<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
PORTFOLIO AT A GLANCE
TOP TEN HOLDINGS 6
TOP FIVE SECTORS 6
Q&A WITH YOUR PORTFOLIO MANAGERS 7
GLOSSARY OF TERMS 10
BY THE NUMBERS
YOUR FUND'S INVESTMENTS 11
FINANCIAL STATEMENTS 14
NOTES TO FINANCIAL STATEMENTS 20
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 27
FUND OFFICERS AND IMPORTANT ADDRESSES 28
</TABLE>
It is times like these when money- management experience may make a difference.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
July 20, 2000
Dear Shareholder,
Whether you have held your fund for years or just joined the Van Kampen family
of shareholders in the last few months, you are likely to have questions and
even some concerns about how recent market volatility has affected your
investment. I encourage you to review the following Q&A in which your portfolio
manager provides an update on how your fund is being managed in this
environment.
It is times like these when money-management experience may make a difference.
Toward that end, you should know that Van Kampen is one of the nation's oldest
investment-management firms, with a history of money management dating back to
1926. Our portfolio managers have invested in all types of market
conditions--during bull and bear markets, periods of inflation and rising
interest rates, and now a technology revolution. We have managed money long
enough to understand short-term market volatility and the value of investing for
the long term.
As we move through the second half of 2000, count on us to
continue to draw on the wisdom of our 74 years of experience.
Along those lines, Van Kampen's "Generations of Experience" is
the theme of a national advertising campaign that we recently kicked off. The
message emphasizes our depth of investment-management history, as well as our
firm belief that with the right investments, anyone can realize life's true
wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
BEGINNING IN THE SECOND QUARTER OF 2000, EVIDENCE OF SLOWER ECONOMIC GROWTH IN
THE UNITED STATES EMERGED. HOWEVER, ANALYSTS BELIEVE IT MAY HAVE BEEN PREMATURE
TO ASSUME THAT THE U.S. ECONOMY HAS SLOWED TO A SUSTAINABLE, NONINFLATIONARY
PACE, WITH THE GROSS DOMESTIC PRODUCT (GDP), A MEASURE OF ECONOMIC GROWTH, UP
5.2 PERCENT ANNUALIZED IN THE SECOND QUARTER OF 2000.
CONSUMER SPENDING AND EMPLOYMENT
CONSUMER SPENDING REMAINED THE MAIN ENGINE OF GROWTH BEHIND THE U.S. ECONOMY.
LIVING STANDARDS AND SPENDING HABITS WERE BOOSTED BY STRONG GAINS IN REAL
INCOME, AND INDIVIDUAL WEALTH INCREASED SUBSTANTIALLY, PRIMARILY DUE TO A
BUOYANT STOCK MARKET. NONETHELESS, DATA RELEASED IN THE SECOND QUARTER OF 2000
REFLECTED A MINOR DECREASE IN THE SPENDING OF INDIVIDUALS. IN JUNE, THE CONSUMER
PRICE INDEX (CPI), THE LEADING INFLATION INDICATOR, ROSE HIGHER THAN
EXPECTED--0.6 PERCENT MORE THAN THE PREVIOUS MONTH. THAT HEIGHTENED CONCERNS
ABOUT INFLATION, AND THE PROSPECT OF ADDITIONAL FEDERAL RESERVE BOARD
INTEREST-RATE INCREASES.
THE U.S. LABOR MARKET WAS STILL ROBUST DURING THIS TIME, AND JOB INSECURITY
CONTINUED TO DECLINE. SOLID EMPLOYMENT GROWTH WAS ACCOMPANIED BY UNUSUALLY LARGE
GAINS IN PRODUCTIVITY, WHICH LIMITED THE RISE IN UNIT LABOR COSTS ACROSS THE
WHOLE ECONOMY. GIVEN THE HIGH EMPLOYMENT NUMBERS AND STRONG LEVELS OF
PRODUCTIVITY, ANALYSTS BELIEVE AN INCREASE IN INTEREST RATES TO WARD OFF
INFLATION AND FURTHER SLOW THE ECONOMY IS POSSIBLE.
INTEREST RATES AND INFLATION
DURING THE PAST FEW MONTHS, PERSISTENT STRENGTH IN CONSUMER SPENDING ACCOMPANIED
BY A VERY TIGHT LABOR MARKET, RESULTED IN SOME INFLATION. THE CPI REACHED A
LEVEL OF 2.7 PERCENT IN JANUARY 2000 AND 3.7 PERCENT IN JUNE 2000, CLEARLY
DEMONSTRATING SIGNS OF INFLATION.
SINCE JUNE 1999, THE FEDERAL RESERVE HAS INCREASED THE FEDERAL FUNDS RATE SIX
TIMES BY A TOTAL OF 175 BASIS POINTS TO LOWER ECONOMIC GROWTH AND DECREASE ANY
FUTURE FEARS OF INFLATION. THESE INCREASES IN INTEREST RATES HELPED SLOW THE
INTEREST-SENSITIVE AUTO AND HOUSING MARKETS.
MANY OBSERVERS BELIEVE INTEREST RATES COULD BE LIFTED FURTHER IN COMING MONTHS.
WHILE MARKETS HAVE EXPERIENCED MUCH SHORT-TERM VOLATILITY, THE MARKET'S OUTLOOK
COULD IMPROVE ONCE INTEREST-RATE HIKES CEASE.
2
<PAGE> 4
U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(June 30, 1998 - June 30, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Jun 98 2.10
Sep 98 3.80
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.20
</TABLE>
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(June 30, 1998 - June 30, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 98 5.50 1.70
5.50 1.70
5.50 1.60
Sep 98 5.25 1.50
5.00 1.50
4.75 1.50
Dec 98 4.75 1.60
4.75 1.70
4.75 1.60
Mar 99 4.75 1.70
4.75 2.30
4.75 2.10
Jun 99 5.00 2.00
5.00 2.10
5.25 2.30
Sep 99 5.25 2.60
5.25 2.60
5.50 2.60
Dec 99 5.50 2.70
5.50 2.70
5.75 3.20
Mar 00 6.00 3.70
6.00 3.00
6.50 3.10
Jun 00 6.50 3.70
</TABLE>
Interest rates are represented by the closing midline federal funds target 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.
3
<PAGE> 5
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of June 30, 2000)
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six-month total return based on
NAV(1) 14.13% 13.75% 13.66%
-------------------------------------------------------------------------
Six-month total return(2) 8.72% 9.75% 12.66%
-------------------------------------------------------------------------
One-year total return(2) -2.62% -2.54% 0.43%
-------------------------------------------------------------------------
Five-year average annual total
return(2) 11.45% 11.49% 11.67%
-------------------------------------------------------------------------
Life-of-Fund average annual total
return(2)* 9.90% 9.95% 9.97%
-------------------------------------------------------------------------
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 Class A Shares) or
contingent deferred sales charge ("CDSC"). On purchases of Class A Shares of
$1 million or more, a CDSC of 1% may be imposed on certain redemptions made
within one year of purchase. Returns for Class B Shares are calculated
without the effect of the maximum 4% CDSC, charged on certain redemptions
made within one year of purchase and declining to 0% after the fifth year.
Returns for Class C Shares are calculated without the effect of the maximum
1% CDSC, charged on certain redemptions made within one year of purchase. If
the sales charges were included, total returns would be lower.
(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (4.75% for Class A
Shares) or contingent deferred sales charge ("CDSC"). On purchases of Class
A Shares of $1 million or more, a CDSC of 1% may be impose on certain
redemptions made within one year of purchase. Returns for Class B Shares are
calculated with the effect of the maximum 4% CDSC, charged on certain
redemptions made within one year of purchase and declining to 0% after the
fifth year. Returns for Class C Shares are calculated with the effect of the
maximum 1% CDSC, charged on certain redemptions made within one year of
purchase.
(*) Total return is calculated from June 30, 1994 (the date the Fund's
investment strategy was implemented) through the end of the period.
An investment in the Fund is subject to investment risks, and you could lose
money on your investment in the Fund. Please review the Risk/Return Summary
of the Prospectus for further details on investment risks. Fund shares, when
redeemed, may be worth more or less than their original cost. Past
performance is no guarantee of future results. Investment return and net
asset value will fluctuate with market conditions.
Foreign securities may magnify volatility due to changes in foreign exchange
rates, the political and economic uncertainties in foreign countries, and
the potential lack of liquidity, government supervision, and regulation.
4
<PAGE> 6
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.
5
<PAGE> 7
PORTFOLIO AT A GLANCE
TOP TEN HOLDINGS
(as a percentage of long-term investments--June 30, 2000)
<TABLE>
<S> <C> <C>
1. ESSEX PROPERTY TRUST 5.7%
Acquires multifamily properties on
the West Coast.
2. EQUITY OFFICE PROPERTIES 5.5%
Owns office buildings and parking
facilities in the United States.
3. ARDEN REALTY 5.4%
Owns, leases, and renovates
commercial properties in Southern
California.
4. STARWOOD HOTELS & RESORTS 5.4%
Owns hotels and time-share resorts
worldwide.
5. AVALONBAY COMMUNITIES 5.3%
Develops and manages apartment
communities in the United States.
6. CHATEAU COMMUNITIES 4.9%
Operates manufactured-home
communities in the United States.
7. PUBLIC STORAGE 4.6%
Develops and operates self-storage
facilities and commercial properties.
8. TAUBMAN CENTERS 4.4%
Owns, operates, and develops regional
shopping centers in the United
States.
9. BROOKFIELD PROPERTIES 4.4%
Manages North American office
properties and develops residential
communities.
10. BOSTON PROPERTIES 4.3%
Owns commercial and industrial
properties in the United States.
</TABLE>
TOP FIVE SECTORS*
(as a percentage of long-term investments)
[BAR GRAPH]
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
Office/Industrial 35.30 35.20
Apartments 22.30 23.00
Shopping Malls 10.60 8.90
Shopping Centers 6.70 8.70
Hotel & Lodging 6.60 5.30
</TABLE>
* These sectors represent broad groupings of related industries.
6
<PAGE> 8
Q&A WITH YOUR PORTFOLIO MANAGERS
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
AND INFLUENCED THE FUND'S RETURN DURING THE SIX MONTHS ENDED JUNE 30, 2000. THE
TEAM IS LED BY THEODORE R. BIGMAN AND DOUGLAS A. FUNKE, WHO HAVE MANAGED THE
FUND SINCE 1995 AND 1999, AND HAVE WORKED IN THE INVESTMENT INDUSTRY SINCE 1983
AND 1993, RESPECTIVELY. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE
FUND'S PERFORMANCE.
Q HOW WOULD YOU DESCRIBE THE
MARKET ENVIRONMENT IN WHICH THE FUND OPERATED, AND HOW DID THE FUND PERFORM
IN THAT ENVIRONMENT?
A During the reporting period, the
REIT (real estate investment trust) market not only outperformed the Standard &
Poor's 500 Index, but also experienced far less volatility. In fact, major stock
market indicators such as the S&P 500 Index, the Dow Jones Industrial Average,
and the technology-heavy NASDAQ all posted negative returns, while the NAREIT
(National Association of Real Estate Investment Trusts) Equity REIT Index was up
for the first half of 2000.
In our view, REITs performed as they should have. Although real estate stock
prices are influenced by the broader stock market's movements, we believe their
performance depends primarily on the real estate market, which has helped them
achieve attractive performance with less volatility than the overall market.
As a result of the robust economy, many real estate markets experienced
increases in occupancy rates and strong rental growth, particularly in areas
with significant exposure to technology-oriented businesses and central business
locations. Furthermore, investors who were uncomfortable with the stock market's
sharp movements in the first half of the year began turning to less volatile
alternatives, such as REITs, for diversification.
The growth in real estate markets and attention from investors helped the
fund achieve a total return of 14.13 percent for the six-month period ended June
30, 2000 (Class A shares at net asset value; if the maximum sales charge of 4.75
percent were included, the return would have been lower). As a result of recent
market activity, current performance may vary from the figures shown. By
comparison, the NAREIT Equity REIT Index returned 13.18 percent, and the S&P 500
Index declined 0.43 percent for the same period. Of course, past performance is
no guarantee of future results. The NAREIT
7
<PAGE> 9
Equity REIT Index is an unmanaged index that reflects the general performance of
a broad range of equity REITs of all property types. The S&P 500 Index is a
broad-based, unmanaged index that measures the performance of 500 stocks from 83
industrial groups and reflects the general performance of the stock market.
These indexes are statistical composites that do not include any commissions or
sales charges that would be paid by an investor purchasing the securities they
represent. Such costs would lower the performance of the indexes. It is not
possible to invest directly in an index. Please refer to the chart and footnotes
on page 4 for additional fund performance results.
Q IN THIS ENVIRONMENT, WHAT WAS
YOUR STRATEGY FOR MANAGING THE FUND?
A We continued to shape the fund's
portfolio with companies that have solid business fundamentals and are available
at attractive prices. Overall, the fund's sector weightings did not change much
from quarter to quarter. We added to companies focused on offices in central
business districts, as recent increases in rent helped this sector's overall
performance. Despite its weak performance, we liked the manufactured home sector
because of its predictable growth, limited degree of new supply, and the modest
levels of capital expenditure it requires. We were cautious about the retail
sector because rising interest rates and a subsequent decline in consumer
confidence led us to believe that consumers' shopping appetites might be
slowing.
Q WHAT SECTORS OF THE REAL
ESTATE MARKET PERFORMED WELL, AND WHAT SECTORS WERE DISAPPOINTMENTS?
A Lodging stocks have been the best
performers, as the solid economy has provided strong demand for hotels and
resorts. As a result, we added to the fund's weighting in these stocks during
the reporting period. Another good performer was the office and industrial
sector, which benefited from a burst in demand and a rise in rents in the
markets where technology plays a major role in the local economies. The
apartment sector, which is the fund's second largest sector allocation,
performed modestly well on a year-to-date basis.
On the other hand, neither the manufactured home sector nor the retail
sector performed well, although performance in the regional mall sub-sector
improved when investors realized that Internet commerce did not pose a serious
and immediate competitive threat to traditional "bricks and mortar" stores.
Finally, the self-storage sector was the worst performer. Because this is a
small sector, negative events at individual companies had a pronounced effect on
the sector's overall performance.
Keep in mind that not all sectors in the portfolio performed favorably, and
there is no guarantee that any of these sectors will perform well or will
continue to be a part of the fund's portfolio in the future. For additional fund
portfolio highlights, please refer to page 6.
8
<PAGE> 10
Q WHAT IS YOUR OUTLOOK FOR THE
REAL ESTATE MARKET?
A The outlook for the REIT market
continues to be favorable. We will focus on two key factors: the health of the
physical property markets and the pricing for the securities. The private real
estate markets have remained attractive, based on the robust U.S. economy and a
reasonable level of new supply. We are encouraged that the flow of development
either peaked in 1999 or is in the process of peaking in 2000 for the vast
majority of property types. Clearly, the strength of the economy has provided
demand for development. However, given the declining levels of construction, we
believe the U.S. real estate market is prepared for the eventual slowdown in the
economy. Given the current volatility in the equity markets, we believe that
REITs may be well poised to continue to receive a high level of attention from
traditional equity investors.
9
<PAGE> 11
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
CLASS A SHARES: A division of mutual funds, which are generally divided into
three groupings, called Class A, Class B, and Class C shares. The specific
features of each are dependent on varying fees and sales charges. In most cases,
Class A shares will have no redemption fee (contingent deferred sales charge).
DIVERSIFICATION: A method of portfolio allocation and management aimed at
balancing risk and return; a balanced portfolio may combine stocks, bonds,
packaged products, and cash equivalents.
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.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
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.
STANDARD & POOR'S 500 INDEX: A broad-based measurement of changes in
stock-market conditions based on the average performance of 500 widely held
common stocks from 83 industrial groups. The index, which tracks industrial,
transportation, financial, and utility stocks, to name a few, provides a guide
to the overall health of the U.S. stock market.
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
10
<PAGE> 12
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON AND PREFERRED STOCKS 94.7%
APARTMENTS 21.1%
Amli Residential Properties Trust........................... 71,900 $ 1,694,144
Archstone Communities Trust................................. 106,690 2,247,158
Avalonbay Communities, Inc. ................................ 161,300 6,734,275
Equity Residential Properties Trust......................... 111,969 5,150,574
Essex Property Trust, Inc. ................................. 172,700 7,253,400
Pennsylvania REIT........................................... 96,800 1,657,700
Smith (Charles E.) Residential Realty, Inc. ................ 88,100 3,347,800
Summit Properties, Inc. .................................... 4,300 90,300
------------
28,175,351
------------
DEVELOPMENT 5.9%
Atlantic Gulf Communities Corp. (a)......................... 224,804 19,108
Atlantic Gulf Communities Corp.--Preferred Ser B (a)........ 30,570 164,314
Atlantic Gulf Communities Corp.--Preferred Ser B, 144A--
Private Placement (a) (b)................................. 43,609 256,203
Atlantic Gulf Communities Corp. Warrants, 20,380 shares of
each Class A, B, and C, expiring 06/23/04 (a)............. 61,140 3,668
Atlantic Gulf Communities Corp. Warrants, 39,121 shares of
each Class A, B, and C, expiring 06/24/04, 144A--Private
Placement (a) (b)......................................... 117,363 7,042
Brookfield Properties Corp. ................................ 415,553 5,532,049
Brookfield Properties Corp.--Canada......................... 72,836 967,051
Trizec Hahn Corp. .......................................... 52,600 940,225
------------
7,889,660
------------
HEALTHCARE FACILITIES 0.1%
Meditrust Cos. (a).......................................... 14,100 52,875
------------
HOTEL & LODGING 6.3%
Candlewood Hotel Company, Inc. (a).......................... 65,200 154,850
Hammons (John Q.) Hotels Inc., Class A (a).................. 12,100 60,500
Hilton Hotels Corp. ........................................ 37,300 350,892
Interstate Hotels Corp. (a)................................. 13,259 38,949
Starwood Hotels & Resorts, Class B.......................... 209,328 6,816,243
Wyndham International, Inc., Class A (a).................... 377,698 944,245
------------
8,365,679
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
YOUR FUND'S INVESTMENTS
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
MANUFACTURED HOME COMMUNITIES 5.4%
Chateau Communities, Inc. .................................. 219,342 $ 6,196,411
Manufactured Home Communities, Inc. ........................ 40,200 962,288
------------
7,158,699
------------
OFFICE/INDUSTRIAL 33.4%
Arden Realty, Inc. ......................................... 291,900 6,859,650
Beacon Capital Partners, Co Space........................... 39,951 59,774
Beacon Capital Partners, Cypress Communications, Inc. ...... 31,728 133,957
Beacon Capital Partners, Inc. .............................. 177,900 2,124,553
Beacon Capital Partners, Wyndham International, Inc. ....... 8,301 755,512
Boston Properties, Inc. .................................... 141,300 5,457,712
Brandywine Realty Trust..................................... 24,166 462,175
Cabot Industrial Trust...................................... 8,300 163,406
CarrAmerica Realty Corp. ................................... 178,400 4,727,600
Equity Office Properties Trust.............................. 252,316 6,954,460
Great Lakes REIT, Inc. ..................................... 259,909 4,418,453
Pacific Gulf Properties, Inc. .............................. 163,500 4,097,719
Prentiss Properties Trust................................... 17,300 415,200
Prime Group Realty Trust.................................... 227,300 3,452,119
ProLogis Trust.............................................. 115,760 2,467,135
Wellsford Real Properties, Inc. (a)......................... 133,550 2,019,944
------------
44,569,369
------------
SELF-STORAGE 6.2%
PS Business Parks, Inc. .................................... 103,041 2,472,984
Public Storage, Inc. ....................................... 249,274 5,842,359
------------
8,315,343
------------
SHOPPING CENTERS 6.3%
Acadia Realty Trust......................................... 32,200 183,138
Burnham Pacific Properties, Inc. ........................... 492,381 3,385,119
Federal Realty Investment Trust............................. 143,000 2,860,000
JDN Realty Corp. ........................................... 54,700 557,256
Pan Pacific Retail Properties, Inc. ........................ 55,700 1,120,962
Ramco-Gershenson Properties Trust........................... 1,000 15,438
Vornado Realty Trust........................................ 8,800 305,800
------------
8,427,713
------------
SHOPPING MALLS 10.0%
Rouse Co. .................................................. 95,800 2,371,050
Simon Property Group, Inc. ................................. 243,900 5,411,531
Taubman Centers, Inc. ...................................... 506,045 5,566,495
------------
13,349,076
------------
TOTAL COMMON AND PREFERRED STOCKS 94.7%
(Cost $126,413,316)................................................. 126,303,765
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
YOUR FUND'S INVESTMENTS
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION VALUE
<S> <C>
SHORT-TERM INVESTMENTS 6.7%
REPURCHASE AGREEMENT 6.1%
BA Securities ($8,150,000 par, collateralized by U.S.
Government obligations in a pooled cash account, dated
06/30/00, to be sold on 07/03/00 at $8,154,652)........... $ 8,150,000
U.S. GOVERNMENT AGENCY OBLIGATION 0.6%
Federal Home Loan Bank Discount Note ($795,000 par, yielding
4.38%, maturing 07/03/00)................................. 794,710
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $8,944,710)......................................... 8,944,710
------------
TOTAL INVESTMENTS 101.4%
(Cost $135,358,026)....................................... 135,248,475
LIABILITIES IN EXCESS OF OTHER ASSETS (1.4%)............... (1,846,583)
------------
NET ASSETS 100.0%.......................................... $133,401,892
============
</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, as amended. These securities may be resold
only in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
REIT--Real Estate Investment Trust
See Notes to Financial Statements
13
<PAGE> 15
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $135,358,026)....................... $135,248,475
Receivables:
Dividends................................................. 1,247,879
Fund Shares Sold.......................................... 927,650
Investments Sold.......................................... 269,680
Interest.................................................. 21,482
Other....................................................... 5,317
------------
Total Assets............................................ 137,720,483
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 3,229,662
Fund Shares Repurchased................................... 314,013
Custodian Bank............................................ 257,053
Distributor and Affiliates................................ 212,162
Investment Advisory Fee................................... 83,239
Income Distributions...................................... 10,806
Accrued Expenses............................................ 126,026
Trustees' Deferred Compensation and Retirement Plans........ 85,630
------------
Total Liabilities....................................... 4,318,591
------------
NET ASSETS.................................................. $133,401,892
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $141,494,617
Accumulated Undistributed Net Investment Income............. 2,222,267
Net Unrealized Depreciation................................. (109,782)
Accumulated Net Realized Loss............................... (10,205,210)
------------
NET ASSETS.................................................. $133,401,892
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $57,781,975 and 4,752,593 shares of
beneficial interest issued and outstanding)............. $ 12.16
Maximum sales charge (4.75%* of offering price)......... .61
------------
Maximum offering price to public........................ $ 12.77
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $53,766,611 and 4,418,704 shares of
beneficial interest issued and outstanding)............. $ 12.17
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $21,853,306 and 1,796,928 shares of
beneficial interest issued and outstanding)............. $ 12.16
============
</TABLE>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
14
<PAGE> 16
Statement of Operations
For the Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $8,879)...... $ 3,638,402
Interest (Net of foreign withholding taxes of $4,474)....... 88,515
------------
Total Income............................................ 3,726,917
------------
EXPENSES:
Investment Advisory Fee..................................... 596,702
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $62,366, $256,397 and $90,853,
respectively)............................................. 409,616
Shareholder Services........................................ 208,080
Trustees' Fees and Related Expenses......................... 26,238
Legal....................................................... 8,548
Custody..................................................... 6,098
Other....................................................... 115,604
------------
Total Expenses.......................................... 1,370,886
Investment Advisory Fee Reduction....................... 185,453
Less Credits earned on Cash Balances.................... 94
------------
Net Expenses............................................ 1,185,339
------------
NET INVESTMENT INCOME....................................... $ 2,541,578
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $(2,641,570)
Foreign Currency Transactions............................. 1,605
------------
Net Realized Loss........................................... (2,639,965)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (15,376,563)
------------
End of the Period:
Investments............................................. (109,551)
Foreign Currency Translation............................ (231)
------------
(109,782)
------------
Net Unrealized Appreciation During the Period............... 15,266,781
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 12,626,816
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 15,168,394
============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
Statement of Changes in Net Assets
For the Six Months Ended June 30, 2000 and the Year Ended December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................. $ 2,541,578 $ 4,039,742
Net Realized Loss................................. (2,639,965) (1,804,103)
Net Unrealized Appreciation/Depreciation During
the Period...................................... 15,266,781 (10,108,436)
------------ ------------
Change in Net Assets from Operations.............. 15,168,394 (7,872,797)
------------ ------------
Distributions from Net Investment Income:
Class A Shares.................................. (836,393) (1,871,853)
Class B Shares.................................. (630,944) (1,627,111)
Class C Shares.................................. (236,238) (461,820)
------------ ------------
Total Distributions......................... (1,703,575) (3,960,784)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES...................................... 13,464,819 (11,833,581)
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold......................... 32,096,366 74,064,030
Net Asset Value of Shares Issued Through Dividend
Reinvestment.................................... 1,405,469 3,338,587
Cost of Shares Repurchased........................ (37,079,118) (65,184,209)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.................................... (3,577,283) 12,218,408
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 9,887,536 384,827
NET ASSETS:
Beginning of the Period........................... 123,514,356 123,129,529
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of
$2,222,267 and $1,384,264, respectively)........ $133,401,892 $123,514,356
============ ============
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
CLASS A SHARES JUNE 30, -------------------------------------
2000(A) 1999(A) 1998 1997 1996
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE
PERIOD........................... $10.838 $11.578 $13.810 $13.008 $ 10.00
------- ------- ------- ------- -------
Net Investment Income............ .261 .404 .509 .364 .351
Net Realized and Unrealized
Gain/Loss...................... 1.249 (.764) (2.139) 2.220 3.514
------- ------- ------- ------- -------
Total from Investment Operations... 1.510 (.360) (1.630) 2.584 3.865
------- ------- ------- ------- -------
Less:
Distributions from and in Excess
of Net Investment Income....... .190 .380 .380 .380 .380
Distributions from Net Realized
Gain........................... -0- -0- .222 1.402 .477
------- ------- ------- ------- -------
Total Distributions................ .190 .380 .602 1.782 .857
------- ------- ------- ------- -------
NET ASSET VALUE, END OF THE
PERIOD........................... $12.158 $10.838 $11.578 $13.810 $13.008
======= ======= ======= ======= =======
Total Return (b)................... 14.13%* -3.15% -11.99% 20.66% 39.82%
Net Assets at End of the Period (In
millions)........................ $ 57.8 $ 52.8 $ 41.7 $ 51.3 $ 23.3
Ratio of Expenses to Average Net
Assets**......................... 1.55% 1.68% 1.76% 1.77% 2.60%
Ratio of Net Investment Income to
Average Net Assets**............. 4.70% 3.53% 3.98% 2.77% 3.21%
Portfolio Turnover................. 21%* 46% 113% 159% 97%
* 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........................... 1.86% 1.94% N/A N/A 2.61%
Ratio of Net Investment Income to
Average Net Assets............... 4.39% 3.26% N/A N/A 3.19%
</TABLE>
N/A--Not Applicable
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or contingent deferred
sales charge ("CDSC"). On purchases of $1 million or more, a CDSC of 1% may
be imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower.
See Notes to Financial Statements
17
<PAGE> 19
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
CLASS B SHARES JUNE 30, -------------------------------------
2000(A) 1999(A) 1998 1997 1996
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE
PERIOD........................... $10.844 $11.574 $13.800 $13.008 $ 10.00
------- ------- ------- ------- -------
Net Investment Income............ .224 .289 .409 .272 .266
Net Realized and Unrealized
Gain/Loss...................... 1.242 (.735) (2.129) 2.206 3.519
------- ------- ------- ------- -------
Total from Investment Operations... 1.466 (.446) (1.720) 2.478 3.785
------- ------- ------- ------- -------
Less:
Distributions from and in Excess
of Net Investment Income....... .142 .284 .284 .284 .300
Distributions from Net Realized
Gain........................... -0- -0- .222 1.402 .477
------- ------- ------- ------- -------
Total Distributions................ .142 .284 .506 1.686 .777
------- ------- ------- ------- -------
NET ASSET VALUE, END OF THE
PERIOD........................... $12.168 $10.844 $11.574 $13.800 $13.008
======= ======= ======= ======= =======
Total Return (b)................... 13.75%* -3.98% -12.62% 19.76% 38.82%
Net Assets at End of the Period (In
millions)........................ $ 53.8 $ 53.8 $ 64.4 $ 73.2 $ 26.5
Ratio of Expenses to Average Net
Assets**......................... 2.30% 2.46% 2.53% 2.52% 3.37%
Ratio of Net Investment Income to
Average Net Assets**............. 3.94% 2.52% 3.26% 2.03% 2.39%
Portfolio Turnover................. 21%* 46% 113% 159% 97%
* 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........................... 2.61% 2.72% N/A N/A 3.39%
Ratio of Net Investment Income to
Average Net Assets............... 3.63% 2.26% N/A N/A 2.37%
</TABLE>
N/A--Not Applicable
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge of 4%,
charged on certain redemptions made within one year of purchase and
declining thereafter to 0% after the fifth year. If the sales charge was
included, total returns would be lower.
See Notes to Financial Statements
18
<PAGE> 20
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
CLASS C SHARES JUNE 30, -------------------------------------
2000(A) 1999(A) 1998(A) 1997 1996
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE
PERIOD........................... $10.839 $11.568 $13.790 $12.999 $ 9.99
------- ------- ------- ------- -------
Net Investment Income............ .224 .296 .409 .271 .266
Net Realized and Unrealized
Gain/Loss...................... 1.240 (.741) (2.125) 2.206 3.520
------- ------- ------- ------- -------
Total from Investment Operations... 1.464 (.445) (1.716) 2.477 3.786
------- ------- ------- ------- -------
Less:
Distributions from and in Excess
of Net Investment Income....... .142 .284 .284 .284 .300
Distributions from Net Realized
Gain........................... -0- -0- .222 1.402 .477
------- ------- ------- ------- -------
Total Distribution................. .142 .284 .506 1.686 .777
------- ------- ------- ------- -------
NET ASSET VALUE, END OF THE
PERIOD........................... $12.161 $10.839 $11.568 $13.790 $12.999
======= ======= ======= ======= =======
Total Return (b)................... 13.66%* -3.89% -12.63% 19.78% 38.86%
Net Assets at End of the Period (In
millions)........................ $ 21.9 $ 16.9 $ 17.1 $ 17.4 $ 7.7
Ratio of Expenses to Average Net
Assets**......................... 2.30% 2.46% 2.54% 2.52% 3.38%
Ratio of Net Investment Income to
Average Net Assets**............. 3.95% 2.60% 3.31% 2.00% 2.39%
Portfolio Turnover................. 21%* 46% 113% 159% 97%
* 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........................... 2.61% 2.72% N/A N/A 3.40%
Ratio of Net Investment Income to
Average Net Assets............... 3.64% 2.33% N/A N/A 2.38%
</TABLE>
N/A--Not Applicable
(a) Based on average shares outstanding
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge of 1%,
charge on certain redemptions made within one year of purchase. If the sales
charge was included, total returns would be lower.
See Notes to Financial Statements
19
<PAGE> 21
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (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.
Current income is a secondary investment objective. The Fund's investment
adviser seeks to achieve its objective 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, which approximates market value.
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
20
<PAGE> 22
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (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. 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, 1999, the Fund had an accumulated capital loss carryforward for
tax purposes of $4,646,722 which will expire between December 31, 2006 and
December 31, 2007. 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.
At June 30, 2000, for federal income tax purposes the cost of long- and
short-term investments is $136,013,810, the aggregate gross unrealized
appreciation is $10,663,604 and the aggregate gross unrealized depreciation is
$11,428,939, resulting in net unrealized depreciation on long- and short-term
investments of $765,335.
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains. All short-term capital gains are included
in ordinary income for tax purposes.
The Fund may distribute 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, 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.
F. EXPENSE REDUCTIONS During the six months ended June 30, 2000, the Fund's
custody fee was reduced by $94 as a result of credits earned on overnight cash
balances.
21
<PAGE> 23
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
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, payable
monthly, as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $500 million.......................................... 1.00 of 1%
Next $500 million........................................... .95 of 1%
Over $1 billion............................................. .90 of 1%
</TABLE>
The Adviser has 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, 2000, the Adviser voluntarily waived
$185,453 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, 2000, the Fund recognized expenses of
approximately $8,500 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, 2000, the Fund recognized expenses of
approximately $9,300 representing Van Kampen's cost of providing accounting
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,
2000, the Fund recognized expenses of approximately $144,700. 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 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.
22
<PAGE> 24
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
At June 30, 2000, Van Kampen owned 10,605 Class A Shares, 53 Class B and 8
Class C Shares.
3. CAPITAL TRANSACTIONS
At June 30, 2000, capital aggregated $60,310,212, $58,848,893 and
$22,335,512 for Classes A, B, and C, respectively. For the six months ended June
30, 2000, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A................................................. 1,699,371 $ 19,458,713
Class B................................................. 504,052 5,747,788
Class C................................................. 600,906 6,889,865
---------- ------------
Total Sales............................................... 2,804,329 $ 32,096,366
========== ============
Dividend Reinvestment:
Class A................................................. 62,529 $ 720,522
Class B................................................. 43,842 504,549
Class C................................................. 15,627 180,398
---------- ------------
Total Dividend Reinvestment............................... 121,998 $ 1,405,469
========== ============
Repurchases:
Class A................................................. (1,878,888) $(20,706,774)
Class B................................................. (1,088,106) (12,078,265)
Class C................................................. (384,074) (4,294,079)
---------- ------------
Total Repurchases......................................... (3,351,068) $(37,079,118)
========== ============
</TABLE>
23
<PAGE> 25
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
At December 31, 1999, capital aggregated $60,837,751, $64,674,821, and
$19,559,328 for Classes A, B, and C, respectively. For the year ended December
31, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A................................................. 3,355,606 $ 39,893,618
Class B................................................. 2,049,755 24,581,688
Class C................................................. 822,432 9,588,724
---------- ------------
Total Sales............................................... 6,227,793 $ 74,064,030
========== ============
Dividend Reinvestment:
Class A................................................. 149,818 $ 1,662,007
Class B................................................. 116,359 1,296,199
Class C................................................. 34,174 380,381
---------- ------------
Total Dividend Reinvestment............................... 300,351 $ 3,338,587
========== ============
Repurchases:
Class A................................................. (2,237,017) $(25,293,783)
Class B................................................. (2,768,841) (31,322,022)
Class C................................................. (766,987) (8,568,404)
---------- ------------
Total Repurchases......................................... (5,772,845) $(65,184,209)
========== ============
</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 purchased
on or after June 1, 1996, and any dividend reinvestment plan Class B Shares
received thereon, automatically convert to Class A Shares eight years after the
end of the calendar month in which the shares were purchased. Class B Shares
purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares
received thereon, automatically convert to Class A Shares six years after the
end of the calendar month in which the shares were purchased. For the six months
ended June 30, 2000 and the year ended December 31, 1999, 31,663 and 72,061
Class B Shares converted to Class A Shares, respectively, and are shown in the
above tables as sales of Class A Shares and repurchases of Class B Shares. Class
C Shares purchased before January 1, 1997, and any dividend reinvestment plan
Class C Shares received thereon, automatically convert to Class A Shares ten
years after the end of the calendar month in which such shares were purchased.
Class C Shares purchased on or after January 1, 1997 do not possess a conversion
feature. For the six months ended June 30, 2000 and the year ended December 31,
1999, no Class C Shares converted to Class A Shares. The CDSC for Class B and C
Shares will be imposed on most redemptions made within five years of
24
<PAGE> 26
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
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 AS A
PERCENTAGE OF DOLLAR
AMOUNT SUBJECT TO CHANGE
--------------------------
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>
For the six months ended June 30, 2000, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A Shares of
approximately $11,500 and CDSC on the redeemed shares of approximately $126,000.
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 $24,415,521 and $30,208,030,
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, as amended, 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, 2000, are payments retained by Van Kampen of
approximately $226,700.
6. BORROWINGS
In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, entered in to a $650 million committed line of credit facility
with a group of banks which expires on November 28, 2000, but is renewable with
the consent of the participating banks. Each fund is permitted to utilize the
facility in
25
<PAGE> 27
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
accordance with the restrictions of its prospectus. In the event the demand for
the credit facility meets or exceeds $650 million on a complex-wide basis, each
fund will be limited to its pro-rata percentage based on the net assets of each
participating fund. Interest on borrowings is charged under the agreement at a
rate of 0.50% above the federal funds rate per annum. An annual commitment fee
of 0.09% per annum is charged on the unused portion of the credit facility,
which each fund incurs based on its pro-rata percentage of quarterly net assets.
The Fund has not borrowed against the credit facility during the period.
26
<PAGE> 28
VAN KAMPEN FUNDS
THE VAN KAMPEN
FAMILY OF FUNDS
Growth
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Mid Cap Growth
Pace
Select Growth
Small Cap Value
Tax Managed Equity Growth
Technology
Growth and Income
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
International Magnum
Latin American
Strategic Income
Tax Managed Global Franchise
Worldwide High Income
Income
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return*
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
Tax Free
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
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 ongoing 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 [COMPUTER ICON]
- 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.
[PHONE ICON]
- e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
[MAIL ICON]
* Closed to new investors
** Open to new investors for a limited time
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<PAGE> 29
FUND OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN REAL ESTATE SECURITIES FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH, III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer
and Chief Financial Officer
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
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 AUDITORS
ERNST & YOUNG LLP(1)
233 South Wacker Drive
Chicago, Illinois 60606
(1) Independent auditors for the Fund perform an annual audit of the Fund's
financial statements. The Board of Trustees has engaged Ernst & Young LLP
to be the Fund's independent auditors. PricewaterhouseCoopers LLP ceased
being the Fund's independent auditors effective May 18, 2000. The cessation
of the client-auditor relationship between the Fund and
PricewaterhouseCoopers was based solely on a possible future business
relationship by PricewaterhouseCoopers with an affiliate of the Fund's
investment adviser.
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
(C) Van Kampen Funds Inc., 2000. 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, the sales charges on
shares of the Fund, and other pertinent
data. After October 31, 2000, the report, if used with prospective investors,
must be accompanied by a quarterly performance update.
28
