<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Glossary of Terms................................ 4
Portfolio Management Review...................... 5
Portfolio Highlights............................. 9
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 17
Statement of Operations.......................... 18
Statement of Changes in Net Assets............... 19
Financial Highlights............................. 20
Notes to Financial Statements.................... 23
</TABLE>
PACE SAR 2/99
<PAGE> 2
LETTER TO SHAREHOLDERS
January 20, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together, we've
witnessed one of the greatest bull markets in investment history, unprecedented
growth in mutual fund investing, and a surge in personal retirement planning.
The coming millennium promises to hold even more opportunities.
To lead us into this new era of investing, Richard F. Powers III has joined
Van Kampen as Chairman and Chief Executive Officer. He comes to us from our
parent company, Morgan Stanley Dean Witter & Co., where he served as Executive
Vice President and Director of Marketing. He brings 27 years of experience in
the financial services industry, including an extensive background in product
management, strategic planning and brand development.
Although former Chairman Don G. Powell retired on January 1, he will remain
active in the industry and the community. Mr. Powell plans to continue his
service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
ECONOMIC OVERVIEW
Despite a stormy year in the global economy, the United States ended 1998
with only a moderate slowdown in growth. The nation's gross domestic product, a
measure of economic health, grew 3.9 percent during the year, matching 1997's
growth rate and indicating that our nation's economy remains strong. A
continuation of low inflation--only a 1.6 percent increase in the consumer price
index over the last 12 months--also helped sustain the domestic economy and kept
inflation-adjusted interest rates attractive.
Although the year ended on a positive note, the economic environment was
quite unsettled in the third quarter, with the Asian financial crisis
contributing to slowing corporate profits in the United States. Given the
uncertainty surrounding emerging market nations and the near-collapse of a major
U.S. hedge fund, the stock and bond markets experienced significant volatility
during this period. With instability as a backdrop, American and foreign
investors alike pursued a flight to quality--seeking the relative safety of
large-company stocks and government bonds.
In the last few months of the year the global financial situation improved
in conjunction with the Federal Reserve's interest rate decreases. In response
to declining corporate profits and mounting international concerns, the Fed
lowered interest rates three times, with 0.25 percent cuts in September,
October, and November. These rate cuts, coupled with a wave of corporate mergers
and cost-cutting measures, lent the support needed to keep the economy growing.
Dozens of foreign central banks also reduced interest rates in an effort to
stimulate their economies. These actions gave a boost to investor confidence and
encouraged a return to a more diversified range of investments in the last few
months of the year.
Continued on page 2
1
<PAGE> 3
MARKET REVIEW
Despite bouts of volatility, the stock market experienced impressive returns
during 1998. Large-company stocks were responsible for much of this as investors
favored the perceived stability of established, high-quality companies. The Dow
Jones Industrial Average rose more than 16 percent during the year and hit a
record high of 9374 in November before falling back to more moderate levels.
Technology companies generally fared well during the year, with the
technology-heavy Nasdaq composite index up almost 40 percent for the year. On
the other hand, commodity-based stocks--especially those of oil
companies--suffered from declining commodity prices. Small-company stocks also
significantly underperformed the rest of the market, with the Russell 2000 index
actually losing 3.45 percent during the 12-month period.
OUTLOOK
Our outlook for the domestic economy is positive, and we anticipate
continued low inflation and healthy economic growth. However, the aftereffects
of the global economic slowdown may continue to put pressure on corporate
earnings in the first half of the year. Internationally, we anticipate that low
interest rates and declining inflation will lead to improvements in troubled
areas such as Asia and Latin America. With the successful launch of the euro,
the new European transnational currency, we believe that many foreign markets
will become increasingly attractive in 1999.
In the long term, we are optimistic that the stock market will continue its
record growth, although we could experience additional volatility in the months
ahead if concerns about high stock valuations and increasing earnings pressure
become more pronounced. Combined with growing questions about corporate and
government reactions to the Year 2000 computer problem, we could see an
increasingly cautious market by mid-year.
Additional details about your fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.
Sincerely,
[SIG]
Richard F. Powers III
Chairman
Van Kampen Asset Management Inc.
[SIG]
Dennis J. McDonnell
President
Van Kampen Asset Management Inc.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1998
VAN KAMPEN PACE FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV(1)... 5.28% 4.87% 4.93%
Six-month total return(2)................ (0.75%) 0.07% 3.97%
One-year total return(2)................. 14.95% 16.10% 20.15%
Five-year average annual total
return(2)................................ 18.21% 18.52% 18.62%
Ten-year average annual total
return(2)................................ 15.59% N/A N/A
Life-of-Fund average annual total
return(2)................................ 13.46% 15.04% 17.80%
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 Prior 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. Market volatility may have
adversely affected fund performance since December 31, 1998. 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
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.
BOTTOM-UP INVESTING: A management style that emphasizes the analysis of
individual stocks, rather than economic and market cycles.
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).
DOW JONES INDUSTRIAL AVERAGE: The oldest and most widely recognized stock market
average, which reflects the performance of 30 actively traded stocks of
well-established, blue-chip companies.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its
policy-making committee, called the Federal Open Market Committee, meets
eight times a year to establish monetary policy and monitor the economic
pulse of the United States.
"FLIGHT TO QUALITY": The flow of funds toward safer investments in times of
marketplace uncertainty or fear.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
HEDGE FUND: A fund, usually used by wealthy individuals and institutions, that
is allowed to use aggressive strategies that are unavailable to most mutual
funds.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
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.
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
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 six
months. The team previously consisted of B. Robert Baker Jr., John M. Cunniff,
and Jeff D. New, portfolio comanagers. As of July 1998, the Fund has been
managed by John M. Cunniff, portfolio manager, and Stephen L. Boyd, chief
investment officer for equity investments. The following excerpts reflect their
views on the Fund's performance during the six months ended December 31, 1998.
Q CAN YOU DESCRIBE THE STOCK MARKET ENVIRONMENT FOR THE FUND DURING THE
REPORTING PERIOD?
A The stock market began the period on a high note with the Dow Jones
Industrial Average setting a then-record high on July 17. Trouble was on
the horizon, however, as the markets feared that many U.S. companies would
announce decreased earnings resulting from exposure to lagging international
economies. Investors became increasingly concerned after severe economic
problems in Russia and the near-failure of a large hedge fund threatened
financial stability. By August 31 the Dow had fallen 19 percent from its high.
Beginning in September conditions began to improve. Inflation remained tame,
enabling the Federal Reserve Board to lower interest rates in September and then
again in October and November. By October, companies began to report
better-than-expected third-quarter earnings, reminding investors that the U.S.
economy, though slowing, was still fundamentally solid. The volatile stock
market began to rise again, with the Dow setting a new record in November before
declining modestly from its high by year end.
Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET
ITS OBJECTIVE?
A We maintained a 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 opportunities, while preserving an economically
diversified portfolio.
Under normal market conditions, we keep the Fund heavily invested in stocks.
Rather than moving a significant portion of assets into cash, the Fund remained
heavily invested in equities through the turbulent market conditions in
September and early October and participated in the subsequent market rise.
Q WHAT WERE SOME OF THE FUND'S LARGEST PURCHASES?
A The Fund's largest purchases during the reporting period were all
blue-chip stocks, which generally performed very well amid considerable
market volatility.
5
<PAGE> 7
The success of blue chips during this period represented a "flight to quality,"
or investor preference for large, well-established companies. These purchases
included
- Exxon and Mobil--We believed these stocks were attractively priced and
that their impending merger would result in cost savings;
- Microsoft--We anticipated continued sales growth of computers and the
company's Windows operating system. We also believed that the announced
merger between America Online and Microsoft competitor Netscape will help
Microsoft defend itself against charges of monopolization;
- Intel--As with Microsoft, we anticipated continued sales growth of
computers;
- General Electric--The company continued to deliver strong earnings growth
and effective management; and
- Warner Lambert--The success of its popular diabetes and cholesterol drugs
has been favorable for the stock, as has the company's past ability to
deliver consistent, above-average earnings growth.
Q AND THE FUND'S LARGEST SALES?
A The Fund's largest sales during the past six months included RJR Nabisco,
Philip Morris, Lucent, Conseco, and Homestake Mining. Tobacco stocks such
as Philip Morris and RJR performed very well during the reporting period,
largely because the industry settled a number of lawsuits. We saw the high stock
prices as an opportunity to take profits and reduce our holdings, although we do
continue to own Philip Morris.
We sold a portion of the Fund's position in Lucent after Alcatel, a
comparable European telecommunications equipment company, reported poor
sales--leading us to wonder whether Lucent might be subject to similar
pressures. We also sold our stock in financial services company Conseco because
we questioned whether the firm, in the face of a declining stock price, would be
able to continue its strategy of acquiring other businesses.
Gold stocks such as Homestake Mining performed extremely well during the
September and October market sell-off, and we took that opportunity to reduce
our long-term position in Newmont Mining. Given the slowing global economic
environment, we don't expect a rebound in prices of commodities such as gold.
Q WHICH STOCKS SUPPORTED THE FUND'S PERFORMANCE?
A As mentioned earlier, both Microsoft and Philip Morris were very
successful holdings. Microsoft stock increased 24 percent during the
reporting period, while Philip Morris rose nearly 27 percent.
Technology companies generally performed very well during the reporting
period. EMC Corporation, a leading provider of computer data storage systems and
software, was an excellent performer for the Fund. The company continues to
profit from concerns about the "Year 2000" computer problem. Sun Microsystems,
meanwhile, saw its stock price rise an impressive 48 percent during the
reporting period, as the company benefited from
6
<PAGE> 8
favorable investor sentiment about its partnership with newly merged America
Online and Netscape.
BellSouth, a regional telephone-service provider in the southeast United
States, also helped the Fund. The company demonstrated excellent growth rates
while seeking to cut costs and increase productivity. Demand for the company's
Internet services and high-speed information lines continued to be strong.
Keep in mind that not all stocks in the Portfolio 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 9.
Q DID ANY STOCKS HURT THE FUND?
A Conseco, like many other financial stocks, had a difficult third quarter.
Although it did bounce back somewhat in the next quarter, Conseco's
recovery was disappointing and less dramatic than that of many other
financial companies. The company's stock fell considerably during the reporting
period. Chase Manhattan, another financial-services company, also hurt the
Fund's performance.
HealthSouth, a health care-management company, was another stock that
performed poorly, although it partially recovered from its August low. The
company's poor performance was typical of many health maintenance organization
(HMO) stocks during the third quarter--investors became concerned that HMOs
would need to cut prices in the wake of a more competitive business environment.
We continue to own the stock, however, and are optimistic about the company's
stock buyback plan.
Peoplesoft, which provides software for human-resource management, also hurt
the Fund during the reporting period. Investors were concerned about increased
competition in this growing industry.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A The Fund achieved a six-month total return of 5.28 percent(1) (Class A
shares at net asset value) as of December 31, 1998. By comparison, the
Standard & Poor's 500-Stock Index returned 9.22 percent, and the Lipper
Growth Fund Index, which more closely resembles the Fund, returned 8.76 percent.
The S&P 500-Stock Index is a broad-based, unmanaged 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 on page 3
for additional Fund performance results.
7
<PAGE> 9
Q WHAT DO YOU SEE AHEAD FOR THE MARKET AND THE FUND IN THE NEXT SIX MONTHS?
A We are optimistic about the stock market in the long term but anticipate
continued volatility as we head into 1999. With solid fundamentals and low
inflation, the U.S. economy is still growing, albeit more slowly than in
recent years. At the same time, economies around the world face challenges
ahead, which could put pressure on next year's U.S. corporate earnings. The
"Year 2000" computer problem also adds questions to the mix. During periods of
market uncertainty, equity investors often avoid small, unproven stocks in favor
of well-established, blue-chip companies--such as those owned by the Pace Fund.
If investors continue to favor these larger companies, the Fund may represent an
attractive investment option.
[SIG]
John M. Cunniff
Portfolio Manager
[SIG]
Stephen L. Boyd
Chief Investment Officer
Equity Investments
Please see footnotes on page 3
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS
VAN KAMPEN PACE FUND
PORTFOLIO HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOP TEN HOLDINGS THESE INVESTMENTS
AS OF DECEMBER 31, 1998 SIX MONTHS AGO
<S> <C> <C>
Microsoft Corp. ......... 3.6% ........ 1.3%
Bristol-Myers Squibb
Co. ................... 2.3% ........ 1.3%
General Electric Co. .... 2.3% ........ 0.5%
Philip Morris Cos.,
Inc. .................. 2.1% ........ 2.4%
Intel Corp. ............. 2.1% ........ 0.4%
Wal-Mart Stores, Inc. ... 2.0% ........ 0.2%
Tele-Communications,
Inc. .................. 1.9% ........ N/A
Exxon Corp. ............. 1.9% ........ N/A
Cisco Systems, Inc. ..... 1.7% ........ 0.8%
BankAmerica Corp. ....... 1.7% ........ 0.6%
</TABLE>
N/A = Not Applicable
TOP FIVE HOLDINGS BY SECTOR AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<S> <C>
AS OF DECEMBER 31, 1998
Finance ......................................... 19%
Technology ...................................... 18%
Health Care ..................................... 14%
Utilities ....................................... 11%
Consumer Non-Durables ........................... 8%
AS OF JUNE 30, 1998
Technology ...................................... 17%
Finance ......................................... 16%
Health Care ..................................... 13%
Utilities ....................................... 11%
Consumer Non-Durables ........................... 9%
</TABLE>
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 98.8%
CONSUMER DISTRIBUTION 7.1%
Albertsons, Inc............................................. 79,200 $ 5,044,050
Cardinal Health, Inc........................................ 105,000 7,966,875
CompUSA, Inc. (a)........................................... 506,800 6,620,075
CVS Corp.................................................... 80,000 4,400,000
Dayton Hudson Corp.......................................... 592,900 32,164,825
Family Dollar Stores, Inc................................... 396,000 8,712,000
Federated Department Stores, Inc. (a)....................... 389,000 16,945,812
Home Depot, Inc............................................. 110,000 6,730,625
Kroger Co. (a).............................................. 113,800 6,884,900
Lowe's Cos., Inc............................................ 482,900 24,718,444
McKesson Corp............................................... 88,000 6,957,500
Payless ShoeSource, Inc. (a)................................ 97,900 4,638,013
Rite Aid Corp............................................... 155,000 7,682,188
Ross Stores, Inc............................................ 155,000 6,103,125
Safeway, Inc. (a)........................................... 275,500 16,788,281
Saks, Inc. (a).............................................. 181,200 5,719,125
Sears Roebuck & Co.......................................... 115,500 4,908,750
TJX Cos., Inc............................................... 1,113,000 32,277,000
Wal-Mart Stores, Inc........................................ 965,600 78,636,050
--------------
283,897,638
--------------
CONSUMER DURABLES 2.8%
DaimlerChrysler AG.......................................... 105,995 10,182,145
Dana Corp................................................... 436,000 17,821,500
Eaton Corp.................................................. 111,500 7,881,656
Ford Motor Co............................................... 947,300 55,594,669
General Motors Corp......................................... 195,000 13,954,687
Magna International, Inc., Class A.......................... 75,000 4,650,000
--------------
110,084,657
--------------
CONSUMER NON-DURABLES 8.0%
Anheuser-Busch Cos., Inc.................................... 722,300 47,400,937
Bestfoods................................................... 69,000 3,674,250
Borders Group, Inc. (a)..................................... 158,000 3,940,125
Coca-Cola Co................................................ 349,400 23,366,125
Colgate-Palmolive Co........................................ 81,800 7,597,175
ConAgra, Inc................................................ 494,700 15,583,050
Dial Corp................................................... 717,800 20,726,475
First Brands Corp........................................... 102,400 4,038,400
Heinz, H. J. & Co........................................... 363,500 20,583,187
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER NON-DURABLES (CONTINUED)
Jones Apparel Group, Inc. (a)............................... 93,000 $ 2,051,813
Kimberly Clark Corp......................................... 237,300 12,932,850
Liz Claiborne, Inc.......................................... 111,600 3,522,375
Loews Corp.................................................. 109,000 10,709,250
Philip Morris Cos., Inc..................................... 1,582,200 84,647,700
Procter & Gamble Co......................................... 118,700 10,838,794
Quaker Oats Co.............................................. 100,000 5,950,000
Sara Lee Corp............................................... 50,000 1,409,375
Tommy Hilfiger Corp. (a).................................... 307,700 18,462,000
Unilever NV -- ADR (Netherlands)............................ 203,100 16,844,606
V.F. Corp................................................... 155,100 7,270,313
--------------
321,548,800
--------------
CONSUMER SERVICES 5.2%
Brinker International, Inc. (a)............................. 489,000 14,119,875
Carnival Corp............................................... 82,900 3,979,200
CBS Corp.................................................... 246,000 8,056,500
Gannett Co., Inc............................................ 474,200 30,585,900
Hilton Hotels Corp.......................................... 241,500 4,618,688
Jacor Communications, Inc., Class A (a)..................... 120,000 7,725,000
Knight Ridder, Inc.......................................... 97,900 5,005,137
Metamor Worldwide, Inc. (a)................................. 131,000 3,275,000
New York Times Co., Class A................................. 380,800 13,209,000
Omnicom Group, Inc.......................................... 184,000 10,672,000
Promus Hotel Corp. (a)...................................... 96,800 3,133,900
Tele-Communications, Inc., Class A (a)...................... 1,342,400 74,251,500
Time Warner, Inc............................................ 144,200 8,949,400
Tribune Co.................................................. 181,000 11,946,000
Walt Disney Co.............................................. 290,000 8,700,000
--------------
208,227,100
--------------
ENERGY 5.2%
Amoco Corp.................................................. 676,800 40,861,800
Ashland, Inc................................................ 117,800 5,698,575
Atlantic Richfield Co....................................... 78,200 5,102,550
British Petroleum Co. PLC -- ADR (United Kingdom)........... 141,000 12,637,125
Chevron Corp................................................ 149,000 12,357,688
Coastal Corp................................................ 528,400 18,460,975
Columbia Energy Group....................................... 83,000 4,793,250
El Paso Energy Corp......................................... 282,700 9,841,494
Enron Corp.................................................. 130,000 7,418,125
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
Mobil Corp.................................................. 658,700 $ 57,389,237
Royal Dutch Petroleum Co. -- ADR (Netherlands).............. 355,000 16,995,625
Texaco, Inc................................................. 108,000 5,710,500
Total SA -- ADR (France).................................... 84,000 4,179,000
USX -- Marathon Group....................................... 170,100 5,124,263
YPF Sociedad Anonima, Class D -- ADR (Argentina)............ 131,500 3,673,780
--------------
210,243,987
--------------
FINANCE 18.5%
Allstate Corp............................................... 735,000 28,389,375
AMBAC Financial Group, Inc.................................. 413,900 24,911,606
American Bankers Insurance Group, Inc....................... 307,300 14,865,637
American Express Co......................................... 294,000 30,061,500
American General Corp....................................... 212,000 16,536,000
American International Group, Inc........................... 75,000 7,246,875
Associates First Capital Corp., Class A..................... 250,476 10,613,920
Banc One Corp............................................... 507,548 25,916,670
BankAmerica Corp............................................ 1,135,979 68,300,737
BankBoston Corp............................................. 317,600 12,366,550
Bear Stearns Cos., Inc...................................... 339,950 12,705,631
Chase Manhattan Corp........................................ 758,500 51,625,406
CIGNA Corp.................................................. 284,300 21,979,944
Citigroup, Inc.............................................. 1,035,225 51,243,637
CMAC Investment Corp........................................ 295,400 13,569,937
Comerica, Inc............................................... 75,000 5,114,063
Conseco, Inc................................................ 408,160 12,474,390
Countrywide Credit Industries, Inc.......................... 270,000 13,550,625
Edwards A G, Inc............................................ 78,800 2,935,300
Equitable Cos., Inc......................................... 80,000 4,630,000
Federal Home Loan Mortgage Corp............................. 168,400 10,851,275
Federal National Mortgage Assn.............................. 884,700 65,467,800
First Union Corp............................................ 560,496 34,085,163
Fleet Financial Group, Inc.................................. 366,400 16,373,500
Household International, Inc................................ 147,700 5,852,613
Jefferson-Pilot Corp........................................ 25,000 1,875,000
LandAmerica Financial Group, Inc............................ 93,200 5,201,725
Liberty Financial Cos., Inc................................. 24,250 654,750
Lincoln National Corp....................................... 25,000 2,045,313
Marsh & McLennan Cos., Inc.................................. 84,300 4,926,281
MBIA, Inc................................................... 84,000 5,507,250
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
Merrill Lynch & Co., Inc.................................... 89,000 $ 5,940,750
MGIC Investment Corp........................................ 156,200 6,218,713
Nationwide Financial Services, Inc., Class A................ 56,800 2,935,850
SouthTrust Corp............................................. 77,500 2,862,656
St. Paul Cos., Inc.......................................... 25,000 868,750
SunAmerica, Inc............................................. 242,050 19,636,306
SunTrust Banks, Inc......................................... 220,900 16,898,850
Torchmark, Inc.............................................. 210,300 7,426,219
U.S. Bancorp................................................ 250,000 8,875,000
United Asset Management Corp................................ 213,300 5,545,800
Van Kampen Small Capitalization Fund (an affiliate of Van
Kampen)................................................... 5,967,402 60,151,436
Waddell & Reed Financial, Inc., Class B..................... 51,502 1,197,422
Washington Mutual, Inc...................................... 336,656 12,856,051
Wells Fargo & Co............................................ 260,200 10,391,738
--------------
743,684,014
--------------
HEALTHCARE 14.2%
Abbott Laboratories, Inc.................................... 299,000 14,651,000
Aetna, Inc.................................................. 173,200 13,617,850
American Home Products Corp................................. 617,000 34,744,812
Bausch & Lomb, Inc.......................................... 246,200 14,772,000
Becton Dickinson & Co....................................... 286,000 12,208,625
Bristol-Myers Squibb Co..................................... 692,400 92,651,775
Guidant Corp................................................ 143,800 15,853,950
HBO & Co.................................................... 260,000 7,458,750
HCR Manor Care, Inc. (a).................................... 176,000 5,170,000
Health Management Assn., Inc., Class A (a).................. 60,750 1,313,719
HEALTHSOUTH Corp. (a)....................................... 598,600 9,240,888
Johnson & Johnson, Inc...................................... 282,100 23,661,137
Lincare Holdings, Inc. (a).................................. 321,200 13,028,675
Merck & Co., Inc............................................ 297,400 43,922,262
Mylan Laboratories, Inc..................................... 657,000 20,695,500
PacifiCare Health Systems, Class B (a)...................... 158,800 12,624,600
Pfizer, Inc................................................. 250,800 31,459,725
Pharmacia & Upjohn, Inc..................................... 111,000 6,285,375
Rhone-Poulenc, SA, Class A -- ADR (France).................. 275,600 13,848,900
Schering-Plough Corp........................................ 966,000 53,371,500
Tenet Healthcare Corp. (a).................................. 868,700 22,803,375
Universal Health Services, Inc., Class B (a)................ 177,000 9,181,875
Warner-Lambert Co........................................... 820,500 61,691,344
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
Watsons Pharmaceuticals, Inc. (a)........................... 218,000 $ 13,706,750
Wellpoint Health Networks, Inc., Class A (a)................ 256,500 22,315,500
--------------
570,279,887
--------------
PRODUCER MANUFACTURING 5.7%
AlliedSignal, Inc........................................... 39,700 1,759,206
Alstom SA -- ADR (France) (a)............................... 48,300 1,122,975
American Power Conversion Corp. (a)......................... 158,300 7,667,656
Canadian Pacific Ltd........................................ 295,000 5,568,125
Caterpillar, Inc............................................ 75,000 3,450,000
Cognex Corp. (a)............................................ 291,900 5,838,000
Deere & Co.................................................. 164,300 5,442,438
General Electric Co......................................... 896,400 91,488,825
Hartford Financial Services Group, Inc...................... 90,000 4,938,750
Illinois Tool Works, Inc.................................... 54,000 3,132,000
Ingersoll-Rand Co........................................... 315,700 14,818,169
Johnson Controls, Inc....................................... 78,000 4,602,000
Paccar, Inc................................................. 50,000 2,056,250
Textron, Inc................................................ 191,000 14,504,063
The St. Joe Co.............................................. 60,800 1,425,000
Tyco International Ltd...................................... 269,745 20,348,888
United States Filter Corp. (a).............................. 198,200 4,533,825
United Technologies Corp.................................... 225,700 24,544,875
Waste Management, Inc....................................... 283,200 13,204,200
--------------
230,445,245
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 3.0%
Air Products & Chemicals, Inc............................... 82,200 3,288,000
Bethlehem Steel Corp. (a)................................... 239,800 2,008,325
Boise Cascade Corp.......................................... 244,600 7,582,600
British Steel PLC -- ADR (United Kingdom)................... 773,000 11,305,125
Dow Chemical Co............................................. 65,000 5,910,937
Exxon Corp.................................................. 1,006,800 73,622,250
Goodrich (B.F.) Co.......................................... 20,000 717,500
Goodyear Tire & Rubber Co................................... 102,300 5,159,756
Louisiana Pacific Corp...................................... 390,300 7,147,369
Mead Corp................................................... 125,000 3,664,063
--------------
120,405,925
--------------
TECHNOLOGY 18.2%
Autodesk Inc................................................ 30,000 1,280,625
Avnet, Inc.................................................. 57,600 3,484,800
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
BMC Software, Inc. (a)...................................... 265,600 $ 11,835,800
Cadence Design Systems, Inc. (a)............................ 145,000 4,313,750
Cisco Systems, Inc. (a)..................................... 744,150 69,066,422
Compaq Computer Corp........................................ 633,800 26,579,987
Computer Associates International, Inc...................... 412,950 17,601,994
Computer Sciences Corp. (a)................................. 176,300 11,360,331
Compuware Corp. (a)......................................... 386,000 30,156,250
Dell Computer Corp. (a)..................................... 337,800 24,722,737
EMC Corp. (a)............................................... 219,200 18,632,000
Gateway 2000, Inc. (a)...................................... 356,800 18,263,700
General Dynamics Corp....................................... 233,000 13,659,625
Harris Corp................................................. 138,500 5,072,563
Hewlett-Packard Co.......................................... 420,900 28,752,731
Intel Corp.................................................. 688,400 81,618,425
International Business Machines Corp........................ 137,000 25,310,750
Keane, Inc. (a)............................................. 95,300 3,806,044
Lockheed Martin Corp........................................ 366,000 31,018,500
Lucent Technologies, Inc.................................... 283,800 31,218,000
Microsoft Corp. (a)......................................... 1,021,900 141,724,756
Networks Associates, Inc. (a)............................... 119,050 7,887,063
Nokia Corp. -- ADR (Finland) (a)............................ 93,500 11,260,906
Northern Telecom Ltd........................................ 240,500 12,055,062
Northrop Grumman Corp....................................... 40,000 2,925,000
Oracle Corp. (a)............................................ 255,700 11,027,062
Peoplesoft, Inc. (a)........................................ 451,800 8,555,963
Quantum Corp. (a)........................................... 162,100 3,444,625
SCI Systems, Inc. (a)....................................... 18,000 1,039,500
Sterling Software, Inc. (a)................................. 185,000 5,006,563
Sun Microsystems, Inc. (a).................................. 262,500 22,476,562
Sundstrand Corp............................................. 80,000 4,150,000
SunGard Data Systems, Inc. (a).............................. 570,900 22,657,594
Tellabs, Inc. (a)........................................... 51,500 3,530,969
Thomas & Betts Corp......................................... 40,000 1,732,500
Xerox Corp.................................................. 99,000 11,682,000
--------------
728,911,159
--------------
TRANSPORTATION 0.4%
AMR Corp. (a)............................................... 172,100 10,218,438
Canadian National Railway Co................................ 108,100 5,607,688
--------------
15,826,126
--------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES 10.5%
ALLTEL Corp................................................. 44,000 $ 2,631,750
Ameritech Corp.............................................. 902,700 57,208,612
AT & T Corp................................................. 175,000 13,168,750
Baltimore Gas & Electric Co................................. 62,100 1,917,338
BEC Energy.................................................. 431,000 17,751,812
Bell Atlantic Corp.......................................... 450,500 25,594,031
BellSouth Corp.............................................. 917,400 45,755,325
CMS Energy Group............................................ 245,400 11,886,563
DTE Energy Co............................................... 254,000 10,890,250
Edison International........................................ 93,000 2,592,375
FPL Group, Inc.............................................. 150,000 9,243,750
GPU, Inc.................................................... 303,700 13,419,744
GTE Corp.................................................... 871,400 58,765,038
Houston Industries, Inc..................................... 548,700 17,626,987
Idacorp Inc................................................. 308,900 11,178,319
Illinova Corp............................................... 198,300 4,957,500
NIPSCO Industries, Inc...................................... 92,500 2,815,469
Northern States Power Co. MN................................ 226,800 6,293,700
OGE Energy Corp............................................. 514,200 14,911,800
PacifiCorp.................................................. 146,700 3,089,869
Pinnacle West Capital Corp.................................. 373,000 15,805,875
Public Service Co. of New Mexico............................ 478,000 9,769,125
SBC Communications, Inc..................................... 491,000 26,329,875
Texas Utilities Co.......................................... 426,300 19,902,881
U.S. West, Inc.............................................. 253,100 16,356,587
--------------
419,863,325
--------------
TOTAL LONG-TERM INVESTMENTS 98.8%
(Cost $2,873,913,478)................................................ 3,963,417,863
REPURCHASE AGREEMENT 0.7%
BA Securities, ($30,460,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 12/31/98, to be sold on
01/04/99 at $30,555,278)
(Cost $30,460,000)................................................... 30,460,000
--------------
TOTAL INVESTMENTS 99.5%
(Cost $2,904,373,478)................................................ 3,993,877,863
OTHER ASSETS IN EXCESS OF LIABILITIES 0.5%............................ 18,849,631
--------------
NET ASSETS 100.0%..................................................... $4,012,727,494
==============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
16
<PAGE> 18
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $2,904,373,478)..................... $3,993,877,863
Receivables:
Fund Shares Sold.......................................... 110,948,199
Investments Sold.......................................... 4,557,929
Dividends................................................. 4,514,970
Other....................................................... 74,929
--------------
Total Assets.......................................... 4,113,973,890
--------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 55,832,180
Investments Purchased..................................... 39,771,827
Distributor and Affiliates................................ 2,467,242
Investment Advisory Fee................................... 1,393,595
Accrued Expenses............................................ 1,442,949
Trustees' Deferred Compensation and Retirement Plans........ 338,603
--------------
Total Liabilities..................................... 101,246,396
--------------
NET ASSETS.................................................. $4,012,727,494
==============
NET ASSETS CONSIST OF:
Capital..................................................... $2,805,398,276
Net Unrealized Appreciation................................. 1,089,504,385
Accumulated Net Realized Gain............................... 115,694,767
Accumulated Undistributed Net Investment Income............. 2,130,066
--------------
NET ASSETS.................................................. $4,012,727,494
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $3,852,939,286 and 268,821,779 shares of
beneficial interest issued and outstanding)........... $ 14.33
Maximum sales charge (5.75%* of offering price)......... .87
--------------
Maximum offering price to public........................ $ 15.20
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $146,086,665 and 10,309,018 shares of
beneficial interest issued and outstanding)........... $ 14.17
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $13,701,543 and 964,954 shares of
beneficial interest issued and outstanding)........... $ 14.20
==============
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
17
<PAGE> 19
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ($658,486 from affiliates of Van Kampen).......... $ 25,347,998
Interest.................................................... 2,241,435
--------------
Total Income............................................ 27,589,433
--------------
EXPENSES:
Investment Advisory Fee..................................... 7,854,291
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $3,899,262, $657,211 and $53,173,
respectively)............................................. 4,609,646
Shareholder Services........................................ 2,055,933
Custody..................................................... 119,144
Legal....................................................... 98,571
Trustees' Fees and Expenses................................. 27,854
Other....................................................... 811,349
--------------
Total Expenses.......................................... 15,576,788
--------------
NET INVESTMENT INCOME....................................... $ 12,012,645
==============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments ($4,040,908 from affiliates of Van Kampen).... $ 154,684,661
--------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 1,051,496,847
End of the Period:
Investments............................................... 1,089,504,385
--------------
NET UNREALIZED APPRECIATION DURING THE PERIOD............... 38,007,538
--------------
NET REALIZED AND UNREALIZED GAIN............................ $ 192,692,199
==============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 204,704,844
==============
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1998 and
the Year Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1998 June 30, 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................. $ 12,012,645 $ 27,007,529
Net Realized Gain...................................... 154,684,661 451,337,264
Net Unrealized Appreciation During the Period.......... 38,007,538 428,309,061
-------------- ---------------
Change in Net Assets from Operations................... 204,704,844 906,653,854
-------------- ---------------
Distributions from Net Investment Income:
Class A Shares....................................... (24,880,534) (30,092,754)
Class B Shares....................................... -0- (375,733)
Class C Shares....................................... -0- (25,654)
-------------- ---------------
(24,880,534) (30,494,141)
-------------- ---------------
Distributions from Net Realized Gain:
Class A Shares....................................... (295,692,117) (507,041,781)
Class B Shares....................................... (11,171,729) (16,529,561)
Class C Shares....................................... (972,116) (1,128,369)
-------------- ---------------
(307,835,962) (524,699,711)
-------------- ---------------
Total Distributions.................................... (332,716,496) (555,193,852)
-------------- ---------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (128,011,652) 351,460,002
-------------- ---------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.............................. 3,610,052,028 1,921,901,750
Net Asset Value of Shares Issued Through Dividend
Reinvestment......................................... 309,004,515 515,581,788
Cost of Shares Repurchased............................. (3,591,763,100) (2,070,189,122)
-------------- ---------------
Net Change in Net Assets from Capital Transactions..... 327,293,443 367,294,416
-------------- ---------------
TOTAL INCREASE IN NET ASSETS........................... 199,281,791 718,754,418
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 $2,130,066 and $14,997,955,
respectively)........................................ $4,012,727,494 $ 3,813,445,703
============== ===============
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
Six Months Ended -----------------------------------------
Class A Shares December 31, 1998 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........ .053 .122 .132 .12 .14
Net Realized and Unrealized
Gain....................... .669 3.541 3.191 2.09 1.85
-------- -------- -------- -------- --------
Total from Investment
Operations................... .722 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....................... $ 14.333 $ 14.971 $ 13.872 $ 11.92 $ 11.62
======== ======== ======== ======== ========
Total Return (b)............... 5.28%* 29.89% 30.06% 20.48% 20.62%
Net Assets at End of the Period
(In millions)................ $3,852.9 $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).... .69% .80% 1.01% 1.02% 1.24%
Portfolio Turnover............. 44%* 67% 144% 213% 248%
</TABLE>
* Non-Annualized
(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
20
<PAGE> 22
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
Six Months Ended ----------------------------------------
Class B Shares December 31, 1998 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............... (.010) .045 .046 .02 .05
Net Realized and Unrealized Gain.... .669 3.466 3.151 2.07 1.85
------- ------- ------- ------- -------
Total from Investment Operations.... .659 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............................ $14.171 $14.766 $13.730 $ 11.81 $ 11.53
======= ======= ======= ======= =======
Total Return (b).................... 4.87%* 28.92% 29.08% 19.44% 19.73%
Net Assets at End of the Period (In
millions)......................... $ 146.1 $ 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)............ (.09%) .03% .23% .21% .44%
Portfolio Turnover.................. 44%* 67% 144% 213% 248%
</TABLE>
* Non-Annualized
(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. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
Six Months Ended -------------------------------------
Class C Shares December 31, 1998 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............... (.014) .028 .036 .02 .05
Net Realized and Unrealized Gain.... .680 3.482 3.163 2.10 1.81
----------- ------- ------- ------ -------
Total from Investment Operations.... .666 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............................ $14.199 $14.787 $13.752 $11.83 $ 11.52
=========== ======= ======= ====== =======
Total Return (b).................... 4.93%* 28.87% 29.04% 19.74% 19.27%
Net Assets at End of the Period (In
millions)......................... $ 13.7 $ 11.7 $ 7.0 $ 4.5 $ 2.2
Ratio of Expenses to Average Net
Assets (c)........................ 1.62% 1.66% 1.74% 1.75% 1.84%
Ratio of Net Investment Income to
Average Net Assets (c)............ (.09%) .04% .23% .15% .44%
Portfolio Turnover.................. 44%* 67% 144% 213% 248%
</TABLE>
* Non-Annualized
(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
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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 six months ended December 31, 1998. 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
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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. Discounts on debt securities
purchased are amortized over the expected life of each applicable security.
Premiums on debt securities are not amortized. 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 December 31, 1998, for federal income tax purposes, cost of long- and
short-term investments is $2,911,107,949; the aggregate gross unrealized
appreciation is $1,153,817,059 and the aggregate gross unrealized depreciation
is $71,047,145, resulting in net unrealized appreciation on long- and short-term
investments of $1,082,769,914.
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.
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE 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 six months ended December 31, 1998, the Fund recognized expenses of
approximately $98,600 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 December 31, 1998, the Fund recognized expenses of
approximately $457,000 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 six months ended
December 31, 1998, the Fund recognized expenses of approximately $1,679,700.
Beginning in 1998, the 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.
At December 31, 1998, the Fund owned 100% of the Van Kampen Small
Capitalization Fund. This entity does not charge an investment advisory fee or
sales charge
25
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
and the shares of this entity may only be purchased by other funds in the Van
Kampen fund complex.
<TABLE>
<CAPTION>
TRANSACTIONS
DURING THE PERIOD
% OF ---------------------
NET ASSETS AT COST OF PROCEEDS
DECEMBER 31, 1998 PURCHASES OF SALES
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Small Capitalization Fund........ 1.50% -0- -0-
</TABLE>
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At December 31, 1998, capital aggregated $2,667,785,960, $125,568,185 and
$12,044,131 for Classes A, B, and C, respectively. For the six months ended
December 31, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................. 248,059,825 $ 3,450,066,206
Class B................................. 9,609,406 130,821,092
Class C................................. 2,111,380 29,164,730
------------ ---------------
Total Sales............................... 259,780,611 $ 3,610,052,028
============ ===============
Dividend Reinvestment:
Class A................................. 21,854,091 $ 297,652,697
Class B................................. 776,995 10,466,118
Class C................................. 65,607 885,700
------------ ---------------
Total Dividend Reinvestment............... 22,696,693 $ 309,004,515
============ ===============
Repurchases:
Class A................................. (245,661,253) $(3,432,638,487)
Class B................................. (9,576,254) (131,416,073)
Class C................................. (2,005,405) (27,708,540)
------------ ---------------
Total Repurchases......................... (257,242,912) $(3,591,763,100)
============ ===============
</TABLE>
26
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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>
27
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended December 31, 1998, Van Kampen, as Distributor for
the Fund, received commissions on sales of the Fund's Class A shares of
approximately $176,200 and CDSC on redeemed shares of approximately $90,900.
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 $1,565,590,954 and $1,556,201,576,
respectively.
5. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the six months ended December 31, 1998, are payments retained by Van Kampen
of approximately $681,900.
28
<PAGE> 30
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
29
<PAGE> 31
VAN KAMPEN PACE FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
PAUL G. YOVOVICH
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
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 June 30, 1999, the report, if used with prospective
investors, must be accompanied by a quarterly performance update.
30
<PAGE> 32
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.
31
<PAGE> 33
VAN KAMPEN FUNDS
YOUR NOTES:
32
<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> DEC-31-1998
<INVESTMENTS-AT-COST> 2,904,373,478<F1>
<INVESTMENTS-AT-VALUE> 3,993,877,863<F1>
<RECEIVABLES> 120,021,098<F1>
<ASSETS-OTHER> 74,929<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 4,113,973,890<F1>
<PAYABLE-FOR-SECURITIES> 39,771,827<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 61,474,569<F1>
<TOTAL-LIABILITIES> 101,246,396<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,667,785,960
<SHARES-COMMON-STOCK> 268,821,779
<SHARES-COMMON-PRIOR> 244,569,116
<ACCUMULATED-NII-CURRENT> 2,130,066<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 115,694,767<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,089,504,385<F1>
<NET-ASSETS> 3,852,939,286
<DIVIDEND-INCOME> 25,347,998<F1>
<INTEREST-INCOME> 2,241,435<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (15,576,788)<F1>
<NET-INVESTMENT-INCOME> 12,012,645<F1>
<REALIZED-GAINS-CURRENT> 154,684,661<F1>
<APPREC-INCREASE-CURRENT> 38,007,538<F1>
<NET-CHANGE-FROM-OPS> 204,704,844<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (24,880,534)
<DISTRIBUTIONS-OF-GAINS> (295,692,117)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 248,059,825
<NUMBER-OF-SHARES-REDEEMED> (245,661,253)
<SHARES-REINVESTED> 21,854,091
<NET-CHANGE-IN-ASSETS> 191,489,739
<ACCUMULATED-NII-PRIOR> 14,997,955<F1>
<ACCUMULATED-GAINS-PRIOR> 268,846,068<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 7,854,291<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 15,576,788<F1>
<AVERAGE-NET-ASSETS> 3,450,774,517
<PER-SHARE-NAV-BEGIN> 14.971
<PER-SHARE-NII> 0.053
<PER-SHARE-GAIN-APPREC> 0.669
<PER-SHARE-DIVIDEND> (0.106)
<PER-SHARE-DISTRIBUTIONS> (1.254)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.333
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<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> DEC-31-1998
<INVESTMENTS-AT-COST> 2,904,373,478<F1>
<INVESTMENTS-AT-VALUE> 3,993,877,863<F1>
<RECEIVABLES> 120,021,098<F1>
<ASSETS-OTHER> 74,929<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 4,113,973,890<F1>
<PAYABLE-FOR-SECURITIES> 39,771,827<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 61,474,569<F1>
<TOTAL-LIABILITIES> 101,246,396<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 125,568,185
<SHARES-COMMON-STOCK> 10,309,018
<SHARES-COMMON-PRIOR> 9,498,871
<ACCUMULATED-NII-CURRENT> 2,130,066<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 115,694,797<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,089,504,385<F1>
<NET-ASSETS> 146,086,665
<DIVIDEND-INCOME> 25,347,998<F1>
<INTEREST-INCOME> 2,241,435<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (15,576,788)<F1>
<NET-INVESTMENT-INCOME> 12,012,645<F1>
<REALIZED-GAINS-CURRENT> 154,684,661<F1>
<APPREC-INCREASE-CURRENT> 38,007,538<F1>
<NET-CHANGE-FROM-OPS> 204,704,844<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (11,171,729)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,609,406
<NUMBER-OF-SHARES-REDEEMED> (9,576,254)
<SHARES-REINVESTED> 776,995
<NET-CHANGE-IN-ASSETS> 5,822,040
<ACCUMULATED-NII-PRIOR> 14,997,955<F1>
<ACCUMULATED-GAINS-PRIOR> 268,846,068<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 7,854,291<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 15,576,788<F1>
<AVERAGE-NET-ASSETS> 130,288,641
<PER-SHARE-NAV-BEGIN> 14.766
<PER-SHARE-NII> (0.010)
<PER-SHARE-GAIN-APPREC> 0.669
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (1.254)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.171
<EXPENSE-RATIO> 1.61
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<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> DEC-31-1998
<INVESTMENTS-AT-COST> 2,904,373,478<F1>
<INVESTMENTS-AT-VALUE> 3,993,877,863<F1>
<RECEIVABLES> 120,021,098<F1>
<ASSETS-OTHER> 74,929<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 4,113,973,890<F1>
<PAYABLE-FOR-SECURITIES> 39,771,827<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 61,474,569<F1>
<TOTAL-LIABILITIES> 101,246,396<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,044,131
<SHARES-COMMON-STOCK> 964,954
<SHARES-COMMON-PRIOR> 793,372
<ACCUMULATED-NII-CURRENT> 2,130,066<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 115,694,767<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,089,504,385<F1>
<NET-ASSETS> 13,701,543
<DIVIDEND-INCOME> 25,347,998<F1>
<INTEREST-INCOME> 2,241,435<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (15,576,788)<F1>
<NET-INVESTMENT-INCOME> 12,012,645<F1>
<REALIZED-GAINS-CURRENT> 154,684,661<F1>
<APPREC-INCREASE-CURRENT> 38,007,538<F1>
<NET-CHANGE-FROM-OPS> 204,704,844<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (972,116)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,111,380
<NUMBER-OF-SHARES-REDEEMED> (2,005,405)
<SHARES-REINVESTED> 65,607
<NET-CHANGE-IN-ASSETS> 1,970,012
<ACCUMULATED-NII-PRIOR> 14,997,955<F1>
<ACCUMULATED-GAINS-PRIOR> 268,846,068<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 7,854,291<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 15,576,788<F1>
<AVERAGE-NET-ASSETS> 10,537,909
<PER-SHARE-NAV-BEGIN> 14.787
<PER-SHARE-NII> (0.014)
<PER-SHARE-GAIN-APPREC> 0.680
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (1.254)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.199
<EXPENSE-RATIO> 1.62
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
