<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.............. 14
Statement of Operations.......................... 15
Statement of Changes in Net Assets............... 16
Financial Highlights............................. 17
Notes to Financial Statements.................... 20
</TABLE>
GI SAR 7/99
<PAGE> 2
LETTER TO SHAREHOLDERS
June 16, 1999
Dear Shareholder,
With the volatility that we've experienced in many financial markets in
recent months, 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 latest 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 economy continued to grow at a record pace. The nation's gross domestic
product, a measure of economic health, rose at an astounding 6.0 percent
annualized rate in the fourth quarter of 1998, and remained strong at 4.5
percent through the first quarter of 1999. Growth was fueled by an increase in
consumer spending even as retail prices inched upward. Consumer spending rose at
a 6.7 percent annualized rate in the first quarter of 1999--an 11-year record.
This willingness to spend was attributed to higher consumer confidence as a
result of the positive employment environment. Although U.S. exports declined,
the high level of spending on domestic goods and services compensated for this
weak spot.
Inflation remained low throughout most of the reporting period, although a
sharp increase in oil prices contributed to a recent boost in the consumer price
index, pointing to the potential for higher inflation in the months ahead. This
rise in inflation led the Federal Reserve to express a bias toward raising
interest rates in the near term, although it did not make any rate changes over
the past six months. Despite a lack of action by the Fed, long-term interest
rates continued to climb during this period due to market conditions.
Our outlook for the economy suggests that a moderate slowdown may be on the
horizon. Healthy job growth, which has been supporting the strong 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. Also, with the Asian economic crisis currently under
control and financial improvements in other parts of the world, we believe the
U.S. economy will remain strong even if growth slows somewhat in the near term.
INTEREST RATES AND INFLATION
May 31, 1997, through May 31, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
May 1997 5.625 2.20
6.50 2.30
6.00 2.20
Aug 1997 5.50 2.20
6.25 2.20
5.75 2.10
Nov 1997 5.6875 1.80
6.50 1.70
5.5625 1.60
Feb 1998 5.625 1.40
6.125 1.40
5.625 1.40
May 1998 5.6875 1.70
6.00 1.70
5.5625 1.70
Aug 1998 5.9375 1.60
5.75 1.50
5.25 1.50
Nov 1998 4.875 1.50
4.00 1.60
4.8125 1.70
Feb 1999 4.875 1.60
5.125 1.70
4.9375 2.30
May 1999 4.50 2.10
</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 MAY 31, 1999
VAN KAMPEN GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV(1)... 9.29% 8.87% 8.87%
Six-month total return(2)................ 3.02% 3.87% 7.87%
One-year total return(2)................. 4.05% 4.56% 8.56%
Five-year average annual total
return(2).............................. 18.51% 18.84% 18.99%
Ten-year average annual total
return(2).............................. 13.93% N/A N/A
Life-of-Fund average annual total
return(2).............................. 10.19% 17.18% 17.19%
Commencement date........................ 08/01/46 08/02/93 08/02/93
</TABLE>
N/A = Not Applicable
(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for A shares) or contingent
deferred sales charge for early withdrawal (5% for B shares and 1% for C
shares).
(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).
See the 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.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
GROWTH AND INCOME FUND SEMIANNUAL REPORT
We recently spoke with the management team of the Van Kampen Growth and Income
Fund about the key events and economic forces that shaped the markets during the
six-month period ended May 31, 1999. The team is led by James A. Gilligan,
portfolio manager, who has managed the Fund since January 1990 and worked in the
investment industry since 1985. He is joined by Scott Carroll and James Roeder,
portfolio comanagers, and Stephen L. Boyd, chief investment officer for equity
investments. The following excerpts reflect their views on the Fund's
performance during this time.
Q HOW WOULD YOU DESCRIBE THE MARKET ENVIRONMENT IN WHICH THE FUND OPERATED
DURING THIS SIX-MONTH PERIOD?
A It's been an explosive market. As global growth strengthened toward the
end of 1998, investors gained confidence in the domestic economy. Fueled
by new money, the stock market soared to record highs, breaking through
the 10,000 point ceiling and pushing past 11,000. However, investors found cause
for concern when interest rates began to creep higher in the second quarter of
1999. These fears were only heightened when the Fed announced its bias toward
tightening short-term interest rates. As a result, the last few weeks of the
reporting period were marked by heightened market volatility.
For much of the period, the booming stock market created a very challenging
environment for a value-oriented portfolio such as this one. As stock prices
rose, it was often difficult to find pockets of value in any particular sector.
In April, however, value stocks returned to favor as investors began to consider
equity opportunities beyond the market's blue-chip growth offerings. Although
traditional cyclical industries such as oil demonstrated the potential for value
during this time, no single group stood out as a consistently attractive value
area.
Q BASED ON THIS ASSESSMENT, HOW AND WHERE DID YOU FIND INVESTMENTS?
A In our search for good value investments, we focus on companies that we
believe are underappreciated by the market but demonstrate a catalyst for
positive change. We might examine a troubled company that's recently come
under new management, or study a sector that has fallen out of favor but
exhibits solid fundamentals for recovery.
For example, in your last report, we described the troubles that had
befallen many financial companies because of economic turmoil overseas. As many
of the global economies began to recover, we revisited the financial sector
during the past six months and selected several large financial companies that
we believed were in good positions to take advantage of this recovery. As a
result, we added or reinforced holdings in Equitable Companies, Citigroup, and
Chase Manhattan. Once these companies began to post solid earnings gains, we
considered their future potential for growth and, in some cases, chose to reduce
our positions. At the same time, we added two new financial companies to the
4
<PAGE> 6
portfolio--Lincoln National and Marsh & McLennan--both of which have reasonable
valuations and have announced new chief executive officers.
Q IN WHAT OTHER AREAS DID YOU SEARCH FOR VALUE?
A We also looked for turnaround stories in the technology sector, which
demonstrated the capacity for a strong rebound during the period. We were
especially interested in some of the technology areas that weren't part of
last year's market surge. For example, our position in Adobe was one of the best
performers during the period. We also invested successfully in Motorola and
QualComm during the period, although we eliminated the latter when we believed
the stock had reached its price target. Computer hardware giant IBM continues to
be one of the portfolio's largest positions, although our holding in this
company fluctuated based on some variable quarterly earnings reports. In the
consumer nondurables sector, we focused our attention on a relatively new area
to the portfolio: beverage companies. These included Anheuser-Busch, Pepsi
Bottling Group, Inc., and Whitman, a bottling company. Although we occasionally
moderated our positions in these holdings during the period, we were attracted
to the high volume and attractive pricing of this industry. Although we might
say the same for Philip Morris, which used to be one of our largest holdings, we
reduced that position dramatically during the period. With continuing clouds of
litigation hanging over the company, we were unable to identify a catalyst for
improvement in the stock's price.
Q WERE THERE ANY OTHER DISAPPOINTMENTS IN THE PORTFOLIO?
A One of our largest sector exposures, health care--in particular,
pharmaceutical companies--fell out of favor with investors during this
six-month period. Investors might have been concerned about the negative
repercussions of a proposed prescription drug benefit for Medicare recipients,
which could put pricing pressure on these companies. However, we focused on
establishing holdings in companies that we believe are best positioned to take
advantage of a recovery in this sector. We also continued to study health-care
service companies, such as nursing home HCR Manor Care. We expect to add to this
area as we find additional value opportunities. For additional Fund portfolio
highlights, please refer to page 8.
Q TAKING EVERYTHING INTO CONSIDERATION, HOW DID THE FUND PERFORM DURING THE
REPORTING PERIOD?
A Although some of our holdings in the health-care sector hurt the Fund's
return, we also enjoyed some impressive gains in the financial and
technology sectors. As a result, the Fund achieved a total return of 9.29
percent(1) (Class A shares at net asset value) for the six-month period ended
May 31, 1999. By comparison, the Standard & Poor's 500 Index returned 12.59
percent, and the Lipper Growth and Income Fund Index produced a total return of
10.80 percent for the same period.
5
<PAGE> 7
The S&P 500 Index is a broad-based index that reflects the general
performance of the stock market, and the Lipper Growth and Income Fund Index
reflects the average performance of the largest growth and income funds. Keep in
mind that these indices are statistical composites that do not reflect any
commissions or sales charges that would be paid by an investor purchasing the
securities or investments 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 DO YOU SEE HAPPENING IN THE MARKET OVER THE COMING MONTHS?
A The market seems to be reacting to the possibility that the Fed will raise
rates sooner rather than later, and we expect a tightening of short-term
interest rates by mid-summer. (Editor's note: After the reporting period
ended, the Fed raised interest rates by 0.25 percent on June 30.) Investors
understand the need for a stable economy and realize that if the Fed doesn't
take appropriate action to ward off inflation, the stock market's rise could be
tempered. Until the situation becomes clear, we would expect an increase in
market volatility, if only because the Dow's current level is so high. We hope
that volatility will initiate a return to a broader market, in which our
bottom-up analysis and disciplined value criteria will help us uncover fresh
investment opportunities.
[SIG.]
James A. Gilligan
Portfolio Manager
[SIG.]
James Roeder
Portfolio Comanager
[SIG.]
Scott Carroll
Portfolio Comanager
[SIG.]
Stephen L. Boyd
Chief Investment Officer
Equity Investments
6
<PAGE> 8
GLOSSARY OF TERMS
BOTTOM-UP INVESTING: A management style that emphasizes the analysis of
individual stocks, rather than economic and market cycles.
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.
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.
EARNINGS ESTIMATES: A forecast for a company's net income during a given period.
Earnings estimates can come from the company's management as well as from
independent analysts.
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.
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.
VALUATION: The estimated or determined worth of a stock, based on financial
measures such as the stock's current price relative to earnings, revenue,
book value, and cash flow.
VALUE INVESTING: A strategy that seeks to identify stocks that are sound
investments but are temporarily out of favor in the marketplace. As a
result, the stocks trade at prices below the value that value investors
believe they are actually worth.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN GROWTH AND INCOME FUND
TOP TEN PORTFOLIO HOLDINGS AS OF MAY 31, 1999*
<TABLE>
<S> <C>
ADOBE SYSTEMS--develops, markets, and supports computer
software products and technologies.......................... 2.39%
INTERNATIONAL BUSINESS MACHINE (IBM)--develops,
manufactures, and sells advanced technology processing
products, including computers, software, networking systems,
and related services........................................ 2.32%
INGERSOLL-RAND--is a multinational manufacturer of
nonelectrical industrial machinery and equipment, such as
air compressors, architectural hardware products,
construction equipment, automotive parts, and temperature
control systems............................................. 2.24%
AMERICAN HOME PRODUCTS--is engaged in the discovery,
development, manufacture, distribution, and sale of a
diversified line of products for health care and
agriculture................................................. 2.07%
EQUITABLE COMPANIES--is a financial services company
operating in the insurance, investment management, and
investment banking industries............................... 2.07%
AMERICAN GENERAL--is a consumer financial services
organization providing retirement services, life insurance,
and consumer loans.......................................... 1.97%
MOBIL--primarily operates a worldwide oil and gas
exploration/production business, a global marketing and
refining complex, and a network of pipelines and tankers.... 1.91%
UNITED HEALTHCARE--provides comprehensive managed care
services and unbundled health-care management products and
services.................................................... 1.78%
XEROX--engages in the worldwide development, marketing,
manufacturing, financing, and servicing of document
processing products and services............................ 1.75%
SPRINT--is a global communications company whose operations
include long distance, local telephone, product
distribution, and directory publishing...................... 1.65%
</TABLE>
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
MAY 31, 1999 NOVEMBER 30, 1998
------------ -----------------
<S> <C> <C>
Finance 17.1 15.2
Health Care 16.5 17.4
Technology 16.1 15.0
Utilities 14.9 12.8
Consumer Non-Durables 10.5 10.7
</TABLE>
* As a Percentage of Fund's Long-Term Investments
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 88.3%
CONSUMER DURABLES 0.5%
Black & Decker Corp. ............................. 140,700 $ 8,011,106
--------------
CONSUMER NON-DURABLES 9.6%
Anheuser-Busch Cos., Inc. ........................ 227,580 16,627,564
Benckiser NV, Class B - ADR (Netherlands)......... 145,500 7,875,187
Colgate - Palmolive Co. .......................... 206,010 20,575,249
Hershey Foods Corp. .............................. 239,600 12,998,300
Pepsi Bottling Group, Inc. ....................... 411,200 9,534,700
PepsiCo, Inc. .................................... 274,900 9,844,856
Philip Morris Cos., Inc. ......................... 459,500 17,719,469
Ralston Purina Group.............................. 690,500 18,816,125
Seagram Co. Ltd. - ADR (Canada)................... 182,400 9,473,400
Unilever NV - ADR (Netherlands)................... 148,304 9,686,040
Whitman Corp. .................................... 584,000 9,928,000
--------------
143,078,890
--------------
CONSUMER SERVICES 1.4%
H & R Block, Inc. ................................ 328,900 15,848,869
International Game Technology..................... 255,800 4,508,475
--------------
20,357,344
--------------
ENERGY 7.1%
Apache Corp. ..................................... 70,000 2,520,000
Coastal Corp. .................................... 432,200 16,666,713
El Paso Energy Corp. ............................. 578,200 20,851,337
Mobil Corp. ...................................... 256,100 25,930,125
Texaco, Inc. ..................................... 285,500 18,700,250
YPF Sociedad Anonima, Class D - ADR (Argentina)... 498,200 20,986,675
--------------
105,655,100
--------------
FINANCE 15.3%
Aetna, Inc. ...................................... 166,670 15,135,719
American General Corp. ........................... 369,500 26,696,375
Arden Realty, Inc. (REIT)......................... 399,500 10,212,219
Bank of Tokyo Mitsubishi, Ltd. - ADR (Japan)...... 1,162,300 15,691,050
Chase Manhattan Corp. ............................ 278,000 20,155,000
Citigroup, Inc. .................................. 273,410 18,113,412
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
CMAC Investment Corp. ............................ 24,200 $ 1,223,613
Equitable Cos., Inc. ............................. 400,000 28,075,000
Fleet Financial Group, Inc. ...................... 389,600 16,022,300
Lincoln National Corp. ........................... 108,900 11,080,575
Marsh & McLennan Cos., Inc. ...................... 194,600 14,157,150
Merrill Lynch & Co., Inc. ........................ 108,400 9,105,600
PNC Bank Corp. ................................... 328,500 18,806,625
Washington Mutual, Inc. .......................... 358,450 13,688,309
XL Capital Ltd., Class A - ADR (Bermuda).......... 165,500 10,064,469
--------------
228,227,416
--------------
HEALTHCARE 14.2%
Alza Corp. (a).................................... 303,100 10,816,881
American Home Products Corp. ..................... 488,500 28,149,812
Beckman Coulter, Inc. ............................ 235,520 11,952,640
Bristol-Myers Squibb Co. ......................... 98,500 6,759,563
Columbia / HCA Healthcare Corp. .................. 445,110 10,487,904
HCR Manor Care, Inc. (a).......................... 249,400 6,671,450
IMS Health, Inc. ................................. 506,800 12,479,950
LifePoint Hospitals, Inc. ........................ 23,427 234,260
Merck & Co., Inc. ................................ 235,500 15,896,250
Mylan Labs., Inc. ................................ 675,400 17,138,275
Oxford Health Plans, Inc. (a)..................... 821,600 15,661,750
Pharmacia & Upjohn, Inc. ......................... 324,120 17,968,403
Rhodia, SA - ADR (France) (a)..................... 86,000 1,462,000
Rhone-Poulenc, SA - ADR (France), Warrants
(expiring 11/05/01) (a)......................... 239,000 717,000
Teva Pharmaceutical Industries Ltd. - ADR
(Israel)........................................ 283,600 13,931,850
Triad Hospitals, Inc. (a)......................... 23,427 237,188
United HealthCare Corp. .......................... 415,300 24,191,225
Warner-Lambert Co. ............................... 279,000 17,298,000
--------------
212,054,401
--------------
PRODUCER MANUFACTURING 6.0%
AlliedSignal, Inc. ............................... 166,600 9,673,213
Ingersoll-Rand Co. ............................... 478,300 30,461,731
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING (CONTINUED)
Koninkijke Philips Electronics NV - ADR
(Netherlands)................................... 207,100 $ 17,810,600
Minnesota Mining & Manufacturing Co. ............. 193,100 16,558,325
Tyco International Ltd. .......................... 27 2,359
Waste Management, Inc. ........................... 301,000 15,915,375
--------------
90,421,603
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 4.8%
Boise Cascade Corp. .............................. 323,900 12,834,538
Crown Cork & Seal Co., Inc. ...................... 269,000 8,439,875
Imperial Chemical Industries PLC - ADR (United
Kingdom)........................................ 275,600 12,109,175
Monsanto Co. ..................................... 69,040 2,865,160
Raychem Corp. .................................... 364,000 12,649,000
Sherwin-Williams Co. ............................. 475,200 14,642,100
Union Carbide Corp. .............................. 170,500 8,748,781
--------------
72,288,629
--------------
RETAIL 2.1%
Federated Department Stores, Inc. (a)............. 309,400 16,862,300
Gap, Inc. ........................................ 221,900 13,882,619
--------------
30,744,919
--------------
TECHNOLOGY 13.8%
Adobe Systems, Inc. .............................. 437,400 32,422,275
Alcatel, SA - ADR (France)........................ 173,400 4,107,412
Boeing Co. ....................................... 371,300 15,687,425
Electronic Data Systems Corp. .................... 338,900 19,063,125
First Data Corp. ................................. 129,700 5,828,394
International Business Machines Corp. ............ 270,200 31,427,637
Motorola, Inc. ................................... 269,000 22,276,562
Nippon Telegraph & Telephone Corp - ADR (Japan)
(a)............................................. 285,100 13,898,625
Oracle Corp. (a).................................. 129,000 3,200,813
SunGard Data Systems, Inc. (a).................... 96,000 3,360,000
Texas Instruments, Inc. .......................... 177,000 19,359,375
Xerox Corp. ...................................... 422,500 23,739,219
Xilinx, Inc. (a).................................. 280,000 12,442,500
--------------
206,813,362
--------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES 13.5%
BEC Energy........................................ 430,200 $ 18,928,800
Consolidated Edison, Inc. ........................ 382,900 18,594,581
DQE, Inc. ........................................ 312,200 13,346,550
Edison International.............................. 414,800 11,407,000
GPU, Inc. ........................................ 227,800 9,923,537
GTE Corp. ........................................ 248,300 15,658,419
Illinova Corp. ................................... 243,600 6,622,875
NCR Corp. (a)..................................... 498,000 19,453,125
Niagara Mohawk Holdings, Inc. (a)................. 1,394,500 20,743,187
Northeast Utilities (a)........................... 1,221,500 21,528,937
PECO Energy Co. .................................. 168,200 8,231,288
SBC Communications, Inc. ......................... 168,700 8,624,788
Sprint Corp. (PCS Group).......................... 198,100 22,335,775
US WEST Media Group............................... 128,400 6,941,625
--------------
202,340,487
--------------
TOTAL COMMON STOCKS 88.3%....................................... 1,319,993,257
--------------
PREFERRED STOCK 0.4%
Fresenius National Med Care, Inc. (convertible
into common stock) (a).......................... 10,000 180
Microsoft Corp., $2.196 dividend per share
(convertible into common stock)................. 58,000 5,771,000
--------------
TOTAL PREFERRED STOCK............................................ 5,771,180
--------------
CORPORATE OBLIGATIONS 2.1%
Deutsche Finance - 144A Private Placement (Netherlands)
($18,000,000 par, 0% coupon, 02/12/17 maturity) (c)............ 9,765,000
Hewlett-Packard Co. LYON - 144A Private Placement ($8,375,000
par, 0% coupon, 10/14/17 maturity) (c)......................... 5,370,469
Merrill Lynch STRYPES ($66,100 par, 6.00% coupon, 06/01/99
maturity)...................................................... 4,470,845
Roche Holdings, Inc. LYON (Switzerland) ($17,000,000 par, 0%
coupon, 04/20/10 maturity)..................................... 9,902,500
Sandoz Ltd. (Switzerland) ($1,310,000 par, 2.00% coupon, 10/06/02
maturity)...................................................... 1,860,200
--------------
TOTAL CORPORATE OBLIGATIONS...................................... 31,369,014
--------------
TOTAL LONG-TERM INVESTMENTS 90.8%
(Cost $1,051,595,451).......................................... 1,357,133,451
--------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS 7.8%
COMMERCIAL PAPER 5.3%
Prudential Funding Corp. ($50,000,000 par, yielding 4.853%,
06/01/99 maturity)............................................... $49,973,056
General Electric Capital Corp. ($30,000,000 par, yielding 4.923%,
06/01/99 maturity) (b)........................................... 29,983,600
--------------
TOTAL COMMERCIAL PAPER........................................... 79,956,656
--------------
REPURCHASE AGREEMENT 1.8%
BankAmerica Securities ($26,789,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 05/28/99,
to be sold on 06/01/99 at $26,803,436)........................... 26,789,000
U.S. GOVERNMENT AGENCY OBLIGATIONS 0.7%
Federal National Mortgage Association Discount Notes ($10,000,000
par, yielding 4.850%, 08/06/99 maturity) (b)..................... 9,905,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $116,657,656)............................................ 116,650,656
--------------
TOTAL INVESTMENTS 98.6%
(Cost $1,168,253,107).......................................... 1,473,784,107
OTHER ASSETS IN EXCESS OF LIABILITIES 1.4%...................... 21,014,429
--------------
NET ASSETS 100.0%............................................... $1,494,798,536
==============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) Assets segregated for open futures transactions.
(c) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may be resold only in
transactions exempt from registration which are normally those transactions
with qualified institutional buyers.
ADR--American Depository Receipt.
LYON--Liquid Yield Option Note.
REIT--Real Estate Investment Trust.
STRYPES--Structured Yield Product Exchangeable For Common Stock.
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $1,168,253,107)..................... $1,473,784,107
Cash........................................................ 36,569
Receivables:
Fund Shares Sold.......................................... 21,816,758
Investments Sold.......................................... 3,288,467
Dividends................................................. 3,076,241
Variation Margin on Futures............................... 299,600
Other....................................................... 50,579
--------------
Total Assets.......................................... 1,502,352,321
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 2,804,730
Fund Shares Repurchased................................... 2,617,071
Distributor and Affiliates................................ 930,665
Investment Advisory Fee................................... 476,124
Income Distributions...................................... 63,493
Accrued Expenses............................................ 444,165
Trustees Deferred Compensation and Retirement Plans......... 217,537
--------------
Total Liabilities..................................... 7,553,785
--------------
NET ASSETS.................................................. $1,494,798,536
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,112,025,171
Net Unrealized Appreciation................................. 305,004,629
Accumulated Net Realized Gain............................... 74,679,586
Accumulated Undistributed Net Investment Income............. 3,089,150
--------------
NET ASSETS.................................................. $1,494,798,536
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $980,723,136 and 50,679,629 shares of
beneficial interest issued and outstanding)............. $ 19.35
Maximum sales charge (5.75%* of offering price)......... 1.18
--------------
Maximum offering price to public........................ $ 20.53
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $463,106,943 and 24,094,596 shares of
beneficial interest issued and outstanding)............. $ 19.22
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $50,968,457 and 2,650,329 shares of
beneficial interest issued and outstanding)............. $ 19.23
==============
*On sales of $50,000 or more, the sales charge will be
reduced.
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................... $ 11,290,295
Interest.................................................... 3,416,625
------------
Total Income............................................ 14,706,920
------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $1,115,806, $2,247,431 and $238,111,
respectively)............................................. 3,601,348
Investment Advisory Fee..................................... 2,676,286
Shareholder Services........................................ 1,473,104
Custody..................................................... 90,730
Trustees' Fees and Related Expenses......................... 37,432
Legal....................................................... 25,844
Other....................................................... 355,960
------------
Total Expenses............................................ 8,260,704
Less Credits Earned on Overnight Cash Balances............ 16,610
------------
Net Expenses.............................................. 8,244,094
------------
NET INVESTMENT INCOME....................................... $ 6,462,826
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................. $ 70,654,586
Futures................................................. 14,366,958
------------
Net Realized Gain........................................... 85,021,544
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 271,665,940
------------
End of the Period:
Investments............................................. 305,531,000
Futures................................................. (526,371)
------------
305,004,629
------------
Net Unrealized Appreciation During the Period............... 33,338,689
------------
NET REALIZED AND UNREALIZED GAIN............................ $118,360,233
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $124,823,059
============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended May 31, 1999
and the Year Ended November 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 1999 November 30, 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income......................... $ 6,462,826 $ 11,415,122
Net Realized Gain............................. 85,021,544 72,622,898
Net Unrealized Appreciation During the
Period...................................... 33,338,689 101,531,711
-------------- --------------
Change in Net Assets from Operations.......... 124,823,059 185,569,731
-------------- --------------
Distributions from Net Investment Income:
Class A Shares.............................. (3,623,794) (10,777,270)
Class B Shares.............................. (322,165) (2,403,630)
Class C Shares.............................. (34,842) (246,229)
-------------- --------------
(3,980,801) (13,427,129)
-------------- --------------
Distributions from Net Realized Gain:
Class A Shares.............................. (52,929,557) (92,498,080)
Class B Shares.............................. (26,140,329) (41,387,552)
Class C Shares.............................. (2,709,491) (4,313,012)
-------------- --------------
(81,779,377) (138,198,644)
-------------- --------------
Total Distributions....................... (85,760,178) (151,625,773)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.................................. 39,062,881 33,943,958
-------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold..................... 1,014,330,895 608,114,596
Net Asset Value of Shares Issued Through
Dividend Reinvestment....................... 78,975,228 139,051,242
Cost of Shares Repurchased.................... (1,026,846,480) (541,465,227)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................ 66,459,643 205,700,611
-------------- --------------
TOTAL INCREASE IN NET ASSETS.................. 105,522,524 239,644,569
NET ASSETS:
Beginning of the Period....................... 1,389,276,012 1,149,631,443
-------------- --------------
End of the Period (Including accumulated
undistributed net investment income of
$3,089,150 and $607,125, respectively)...... $1,494,798,536 $1,389,276,012
============== ==============
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended November 30,
Ended ----------------------------------------
Class A Shares May 31, 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........ $18.882 $18.716 $16.786 $ 14.81 $ 12.26
------- ------- ------- ------- -------
Net Investment Income......................... .107 .200 .226 .243 .28
Net Realized and Unrealized Gain/Loss......... 1.545 2.441 3.032 2.851 3.455
------- ------- ------- ------- -------
Total from Investment Operations................ 1.652 2.641 3.258 3.094 3.735
------- ------- ------- ------- -------
Less:
Distributions from Net Investment Income...... .073 .230 .230 .250 .2925
Distributions from Net Realized Gain.......... 1.110 2.245 1.098 .868 .8925
------- ------- ------- ------- -------
Total Distributions............................. 1.183 2.475 1.328 1.118 1.185
------- ------- ------- ------- -------
Net Asset Value, End of the Period.............. $19.351 $18.882 $18.716 $16.786 $ 14.81
======= ======= ======= ======= =======
Total Return (a)................................ 9.29%* 16.21% 21.27% 22.35% 33.34%
Net Assets at End of the Period (In millions)... $ 980.7 $ 901.3 $ 773.3 $ 584.6 $ 381.6
Ratio of Expenses to Average Net Assets (b)..... .89% .92% .94% 1.04% 1.15%
Ratio of Net Investment Income to Average Net
Assets (b).................................... 1.18% 1.13% 1.33% 1.68% 2.24%
Portfolio Turnover.............................. 42%* 76% 94% 110% 108%
</TABLE>
* Non-Annualized
(a) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended November 30, 1995 through 1997, the impact on the Ratios
of Expenses and Net Investment Income to Average Net Assets due to Van
Kampen's reimbursement of certain expenses was less than 0.01%.
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>
Six Months Year Ended November 30,
Ended ----------------------------------------
Class B Shares May 31, 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........ $18.772 $18.630 $16.721 $ 14.77 $ 12.25
------- ------- ------- ------- -------
Net Investment Income......................... .039 .071 .097 .142 .17
Net Realized and Unrealized Gain/Loss......... 1.532 2.426 3.020 2.827 3.455
------- ------- ------- ------- -------
Total from Investment Operations................ 1.571 2.497 3.117 2.969 3.625
------- ------- ------- ------- -------
Less:
Distributions from Net Investment Income...... .013 .110 .110 .150 .2125
Distributions from Net Realized Gain.......... 1.110 2.245 1.098 .868 .8925
------- ------- ------- ------- -------
Total Distributions............................. 1.123 2.355 1.208 1.018 1.105
------- ------- ------- ------- -------
Net Asset Value, End of Period.................. $19.220 $18.772 $18.630 $16.721 $ 14.77
======= ======= ======= ======= =======
Total Return (a)................................ 8.87%* 15.38% 20.37% 21.38% 32.15%
Net Assets at End of the Period (In millions)... $ 463.1 $ 442.4 $ 340.8 $ 210.3 $ 98.4
Ratio of Expenses to Average Net Assets (b)..... 1.66% 1.69% 1.72% 1.83% 1.99%
Ratio of Net Investment Income to Average Net
Assets (b).................................... .41% .36% .55% .89% 1.25%
Portfolio Turnover.............................. 42%* 76% 94% 110% 108%
</TABLE>
* Non-Annualized
(a) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended November 30, 1995 through 1997, the impact on the Ratios
of Expenses and Net Investment Income to Average Net Assets due to Van
Kampen's reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
18
<PAGE> 20
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended November 30,
Ended ----------------------------------------
Class C Shares May 31, 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........ $18.779 $18.643 $16.734 $ 14.78 $ 12.26
------- ------- ------- ------- -------
Net Investment Income......................... .040 .072 .096 .139 .18
Net Realized and Unrealized Gain/Loss......... 1.535 2.419 3.021 2.833 3.445
------- ------- ------- ------- -------
Total from Investment Operations................ 1.575 2.491 3.117 2.972 3.625
------- ------- ------- ------- -------
Less:
Distributions from Net Investment Income...... .013 .110 .110 .150 .2125
Distributions from Net Realized Gain.......... 1.110 2.245 1.098 .868 .8925
------- ------- ------- ------- -------
Total Distributions............................. 1.123 2.355 1.208 1.018 1.105
------- ------- ------- ------- -------
Net Asset Value, End of the Period.............. $19.231 $18.779 $18.643 $16.734 $ 14.78
======= ======= ======= ======= =======
Total Return (a)................................ 8.87%* 15.37% 20.28% 21.43% 32.23%
Net Assets at End of the Period (In millions)... $ 51.0 $ 45.6 $ 35.5 $ 22.1 $ 10.4
Ratio of Expenses to Average Net Assets (b)..... 1.66% 1.69% 1.72% 1.83% 1.97%
Ratio of Net Investment Income to Average Net
Assets (b).................................... .41% .36% .55% .89% 1.35%
Portfolio Turnover.............................. 42%* 76% 94% 110% 108%
</TABLE>
* Non-Annualized
(a) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended November 30, 1995 through 1997, the impact on the Ratios
of Expenses and Net Investment Income to Average Net Assets due to Van
Kampen's reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Growth and Income 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 investment objective is to provide income and long-term growth of capital
by investing principally in income-producing equity securities including common
stock and convertible securities. The Fund commenced investment operations on
August 1, 1946. The distribution of the Fund's Class B and Class C shares
commenced on August 2, 1993.
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.
Fixed income investments are stated at value using market quotations or
indications of value obtained from an independent pricing service. Unlisted
securities and listed securities for which the last sales price is not available
are valued at the mean of 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 purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At May 31, 1999, there were no when
issued or delayed delivery purchase commitments.
The Fund may invest in repurchase agreements, which are short-term
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
repurchase the security at a future time and specified price. The Fund may
invest independently in repurchase agreements, or transfer uninvested cash
balances into a pooled cash account along with other investment companies
advised by Van Kampen Asset Management Inc. (the "Adviser") or its affiliates,
the daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are fully collateralized by the underlying debt security. The Fund
will make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is required
to maintain the value of the underlying security at not less than the repurchase
proceeds due the Fund.
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Original issue discounts on
debt securities purchased are amortized over the expected life of each
applicable security. Premiums on debt securities are not amortized. 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.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of gains or losses recognized for tax purposes on
open futures at November 30, 1998, and the deferral of losses for tax purposes
relating to wash sale transactions.
At May 31, 1999, for federal income tax purposes the cost of long- and
short-term investments is $1,169,607,330; the aggregate gross unrealized
appreciation is $327,368,364 and the aggregate gross unrealized depreciation is
$23,191,587, resulting in net unrealized appreciation on long- and short-term
investments of $304,176,777.
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 and gains on option and futures
transactions. All short-term capital gains and a portion of option and futures
gains are included in ordinary income for tax purposes.
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
F. EXPENSE REDUCTIONS--During the six months ended May 31, 1999, the Fund's
custody fee was reduced by $16,610 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 facilities and investment advice to the Fund for an annual fee
payable monthly
as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- --------------------------------------------------------------------
<S> <C>
First $150 million..................................... .50 of 1%
Next $100 million...................................... .45 of 1%
Next $100 million...................................... .40 of 1%
Over $350 million...................................... .35 of 1%
</TABLE>
For the six months ended May 31, 1999, the Fund recognized expenses of
approximately $25,800 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 May 31, 1999, the Fund recognized expenses of
approximately $143,400 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") 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 May 31,
1999, the Fund recognized expenses of approximately $1,185,500. 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 (CONTINUED)
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended May 31, 1999, the Fund paid brokerage commissions
to Morgan Stanley Dean Witter & Co., an affiliate of Van Kampen, totaling
$3,246.
3. CAPITAL TRANSACTIONS
At May 31, 1999, capital aggregated $698,072,744, $372,803,989 and $41,148,438
for Classes A, B, and C, respectively. For the six months ended May 31, 1999,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................ 49,917,380 $ 923,444,709
Class B................................ 2,913,186 53,283,750
Class C................................ 2,051,254 37,602,436
----------- ---------------
Total Sales.............................. 54,881,820 $ 1,014,330,895
=========== ===============
Dividend Reinvestment:
Class A................................ 2,924,893 $ 52,262,129
Class B................................ 1,371,602 24,366,741
Class C................................ 132,001 2,346,358
----------- ---------------
Total Dividend Reinvestment.............. 4,428,496 $ 78,975,228
=========== ===============
Repurchases:
Class A................................ (49,894,958) $ (922,274,815)
Class B................................ (3,754,455) (68,603,872)
Class C................................ (1,963,602) (35,967,793)
----------- ---------------
Total Repurchases........................ (55,613,015) $(1,026,846,480)
=========== ===============
</TABLE>
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At November 30, 1998, capital aggregated $644,640,721, $363,757,370 and
$37,167,437 for Classes A, B, and C, respectively. For the year ended November
30, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................. 24,895,780 $ 446,127,507
Class B................................. 7,916,780 142,709,294
Class C................................. 1,081,258 19,277,795
------------ -------------
Total Sales............................... 33,893,818 $ 608,114,596
============ =============
Dividend Reinvestment:
Class A................................. 5,811,162 $ 95,421,131
Class B................................. 2,446,668 39,889,597
Class C................................. 229,289 3,740,514
------------ -------------
Total Dividend Reinvestment............... 8,487,119 $ 139,051,242
============ =============
Repurchases:
Class A................................. (24,293,403) $(436,053,298)
Class B................................. (5,090,880) (91,529,090)
Class C................................. (785,695) (13,882,839)
------------ -------------
Total Repurchases......................... (30,169,978) $(541,465,227)
============ =============
</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.......................................... 5.00% 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 May 31, 1999, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
$203,500 and CDSC on the redeemed shares of Classes B and C of approximately
$531,200. 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 $546,558,230 and $566,386,240,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
exercising a call option contract or taking delivery of a security underlying a
futures contract. In these instances the recognition of gain or loss is
postponed until the disposal of the security underlying the option or futures
contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in stock index futures. These contracts are generally used as
a substitute for purchasing and selling specific securities. Upon entering into
futures contracts, the Fund maintains, in a segregated account with its
custodian, cash or liquid securities with a value equal to its obligation under
the futures contracts. During the period the futures contract is open, payments
are received from or made to the broker based upon changes in the value of the
contract (the variation margin). The risk of loss associated with a futures
contract is in excess of the variation margin reflected on the Statement of
Assets and Liabilities.
Transactions in futures contracts for the six months ended May 31, 1999,
were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ---------------------------------------------------------------------
<S> <C>
Outstanding at November 30, 1998.......................... 260
Futures Opened............................................ 350
Futures Closed............................................ (503)
-----
Outstanding at May 31, 1999............................... 107
=====
</TABLE>
25
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
The futures contracts outstanding as of May 31, 1999, and the description
and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION/DEPRECIATION
- ----------------------------------------------------------------------------
<S> <C> <C>
Long Contracts:
S&P 500 Index Futures Jun 1999
(Current Notional Value of
$324,300 per contract)........... 107 $(526,371)
=== =========
</TABLE>
6. 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 May 31, 1999, are payments retained by Van Kampen of
approximately $1,911,000.
26
<PAGE> 28
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
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
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
27
<PAGE> 29
VAN KAMPEN GROWTH AND INCOME 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
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 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
200 E. 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, the sales charge, and
other pertinent data. After December 31, 1999, the report, if used with
prospective investors, must be accompanied by a quarterly performance update, if
applicable.
28
<PAGE> 30
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.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> GROWTH AND INCOME - C1A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 1,168,253,107<F1>
<INVESTMENTS-AT-VALUE> 1,473,784,107<F1>
<RECEIVABLES> 28,481,066<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 87,148<F1>
<TOTAL-ASSETS> 1,502,352,321<F1>
<PAYABLE-FOR-SECURITIES> 2,804,730<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 4,749,055<F1>
<TOTAL-LIABILITIES> 7,553,785<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 698,072,744
<SHARES-COMMON-STOCK> 50,679,629
<SHARES-COMMON-PRIOR> 47,732,314
<ACCUMULATED-NII-CURRENT> 3,089,150<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 74,679,586<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 305,004,629<F1>
<NET-ASSETS> 980,723,136
<DIVIDEND-INCOME> 11,290,295<F1>
<INTEREST-INCOME> 3,416,625<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (8,244,094)<F1>
<NET-INVESTMENT-INCOME> 6,462,826<F1>
<REALIZED-GAINS-CURRENT> 85,021,544<F1>
<APPREC-INCREASE-CURRENT> 33,338,689<F1>
<NET-CHANGE-FROM-OPS> 124,823,059<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (3,623,794)
<DISTRIBUTIONS-OF-GAINS> (52,929,557)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 49,917,380
<NUMBER-OF-SHARES-REDEEMED> (49,894,958)
<SHARES-REINVESTED> 2,924,893
<NET-CHANGE-IN-ASSETS> 79,448,748
<ACCUMULATED-NII-PRIOR> 607,125<F1>
<ACCUMULATED-GAINS-PRIOR> 71,437,419<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,676,286<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 8,260,704<F1>
<AVERAGE-NET-ASSETS> 929,222,583
<PER-SHARE-NAV-BEGIN> 18.882
<PER-SHARE-NII> 0.107
<PER-SHARE-GAIN-APPREC> 1.545
<PER-SHARE-DIVIDEND> (0.073)
<PER-SHARE-DISTRIBUTIONS> (1.110)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 19.351
<EXPENSE-RATIO> 0.89
<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> GROWTH AND INCOME - C1B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 1,168,253,107<F1>
<INVESTMENTS-AT-VALUE> 1,473,784,107<F1>
<RECEIVABLES> 28,481,066<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 87,148<F1>
<TOTAL-ASSETS> 1,502,352,321<F1>
<PAYABLE-FOR-SECURITIES> 2,804,730<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 4,749,055<F1>
<TOTAL-LIABILITIES> 7,553,785<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 372,803,989
<SHARES-COMMON-STOCK> 24,094,596
<SHARES-COMMON-PRIOR> 23,564,263
<ACCUMULATED-NII-CURRENT> 3,089,150<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 74,679,586<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 305,004,629<F1>
<NET-ASSETS> 463,106,943
<DIVIDEND-INCOME> 11,290,295<F1>
<INTEREST-INCOME> 3,416,625<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (8,244,094)<F1>
<NET-INVESTMENT-INCOME> 6,462,826<F1>
<REALIZED-GAINS-CURRENT> 85,021,544<F1>
<APPREC-INCREASE-CURRENT> 33,338,689<F1>
<NET-CHANGE-FROM-OPS> 124,823,059<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (322,165)
<DISTRIBUTIONS-OF-GAINS> (26,140,329)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,913,186
<NUMBER-OF-SHARES-REDEEMED> (3,754,455)
<SHARES-REINVESTED> 1,371,602
<NET-CHANGE-IN-ASSETS> 20,751,629
<ACCUMULATED-NII-PRIOR> 607,125<F1>
<ACCUMULATED-GAINS-PRIOR> 71,437,419<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,676,286<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 8,260,704<F1>
<AVERAGE-NET-ASSETS> 451,071,977
<PER-SHARE-NAV-BEGIN> 18.772
<PER-SHARE-NII> 0.039
<PER-SHARE-GAIN-APPREC> 1.532
<PER-SHARE-DIVIDEND> (0.013)
<PER-SHARE-DISTRIBUTIONS> (1.110)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 19.220
<EXPENSE-RATIO> 1.66
<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> GROWTH AND INCOME - C1C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 1,168,253,107<F1>
<INVESTMENTS-AT-VALUE> 1,473,784,107<F1>
<RECEIVABLES> 28,481,066<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 87,148<F1>
<TOTAL-ASSETS> 1,502,352,321<F1>
<PAYABLE-FOR-SECURITIES> 2,804,730<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 4,749,055<F1>
<TOTAL-LIABILITIES> 7,553,785<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41,148,438
<SHARES-COMMON-STOCK> 2,650,329
<SHARES-COMMON-PRIOR> 2,430,676
<ACCUMULATED-NII-CURRENT> 3,089,150<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 74,679,586<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 305,004,629<F1>
<NET-ASSETS> 50,968,457
<DIVIDEND-INCOME> 11,290,295<F1>
<INTEREST-INCOME> 3,416,625<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (8,244,094)<F1>
<NET-INVESTMENT-INCOME> 6,462,826<F1>
<REALIZED-GAINS-CURRENT> 85,021,544<F1>
<APPREC-INCREASE-CURRENT> 33,338,689<F1>
<NET-CHANGE-FROM-OPS> 124,823,059<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (34,842)
<DISTRIBUTIONS-OF-GAINS> (2,709,491)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,051,254
<NUMBER-OF-SHARES-REDEEMED> (1,963,602)
<SHARES-REINVESTED> 132,001
<NET-CHANGE-IN-ASSETS> 5,322,147
<ACCUMULATED-NII-PRIOR> 607,125<F1>
<ACCUMULATED-GAINS-PRIOR> 71,437,419<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,676,286<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 8,260,704<F1>
<AVERAGE-NET-ASSETS> 47,801,587
<PER-SHARE-NAV-BEGIN> 18.779
<PER-SHARE-NII> 0.040
<PER-SHARE-GAIN-APPREC> 1.535
<PER-SHARE-DIVIDEND> (0.013)
<PER-SHARE-DISTRIBUTIONS> (1.110)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 19.231
<EXPENSE-RATIO> 1.66
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
