303,849)
Class B...................................... (1,428,561) (16,483,735)
Class C...................................... (401,422) (4,556,031)
---------- ------------
Total Repurchases.............................. (2,807,706) $(32,343,615)
========== ============
</TABLE>
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At December 31, 1998, capital aggregated $43,933,627, $69,341,200 and
$17,941,526 for Classes A, B, and C, respectively. For the year ended December
31, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 6,983,175 $ 89,637,024
Class B.................................... 1,955,125 24,939,392
Class C.................................... 584,081 7,222,484
---------- -------------
Total Sales.................................. 9,522,381 $ 121,798,900
========== =============
Dividend Reinvestment:
Class A.................................... 164,711 $ 2,034,093
Class B.................................... 189,265 2,349,248
Class C.................................... 44,624 552,421
---------- -------------
Total Dividend Reinvestment.................. 398,600 $ 4,935,762
========== =============
Repurchases:
Class A.................................... (7,262,378) $ (92,416,901)
Class B.................................... (1,886,995) (22,972,821)
Class C.................................... (418,251) (5,035,128)
---------- -------------
Total Repurchases............................ (9,567,624) $(120,424,850)
========== =============
</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>
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended June 30, 1999, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $13,100 and CDSC on the redeemed shares of approximately $210,400.
Sales charges do not represent expenses of the Fund.
On February 19, 1999, the Fund acquired all of the assets and liabilities of
the Van Kampen U.S. Real Estate Fund (the "USRE Fund") through a tax free
reorganization approved by USRE Fund shareholders on October 23, 1997. The Fund
issued 1,120,163, 1,030,739 and 238,764 shares of Classes A, B and C valued at
$12,433,809, $11,420,588 and $2,643,117, respectively, in exchange for USRE
Fund's net assets. Included in these net assets was a capital loss carryforward
of $1,352,124 which is included in accumulated net realized gain/loss. Shares
issued in connection with this reorganization are included in common share sales
for the six months ended June 30, 1999. Combined net assets on the day of
acquisition were $144,578,996.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $57,893,637 and $36,900,871,
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 months ended June 30, 1999, are payments retained by Van Kampen of
approximately $295,500.
24
<PAGE> 26
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
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
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM--to view a prospectus, select Download
Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Deaf users, call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM and selecting Contact Us
25
<PAGE> 27
VAN KAMPEN REAL ESTATE SECURITIES FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY, PH.D.
PAUL G. YOVOVICH
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief Financial Officer
CURTIS W. MORRELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
ASSET MANAGEMENT INC.
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
SHAREHOLDER SERVICING AGENT
VAN KAMPEN
INVESTOR SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256
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., 1999 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, 1999 the report must, if used with prospective
investors, be accompanied by a quarterly performance update.
26
<PAGE> 28
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
27
<PAGE> 29
VAN KAMPEN FUNDS
YOUR NOTES:
28
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> REAL ESTATE A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 147,524,365<F1>
<INVESTMENTS-AT-VALUE> 150,468,516<F1>
<RECEIVABLES> 2,683,771<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 7,679<F1>
<TOTAL-ASSETS> 153,159,966<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 996,593<F1>
<TOTAL-LIABILITIES> 996,593<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,891,515
<SHARES-COMMON-STOCK> 4,787,414
<SHARES-COMMON-PRIOR> 3,601,174
<ACCUMULATED-NII-CURRENT> 837,377<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (5,282,375)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 2,944,151<F1>
<NET-ASSETS> 58,971,363
<DIVIDEND-INCOME> 3,070,403<F1>
<INTEREST-INCOME> 69,291<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,603,301<F1>
<NET-INVESTMENT-INCOME> 1,536,393<F1>
<REALIZED-GAINS-CURRENT> (1,156,104)<F1>
<APPREC-INCREASE-CURRENT> 8,212,278<F1>
<NET-CHANGE-FROM-OPS> 8,592,567<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (905,131)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,094,765
<NUMBER-OF-SHARES-REDEEMED> (977,723)
<SHARES-REINVESTED> 69,198
<NET-CHANGE-IN-ASSETS> 17,275,346
<ACCUMULATED-NII-PRIOR> 1,307,574<F1>
<ACCUMULATED-GAINS-PRIOR> (4,126,271)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 690,413<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,728,890<F1>
<AVERAGE-NET-ASSETS> 51,899,891
<PER-SHARE-NAV-BEGIN> 11.578
<PER-SHARE-NII> 0.121
<PER-SHARE-GAIN-APPREC> 0.809
<PER-SHARE-DIVIDEND> (0.190)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.318
<EXPENSE-RATIO> 1.81
<FN>
<F1>THIS ITEM RELATES TO THE FUND ON A COMPOSITE BASIS AND NOT ON A CLASS BASIS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> REAL ESTATE B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 147,524,365<F1>
<INVESTMENTS-AT-VALUE> 150,468,516<F1>
<RECEIVABLES> 2,683,771<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 7,679<F1>
<TOTAL-ASSETS> 153,159,966<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 996,593<F1>
<TOTAL-LIABILITIES> 996,593<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 74,461,904
<SHARES-COMMON-STOCK> 5,916,812
<SHARES-COMMON-PRIOR> 5,561,643
<ACCUMULATED-NII-CURRENT> 837,377<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (5,282,375)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 2,944,151<F1>
<NET-ASSETS> 72,880,423
<DIVIDEND-INCOME> 3,070,403<F1>
<INTEREST-INCOME> 69,291<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,603,301<F1>
<NET-INVESTMENT-INCOME> 1,536,393<F1>
<REALIZED-GAINS-CURRENT> (1,156,104)<F1>
<APPREC-INCREASE-CURRENT> 8,212,278<F1>
<NET-CHANGE-FROM-OPS> 8,592,567<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (863,635)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,723,853
<NUMBER-OF-SHARES-REDEEMED> (1,428,561)
<SHARES-REINVESTED> 59,877
<NET-CHANGE-IN-ASSETS> 8,507,447
<ACCUMULATED-NII-PRIOR> 1,307,574<F1>
<ACCUMULATED-GAINS-PRIOR> (4,126,271)<F1>
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 690,413<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,728,890
<AVERAGE-NET-ASSETS> 69,080,584
<PER-SHARE-NAV-BEGIN> 11.574
<PER-SHARE-NII> 0.096
<PER-SHARE-GAIN-APPREC> 0.790
<PER-SHARE-DIVIDEND> (0.142)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.318
<EXPENSE-RATIO> 2.61
<FN>
<F1>THIS ITEM RELATES TO THE FUND ON A COMPOSITE BASIS AND NOT ON A CLASS BASIS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> REAL ESTATE C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 147,524,365<F1>
<INVESTMENTS-AT-VALUE> 150,468,516<F1>
<RECEIVABLES> 2,683,771<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 7,679<F1>
<TOTAL-ASSETS> 153,159,966<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 996,593<F1>
<TOTAL-LIABILITIES> 996,593<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,310,801
<SHARES-COMMON-STOCK> 1,649,913
<SHARES-COMMON-PRIOR> 1,474,850
<ACCUMULATED-NII-CURRENT> 837,377<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (5,282,375)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 2,944,151<F1>
<NET-ASSETS> 20,311,587
<DIVIDEND-INCOME> 3,070,403<F1>
<INTEREST-INCOME> 69,291<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,603,301<F1>
<NET-INVESTMENT-INCOME> 1,536,393<F1>
<REALIZED-GAINS-CURRENT> (1,156,104)<F1>
<APPREC-INCREASE-CURRENT> 8,212,278<F1>
<NET-CHANGE-FROM-OPS> 8,592,567<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (237,824)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 559,569
<NUMBER-OF-SHARES-REDEEMED> (401,422)
<SHARES-REINVESTED> 16,916
<NET-CHANGE-IN-ASSETS> 3,251,051
<ACCUMULATED-NII-PRIOR> 1,307,574<F1>
<ACCUMULATED-GAINS-PRIOR> (4,126,271)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 690,413<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,728,890<F1>
<AVERAGE-NET-ASSETS> 18,737,299
<PER-SHARE-NAV-BEGIN> 11.568
<PER-SHARE-NII> 0.092
<PER-SHARE-GAIN-APPREC> 0.793
<PER-SHARE-DIVIDEND> (0.142)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.311
<EXPENSE-RATIO> 2.61
<FN>
<F1>THIS ITEM RELATES TO THE FUND ON A COMPOSITE BASIS AND NOT ON A CLASS BASIS
</FN>
</TABLE>
