<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Performance in Perspective....................... 4
Portfolio Management Review...................... 5
Glossary of Terms................................ 9
Portfolio Highlights............................. 10
Portfolio of Investments......................... 11
Statement of Assets and Liabilities.............. 18
Statement of Operations.......................... 19
Statement of Changes in Net Assets............... 20
Financial Highlights............................. 21
Notes to Financial Statements.................... 24
Report of Independent Accountants................ 31
</TABLE>
PACE ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Asset Management Inc.
[SIG]
Dennis J. McDonnell
President
Van Kampen Asset Management Inc.
1
<PAGE> 3
ECONOMIC SNAPSHOT
The strength of the domestic economy continued to defy expectations in the
first half of 1999, although it finally began to show signs of slowing down.
Strong growth, healthy employment, and low inflation all contributed to the
favorable economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3
percent during the first quarter of 1999, but fell to 2.3 percent in the second
quarter. The first-quarter expansion was fueled by an increase in consumer
spending, which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in
more than 30 years. Throughout the reporting period, unemployment remained low,
the number of jobs grew, and wages rose. The labor market remained especially
tight in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report (CPI). Following this up-tick, the Federal Reserve raised interest
rates 0.25 percent on June 30. Although the Fed had expressed a bias toward a
series of rate increases, May's tame CPI report prompted it to drop this bias
when announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may
continue, bringing the economy back to historically normal growth levels.
Healthy job growth, which has been supporting the consumer confidence and
spending levels, showed signs of faltering toward the end of the reporting
period. However, a renewed optimism for corporate earnings, low unemployment,
and a vibrant housing market should provide some balance against a slower job
growth rate.
INTEREST RATES AND INFLATION
June 30, 1997, through June 30, 1999
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 1997 6.5000 2.3000
6.0000 2.2000
5.5000 2.2000
Sep 1997 6.2500 2.2000
5.7500 2.1000
5.6875 1.8000
Dec 1997 6.5000 1.7000
5.5625 1.6000
5.6250 1.4000
Mar 1998 6.1250 1.4000
5.6250 1.4000
5.6875 1.7000
Jun 1998 6.0000 1.7000
5.5625 1.7000
5.9375 1.6000
Sep 1998 5.7500 1.5000
5.2500 1.5000
4.8750 1.5000
Dec 1998 4.0000 1.6000
4.8125 1.7000
4.8750 1.6000
Mar 1999 5.1250 1.7000
4.9375 2.3000
4.5000 2.1000
Jun 1999 4.0000 2.0000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1999
VAN KAMPEN PACE FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
One-year total return based on NAV(1).... 13.65% 12.79% 12.91%
One-year total return(2)................. 7.14% 7.79% 11.91%
Five-year average annual total
return(2).............................. 21.34% 21.70% 21.81%
Ten-year average annual total
return(2).............................. 14.71% N/A N/A
Life-of-Fund average annual total
return(2).............................. 13.52% 15.09% 17.64%
Commencement Date........................ 07/22/69 01/10/92 08/27/93
</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 Comparative Performance section of the current prospectus. An investment
should be made with an understanding of the risks that an investment in equity
securities entails. These include the risk that the financial condition of the
issuers of the securities in the portfolio, or the condition of the stock market
in general, may worsen and therefore, the value of Fund shares may decline. Past
performance does not guarantee future results. Investment return and net asset
value will fluctuate with market conditions. Fund shares, when redeemed, may be
worth more or less than their original cost.
Because the prices of common stocks and other securities fluctuate, the value of
an investment in the Fund will vary upon the Fund's investment performance.
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.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 5
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment performance at regular intervals. A
comparison of your Fund's performance to an applicable benchmark can:
- Illustrate the market environment in which your Fund is being managed.
- Reflect the impact of favorable market trends or difficult market
conditions.
- Help you evaluate how your Fund's management team has responded to
opportunities and challenges.
The following graph compares your Fund's performance to that of the Standard
& Poor's 500 Index and the Lipper Growth Fund Index over time. These indices are
broad-based, statistical composites that does not include any commissions or
sales charges that would be paid by an investor purchasing the securities they
represent.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Pace Fund vs. the Standard & Poor's 500 Index and
the Lipper Growth Fund (June 30, 1989, through June 30, 1999)
[INVESTMENT PERFORMANCE GRAPH]
- ------------------------------
Fund's Total Return
1 Year Total Return = 7.14%
5 Year Avg. Annual = 21.34%
10 Year Avg. Annual = 14.71%
Inception Avg. Annual = 13.52%
- ------------------------------
<TABLE>
<CAPTION>
VAN KAMPEN PACE-A FUND STANDARD & POOR'S 500 INDEX LIPPER GROWTH FUND INDEX
---------------------- --------------------------- ------------------------
<S> <C> <C> <C>
Jun 1989 9426.00 10000.00 10000.00
10204.00 10864.00 10702.00
10430.00 11053.00 10959.00
10326.00 11069.00 10986.00
10030.00 10791.00 10643.00
10219.00 10969.00 10791.00
10399.00 11295.00 10895.00
9703.00 10517.00 10164.00
9846.00 10607.00 10334.00
10062.00 10953.00 10605.00
9812.00 10659.00 10325.00
10784.00 11639.00 11307.00
Jun 1990 10716.00 11639.00 11319.00
10665.00 11578.00 11122.00
9703.00 10486.00 10099.00
9154.00 10047.00 9458.00
8976.00 9980.00 9277.00
9542.00 10578.00 9957.00
9795.00 10943.00 10305.00
10328.00 11397.00 10998.00
11060.00 12164.00 11810.00
11322.00 12527.00 12093.00
11349.00 12531.00 12122.00
11864.00 13014.00 12652.00
Jun 1991 11178.00 12499.00 11908.00
11756.00 13060.00 12644.00
12154.00 13316.00 13007.00
11928.00 13167.00 12910.00
12027.00 13323.00 13123.00
11521.00 12738.00 12571.00
12903.00 14262.00 14049.00
12800.00 13979.00 14027.00
13025.00 14112.00 14277.00
12613.00 13904.00 13827.00
12725.00 14292.00 13807.00
12819.00 14305.00 13955.00
Jun 1992 12360.00 14169.00 13555.00
12781.00 14726.00 14001.00
12463.00 14373.00 13688.00
12585.00 14615.00 13900.00
12753.00 14646.00 14147.00
13296.00 15089.00 14877.00
13469.00 15348.00 15121.00
13645.00 15456.00 15338.00
13634.00 15618.00 15137.00
14030.00 16016.00 15571.00
13687.00 15609.00 15149.00
14151.00 15963.00 15751.00
Jun 1993 14238.00 16092.00 15800.00
14173.00 16006.00 15781.00
14658.00 16557.00 16453.00
14799.00 16506.00 16559.00
14788.00 16826.00 16832.00
14502.00 16609.00 16491.00
14928.00 16880.00 16933.00
15453.00 17436.00 17519.00
15133.00 16913.00 17231.00
14390.00 16253.00 16426.00
14544.00 16440.00 16558.00
14582.00 16644.00 16637.00
Jun 1994 14147.00 16322.00 16067.00
14416.00 16836.00 16522.00
14889.00 17469.00 17226.00
14505.00 17120.00 16655.00
14761.00 17477.00 17176.00
14224.00 16787.00 16523.00
14376.00 17117.00 16667.00
14523.00 17532.00 16727.00
15140.00 18165.00 17346.00
15448.00 18778.00 17871.00
15845.00 19303.00 18377.00
16461.00 20004.00 18933.00
Jun 1995 17064.00 20565.00 19784.00
17974.00 21218.00 20740.00
18077.00 21212.00 20959.00
18649.00 22194.00 21581.00
18326.00 22084.00 21295.00
18884.00 22890.00 22016.00
19091.00 23526.00 22109.00
19660.00 24294.00 22643.00
20023.00 24462.00 22998.00
20281.00 24787.00 23105.00
20540.00 25120.00 23684.00
20868.00 25694.00 24104.00
Jun 1996 20557.00 25897.00 23869.00
19523.00 24712.00 22578.00
20161.00 25177.00 23260.00
21282.00 26692.00 24559.00
21868.00 27389.00 24913.00
23437.00 29399.00 25487.00
23016.00 28914.00 25985.00
24250.00 30687.00 27339.00
24250.00 30868.00 27123.00
23074.00 29694.00 25887.00
24134.00 31428.00 27026.00
25792.00 33269.00 28898.00
Jun 1997 26737.00 34867.00 29977.00
29185.00 37591.00 32461.00
28433.00 35431.00 31262.00
30110.00 37474.00 33049.00
28741.00 36182.00 31962.00
29551.00 37795.00 32716.00
29972.00 38546.00 33269.00
30343.00 38938.00 33493.00
32686.00 41681.00 35854.00
34310.00 43912.00 37368.00
34704.00 44310.00 37788.00
33776.00 43476.00 36857.00
Jun 1998 34727.00 45357.00 38449.00
33889.00 44831.00 38041.00
28650.00 38294.00 31934.00
30343.00 40854.00 34062.00
32570.00 44135.00 38420.00
34681.00 46744.00 38590.00
36560.00 49540.00 41816.00
37658.00 51572.00 43600.00
36254.00 49907.00 42111.00
37147.00 52005.00 43938.00
36423.00 53978.00 45054.00
37913.00 52630.00 44178.00
Jun 1999 39469.00 55664.00 46789.00
</TABLE>
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions, and includes payment of the maximum
sales charge (5.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
4
<PAGE> 6
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN PACE FUND
We recently spoke to the management team of the Van Kampen Pace Fund about the
key events and economic forces that shaped the markets during the past year. The
team includes John M. Cunniff, senior portfolio manager, who has been a member
of the Fund's management team since November 1996 and has worked in the
investment industry since 1992; Thomas Copper, portfolio manager (since April
1999); and Stephen L. Boyd, chief investment officer for equity investments. The
following excerpts reflect their views on the Fund's performance during the 12
months ended June 30, 1999.
Q WHAT MARKET FACTORS AFFECTED THE FUND DURING THE REPORTING PERIOD?
A For the majority of the reporting period, blue-chip companies, in which
the Fund invests the majority of its assets, performed extremely well. The
stock market began the reporting period on a positive note with the Dow
Jones Industrial Average setting a then-record high in July 1998. Trouble was on
the horizon, however, as investors feared disappointing corporate earnings
reports and other effects of international economic troubles. By the end of
August, the Dow had fallen 19 percent from its high.
Following a series of interest-rate cuts by the Federal Reserve Board, U.S.
companies began to report better-than-expected earnings, reassuring investors
that the domestic economy was still fundamentally sound. These events helped
place the stock market on an upward trend that continued through the rest of the
reporting period. In the second quarter of 1999, the enthusiasm for large,
growth-oriented stocks began to subside as investors felt more confident looking
beyond the perceived stability of growth stocks. As a result, traditional value
stocks in cyclical sectors such as basic materials, energy, and producer
manufacturing began to outperform growth stocks for the first time in several
years.
Q HOW DID YOU MANAGE THE FUND IN RESPONSE TO THESE EVENTS?
A When market sentiment shifted to favor cyclical stocks over traditional
growth companies, we positioned the Fund somewhat defensively, purchasing
some utility companies and limiting our exposure to technology firms.
Despite changing market conditions, however, we maintained our consistent
strategy of investing primarily in stocks of large, well-established companies
with above-average growth rates. In selecting stocks for the portfolio, we use a
"bottom-up" investment process. In other words, we evaluate stocks one by one
and make purchases wherever we find good investment opportunities, while
preserving an economically diversified portfolio. Because of our bottom-up
approach to stock selection, we do not attempt to invest in a predetermined mix
of industry sectors. As a result, the portfolio includes securities from a broad
range of industries.
5
<PAGE> 7
Q BASED ON THIS BOTTOM-UP STRATEGY, WHAT KIND OF STOCKS DID YOU BUY AND
SELL?
A Our most significant new purchases included:
- TCI Telecommunications--AT&T purchased TCI Telecommunications in early
1999, which should allow AT&T to move forward with its plans to offer
telephone service over cable lines.
- GTE--This telecommunications company's proposed merger with Bell Atlantic
represents an attractive combination of Bell Atlantic's customer base with
GTE's fiber network and high-speed data lines.
- General Electric--The company continued to deliver strong earnings growth
and effective management.
- Intel--This preeminent manufacturer of computer chips continued to benefit
from growing Internet usage.
- Wal-Mart--The discount giant and other retailers have been thriving amid
record consumer spending.
The Fund's largest sales during the year included:
- EMC--This leading supplier of corporate data storage systems and software
may see a slowdown in earnings growth as it loses business to competitors,
so we sold our holdings in the stock.
- Waste Management--Although this company is the largest trash hauler in the
United States, we saw better opportunities for growth elsewhere and
decided to unload our position in this stock.
- RJR Nabisco--Tobacco stocks, such as RJR, performed well during the latter
half of 1998, largely because the industry settled a number of lawsuits.
We saw the favorable stock prices as an opportunity to take profits and
fully sell this position.
- Philip Morris--For much the same reason, we sold a sizeable portion of our
stock in this industry leader. We do continue, however, to hold a small
position in the company, which did not perform well in the first half of
1999.
Q WHICH STOCKS IN THE PORTFOLIO PERFORMED ESPECIALLY WELL?
A For most of the reporting period, blue-chip stocks performed very well
amid considerable market volatility. In general, the stocks whose
performance most helped the Fund's return were in the technology area. The
growth of the Internet and the promise of increased business productivity fueled
new purchases of technology equipment.
Leading software-maker Microsoft continued on a path of impressive growth,
despite being involved in ongoing litigation about its business practices. The
company's stock appreciated 26 percent during the reporting period. Cisco, which
makes computer networking devices, was also an outstanding performer, as was
cable company TCI Telecommunications, computer giant IBM, and networking
specialist Sun Microsystems.
6
<PAGE> 8
Keep in mind that not all stocks in the Fund performed as favorably, and
there is no guarantee that any of these stocks will perform as well in the
future. For additional Fund portfolio highlights, please refer to page 10.
Q DID ANY STOCKS HURT THE FUND?
A Conseco, like many other financial stocks, reacted poorly to the market
sell-off in the third quarter of 1998. Unlike other financial companies,
which rebounded quickly, Conseco's stock recovery was disappointing. We do
continue to hold a small position in this stock.
The poor performance of HealthSouth, a health care-management company, was
typical of many health maintenance organization (HMO) stocks--investors became
concerned that HMOs would need to cut prices in the wake of a more competitive
business environment. In response to these conditions, we eliminated HealthSouth
from the Fund.
Peoplesoft, which provides software for human-resource management, also hurt
the Fund during the reporting period. Investors have been concerned that
software companies such as Peoplesoft would encounter declining demand for their
products as businesses opted to spend their technology budgets preparing for the
year 2000 problem. We no longer own this stock.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A The Fund achieved a 12-month return of 13.65 percent(1) (Class A shares at
net asset value) as of June 30, 1999. This return was affected positively
by the healthy performance of our technology holdings and negatively by
the relative underperformance of large-cap growth stocks in the second quarter
of 1999.
By comparison, the Standard & Poor's 500 Index returned 22.72 percent, and
the Lipper Growth Fund Index returned 21.69 percent. The S&P 500 is a
broad-based index that reflects the general performance of the stock market, and
the Lipper Growth Fund Index reflects the average performance of the 30 largest
growth funds. These indices are statistical composites that do not include any
commissions or sales charges that would be paid by an investor purchasing the
securities or investments represented by these indices. Please refer to the
chart and footnotes on page 3 for additional Fund performance results. Past
performance does not guarantee future results.
7
<PAGE> 9
Q WHAT DO YOU SEE AHEAD FOR THE FUND?
A As with the past 12 months, we anticipate continued market volatility. If
the Fed continues to raise interest rates, as it did on the last day of
the reporting period, we expect cyclical stocks to continue to outperform
traditional growth stocks. We are also monitoring the year 2000 problem, because
investors' reaction to the situation could have an impact on the stock market's
stability. Regardless of the market environment, we believe that sticking with
our investment strategy may enable us to achieve solid long-term returns.
[SIG.]
John M. Cunniff
Senior Portfolio Manager
[SIG.]
Thomas Copper
Portfolio Manager
[SIG.]
Stephen L. Boyd
Chief Investment Officer
Equity Investments
8
<PAGE> 10
GLOSSARY OF TERMS
BLUE-CHIP STOCKS: Stocks of large, well-known companies that have a long record
of growth. Examples of blue-chip stocks include General Motors,
International Business Machines (IBM), Coca-Cola, and General Electric.
CLASS A SHARES: When Class A shares of a fund are purchased, the share price
includes the net asset value plus a one-time sales charge (or "load"). In
most cases, there is no redemption fee (contingent deferred sales charge).
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.
DEFENSIVE INVESTMENT STRATEGY: A method of portfolio allocation and management
aimed at minimizing the risk of losing principal. Defensive investors place
a high percentage of their investable assets in bonds, cash equivalents, and
stocks that are less volatile than average.
DOW JONES INDUSTRIAL AVERAGE: The oldest and most widely recognized stock market
average, which reflects the performance of 30 actively traded stocks of
well-established, blue-chip companies.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank 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.
GROWTH INVESTING: An investment strategy that seeks to identify stocks that tend
to offer greater-than-average earnings growth. Growth stocks typically trade
at higher prices relative to their earnings than value stocks, due to their
higher expected earnings growth.
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.
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.
9
<PAGE> 11
PORTFOLIO HIGHLIGHTS
VAN KAMPEN PACE FUND
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 1999*
<TABLE>
<S> <C>
MICROSOFT develops, manufactures, licenses, and supports a
range of software products.................................. 3.9%
GENERAL ELECTRIC is a diversified industrial corporation
whose products include appliances, lighting products,
aircraft engines, and plastics.............................. 2.6%
INTEL designs, manufactures, and markets microcomputer
components.................................................. 2.1%
INTERNATIONAL BUSINESS MACHINES (IBM) develops,
manufactures, and sells advanced technology processing
products, including computers, software, networking systems,
and related services........................................ 2.1%
WAL-MART STORES operates discounts department stores,
warehouse membership clubs, and a combination supermarket
and discount department store............................... 2.1%
LUCENT TECHNOLOGIES develops leading=edge communications
solutions, including wireless systems, messaging systems,
call centers, optical networking, and data networking....... 1.9%
CITIGROUP provides financial services to consumer and
corporate customers around the world........................ 1.9%
GTE provides local, long-distance, and wireless telephone
service, as well as networking capabilities to both
consumers and large companies............................... 1.8%
MCI WORLDCOM is a provider of local, long distance, and
Internet telecommunications services to business,
government, and consumers................................... 1.7%
CISCO SYSTEMS provides networking solutions that connect
computing devices and computer networks..................... 1.7%
</TABLE>
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Technology 20.2 17.5
Finance 14.8 16.4
Utilities 14.7 10.5
Health Care 11.7 12.7
Consumer Distribution 9.3 7.4
</TABLE>
* As a percentage of long-term investments
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 94.9%
CONSUMER DISTRIBUTION 8.8%
Albertsons, Inc................................... 232,900 $ 12,008,906
Best Buy Co., Inc. (a)............................ 263,400 17,779,500
Cardinal Health, Inc.............................. 45,700 2,930,513
Circuit City Stores-Circuit City Group............ 99,200 9,225,600
Dayton Hudson Corp................................ 146,000 9,490,000
Family Dollar Stores, Inc......................... 371,000 8,904,000
Federated Department Stores, Inc. (a)............. 210,800 11,159,225
Home Depot, Inc................................... 164,600 10,606,414
Kmart Corp. (a)................................... 1,588,200 26,106,037
Kroger Co. (a).................................... 644,200 17,997,338
Lexmark International Group Inc., Class A (a)..... 366,600 24,218,512
Lowe's Cos., Inc.................................. 260,400 14,761,425
May Department Stores Co.......................... 684,850 27,993,244
Office Depot, Inc. (a)............................ 677,150 14,939,622
Safeway, Inc. (a)................................. 280,000 13,860,000
Sears Roebuck & Co................................ 472,800 21,069,150
TJX Cos., Inc..................................... 942,000 31,380,376
Toys 'R' Us, Inc. (a)............................. 298,400 6,173,150
Wal-Mart Stores, Inc.............................. 1,646,000 79,419,500
--------------
360,022,512
--------------
CONSUMER DURABLES 1.7%
Dana Corp......................................... 45,000 2,072,813
Delphi Automotive Systems Corp.................... 188,571 3,500,349
Ford Motor Co..................................... 730,200 41,210,662
General Motors Corp............................... 269,800 17,806,800
Magna International, Inc., Class A................ 55,000 3,121,250
--------------
67,711,874
--------------
CONSUMER NON-DURABLES 8.4%
Anheuser-Busch Cos., Inc.......................... 633,700 44,953,094
Coca-Cola Co...................................... 446,900 27,931,250
Dial Corp......................................... 381,800 14,198,187
General Mills, Inc................................ 90,500 7,273,938
Heinz, H. J. & Co................................. 280,000 14,035,000
</TABLE>
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER NON-DURABLES (CONTINUED)
Jones Apparel Group, Inc. (a)..................... 266,500 $ 9,144,281
Kimberly Clark Corp............................... 634,700 36,177,900
Loews Corp........................................ 213,000 16,853,625
Pepsi Bottling Group, Inc......................... 460,000 10,608,750
PepsiCo, Inc...................................... 1,070,000 41,395,625
Philip Morris Cos., Inc........................... 1,409,800 56,656,337
Procter & Gamble Co............................... 89,300 7,970,025
Tommy Hilfiger Corp. (a).......................... 307,700 22,615,950
Tyson Foods, Inc., Class A........................ 712,500 16,031,250
Unilever NV -- ADR (Netherlands).................. 222,957 15,551,251
--------------
341,396,463
--------------
CONSUMER SERVICES 2.9%
Brinker International, Inc. (a)................... 584,400 15,888,375
CBS Corp. (a)..................................... 242,400 10,529,250
Comcast Corp., Class A............................ 264,000 10,147,500
Cox Communications, Inc., Class A (a)............. 286,850 10,559,666
Gannett Co., Inc.................................. 177,900 12,697,612
Infinity Broadcasting Corp., Class A (a).......... 130,200 3,873,450
New York Times Co., Class A....................... 285,600 10,513,650
Omnicom Group, Inc................................ 144,000 11,520,000
Time Warner, Inc.................................. 412,900 30,348,150
--------------
116,077,653
--------------
ENERGY 7.2%
Ashland, Inc...................................... 255,000 10,231,875
British Petroleum Co. PLC -- ADR (United
Kingdom)........................................ 88,715 9,625,578
Coastal Corp...................................... 743,100 29,724,000
Columbia Energy Group............................. 153,000 9,591,188
El Paso Energy Corp............................... 292,100 10,278,269
Enron Corp........................................ 218,400 17,854,200
Exxon Corp........................................ 368,400 28,412,850
McDermott International, Inc...................... 536,900 15,167,425
Mobil Corp........................................ 644,000 63,756,000
Royal Dutch Petroleum Co. -- ADR (Netherlands).... 375,900 22,647,974
Sonat, Inc........................................ 436,600 14,462,375
</TABLE>
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
Total SA -- ADR (France).......................... 34,300 $ 2,210,206
Transocean Offshore Inc........................... 919,900 24,147,375
Ultramar Diamond Shamrock Corp.................... 348,000 7,590,750
USX -- Marathon Group............................. 894,600 29,130,412
--------------
294,830,477
--------------
FINANCE 14.0%
Allstate Corp..................................... 710,500 25,489,187
AMBAC Financial Group, Inc........................ 367,700 21,004,862
American Express Co............................... 106,100 13,806,263
American General Corp. (b)........................ 445,700 33,594,637
American International Group, Inc................. 173,352 20,293,019
Bank One Corp..................................... 469,348 27,955,540
BankAmerica Corp.................................. 433,179 31,757,435
BankBoston Corp................................... 278,200 14,222,975
Bear Stearns Cos., Inc............................ 278,207 13,006,177
Chase Manhattan Corp.............................. 560,700 48,570,637
CIGNA Corp........................................ 101,400 9,024,600
Citigroup, Inc.................................... 1,534,987 72,911,882
Conseco, Inc...................................... 550,578 16,758,218
Countrywide Credit Industries, Inc................ 580,000 24,795,000
Edwards A G, Inc.................................. 66,350 2,139,788
Federal Home Loan Mortgage Corp................... 118,800 6,890,400
Federal National Mortgage Assn.................... 662,300 45,284,762
First Union Corp.................................. 195,633 9,194,751
Fleet Financial Group, Inc........................ 431,700 19,156,688
Lehman Brothers Holdings, Inc..................... 282,700 17,598,075
Lincoln National Corp............................. 298,200 15,599,588
MBNA Corp......................................... 442,300 13,545,438
Merrill Lynch & Co., Inc.......................... 119,000 9,512,563
Nationwide Financial Services, Inc., Class A...... 66,800 3,022,700
Providian Financial Corp.......................... 253,700 23,720,950
Radian Group, Inc................................. 269,200 13,140,325
</TABLE>
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
Schwab Charles Corp............................... 158,800 $ 17,448,150
Torchmark, Inc.................................... 27,000 921,375
--------------
570,365,985
--------------
HEALTHCARE 11.1%
Abbott Laboratories, Inc.......................... 999,300 45,468,150
Aetna, Inc........................................ 232,700 20,812,106
American Home Products Corp....................... 82,500 4,743,750
Bausch & Lomb, Inc................................ 157,200 12,025,800
Becton Dickinson & Co............................. 653,600 19,608,000
Bristol-Myers Squibb Co........................... 856,400 60,322,675
Johnson & Johnson, Inc............................ 461,400 45,217,200
Medtronic, Inc.................................... 178,600 13,908,475
Merck & Co., Inc.................................. 521,400 38,583,600
Mylan Laboratories, Inc........................... 583,300 15,457,450
PacifiCare Health Systems (a)..................... 158,800 11,423,675
Pfizer, Inc....................................... 300,400 32,968,900
Pharmacia & Upjohn, Inc........................... 433,400 24,622,537
Rhone-Poulenc, SA, Class A -- ADR (France)........ 221,100 10,198,238
Schering-Plough Corp.............................. 392,400 20,797,200
Tenet Healthcare Corp. (a)........................ 96,650 1,794,066
Warner-Lambert Co................................. 602,800 41,819,250
Watsons Pharmaceuticals, Inc. (a)................. 207,040 7,259,340
Wellpoint Health Networks, Inc., Class A (a)...... 301,600 25,598,300
--------------
452,628,712
--------------
PRODUCER MANUFACTURING 5.2%
Cummins Engine, Inc............................... 238,300 13,612,888
FMC Corp. (a)..................................... 109,200 7,459,725
General Electric Co............................... 873,200 98,671,600
Honeywell, Inc.................................... 124,100 14,380,087
Ingersoll-Rand Co................................. 370,400 23,937,100
Johnson Controls, Inc............................. 191,100 13,245,619
Navistar International Corp. (a).................. 342,900 17,145,000
Parker Hannifin Corp.............................. 139,400 6,377,550
</TABLE>
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING (CONTINUED)
TRW, Inc. ........................................ 124,200 $ 6,815,475
Tyco International Ltd. .......................... 702 66,515
United Technologies Corp. ........................ 151,925 10,891,123
--------------
212,602,682
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 2.3%
Boise Cascade Corp................................ 412,900 17,703,087
British Steel PLC -- ADR (United Kingdom)......... 318,000 8,287,875
Champion International Corp....................... 170,000 8,138,750
Dow Chemical Co................................... 138,900 17,622,938
Du Pont (E. I.) de Nemours & Co................... 398,900 27,249,856
Mead Corp......................................... 148,600 6,204,050
USX U.S. Steel Group, Inc......................... 333,200 8,996,400
--------------
94,202,956
--------------
TECHNOLOGY 19.2%
ADC Telecommunications, Inc. (a).................. 147,700 6,729,581
America Online, Inc. (a).......................... 293,910 32,477,055
Apple Computer, Inc. (a).......................... 580,400 26,879,775
BMC Software, Inc. (a)............................ 205,700 11,107,800
Cisco Systems, Inc. (a)........................... 1,024,500 65,888,156
Compuware Corp. (a)............................... 852,000 27,104,250
Dell Computer Corp. (a)........................... 478,700 17,711,900
Electronics for Imaging, Inc. (a)................. 119,200 6,123,900
EMC Corp. (a)..................................... 151,200 8,316,000
Gateway, Inc. (a)................................. 436,100 25,729,900
General Dynamics Corp............................. 104,200 7,137,700
Hewlett-Packard Co................................ 579,300 58,219,650
Intel Corp........................................ 1,388,600 82,621,700
International Business Machines Corp.............. 621,200 80,290,100
Lockheed Martin Corp.............................. 411,500 15,328,375
Lucent Technologies, Inc.......................... 1,110,200 74,869,112
Mercury Interactive Corp. (a)..................... 99,100 3,505,663
Microsoft Corp. (a)............................... 1,661,100 149,810,456
Nortel Networks Corp.............................. 106,800 9,271,575
Oracle Corp. (a).................................. 780,550 28,977,919
</TABLE>
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Seagate Technology, Inc. (a)...................... 724,100 $ 18,555,062
SunGard Data Systems, Inc. (a).................... 384,400 13,261,800
Xerox Corp........................................ 163,500 9,656,719
--------------
779,574,148
--------------
TRANSPORTATION 0.1%
AMR Corp. (a)..................................... 55,500 3,787,875
--------------
UTILITIES 14.0%
Ameritech Corp.................................... 804,400 59,123,400
AT & T Corp....................................... 955,232 53,313,886
BEC Energy........................................ 590,600 24,362,250
BellSouth Corp.................................... 694,000 32,531,250
CMS Energy Corp................................... 46,900 1,963,937
DTE Energy Co..................................... 548,800 21,952,000
Energy Corp....................................... 347,900 10,871,875
FPL Group, Inc.................................... 90,400 4,938,100
GPU, Inc.......................................... 537,900 22,692,656
GTE Corp.......................................... 911,400 69,038,550
Idacorp Inc....................................... 449,400 14,156,100
MCI Worldcom, Inc. (a)............................ 778,400 66,991,050
Nextel Communications Inc. (a).................... 394,050 19,776,384
OGE Energy Corp................................... 464,400 11,029,500
P G & E Corp...................................... 317,800 10,328,500
Peco Energy Co.................................... 283,200 11,859,000
Pinnacle West Capital Corp........................ 329,600 13,266,400
Public Service Co. of New Mexico.................. 460,300 9,148,463
Qwest Communications International Inc. (a)....... 843,600 27,891,525
Reliant Energy, Inc............................... 738,700 20,406,587
Sprint Corp. (PCS Group).......................... 288,000 15,210,000
Texas Utilities Co................................ 675,600 27,868,500
U.S. West, Inc.................................... 113,900 6,691,625
Vodafone Group PLC -- ADR (United Kingdom)........ 62,050 12,223,850
--------------
567,635,388
--------------
TOTAL LONG-TERM INVESTMENTS 94.9%
(Cost $2,827,577,507).......................................... 3,860,836,725
--------------
</TABLE>
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS 6.7%
REPURCHASE AGREEMENT 3.4%
Goldman Sachs & Co. ($89,480,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 6/30/99,
to be sold on 07/01/99 at $89,492,055)......................... $ 89,480,000
DLJ Mortgage Acceptance Corp. ($48,180,000 par collateralized by
U.S. Government obligations in a pooled cash account, dated
6/30/99, to be sold on 07/01/99 at $48,186,424)................ 48,180,000
--------------
TOTAL REPURCHASE AGREEMENTS...................................... 137,660,000
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS 2.3%
Federal Home Loan Mortgage Discount Notes ($25,000,000 par,
yielding 4.82%, 07/07/99 maturity) (b)......................... 24,980,000
Federal Home Loan Mortgage Discount Notes ($20,000,000 par,
yielding 4.96%, 08/19/99 maturity) (b)......................... 19,866,067
Federal National Mortgage Association Discount Notes ($25,000,000
par, yielding 4.91%, 07/19/99 maturity) (b).................... 24,938,875
Federal National Mortgage Association Discount Notes ($25,000,000
par, yielding 4.80%, 08/13/99 maturity) (b).................... 24,858,458
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS................................ 94,643,400
--------------
COMMERCIAL PAPER 1.0%
General Electric Capital Corp. ($40,000,000 par, yielding 5.70%,
07/01/99 maturity)............................................. 39,993,667
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $272,297,067)............................................ 272,297,067
--------------
TOTAL INVESTMENTS 101.6%
(Cost $3,099,874,574).......................................... 4,133,133,792
LIABILITIES IN EXCESS OF OTHER ASSETS (1.6%)..................... (63,200,607)
--------------
NET ASSETS 100.0%............................................... $4,069,933,185
==============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) Assets segregated as collateral for open futures contracts.
17
<PAGE> 19
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $3,099,874,574)..................... $4,133,133,792
Receivables:
Investments Sold.......................................... 21,039,336
Fund Shares Sold.......................................... 20,839,981
Dividends................................................. 4,697,707
Variation Margin on Futures............................... 1,875,000
Other....................................................... 265,370
--------------
Total Assets.......................................... 4,181,851,186
--------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 89,894,866
Investments Purchased..................................... 17,628,003
Distributor and Affiliates................................ 1,843,451
Investment Advisory Fee................................... 1,378,758
Accrued Expenses............................................ 771,330
Trustees' Deferred Compensation and Retirement Plans........ 401,593
--------------
Total Liabilities..................................... 111,918,001
--------------
NET ASSETS.................................................. $4,069,933,185
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $2,552,540,071
Net Unrealized Appreciation................................. 1,038,531,718
Accumulated Net Realized Gain............................... 460,007,937
Accumulated Undistributed Net Investment Income............. 18,853,459
--------------
NET ASSETS.................................................. $4,069,933,185
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $3,905,102,875 and 252,413,497 shares of
beneficial interest issued and outstanding)........... $ 15.47
Maximum sales charge (5.75%* of offering price)......... .94
--------------
Maximum offering price to public........................ $ 16.41
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $151,828,453 and 9,963,055 shares of
beneficial interest issued and outstanding)........... $ 15.24
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $13,001,857 and 850,898 shares of
beneficial interest issued and outstanding)........... $ 15.28
==============
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
18
<PAGE> 20
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ($658,486 from affiliates of Van Kampen).......... $ 54,906,924
Interest.................................................... 5,687,403
--------------
Total Income............................................ 60,594,327
--------------
EXPENSES:
Investment Advisory Fee..................................... 16,204,157
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $8,223,239, $1,386,302 and $115,630,
respectively)............................................. 9,725,171
Shareholder Services........................................ 4,392,522
Custody..................................................... 280,845
Legal....................................................... 142,971
Trustees' Fees and Related Expenses......................... 87,973
Other....................................................... 1,528,188
--------------
Total Expenses.......................................... 32,361,827
Less Credits Earned on Overnight Cash Balances.......... 38,051
--------------
Net Expenses............................................ 32,323,776
--------------
NET INVESTMENT INCOME....................................... $ 28,270,551
==============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments ($4,040,908 from affiliates of Van Kampen).... $ 499,247,487
Futures................................................... 249,127
--------------
Net Realized Gain......................................... 499,496,614
--------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 1,051,496,847
--------------
End of the Period:
Investments............................................... 1,033,259,218
Futures................................................... 5,272,500
--------------
1,038,531,718
--------------
NET UNREALIZED DEPRECIATION DURING THE PERIOD............... (12,965,129)
--------------
NET REALIZED AND UNREALIZED GAIN............................ $ 486,531,485
==============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 514,802,036
==============
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income........................ $ 28,270,551 $ 27,007,529
Net Realized Gain............................ 499,496,614 451,337,264
Net Unrealized Appreciation/Depreciation
During
the Period................................. (12,965,129) 428,309,061
--------------- ---------------
Change in Net Assets from Operations......... 514,802,036 906,653,854
--------------- ---------------
Distributions from Net Investment Income:
Class A Shares............................. (24,874,829) (30,092,754)
Class B Shares............................. -0- (375,733)
Class C Shares............................. -0- (25,654)
--------------- ---------------
(24,874,829) (30,494,141)
--------------- ---------------
Distributions from Net Realized Gain:
Class A Shares............................. (295,682,808) (507,041,781)
Class B Shares............................. (11,170,764) (16,529,561)
Class C Shares............................. (972,178) (1,128,369)
--------------- ---------------
(307,825,750) (524,699,711)
--------------- ---------------
Total Distributions.......................... (332,700,579) (555,193,852)
--------------- ---------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................. 182,101,457 351,460,002
--------------- ---------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.................... 7,524,592,594 1,921,901,750
Net Asset Value of Shares Issued Through
Dividend Reinvestment...................... 309,004,514 515,581,788
Cost of Shares Repurchased................... (7,759,211,083) (2,070,189,122)
--------------- ---------------
Net Change in Net Assets from Capital
Transactions............................... 74,386,025 367,294,416
--------------- ---------------
TOTAL INCREASE IN NET ASSETS................. 256,487,482 718,754,418
NET ASSETS:
Beginning of the Period...................... 3,813,445,703 3,094,691,285
--------------- ---------------
End of the Period (Including accumulated
undistributed net investment income of
$18,853,459 and $14,997,955,
respectively).............................. $ 4,069,933,185 $ 3,813,445,703
=============== ===============
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------
Class A Shares 1999 1998 1997 1996(a) 1995(a)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................. $ 14.971 $ 13.872 $ 11.92 $ 11.62 $ 11.05
-------- -------- -------- -------- --------
Net Investment Income......... .117 .122 .132 .12 .14
Net Realized and Unrealized
Gain........................ 1.743 3.541 3.191 2.09 1.85
-------- -------- -------- -------- --------
Total from Investment
Operations.................. 1.860 3.663 3.323 2.21 1.99
-------- -------- -------- -------- --------
Less:
Distributions from and in
Excess of Net Investment
Income.................... .106 .144 .121 .15 .1225
Distributions from Net
Realized Gain............. 1.254 2.420 1.250 1.76 1.2975
-------- -------- -------- -------- --------
Total Distributions........... 1.360 2.564 1.371 1.91 1.42
-------- -------- -------- -------- --------
Net Asset Value, End of the
Period...................... $ 15.471 $ 14.971 $ 13.872 $ 11.92 $ 11.62
======== ======== ======== ======== ========
Total Return (b).............. 13.65% 29.89% 30.06% 20.48% 20.62%
Net Assets at End of the
Period (In millions)........ $3,905.1 $3,661.4 $2,992.2 $2,534.3 $2,279.4
Ratio of Expenses to Average
Net Assets (c).............. .83% .88% .97% .94% 1.04%
Ratio of Net Investment Income
to Average Net Assets (c)... .78% .80% 1.01% 1.02% 1.24%
Portfolio Turnover............ 94% 67% 144% 213% 248%
</TABLE>
(a) Based on average shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the years ended June 30, 1996 and June 30, 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
21
<PAGE> 23
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------
Class B Shares 1999 1998 1997 1996(a) 1995(a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $14.766 $13.730 $ 11.81 $ 11.53 $ 10.96
------- ------- ------- ------- -------
Net Investment Income.......... .005 .045 .046 .02 .05
Net Realized and Unrealized
Gain......................... 1.722 3.466 3.151 2.07 1.85
------- ------- ------- ------- -------
Total from Investment
Operations................... 1.727 3.511 3.197 2.09 1.90
------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income.......... -0- .055 .027 .05 .0325
Distributions from Net
Realized Gain.............. 1.254 2.420 1.250 1.76 1.2975
------- ------- ------- ------- -------
Total Distributions............ 1.254 2.475 1.277 1.81 1.33
------- ------- ------- ------- -------
Net Asset Value, End of the
Period....................... $15.239 $14.766 $13.730 $ 11.81 $ 11.53
======= ======= ======= ======= =======
Total Return (b)............... 12.79% 28.92% 29.08% 19.44% 19.73%
Net Assets at End of the Period
(In millions)................ $ 151.8 $ 140.3 $ 95.5 $ 72.1 $ 53.0
Ratio of Expenses to Average
Net Assets (c)............... 1.61% 1.66% 1.74% 1.75% 1.84%
Ratio of Net Investment Income
to Average Net Assets (c).... 0% .03% .23% .21% .44%
Portfolio Turnover............. 94% 67% 144% 213% 248%
</TABLE>
(a) Based on average shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the years ended June 30, 1996 and June 30, 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
22
<PAGE> 24
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------
Class C Shares 1999 1998 1997 1996(a) 1995(a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $14.787 $13.752 $ 11.83 $ 11.52 $ 10.99
------- ------- ------- ------- -------
Net Investment Income.......... .002 .028 .036 .02 .05
Net Realized and Unrealized
Gain......................... 1.745 3.482 3.163 2.10 1.81
------- ------- ------- ------- -------
Total from Investment
Operations................... 1.747 3.510 3.199 2.12 1.86
------- ------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Investment
Income..................... -0- .055 .027 .05 .0325
Distributions from Net
Realized Gain.............. 1.254 2.420 1.250 1.76 1.2975
------- ------- ------- ------- -------
Total Distributions............ 1.254 2.475 1.277 1.81 1.33
------- ------- ------- ------- -------
Net Asset Value, End of the
Period....................... $15.280 $14.787 $13.752 $ 11.83 $ 11.52
======= ======= ======= ======= =======
Total Return (b)............... 12.91% 28.87% 29.04% 19.74% 19.27%
Net Assets at End of the Period
(In millions)................ $ 13.0 $ 11.7 $ 7.0 $ 4.5 $ 2.2
Ratio of Expenses to Average
Net Assets (c)............... 1.61% 1.66% 1.74% 1.75% 1.84%
Ratio of Net Investment Income
to Average Net Assets (c).... .01% .04% .23% .15% .44%
Portfolio Turnover............. 94% 67% 144% 213% 248%
</TABLE>
(a) Based on average shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the years ended June 30, 1996 and June 30, 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
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Pace 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 long-term growth of capital by investing principally in common stock.
The Fund commenced investment operations on July 22, 1969. The distribution of
the Fund's Class B and Class C shares commenced on January 10, 1992 and August
27, 1993, respectively.
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. The
Fund's security valuation for unlisted securities and listed securities for
which the last sale price is not available was changed in 1998 from bid side
pricing to the mean of the bid and asked prices. The impact of the change, which
was not material, is included as a component of the change in unrealized
appreciation/depreciation for the year ended June 30, 1999. For those securities
where quotations or prices are not available, valuations are determined in
accordance with procedures established in good faith by the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
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. 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 gain differs for financial reporting and tax purposes as a
result of the deferral for tax purposes of losses resulting from wash sales.
At June 30, 1999, for federal income tax purposes, cost of long- and
short-term investments is $3,105,553,566; the aggregate gross unrealized
appreciation is $1,092,060,986 and the aggregate gross unrealized depreciation
is $64,480,760, resulting in net unrealized appreciation on long- and short-term
investments of $1,027,580,226.
E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
annually from net investment income and from net realized gains on securities.
Distributions from net realized gains for book purposes may include short-term
capital gains and gains on futures transactions. All short-term capital gains
are included in ordinary income for tax purposes.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the current fiscal year have been identified and appropriately reclassified.
A permanent difference related to short-term gains totaling $459,782 has been
reclassified from accumulated net realized gain to accumulated undistributed net
investment income. Additionally, a
25
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
permanent difference related to the reversal of wash sales totaling $49,213 has
been reclassified from accumulated net realized gain to capital.
F. EXPENSE REDUCTIONS--During the year ended June 30, 1999, the Fund's custody
fee was reduced by $38,051 as a result of credits earned on overnight cash
balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $1 billion...................................... .50 of 1%
Next $1 billion....................................... .45 of 1%
Next $1 billion....................................... .40 of 1%
Over $3 billion....................................... .35 of 1%
</TABLE>
For the year ended June 30, 1999, the Fund recognized expenses of
approximately $143,000 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 year ended June 30, 1999, the Fund recognized expenses of
approximately $806,300 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. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended June
30, 1999, the Fund recognized expenses of approximately $3,631,900. 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.
26
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
During the year ended June 30, 1999, the Fund entered into transactions with
the Van Kampen Small Capitalization Fund which was managed by the Adviser:
<TABLE>
<CAPTION>
TRANSACTIONS
DURING THE PERIOD
% OF -----------------------------
NET ASSETS AT COST OF PROCEEDS
JUNE 30, 1999 PURCHASES OF SALES
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Small Capitalization
Fund.................. 0% -0- $58,454,293
</TABLE>
On February 12, 1999, the Van Kampen Small Capitalization Fund was
liquidated and made an in-kind distribution of $54,924,458 to the Fund.
3. CAPITAL TRANSACTIONS
At June 30, 1999, capital aggregated $2,421,092,282, $121,070,200 and
$10,377,589 for Classes A, B, and C, respectively. For the year ended June 30,
1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................. 501,845,270 $ 7,187,575,737
Class B................................. 20,290,932 285,120,945
Class C................................. 3,680,466 51,895,912
------------ ---------------
Total Sales............................... 525,816,668 $ 7,524,592,594
============ ===============
Dividend Reinvestment:
Class A................................. 21,854,091 $ 297,652,697
Class B................................. 776,995 10,466,117
Class C................................. 65,607 885,700
------------ ---------------
Total Dividend Reinvestment............... 22,696,693 $ 309,004,514
============ ===============
Repurchases:
Class A................................. (515,854,980) $(7,416,888,916)
Class B................................. (20,603,743) (290,215,746)
Class C................................. (3,688,547) (52,106,421)
------------ ---------------
Total Repurchases......................... (540,147,270) $(7,759,211,083)
============ ===============
</TABLE>
27
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
At June 30, 1998, capital aggregated $2,352,705,544, $115,697,048 and
$9,702,241 for Classes A, B, and C, respectively. For the year ended June 30,
1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................. 114,528,015 $ 1,658,797,819
Class B................................. 15,697,912 224,894,498
Class C................................. 2,661,609 38,209,433
------------ ---------------
Total Sales............................... 132,887,536 $ 1,921,901,750
============ ===============
Dividend Reinvestment:
Class A................................. 39,614,547 $ 499,143,289
Class B................................. 1,243,314 15,504,133
Class C................................. 74,809 934,366
------------ ---------------
Total Dividend Reinvestment............... 40,932,670 $ 515,581,788
============ ===============
Repurchases:
Class A................................. (125,272,563) $(1,827,462,304)
Class B................................. (14,397,387) (207,460,144)
Class C................................. (2,449,887) (35,266,674)
------------ ---------------
Total Repurchases......................... (142,119,837) $(2,070,189,122)
============ ===============
</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. 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>
28
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
For the year ended June 30, 1999, Van Kampen, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$348,300 and CDSC on redeemed shares of approximately $199,600. Sales charges do
not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $3,416,704,872 and $3,796,760,903,
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
taking delivery of a security underlying a futures contract. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the 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 to
provide the return of an index without purchasing all of the securities
underlying the index or to manage the Fund's overall exposure to the equity
markets.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin). The risk of loss associated with a
futures contract is in excess of the variation margin reflected on the Statement
of Assets and Liabilities.
29
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
Transactions in futures contracts for the year ended June 30, 1999, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS
- -----------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1998.............................. -0-
Futures Opened............................................ 600
Futures Closed............................................ (300)
----
Outstanding at June 30, 1999.............................. 300
====
</TABLE>
The futures contracts outstanding at June 30, 1999, and the description and
unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS (DEPRECIATION)
- ---------------------------------------------------------------------------
<S> <C> <C>
LONG CONTRACTS
S&P 500 Futures--September 1999
(Current notional value of $345,425 per
contract)................................. 300 $5,272,500
=== ==========
</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 year ended June 30, 1999, are payments retained by Van Kampen of
approximately $1,430,300.
30
<PAGE> 32
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Van Kampen Pace Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen Pace Fund (the "Fund")
at June 30, 1999, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereinafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
July 28, 1999
31
<PAGE> 33
VAN KAMPEN PACE 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 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Drive
Chicago, Illinois 60601
For federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
June 30, 1999. The Fund designated and paid $213,063,178 as a 20% rate gain
distribution. Shareholders were sent a 1998 Form 1099-DIV in January 1999,
representing their proportionate share of this capital gain distribution. For
corporate shareholders 20.70% of the distributions qualify for the dividend
received deductions.
* "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.
32
<PAGE> 34
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> PACE FUND A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 3,099,874,574<F1>
<INVESTMENTS-AT-VALUE> 4,133,133,792<F1>
<RECEIVABLES> 48,452,024<F1>
<ASSETS-OTHER> 265,370<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 4,181,851,186<F1>
<PAYABLE-FOR-SECURITIES> 110,745,078<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,172,923<F1>
<TOTAL-LIABILITIES> 111,918,001<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,421,092,282
<SHARES-COMMON-STOCK> 252,413,497
<SHARES-COMMON-PRIOR> 244,569,116
<ACCUMULATED-NII-CURRENT> 18,853,459<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 460,007,937<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,038,531,718<F1>
<NET-ASSETS> 3,905,102,875
<DIVIDEND-INCOME> 54,906,924<F1>
<INTEREST-INCOME> 5,687,403<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (32,323,776)<F1>
<NET-INVESTMENT-INCOME> 28,270,551<F1>
<REALIZED-GAINS-CURRENT> 499,496,614<F1>
<APPREC-INCREASE-CURRENT> (12,965,129)<F1>
<NET-CHANGE-FROM-OPS> 514,802,036<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (24,874,829)
<DISTRIBUTIONS-OF-GAINS> (295,682,808)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 501,845,270
<NUMBER-OF-SHARES-REDEEMED> (515,854,980)
<SHARES-REINVESTED> 21,854,091
<NET-CHANGE-IN-ASSETS> 243,653,328
<ACCUMULATED-NII-PRIOR> 14,997,955<F1>
<ACCUMULATED-GAINS-PRIOR> 268,846,069<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 16,204,157<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 32,361,827<F1>
<AVERAGE-NET-ASSETS> 3,621,454,967
<PER-SHARE-NAV-BEGIN> 14.971
<PER-SHARE-NII> 0.117
<PER-SHARE-GAIN-APPREC> 1.743
<PER-SHARE-DIVIDEND> (0.106)
<PER-SHARE-DISTRIBUTIONS> (1.254)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.471
<EXPENSE-RATIO> 0.83
<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> PACE FUND B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 3,099,874,574<F1>
<INVESTMENTS-AT-VALUE> 4,133,133,792<F1>
<RECEIVABLES> 48,452,024<F1>
<ASSETS-OTHER> 265,370<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 4,181,851,186<F1>
<PAYABLE-FOR-SECURITIES> 110,745,078<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,172,923<F1>
<TOTAL-LIABILITIES> 111,918,001<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 121,070,200
<SHARES-COMMON-STOCK> 9,963,055
<SHARES-COMMON-PRIOR> 9,498,871
<ACCUMULATED-NII-CURRENT> 18,853,459<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 460,007,937<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,038,531,718<F1>
<NET-ASSETS> 151,828,453
<DIVIDEND-INCOME> 54,906,924<F1>
<INTEREST-INCOME> 5,687,403<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (32,323,776)<F1>
<NET-INVESTMENT-INCOME> 28,270,551<F1>
<REALIZED-GAINS-CURRENT> 499,496,614<F1>
<APPREC-INCREASE-CURRENT> (12,965,129)<F1>
<NET-CHANGE-FROM-OPS> 514,802,036<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (11,170,764)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,290,932
<NUMBER-OF-SHARES-REDEEMED> (20,603,743)
<SHARES-REINVESTED> 776,995
<NET-CHANGE-IN-ASSETS> 11,563,828
<ACCUMULATED-NII-PRIOR> 14,997,955<F1>
<ACCUMULATED-GAINS-PRIOR> 268,846,069<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 16,204,157<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 32,361,827<F1>
<AVERAGE-NET-ASSETS> 138,623,225
<PER-SHARE-NAV-BEGIN> 14.766
<PER-SHARE-NII> 0.005
<PER-SHARE-GAIN-APPREC> 1.722
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (1.254)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.239
<EXPENSE-RATIO> 1.61
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> PACE FUND C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 3,099,874,574<F1>
<INVESTMENTS-AT-VALUE> 4,133,133,792<F1>
<RECEIVABLES> 48,452,024<F1>
<ASSETS-OTHER> 265,370<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 4,181,851,186<F1>
<PAYABLE-FOR-SECURITIES> 110,745,078<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,172,923<F1>
<TOTAL-LIABILITIES> 111,918,001<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,377,589
<SHARES-COMMON-STOCK> 850,898
<SHARES-COMMON-PRIOR> 793,372
<ACCUMULATED-NII-CURRENT> 18,853,459<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 460,007,937<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,038,531,718<F1>
<NET-ASSETS> 13,001,857
<DIVIDEND-INCOME> 54,906,924<F1>
<INTEREST-INCOME> 5,687,403<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (32,323,776)<F1>
<NET-INVESTMENT-INCOME> 28,270,551<F1>
<REALIZED-GAINS-CURRENT> 499,496,614<F1>
<APPREC-INCREASE-CURRENT> (12,965,129)<F1>
<NET-CHANGE-FROM-OPS> 514,802,036<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (972,178)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,680,466
<NUMBER-OF-SHARES-REDEEMED> (3,688,547)
<SHARES-REINVESTED> 65,607
<NET-CHANGE-IN-ASSETS> 1,270,326
<ACCUMULATED-NII-PRIOR> 14,997,955<F1>
<ACCUMULATED-GAINS-PRIOR> 268,846,069<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 16,204,157<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 32,361,827<F1>
<AVERAGE-NET-ASSETS> 11,557,749
<PER-SHARE-NAV-BEGIN> 14.787
<PER-SHARE-NII> 0.002
<PER-SHARE-GAIN-APPREC> 1.745
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (1.254)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.280
<EXPENSE-RATIO> 1.61
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
