<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders......................... 1
Performance Results............................ 3
Performance in Perspective..................... 4
Glossary of Terms.............................. 5
Portfolio Management Review.................... 6
Portfolio Highlights........................... 9
Portfolio of Investments....................... 10
Statement of Assets and Liabilities............ 13
Statement of Operations........................ 14
Statement of Changes in Net Assets............. 15
Financial Highlights........................... 16
Notes to Financial Statements.................. 19
Report of Independent Accountants.............. 25
</TABLE>
UTLF ANR 8/98
<PAGE> 2
LETTER TO SHAREHOLDERS
July 15, 1998
Dear Shareholder,
As you may know, Van Kampen
American Capital is consolidating all
of the retail mutual funds that we
distribute under the single name of
Van Kampen Funds. This move
accompanies the change in our legal [PHOTO]
name to Van Kampen Funds Inc.
You can be assured that the change
in your fund's name will not affect DENNIS J. MCDONNELL AND DON G. POWELL
its management or daily operations.
You will begin seeing the application
of this change with this report. In addition, as of August 31, your fund will be
listed in the daily newspapers by share class under the heading "Van Kampen
Funds." For your convenience, we have enclosed a separate brochure that covers
additional details related to these changes.
ECONOMIC OVERVIEW
The U.S. economy continued to expand at a robust pace despite a deepening
recession in a number of Asian nations. The nation's inflation-adjusted output
of goods and services ran at 5.4 percent during the first quarter, an annualized
rate considered by many economists to be virtually unsustainable without leading
to inflation. As the reporting period ended, however, there were indications
that the Asian financial crisis was finally having a moderating impact on the
economy. Also, the Conference Board's index of leading indicators points toward
a slowdown in economic growth later this year.
Despite the generally solid pace of economic activity, inflation remained
benign. Consumer prices rose by 1.7 percent during the 12 months through June,
while producer prices actually declined during the same period. Falling
commodity prices and the impact of the strong dollar helped to offset the
inflationary implications of a tight labor market and strong consumer spending.
While the Federal Reserve kept short-term interest rates steady at 5.5
percent during the reporting period, minutes from the central bank's May policy
meeting indicated growing sentiment for tightening monetary policy if the drag
from Asia does not slow the American economy on its own.
MARKET REVIEW
U.S. stocks continued to post gains during the period, but the sharp
variation in returns across industry groups reflected the growing impact of the
Asian financial crisis on corporate profits. The Wilshire 5000 Index, consisting
of all publicly traded U.S. companies, gained 14.68 percent during the first six
months of 1998. Once again, most
Continued on page two
1
<PAGE> 3
of the strength was concentrated in large-capitalization companies, as the S&P
500 Index of large stocks returned 17.67 percent during the period compared to
4.93 percent for the Russell 2000 Index of small-cap issues. Even large stocks,
however, fell back significantly beginning in April as the Asian crisis
intensified.
Companies with heavy exposure to domestic consumers benefited from a strong
American economy, especially during the latter stages of the reporting period.
Consumer cyclical stocks returned 28.94 percent during the first six months of
1998, compared to 6.35 percent for basic materials and 3.01 percent for energy
issues. Eight of the ten top-performing industry groups during the second
quarter were from consumer-related sectors. Meanwhile, the steep decline in
energy and agricultural prices--a consequence of reduced demand from
Asia--undermined the performance of commodity-related stocks. During the three
months through June, five of the ten worst-performing industry sectors were from
either energy, metals, or commodity-based industries.
OUTLOOK
We believe economic growth in the United States is likely to slow in coming
months as the impact of the Asian crisis becomes more apparent. As growth
decelerates, corporate profits will come under pressure, especially among large
companies. Given the difficult year-over-year earnings comparisons that will
begin to appear in coming quarters, we caution investors not to expect a
continuation of the large gains that have become almost routine for U.S. stocks
in recent years. The high valuations and decelerating profit growth could limit
returns in the equity market over the near term.
Still, the overall environment for equities remains positive. Inflation is
low, the economy continues to grow, the bond market is healthy, and monetary
policy is stable. These characteristics usually support relatively high
valuations in the stock market. We remain confident that the domestic equity
asset class will continue to provide solid growth for investors with a long-term
time horizon.
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 serve you and your family through our
diverse menu of quality investments.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1998
VAN KAMPEN UTILITY FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
One-year total return based on NAV(1).... 28.17% 27.20% 27.14%
One-year total return(2)................. 20.82% 23.20% 26.14%
Life-of-Fund average annual total
return(2)................................ 10.71% 10.98% 11.04%
Commencement date........................ 07/28/93 07/28/93 08/13/93
</TABLE>
(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 (4% 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 Fund Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. This performance was achieved during generally
rising stock prices. Fund shares, when redeemed, may be worth more or less than
their original cost.
Because the Fund concentrates investments in the utility industry, it may be
more susceptible to any economic, political or regulatory occurrence effecting
this industry. Foreign securities involve the risk of fluctuations in foreign
exchange rates, future political and economic developments. Lower-rated
securities are referred to as "junk bonds"' and are considered speculative with
regards to payment of interest and principal.
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 portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:
- Illustrate the general market environment in which your investments are
being managed
- Reflect the impact of favorable market trends or difficult market
conditions
- Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over the
period measured
For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Standard & Poor's 40 Utilities
Index over time. As a broad-based, statistical composite, this index does not
reflect any commissions which would be incurred by an Investor purchasing the
securities it represents. Similarly, its performance does not reflect any other
costs which would be applicable to an actively managed portfolio, such as that
of the Fund.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Utility Fund vs. Standard & Poor's 40 Utilities Index
(July 28, 1993 through June 30, 1998)
[GRAPH]
<TABLE>
<CAPTION>
Measurement Period Van Kampen S&P'S 40
(Fiscal Year Covered) Utility Fund Utilities Index
<S> <C> <C>
7/28/93 9427 10000
8/31/93 9848 10443
9/30/93 9848 10504
10/31/93 9968 10441
11/30/93 9465 9871
12/31/93 9696 9908
1/31/94 9776 9938
2/28/94 9442 9333
3/31/94 8994 9094
4/30/94 9102 9274
5/31/94 8913 8982
6/30/94 8730 9093
7/31/94 9004 9355
8/31/94 9120 9285
9/30/94 8867 9138
10/31/94 9040 9172
11/30/94 8721 8993
12/31/94 8742 9128
1/31/95 8952 9794
2/28/95 9120 9734
3/31/95 9043 9759
4/30/95 9221 10068
5/31/95 9476 10341
6/30/95 9490 10481
7/31/95 9626 10702
8/31/95 9740 10871
9/30/95 10228 11650
10/31/95 10329 11879
11/30/95 10561 11994
12/31/95 10988 12946
1/31/96 11149 13064
2/29/96 11018 12499
3/31/96 11020 12335
4/30/96 10939 12421
5/31/96 10939 12340
6/30/96 11382 12952
7/31/96 10876 12082
8/31/96 11121 12284
9/30/96 11203 12552
10/31/96 11684 13093
11/30/96 12112 13313
12/31/96 12191 13348
1/31/97 12376 13381
2/28/97 12353 13197
3/31/97 11911 12902
4/30/97 11856 12652
5/31/97 12354 13130
6/30/97 12884 13654
7/31/97 13229 13910
8/31/97 12876 13596
9/30/97 13606 14306
10/31/97 13700 14385
11/30/97 14553 15343
12/31/97 15324 16619
1/31/98 15260 15901
2/28/98 15610 16381
3/31/98 16773 17544
4/30/98 16383 17143
5/31/98 16188 16996
6/30/98 16514 17752
- --------------------------------
Fund's Total Return
1 Year Avg. Annual = 20.82%
3 Year Avg. Annual = 17.92%
Inception Avg. Annual = 10.71%
- --------------------------------
</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
GLOSSARY OF TERMS
DEREGULATION: The process of allowing utility companies to engage in open
competition to offer customers new and expanded services, as ushered in by
revised state legislation.
DOW JONES INDUSTRIAL AVERAGE (DJIA): 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 FUNDS RATE: The interest rate charged by one financial institution
lending federal funds to another. This overnight rate is used to meet banks'
daily reserve requirements. The Federal Reserve Board uses the federal funds
rate to affect the direction of interest rates.
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 U.S.
INFLATION: An economic state in which the money supply and business activity
dramatically increase, accompanied by sharply rising prices. Inflation is widely
measured by the Consumer Price Index, a leading 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 its total assets and dividing this amount by the
number of shares outstanding. The NAV does not include any initial or contingent
deferred sales charge.
P/E RATIO: The price-to-earnings ratio shows the "multiple" of earnings at which
a stock is selling. The P/E ratio is calculated by dividing a stock's current
price by its current earnings per share. A high multiple means that investors
are optimistic about future growth and have bid up the stock's price.
REGIONAL BELL OPERATING COMPANIES (RBOCS): Local telephone service companies,
formed in 1984 after the break-up of "Ma Bell." Sometimes referred to as LECs,
or local exchange companies, RBOCs are currently able to compete with
long-distance companies to offer long-distance and international calls.
REAL ESTATE INVESTMENT TRUSTS (REITS): Publicly traded companies that own,
develop, and operate apartment complexes, hotels, office buildings, and other
commercial properties.
VALUATION: The estimated or determined worth of a stock, based on financial
measures such as the stock's current price relative to earnings, revenue, book
value, and cash flow.
5
<PAGE> 7
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN UTILITY FUND
We recently spoke with the management team of the Van Kampen Utility Fund about
the key events and economic forces that shaped the markets during the past 12
months. The team is led by Christine Drusch, portfolio manager, Matthew Hart,
portfolio comanager, and Dennis J. McDonnell, president of the adviser. The
following excerpts reflect their views on the Fund's performance during the
fiscal year ended June 30, 1998.
Q WHAT FACTORS HAD THE GREATEST IMPACT ON THE FUND DURING THE REPORTING
PERIOD?
A Two opposing factors influenced the stock market and captured investors'
attention. The currency crisis in Asia surfaced in the third quarter of
1997 and, in the course of the 12-month period, intermittently threatened
to disrupt the U.S. market. In spite of what was happening across the ocean, the
Dow Jones Industrial Average continued its climb, reaching new highs and wowing
investors. In April, the Dow crept over the coveted 9,000-point mark,
fluctuating within 200 points of the then-record high for the remainder of the
period. Stocks were alternately buoyed by steady domestic economic growth and
low inflation, and dashed by disappointing corporate earnings and concerns of
further damage from international woes.
In response to the volatility and confusion of this market, investors sought
safety and quality in Treasuries and other defensive investments, such as
utilities. In response, utility stocks turned in a very strong performance
during the period, with the Dow Jones Utility Index hitting a record high of
293.87 points in June.
Q HOW DID YOU MANAGE THE FUND IN RESPONSE TO THESE FACTORS?
A With interest rates falling throughout the period and a high premium on
low volatility, we increased the Fund's allocation in bonds. By the end of
the reporting period, 8.1 percent of the portfolio's assets were invested
in bonds, reinforcing the Fund's defensive posturing. Among the equity holdings
of the portfolio, we continued to search for opportunities for appreciation at
lower multiples.
We continued to decrease the Fund's position in the electric utility sector,
as electric power companies struggled to meet abnormally high demand in the
unseasonably warm spring and summer months. Additionally, some smaller power
marketers defaulted on power delivery contracts with utilities. As a result of
the defaults and sultry weather, power companies in the Midwest that had already
suffered outages due to severe storms were largely unable to provide enough
energy to meet demand. Foreshadowing what may occur in a deregulated utility
industry, the supply of power became very constrained and companies were forced
to buy electricity at enormous premiums from other generating
6
<PAGE> 8
companies. Many utilities were not able to recover the higher prices and
suffered enormous losses. As a result, we shifted our focus to high-quality,
well-integrated companies with proven track records of superior performance.
Texas-based Enron benefited from this increased price volatility. Enron was able
to deliver power to a high-demand customer base, and additionally reaped the
benefits of their power trading ability.
In the last six months of the reporting period, we maintained the Fund's
position in energy. Due to weak commodity prices, natural gas companies were a
negative force on the Fund's return. Although we reduced the Fund's holdings in
this sector, we're still bullish about the long-term prospects for natural gas.
There continues to be high demand for environmentally "clean" fuel.
Additionally, natural gas fueled power plants can meet peak power demands more
quickly than coal or nuclear power generating plants. Oil and gas distribution
companies also suffered due to a combination of a drop in prices caused by
oversupply, decreased demand from Asia, political turmoil among OPEC
participants, and an unseasonably warm winter. However, we foresee energy
companies finding solace from La Nina, the weather system that threatens to
impose the opposite effects of El Nino.
The Fund's best-performing industry was telecommunications, with
international companies providing some of the highest returns. The introduction
of wireless communications to foreign countries has presented significant
opportunities for growth: installation is less expensive than for traditional
fixed-phone lines, while demand has increased exponentially as more people
around the globe use computers and access the Internet. However, fixed-wire
networks are still more efficient in the transmission of large amounts of data,
so telecommunications equipment firms and service providers have experienced
increased growth in the face of higher demand. As a result, we increased the
Fund's holdings in these high-margin, high-growth companies. For additional Fund
portfolio highlights, please refer to page nine.
Q HOW DID THE FUND PERFORM DURING THE FISCAL YEAR?
A For the 12-month period ended June 30, 1998, the Fund generated a total
return of 28.17 percent(1) (Class A shares at net asset value). By
comparison, the Standard & Poor's 40 Utilities Index returned 30.01
percent, while the Lipper Utility Fund Index returned 26.33 percent for the
period. The S&P 40 Utilities Index is a broad-based, unmanaged index that
reflects the general performance of utility stocks and does not reflect any
commissions that would be paid by an investor purchasing the securities it
represents. The Lipper Utility Fund Index reflects the average performance of
utility funds and does not reflect any sales charges that would be paid by an
investor purchasing the securities it represents. Please refer to the chart on
page three for additional Fund performance results.
7
<PAGE> 9
Q WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A We expect the market to be challenging through the end of 1998. Although
the Dow has continued to set new record highs, estimates for 1998
corporate profits have been reduced. However, even though the turmoil in
Asia is causing a slowdown in global economic growth, the economy at home is
still relatively healthy. The job market is exceptionally tight, and while this
has not had a significant impact in the reported wage inflation data, it is a
reason for concern if continuing low unemployment gives rise to wage inflation.
Meanwhile, the Fed has also expressed some concern about the level of
appreciation in financial assets, particularly in the stock market. In spite of
the fact that the forces that determine interest rates seem to be coming from
all directions, our prediction is that the Fed may act to increase rates later
this year. This action could cause the market to give back some of its recent
gains, but, in the big picture, may forestall a return to an inflationary
environment.
Given our view on the broad equity market, we are conservatively
constructive about utilities. The defensive characteristics of utility
investments may make the Fund a good alternative for stock market investors who
are wary of the record-high Dow. As the effects of ongoing deregulation give
certain companies the opportunity to outperform while negatively impacting
others, we will be appropriately selective in adding new securities to the
portfolio. With a defensive portfolio of both stocks and bonds, we believe the
Utility Fund is well positioned to face the challenges of this market.
[SIG]
Christine Drusch
Portfolio Manager
[SIG]
Matthew Hart
Portfolio Comanager
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
Please see footnotes on page three
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS
VAN KAMPEN UTILITY FUND
PORTFOLIO HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOP TEN HOLDINGS THESE INVESTMENTS
AS OF JUNE 30, 1998 SIX MONTHS AGO(1)
<S> <C> <C>
Pinnacle West Capital Corp. ... 3.4% .............. 3.2%
Cable & Wireless, PLC-ADR
(United Kingdom)............. 3.4% .............. 2.5%
BEC Energy..................... 3.3% .............. N/A
BellSouth Corp. ............... 3.0% .............. 2.6%
CMS Energy Corp. .............. 2.9% .............. 3.3%
Ameritech Corp. ............... 2.9% .............. 2.6%
Firstenergy Corp............... 2.8% .............. 2.7%
SBC Communications, Inc. ...... 2.8% .............. 2.7%
Texas Utilities Co............. 2.8% .............. 1.9%
Florida Progress Corp. ........ 2.6% .............. 2.6%
</TABLE>
N/A = Not Applicable
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997(1)
<S> <C> <C> <C>
Electric Utilities........... 43.4% Electric Utilities........... 44.0%
Telecommunications........... 36.9% Telecommunications........... 33.4%
Oil, Gas, Pipeline and Oil, Gas, Pipeline and
Distribution............... 14.9% Distribution................. 13.3%
Natural Gas Pipeline and Real Estate Investment
Distribution............... 3.3% Trusts....................... 4.3%
Cable Television............. 1.5% Natural Gas Pipeline and
Distribution................. 3.5%
</TABLE>
ASSET ALLOCATION AS A PERCENTAGE OF TOTAL ASSETS
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997(1)
<S> <C> <S> <C>
Stocks.................................... 86.4% Stocks.................................... 87.1%
Bonds..................................... 8.1% Bonds..................................... 8.1%
Convertibles.............................. 2.3% PIE CHART Convertibles.............................. 1.0% PIE CHART
Cash and Short-Term Investments........... 2.6% Cash and Short-Term Investments........... 3.3%
Other..................................... 0.6% Other..................................... 0.5%
</TABLE>
(1)Unaudited
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
June 30, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 89.4%
ELECTRIC UTILITIES 40.9%
BEC Energy ................................................ 120,000 $ 4,980,000
Cinergy Corp. .............................................. 73,000 2,555,000
CMS Energy Group ........................................... 99,800 4,391,200
Consolidated Edison, Inc. .................................. 40,000 1,842,500
DTE Energy Co. ............................................. 50,000 2,018,750
Edison International ....................................... 26,200 774,538
Firstenergy Corp. .......................................... 138,000 4,243,500
Florida Progress Corp. ..................................... 96,000 3,948,000
FPL Group, Inc. ............................................ 36,800 2,318,400
GPU, Inc. .................................................. 85,675 3,239,586
Houston Industries, Inc. ................................... 114,800 3,544,450
Illinova Corp. ............................................. 80,500 2,415,000
New Century Energies, Inc. ................................. 79,000 3,589,562
Niagara Mohawk Power Corp. (a) ............................. 45,700 682,644
OGE Energy Corp. ........................................... 144,000 3,888,000
Pinnacle West Capital Corp. ................................ 111,600 5,022,000
Public Service Co. of New Mexico ........................... 110,000 2,495,625
Sierra Pacific Resources ................................... 100,000 3,631,250
Southern Co. ............................................... 87,100 2,411,581
Texas Utilities Co. ........................................ 73,800 3,071,925
Wisconsin Energy Corp. ..................................... 51,400 1,561,275
------------
62,624,786
------------
NATURAL GAS PIPELINE AND DISTRIBUTION 3.3%
Consolidated Natural Gas Co. ............................... 33,000 1,942,875
National Fuel Gas Co. NJ ................................... 31,000 1,350,438
Wicor, Inc. ................................................ 72,000 1,665,000
------------
4,958,313
------------
OIL, GAS, PIPELINE AND DISTRIBUTION 12.6%
Coastal Corp. .............................................. 54,000 3,769,875
Columbia Energy Corp. ...................................... 55,500 3,087,188
El Paso Energy Capital Trust 1 - Convertible Preferred ..... 41,750 2,212,750
El Paso Natural Gas Co. .................................... 100,000 3,825,000
Enron Corp. ................................................ 36,400 1,967,875
Nicor, Inc. ................................................ 50,000 2,006,250
Southwest Gas Corp. ........................................ 100,000 2,443,750
------------
19,312,688
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS 32.6%
Airtouch Communications, Inc. (a) .......................... 50,000 $ 2,921,875
Ameritech Corp. ............................................ 96,000 4,308,000
AT&T Corp. ................................................. 38,600 2,205,025
Bell Atlantic Corp. ........................................ 39,936 1,822,080
BellSouth Corp. ............................................ 67,000 4,497,375
Cable & Wireless, PLC - ADR (United Kingdom) ............... 136,000 5,015,000
China Telecom - ADR (China) (a) ............................ 82,000 2,834,125
Cincinnati Bell, Inc. ...................................... 41,000 1,173,625
France Telecom - ADR (France) .............................. 20,000 1,391,250
Nextlink Communications Incorporated - Convertible
Preferred, 144A - Private Placement (b) .................. 26,800 1,393,600
Portugal Telecom SA - ADR (Portugal) ....................... 52,600 2,784,512
SBC Communications, Inc. ................................... 106,000 4,240,000
Sprint Corp. ............................................... 23,400 1,649,700
Tele Denmark A/S - ADR (Denmark) ........................... 50,000 2,356,250
Telecom Italia S.P.A. ...................................... 37,000 2,719,500
Telecomunicacoes Brasileiras - ADR (Brazil) ................ 8,000 873,500
Teleport Communications Group, Class A (a) ................. 62,000 3,363,500
Telestra Corp. - ADR (Australia) (a) ....................... 11,700 593,775
U.S. West, Inc. ............................................ 81,000 3,807,000
------------
49,949,692
------------
TOTAL COMMON AND PREFERRED STOCKS 89.4%............................... 136,845,479
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIXED INCOME SECURITIES 8.1%
CABLE TELEVISION 1.4%
$1,000 Continental Cablevision, Inc. .................. 8.300% 05/15/06 $ 1,118,300
1,000 Cox Communications, Inc. ....................... 6.875 06/15/05 1,037,200
------------
2,155,500
------------
ELECTRIC UTILITIES 1.4%
1,000 Texas Utilities Electric Co. ................... 8.250 04/01/04 1,101,250
1,000 Union Electric Co. ............................. 7.375 12/15/04 1,072,855
------------
2,174,105
------------
OIL, GAS, PIPELINE AND DISTRIBUTION 1.9%
1,000 Enron Corp. .................................... 7.125 05/15/07 1,056,050
500 Panhandle Eastern Pipeline Co. ................. 7.875 08/15/04 545,450
100 Texas Eastern Transmission Corp. ............... 8.000 07/15/02 106,429
1,090 Texas Gas Transmission Corp. ................... 8.625 04/01/04 1,217,159
------------
2,925,088
------------
TELECOMMUNICATIONS 3.4%
1,000 360 Communications ............................. 7.125 03/01/03 1,037,900
1,000 Century Telephone Enterprises Inc. Senior Note
Series F ....................................... 6.300 01/15/08 989,800
900 GTE Corp. ...................................... 9.375 12/01/00 964,539
1,000 Sprint Corp. ................................... 8.125 07/15/02 1,068,320
1,000 Worldcom, Inc. ................................. 7.750 04/01/07 1,084,680
------------
5,145,239
------------
TOTAL FIXED INCOME SECURITIES............................................... 12,399,932
------------
TOTAL LONG-TERM INVESTMENTS 97.5%
(Cost $109,999,512)....................................................... 149,245,411
SHORT-TERM INVESTMENTS 2.6%
(Cost $4,034,383)......................................................... 4,034,383
------------
TOTAL INVESTMENTS 100.1%
(Cost $114,033,895)....................................................... 153,279,794
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%)............................... (229,849)
------------
NET ASSETS 100.0%.......................................................... $153,049,945
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $114,033,895)....................... $153,279,794
Cash........................................................ 808
Receivables:
Fund Shares Sold.......................................... 579,294
Interest.................................................. 204,653
Dividends................................................. 189,773
Unamortized Organizational Costs............................ 1,663
Other....................................................... 3,705
------------
Total Assets.......................................... 154,259,690
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 460,096
Fund Shares Repurchased................................... 307,442
Distributor and Affiliates................................ 182,341
Investment Advisory Fee................................... 81,787
Trustees' Deferred Compensation and Retirement Plans........ 107,012
Accrued Expenses............................................ 71,067
------------
Total Liabilities..................................... 1,209,745
------------
NET ASSETS.................................................. $153,049,945
============
NET ASSETS CONSIST OF:
Capital..................................................... $113,910,444
Net Unrealized Appreciation................................. 39,245,899
Accumulated Net Realized Loss............................... (48,816)
Accumulated Distributions in Excess of Net Investment
Income.................................................... (57,582)
------------
NET ASSETS.................................................. $153,049,945
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $60,414,092 and 3,421,515 shares of
beneficial interest issued and outstanding)............. $ 17.66
Maximum sales charge (5.75%* of offering price)......... 1.08
------------
Maximum offering price to public........................ $ 18.74
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $86,770,239 and 4,921,099 shares of
beneficial interest issued and outstanding)............. $ 17.63
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $5,865,614 and 332,912 shares of
beneficial interest issued and outstanding)............. $ 17.62
============
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................... $ 4,260,507
Interest.................................................... 1,219,948
-----------
Total Income............................................ 5,480,455
-----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $139,079, $835,949 and $52,350,
respectively)............................................. 1,027,378
Investment Advisory Fee..................................... 939,137
Shareholder Services........................................ 298,606
Trustees' Fees and Expenses................................. 34,021
Custody..................................................... 27,417
Amortization of Organizational Costs........................ 22,995
Legal....................................................... 16,828
Other....................................................... 194,077
-----------
Total Expenses.......................................... 2,560,459
-----------
NET INVESTMENT INCOME....................................... $ 2,919,996
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 5,691,843
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 12,907,034
End of the Period:
Investments............................................. 39,245,899
-----------
Net Unrealized Appreciation During the Period............... 26,338,865
-----------
NET REALIZED AND UNREALIZED GAIN............................ $32,030,708
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $34,950,704
===========
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1998 June 30, 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 2,919,996 $ 5,126,338
Net Realized Gain........................................ 5,691,843 10,817,404
Net Unrealized Appreciation
During the Period...................................... 26,338,865 1,002,087
------------ -------------
Change in Net Assets from Operations..................... 34,950,704 16,945,829
------------ -------------
Distributions from Net Investment Income................. (3,302,950) (4,918,449)
Distributions in Excess of Net Investment Income......... (58,293) -0-
------------ -------------
Distributions from and in Excess of Net Investment
Income*................................................ (3,361,243) (4,918,449)
------------ -------------
Distributions from Net Realized Gain..................... (13,156,292) (1,861,394)
Distributions in Excess of Net Realized Gain............. (125,726) -0-
------------ -------------
Distributions from and in Excess of Net Realized Gain*... (13,282,018) (1,861,394)
------------ -------------
Return of Capital Distribution*.......................... (7,471,305) -0-
------------ -------------
Total Distributions...................................... (24,114,566) (6,779,843)
------------ -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 10,836,138 10,165,986
------------ -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................ 33,570,538 50,324,196
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 21,003,724 5,538,900
Cost of Shares Repurchased............................... (53,035,786) (80,912,740)
------------ -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... 1,538,476 (25,049,644)
------------ -------------
TOTAL INCREASE/DECREASE IN NET ASSETS.................... 12,374,614 (14,883,658)
NET ASSETS:
Beginning of the Period.................................. 140,675,331 155,558,989
------------ -------------
End of the Period (Including accumulated undistributed
net investment income of $(57,582) and $382,954,
respectively).......................................... $153,049,945 $ 140,675,331
============ =============
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class June 30, 1998 June 30, 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of Net
Investment Income:
Class A Shares............................. $ (1,538,296) $ (2,064,034)
Class B Shares............................. (1,714,845) (2,700,742)
Class C Shares............................. (108,102) (153,673)
------------ -------------
$ (3,361,243) $ (4,918,449)
============ =============
Distributions from and in Excess of Net
Realized Gain:
Class A Shares............................. $ (5,310,506) $ (683,737)
Class B Shares............................. (7,494,154) (1,114,278)
Class C Shares............................. (477,358) (63,379)
------------ -------------
$(13,282,018) $ (1,861,394)
============ =============
Return of Capital Distribution:
Class A Shares............................. $ (2,987,603) $ -0-
Class B Shares............................. (4,215,072) -0-
Class C Shares............................. (268,630) -0-
------------ -------------
$ (7,471,305) $ -0-
============ =============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From July 28, 1993
(Commencement
Year Ended June 30, of Investment
------------------------------------- Operations) to
Class A Shares 1998 1997 1996 1995 June 30, 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................. $16.441 $15.298 $13.386 $12.906 $ 14.300
------ ------ ------ ------ ------
Net Investment Income................ .429 .637 .538 .595 .479
Net Realized and Unrealized
Gain/Loss.......................... 3.909 1.317 2.077 .485 (1.513)
------ ------ ------ ------ ------
Total from Investment Operations..... 4.338 1.954 2.615 1.080 (1.034)
------ ------ ------ ------ ------
Less:
Distributions from and in Excess of
Net Investment Income............ .480 .610 .703 .600 .323
Distributions from and in Excess of
Net Realized Gain................ 1.691 .201 -0- -0- .037
Return of Capital Distribution..... .951 -0- -0- -0- -0-
------ ------ ------ ------ ------
Total Distributions.................. 3.122 .811 .703 .600 .360
------ ------ ------ ------ ------
Net Asset Value, End of the Period... $17.657 $16.441 $15.298 $13.386 $ 12.906
------ ------ ------ ------ ------
Total Return (a)..................... 28.17% 13.20% 19.93% 8.70% (7.38%)*
Net Assets at End of the Period
(In millions)...................... $60.4 $52.5 $57.7 $50.4 $51.5
Ratio of Expenses to Average Net
Assets (b)......................... 1.30% 1.41% 1.38% 1.34% 1.34%
Ratio of Net Investment Income to
Average Net Assets (b)............. 2.47% 4.03% 3.61% 4.55% 4.10%
Portfolio Turnover................... 23% 102% 121% 109% 102%*
</TABLE>
*Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended June 30, 1997 and 1996, 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
16
<PAGE> 18
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From July 28, 1993
(Commencement
Year Ended June 30, of Investment
------------------------------------- Operations) to
Class B Shares 1998 1997 1996 1995 June 30, 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period................................ $16.434 $15.296 $13.356 $12.880 $ 14.300
------- ------- ------- ------- ---------
Net Investment Income................... .309 .519 .426 .507 .394
Net Realized and Unrealized Gain/Loss... 3.891 1.314 2.080 .461 (1.519)
------- ------- ------- ------- ---------
Total from Investment Operations........ 4.200 1.833 2.506 .968 (1.125)
------- ------- ------- ------- ---------
Less:
Distributions from and in Excess of
Net Investment Income............... .360 .494 .566 .492 .258
Distributions from and in Excess of
Net Realized Gain................... 1.691 .201 -0- -0- .037
Return of Capital Distribution........ .951 -0- -0- -0- -0-
------- ------- ------- ------- ---------
Total Distributions..................... 3.002 .695 .566 .492 .295
------- ------- ------- ------- ---------
Net Asset Value, End of the Period...... $17.632 $16.434 $15.296 $13.356 $ 12.880
======= ======= ======= ======= =========
Total Return (a)........................ 27.20% 12.30% 19.08% 7.80% (8.02%)*
Net Assets at End of the Period
(In millions)......................... $86.8 $83.3 $92.9 $81.0 $83.7
Ratio of Expenses to Average Net Assets
(b)................................... 2.07% 2.17% 2.13% 2.05% 2.06%
Ratio of Net Investment Income to
Average Net Assets (b)................ 1.74% 3.27% 2.86% 3.84% 3.36%
Portfolio Turnover...................... 23% 102% 121% 109% 102%*
</TABLE>
*Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended June 30, 1997 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
17
<PAGE> 19
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From August 13, 1993
Year Ended June 30, (Commencement of
------------------------------------- Distribution) to
Class C Shares 1998 1997 1996 1995 June 30, 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period.......................... $16.426 $15.290 $13.356 $12.868 $14.460
------- ------- ------- ------- -------
Net Investment Income............. .308 .503 .470 .482 .330
Net Realized and Unrealized
Gain/Loss....................... 3.887 1.328 2.030 .498 (1.627)
------- ------- ------- ------- -------
Total from Investment
Operations...................... 4.195 1.831 2.500 .980 (1.297)
------- ------- ------- ------- -------
Less:
Distributions from and in Excess
of Net Investment Income...... .360 .494 .566 .492 .258
Distributions from and in Excess
of Net Realized Gain.......... 1.691 .201 -0- -0- .037
Return of Capital
Distribution.................. .951 -0- -0- -0- -0-
------- ------- ------- ------- -------
Total Distributions............... 3.002 .695 .566 .492 .295
------- ------- ------- ------- -------
Net Asset Value, End of the
Period.......................... $17.619 $16.426 $15.290 $13.356 $12.868
======= ======= ======= ======= =======
Total Return (a).................. 27.14% 12.37% 19.00% 7.88% (9.11%)*
Net Assets at End of the Period
(In millions)................... $5.9 $4.9 $5.0 $1.3 $1.1
Ratio of Expenses to Average Net
Assets (b)...................... 2.06% 2.17% 2.13% 2.09% 2.05%
Ratio of Net Investment Income to
Average Net Assets (b).......... 1.73% 3.23% 2.78% 3.80% 3.38%
Portfolio Turnover................ 23% 102% 121% 109% 102%*
</TABLE>
*Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended June 30, 1997 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Utility Fund, formerly known as Van Kampen American Capital Utility
Fund, (the "Fund") is organized as a series of the Van Kampen Equity Trust, 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 its shareholders with capital
appreciation and current income, through investment in common stocks and income
securities of companies engaged in the utilities industry. The Fund commenced
investment operations on July 28, 1993, with two classes of common shares, Class
A and Class B shares. The distribution of the Fund's Class C shares commenced on
August 13, 1993.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Portfolio securities are valued by using market
quotations or prices provided by market makers. Any securities for which current
market quotations are not readily available are valued at their fair value as
determined in good faith using procedures established by the Board of Trustees.
Securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At June 30, 1998, there were no when
issued or delayed delivery purchase commitments.
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
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
along with other investment companies advised by Van Kampen Investment Advisory
Corp. (the "Adviser") or its affiliates, the daily aggregate of which is
invested in repurchase agreements. Repurchase agreements are fully
collateralized by the underlying debt security. The Fund will make payment for
such securities only upon physical delivery or evidence of book entry transfer
to the account of the custodian bank. The seller is required to maintain the
value of the underlying security at not less than the repurchase proceeds due
the Fund.
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date;
interest income is recorded on an accrual basis. Bond discount is amortized over
the expected life of each applicable security. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class of
shares.
D. ORGANIZATIONAL COSTS--The Fund has reimbursed Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $115,000. These costs are being amortized
on a straight line basis over the 60 month period ending July 28, 1998. The
Adviser has agreed that in the event any of the initial shares of the Fund
originally purchased by Van Kampen are redeemed by the Fund during the
amortization period, the Fund will be reimbursed for any unamortized
organizational costs in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.
E. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At June 30, 1998, for federal income tax purposes, cost of long- and
short-term investments is $114,033,895; the aggregate gross unrealized
appreciation is $39,446,984 and the aggregate gross unrealized depreciation is
$201,085, resulting in net unrealized appreciation of $39,245,899.
F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains and gains on option and futures
transactions. All short-term capital gains and a portion of option and futures
gains are included as ordinary income for tax purposes.
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and for
federal income tax purposes, permanent book and tax differences totaling $77,621
have been reclassified from capital with $711 posted to accumulated
undistributed net investment income and $76,910 posted to accumulated net
realized gain/loss. These differences relate to the character of gain/loss
recognized on the sale of and distributions received from REIT's and the impact
of the amortization of organizational costs on tax basis earnings and profits.
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, 1998. The Fund designated $3,489,274 as a 28% rate capital gain distribution
and $5,162,114 as a 20% rate capital gain distribution. Shareholders were sent a
1997 Form 1099-DIV in January 1998 representing their proportionate share of the
capital gain distribution to be reported on their 1997 income tax returns.
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 $500 million...................................... .65 of 1%
Next $500 million....................................... .60 of 1%
Over $1 billion......................................... .55 of 1%
</TABLE>
For the year ended June 30, 1998, the Fund recognized expenses of
approximately $5,400 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, 1998, the Fund recognized expenses of
approximately $64,700 representing Van Kampen's cost of providing accounting and
legal services to the Fund.
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the year ended June
30, 1998, the Fund recognized expenses of approximately $212,500. 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.
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
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 June 30, 1998, Van Kampen owned 100 shares each of Classes A, B and C,
respectively.
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 June 30, 1998, capital aggregated $45,755,409, $63,746,069 and $4,408,966
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.......................................... 1,328,514 $ 22,835,462
Class B.......................................... 538,641 9,290,235
Class C.......................................... 83,771 1,444,841
---------- ------------
Total Sales........................................ 1,950,926 $ 33,570,538
========== ============
Dividend Reinvestment:
Class A.......................................... 540,406 $ 8,897,389
Class B.......................................... 703,377 11,560,470
Class C.......................................... 33,229 545,865
---------- ------------
Total Dividend Reinvestment........................ 1,277,012 $ 21,003,724
========== ============
Repurchases:
Class A.......................................... (1,639,476) $(27,743,068)
Class B.......................................... (1,388,187) (23,874,869)
Class C.......................................... (83,492) (1,417,849)
---------- ------------
Total Repurchases.................................. (3,111,155) $(53,035,786)
========== ============
</TABLE>
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
At June 30, 1997, capital aggregated $44,783,868, $71,029,312 and $4,107,714
for Classes A, B and C, respectively. For the year ended June 30, 1997,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.......................................... 2,620,830 $ 41,844,771
Class B.......................................... 496,213 7,650,734
Class C.......................................... 55,249 828,691
---------- ------------
Total Sales........................................ 3,172,292 $ 50,324,196
========== ============
Dividend Reinvestment:
Class A.......................................... 146,956 $ 2,266,380
Class B.......................................... 203,976 3,135,954
Class C.......................................... 8,882 136,566
---------- ------------
Total Dividend Reinvestment........................ 359,814 $ 5,538,900
========== ============
Repurchases:
Class A.......................................... (3,344,356) $(53,090,333)
Class B.......................................... (1,709,336) (26,459,861)
Class C.......................................... (89,228) (1,362,546)
---------- ------------
Total Repurchases.................................. (5,142,920) $(80,912,740)
========== ============
</TABLE>
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC will be imposed on most redemptions made within six years of
the purchase for Class B and one year of the purchase for Class C as detailed in
the following schedule.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------------------------------------------------------------------
<S> <C> <C>
First.............................................. 4.00% 1.00%
Second............................................. 3.75% None
Third.............................................. 3.50% None
Fourth............................................. 2.50% None
Fifth.............................................. 1.50% None
Sixth.............................................. 1.00% None
Seventh and Thereafter............................. None None
</TABLE>
For the year ended June 30, 1998, Van Kampen, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A shares of approximately
$16,000 and CDSC on redeemed shares of approximately $181,300. 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 $32,564,835 and $51,249,647,
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% for Class A net assets and 1.00%
each for Class B and Class C net assets are accrued daily. Included in these
fees for the year ended June 30, 1998, are payments retained by Van Kampen of
approximately $643,300.
24
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Utility Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Utility Fund (the "Fund"), including the portfolio of investments, as of
June 30, 1998, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Utility Fund as of June 30, 1998, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
August 3, 1998
25
<PAGE> 27
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
U.S. Real Estate
Utility
Value
International/Global
Asian Growth
Emerging Markets
Global Equity
Global Equity Allocation
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 and
Senior Loan Fund
Prime Rate Income Trust
Reserve
Senior Floating Rate
Tax Free Money
To find out more about any of these funds, ask your financial adviser 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.VAN-KAMPEN.COM -- to view
prospectuses, select Investors' Place,
then Download a 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.VAN-KAMPEN.COM and
selecting Investors' Place
26
<PAGE> 28
VAN KAMPEN UTILITY 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
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
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
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
TAX NOTICE TO CORPORATE SHAREHOLDERS
For the Fiscal year ended June 30, 1998, 75.79% of the dividends taxable as
ordinary income qualified for the 70% dividends received deduction for
corporations. For the calendar year ended December 31, 1997, 66.83% of the
dividends taxable as ordinary income qualified for the 70% dividends received
deduction for corporations.
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1998 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, 1998, the report, if used with
prospective investors, must be accompanied by a quarterly performance update.
27
<PAGE> 29
VAN KAMPEN UTILITY FUND
THIS PAGE INTENTIONALLY LEFT BLANK
28
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Performance in Perspective....................... 4
Glossary of Terms................................ 5
Portfolio Management Review...................... 6
Portfolio Highlights............................. 9
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 15
Statement of Operations.......................... 16
Statement of Changes in Net Assets............... 17
Financial Highlights............................. 18
Notes to Financial Statements.................... 21
Report of Independent Accountants................ 26
</TABLE>
AGG ANR 8/98
<PAGE> 31
LETTER TO SHAREHOLDERS
July 15, 1998
Dear Shareholder,
As you may know, Van Kampen
American Capital is consolidating all
of the retail mutual funds that we [PHOTO]
distribute under the single name of
Van Kampen Funds. This move
accompanies the change in our legal
name to Van Kampen Funds Inc.
You can be assured that the DENNIS J. MCDONNELL AND DON G. POWELL
change in your fund's name will not
affect its management or daily
operations. You will begin seeing the
application of this change with this report. In addition, as of August 31, your
fund will be listed in the daily newspapers by share class under the heading
"Van Kampen Funds." For your convenience, we have enclosed a separate brochure
that covers additional details related to these changes.
ECONOMIC REVIEW
The U.S. economy continued to expand at a robust pace despite a deepening
recession in a number of Asian nations. The nation's inflation-adjusted output
of goods and services ran at 5.4 percent during the first quarter, an annualized
rate considered by many economists to be virtually unsustainable without leading
to inflation. As the reporting period ended, however, there were indications
that the Asian financial crisis was finally having a moderating impact on the
economy. Also, the Conference Board's index of leading indicators points toward
a slowdown in economic growth later this year.
Despite the generally solid pace of economic activity, inflation remained
benign. Consumer prices rose by 1.7 percent during the 12 months through June,
while producer prices actually declined during the same period. Falling
commodity prices and the impact of the strong dollar helped to offset the
inflationary implications of a tight labor market and strong consumer spending.
While the Federal Reserve kept short-term interest rates steady at 5.5
percent during the reporting period, minutes from the central bank's May policy
meeting indicated growing sentiment for tightening monetary policy if the drag
from Asia does not slow the American economy on its own.
MARKET REVIEW
U.S. stocks continued to post gains during the period, but the sharp
variation in returns across industry groups reflected the growing impact of the
Asian financial crisis on corporate profits. The Wilshire 5000 Index, consisting
of all publicly traded U.S. companies, gained 14.68 percent during the first six
months of 1998. Once again, most
Continued on page two
1
<PAGE> 32
of the strength was concentrated in large-capitalization companies, as the S&P
500 Index of large stocks returned 17.67 percent during the period compared to
4.93 percent for the Russell 2000 Index of small-cap issues. Even large stocks,
however, fell back significantly beginning in April as the Asian crisis
intensified.
Companies with heavy exposure to domestic consumers benefited from a strong
American economy, especially during the latter stages of the reporting period.
Consumer cyclical stocks returned 28.94 percent during the first six months of
1998, compared to 6.35 percent for basic materials and 3.01 percent for energy
issues. Eight of the ten top-performing industry groups during the second
quarter were from consumer-related sectors. Meanwhile, the steep decline in
energy and agricultural prices--a consequence of reduced demand from
Asia--undermined the performance of commodity-related stocks. During the three
months through June, five of the ten worst-performing industry sectors were from
either energy, metals, or commodity-based industries.
OUTLOOK
We believe economic growth in the United States is likely to slow in coming
months as the impact of the Asian crisis becomes more apparent. As growth
decelerates, corporate profits will come under pressure, especially among large
companies. Given the difficult year-over-year earnings comparisons that will
begin to appear in coming quarters, we caution investors not to expect a
continuation of the large gains that have become almost routine for U.S. stocks
in recent years. The high valuations and decelerating profit growth could limit
returns in the equity market over the near term.
Still, the overall environment for equities remains positive. Inflation is
low, the economy continues to grow, the bond market is healthy, and monetary
policy is stable. These characteristics usually support relatively high
valuations in the stock market. We remain confident that the domestic equity
asset class will continue to provide solid growth for investors with a long-term
time horizon.
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 serve you and your family through our
diverse menu of quality investments.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
2
<PAGE> 33
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1998
VAN KAMPEN AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
One-year total return based on NAV(1).... 37.49% 36.37% 36.47%
One-year total return(2)................. 29.55% 31.41% 35.46%
Life-of-Fund average annual total
return(2)................................ 16.18% 17.37% 18.60%
Commencement date........................ 05/29/96 05/29/96 05/29/96
</TABLE>
(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 (5.00% for B and 1.00% for C shares).
(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. This performance was achieved during generally
rising stock prices. Fund shares, when redeemed, may be worth more or less than
their original cost.
The Fund invests in equity securities of small- and mid-sized companies. These
types of companies may have limited product lines, markets or financial
resources and their securities may be subject to more erratic market movements
than those of larger companies. Foreign investments 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> 34
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:
- Illustrate the general market environment in which your investments are
being managed
- Reflect the impact of favorable market trends or difficult market
conditions
- Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over the
period measured
For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Standard & Poor's 500-Stock
Index and the Russell 2000 Stock Index over time. These indices are statistical
composites and do not reflect any commissions which would be incurred by an
investor purchasing the securities they represent. Similarly, their performance
does not reflect any other costs which would be applicable to an actively
managed portfolio, such as that of the Fund.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Aggressive Growth Fund vs. Standard & Poor's 500-Stock Index and
the Russell 2000 Stock Index (May 29, 1996 through June 30, 1998)
[GRAPH]
<TABLE>
<CAPTION>
Van Kampen
Measurement Period Aggressive Growth Standard & Poors Russell 2000
(Fiscal Year Covered) Fund 500-Stock Index Stock Index
<S> <C> <C> <C>
5/29/96 9421 10000 10000
6/30/96 9101 10097 9589
7/31/96 8262 9635 8752
8/31/96 9051 9816 9260
9/30/96 9990 10407 9622
10/31/96 9950 10678 9474
11/30/96 9900 11462 9864
12/31/96 10010 11273 10122
1/31/97 10120 11964 10325
2/28/97 8821 12035 10074
3/31/97 8092 11577 9599
4/30/97 8372 12253 9626
5/31/97 9341 12971 10697
6/30/97 9920 13594 11155
7/31/97 11089 14656 11674
8/31/97 11419 13814 11941
9/30/97 12687 14611 12815
10/31/97 11788 14107 12252
11/30/97 11219 14736 12173
12/31/97 11379 15029 12386
1/31/98 11129 15181 12191
2/28/98 12288 16251 13092
3/31/98 13067 17120 13632
4/30/98 13307 17276 13707
5/31/98 12507 16951 12969
6/30/98 13666 17684 12996
</TABLE>
- ------------------------------
Fund's Total Return
1 Year Avg. Annual = 29.55%
Inception Avg. Annual = 16.18%
- ------------------------------
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> 35
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.
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.
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 than value stocks, due to their higher expected earnings growth.
LIQUIDITY: The ease with which an investor can buy or sell a stock at a
reasonable price. Generally, it is easier to sell large-company stock than
small-company stock.
MARKET CAPITALIZATION: The size of a company, as measured by the value of its
stock. Morningstar, an independent mutual fund rating service, defines
"small-cap" as less than $1 billion, "mid-cap" as between $1 billion and $5
billion, and "large-cap" as more than $5 billion.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from its total assets and dividing this amount by the
number of shares outstanding. The NAV does not include any initial or contingent
deferred sales charge.
STANDARD & POOR'S 500-STOCK INDEX: A broad-based measurement of changes in
stock-market conditions based on the average performance of 500 widely held
common stocks. The index, which tracks industrial, transportation, financial,
and utility stocks, provides a guide to the overall health of the U.S. stock
market. The S&P 500 is a much broader index than the Dow Jones Industrial
Average and reflects the stock market more accurately.
VALUATION: The estimated or determined worth of a stock, based on financial
measures such as the stock's current price relative to earnings, revenue, book
value, and cash flow.
5
<PAGE> 36
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AGGRESSIVE GROWTH FUND
We recently spoke to the management team of the Van Kampen Aggressive Growth
Fund about the key events and economic forces that shaped the markets during the
past year. The team includes Gary M. Lewis, portfolio manager, and Dennis J.
McDonnell, president of the adviser. The following excerpts reflect their views
on the Fund's performance during the year ended June 30, 1998.
Q CAN YOU DESCRIBE THE STOCK MARKET ENVIRONMENT FOR THE FUND DURING THE
REPORTING PERIOD?
A The stock market was influenced by two opposing factors. On the home
front, steady economic growth and low inflation provided a very favorable
climate for stocks. However, a currency collapse in Southeast Asia
threatened to slow the economies of countries around the world. The Dow Jones
Industrial Average struggled through the last few months of 1997, trying to
regain its momentum after being unsettled by the Asian crisis in October. The
Dow recovered quickly and proceeded to hit record highs in early 1998. During
the final months of the reporting period, the Dow remained relatively flat,
fluctuating around the 9000 mark.
Investors continued to favor large, well-established companies during the
reporting period because of their uncertainty about how the Asian situation
would influence the U.S. markets. Generally, large-capitalization companies made
greater gains than small-cap firms did.
Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET
ITS OBJECTIVE?
A We consistently look for stocks with rising earnings expectations and
rising valuations. We purchase stocks that we believe have the potential
to outperform earnings estimates, and we sell them if their earnings
estimates or valuations are declining. Using a bottom-up selection process, we
evaluate securities one by one and make purchases wherever we find good
opportunities. In other words, we don't require a certain percentage of the
Fund's assets to be in any given industry.
The stock market's preference for large companies during the reporting
period presented a challenge for the Fund, which invests primarily in small and
medium-sized growth companies. In addition, smaller stocks are volatile by
nature and tend to struggle more than large stocks during periods of market
uncertainty. For example, a minor setback to a large-cap stock--such as falling
short of a quarterly earnings estimate--could be devastating to a small-cap
stock. In this environment, we chose to keep larger, more liquid stocks in the
biggest positions in the Fund. This strategy boosted performance and added some
stability to the portfolio. Overall, however, smaller stocks dominated the
portfolio.
6
<PAGE> 37
Q WHICH AREAS OF THE MARKET HAD A SIGNIFICANT IMPACT ON THE FUND?
A Although the technology sector was particularly erratic during the
reporting period, prudent stock selection within this area contributed to
strong Fund performance. Earlier this year, an oversupply of personal
computers overwhelmed many areas of the technology industry, as the events in
Asia put a cap on demand. Manufacturers that sell computers to retailers and
wholesalers had to reduce production of new computers until inventory supply and
consumer demand regained balance. We decreased our holdings in personal
computers but maintained a large position in Dell Computer, whose stock price
rose from $29 to $92 per share during the reporting period--a gain of more than
200 percent. Instead, we focused on areas of technology that were minimally
affected by events in Asia, such as service (Yahoo!, America Online) and
software (BMC Software, Compuware).
The retail segment of the consumer distribution sector benefited from its
limited exposure to Asia, as well as low unemployment, rising disposable income,
and the flourishing housing market. One of our successes was Best Buy, a
consumer electronics chain. During the reporting period, our stock selection
process identified Best Buy as a candidate for the portfolio, despite market
sentiment that the company was headed for bankruptcy. We purchased the stock,
and since then Best Buy has cut costs to improve profitability and has enjoyed
strong holiday sales. The result was an earnings surprise: its stock price
jumped from $7 5/8 per share on June 30, 1997, to $34 3/4 per share a year
later. Other strong performers in the retail sector were American Eagle
Outfitters, a casual apparel manufacturer, and Staples, an office supply
company.
Finally, we had a substantial weighting in consumer services that included
a number of radio stocks. Deregulation of the broadcasting industry has allowed
individual companies to own an unrestricted number of radio and television
stations. Consequently, a small number of broadcasting companies are dominating
the advertising dollars in a given region and commanding higher advertising
prices as they control a larger share of their markets. Many radio companies are
thriving in this era of deregulation, and we were pleased with our holdings in
Clear Channel Communications and Chancellor Media. Of course, 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 nine.
Q WHAT FACTORS HINDERED THE FUND'S PERFORMANCE?
A The biggest disappointment was the energy sector, which had driven Fund
performance upward through much of 1997. As we entered 1998, however,
declining oil prices threatened the profitability of these stocks. The Fund's
holdings were concentrated in oil service providers, and as oil prices dropped,
the economics became less favorable for them to launch exploration projects.
Earnings estimates for many service companies were eventually cut, and we began
to decrease our weighting in this area last fall.
A number of individual stocks had difficulties during the reporting period,
including ESC Medical Systems. ESC is a medical device company that makes
equipment for noninvasive treatment of certain skin problems. The stock
appreciated more than
7
<PAGE> 38
45 percent in the second half of 1997, but this year it has lost much of those
gains. We no longer hold the stock in the portfolio. Other stocks that fell
behind at some point during the past year included Suiza Foods (dairy products
manufacturer and distributor), Airborne Freight (delivery service), Heftel
Broadcasting (Spanish-language radio broadcasting), and Herman Miller (office
furniture manufacturer). Each of these companies supported the Fund's
performance at one time, but declining valuations prompted us to sell them
during the period.
Q HOW DID THE FUND PERFORM DURING THE PAST YEAR?
A The Fund performed very well, achieving a one-year total return of 37.49
percent(1) (Class A shares at net asset value) as of June 30, 1998. By
comparison, the Standard & Poor's 500-Stock Index returned 30.09 percent,
and the Russell 2000-Stock Index, which more closely resembles the Fund,
returned 16.51 percent. The S&P 500-Stock Index is a broad-based, unmanaged
index that reflects the general performance of the stock market, and the Russell
2000-Stock Index reflects the general performance of smaller-cap stocks. These
indices are statistical composites that do not include any commissions that
would be paid by an investor purchasing the securities or investments
represented by these indices. Please refer to the chart on page three for
additional Fund performance results.
Q WHAT IS YOUR OUTLOOK FOR THE FUND FOR THE NEXT SIX MONTHS?
A We continue to view aggressive growth stocks as a promising area of the
market. As we stated in your last report, small-cap stock valuations are
at historically low levels, which could precipitate a number of favorable
scenarios. First, low valuations have typically preceded a rebound in stock
prices among small-cap stocks. Second, when small-cap valuations are
comparatively low, these stocks have the potential to realize substantial
earnings growth, while richly priced large caps may find it more difficult to
achieve growth of the same magnitude. In fact, earnings estimates are currently
in the double digits for small- and mid-cap stocks but single digits among large
caps. Finally, if investors begin taking their money out of overvalued large
stocks and putting their assets into lower-valued small caps, we could see a
significant rebound in small-cap prices. With several factors in place that
could fuel small-cap prices, we believe the Aggressive Growth Fund is well
positioned in this market.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
[SIG]
Gary M. Lewis
Portfolio Manager
Please see footnotes on page three
8
<PAGE> 39
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AGGRESSIVE GROWTH FUND
PORTFOLIO HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOP TEN HOLDINGS THESE INVESTMENTS
AS OF JUNE 30, 1998 SIX MONTHS AGO(1)
<S> <C> <C> <C>
Dell Computer Corp................ 2.9% Dell Computer Corp................ 2.8%
Transport World Entertainment Transport World Entertainment
Corp............................ 1.8% Corp............................ N/A
American Disposal Services, Inc... 1.7% American Disposal Services, Inc... 1.6%
Engineering Animation, Inc........ 1.7% Engineering Animation, Inc........ 0.4%
Capital One Financial Corp........ 1.6% Capital One Financial Corp........ 0.5%
Staples, Inc...................... 1.6% Staples, Inc...................... N/A
HBO & Co.......................... 1.5% HBO & Co.......................... 1.3%
BMC Software, Inc................. 1.5% BMC Software, Inc................. 0.9%
Clear Channel Communications, Clear Channel Communications,
Inc............................. 1.4% Inc............................. 1.2%
Bally Total Fitness Corp.......... 1.4% Bally Total Fitness Corp.......... N/A
</TABLE>
N/A = Not Applicable
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, 1998 DECEMBER 31, 1997 (1)
<S> <C> <C> <C>
Technology............................ 36% Technology............................ 29%
Consumer Distribution................. 17% Consumer Distribution................. 14%
Consumer Services..................... 14% Consumer Services..................... 14%
Finance............................... 11% Finance............................... 5%
Health Care........................... 5% Health Care........................... 13%
</TABLE>
(1) Unaudited
9
<PAGE> 40
PORTFOLIO OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 97.8%
CONSUMER DISTRIBUTION 16.4%
Abacus Direct Corp. (a)..................................... 45,000 $ 2,337,188
Abercrombie & Fitch Co., Class A (a)........................ 80,000 3,520,000
American Eagle Outfitters, Inc. (a)......................... 52,500 2,024,531
Bally Total Fitness Corp. (a)............................... 105,000 3,780,000
Best Buy Co., Inc. (a)...................................... 45,000 1,625,625
DM Management Co. (a)....................................... 50,000 1,793,750
Finish Line, Inc., Class A (a).............................. 50,000 1,406,250
Jacor Communications, Inc., Class A (a)..................... 30,000 1,770,000
Kohl's Corp. (a)............................................ 25,000 1,296,875
Lason Holdings, Inc. (a).................................... 20,000 1,090,000
Lexmark International Group, Inc., Class A (a).............. 20,000 1,220,000
Lowe's Cos., Inc. .......................................... 60,000 2,433,750
Mens Wearhouse, Inc. (a).................................... 40,000 1,320,000
Pacific Sunwear of California (a)........................... 90,000 3,150,000
Party City Corp. (a)........................................ 60,000 1,762,500
Proffitt's, Inc. (a)........................................ 40,000 1,615,000
Stage Stores, Inc. (a)...................................... 40,000 1,810,000
Staples, Inc. (a)........................................... 150,000 4,340,625
TJX Cos., Inc. ............................................. 60,000 1,447,500
Transport World Entertainment Corp. (a)..................... 115,000 4,959,375
Whole Foods Market, Inc. (a)................................ 25,000 1,512,500
------------
46,215,469
------------
CONSUMER DURABLES 1.3%
Mohawk Industries, Inc. (a)................................. 50,000 1,584,375
Rent-Way, Inc. (a).......................................... 40,000 1,220,000
Smith (A. O.) Corp. ........................................ 15,000 775,312
------------
3,579,687
------------
CONSUMER NON-DURABLES 4.3%
Ashworth, Inc. (a).......................................... 50,000 693,750
Buckle, Inc. (a)............................................ 45,000 1,327,500
Fossil, Inc. (a)............................................ 90,000 2,238,750
Linens 'N Things, Inc. (a).................................. 100,000 3,056,250
Media Arts Group, Inc. (a).................................. 35,000 673,750
Pillowtex Corp. ............................................ 40,000 1,605,000
</TABLE>
See Notes to Financial Statements
10
<PAGE> 41
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER NON-DURABLES (CONTINUED)
Twinlab Corp. (a)........................................... 60,000 $ 2,621,250
------------
12,216,250
------------
CONSUMER SERVICES 13.9%
American Disposal Services, Inc. (a)........................ 100,000 4,687,500
Chancellor Media Corp. (a).................................. 50,000 2,482,813
Charles River Associates, Inc. (a).......................... 25,000 625,000
Clear Channel Communications, Inc. (a)...................... 35,000 3,819,375
Consolidated Graphics, Inc. (a)............................. 35,000 2,065,000
Family Golf Centers, Inc. (a)............................... 52,500 1,328,906
International Network Services (a).......................... 65,000 2,665,000
Labor Ready, Inc. (a)....................................... 105,000 3,169,687
Macrovision, Corp. (a)...................................... 35,000 835,625
Mail-Well, Inc. (a)......................................... 60,000 1,301,250
Metris Cos., Inc............................................ 45,000 2,868,750
Outdoor Systems, Inc. (a)................................... 78,750 2,205,000
PMT Services, Inc. (a)...................................... 50,000 1,271,875
Pegasus Systems, Inc. (a)................................... 30,000 768,750
Provant, Inc. (a)........................................... 50,000 918,750
Romac International, Inc. (a)............................... 75,000 2,278,125
Select Appointments Holdings Plc. -- ADR (United Kingdom)
(a)....................................................... 25,000 737,500
Steiner Leisure Ltd. (a).................................... 67,500 2,041,875
Steven Myers & Associates, Inc. (a)......................... 30,000 577,500
Tele-Communications, Inc., Class A (a)...................... 40,000 1,552,500
Valassis Communications, Inc. (a)........................... 25,000 964,063
------------
39,164,844
------------
ENERGY 2.0%
Cal Dive International, Inc. (a)............................ 25,000 689,063
Core Laboratories N.V. -- ADR (Netherlands) (a)............. 75,000 1,621,875
National Oilwell, Inc. (a).................................. 55,000 1,474,687
Stolt Comex Seaway S.A. -- ADR (United Kingdom) (a)......... 20,000 350,000
Stolt Comex Seaway S.A. (a)................................. 40,000 775,000
Varco International, Inc. (a)............................... 40,000 792,500
------------
5,703,125
------------
FINANCE 10.8%
Capital One Financial Corp.................................. 35,000 4,346,562
Dime Bancorp, Inc........................................... 40,000 1,197,500
</TABLE>
See Notes to Financial Statements
11
<PAGE> 42
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
Fidelity National Financial, Inc............................ 60,000 $ 2,388,750
First American Financial Corp............................... 10,000 900,000
Healthcare Financial Partners, Inc. (a)..................... 45,000 2,759,063
LandAmerica Financial Group, Inc............................ 45,000 2,576,250
Mercury General Corp........................................ 20,000 1,288,750
National Commerce Bancorp................................... 35,000 1,465,625
Nationwide Financial Services, Inc., Class A................ 35,000 1,785,000
North Fork Bancorp, Inc..................................... 52,500 1,282,969
Premier Bancshares, Inc..................................... 35,000 927,500
Protective Life Corp........................................ 40,000 1,467,500
Providian Financial Corp.................................... 40,000 3,142,500
ResortQuest International, Inc. (a)......................... 50,000 815,625
Star Banc Corp.............................................. 20,000 1,277,500
US Trust Corp............................................... 20,000 1,525,000
Zions Bancorp............................................... 25,000 1,328,125
------------
30,474,219
------------
HEALTHCARE 5.3%
Barr Labs, Inc. (a)......................................... 20,000 795,000
First Consulting Group (a).................................. 35,000 918,750
HBO & Co.................................................... 120,000 4,230,000
Hooper Holmes, Inc.......................................... 75,000 1,575,000
Icon Plc. -- ADR (United Kingdom) (a)....................... 25,000 631,250
Medical Manager Corp. (a)................................... 75,000 2,071,875
MedQuist, Inc. (a).......................................... 120,000 3,465,000
NBTY, Inc. (a).............................................. 50,000 918,750
Professional Detailing, Inc. (a)............................ 16,200 402,975
------------
15,008,600
------------
PRODUCER MANUFACTURING 3.5%
Allied Waste Industries, Inc. (a)........................... 110,000 2,640,000
Eastern Environmental Services, Inc. (a).................... 90,000 3,060,000
North American Scientific, Inc. (a)......................... 40,000 825,000
United Rentals, Inc. (a).................................... 80,000 3,360,000
------------
9,885,000
------------
RAW MATERIALS/PROCESSING INDUSTRIES 0.9%
Safeskin Corp. (a).......................................... 65,000 2,673,125
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 43
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY 35.6%
America Online, Inc. (a).................................... 30,000 $ 3,180,000
Applied Voice Technology, Inc. (a).......................... 70,000 1,610,000
Axent Technologies, Inc. (a)................................ 60,000 1,837,500
BMC Software, Inc. (a)...................................... 80,000 4,155,000
Cambridge Technology Partners, Inc. (a)..................... 25,000 1,365,625
CBT Group Ltd. -- ADR (Ireland) (a)......................... 50,000 2,675,000
Ciber, Inc. (a)............................................. 45,000 1,710,000
Citrix Systems, Inc. (a).................................... 20,000 1,367,500
Com21, Inc. (a)............................................. 30,000 637,500
Compuware Corp. (a)......................................... 60,000 3,067,500
Dell Computer Corp. (a)..................................... 85,000 7,889,062
Dendrite International, Inc. (a)............................ 85,000 3,198,125
Documentum, Inc. (a)........................................ 25,000 1,200,000
EMC Corp. (a)............................................... 70,000 3,136,875
Engineering Animation, Inc. (a)............................. 75,000 4,575,000
Envoy Corp. (a)............................................. 25,000 1,184,375
Geotel Communications Corp. (a)............................. 75,000 3,056,250
Inktomi Corp. (a)........................................... 11,300 449,175
Inspire Insurance Solutions, Inc. (a)....................... 45,000 1,496,250
JDA Software Group, Inc. (a)................................ 25,000 1,093,750
Keane, Inc. (a)............................................. 30,000 1,680,000
Kellstrom Industries, Inc. (a).............................. 60,000 1,738,125
Legato Systems, Inc. (a).................................... 60,000 2,340,000
Lernout & Hauspie Speech Products N.V. -- ADR
(Netherlands) (a)......................................... 60,000 3,581,250
Lucent Technologies, Inc.................................... 45,000 3,743,437
Mercury Interactive Corp. (a)............................... 20,000 892,500
Metro Information Services, Inc. (a)........................ 40,000 1,565,000
MICROS Systems, Inc. (a).................................... 48,000 1,588,500
Microstrategy, Inc., Class A (a)............................ 50,000 1,412,500
Mindspring Enterprises, Inc. (a)............................ 20,000 2,057,500
MMC Networks, Inc. (a)...................................... 50,000 1,593,750
Network Solutions, Inc., Class A (a)........................ 35,000 1,575,000
New Era Of Networks, Inc. (a)............................... 25,000 762,500
Peerless Systems Corp. (a).................................. 35,000 726,250
Platinum Software Corp. (a)................................. 35,000 853,125
QuadraMed Corp. (a)......................................... 50,000 1,365,625
</TABLE>
See Notes to Financial Statements
13
<PAGE> 44
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Sapient Corp. (a)........................................... 36,000 $ 1,899,000
Saville Systems Plc. -- ADR (Ireland) (a)................... 35,000 1,754,375
Software AG Systems, Inc. (a)............................... 100,000 2,925,000
Software.Net Corp. (a)...................................... 20,000 382,500
SPR, Inc. (a)............................................... 40,000 1,245,000
Star Telecommunications, Inc. (a)........................... 71,750 1,605,406
Sterling Software, Inc. (a)................................. 60,000 1,773,750
Veritas DGC, Inc. (a)....................................... 55,000 2,746,563
VERITAS Software Corp. (a).................................. 40,000 1,655,000
Visio Corp. (a)............................................. 30,000 1,432,500
Waters Corp. (a)............................................ 50,000 2,946,875
Xylan Corp. (a)............................................. 25,000 745,313
Yahoo!, Inc. (a)............................................ 20,000 3,150,000
------------
100,620,831
------------
TRANSPORTATION 3.8%
Alaska Air Group, Inc. (a).................................. 35,000 1,909,687
America West Holding Corp., Class B (a)..................... 25,000 714,063
Atlantic Coast Airlines, Inc. (a)........................... 100,000 3,000,000
Mesaba Holdings, Inc. (a)................................... 112,500 2,587,500
Royal Caribbean Cruises Ltd................................. 30,000 2,385,000
------------
10,596,250
------------
TOTAL LONG-TERM INVESTMENTS 97.8%
(Cost $206,084,398)................................................ 276,137,400
REPURCHASE AGREEMENT 6.5%
DLJ Mortgage Acceptance Corp. ($18,345,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 06/30/98, to
be sold on 07/01/98 at $18,347,803)
(Cost $18,345,000)................................................. 18,345,000
------------
TOTAL INVESTMENTS 104.3%
(Cost $224,429,398)................................................ 294,482,400
LIABILITIES IN EXCESS OF OTHER ASSETS (4.3%)........................ (12,265,029)
------------
NET ASSETS 100.0%................................................... $282,217,371
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
14
<PAGE> 45
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $224,429,398)....................... $294,482,400
Cash........................................................ 322
Receivables:
Investments Sold.......................................... 4,019,767
Fund Shares Sold.......................................... 578,775
Dividends................................................. 30,513
Unamortized Organizational Costs............................ 61,275
Other....................................................... 3,226
------------
Total Assets.......................................... 299,176,278
------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 12,416,230
Investments Purchased..................................... 3,807,001
Distributor and Affiliates................................ 339,635
Investment Advisory Fee................................... 169,071
Accrued Expenses............................................ 174,544
Trustees' Deferred Compensation and Retirement Plans........ 52,426
------------
Total Liabilities..................................... 16,958,907
------------
NET ASSETS.................................................. $282,217,371
============
NET ASSETS CONSIST OF:
Capital..................................................... $192,883,941
Net Unrealized Appreciation................................. 70,053,002
Accumulated Net Realized Gain............................... 19,332,000
Accumulated Net Investment Loss............................. (51,572)
------------
NET ASSETS.................................................. $282,217,371
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $117,451,248 and 8,588,377 shares of
beneficial interest issued and outstanding)............. $ 13.68
Maximum sales charge (5.75%* of offering price)......... .83
------------
Maximum offering price to public........................ $ 14.51
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $148,386,948 and 11,023,802 shares of
beneficial interest issued and outstanding)............. $ 13.46
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $16,379,175 and 1,216,007 shares of
beneficial interest issued and outstanding)............. $ 13.47
============
*On sales of $50,000 or more, the sales charge will be
reduced.
</TABLE>
See Notes to Financial Statements
15
<PAGE> 46
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 595,465
Dividends................................................... 248,561
------------
Total Income............................................ 844,026
------------
EXPENSES:
Investment Advisory Fee..................................... 1,820,687
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $264,715, $1,233,496 and $135,103,
respectively)............................................. 1,633,314
Shareholder Services........................................ 1,106,755
Trustees' Fees and Expenses................................. 23,085
Amortization of Organizational Costs........................ 20,998
Legal....................................................... 15,344
Custody..................................................... 1,659
Other....................................................... 326,581
------------
Total Expenses.......................................... 4,948,423
Less Fees Waived........................................ 406,180
------------
Net Expenses............................................ 4,542,243
------------
NET INVESTMENT LOSS......................................... $ (3,698,217)
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 46,196,606
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 39,121,376
End of the Period......................................... 70,053,002
------------
Net Unrealized Appreciation During the Period............... 30,931,626
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 77,128,232
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 73,430,015
============
</TABLE>
See Notes to Financial Statements
16
<PAGE> 47
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1998 June 30, 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss.............................. $ (3,698,217) $ (1,683,612)
Net Realized Gain/Loss........................... 46,196,606 (25,868,909)
Net Unrealized Appreciation During the Period.... 30,931,626 39,073,042
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... 73,430,015 11,520,521
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold........................ 165,163,266 183,003,605
Cost of Shares Repurchased....................... (145,403,812) (65,305,867)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................... 19,759,454 117,697,738
------------ ------------
TOTAL INCREASE IN NET ASSETS..................... 93,189,469 129,218,259
NET ASSETS:
Beginning of the Period.......................... 189,027,902 59,809,643
------------ ------------
End of the Period (Including accumulated net
investment loss of $51,572 and $34,878,
respectively).................................. $282,217,371 $189,027,902
============ ============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 48
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 29, 1996
(Commencement
Year Ended June 30 of Investment
------------------- Operations) to
Class A Shares 1998 1997 June 30, 1996
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------
Net Asset Value, Beginning of the Period....... $ 9.948 $ 9.118 $9.430
------- ------- ------
Net Investment Loss.......................... (.135) (.065) (.002)
Net Realized and Unrealized Gain/Loss........ 3.863 .895 (.310)
------- ------- ------
Total from Investment Operations............... 3.728 .830 (.312)
------- ------- ------
Net Asset Value, End of the Period............. $13.676 $ 9.948 $9.118
======= ======= ======
Total Return (a)............................... 37.49% 9.10% (3.29%)**
Net Assets at End of the Period (In
millions).................................... $117.5 $84.0 $30.3
Ratio of Expenses to Average Net Assets*....... 1.44% 1.30% 1.29%
Ratio of Net Investment Loss to Average Net
Assets*...................................... (1.09%) (.81%) (.50%)
Portfolio Turnover............................. 185% 186% 4%**
</TABLE>
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
* If certain expenses had not been waived by Van Kampen, Total Return would have
been lower and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C>
Ratio of Expenses to Average Net Assets........ 1.61% 1.61% 2.05%
Ratio of Net Investment Loss to Average Net
Assets....................................... (1.26%) (1.12%) (1.25%)
</TABLE>
**Non-Annualized
See Notes to Financial Statements
18
<PAGE> 49
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 29, 1996
(Commencement
Year Ended June 30 of Investment
-------------------- Operations) to
Class B Shares 1998 1997 June 30, 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
Net Asset Value, Beginning of the Period....... $ 9.867 $9.112 $9.430
------- ------ ------
Net Investment Loss.......................... (.204) (.105) (.006)
Net Realized and Unrealized Gain/Loss........ 3.798 .860 (.312)
------- ------ ------
Total from Investment Operations............... 3.594 .755 (.318)
------- ------ ------
Net Asset Value, End of the Period............. $13.461 $9.867 $9.112
======= ====== ======
Total Return (a)............................... 36.37% 8.34% (3.39%)**
Net Assets at End of the Period (In
millions).................................... $148.4 $94.2 $25.5
Ratio of Expenses to Average Net Assets*....... 2.20% 2.05% 2.06%
Ratio of Net Investment Loss to Average Net
Assets*...................................... (1.85%) (1.55%) (1.28%)
Portfolio Turnover............................. 185% 186% 4%**
</TABLE>
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
* If certain expenses had not been waived by Van Kampen, Total Return would have
been lower and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C>
Ratio of Expenses to Average Net Assets........ 2.37% 2.35% 2.81%
Ratio of Net Investment Loss to Average Net
Assets....................................... (2.02%) (1.86%) (2.04%)
</TABLE>
**Non-Annualized
See Notes to Financial Statements
19
<PAGE> 50
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 29, 1996
(Commencement
Year Ended June 30 of Investment
------------------------ Operations) to
Class C Shares 1998 1997 June 30, 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period...... $ 9.869 $9.113 $ 9.430
------- ------ -------
Net Investment Loss......................... (.203) (.103) (.006)
Net Realized and Unrealized Gain/Loss....... 3.804 .859 (.311)
------- ------ -------
Total from Investment Operations.............. 3.601 .756 (.317)
------- ------ -------
Net Asset Value, End of the Period............ $13.470 $9.869 $ 9.113
======= ====== =======
Total Return (a).............................. 36.47% 8.34% (3.39%)**
Net Assets at End of the Period (In
millions)................................... $16.4 $10.8 $3.9
Ratio of Expenses to Average Net Assets*...... 2.20% 2.05% 2.05%
Ratio of Net Investment Loss to Average Net
Assets*..................................... (1.85%) (1.54%) (1.28%)
Portfolio Turnover............................ 185% 186% 4%**
</TABLE>
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
* If certain expenses had not been waived by Van Kampen, Total Return would have
been lower and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C>
Ratio of Expenses to Average Net Assets....... 2.36% 2.35% 2.81%
Ratio of Net Investment Loss to Average Net
Assets...................................... (2.02%) (1.85%) (2.04%)
</TABLE>
**Non-Annualized
See Notes to Financial Statements
20
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Aggressive Growth Fund, formerly known as Van Kampen American Capital
Aggressive Growth Fund, (the "Fund") is organized as a separate diversified
series of Van Kampen Equity Trust (the "Trust"), a Delaware business trust,
which is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to seek capital growth by investing primarily in a diversified portfolio of
common stocks and other equity securities. The Fund commenced investment
operations on May 29, 1996 with three classes of common shares, Class A, Class B
and Class C.
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.
Investments in securities not listed on a securities exchange are valued based
on their last sales price or, if not available, their fair value as determined
using 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 Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are 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.
21
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class of
shares.
D. ORGANIZATIONAL COSTS--The Fund will reimburse Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $105,000. These costs are being amortized
on a straight line basis over the 60 month period ending May 28, 2001. The
Adviser has agreed that in the event any of the initial shares of the Fund
originally purchased by Van Kampen are redeemed by the Fund during the
amortization period, the Fund will be reimbursed for any unamortized
organizational costs in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.
E. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At June 30, 1998, for federal income tax purposes, cost of long- and
short-term investments is $224,524,545; the aggregate gross unrealized
appreciation is $74,453,491 and the aggregate gross unrealized depreciation is
$4,495,636 resulting in net unrealized appreciation of $69,957,855.
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of wash sales.
F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
annually from net investment income and net realized gains, if any. Due to
inherent differences in the recognition of certain expenses under generally
accepted accounting principles and for federal income tax purposes, the amount
of net investment income/loss may differ between book and federal income tax
purposes for a particular period. These differences are temporary in nature, but
may result in book basis net investment losses.
Short-term capital gains totaling $124,267 were offset against the 1998 tax
basis net operating loss resulting in a reclassification from accumulated net
realized gains to accumulated net investment loss. The $3,557,256 of remaining
tax basis net operating loss was reclassified from accumulated net operating
loss to capital.
22
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
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 $500 million...................................... .75 of 1%
Next $500 million....................................... .70 of 1%
Over $1 billion......................................... .65 of 1%
</TABLE>
For the year ended June 30, 1998, the Fund recognized expenses of
approximately $4,600 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 year ended June 30, 1998, the Fund recognized expenses of
approximately $86,100, representing Van Kampen's cost of providing accounting
and legal services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the year ended June 30, 1998,
the Fund recognized expenses of approximately $865,100. 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 June 30, 1998, Van Kampen owned 100 shares each of Classes A, B and C.
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.
23
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
At June 30, 1998, capital aggregated $77,375,241, $103,908,446 and
$11,600,254 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................................... 9,586,041 $ 113,481,993
Class B................................... 3,875,397 46,006,833
Class C................................... 476,868 5,674,440
----------- -------------
Total Sales................................. 13,938,306 $ 165,163,266
=========== =============
Repurchases:
Class A................................... (9,437,958) $(112,683,409)
Class B................................... (2,400,562) (28,531,040)
Class C................................... (359,118) (4,189,363)
----------- -------------
Total Repurchases........................... (12,197,638) $(145,403,812)
=========== =============
</TABLE>
At June 30, 1997, capital aggregated $78,128,681, $88,239,951 and
$10,313,111 for Classes A, B, and C, respectively. For the year ended June 30,
1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................... 9,770,450 $ 92,970,307
Class B................................... 8,682,864 81,053,761
Class C................................... 950,840 8,979,537
---------- ------------
Total Sales................................. 19,404,154 $183,003,605
========== ============
Repurchases:
Class A................................... (4,658,667) $(44,877,839)
Class B................................... (1,934,698) (17,864,738)
Class C................................... (284,968) (2,563,290)
---------- ------------
Total Repurchases........................... (6,878,333) $(65,305,867)
========== ============
</TABLE>
Class B and C Shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B Shares will
automatically convert to Class A Shares after the eighth year following
purchase. The CDSC for Class B and C shares will be imposed on most redemptions
made within five years of the purchase for Class B and one year of the purchase
for Class C as detailed in the following schedule.
24
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALE CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- ---------------------------------------------------------------------------
<S> <C> <C>
First........................................... 5.00% 1.00%
Second.......................................... 4.00% None
Third........................................... 3.00% None
Fourth.......................................... 2.50% None
Fifth........................................... 1.50% None
Sixth and Thereafter............................ None None
</TABLE>
For the year ended June 30, 1998, Van Kampen, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$140,600 and CDSC on redeemed shares of approximately $412,300. 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 $447,463,505 and $431,097,637,
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 year ended June 30, 1998, are payments retained by Van Kampen of
approximately $983,700.
25
<PAGE> 56
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Aggressive Growth Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Aggressive Growth Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1998, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Aggressive Growth Fund as of June 30, 1998, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
July 24, 1998
26
<PAGE> 57
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
U.S. Real Estate
Utility
Value
International/Global
Asian Growth
Emerging Markets
Global Equity
Global Equity Allocation
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 and
Senior Loan Fund
Prime Rate Income Trust
Reserve
Senior Floating Rate
Tax Free Money
To find out more about any of these funds, ask your financial adviser 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.VAN-KAMPEN.COM -- to view prospectuses, select Investors' Place, then
Download a 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.VAN-KAMPEN.COM and selecting Investors' Place
27
<PAGE> 58
VAN KAMPEN AGGRESSIVE GROWTH 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
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORRELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
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
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1998 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds
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, 1998 the report, if used with
prospective investors, must be accompanied by a quarterly performance update.
28
<PAGE> 59
Van Kampen American Capital
VALUE FUND
Annual Report
June 30, 1998
DISTRIBUTED BY VAN KAMPEN FUNDS, INC.
TABLE OF CONTENTS
Letter to Shareholders........................................... 1
Putting Your Fund's Performance in Perspective .................. 3
Portfolio Management Review...................................... 4
Portfolio of Investments......................................... 7
Statement of Assets and Liabilities.............................. 9
Statement of Operations.......................................... 10
Statement of Changes in Net Assets............................... 11
Financial Highlights............................................. 12
Notes to Financial Statements.................................... 15
Independent Accountants' Report.................................. 18
VALF ANR 8/98
<PAGE> 60
LETTER TO SHAREHOLDERS
July 20, 1998
Dear Shareholder,
As you may know, Van Kampen American Capital is consolidating all of
the retail mutual funds that we distribute under the single name of Van Kampen
Funds. This move accompanies the change in our legal name to Van Kampen Funds
Inc. You can be assured that this change will not affect its management or daily
operations.
ECONOMIC OVERVIEW
The U.S. economy continued to expand at a robust pace despite a deepening
recession in a number of Asian nations. The nation's inflation-adjusted output
of goods and services ran at 5.4 percent during the first quarter, an annualized
rate considered by many economists to be virtually unsustainable without leading
to inflation. As the reporting period ended, however, there were indications
that the Asian financial crisis was finally having a moderating impact on the
economy. Also, the Conference Board's index of leading indicators points toward
a slowdown in economic growth later this year.
Despite the generally solid pace of economic activity, inflation remained
benign. Consumer prices rose by 1.7 percent during the 12 months through June,
while producer prices actually declined during the same period. Falling
commodity prices and the impact of the strong dollar helped to offset the
inflationary implications of a tight labor market and strong consumer spending.
While the Federal Reserve kept short-term interest rates steady at 5.5
percent during the reporting period, minutes from the central bank's May policy
meeting indicated growing sentiment for tightening monetary policy if the drag
from Asia does not slow the American economy on its own.
MARKET OVERVIEW
U.S. stocks continued to post gains during the period, but the sharp
variation in returns across industry groups reflected the growing impact of the
Asian financial crisis on corporate profits. The Wilshire 5000 Index, consisting
of all publicly traded U.S. companies, gained 14.68 percent during the first six
months of 1998. Once again, most of the strength was concentrated in
large-capitalization companies, as the S&P 500 Index of large stocks returned
17.67 percent during the period compared to 4.93 percent for the Russell 2000
Index of small-cap issues. Even large stocks, however, fell back significantly
beginning in April as the Asian crisis intensified.
Companies with heavy exposure to domestic consumers benefited from a strong
American economy, especially during the latter stages of the reporting period.
Consumer cyclical stocks returned 28.94 percent during the first six months of
1998, compared to 6.35 percent for basic materials and 3.01 percent for energy
issues. Eight of the ten top-performing industry groups during the second
quarter were from consumer-related sectors. Meanwhile, the steep decline in
energy and agricultural prices--a consequence of reduced demand from
Asia--undermined the performance of commodity-related stocks. During the three
months through June, five of the ten worst-performing industry sectors were from
either energy, metals, or commodity-based industries.
OUTLOOK
We believe economic growth in the United States is likely to slow in coming
months as the impact of the Asian crisis becomes more apparent. As growth
decelerates, corporate profits will come under pressure, especially among large
companies. Given the difficult year-over-year earnings comparisons that will
begin
1
Continued on page two
<PAGE> 61
to appear in coming quarters, we caution investors not to expect a continuation
of the large gains that have become almost routine for U.S. stocks in recent
years. The high valuations and decelerating profit growth could limit returns in
the equity market over the near term.
Still, the overall environment for equities remains positive. Inflation is
low, the economy continues to grow, the bond market is healthy, and monetary
policy is stable. These characteristics usually support relatively high
valuations in the stock market. We remain confident that the domestic equity
asset class will continue to provide solid growth for investors with a long-term
time horizon.
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 serve you and your family through our
diverse menu of quality investments
Sincerely,
/s/Don G. Powell /s/Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kempen Investment Van Kampen Investment
Advisory Corp. Advisory Corp.
2
<PAGE> 62
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:
- Illustrate the general market environment in which your investments
are being managed
- Reflect the impact of favorable market trends or difficult market
conditions
- Help you evaluate the extent to which your Fund's management team
has responded to the opportunities and challenges presented to them
over the period measured
For these reasons, you may find it helpful to review the chart below,
which compares your Fund's performance to that of the Standard & Poor's
500-Stock Index and the Standard & Poor's 400 Midcap Index* over time. These
indices are statistical composites and do not reflect any commissions or fees
which would be incurred by an investor purchasing the securities they represent.
Similarly, their performance does not reflect any other costs which would be
applicable to an actively managed portfolio, such as that of the Fund.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Value Fund vs. the Standard & Poor's 500-Stock Index
and the Standard & Poor's 400 Midcap Index* (December 27, 1995 through
June 30, 1998)
Chart:
VKAC Value Fund 6/30/98 Report
Returns
Month Fund Value S&P 400 Midcap S&P 500 Index
Dec-95 $9,425 $10,000 $10,000
Jan-96 $9,614 $10,177 $10,409
Feb-96 $9,887 $10,504 $10,482
Mar-96 $10,141 $10,659 $10,621
Apr-96 $10,386 $10,972 $10,764
May-96 $11,027 $11,103 $11,010
Jun-96 $10,745 $10,966 $11,096
Jul-96 $10,179 $10,213 $10,589
Aug-96 $10,669 $10,786 $10,788
Sep-96 $11,103 $11,283 $11,437
Oct-96 $10,867 $11,302 $11,736
Nov-96 $11,800 $11,921 $12,597
Dec-96 $12,099 $11,965 $12,389
Jan-97 $12,387 $12,401 $13,149
Feb-97 $12,864 $12,282 $13,227
Mar-97 $12,208 $11,790 $12,723
Apr-97 $12,457 $12,082 $13,466
May-97 $13,897 $13,121 $14,255
Jun-97 $14,225 $13,520 $14,940
Jul-97 $15,755 $14,841 $16,107
Aug-97 $15,248 $14,808 $15,182
Sep-97 $15,983 $15,691 $16,057
Oct-97 $14,841 $14,992 $15,503
Nov-97 $14,483 $15,198 $16,195
Dec-97 $14,582 $15,820 $16,516
Jan-98 $14,676 $15,504 $16,684
Feb-98 $16,071 $16,770 $17,859
Mar-98 $16,704 $17,559 $18,815
Apr-98 $16,528 $17,863 $18,986
May-98 $16,013 $17,043 $18,629
Jun-98 $16,083 $17,183 $19,435
Fund's Total Return
1 Year Avg. Annual = 6.59%
Inception Avg. Annual = 20.84%
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.
The Fund commenced operation in 1995 with limited capital invested primarily by
the adviser's affiliates. While the Fund has been available for sale in a
limited number of states, as of June 30, 1998 the Fund had not engaged in a
broad continuous public offering and was not subject to redemption requests. The
Fund's adviser believes that the portfolio has been managed substantially the
same as if the Fund had been open for investment to all public investors. No
assurances can be given, however, that the Fund's investment performance would
have been the same during the period if the Fund had been broadly distributed.
During this period, certain fees were waived and expenses were reimbursed by the
Fund's adviser which had a material effect on the Fund's total return.
*The Standard & Poor's 500-Stock Index represents general stock market
performance and was initially selected as a benchmark for the Fund's
performance; additionally the Standard & Poor's 400 Midcap Index was selected to
represent a more narrow-based comparison.
3
<PAGE> 63
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
We recently spoke to the management team of the Van Kampen American Capital
Value Fund about the key events and economic forces that shaped the markets
during the past year. The team is led by James A. Gilligan, portfolio manager;
Scott Carroll portfolio comanager; and Dennis J. McDonnell, president of the
adviser. The following excerpts reflect their views on the Fund's performance
during the year ended June 30, 1998.
Q CAN YOU DESCRIBE THE STOCK MARKET ENVIRONMENT FOR THE FUND DURING THE
REPORTING PERIOD?
A The stock market was influenced by two opposing factors. On the home front,
steady economic growth and low inflation provided a very favorable climate for
stocks. However, a currency collapse in Southeast Asia threatened to slow the
economies of countries around the world. The Dow Jones Industrial Average
struggled through the last few months of 1997, trying to regain its momentum
after being unsettled by the Asian currency crisis in October. The Dow recovered
quickly and proceeded to hit record highs in early 1998. During the final months
of the reporting period, the Dow remained relatively flat, fluctuating around
the 9000 mark.
Investors continued to favor large, well-established companies during
the reporting period because of their uncertainty about how the Asian situation
would affect the U.S. markets. Generally, large-capitalization companies made
greater gains than small-cap firms did.
Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET ITS
OBJECTIVE?
A We use a consistent strategy of identifying stocks in the mid-cap universe
that we believe are selling at a discount to their intrinsic value. More
specifically, we favor companies with compelling economics and that we feel have
the ability to grow their intrinsic values at attractive rates with minimal
incremental capital. Generally, we look for three types of value situations.
First, we look for businesses with high return on capital whose virtues are
being ignored by most investors. Second, we seek out companies undergoing a
restructuring that may be able to dramatically increase their earning power by
reducing their cost structure or divesting non-core businesses. Finally, the
most common opportunity arises when a short-term problem, such as disappointing
quarterly earnings, creates a dramatic share-price decline and buying
opportunity for the patient investor. In each situation, we require a 50-percent
appreciation potential to estimated intrinsic value during the expected holding
period, thereby seeking to increase the return of the Fund while potentially
limiting the risk of a permanent loss of capital.
Q WHAT AREAS OF THE MARKET AFFECTED THE FUND'S PERFORMANCE DURING THE PAST YEAR?
A The major influences on Fund performance can be traced to two sources:
companies that restructured and companies that had exposure to Asia. Several of
our holdings underwent a corporate restructuring during the reporting period,
which ultimately strengthened the companies and boosted their
4
<PAGE> 64
stock prices. A good example was PacifiCare Health Systems, a health
maintenance organization. At the time of your last report, PacifiCare and other
HMOs were caught between accelerating costs and an inability to raise prices.
However, we anticipated that restructuring within PacifiCare would increase its
profitability, and that is exactly what happened in the first half of 1998.
PacifiCare acquired FHP Health Care, cut its operating costs, and implemented
price increases. Although this wasn't a smooth process, the outcome has been
positive and the stock has met our original appreciation targets.
Another favorable restructuring story was Black & Decker. Faced with
earnings problems, the home and garden tool manufacturer refocused on its core
business and instituted a cost reduction program--actions designed to drive up
the stock price. The result was a 60 percent appreciation in Black & Decker's
stock price since June 30, 1997.
Finally, the Fund held Beckman Instruments, which acquired Coulter in
October to form Beckman Coulter, a leading provider of laboratory instruments.
The new combined entity is still in the process of integrating the merger, but
the venture has already resulted in tremendous cost savings and enhanced cash
flows. The stock price has jumped 33 percent since the acquisition in October.
In addition to restructuring companies, the other dominant theme for
the Fund was our Asian exposure. In your last report, we discussed how several
of our holdings were negatively affected by the economic turmoil in Asia last
fall--including Philips Electronics and Fluor. This year, investors have
realized that companies aren't headed for disaster just because they do business
with Asia, and many stocks rebounded when investors' fears were mitigated.
Philips Electronics has reported solid earnings, as the strength of its overall
business compensated for weaknesses in Asia. In the past 12 months, the stock
price has risen 15 percent. We believe Philips Electronics is still undervalued,
so we continued to hold a large position in the portfolio at the end of the
reporting period. Fluor has appreciated more than 35 percent year to date, but
it has not quite recovered from its losses of late 1997. 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.
Q WERE THERE ANY DISAPPOINTMENTS IN THE PORTFOLIO?
A Tobacco giant Philip Morris has been trying to settle a number of lawsuits,
and its stock price has declined amid this legal battle. The stock was a large
holding during the reporting period, so its underperformance significantly
hindered the Fund's return. We continued to hold Philip Morris because we
believe it is a strong company selling at a low valuation. In addition, we think
there are several factors that could trigger a price increase--the most likely
catalyst being a resolution of its litigation. Although questions remain about
the financial impact of the eventual settlement, this risk seems to be
discounted in the stock price.
The Fund's technology stocks also struggled during the past year. In
early 1998, an oversupply of personal computers overwhelmed many areas of the
technology industry, as the Asian situation put a cap on demand. Consequently,
the manufacturers of semiconductors suffered an inventory buildup and had to
reduce production. Adaptec, a computer hardware manufacturer, and VLSI
Technology, a semiconductor firm, were among our disappointments in this sector.
5
<PAGE> 65
Q HOW DID THE FUND PERFORM DURING THE PAST YEAR?
A The Fund achieved a one-year total return of 13.06 percent (Class A shares at
net asset value) as of June 30, 1998. In addition, the Fund generated total
returns of 3.94 percent, 6.59 percent, and 20.84 percent for six months, 12
months, and the life of the Fund, respectively (Class A shares at maximum sales
charge).
By comparison, the Standard & Poor's 500-Stock Index returned 30.09
percent for the reporting period, and the Standard & Poor's Mid-Cap Index, which
more closely resembles the Fund, returned 27.10 percent. The S&P 500-Stock Index
is a broad-based index that reflects the general performance of the stock
market, and the S&P Mid-Cap Index reflects the general performance of mid-cap
stocks. Keep in mind that these indices are statistical composites that do not
include any commissions that would be paid by an investor purchasing the
securities or investments represented by these indices.
Q WHAT IS YOUR OUTLOOK FOR THE FUND FOR THE REST OF THE YEAR?
A At the time of your last report, the effects of the Asian economic crisis on
the U.S. stock market were unclear but ominous. Today, its effects are still
uncertain, but the domestic outlook is more positive: the crisis has had a
severe impact on a few segments of the U.S. market but otherwise has been fairly
contained. The stock market reached new highs during the reporting period, and
we expect that controlled growth and low inflation will continue to support
stock prices during the remainder of the year.
In managing the Fund, we continue to look for undervalued mid-cap stocks
with what we believe are solid earnings growth potential and strong
fundamentals. We've stated repeatedly that the stock market is highly valued,
and this continues to be true. Investors should be aware that inflated stock
prices can translate into high risk, because expensive securities have farther
to fall in a market downturn than low-priced stocks. As such, we believe that
the Value Fund, with its emphasis on undervalued stocks, may be well suited for
this environment.
/s/Dennis J. McDonnell /s/James A. Gilligan /s/Scott Carroll
Dennis J. McDonnell James A. Gilligan Scott Carroll
President Portfolio Manager Portfolio Comanager
Van Kampen Investment
Advisory Corp.
6
<PAGE> 66
<TABLE>
<CAPTION>
Van Kampen American Capital Value Fund
Portfolio of Investments
June 30, 1998
Description Shares Market Value
- -----------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 96.2%
Consumer Distribution 1.6%
Federated Department Stores, Inc. (a) 490 $ 26,368
-----------
Consumer Durables 1.9%
Black & Decker Corp. 500 30,500
-----------
Consumer Non-Durables 8.1%
Philip Morris Cos., Inc. 1,470 57,881
Tommy Hilfiger Corp. (a) 1,200 75,000
-----------
132,881
-----------
Consumer Services 5.0%
Bell & Howell Co. (a) 1,890 48,786
H & R Block, Inc. 260 10,952
Lone Star Steakhouse & Saloon (a) 1,580 21,824
-----------
81,562
-----------
Energy 1.7%
Nabors Industries, Inc. (a) 1,400 27,738
-----------
Finance 21.2%
Aetna, Inc. 450 34,256
Amerus Life Holdings, Inc., Class A 800 25,900
Arden Realty, Inc. 1,200 31,050
Avis Rent A Car, Inc. (a) 1,900 47,025
Chase Manhattan Corp. 760 57,380
Conseco, Inc. 140 6,545
Dresdner Bank AG - SP ADR (Germany) 600 32,025
ESG Re Ltd. 2,000 43,250
Exel Ltd. 500 38,906
Provident Cos., Inc. 140 4,830
Washington Mutual, Inc. 600 26,063
-----------
347,230
-----------
Healthcare 12.8%
Beckman Coulter, Inc. 1,200 69,900
PacifiCare Health Systems, Class B (a) 1,190 105,166
Pharmacia & Upjohn, Inc. 700 32,288
Rhodia, SA - SP ADR (France) (a) 100 2,725
-----------
210,079
-----------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 67
<TABLE>
<CAPTION>
Van Kampen American Capital Value Fund
Portfolio of Investments (Continued)
June 30, 1998
Description Shares Market Value
- -----------------------------------------------------------------------------
<S> <C> <C>
Producer Manufacturing 15.4%
AGCO Corp. 200 $ 4,112
Cognex Corp. (a) 1,000 18,500
Flowserve Corp. 800 19,700
Fluor Corp. 850 43,350
Magnetek Inc. (a) 2,500 39,375
Philips Electronics N.V. - N.Y. Registered Shares 770 65,450
(Netherlands)
USA Waste Services, Inc. (a) 1,000 49,375
Waste Management, Inc. 400 14,000
-----------
253,862
-----------
Raw Materials/Processing Industries 1.8%
Raychem Corp. 1,000 29,563
-----------
Technology 16.1%
3Com Corp. (a) 1,100 33,756
Adaptec, Inc. (a) 2,100 30,056
First Data Corp. 1,300 43,306
Micron Technology, Inc. (a) 1,400 34,737
Nokia Corp. - ADR (Finland) 280 20,318
Quantum Corp. (a) 1,400 29,050
SunGard Data Systems, Inc. (a) 1,000 38,375
VLSI Technology, Inc. (a) 2,100 35,241
-----------
264,839
-----------
Utilities 10.6%
GPU, Inc. 800 30,250
Niagara Mohawk Power Corp. (a) 5,200 77,675
Northeast Utilities (a) 2,200 37,262
Texas Utilities Co. 700 29,138
-----------
174,325
-----------
Total Investments 96.2%
(Cost $1,410,856) 1,578,947
-----------
Other Assets in Excess of Liabilities 3.8% 62,383
-----------
Net Assets 100.0% $ 1,641,330
===========
</TABLE>
(a)Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
8
<PAGE> 68
<TABLE>
<CAPTION>
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
ASSETS:
<S> <C>
Total Investments (Cost $1,410,856) $ 1,578,947
Cash 38,489
Receivable from Distributor and Affiliates 58,853
Unamortized Organizational Costs 20,106
Other 3,252
-----------
Total Assets 1,699,647
-----------
LIABILITIES:
Trustees' Deferred Compensation and Retirement Plans 24,763
Reports to Shareholders 19,750
Audit Fees 9,092
Other Accrued expenses 4,712
-----------
Total Liabilities 58,317
-----------
NET ASSETS $ 1,641,330
===========
NET ASSETS CONSIST OF:
Capital $ 1,411,262
Net Unrealized Appreciation 168,091
Accumulated Net Realized Gain 82,668
Accumulated Net Investment Loss (20,691)
-----------
NET ASSETS $ 1,641,330
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share
(Based on net assets of
$1,430,777 and 104,285 shares of beneficial
interest issued and outstanding $ 13.72
Maximum sales charge (5.75%* of offering price) 0.84
-----------
Maximum offering price to public $ 14.56
===========
Class B Shares:
Net asset value and offering price per share
(Based on net assets of $105,268
and 7,670 shares of beneficial interest issued and
outstanding $ 13.72
===========
Class C Shares:
Net asset value and offering price per share
(Based on net assets of $105,285
and 7,670 shares of beneficial interest issued and
outstanding $ 13.73
===========
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
9
<PAGE> 69
<TABLE>
<CAPTION>
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
STATEMENT OF OPERATIONS
For the Twelve Months Ended June 30, 1998
INVESTMENT INCOME:
<S> <C>
Dividends $ 15,205
-----------
EXPENSES:
Accounting 29,582
Shareholder Reports 20,885
Shareholder Services 16,558
Investment Advisory Fee 12,163
Audit 11,991
Amortization of Organizational Costs 7,997
Trustees' Fees and Expenses 7,383
Trustees' Retirement Plan 5,572
Legal 5,184
Custody 4,623
Registration 1,285
Other 2,691
-----------
Total Expenses 125,914
Less: Fees Waived and Expenses Reimbursed
($12,163 and $90,382 respectively) 102,545
Earnings Credits on Cash Balances 2,286
-----------
Net Expenses 21,083
-----------
NET INVESTMENT LOSS $ (5,878)
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 240,590
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period 206,246
End of the Period 168,091
-----------
Net Unrealized Depreciation During the Period (38,155)
-----------
NET REALIZED AND UNREALIZED GAIN $ 202,435
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 196,557
===========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 70
<TABLE>
<CAPTION>
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1998 and 1997
Year Ended Year Ended
June 30, 1998 June 30, 1997
FROM INVESTMENT ACTIVITIES:
Operations:
<S> <C> <C>
Net Investment Loss $ (5,878) $ (1,438)
Net Realized Gain 240,590 64,043
Net Unrealized Appreciation/ Depreciation
During the Period (38,155) 185,690
-------------- -------------
Change in Net Assets from Operations 196,557 248,295
-------------- -------------
Distributions in Excess of Net Investment Income:
Class A Shares (9,412) (174)
Class B Shares (666) (111)
Class C Shares (666) (111)
-------------- -------------
(10,744) (396)
-------------- -------------
Distributions from Net Realized Gain:
Class A Shares (192,785) (6,330)
Class B Shares (13,647) (4,004)
Class C Shares (13,647) (4,004)
-------------- -------------
(220,079) (14,338)
-------------- -------------
Total Distributions (230,823) (14,734)
-------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES (34,266) 233,561
-------------- -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold 1,196 1,000,000
Net Asset Value of Shares Issued Through
Dividend Reinvestment 230,823 2,074
Cost of Capital Stock Repurchased (57,633) 0
-------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 174,386 1,002,074
-------------- -------------
TOTAL INCREASE IN NET ASSETS 140,120 1,235,635
NET ASSETS:
Beginning of the Period 1,501,210 265,575
-------------- -------------
End of the Period (Including accumulated
undistributed net investment
loss of $20,691 and $4,069 respectively) $ 1,641,330 $ 1,501,210
============== =============
</TABLE>
See Notes to Financial Statements
11
<PAGE> 71
<TABLE>
<CAPTION>
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
December 27, 1995
(Commencement
of Investment
Year Ended Year Ended Operations) to
Class A Shares June 30, 1998 June 30, 1997 June 30, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 14.321 $ 11.409 $ 10.000
------------- ------------- -------------
Net Investment Income/Loss (0.032) (0.014) 0.018
Net Realized and Unrealized Gain 1.633 3.559 1.391
------------- ------------- -------------
Total from Investment Operations 1.601 3.545 1.409
------------- ------------- -------------
Less:
Distributions from Net Investment Income 0.103 0.017 -0-
Distributions from Net Realized Gain 2.100 0.616 -0-
------------- ------------- -------------
Total Distributions 2.203 0.633 -0-
------------- ------------- -------------
Net Asset Value, End of the Period $ 13.719 $ 14.321 $ 11.409
============= ============= =============
Total Return * (a) 13.06% 32.39% 14.00%**
Net Assets at End of the Period (In thousands) $1,430.7 $1,315.0 $117.2
Ratio of Expenses to Average Net Assets* (b) 1.44% 1.48% 1.38%
Ratio of Net Investment Income/Loss to Average Net Assets* (0.36)% (0.31)% 0.38%
Portfolio Turnover 109% 85% 41%**
*If certain expenses had not been assumed by VKAC,
total return would have been lower and the ratios
would have been as follows:
Ratio of Expenses to Average Net Assets (b) 7.76% 17.19% 17.57%
Ratio of Net Investment Income/Loss to Average Net Assets (6.69)% (16.01)% (15.81)%
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits
earned on overnight cash balances. If these credits were reflected as a
reduction of expenses, the ratios would decrease by .14%,.18% and .08%
for the periods ended on June 30, 1998, on June 30, 1997 and on June 30,
1996 respectively.
See Notes to Financial Statements
12
<PAGE> 72
<TABLE>
<CAPTION>
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
December 27, 1995
(Commencement
of Investment
Year Ended Year Ended Operations) to
Class B Shares June 30, 1998 June 30, 1997 June 30, 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 14.327 $ 11.410 $ 10.000
------------- ------------- -------------
Net Investment Income/Loss (0.027) (0.017) 0.024
Net Realized and Unrealized Gain 1.626 3.567 1.386
------------- ------------- -------------
Total from Investment Operations 1.599 3.550 1.410
------------- ------------- -------------
Less:
Distributions from Net Investment Income 0.102 0.017 -0-
Distributions from Net Realized Gain 2.100 0.616 -0-
------------- ------------- -------------
Total Distributions 2.202 0.633 -0-
------------- ------------- -------------
Net Asset Value, End of the Period $ 13.724 $ 14.327 $ 11.410
============= ============= =============
Total Return * (a) 12.98% 32.48% 14.00%**
Net Assets at End of the Period (In thousands) $105.3 $93.1 $74.2
Ratio of Expenses to Average Net Assets* (b) 1.44% 1.48% 1.38%
Ratio of Net Investment Income/Loss to Average Net Assets* (0.36)% (0.14)% 0.44%
Portfolio Turnover 109% 85% 41%**
*If certain expenses had not been assumed by VKAC,
total return would have been lower and the ratios
would have been as follows:
Ratio of Expenses to Average Net Assets (b) 7.76% 17.19% 17.57%
Ratio of Net Investment Income/Loss to Average Net Assest (6.69)% (15.79)% (15.75)%
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits
earned on overnight cash balances. If these credits were reflected as a
reduction of expenses, the ratios would decrease by .14%, .18% and .08%
for the periods ended on June 30, 1998, on June 30, 1997 and on June 30,
1996 respectively.
See Notes to Financial Statements
13
<PAGE> 73
<TABLE>
<CAPTION>
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
December 27, 1995
(Commencement
of Investment
Year Ended Year Ended Operations) to
Class C Shares June 30, 1998 June 30, 1997 June 30, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 14.327 $ 11.410 $ 10.000
------------- ------------- -------------
Net Investment Income/Loss (0.026) (0.017) 0.024
Net Realized and Unrealized Gain 1.627 3.567 1.386
------------- ------------- -------------
Total from Investment Operations 1.601 3.550 1.410
------------- ------------- -------------
Less:
Distributions from Net Investment Income 0.102 0.017 -0-
Distributions from Net Realized Gain 2.100 0.616 -0-
------------- ------------- -------------
Total Distributions 2.202 0.633 -0-
------------- ------------- -------------
Net Asset Value, End of the Period $ 13.726 $ 14.327 $ 11.410
============= ============= =============
Total Return * (a) 13.06% 32.48% 14.00%**
Net Assets at End of the Period (In thousands) $105.3 $93.1 $74.2
Ratio of Expenses to Average Net Assets* (b) 1.44% 1.48% 1.38%
Ratio of Net Investment Income/Loss to Average Net Assest* (0.36)% (0.14)% 0.44%
Portfolio Turnover 109% 85% 41%**
*If certain expenses had not been assumed by VKAC,
total return would have been lower and the ratios
would have been as follows:
Ratio of Expenses to Average Net Assets (b) 7.76% 17.19% 17.57%
Ratio of Net Investment Income/Loss to Average Net Assest (6.68)% (15.79)% (15.75)%
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits
earned on overnight cash balances. If these credits were reflected as
a reduction of expenses, the ratios would decrease by .14%,.18% and .08%
for the periods ended on June 30, 1998, on June 30, 1997 and on June 30,
1996 respectively.
See Notes to Financial Statements
14
<PAGE> 74
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Value Fund (the "Fund") is organized as a series of
Van Kampen Equity Trust (the "Trust"), 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 seek long-term growth of capital by investing primarily in a diversified
portfolio of common stocks and other equity securities of medium and larger
capitalization companies. The Fund commenced investment operations on December
27, 1995, with three classes of common shares, Class A, Class B and Class C.
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 sales price as of the close of such securities
exchange or, if not available, their fair value as determined by the Board of
Trustees. Short-term securities with remaining maturities of 60 days or less are
valued at amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to 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. Expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. ORGANIZATIONAL COSTS - The Fund will reimburse Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $40,000. These costs are being amortized on
a straight line basis over the 60 month period ending December 27, 2000. The
Adviser has agreed that in the event any of the initial shares of the Fund
originally purchased by Van Kampen are redeemed during the amortization period,
the Fund will be reimbursed for any unamortized organizational costs in the same
proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.
E. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and gains to
its shareholders. Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial purposes primarily as a
result of wash sales at June 30, 1998.
At June 30, 1998, for federal income tax purposes, the cost of long-term
investments is $1,412,583; the aggregate gross unrealized appreciation is
$243,969 and the aggregate gross unrealized depreciation is $77,605, resulting
in net unrealized appreciation of $166,364.
F. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
annually from net investment income and net realized gains on securities, if
any. Distributions from net realized gains for book purposes may include
short-term capital gains which are included in ordinary income for tax purposes.
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, 1998. The Fund designated $16,078 as a 28% rate capital gain distribution
and $2,004 as a 20% rate capital gain distribution. Shareholders were sent a
1997 Form 1099-DIV in January 1998 representing their proportionate share of
capital gain distribution to be reported on their income tax returns.
G. EXPENSE REDUCTIONS - During the twelve months ended June 30, 1998, the Fund's
custody fee was reduced by $2,286 as a result of credits earned on overnight
cash balances.
15
<PAGE> 75
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
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:
AVERAGE NET ASSETS % PER ANNUM
- ------------------------------- ---------------------
First $500 million .75%
Next $500 million .70%
Over $1 billion .65%
For the year ended June 30, 1998, the Fund incurred expenses of
approximately $5,200 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. All of this cost has been assumed by Van Kampen.
For the year ended June 30, 1998, the Fund incurred expenses of
approximately $34,800 representing Van Kampen's cost of providing accounting and
legal services to the Fund. All of this cost has been assumed by Van Kampen.
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the year ended June
30, 1998, the Fund recognized expenses of approximately $15,000. All of this
cost has been assumed by Van Kampen. 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 June 30, 1998, Van Kampen owned 104,277 shares of Class A, 7,670 shares
of Class B, and 7,670 shares of Class C.
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 June 30, 1998, capital aggregated $1,251,565, $80,397 and $79,300 for
Classes A, B and C, respectively.
For the twelve months ended June 30, 1998, transactions were as follows:
SHARES VALUE
------------- ----------------
Sales:
Class A 7 $100
Class B 0 1,096
============= ================
Total Sales 7 $1,196
============= ================
Dividend Reinvestment:
Class A 16,533 $202,197
Class B 1,170 14,313
Class C 1,170 14,313
============= ================
Total Dividend Reinvestment 18,873 $230,823
============= ================
Shares Repurchased:
Class A (4,076) ($57,633)
============= ================
At June 30, 1997, capital aggregated $1,106,900, $64,988 and $64,988 for
Classes A, B, and C respectively. For the year ended June 30, 1997, transactions
were as follows:
SHARES VALUE
------------- ----------------
Sales:
Class A 81,367 $1,000,000
============= ================
Dividend Reinvestment:
Class A 177 $2,074
============= ================
Class B and Class C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC 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.
CONTINGVALUEEFERRED
SALES CHARGE
CLASS B CLASS C
YEAR OF REDEMPTION SHARES SHARES
- ------------------------------ ------------- ------------
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
16
<PAGE> 76
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $1,697,057 and $1,565,249 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. The Fund's net assets are subject to annual fees under the Plans of up
to .25% for Class A shares and 1.00% each for Class B and Class C shares. No
fees related to the Plans have been accrued by the Fund, as the Fund is
currently owned solely by affiliated persons.
17
<PAGE> 77
KPMG Peat Marwick LLP
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen American Capital Value Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Value Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1998, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the periods presented. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 1998, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen American Capital Value Fund as of June 30, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the periods presented, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Chicago, Illinois
August 7, 1998
18
<PAGE> 78
Van Kampen American Capital Value Fund
BOARD OF TRUSTEES INVESTMENT ADVISER
J. MILES BRANAGAN VAN KAMPEN INVESTMENT ADVISORY CORP.
RICHARD M. DEMARTINI* One Parkview Plaza
LINDA HUTTON HEAGY Oakbrook Terrace, Illinois 60181
R. CRAIG KENNEDY
JACK E. NELSON DISTRIBUTOR
DON G. POWELL*
PHILLIP B. ROONEY VAN KAMPEN FUNDS INC.
FERNANDO SISTO One Parkview Plaza
WAYNE W. WHALEN* - Chairman Oakbrook Terrace, Illinois 60181
OFFICERS SHAREHOLDER SERVICING AGENT
DENNIS J. MCDONNELL* VAN KAMPEN INVESTOR SERVICES INC.
President P.O. Box 418256
Kansas City, Missouri 64141-9256
RONALD A. NYBERG*
Vice President and Secretary CUSTODIAN
EDWARD C. WOOD, III* STATE STREET BANK AND TRUST COMPANY
Vice President and Chief 225 Franklin Street
Financial Officer P.O. Box 1713
Boston, Massachusetts 02105
CURTIS W. MORELL*
Vice President and Chief
Accounting Officer
LEGAL COUNSEL
JOHN L. SULLIVAN*
Treasurer SKADDEN, ARPS, SLATE, MEAGHER & FLOM
(ILLINOIS)
333 West Wacker Drive
TANYA M. LODEN* Chicago, Illinois 60606
Controller
INDEPENDENT ACCOUNTANTS
PETER W. HEGEL*
PAUL R. WOLKENBERG* KPMG PEAT MARWICK LLP
Vice Presidents Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
- -----------------------------------------------------------------------
TAX NOTICE TO CORPORATE SHAREHOLDERS
For the year ended June 30, 1998, 7.42% of the
dividends taxable as ordinary income qualified
for 70% dividends received deduction for
corporations.
- ---------------------------------------------------------------------
* "Interested" persons of the Fund, as defined in the Investment
Company Act of 1940.
Van Kampen Funds Inc., 1998 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, 1998, the report, if used with
prospective investors, must be accompanied by a quarterly performance update.
<PAGE> 79
VAN KAMPEN
GREAT AMERICAN
COMPANIES FUND
Annual Report
June 30, 1998
Van Kampen
Funds
TABLE OF CONTENTS
Letter to Shareholders.......................................... 1
Performance in Perspective...................................... 3
Portfolio Management Review..................................... 4
Portfolio of Investments........................................ 7
Statement of Assets and Liabilities............................. 10
Statement of Operations......................................... 11
Statement of Changes in Net Assets.............................. 12
Financial Highlights............................................ 13
Notes to Financial Statements................................... 16
Report of Independent Accountants............................... 19
GAC ANR 8/98
<PAGE> 80
LETTER TO SHAREHOLDERS
July 20, 1998
Dear Shareholder,
As you may know, Van Kampen American Capital is consolidating all of
the retail mutual funds that we distribute under the single name of Van Kampen
Funds. This move accompanies the change in our legal name to Van Kampen Funds
Inc. You can be assured that the change in your fund's name will not affect its
management or daily operations. You will begin seeing the application of this
change with this report.
ECONOMIC OVERVIEW
The U.S. economy continued to expand at a robust pace despite a deepening
recession in a number of Asian nations. The nation's inflation-adjusted output
of goods and services ran at 5.4 percent during the first quarter, an annualized
rate considered by many economists to be virtually unsustainable without leading
to inflation. As the reporting period ended, however, there were indications
that the Asian financial crisis was finally having a moderating impact on the
economy. Also, the Conference Board's index of leading indicators points toward
a slowdown in economic growth later this year.
Despite the generally solid pace of economic activity, inflation remained
benign. Consumer prices rose by 1.7 percent during the 12 months through June,
while producer prices actually declined during the same period. Falling
commodity prices and the impact of the strong dollar helped to offset the
inflationary implications of a tight labor market and strong consumer spending.
While the Federal Reserve kept short-term interest rates steady at 5.5
percent during the reporting period, minutes from the central bank's May policy
meeting indicated growing sentiment for tightening monetary policy if the drag
from Asia does not slow the American economy on its own.
MARKET OVERVIEW
U.S. stocks continued to post gains during the period, but the sharp
variation in returns across industry groups reflected the growing impact of the
Asian financial crisis on corporate profits. The Wilshire 5000 Index, consisting
of all publicly traded U.S. companies, gained 14.68 percent during the first six
months of 1998. Once again, most of the strength was concentrated in
large-capitalization companies, as the S&P 500 Index of large stocks returned
17.67 percent during the period compared to 4.93 percent for the Russell 2000
Index of small-cap issues. Even large stocks, however, fell back significantly
beginning in April as the Asian crisis intensified.
Companies with heavy exposure to domestic consumers benefited from a strong
American economy, especially during the latter stages of the reporting period.
Consumer cyclical stocks returned 28.94 percent during the first six months of
1998, compared to 6.35 percent for basic materials and 3.01 percent for energy
issues. Eight of the ten top-performing industry groups during the second
quarter were from consumer-related sectors. Meanwhile, the steep decline in
energy and agricultural prices--a consequence of reduced demand from
Asia--undermined the performance of commodity-related stocks. During the three
months through June, five of the ten worst-performing industry sectors were from
either energy, metals, or commodity-based industries.
OUTLOOK
We believe economic growth in the United States is likely to slow in coming
months as the impact of the Asian crisis becomes more apparent. As growth
decelerates, corporate profits will come under pressure, especially among large
companies. Given the difficult year-over-year earnings comparisons that will
begin
Continued on page two
1
<PAGE> 81
to appear in coming quarters, we caution investors not to expect a continuation
of the large gains that have become almost routine for U.S. stocks in recent
years. The high valuations and decelerating profit growth could limit returns in
the equity market over the near term.
Still, the overall environment for equities remains positive. Inflation is
low, the economy continues to grow, the bond market is healthy, and monetary
policy is stable. These characteristics usually support relatively high
valuations in the stock market. We remain confident that the domestic equity
asset class will continue to provide solid growth for investors with a long-term
time horizon.
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 serve you and your family through our
diverse menu of quality investments.
Sincerely,
/s/Don G. Powel /s/Dennis J. McDonnell
Don G. Powel Dennis J. McDonnell
Chairman President
Van Kampen Investment Van Kampen Investment
Advisory Corp. Advisory Corp.
2
<PAGE> 82
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:
- Illustrate the general market environment in which your investments are
being managed
- Reflect the impact of favorable market trends or difficult market
conditions
- Help you evaluate the extent to which your Fund's management team
has responded to the opportunities and challenges presented to them
over the period measured
For these reasons, you may find it helpful to review the chart below,
which compares your Fund's performance to that of the Standard & Poor's
500-Stock Index and the Lipper Growth Fund Index over time. These indices are
statistical composites and do not reflect any commissions or fees which would be
incurred by an investor purchasing the securities they represent. Similarly,
their performance does not reflect any sales charges or other costs which would
be applicable to an actively managed portfolio, such as that of the Fund.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Great American Companies Fund vs. the Standard & Poor's 500-Stock
Index and the Lipper Growth Fund Index (December 27, 1995 through June 30, 1998)
Chart:
VK Great American Companies Fund 6/30/98 Report
Returns
Month Fund Value Lipper Growth S&P 500 Index
Dec-95 $ 9,425 $10,000 $10,000
Jan-96 $ 9,925 $10,242 $10,409
Feb-96 $10,217 $10,402 $10,482
Mar-96 $10,603 $10,451 $10,621
Apr-96 $10,773 $10,713 $10,764
May-96 $10,933 $10,903 $11,010
Jun-96 $10,943 $10,796 $11,096
Jul-96 $10,377 $10,212 $10,589
Aug-96 $10,754 $10,516 $10,788
Sep-96 $11,310 $11,103 $11,437
Oct-96 $11,433 $11,263 $11,736
Nov-96 $12,290 $11,975 $12,597
Dec-96 $12,311 $11,748 $12,389
Jan-97 $12,809 $12,364 $13,149
Feb-97 $12,829 $12,269 $13,227
Mar-97 $12,463 $11,708 $12,723
Apr-97 $12,971 $12,223 $13,466
May-97 $13,754 $13,069 $14,255
Jun-97 $14,476 $13,557 $14,940
Jul-97 $15,553 $14,681 $16,107
Aug-97 $14,760 $14,138 $15,182
Sep-97 $15,564 $14,946 $16,057
Oct-97 $15,208 $14,464 $15,503
Nov-97 $15,503 $14,796 $16,195
Dec-97 $15,998 $15,046 $16,516
Jan-98 $15,847 $15,147 $16,684
Feb-98 $17,075 $16,215 $17,859
Mar-98 $17,863 $16,908 $18,815
Apr-98 $18,025 $17,090 $18,986
May-98 $17,770 $16,671 $18,629
Jun-98 $18,685 $17,391 $19,435
Fund's Total Return
1 Year Avg. Annual = 21.64%
Inception Avg. Annual = 28.28%
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.
The Fund commenced operation in 1995 with limited capital invested primarily
by the adviser's affiliates. While the Fund has been available for sale in a
limited number of statees, as of June 30, 1998 the Fund had not engaged in a
broad continuous public offering and was not subject to redemption requests.
The Fund's adviser believes that the portfolio has been managed substantially
the same as if the Fund had been open for investment to all public investors.
No assurances can be given, however, that the Fund's investment performance
would have been the same during the period if the Fund had been broadly
distributed. During this period, certain fees were waived and expenses were
reimbursed by the Fund's adviser which had a material effect on the Fund's
total return.
3
<PAGE> 83
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
We recently spoke to the management team of the Van Kampen Great American
Companies Fund about the key events and economic forces that shaped the markets
during the past year. The team previously included Evan Harrel and Stephen L.
Boyd, portfolio comanagers. As of May 1, 1998, the Fund has been managed by Jeff
D. New, portfolio manager; Michael Davis, portfolio comanager; and Dennis J.
McDonnell, president of the adviser. The following excerpts reflect their views
on the Fund's performance during the year ended June 30, 1998.
Q CAN YOU DESCRIBE THE STOCK MARKET ENVIRONMENT FOR THE FUND DURING THE
REPORTING PERIOD?
A The stock market was influenced by two opposing factors. On the home front,
steady economic growth and low inflation provided a very favorable climate for
stocks. However, a currency collapse in Southeast Asia threatened to slow the
economies of countries around the world. The Dow Jones Industrial Average
struggled through the last few months of 1997, trying to regain its momentum
after being unsettled by the Asian currency crisis in October. The Dow recovered
quickly and proceeded to hit record highs in early 1998. During the final months
of the reporting period, the Dow remained relatively flat, fluctuating around
the 9000 mark.
Investors continued to favor large, well-established companies during
the reporting period because of their uncertainty about how the Asian situation
would affect the U.S. markets. Generally, stocks of large-capitalization
companies made greater gains than stocks of small-cap firms.
Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET ITS
OBJECTIVE?
A The Fund invests primarily in established U.S. companies that have been market
leaders in their respective fields. We believe these companies will be able to
sustain their position and produce superior performance over time. Although
quality is a primary consideration, we also evaluate potential holdings for
attractive valuations relative to their growth rates. Finally, we diversify the
Fund among many market sectors to gain exposure to a spectrum of industries.
Q WHAT EFFECT DID THE FUND'S MANAGEMENT CHANGE HAVE ON THE PORTFOLIO?
A Since we assumed responsibility for the management of the Fund in May, there
have been some significant changes to the portfolio's sector weightings. For
example, the Fund's exposure to technology, healthcare, and finance stocks has
increased substantially. New stocks added in these areas included Cisco Systems,
EMC, Computer Sciences, BMC Software, Bristol-Myers Squibb, Schering-Plough,
Healthsouth, Travelers Group, and U.S. Bancorp.
The retail area of the consumer distribution sector also offered some
favorable opportunities, thanks to a combination of low unemployment and rising
disposable income. Strong retail stocks
4
<PAGE> 84
included our new positions in Safeway and Dayton Hudson. Also, we lowered the
Fund's allocation to consumer nondurables because we believed they were
overvalued. We sold most of our stocks in this sector, keeping Bestfoods, Dial,
Philip Morris, and Colgate-Palmolive.
It is important to remember that we use a bottom-up selection process
for the Fund, meaning that we evaluate securities one by one and make purchases
wherever we find attractive securities. As such, the changes in the Fund's
sector weightings were simply a reflection of where we found stocks with a
combination of positive fundamentals at attractive prices, in consistency with
the overall strategy of the Fund.
Q WHAT FACTORS WORKED AGAINST THE FUND?
A Philip Morris dragged down the Fund's performance. Philip Morris and the rest
of the tobacco industry have been trying to settle a number of lawsuits, and, as
the settlement process has lingered into 1998, the stock price has fallen 13
percent in the past six months. Despite this price decline, we held on to Philip
Morris because it fits our criteria of an established market leader selling at
an attractive price. The energy sector was another big disappointment. As we
entered 1998, declining oil prices posed a threat to companies whose profits are
tied to commodity prices. We chose to sell the majority of our energy holdings,
including Amoco, Exxon, and Unocal.
Q HOW DID THE FUND PERFORM DURING THE PAST YEAR?
A The Fund achieved a one-year total return of 29.08 percent (Class A shares at
net asset value) as of June 30, 1998. In addition, the Fund generated total
returns of 10.10 percent, 21.64 percent, and 28.28 percent for six months, one
year, and the life of the Fund, respectively (Class A shares at maximum sales
charge).
By comparison, the Standard & Poor's 500-Stock Index achieved a
one-year total return of 30.09 percent, and the Lipper Growth Fund Index, which
more closely resembles the Fund, returned 28.28 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. Keep in mind that 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 they represent.
Q WHAT IS YOUR OUTLOOK FOR THE FUND IN THE NEXT SIX MONTHS?
A At the time of the last report, the effects of the Asian economic crisis on
the U.S. stock market were unclear but certainly negative. Today its effects are
still uncertain, but the outlook is more positive: the crisis has had a severe
impact on a few segments of the U.S. market but otherwise has been fairly
contained. The stock market reached new highs during the reporting period, and
we expect that
5
<PAGE> 85
controlled growth and low inflation will support stock prices during the
remainder of the year. The Fund will continue to invest in favorably priced
companies that we believe can succeed in a variety of market environments.
/s/ Dennis J. McDonnell /s/ Jeff D. New /s/ Michael Davis
Dennis J. McDonnell Jeff D. New Michael Davis
President Portfolio Manager Portfolio Comanager
Van Kampen Investment
Advisory Corp.
6
<PAGE> 86
Van Kampen Great American Companies Fund
Portfolio of Investments
June 30, 1998
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------------
Common Stocks 95.7%
<S> <C> <C>
Consumer Distribution 13.3%
Brylane Inc. (a) 300 $ 13,800
Dayton Hudson Corp. 400 19,400
Federated Department Stores, Inc. (a) 500 26,906
Finish Line, Class A (a) 750 21,093
Kroger Co. (a) 400 17,150
Lear Corp. (a) 500 25,656
Lowes Companies Inc. 800 32,450
Pacific Sunware of California, Inc (a) 750 26,250
Ross Stores Inc. 500 21,500
Safeway Inc. (a) 500 20,344
TJX Companies Inc. 1000 24,125
------------
248,674
------------
Consumer Durables 1.9%
Ford Motor Co. 600 35,400
------------
Consumer Non-Durables 8.2%
Bestfoods 600 34,836
Colgate-Palmolive Co. 400 35,200
Dial Corp. 1,700 44,094
Philip Morris Cos., Inc. 1000 39,375
------------
153,505
------------
Consumer Services 11.4%
Brinker International, Inc. (a) 1,000 19,250
CKE Restaurants, Inc. 600 24,750
Cox Communications, Inc., Class A (a) 900 43,594
New York Times Co., Class A 400 31,700
Omnicom Group, Inc. 800 39,900
TCI Ventures Group, Series A (a) 1000 20,062
Time Warner, Inc. 400 34,175
------------
213,431
------------
Energy 2.7%
Coastal Corp. 250 17,453
Enron Corp. 600 32,438
------------
49,891
------------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 87
Van Kampen Great American Companies Fund
Portfolio of Investments (Continued)
June 30, 1998
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Finance 17.7%
Allstate Corp. 300 $ 27,469
American Express Co. 200 22,800
American General Corp. 400 28,475
Associates First Capital 157 12,069
BankBoston Corp. 400 22,250
Chase Manhattan Corp. 600 45,300
Conseco, Inc. 700 32,725
Federal National Mortgage Assn. 600 36,450
Household International, Inc. 450 22,388
MGIC Investment Corp. 200 11,412
Travelers Group Inc. 500 30,313
US Bancorp 450 19,350
Washington Mutual Inc. 450 19,547
------------
330,548
------------
Healthcare 13.5%
Becton Dickinson & Co. 370 28,721
Bristol-Myers Squibb Co. 300 34,481
Guidant Corp. 200 14,263
Healthsouth Corp. (a) 1300 34,694
Merck & Company, Inc. 200 26,750
Pfizer, Inc. 100 10,869
Schering Plough Corp. 300 27,488
Tenet Healthcare Corp. (a) 700 21,875
Total Renal Care Holdings (a) 800 27,600
United Healthcare Corp. 400 25,400
------------
252,141
------------
Producer Manufacturing 3.6%
Republic Services, Inc., Class A (a) 200 4,800
Tyco International, Ltd. 350 22,050
USA Waste Services, Inc. (a) 800 39,500
------------
66,350
------------
Raw Materials/Processing Industries 1.2%
Du Pont (E.I.) De Nemours & Co. 300 22,388
------------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 88
Van Kampen Great American Companies Fund
Portfolio of Investments (Continued)
June 30, 1998
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Technology 18.0%
America Online, Inc. (a) 330 $ 34,980
Ascend Communications, Inc. (a) 500 24,780
BMC Software, Inc. (a) 600 31,163
Cadence Design Systems, Inc. (a) 500 15,625
Cisco Systems, Inc. (a) 300 27,619
Citrix Systems, Inc. (a) 300 20,513
Computer Assoc International, Inc. 400 22,225
Computer Sciences Corp. (a) 640 40,960
Compuware Corp. (a) 400 20,450
EMC Corp. (a) 500 22,406
Networks Associates, Inc. (a) 700 33,513
Sterling Software, Inc. (a) 900 26,606
Veritas DGC, Inc. (a) 300 14,981
------------
335,821
------------
Transportation 1.3%
US Xpress Enterprises, Inc., Class A (a) 1,500 25,125
------------
Utilities 2.9%
AT & T Corp. 300 17,138
BEC Energy 300 12,450
SBC Communications, Inc. 200 8,000
Teleport Communications Group, Class A (a) 300 16,275
------------
53,863
------------
Total Investments 95.7%
(Cost $1,486,008) 1,787,137
Other Assets in Excess of Liabilities 4.3% 79,523
------------
Net Assets 100.0% $ 1,866,660
============
</TABLE>
(a) Non-income producing security as this stock does not currently declare
dividends.
See Notes to Financial Statements
9
<PAGE> 89
<TABLE>
<CAPTION>
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
ASSETS:
<S> <C>
Total Investments (Cost $1,486,008) $ 1,787,137
Cash 60,653
Receivables:
Expense Reimbursement from Adviser 26,082
Dividends 1,517
Unamortized Organizational Costs 20,106
Other 805
-----------
Total Assets 1,896,300
-----------
LIABILITIES:
Payable for Investments Purchased 4,800
Trustees' Deferred Compensation and Retirement Plans 24,840
-----------
Total Liabilities 29,640
-----------
NET ASSETS $ 1,866,660
===========
NET ASSETS CONSIST OF:
Capital $ 1,390,846
Net Unrealized Appreciation 301,129
Accumulated Net Realized Gain 195,495
Accumulated Net Investment Loss (20,810)
-----------
NET ASSETS $ 1,866,660
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$1,627,709 and 100,925 shares of beneficial interest issued and outstanding) $16.13
Maximum sales charge (5.75%* of offering price) 0.98
-----------
Maximum offering price to public $17.11
===========
Class B Shares:
Net asset value and offering price per share (Based on net assets of
$119,469 and 7,407 shares of beneficial interest issued
and outstanding) $16.13
===========
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $119,482 and 7,407 shares of beneficial interest issued and
outstanding) $16.13
===========
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
</TABLE>
10
<PAGE> 90
<TABLE>
<CAPTION>
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1998
INVESTMENT INCOME:
<S> <C>
Dividends $ 16,979
------------
EXPENSES:
Shareholder Reports 25,938
Accounting 23,528
Shareholder Services 15,259
Audit 11,992
Investment Advisory Fee 11,450
Trustees' Fees and Expenses 9,477
Legal 9,020
Amortization of Organizational Costs 7,997
Custody 7,307
Trustees' Retirement Plan 5,572
Registration and Filing 2,731
Other 7,072
------------
Total Expenses 137,343
Less: Fees Waived and Expenses Reimbursed ($11,450 and $101,306 respectively) 112,756
Earnings Credits on Cash Balances 4,169
------------
Net Expenses 20,418
------------
NET INVESTMENT LOSS $ (3,439)
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 320,602
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period 198,127
End of the Period 301,129
------------
Net Unrealized Appreciation During the Period 103,002
------------
NET REALIZED AND UNREALIZED GAIN $ 423,604
============
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 420,165
============
See Notes to Financial Statements
</TABLE>
11
<PAGE> 91
<TABLE>
<CAPTION>
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1998 and 1997
Year Ended Year Ended
June 30, 1998 June 30, 1997
------------- -------------
FROM INVESTMENT ACTIVITIES:
Operations:
<S> <C> <C>
Net Investment Loss $ (3,439) $ (369)
Net Realized Gain 320,602 56,138
Net Unrealized Appreciation During the Period 103,002 176,652
--------------- ------------
Change in Net Assets from Operations 420,165 232,421
--------------- ------------
Distributions from and in Excess of Net Investment Income:
Class A Shares (12,532) (133)
Class B Shares (920) (123)
Class C Shares (920) (123)
--------------- ------------
(14,372) (379)
--------------- ------------
Distributions from Net Realized Gain:
Class A Shares (154,061) (6,296)
Class B Shares (11,306) (5,847)
Class C Shares (11,306) (5,847)
--------------- ------------
(176,673) (17,990)
--------------- ------------
Total Distributions (191,045) (18,369)
--------------- ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES 229,120 214,052
FROM CAPITAL TRANSACTIONS:
Net Asset Value of Shares Issued Through
Dividend Reinvestment 191,045 0
Cost of Shares Repurchased (5,023) 1,005,024
--------------- ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 186,022 1,005,024
--------------- ------------
TOTAL INCREASE IN NET ASSETS 415,142 1,219,076
NET ASSETS:
Beginning of the Period 1,451,518 232,442
--------------- ------------
End of the Period (Including accumulated net investment
loss of $20,810 and $2,999, respect $ 1,866,660 $ 1,451,518
=============== ============
See Notes to Financial Statements
</TABLE>
12
<PAGE> 92
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
Year Ended June 30, of Investment
------------------------------ Operations) to
Class A Shares 1998 1997 June 30, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 14.235 $ 11.622 $ 10.000
------------- ------------ -------------
Net Investment Income/Loss (0.009) (0.003) 0.019
Net Realized and Unrealized Gain 3.784 3.535 1.603
------------- ------------ -------------
Total from Investment Operations 3.775 3.532 1.622
------------- ------------ -------------
Less:
Distributions from and in Excess of Net Investment Income 0.142 0.019 ---
Distributions from Net Realized Gain 1.740 0.900 ---
------------- ------------ -------------
Total Distributions 1.882 0.919 ---
------------- ------------ -------------
Net Asset Value, End of the Period $ 16.128 $ 14.235 $ 11.622
============= ============ =============
Total Return * (a) 29.08% 32.29% 16.10%**
Net Assets at End of the Period (In thousands) $1,627.7 $1,260.8 $81.4
Ratio of Expenses to Average Net Assets* (b) 1.51% 1.59% 1.37%
Ratio of Net Investment Income/Loss to Average Net Assets* (0.21%) (0.08%) 0.33%
Portfolio Turnover 150% 100% 48%**
*If certain expenses had not been assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets (b) 8.41% 17.82% 18.46%
Ratio of Net Investment Income/Loss to Average Net Assets (7.11%) (16.31%) (16.76%)
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .26%, .34% and .13% for the years
ended, June 30, 1998, 1997 and 1996, respectively.
See Notes to Financial Statements
13
<PAGE> 93
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
Year Ended June 30, of Investment
------------------------------ Operations) to
Class B Shares 1998 1997 June 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 14.237 $ 11.622 $ 10.000
------------- ------------ -------------
Net Investment Income/Loss (0.004) (0.007) 0.019
Net Realized and Unrealized Gain 3.778 3.541 1.603
------------- ------------ -------------
Total from Investment Operations 3.774 3.534 1.622
------------- ------------ -------------
Less:
Distributions from and in Excess of Net Investment Income 0.142 0.019 ---
Distributions from Net Realized Gain 1.740 0.900 ---
------------- ------------ -------------
Total Distributions 1.882 0.919 ---
------------- ------------ -------------
Net Asset Value, End of the Period $ 16.129 $ 14.237 $ 11.622
============= ============ =============
Total Return * (a) 29.08% 32.29% 16.10%**
Net Assets at End of the Period (In thousands) $119.5 $92.5 $75.5
Ratio of Expenses to Average Net Assets* (b) 1.51% 1.59% 1.37%
Ratio of Net Investment Income/Loss to Average Net Assets* (0.21%) (0.05%) 0.33%
Portfolio Turnover 150% 100% 48%**
*If certain expenses had not been assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets (b) 8.41% 17.82% 18.46%
Ratio of Net Investment Income/Loss to Average Net Assets (7.11%) (16.28%) (16.76%)
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .26%, .34% and .13% for the years
ended, June 30, 1998, 1997 and 1996, respectively.
See Notes to Financial Statements
14
<PAGE> 94
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
Year Ended June 30, of Investment
------------------------------- Operations) to
Class C Shares 1998 1997 June 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 14.237 $ 11.622 $ 10.000
------------- ------------ -------------
Net Investment Income/Loss (0.008) (0.007) 0.019
Net Realized and Unrealized Gain 3.784 3.541 1.603
------------- ------------ -------------
Total from Investment Operations 3.776 3.534 1.622
------------- ------------ -------------
Less:
Distributions from and in Excess of Net Investment Income 0.142 0.019 ---
Distributions from Net Realized Gain 1.740 0.900 ---
------------- ------------ -------------
Total Distributions 1.882 0.919 ---
------------- ------------ -------------
Net Asset Value, End of the Period $ 16.131 $ 14.237 $ 11.622
============= ============ =============
Total Return * (a) 29.08% 32.29% 16.10%**
Net Assets at End of the Period (In thousands) $ 119.5 $98.2 $75.5
Ratio of Expenses to Average Net Assets* (b) 1.51% 1.59% 1.37%
Ratio of Net Investment Income/Loss to Average Net Assets* (0.21%) (0.05%) 0.33%
Portfolio Turnover 150% 100% 48%**
*If certain expenses had not been assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets (b) 8.41% 17.82% 18.46%
Ratio of Net Investment Income/Loss to Average Net Assets (7.11%) (16.28%) (16.76%)
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .26%, .34% and .13% for the years
ended, June 30, 1998, 1997 and 1996, respectively.
See Notes to Financial Statements
</TABLE>
15
<PAGE> 95
VAN KAMPEN
GREAT AMERICAN COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Great American Companies Fund, formerly known as Van Kampen American
Capital Great American Companies Fund (the "Fund"), is organized as a series of
the Van Kampen Equity Trust (the "Trust"), 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 seek long-term growth of capital by investing principally in common stocks
and other equity securities. The Fund commenced investment operations on
December 27, 1995, with three classes of common shares, Class A, Class B and
Class C shares.
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. Investments in securities not listed on a securities exchange are
valued based on their last quoted bid price or, if not available, their fair
value as determined 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 Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
C. INCOME AND EXPENSES - Dividend income is recorded on the ex-dividend date
and interest income is recorded on an accrual basis. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class of
shares.
D. ORGANIZATIONAL COSTS - The Fund will reimburse Van Kampen Funds Inc. or its
affiliates' (collectively "Van Kampen") for costs incurred in connection with
the Fund's organization in the amount of $40,000. These costs are being
amortized on a straight line basis over the 60 month period ending December 27,
2000. The Adviser has agreed that in the event any of the initial shares of the
Fund originally purchased by Van Kampen are redeemed during the amortization
period, the Fund will be reimbursed for any unamortized organizational costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.
E. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required. Net
realized gains or losses may differ for financial reporting and tax purposes
primarily as a result of wash sales.
At June 30, 1998, for federal income tax purposes, cost of long-term
investments is $1,486,984; the aggregate gross unrealized appreciation is
$335,795 and the aggregate gross unrealized depreciation is $35,642, resulting
in net unrealized appreciation of $300,153.
F. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
annually from net investment income. Net realized gains, if any, are distributed
annually. Distributions from net realized gains for book purpose may include
short-term capital gains which are included in ordinary income for tax purposes.
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, 1998. The Fund designated $19,923 as a 28% rate capital gain
distribution and $12,781 as a 20% rate capital gain distribution. Shareholders
were sent a 1997 Form-DIV in January 1998 representing their proportionate share
of the capital gain distribution to be reported on their income tax returns. For
corporate shareholders, 8.67% of the distributions qualify for the dividend
received deductions.
16
<PAGE> 96
VAN KAMPEN
GREAT AMERICAN COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
G. EXPENSE REDUCTIONS - During the year ended June 30, 1998, the Fund's
custody fee was reduced by $4,169 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:
Average Net Assets % Per Annum
- -----------------------------------------------------
First $500 million .70 of 1%
Next $500 million .65 of 1%
Over $1 billion .60 of 1%
For the year ended June 30, 1998, the Fund recognized expenses of
approximately $500, representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund of which a trustee of the
Fund is an affiliated person. All of this cost has been assumed by Van Kampen.
For the year ended June 30, 1998, the Fund incurred expenses of
approximately $37,300, representing Van Kampen's cost of providing accounting
and legal services to the Fund. All of this cost has been assumed by Van Kampen.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the year ended June 30, 1998,
the Fund recognized expenses of approximately $15,000. All of this cost has been
assumed by Van Kampen. 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 June 30, 1998, Van Kampen owned 92,948 shares of Class A and all shares
of Classes B and C, respectively.
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 June 30, 1998, capital aggregated $1,236,456, $77,195 and $77,195 for
Classes A, B and C, respectively. For the year ended June 30, 1998, transactions
were as follows:
Shares Value
- ---------------------------------- ------------ ---------------
Dividend Reinvestment:
Class A 12,359 $166,593
Class B 907 12,226
Class C 907 12,226
============ ===============
Total Dividend Reinvestment 14,173 $191,045
============ ===============
Cost of Shares Repurchased:
Class C (398) $(5,023)
============ ===============
At June 30, 1997, capital aggregated $1,069,863, $64,969 and $69,992 for
Classes A, B and C, respectively. For the year ended June 30, 1997, transactions
were as follows:
Shares
Value
- ---------------------------------- ------------ ---------------
Sales:
Class A 81,566 $1,000,000
Class B 0 0
Class C 398 5,024
============ ===============
Total Sales: 81,964 $1,005,024
============ ===============
Class B and Class C shares are offered without a front end sales charge,
but are subject to a contingent deferred sales charge (CDSC). The CDSC 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.
Contingent Deferred
Sales Charge
------------
Class B Class C
Year of Redemption Shares Shares
- ------------------------------ ------------ -------------
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
17
<PAGE> 97
VAN KAMPEN
GREAT AMERICAN COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $2,298,298 and $2,282,313, 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.
The Fund's net assets are subject to annual fees under the Plans of up to
.25% for Class A net assets and 1.00% each for Class B and Class C net assets.
No fees related to the Plans have been accrued by the Fund as the Fund is
currently owned solely by affiliated persons.
18
<PAGE> 98
KPMG Peat Marwick LLP
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Great American Companies Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Great American Companies Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1998, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the periods presented. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 1998, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen Great American Companies Fund as of June 30, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the periods presented, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Chicago, Illinois
August 7, 1998
19
<PAGE> 99
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
BOARD OF TRUSTEES INVESTMENT ADVISER
J. MILES BRANAGAN VAN KAMPEN
RICHARD M. DEMARTINI* INVESTMENT ADVISORY CORP.
LINDA HUTTON HEAGY One Parkview Plaza
R. CRAIG KENNEDY Oakbrook Terrace, Illinois 60181
JACK E. NELSON
DON G. POWELL* DISTRIBUTOR
PHILLIP B. ROONEY
FERNANDO SISTO VAN KAMPEN FUNDS INC.
WAYNE W. WHALEN* - Chairman One Parkview Plaza
Oakbrook Terrace, Illinois 60181
OFFICERS
SHAREHOLDER SERVICING AGENT
DENNIS J. MCDONNELL*
President VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 418256
RONALD A. NYBERG* Kansas City, Missouri 64141-9256
Vice President and Secretary
EDWARD C. WOOD, III* CUSTODIAN
Vice President and Chief
Financial Officer STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
CURTIS W. MORELL* P.O. Box 1713
Vice President and Chief Boston, Massachusetts 02105
Accounting Officer
JOHN L. SULLIVAN* LEGAL COUNSEL
Treasurer
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
(ILLINOIS)
TANYA M. LODEN* 333 West Wacker Drive
Controller Chicago, Illinois 60606
PETER W. HEGEL* INDEPENDENT ACCOUNTANTS
PAUL R. WOLKENBERG*
Vice Presidents KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the
Investment Company Act of 1940.
Van Kampen Funds Inc., 1998
All Rights Reserved.
SM denotes a service mark of Van Kampen Funds Inc.
--------------------------------------------------
TAX NOTICE TO CORPORATE
SHAREHOLDERS
For the fiscal year ended June 30, 1998, 8.67%
of the dividends taxable as ordinary income
qualified for the 70% dividends
received deduction for corporations. For
the calendar year ended December 31, 1997, 7.78%
of the dividends taxable as ordinary income
qualified for the 70% dividends received
deduction for corporations.
--------------------------------------------------
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, 1998, the report, if used with
prospective investors, must be accompanied by a quarterly performance update.
<PAGE> 100
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Performance in Perspective....................... 4
Glossary of Terms................................ 5
Portfolio Management Review...................... 6
Portfolio Highlights............................. 10
Portfolio of Investments......................... 11
Statement of Assets and Liabilities.............. 14
Statement of Operations.......................... 15
Statement of Changes in Net Assets............... 16
Financial Highlights............................. 17
Notes to Financial Statements.................... 20
Report of Independent Accountants................ 27
</TABLE>
GF ANR 8/98
<PAGE> 101
LETTER TO SHAREHOLDERS
July 15, 1998
Dear Shareholder,
As you may know, Van Kampen
American Capital is consolidating all
of the retail mutual funds that we
distribute under the single name of
Van Kampen Funds. This move [PHOTO]
accompanies the change in our legal
name to Van Kampen Funds Inc.
You can be assured that the change DENNIS J. MCDONNELL AND DON G. POWELL
in your fund's name will not affect
its management or daily operations.
You will begin seeing the application
of this change with this report. In addition, as of August 31, your fund will be
listed in the daily newspapers by share class under the heading "Van Kampen
Funds." For your convenience, we have enclosed a separate brochure that covers
additional details related to these changes.
ECONOMIC REVIEW
The U.S. economy continued to expand at a robust pace despite a deepening
recession in a number of Asian nations. The nation's inflation-adjusted output
of goods and services ran at 5.4 percent during the first quarter, an annualized
rate considered by many economists to be virtually unsustainable without leading
to inflation. As the reporting period ended, however, there were indications
that the Asian financial crisis was finally having a moderating impact on the
economy. Also, the Conference Board's index of leading indicators points toward
a slowdown in economic growth later this year.
Despite the generally solid pace of economic activity, inflation remained
benign. Consumer prices rose by 1.7 percent during the 12 months through June,
while producer prices actually declined during the same period. Falling
commodity prices and the impact of the strong dollar helped to offset the
inflationary implications of a tight labor market and strong consumer spending.
While the Federal Reserve kept short-term interest rates steady at 5.5
percent during the reporting period, minutes from the central bank's May policy
meeting indicated growing sentiment for tightening monetary policy if the drag
from Asia does not slow the American economy on its own.
MARKET REVIEW
U.S. stocks continued to post gains during the period, but the sharp
variation in returns across industry groups reflected the growing impact of the
Asian financial crisis on corporate profits. The Wilshire 5000 Index, consisting
of all publicly traded U.S. companies, gained 14.68 percent during the first six
months of 1998. Once again, most of the strength was concentrated in
large-capitalization companies, as the S&P 500 Index
Continued on page two
1
<PAGE> 102
of large stocks returned 17.67 percent during the period compared to 4.93
percent for the Russell 2000 Index of small-cap issues. Even large stocks,
however, fell back significantly beginning in April as the Asian crisis
intensified.
Companies with heavy exposure to domestic consumers benefited from a strong
American economy, especially during the latter stages of the reporting period.
Consumer cyclical stocks returned 28.94 percent during the first six months of
1998, compared to 6.35 percent for basic materials and 3.01 percent for energy
issues. Eight of the ten top-performing industry groups during the second
quarter were from consumer-related sectors. Meanwhile, the steep decline in
energy and agricultural prices--a consequence of reduced demand from
Asia--undermined the performance of commodity-related stocks. During the three
months through June, five of the ten worst-performing industry sectors were from
either energy, metals, or commodity-based industries.
OUTLOOK
We believe economic growth in the United States is likely to slow in coming
months as the impact of the Asian crisis becomes more apparent. As growth
decelerates, corporate profits will come under pressure, especially among large
companies. Given the difficult year-over-year earnings comparisons that will
begin to appear in coming quarters, we caution investors not to expect a
continuation of the large gains that have become almost routine for U.S. stocks
in recent years. The high valuations and decelerating profit growth could limit
returns in the equity market over the near term.
Still, the overall environment for equities remains positive. Inflation is
low, the economy continues to grow, the bond market is healthy, and monetary
policy is stable. These characteristics usually support relatively high
valuations in the stock market. We remain confident that the domestic equity
asset class will continue to provide solid growth for investors with a long-term
time horizon.
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 serve you and your family through our
diverse menu of quality investments.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen Investment
Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment
Advisory Corp.
2
<PAGE> 103
PERFORMANCE RESULTS FOR THE YEAR ENDED JUNE 30, 1998
VAN KAMPEN GROWTH FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
One-Year total return based on NAV(1).... 38.52% 37.56% 37.56%
One-year total return(2)................. 30.56% 32.56% 36.56%
Life-of-Fund average annual total
return(2).............................. 42.50% 44.52% 45.21%
Commencement Date........................ 12/27/95 12/27/95 12/27/95
</TABLE>
(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. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. This performance was achieved during generally
rising stock prices. Fund shares, when redeemed, may be worth more or less than
their original cost.
Since the fund's inception, certain fees were waived and expenses were
reimbursed by the Fund's adviser which had a material effect on the Fund's total
return.
The Fund's investments in less seasoned companies, special situations involving
new management, special projects and techniques, unusual developments, mergers,
or liquidations involve greater risks than more conservative investments.
Securities of foreign issuers 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> 104
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:
- Illustrate the general market environment in which your investments are
being managed
- Reflect the impact of favorable market trends or difficult market
conditions
- Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over the
period measured
For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Standard & Poor's 500-Stock
Index and the Lipper Growth Fund Index over time. These indices are statistical
composites and do not reflect any commissions which would be incurred by an
investor purchasing the securities they represent. Similarly, their performance
does not reflect any sales charges or other costs which would be applicable to
an actively managed portfolio, such as that of the Fund.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Growth Fund vs. Standard & Poor's 500-Stock Index and the Lipper
Growth Fund Index (December 27, 1995 through June 30, 1998)
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Growth Fund A S&P 500 Lipper
<S> <C> <C> <C>
12/27/95 9425 10000 10000
1/31/96 9849 10409 10242
2/29/96 10688 10482 10402
3/31/96 11310 10621 10451
4/30/96 12884 10764 10713
5/31/96 13525 11010 10903
6/30/96 12912 11096 10796
7/31/96 11659 10589 10212
8/31/96 12516 10788 10516
9/30/96 14213 11437 11103
10/31/96 15108 11736 11263
11/30/96 15721 12597 11975
12/31/96 15390 12389 11748
1/31/97 16883 13149 12364
2/28/97 16598 13227 12269
3/31/97 15213 12723 11708
4/30/97 15635 13466 12223
5/31/97 16873 14255 13069
6/30/97 17561 14940 13557
7/31/97 19360 16107 14681
8/31/97 19301 15182 14138
9/30/97 21168 16057 14946
10/31/97 19664 15503 14464
11/30/97 19664 16195 14796
12/31/97 19546 16516 15046
1/31/98 19639 16684 15147
2/28/98 21713 17859 16215
3/31/98 23134 18815 16908
4/30/98 23528 18986 17090
5/31/98 22429 18629 16671
6/30/98 24326 19435 17391
</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.
The Fund commenced operation in 1995 with limited capital invested primarily by
the adviser's affiliates. While the Fund had been available for sale in a
limited number of states, prior to February 3, 1997, the Fund had not engaged in
a broad continuous public offering, had limited public investors, and was not
subject to redemption requests. The Fund's adviser believes that the portfolio
had been managed substantially the same as if the Fund had been open for
investment to all public investors. No assurances can be given, however, that
the Fund's investment performance would have been the same during the period if
the Fund had been broadly distributed.
4
<PAGE> 105
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.
DOW JONES INDUSTRIAL AVERAGE: The oldest and most widely recognized stock market
average, which reflects the performance of 30 actively traded stocks of
well-established, blue-chip companies.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
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 than value stocks, due to their higher expected earnings growth.
MARKET CAPITALIZATION: The size of a company, as measured by the value of its
stock. Morningstar, an independent mutual fund rating service, defines
"small-cap" as less than $1 billion, "mid-cap" as between $1 billion and $5
billion, and "large-cap" as more than $5 billion.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from its total assets and dividing this amount by the
number of shares outstanding. The NAV does not include any initial or contingent
deferred sales charge.
STANDARD & POOR'S 500-STOCK INDEX: A broad-based measurement of changes in
stock-market conditions based on the average performance of 500 widely held
common stocks. The index, which tracks industrial, transportation, financial,
and utility stocks, provides a guide to the overall health of the U.S. stock
market. The S&P 500 is a much broader index than the Dow Jones Industrial
Average and reflects the stock market more accurately.
VALUATION: The estimated or determined worth of a stock, based on financial
measures such as the stock's current price relative to earnings, revenue, book
value, and cash flow.
5
<PAGE> 106
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN GROWTH FUND
We recently spoke to the management team of the Van Kampen Growth Fund about the
key events and economic forces that shaped the markets during the past year. The
team includes Jeff D. New, portfolio manager; Michael Davis, portfolio
comanager; and Dennis J. McDonnell, president of the adviser. The following
excerpts reflect their views on the Fund's performance during the year ended
June 30, 1998.
Q CAN YOU DESCRIBE THE STOCK MARKET ENVIRONMENT FOR THE FUND DURING THE
REPORTING PERIOD?
A The stock market was influenced by two opposing factors. On the home
front, steady economic growth and low inflation provided a very favorable
climate for stocks. However, a currency collapse in Southeast Asia
threatened to slow the economies of countries around the world. The Dow Jones
Industrial Average struggled through the last few months of 1997, trying to
regain its momentum after being unsettled by the Asian currency crisis in
October. The Dow recovered quickly and proceeded to hit record highs in early
1998. During the final months of the reporting period, the Dow remained
relatively flat, fluctuating around the 9000 mark.
Investors continued to favor large, well-established companies during the
reporting period because of their uncertainty about how the Asian situation
would affect the U.S. markets. Generally, stocks of large-capitalization
companies made greater gains than small-cap stocks did.
Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET
ITS OBJECTIVE?
A We maintain a consistent strategy of identifying companies that have a
combination of positive future fundamentals at attractive current prices.
By our definition, positive future fundamentals include at least one the
following traits: consistent earnings growth; accelerating earnings growth;
better-than-expected fundamentals; or an underlying change in a company,
industry, or regulatory environment. We evaluate stocks one by one according to
these criteria and make purchases wherever we find good opportunities. This
approach to stock selection has served the Fund well since inception, so we work
hard to maintain this strategy during each reporting period. Therefore, we
expect most of the companies in the portfolio to grow earnings significantly
faster than the average corporation.
Q WHICH STOCKS SUPPORTED THE FUND'S PERFORMANCE DURING THE REPORTING PERIOD?
A Many of the Fund's best-performing stocks came from the retail segment of
the consumer distribution sector. We owned a number of retail stocks at
the end of last year, which put us in a good position when the Asian
crisis flared up in October. Most
6
<PAGE> 107
U.S. retail companies depend on domestic sales to generate revenues, so their
stock prices were largely insulated from overseas turmoil. The combination of
low unemployment, rising disposable income, and a flourishing housing market
recently contributed to healthy retail sales. In addition, the strong U.S.
dollar reduced the cost of imported goods for many retailers, which improved
their profitability. Retail stocks that performed well for the portfolio
included Safeway, Proffitt's, and TJX Companies. We believe that a continuation
of slow but steady economic growth will support the fundamentals for these
stocks.
Health-care stocks continued to comprise a large portion of the Fund. Among
this group, Mylan Laboratories, a leading manufacturer of generic
pharmaceuticals, was one of the most successful holdings. The company expects to
gain FDA approval for a number of products in the next few years, and Mylan's
ascending stock price (from $20 5/8 to $31 3/4 per share in the past six months)
shows that investors are anticipating these events. Universal Health Services
also supported our performance. This owner and operator of acute care hospitals
and other medical service centers saw its stock price rise almost 50 percent in
the past year. Of course, 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 ten.
Q IN THE LAST REPORT, WE DISCUSSED HOW TECHNOLOGY STOCKS HAD BEEN A MAJOR
OBSTACLE TO FUND PERFORMANCE. LOOKING BACK OVER THE ENTIRE REPORTING
PERIOD, HOW DID THESE STOCKS PERFORM?
A Although the technology sector was erratic during the reporting period,
prudent stock picking within this area ultimately enhanced the Fund's
performance. As we mentioned in the last report, the Asian crisis was
especially rough on technology stocks toward the end of last year. Then, in
early 1998, an oversupply of personal computers overwhelmed many areas of the
technology industry, as the Asian situation put a cap on demand. Manufacturers
such as Compaq Computer, which sells computers to retailers and wholesalers for
distribution, had to reduce production of new computers until inventory supply
and consumer demand regained its balance. We decreased our holdings in personal
computer stocks as a result.
Instead, we focused on areas of technology that were minimally affected by
events in Asia, such as computer software, data storage, and telecommunications
equipment. Software has been a promising niche, because many businesses view
software upgrades as necessary to remain competitive. JD Edwards and Compuware
were some of our holdings in this field. Data storage, the centralized storage
system that saves a company's computer files, has been a high-growth area as
well. In the age of e-mails and databases, companies need sophisticated storage
systems to access an increasing volume of information frequently and
efficiently. EMC Corp. is a leader in data storage, and its stock price has
risen 63 percent since the beginning of the year. Finally, telecom equipment has
seen explosive growth from the demand for cellular phones, computer networking,
and remote access functions, and the Fund received strong performance from
Applied Voice Technology.
7
<PAGE> 108
Q WHAT STOCKS WORKED AGAINST THE FUND?
A Our biggest disappointment was ESC Medical Systems. In the last report, we
mentioned that the stock had been an impressive performer in the health
care sector and a large holding for the Fund. This year, however, the
stock price has fallen 12 percent. ESC recently made an acquisition that we
believe will strengthen the company, and it expects to receive several product
approvals this year. In addition, the stock has good fundamentals, excellent
earnings, and a reasonable price, so we remain optimistic that it will turn
around.
Another laggard was Cendant, a marketer and provider of consumer and
business services. This stock made the news in April when the company disclosed
accounting irregularities, which caused the price to plummet 46 percent in one
day. Cendant had been a sizable holding in the portfolio, and we continue to own
it because we believe the company has good market position.
Philip Morris has been another drag on the Fund. Philip Morris and the rest
of the tobacco industry have been trying to settle a number of lawsuits, and we
increased our position in the stock last year when a settlement that would give
tobacco firms immunity to future lawsuits appeared imminent. No deal could be
reached, however, and the settlement process lingered into 1998. Amid these
factors, the stock price dropped 13 percent in the past six months. Despite this
price decline, we held on to Philip Morris for a number of reasons. First, the
stock fits our criteria of strong fundamentals at an attractive price. Tobacco
firms have typically been high-growth companies, and Philip Morris is very
inexpensive right now compared to its historical values. Second, tobacco stocks
have routinely suffered bouts of negative sentiment, but these periods have
usually been followed by rebounds in stock price. Although we sold some of our
position, we maintained a modest weighting in the stock.
Q HOW DID THE FUND PERFORM DURING THE PAST YEAR?
A We were very pleased with the Fund's performance. The Fund achieved a one-
year total return of 38.52 percent(1) (Class A shares at net asset value)
as of June 30, 1998. By comparison, the Standard & Poor's 500-Stock Index
returned 30.09 percent, and the Lipper Growth Fund Index, which more closely
resembles the Fund, returned 28.28 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.
Keep in mind that 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 three for additional Fund performance results.
8
<PAGE> 109
Q WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A In the near term, we see little to disrupt the present state of
affairs--favorable inflation and solid, controlled economic growth should
continue to support the stock market. One important change, however, is
that corporate earnings estimates are beginning to slow. Generally, companies
have already implemented strategies to streamline their businesses and increase
profitability, and they've run out of easy ways to enhance their profits. While
we expect most companies to continue to show solid growth, the majority will not
be able to achieve the remarkably high growth rates they have enjoyed in the
past several years. We believe the few companies that are able to demonstrate
such growth levels will be the big winners in the long term.
The investment style of the Growth Fund is well suited for these conditions,
as we target those companies that we believe can demonstrate strong earnings
growth at reasonable prices. In this type of environment, where superior
earnings growth is harder to achieve, the Growth Fund may be able to add value
to shareholders through disciplined stock selection.
[SIG]
Jeff D. New
Portfolio Manager
[SIG]
Michael Davis
Portfolio Comanager
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment
Advisory Corp.
Please see footnotes on page three
9
<PAGE> 110
PORTFOLIO HIGHLIGHTS
VAN KAMPEN GROWTH FUND
PORTFOLIO HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOP TEN HOLDINGS THESE INVESTMENTS
AS OF JUNE 30, 1998 SIX MONTHS AGO(1)
<S> <C> <C>
ESC Medical Systems Ltd. .... 5.0% .............. 4.3%
Applied Voice Technology,
Inc. ...................... 2.8% .............. 2.6%
USA Waste Services, Inc. .... 2.5% .............. 2.8%
TJX Cos., Inc. .............. 2.4% .............. 2.5%
EMC Corp. ................... 2.3% .............. 2.3%
CKE Restaurants, Inc. ....... 2.3% .............. N/A
Networks Associates, Inc..... 2.2% .............. 2.1%
Universal Health Services,
Inc., Class B ............ 2.0% .............. 2.8%
Safeway, Inc. ............... 1.9% .............. 2.2%
SunAmerica, Inc. ............ 1.9% .............. 1.8%
</TABLE>
N/A = Not Applicable
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997(1)
<S> <C> <C> <C>
Technology................. 26% Technology................. 24%
Health Care................ 25% Health Care................ 23%
Consumer Distribution...... 17% Consumer Distribution...... 18%
Consumer Services.......... 13% Finance.................... 12%
Finance.................... 8% Consumer Services.......... 9%
</TABLE>
(1) Unaudited
10
<PAGE> 111
PORTFOLIO OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 99.6%
CONSUMER DISTRIBUTION 17.2%
Brylane, Inc. (a)........................................... 40,000 $ 1,840,000
Chico's Fas, Inc. (a)....................................... 47,000 728,500
Elder-Beerman Stores Corp. (a).............................. 59,000 1,574,563
Goodys Family Clothing, Inc................................. 30,000 1,646,250
Lowe's Cos.................................................. 42,800 1,736,075
Pacific Sunwear of California (a)........................... 67,500 2,362,500
Proffitt's, Inc. (a)........................................ 55,000 2,220,625
Rite Aid Corp............................................... 48,000 1,803,000
Ross Stores, Inc............................................ 39,000 1,677,000
Safeway, Inc. (a)........................................... 72,000 2,929,500
The Finish Line, Class A (a)................................ 80,000 2,250,000
TJX Cos., Inc............................................... 150,000 3,618,750
Trans World Entertainment Corp. (a)......................... 50,000 2,156,250
------------
26,543,013
------------
CONSUMER NON-DURABLES 2.3%
Philip Morris Cos., Inc..................................... 57,800 2,275,875
Tommy Hilfiger Corp. (a).................................... 21,000 1,312,500
------------
3,588,375
------------
CONSUMER SERVICES 13.3%
AccuStaff, Inc. (a)......................................... 63,000 1,968,750
Brinker International, Inc. (a)............................. 100,000 1,925,000
Capstar Broadcasting Corp., Class A (a)..................... 26,300 660,787
Cendant Corp. (a)........................................... 76,000 1,586,500
CKE Restaurants, Inc........................................ 84,000 3,465,000
FIRSTPLUS Financial Group, Inc. (a)......................... 33,000 1,188,000
New York Times Co., Class A................................. 28,000 2,219,000
Showbiz Pizza Time, Inc. (a)................................ 56,000 2,257,500
United Road Services, Inc................................... 140,000 2,677,500
Young & Rubicam, Inc. (a)................................... 80,000 2,560,000
------------
20,508,037
------------
ENERGY 1.0%
J. Ray McDermott SA (a)..................................... 38,000 1,577,000
------------
FINANCE 8.1%
Affiliated Managers Group, Inc. (a)......................... 42,000 1,559,250
Allstate Corp............................................... 18,000 1,648,125
Conseco, Inc................................................ 60,000 2,805,000
Finova Group, Inc........................................... 35,000 1,981,875
</TABLE>
See Notes to Financial Statements
11
<PAGE> 112
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
First Union Corp............................................ 25,159 $ 1,465,512
SunAmerica, Inc............................................. 51,000 2,929,312
------------
12,389,074
------------
HEALTHCARE 24.5%
Ameripath, Inc. (a)......................................... 130,000 1,535,625
Bristol-Myers Squibb Co..................................... 24,000 2,758,500
ESC Medical Systems Ltd. (a)................................ 226,000 7,627,500
Guldant Corp................................................ 20,000 1,426,250
HBO & Co.................................................... 72,000 2,538,000
Health Management Assn., Inc., Class A (a).................. 59,000 1,972,812
Healthsouth Corp. (a)....................................... 101,000 2,695,437
Idexx Laboratories, Inc. (a)................................ 72,000 1,791,000
Lincare Holdings, Inc. (a).................................. 64,000 2,692,000
Mylan Laboratories, Inc..................................... 60,000 1,803,750
Schering-Plough Corp........................................ 22,000 2,015,750
Shared Medical Systems...................................... 23,000 1,689,063
Total Renal Care Holdings, Inc. (a)......................... 74,760 2,579,220
Universal Health Services, Inc., Class B (a)................ 52,100 3,041,338
Wellpoint Health Networks, Inc., Class A (a)................ 20,000 1,480,000
------------
37,646,245
------------
PRODUCER MANUFACTURING 2.5%
USA Waste Services, Inc. (a)................................ 77,000 3,801,875
------------
RAW MATERIALS/PROCESSING INDUSTRIES 1.5%
Safeskin Corp. (a).......................................... 56,000 2,303,000
------------
TECHNOLOGY 26.2%
Advanced Fibre Communication (a)............................ 42,000 1,682,625
Applied Voice Technology, Inc. (a).......................... 184,000 4,232,000
Ascend Communications, Inc. (a)............................. 42,000 2,081,625
BMC Software, Inc. (a)...................................... 40,000 2,077,500
Cadence Design Systems, Inc. (a)............................ 42,000 1,312,500
Check Point Software Tech (a)............................... 37,000 1,211,750
Computer Associates Intl, Inc............................... 35,000 1,944,688
Computer Sciences Corp...................................... 38,000 2,432,000
Compuware Corp. (a)......................................... 33,000 1,687,125
EMC Corp. (a)............................................... 78,000 3,495,375
Inktomi Corp................................................ 6,100 242,475
Maxim Integrated Products, Inc. (a)......................... 32,000 1,014,000
Micromuse Inc............................................... 35,000 1,428,437
Networks Associates, Inc. (a)............................... 72,000 3,447,000
</TABLE>
See Notes to Financial Statements
12
<PAGE> 113
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
SCI Systems, Inc. (a)....................................... 24,000 $ 903,000
Software Ag Systems, Inc. (a)............................... 92,000 2,691,000
Sterling Software, Inc. (a)................................. 73,000 2,158,063
Veritas DGC, Inc. (a)....................................... 28,000 1,398,250
Walker Interactive Systems (a).............................. 100,000 1,475,000
Waters Corp. (a)............................................ 36,000 2,121,750
World Access, Inc. (a)...................................... 40,000 1,200,000
------------
40,236,163
------------
TRANSPORTATION 2.0%
AMR Corp. (a)............................................... 20,000 1,665,000
Covenant Transport Inc., Class A (a)........................ 70,000 1,365,000
------------
3,030,000
------------
UTILITIES 1.0%
Transwitch Corp. (a)........................................ 115,000 1,581,250
------------
TOTAL LONG-TERM INVESTMENTS 99.6%
(Cost $114,210,888).............................................. 153,204,032
REPURCHASE AGREEMENT 1.0%
DLJ Mortgage Acceptance Corp., ($1,580,000 par collateralized by
U.S. Government obligations in a pooled cash account, dated
6/30/98, to be sold on 7/01/98 at $1,580,241)
(Cost $1,580,000)................................................ 1,580,000
------------
TOTAL INVESTMENTS 100.6%
(Cost $115,790,888).............................................. 154,784,032
LIABILITIES IN EXCESS OF OTHER ASSETS (0.6%)........................ (934,015)
------------
NET ASSETS 100.0%................................................... $153,850,017
-----------
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
13
<PAGE> 114
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $115,790,888)....................... $154,784,032
Cash........................................................ 1,184
Receivables:
Fund Shares Sold.......................................... 303,689
Dividends................................................. 67,275
Unamortized Organizational Costs............................ 20,106
Other....................................................... 2,190
------------
Total Assets............................................ 155,178,476
------------
LIABILITIES:
Payables:
Investment Advisory Fee................................... 435,517
Fund Shares Repurchased................................... 273,553
Distributor and Affiliates................................ 195,093
Accrued Expenses............................................ 376,361
Trustees' Deferred Compensation and Retirement Plans........ 47,935
------------
Total Liabilities....................................... 1,328,459
------------
NET ASSETS.................................................. $153,850,017
----------
NET ASSETS CONSIST OF:
Capital..................................................... $111,525,820
Net Unrealized Appreciation................................. 38,993,144
Accumulated Net Realized Gain............................... 3,378,184
Accumulated Net Investment Loss............................. (47,131)
------------
NET ASSETS.................................................. $153,850,017
----------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $64,885,052 and 2,765,431 shares of
beneficial interest issued and outstanding)............. $ 23.46
Maximum sales charge (5.75%* of offering price)......... 1.43
------------
Maximum offering price to public........................ $ 24.89
----------
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $79,731,316 and 3,440,655 shares of
beneficial interest issued and outstanding)............. $ 23.17
----------
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $9,233,649 and 398,471 shares of
beneficial interest issued and outstanding)............. $ 23.17
----------
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
14
<PAGE> 115
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................... $ 466,773
Interest.................................................... 421,677
-----------
Total Income............................................ 888,450
-----------
EXPENSES:
Investment Advisory Fee..................................... 1,014,540
Distribution (12b-1) and Service Fees (Attributed to Class
A, B, and C of $148,958, $669,433 and $87,301,
respectively)............................................. 905,692
Shareholder Services........................................ 574,734
Trustees' Fees and Expenses................................. 24,916
Legal....................................................... 14,323
Amortization of Organizational Costs........................ 7,997
Custody..................................................... 2,177
Other....................................................... 168,777
-----------
Total Expenses.......................................... 2,713,156
Less Fees Waived........................................ 386,039
-----------
Net Expenses............................................ 2,327,117
-----------
NET INVESTMENT LOSS......................................... $(1,438,667)
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $12,625,540
Futures................................................... 278,325
-----------
Net Realized Gain........................................... 12,903,865
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 7,542,991
End of the Period......................................... 38,993,144
-----------
Net Unrealized Appreciation During the Period............... 31,450,153
-----------
NET REALIZED AND UNREALIZED GAIN............................ $44,354,018
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $42,915,351
===========
</TABLE>
See Notes to Financial Statements
15
<PAGE> 116
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1998 June 30, 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss....................................... $ (1,438,667) $ (86,224)
Net Realized Gain/Loss.................................... 12,903,865 (1,757,194)
Net Unrealized Appreciation During the Period............. 31,450,153 7,484,772
------------ ------------
Change in Net Assets from Operations...................... 42,915,351 5,641,354
------------ ------------
Distributions from Net Realized Gain...................... (6,327,980) (23,514)
Distributions in Excess of Net Realized Gain.............. -0- (1,799)
------------ ------------
Distributions from and in Excess of Net Realized
Gain*................................................. (6,327,980) (25,313)
Return of Capital Distribution*........................... -0- (21,887)
------------ ------------
Total Distributions..................................... (6,327,980) (47,200)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES....... 36,587,371 5,594,154
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................. 28,476,433 122,206,757
Net Asset Value of Shares Issued Through Dividend
Reinvestment............................................ 5,825,754 2,031
Cost of Shares Repurchased................................ (33,462,669) (11,696,360)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS........ 839,518 110,512,428
------------ ------------
TOTAL INCREASE IN NET ASSETS.............................. 37,426,889 116,106,582
NET ASSETS:
Beginning of the Period................................... 116,423,128 316,546
------------ ------------
End of the Period (Including accumulated net investment
loss of $47,131 and $23,118, respectively).............. $153,850,017 $116,423,128
============ ============
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class June 30, 1998 June 30, 1997
- ------------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of Net
Realized Gain:
Class A Shares......................... $(2,743,327) $(24,246)
Class B Shares......................... (3,159,670) (537)
Class C Shares......................... (424,983) (530)
----------- --------
$(6,327,980) $(25,313)
=========== ========
Return of Capital Distribution:
Class A Shares......................... $ -0- $(20,964)
Class B Shares......................... -0- (465)
Class C Shares......................... -0- (458)
----------- --------
$ -0- $(21,887)
=========== ========
</TABLE>
See Notes to Financial Statements
16
<PAGE> 117
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
(Commencement of
Year Ended Year Ended Investment Operations)
Class A Shares June 30, 1998 June 30, 1997(a) to June 30, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................ $17.878 $13.696 $10.000
------- ------- -------
Net Investment Income/Loss........ (.136) .031 (.044)
Net Realized and Unrealized
Gain............................ 6.711 4.810 3.740
------- ------- -------
Total from Investment Operations.... 6.575 4.841 3.696
Less:
Distributions from and in Excess
of Net Realized Gain............ .990 .353 -0-
Return of Capital Distribution.... -0- .306 -0-
------- ------- -------
Total Distributions................. .990 .659 -0-
------- ------- -------
Net Asset Value, End of the
Period............................ $23.463 $17.878 $13.696
======= ======= =======
Total Return* (b)................... 38.52% 36.00% 37.00%**
Net Assets at End of the Period (In
millions)......................... $ 64.9 $ 53.1 $ .1
Ratio of Expenses to Average Net
Assets*........................... 1.30% 1.32% 1.46%
Ratio of Net Investment Income to
Average Net Assets*............... (.64%) .19% (.79%)
Portfolio Turnover.................. 125% 139% 94%**
* If certain fees had not been
assumed by Van Kampen, Total
Return would have been lower and
the ratios would have been as
follows:
Ratio of Expenses to Average Net
Assets............................ 1.58% 2.31% 15.69%
Ratio of Net Investment Income to
Average Net Assets................ (.92%) (.80%) (15.02%)
</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.
See Notes to Financial Statements
17
<PAGE> 118
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
(Commencement of
Year Ended Year Ended Investment Operations)
Class B Shares June 30, 1998 June 30, 1997(a) to June 30, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period.............................. $17.796 $13.695 $10.000
------- ------- -------
Net Investment Loss................. (.270) (.093) (.045)
Net Realized and Unrealized Gain.... 6.637 4.853 3.740
------- ------- -------
Total from Investment Operations...... 6.367 4.760 3.695
Less:
Distributions from and in Excess of
Net Realized Gain................. .990 .353 -0-
Return of Capital Distribution...... -0- .306 -0-
------- ------- -------
Total Distributions................... .990 .659 -0-
------- ------- -------
Net Asset Value, End of the Period.... $23.173 $17.796 $13.695
======= ======= =======
Total Return* (b)..................... 37.56% 35.32% 37.00%**
Net Assets at End of the Period (In
millions)........................... $ 79.7 $ 55.0 $ .1
Ratio of Expenses to Average Net
Assets*............................. 2.05% 2.07% 1.46%
Ratio of Net Investment Income to
Average Net Assets*................. (1.40%) (.56%) (.74%)
Portfolio Turnover.................... 125% 139% 94%**
* If certain fees had not been assumed
by Van Kampen, Total Return would
have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net
Assets.............................. 2.34% 3.04% 15.70%
Ratio of Net Investment Income to
Average Net Assets.................. (1.68%) (1.53%) (14.97%)
</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.
See Notes to Financial Statements
18
<PAGE> 119
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
(Commencement of
Year Ended Year Ended Investment Operations)
Class C Shares June 30, 1998 June 30, 1997(a) to June 30, 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period........................... $17.793 $13.695 $10.000
------- ------- -------
Net Investment Loss.............. (.311) (.096) (.045)
Net Realized and Unrealized
Gain........................... 6.681 4.853 3.740
------- ------- -------
Total from Investment Operations... 6.370 4.757 3.695
Less:
Distributions from and in Excess
of Net Realized Gain........... .990 .353 -0-
Return of Capital Distribution... -0- .306 -0-
------- ------- -------
Total Distributions................ .990 .659 -0-
------- ------- -------
Net Asset Value, End of the
Period........................... $23.173 $17.793 $13.695
======= ======= =======
Total Return* (b).................. 37.56% 35.32% 37.00%**
Net Assets at End of the Period (In
millions)........................ $9.2 $8.3 $.1
Ratio of Expenses to Average Net
Assets*.......................... 2.05% 2.07% 1.46%
Ratio of Net Investment Income to
Average Net Assets*.............. (1.39%) (.57%) (.74%)
Portfolio Turnover................. 125% 139% 94%**
* If certain fees had not been
assumed by Van Kampen, Total
Return would have been lower and
the ratios would have been as
follows:
Ratio of Expenses to Average Net
Assets........................... 2.34% 3.04% 15.70%
Ratio of Net Investment Income to
Average Net Assets............... (1.68%) (1.55%) (14.97%)
</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.
See Notes to Financial Statements
19
<PAGE> 120
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Growth Fund, formerly known as Van Kampen American Capital Growth
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 seek
capital growth by investing primarily in a diversified portfolio of common
stocks and other equity securities of growth companies. The Fund commenced
investment operations on December 27, 1995, with three classes of common shares,
Class A, Class B and Class C.
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.
Investments in securities not listed on a securities exchange are valued based
on their last quoted bid price or, if not available, their fair value as
determined 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 basis.
Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to 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 Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
20
<PAGE> 121
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Original issue discount 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. ORGANIZATIONAL COSTS--The Fund has agreed to reimburse Van Kampen Funds Inc.
or its affiliates ("collectively Van Kampen") for costs incurred in connection
with the Fund's organization in the amount of $40,000. These costs are being
amortized on a straight line basis over the 60 month period ending December 27,
2000. The Adviser has agreed that in the event any of the initial shares of the
Fund originally purchased by Van Kampen are redeemed during the amortization
period, the Fund will be reimbursed for any unamortized organizational costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.
E. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of losses from wash sales and post October 31
losses which are not recognized for tax purposes until the first day of the
following fiscal year.
At June 30, 1998, for federal income tax purposes the cost of long- and
short-term investments is $116,081,935; the aggregate gross unrealized
appreciation is $40,818,724 and the aggregate gross unrealized depreciation is
$2,116,627, resulting in net unrealized appreciation of $38,702,097.
F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
annually from net investment income. Net realized gains, if any, are distributed
annually. Distributions from net realized gains for book purposes may include
short-term capital gains and gains on futures transactions. All short-term
capital gains are included in ordinary income for tax purposes.
Due to interest 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
21
<PAGE> 122
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
have been identified and appropriately reclassified. A permanent difference
related to net operating loss which may be used as an offset against short-term
gains for tax purposes totaling $1,414,654 has been reclassified from
accumulated net investment loss to accumulated net realized gain.
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 $500 million...................................... .75 of 1%
Next $500 million....................................... .70 of 1%
Over $1 billion......................................... .65 of 1%
</TABLE>
Van Kampen has agreed to waive fees or reimburse certain expenses through
June 30, 1998 to the extent necessary so that the net expense based upon Average
Net Assets would not exceed 1.30%, 2.05% and 2.05% for Classes A, B and C
shares, respectively.
For the year ended June 30, 1998, the Fund recognized expenses of
approximately $3,000 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, 1998, the Fund recognized expenses of
approximately $50,100 representing Van Kampen's cost of providing accounting and
legal services to the Fund.
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the year ended June
30, 1998, the Fund recognized expenses of approximately $412,300. 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.
22
<PAGE> 123
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
At June 30, 1998, Van Kampen owned 7,000 shares of Class A and 6,500 shares
each of Classes B and C, respectively.
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 June 30, 1998, capital aggregated $46,142,115, $58,925,789, and
$6,457,916 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.................................. 703,177 $ 14,445,936
Class B.................................. 623,694 12,750,067
Class C.................................. 63,730 1,280,430
---------- ------------
Total Sales................................ 1,390,601 $ 28,476,433
========== ============
Dividend Reinvestment:
Class A.................................. 141,978 $ 2,548,516
Class B.................................. 166,305 2,960,278
Class C.................................. 17,807 316,960
---------- ------------
Total Dividend Reinvestment................ 326,090 $ 5,825,754
========== ============
Repurchases:
Class A.................................. (1,052,014) $(21,445,447)
Class B.................................. (440,708) (9,047,981)
Class C.................................. (147,921) (2,969,241)
---------- ------------
Total Repurchases.......................... (1,640,643) $(33,462,669)
========== ============
</TABLE>
23
<PAGE> 124
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
At June 30, 1997, capital aggregated $50,593,110, $52,263,425, and
$7,829,767 for Classes A, B, and C, respectively. For the year ended June 30,
1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 3,381,843 $ 57,414,786
Class B.................................. 3,282,280 55,512,272
Class C.................................. 548,147 9,279,699
--------- ------------
Total Sales................................ 7,212,270 $122,206,757
========= ============
Dividend Reinvestment:
Class A.................................. 132 $ 2,031
Class B.................................. -0- -0-
Class C.................................. -0- -0-
--------- ------------
Total Dividend Reinvestment................ 132 $ 2,031
========= ============
Repurchases:
Class A.................................. (419,798) $ (6,901,267)
Class B.................................. (197,416) (3,284,564)
Class C.................................. (89,792) (1,510,529)
--------- ------------
Total Repurchases.......................... (707,006) $(11,696,360)
========= ============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC for Class B and C shares will be imposed on most redemptions
made within five years of the purchase for Class B and one year of the purchase
for Class C as detailed in the following schedule.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- -----------------------------------------------------------------------------
<S> <C> <C>
First.......................................... 5.00% 1.00%
Second......................................... 4.00% None
Third.......................................... 3.00% None
Fourth......................................... 2.50% None
Fifth.......................................... 1.50% None
Sixth and thereafter........................... None None
</TABLE>
24
<PAGE> 125
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
For the year ended June 30, 1998, Van Kampen, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A shares of approximately
$38,700 and CDSC on the redeemed shares of Classes B and C of approximately
$191,300. 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 $167,989,019 and $160,998,244,
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 these instances,
the recognition of gain or loss is postponed until the disposal of the security
underlying futures contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in stock index futures. These contracts are generally used as
a substitute for purchasing and selling specific securities. Upon entering into
futures contracts, the Fund maintains, in a segregated account with its
custodian, 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).
25
<PAGE> 126
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
Transactions in futures contracts for the year ended June 30, 1998, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1997................................ 15
Futures Opened.............................................. 0
Futures Closed.............................................. (15)
---
Outstanding at June 30, 1998................................ 0
---
</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, 1998, are payments retained by Van Kampen of
approximately $568,400.
26
<PAGE> 127
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Growth Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Growth Fund (the "Fund"), including the portfolio of investments, as of
June 30, 1998, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Growth Fund as of June 30, 1998, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
August 3, 1998
27
<PAGE> 128
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
U.S. Real Estate
Utility
Value
International/Global
Asian Growth
Emerging Markets
Global Equity
Global Equity Allocation
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 and
Senior Loan Fund
Prime Rate Income Trust
Reserve
Senior Floating Rate
Tax Free Money
To find out more about any of these funds, ask your financial adviser 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.VAN-KAMPEN.COM -- to view prospectuses, select
Investors' Place, then Download a 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.VAN-KAMPEN.COM and selecting Investors' Place
28
<PAGE> 129
VAN KAMPEN GROWTH 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
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
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
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1998 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, 1998, the report, if used with
prospective investors, must be accompanied by a quarterly performance update.
29
<PAGE> 130
VAN KAMPEN
PROSPECTOR FUND
ANNUAL REPORT
JUNE 30, 1998
VAN KAMPEN
FUNDS
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
Letter to Shareholders....................................................1
Putting Your Fund's Performance in Perspective............................3
Portfolio Management Review...............................................4
Portfolio of Investments..................................................7
Statement of Assets and Liabilities.......................................10
Statement of Operations...................................................11
Statement of Changes in Net Assets........................................12
Financial Highlights......................................................13
Notes to Financial Statements.............................................16
Report of Independent Accountants.........................................18
</TABLE>
PRS ANR 8/98
<PAGE> 131
Letter to Shareholders
July 20, 1998
Dear Shareholder,
As you may know, Van Kampen American Capital is consolidating all of the
retail mutual funds that we distribute under the single name of Van Kampen
Funds. This move accompanies the change in our legal name to Van Kampen Funds
Inc. You can be assured that the change in your fund's name will not affect its
management or daily operations. You will begin seeing the application of this
change with this report.
ECONOMIC OVERVIEW
The U.S. economy continued to expand at a robust pace despite a deepening
recession in a number of Asian nations. The nation's inflation-adjusted output
of goods and services ran at 5.4 percent during the first quarter, an annualized
rate considered by many economists to be virtually unsustainable without leading
to inflation. As the reporting period ended, however, there were indications
that the Asian financial crisis was finally having a moderating impact on the
economy. Also, the Conference Board's index of leading indicators points toward
a slowdown in economic growth later this year.
Despite the generally solid pace of economic activity, inflation remained
benign. Consumer prices rose by 1.7 percent during the 12 months through June,
while producer prices actually declined during the same period. Falling
commodity prices and the impact of the strong dollar helped to offset the
inflationary implications of a tight labor market and strong consumer spending.
While the Federal Reserve kept short-term interest rates steady at 5.5
percent during the reporting period, minutes from the central bank's May policy
meeting indicated growing sentiment for tightening monetary policy if the drag
from Asia does not slow the American economy on its own.
MARKET OVERVIEW
U.S. stocks continued to post gains during the period, but the sharp
variation in returns across industry groups reflected the growing impact of the
Asian financial crisis on corporate profits. The Wilshire 5000 Index, consisting
of all publicly traded U.S. companies, gained 14.68 percent during the first six
months of 1998. Once again, most of the strength was concentrated in
large-capitalization companies, as the S&P 500 Index of large stocks returned
17.67 percent during the period compared to 4.93 percent for the Russell 2000
Index of small-cap issues. Even large stocks, however, fell back significantly
beginning in April as the Asian crisis intensified.
Companies with heavy exposure to domestic consumers benefited from a strong
American economy, especially during the latter stages of the reporting period.
Consumer cyclical stocks returned 28.94 percent during the first six months of
1998, compared to 6.35 percent for basic materials and 3.01 percent for energy
issues. Eight of the ten top-performing industry groups during the second
quarter were from consumer-related sectors. Meanwhile, the steep decline in
energy and agricultural prices--a consequence of reduced demand from
Asia--undermined the performance of commodity-related stocks. During the three
months through June, five of the ten worst-performing industry sectors were from
either energy, metals, or commodity-based industries.
OUTLOOK
We believe economic growth in the United States is likely to slow in coming
months as the impact of the Asian crisis becomes more apparent. As growth
decelerates, corporate profits will come under pressure, especially among large
companies. Given the difficult year-over-year earnings comparisons that will
begin
1 Continued on page two
<PAGE> 132
to appear in coming quarters, we caution investors not to expect a continuation
of the large gains that have become almost routine for U.S. stocks in recent
years. The high valuations and decelerating profit growth could limit returns in
the equity market over the near term.
Still, the overall environment for equities remains positive. Inflation is low,
the economy continues to grow, the bond market is healthy, and monetary policy
is stable. These characteristics usually support relatively high valuations in
the stock market. We remain confident that the domestic equity asset class will
continue to provide solid growth for investors with a long-term time horizon.
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 serve you and your family through our diverse
menu of quality investments.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
2
<PAGE> 133
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:
- Illustrate the general market environment in which your investments
are being managed
- Reflect the impact of favorable market trends or difficult market
conditions
- Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over
the period measured
For these reasons, you may find it helpful to review the chart below,
which compares your Fund's performance to that of the Standard & Poor's
500-Stock Index and the Lipper Growth and Income Fund Index over time. These
indices are statistical composites and do not reflect any commissions or fees
which would be incurred by an investor purchasing the securities they represent.
Similarly, their performance does not reflect any sales charges or other costs
which would be applicable to an actively managed portfolio, such as that of the
Fund.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Prospector Fund vs. the Standard & Poor's 500-Stock Index and the
Lipper Growth and Index Fund Index (December 27, 1995 through June 30, 1998)
Chart:
VK Prospector Fund 6/30//98 Report
Returns
<TABLE>
<CAPTION>
Month Fund Value Lipper G & I Index S&P 500 Index
<S> <C> <C> <C>
Dec-95 $9,425 $10,000 $10,000
Jan-96 $9,887 $10,297 $10,409
Feb-96 $9,953 $10,441 $10,482
Mar-96 $10,160 $10,574 $10,621
Apr-96 $10,518 $10,736 $10,764
May-96 $10,603 $10,892 $11,010
Jun-96 $10,666 $10,846 $11,096
Jul-96 $10,297 $10,404 $10,589
Aug-96 $10,732 $10,717 $10,788
Sep-96 $11,093 $11,196 $11,437
Oct-96 $11,140 $11,450 $11,736
Nov-96 $11,917 $12,187 $12,597
Dec-96 $12,173 $12,069 $12,389
Jan-97 $12,701 $12,606 $13,149
Feb-97 $12,813 $12,715 $13,227
Mar-97 $12,135 $12,272 $12,723
Apr-97 $12,492 $12,724 $13,466
May-97 $13,470 $13,464 $14,255
Jun-97 $13,771 $13,992 $14,940
Jul-97 $14,853 $14,996 $16,107
Aug-97 $14,966 $14,433 $15,182
Sep-97 $15,818 $15,163 $16,057
Oct-97 $15,184 $14,659 $15,503
Nov-97 $15,624 $15,068 $16,195
Dec-97 $16,208 $15,323 $16,516
Jan-98 $16,367 $15,351 $16,684
Feb-98 $17,533 $16,314 $17,859
Mar-98 $18,355 $17,069 $18,815
Apr-98 $18,718 $17,161 $18,986
May-98 $18,015 $16,886 $18,629
Jun-98 $18,128 $17,089 $19,435
</TABLE>
Fund's Total Return
1 Year Avg. Annual = 24.10%
Inception Avg. Annual = 26.74%
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.
The Fund commenced operation in 1995 with limited capital invested primarily by
the adviser's affiliates. While the Fund has been available for sale in a
limited number of states, as of June 30, 1998 the Fund had not engaged in a
broad continuous public offering and was not subject to redemption requests. The
Fund's adviser believes that the portfolio has been managed substantially the
same as if the Fund had been open for investment to all public investors. No
assurances can be given, however, that the Fund's investment performance would
have been the same during the period if the Fund had been broadly distributed.
During this period, certain fees were waived and expenses were reimbursed by the
Fund's adviser which had a material effect on the Fund's total return.
3
<PAGE> 134
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN PROSPECTOR FUND
We recently spoke to the management team of the Van Kampen Prospector Fund about
the key events and economic forces that shaped the markets during the past year.
The team includes B. Robert Baker, Jr., portfolio manager; Jason Leder and Edie
Terreson, portfolio comanagers; and Dennis J. McDonnell, president of the
adviser. The following excerpts reflect their views on the Fund's performance
during the year ended June 30, 1998.
Q CAN YOU DESCRIBE THE STOCK MARKET ENVIRONMENT FOR THE FUND DURING THE
REPORTING PERIOD?
A The stock market was influenced by two opposing factors. On the home front,
steady economic growth and low inflation provided a very favorable climate for
stocks. However, a currency collapse in Southeast Asia threatened to slow the
economies of countries around the world. The Dow Jones Industrial Average
struggled through the last few months of 1997, trying to regain its momentum
after being unsettled by the Asian currency crisis in October. The Dow recovered
quickly and proceeded to hit record highs in early 1998. During the final months
of the reporting period, the Dow remained relatively flat, fluctuating around
the 9000 mark.
Investors continued to favor large, well-established companies during
the reporting period because of their uncertainty about how the Asian situation
would affect the U.S. markets. Generally, large-capitalization companies made
greater gains than small-cap firms did.
Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET ITS
OBJECTIVE?
A We consistently seek to identify undervalued stocks that we believe have the
potential for future price appreciation. To do this, we look for companies that
are temporarily out of favor in the marketplace, because their stock prices are
usually lower than what we believe these companies are actually worth. Then, we
look for factors that might move the stock from being undervalued to being
fairly valued. This catalyst could come from within the company in the form of
new management, operational enhancements, restructuring, or reorganization. It
could also be an external factor, such as an improvement in industry conditions
or a regulatory change. When we find a company that is undervalued and has an
identifiable catalyst, we consider adding that company to the portfolio.
Q WHICH STOCKS MADE THE GREATEST CONTRIBUTIONS TO POSITIVE PERFORMANCE?
A Because we used a bottom-up selection process, Fund performance was
driven by individual stock selection, and our biggest winners represented a
broad range of industries. For example, Waste Management had been a longtime
holding for the Fund, and a recent
4
<PAGE> 135
announcement that the company would be merging with U.S.A. Waste contributed to
a price increase of approximately 26 percent in the last six months. Investors
also favored many pharmaceutical stocks, given their steady earnings growth and
low exposure to Asia. Mylan Labs, Rhone Poulenc, Pharmacia & Upjohn, and
American Home Products were favorable stocks, and their valuations were
reasonable compared to the rest of the pharmaceutical industry. Other standouts
included PacifiCare Health Systems and American Bankers Insurance. Of course,
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.
Q WHAT FACTORS WORKED AGAINST THE FUND?
A Our large holdings in Philip Morris and RJR Nabisco impeded Fund performance.
These stocks weakened this spring amid uncertainty surrounding the outcome of a
number of legal and legislative issues. We added to the stocks when they became
extremely cheap, reaching historically low valuations, and we believe there are
several factors that could drive the stocks upward. The most significant and
likely catalyst would be a more favorable resolution to the tobacco legislation
than the proposals recently debated in Washington. Although the outcome is
unknown, we think the stocks adequately reflect the associated risks.
The Fund's gold stocks were a mixed bag during the reporting period. As
we mentioned in the last report, gold prices were at a historic low at the end
of 1997. We used that opportunity to invest, believing that nearly any change in
the market environment would send gold prices higher. Gold has been very
volatile this year, helping the Fund during the first quarter of 1998 but
hindering it during the second quarter. As of June 30, gold prices were quite
low again, so we held on to our position.
Q HOW DID THE FUND PERFORM DURING THE PAST YEAR?
A The Fund achieved a one-year total return of 31.65 percent1 (Class A shares at
net asset value) as of June 30, 1998. In addition, the Fund generated total
returns of 5.44 percent, 24.10 percent, and 26.74 percent for six months, 12
months, and the life of the Fund, respectively (Class A shares at maximum sales
charge).
By comparison, the Standard & Poor's 500-Stock Index returned 30.09
percent, and the Lipper Growth and Income Fund Index, which more closely
resembles the Fund, returned 22.14 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 and Income Fund Index reflects the average
performance of the 30 largest growth and income funds. Keep in mind that 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.
Q WHAT IS YOUR OUTLOOK FOR THE FUND FOR THE REMAINDER OF THE YEAR?
A At the time of your last report, the effects of the Asian economic
crisis on the U.S. stock market were unclear but ominous. Today, its effects are
still uncertain, but the domestic outlook
5
<PAGE> 136
is more positive: the crisis has had a severe impact on a few
segments of the U.S. market but otherwise has been fairly contained. The stock
market reached new highs during the reporting period, and we expect that
controlled growth and low inflation will continue to support stock prices
during the remainder of the year.
In managing the Fund, we continue to look for undervalued stocks with
limited exposure to Asia. The stock market is still highly valued, with many
stocks at record prices. Inflated stock prices translate into high risk for
investors, because expensive securities generally have farther to fall in a
market downturn than low-priced stocks. We believe that value-oriented products
like the Propector Fund may be well suited for this environment.
/s/Dennis J. McDonnell
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
/s/B. Robert Baker, Jr.
B. Robert Baker, Jr.
Portfolio Manager
/s/Jason Leder
Jason Leder
Portfolio Comanager
/s/Edie Terreson
Edie Terreson
Portfolio Comanager
6
<PAGE> 137
VAN KAMPEN PROSPECTOR FUND
Portfolio of Investments
June 30, 1998
<TABLE>
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Common Stocks 98.1%
Consumer Distribution 3.6%
CompUSA, Inc. (a) 1,740 $31,429
Proffitt's, Inc. (a) 330 13,324
Sears, Roebuck & Co. 370 22,593
----------
67,346
----------
Consumer Non-Durables 12.3%
Dial Corp. 2,460 63,806
Kimberly-Clark Corp. 930 42,664
Philip Morris Cos., Inc. 1,690 66,544
RJR Nabisco Holdings Corp. 2,295 54,506
----------
227,520
----------
Consumer Services 1.1%
Hilton Hotels Corp. 400 11,400
News Corp. Ltd. - ADR (Australia) 300 8,475
----------
19,875
----------
Energy 4.9%
Amoco Corp. 480 19,980
Chevron Corp. 190 15,782
ENI SpA - ADR (Italy) 300 19,500
Texaco, Inc. 280 16,713
YPF Sociedad Anonima, Class D - ADR (Argentina) (a) 630 18,939
----------
90,914
----------
Finance 10.9%
AMBAC, Inc. 830 48,555
Bear Stearns Cos., Inc. 259 14,731
Chase Manhattan Corp. 240 18,120
CMAC Investment Corp. 360 22,140
Conseco, Inc. 170 7,947
LandAmerica Financial Group, Inc. 1,070 61,257
United Asset Management Corp. 400 10,425
</TABLE>
See Notes to Financial Statements
7
<PAGE> 138
Van Kampen Prospector Fund
Portfolio of Investments (Continued)
June 30, 1998
<TABLE>
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Finance (Continued)
Washington Mutual, Inc. 420 $18,244
----------
201,419
----------
Healthcare 11.1%
American Home Products Corp. 930 48,127
Mylan Laboratories, Inc. 860 25,854
PacifiCare Health Systems, Class B (a) 300 26,513
Pharmacia & Upjohn, Inc. 370 17,066
Rhodia, SA - ADR (France) (a) 100 2,725
Rhone-Poulenc, SA, Class A - ADR (France) 740 41,579
Tenet Healthcare Corp. (a) 1,400 43,750
----------
205,614
----------
Producer Manufacturing 9.9%
Alstom SA - ADR (France) (a) 600 19,538
American Power Conversion Corp. (a) 1,150 34,500
Cognex Corp. (a) 2,115 39,127
LucasVarity Plc. - ADR (United Kingdom) 310 12,342
Navistar International Corp. (a) 280 8,085
U.S. Filter Corp. (a) 760 21,327
Waste Management, Inc. 1,390 48,650
----------
183,569
----------
Raw Materials/Processing Industries 11.4%
Barrick Gold Corp. 1,100 21,106
Bethlehem Steel Corp. (a) 240 2,985
Boise Cascade Corp. 355 11,626
British Steel Plc. - ADR (United Kingdom) 830 18,883
Champion International Corp. 130 6,394
Freeport-McMoRan Copper & Gold, Inc., Class B 1,540 23,389
Homestake Mining Co. 3,340 34,652
Louisiana-Pacific Corp. 2,360 43,070
Newmont Mining Corp. 1,200 28,350
Placer Dome, Inc. 1,200 14,100
Stone Container Corp. (a) 460 7,188
----------
211,743
----------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 139
Van Kampen Prospector Fund
Portfolio of Investments (Continued)
June 30, 1998
<TABLE>
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Technology 6.8%
Amkor Technology, Inc. (a) 430 $4,018
Avnet, Inc. 210 11,484
Electronics for Imaging, Inc. (a) 460 9,718
Etec Systems, Inc. (a) 330 11,612
Micron Technology, Inc. (a) 460 11,414
Quantum Corp. (a) 1,070 22,202
SunGard Data Systems, Inc. (a) 1,130 43,364
VLSI Technology, Inc. (a) 740 12,418
----------
126,230
----------
Transportation 0.3%
Canadian National Railway Co. 100 5,313
----------
Utilities 25.8%
BEC Energy 500 20,750
Bell Atlantic Corp. 600 27,375
Endesa SA - ADR (Spain) 650 14,056
Houston Industries, Inc. 2,400 74,100
Idaho Power Co. 1,000 34,625
Niagara Mohawk Power Corp. (a) 200 2,987
Northeast Utilities (a) 1,210 20,494
OGE Energy Corp. 1,000 27,000
PacifiCorp 3,200 72,400
Pinnacle West Capital Corp. 700 31,500
Public Service Co. of New Mexico 830 18,831
Texas Utilities Co. 1,870 77,839
US WEST, Inc. 1,160 54,520
----------
476,477
----------
Total Long-Term Investments 98.1%
(Cost $1,597,089) 1,816,020
Other Assets in Excess of Liabilities 1.9% 35,018
----------
Net Assets 100.0% $1,851,038
===========
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
9
<PAGE> 140
VAN KAMPEN PROSPECTOR FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Total Investments (Cost $1,597,089) $ 1,816,020
Cash 1,261
Receivables:
Expense Reimbursement from Adviser 82,510
Investments Sold 6,328
Dividends 6,207
Unamortized Organizational Costs 20,062
Other 805
---------------
Total Assets 1,933,193
---------------
LIABILITIES:
Accrued Expenses 35,978
Deferred Compensation and Retirement Plans 24,763
Payable to Distributor and Affliates 21,414
---------------
Total Liabilities 82,155
---------------
NET ASSETS $ 1,851,038
==============
NET ASSETS CONSIST OF:
Capital $ 1,366,891
Accumulated Net Realized Gain 281,283
Net Unrealized Appreciation 218,931
Accumulated Undistributed Net Investment Income (16,067)
---------------
NET ASSETS $ 1,851,038
===============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share
(Based on net assets of
$1,619,058 and 101,359 shares of beneficial
interest issued and outstanding) $ 15.97
Maximum sales charge (5.75%* of offering price) 0.97
----------
Maximum offering price to public $ 16.94
==========
Class B Shares:
Net asset value and offering price per share
(Based on net assets of $115,990
and 7,262 shares of beneficial interest issued and outstanding) $ 15.97
==========
Class C Shares:
Net asset value and offering price per share
(Based on net assets of $115,990
and 7,262 shares of beneficial interest issued and outstanding)
$ 15.97
=========
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
10
<PAGE> 141
VAN KAMPEN PROSPECTOR FUND
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1998
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends $ 33,513
----------
EXPENSES:
Accounting 28,861
Shareholder Reports 22,389
Shareholder Services 15,036
Audit 11,992
Investment Advisory Fee 11,782
Trustees' Fees and Expenses 8,483
Amortization of Organizational Costs 7,997
Legal 5,934
Registration 1,800
Custody 2,145
Miscellaneous 8,284
----------
Total Expenses 124,703
Less: Fees Waived and Expenses Reimbursed
($11,782 and $91,388, respectively) 103,170
Credits earned on Overnight Cash Balances 474
----------
Net Expenses 21,059
----------
NET INVESTMENT INCOME $ 12,454
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 373,394
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period 158,790
End of the Period 218,931
Net Unrealized Appreciation During the Period 60,141
----------
NET REALIZED AND UNREALIZED GAIN $ 433,535
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 445,989
==========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 142
VAN KAMPEN PROSPECTOR FUND
STATEMENT OF CHANGES IN NET ASSETS For the Years Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1998 June 30, 1997
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income $ 12,454 $ 5,574
Net Realized Gain 373,394 50,199
Net Unrealized Appreciation During the Period 60,141 140,918
--------------- --------------
Change in Net Assets from Operations 445,989 196,691
--------------- --------------
Distributions from Net Investment Income (13,056) (6,087)
Distributions in Excess of Net Investment Income (16,067) -0-
--------------- --------------
Distributions from and in Excess of Net Investment Income * (29,123) (6,087)
Distributions from Net Realized Gain * (133,630) (15,600)
--------------- --------------
Total Distributions (162,753) (21,687)
--------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES 283,236 175,004
--------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold -0- 1,000,000
Net Asset Value of Shares Issued Through Dividend Reinvestment 162,753 4,341
--------------- --------------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 162,753 1,004,341
TOTAL INCREASE IN NET ASSETS 445,989 1,179,345
NET ASSETS:
Beginning of the Period 1,405,049 225,704
--------------- --------------
End of the Period (Including accumulated
undistributed net investment
income of $(16,067) and $602, respectively) $ 1,851,038 $ 1,405,049
=============== ===============
<CAPTION>
Year Ended Year Ended
*Distributions by Class June 30, 1998 June 30, 1997
<S> <C> <C>
Distributions from and in excess of Net Investment Income:
Class A Shares $ (25,473) $ (4,041)
Class B Shares (1,825) (1,023)
Class C Shares (1,825) (1,023)
--------------- --------------
$ (29,123) $ (6,087)
--------------- --------------
Distributions from Net Realized Gain:
Class A Shares $ (116,882) $ (5,460)
Class B Shares (8,374) (5,070)
Class C Shares (8,374) (5,070)
--------------- --------------
$ (133,630) $ (15,600)
--------------- --------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 143
VAN KAMPEN PROSPECTOR FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Year Ended June 30, Operations) to
Class A Shares 1998 1997 (a) June 30, 1996
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.473 $ 11.285 $ 10.000
-------------- ------------- -------------
Net Investment Income 0.131 0.115 0.072
Net Realized and Unrealized Gain 3.924 2.996 1.239
-------------- ------------- -------------
Total from Investment Operations 4.055 3.111 1.311
-------------- ------------- -------------
Less:
Distributions from and in Excess
of Net Investment Income 0.275 0.143 0.026
Distributions from Net Realized Gain 1.279 0.780 0.000
-------------- ------------- -------------
Total Distributions 1.554 0.923 0.026
-------------- ------------- -------------
Net Asset Value, End of the Period $ 15.974 $ 13.473 $ 11.285
============ ============= =============
Total Return * (b) 31.65% 29.11% 13.10%**
Net Assets at End of the Period (In thousands) $1,619.1 $1,229.0 $78.9
Ratio of Expenses to Average Net Assets* (c) 1.28% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets* 0.74% 1.19% 1.34%
Portfolio Turnover 132% 104% 69%**
*If certain expenses had not been assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets (c) 7.40% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets (5.38%) (15.97%) (18.07%)
</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) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .03%, .30% and .04% for the years
ended June 30, 1998 and 1997, and for the period ending June 30, 1996,
respectively.
See Notes to Financial Statements
13
<PAGE> 144
VAN KAMPEN PROSPECTOR FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Year Ended June 30, Operations) to
Class B Shares 1998 1997 (a) June 30, 1996
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.473 $ 11.285 $ 10.000
-------------- -------------- ----------------
Net Investment Income 0.131 0.113 0.072
Net Realized and Unrealized Gain 3.923 3.020 1.239
-------------- -------------- ----------------
Total from Investment Operations 4.054 3.133 1.311
-------------- -------------- ----------------
Less:
Distributions from and in Excess
of Net Investment Income 0.275 0.165 0.026
Distributions from Net Realized Gain 1.279 0.780 0.000
--------------- -------------- ----------------
Total Distributions 1.554 0.945 0.026
--------------- -------------- ----------------
Net Asset Value, End of the Period $ 15.973 $ 13.473 $ 11.285
============== ============== ================
Total Return * (b) 31.65% 29.11% 13.19%**
Net Assets at End of the Period (In thousands) $116.0 $88.0 $73.4
Ratio of Expenses to Average Net Assets* (c) 1.28% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets* 0.74% 0.86% 1.34%
Portfolio Turnover 132% 104% 69%**
*If certain expenses had not been assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets (c) 7.40% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets (5.38%) (16.30%) (18.07%)
</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) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .03%, .30% and .04% for the years
ended June 30, 1998 and 1997, and for the period ending June 30, 1996,
respectively.
See Notes to Financial Statements
14
<PAGE> 145
VAN KAMPEN PROSPECTOR FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Year Ended June 30, Operations) to
Class C Shares 1998 1997 (a) June 30, 1996
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.473 $ 11.285 $ 10.000
-------------- -------------- ---------------
Net Investment Income 0.131 0.113 0.072
Net Realized and Unrealized Gain 3.923 3.020 1.239
-------------- -------------- ---------------
Total from Investment Operations 4.054 3.133 1.311
-------------- -------------- ---------------
Less:
Distributions from and in Excess
of Net Investment Income 0.275 0.165 0.026
Distributions from Net Realized Gain 1.279 0.780 0.000
-------------- -------------- ---------------
Total Distributions 1.554 0.945 0.026
-------------- -------------- ---------------
Net Asset Value, End of the Period $ 15.973 $ 13.473 $ 11.285
============= ============== ===============
Total Return * (b) 31.65% 29.11% 13.19%**
Net Assets at End of the Period (In thousands) $116.0 $88.0 $73.4
Ratio of Expenses to Average Net Assets* (c) 1.28% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets 0.74% 0.86% 1.34%
Portfolio Turnover 132% 104% 69%**
*If certain expenses had not been assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets (c) 7.40% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets (5.38%) (16.30%) (18.07%)
</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) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .03%, .30% and .04% for the years
ended June 30, 1998 and 1997, and for the period ending June 30, 1996,
respectively.
See Notes to Financial Statements
15
<PAGE> 146
VAN KAMPEN PROSPECTOR FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Prospector Fund, formerly known as the Van Kampen American Capital
Prospector Fund, (the "Fund") is organized as a series of the Van Kampen Equity
Trust, a Delaware business trust (the "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 seek capital
growth and income through investing principally in income producing equity
securities and other equity securities. The Fund commenced investment operations
on December 27, 1995, with three classes of common shares, Class A, Class B and
Class C shares.
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 or, if not available, their fair market value as 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 Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
C. INCOME AND EXPENSES - Dividend income is recorded on the ex-dividend
date. Expenses of the Fund are allocated on a pro rata basis to each class of
shares, except for distribution and service fees and transfer agency costs which
are unique to each class of shares.
D. ORGANIZATIONAL COSTS - The Fund will reimburse Van Kampen Funds Inc.
or its affiliates (collectively "Van Kampen") for costs incurred in connection
with the Fund's organization in the amount of $40,000. These costs are being
amortized on a straight line basis over the 60 month period ending December 26,
2000. The Adviser has agreed that in the event any of the initial shares of the
Fund originally purchased by Van Kampen are redeemed during the amortization
period, the Fund will be reimbursed for any unamortized organizational costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.
E. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and gains,
if any, to its shareholders. Therefore, no provision for federal income taxes is
required. Net realized gains or losses may differ for financial reporting and
tax purposes primarily as a result of wash sales.
At June 30, 1998, for federal income tax purposes, cost of long-term
investments is $1,615,642; the aggregate gross unrealized appreciation is
$264,795, and the aggregate gross unrealized depreciation is $64,417, resulting
in net unrealized appreciation of $200,378.
F. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays
dividends quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included in ordinary income for
tax purposes.
Due to inherent differences in the recognition of expenses under generally
accepted accounting principles and federal income tax purposes, the amount of
distributed net investment income may differ for a particular period. These
differences are temporary in nature, but may result in book basis distribution
in excess of net investment income for certain periods.
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, 1998. The Fund designated $9,170 as a 28% rate capital gain
distribution and $4,784 as a 20% rate capital gain distribution. Shareholders
were sent a 1997 Form 1099-DIV in January 1998 representing their proportionate
share of the capital gain distribution to be reported on their income tax
returns. For corporate shareholders, 11.42% of their distributions qualify for
the dividend received deductions.
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:
AVERAGE NET ASSETS % PER ANNUM
First $500 million .70%
Next $500 million .65%
Over $1 billion .60%
For the year ended June 30, 1998, the Fund recognized expenses of
approximately $300 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. All of this cost has been assumed by Van Kampen.
16
<PAGE> 147
VAN KAMPEN PROSPECTOR FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
For the year ended June 30, 1998, the Fund incurred expenses of
approximately $35,400 representing Van Kampen's cost of providing accounting and
legal services to the Fund. All of this cost has been assumed by Van Kampen.
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, 1998, the Fund recognized expenses of approximately $15,000. 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. All of
this cost has been assumed by Van Kampen.
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 equal to $2,500.
At June 30, 1998, Van Kampen owned all shares of Classes A, B and C,
respectively.
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 June 30, 1998 capital aggregated
$1,215,609, $75,641 and $75,641 for classes A, B, and C, respectively. For the
year ended June 30, 1998, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
------------- ----------------
Dividend Reinvestment:
<S> <C> <C>
Class A 10,142 $142,357
Class B 727 10,198
Class C 727 10,198
------------- ----------------
Total Dividend Reinvestments 11,596 $162,753
============= ================
At June 30, 1997 capital aggregated $1,073,252, $65,443 and $65,443 for
classes A, B, and C, respectively. For the year ended June 30, 1997,
transactions were as follows:
<CAPTION>
Shares Value
------------- ----------------
Sales:
<S> <C> <C>
Class A 83,963 $ 1,000,000
Class B -0- -0-
Class C -0- -0-
------------- ----------------
Total Sales 83,963 $ 1,000,000
============= =================
Dividend Reinvestment:
Class A 254 $3,429
Class B 35 456
Class C 35 456
------------- ----------------
Total Dividend Reinvestments 324 $ 4,341
============= ================
Class B and Class C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B and Class C shares
will automatically convert to Class A shares after the seventh and tenth years,
respectively, following purchase. The CDSC 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.
<CAPTION>
ContingValueeferred
Sales Charge
Class B Class C
Year of Redemption Shares Shares
- ------------------------------ ------------ -------------
<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>
4. INVESTMENT TRANSACTIONS
During the year ended June 30, 1998, the cost of purchases and proceeds from
sales of investments, excluding short-term investments, were $2,180,788 and
$2,223,842 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.
The Fund's net assets are subject to annual fees under the Plans of up to
.25% for Class A net assets and 1.00% each for Class B and Class C net assets.
No fees related to the Plans have been accrued by the Fund as the Fund is
currently owned solely by affiliated persons.
17
<PAGE> 148
KPMG PEAT MARWICK LLP
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Prospector Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Prospector Fund (the "Fund"), including the portfolio of investments,
as of June 30, 1998, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 1998, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen Prospector Fund as of June 30, 1998, the results of its operations for
the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the
periods presented, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Chicago, Illinois
August 7, 1998
18
<PAGE> 149
VAN KAMPEN PROSPECTOR FUND
BOARD OF TRUSTEES INVESTMENT ADVISER
J. MILES BRANAGAN VAN KAMPEN INVESTMENT ADVISORY CORP.
RICHARD M. DEMARTINI One Parkview Plaza
LINDA HUTTON HEAGY Oakbrook Terrace, Illinois 60181
R. CRAIG KENNEDY
JACK E. NELSON DISTRIBUTOR
DON G. POWELL*
PHILLIP B. ROONEY VAN KAMPEN FUNDS INC.
FERNANDO SISTO One Parkview Plaza
WAYNE W. WHALEN* - Chairman Oakbrook Terrace, Illinois 60181
OFFICERS SHAREHOLDER SERVICING AGENT
DENNIS J. MCDONNELL* VAN KAMPEN INVESTOR SERVICES INC.
President P.O. Box 418256
Kansas City, Missouri 64141-9256
RONALD A. NYBERG*
Vice President and Secretary CUSTODIAN
EDWARD C. WOOD, III* STATE STREET BANK AND TRUST COMPANY
Vice President and Chief
Financial Officer 225 Franklin Street
P.O. Box 1713
CURTIS W. MORELL* Boston, Massachusetts 02105
Vice President and Chief
Accounting Officer
LEGAL COUNSEL
JOHN L. SULLIVAN*
Treasurer SKADDEN, ARPS, SLATE, MEAGHER &
FLOM (ILLINOIS)
333 West Wacker Drive
TANYA M. LODEN* Chicago, Illinois 60606
Controller
INDEPENDENT ACCOUNTANTS
PETER W. HEGEL*
PAUL R. WOLKENBERG* KPMG PEAT MARWICK LLP
Vice Presidents Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the
Investment Company Act of 1940.
Van Kampen Funds Inc., 1998 All Rights Reserved.
SM denotes a service mark of Van Kampen Funds Inc.
- -------------------------------------------------------------------------------
TAX NOTICE TO CORPORATE
SHAREHOLDERS
For the fiscal year ended June 30, 1998, 11.42% of the dividends
taxable as ordinary income qualified for the 70% dividends received deduction
for corporations. For the calendar year ended December 31, 1997, 10.67% of the
dividends taxable as ordinary income qualified for the 70% dividends received
deduction for corporations.
- -------------------------------------------------------------------------------
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, 1998, the report, if used with
prospective investors, must be accompanied by a quarterly performance update.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</LEGEND>
<SERIES>
<NUMBER> 21
<NAME> UTILITY CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 114,033,895 <F1>
<INVESTMENTS-AT-VALUE> 153,279,794 <F1>
<RECEIVABLES> 973,720 <F1>
<ASSETS-OTHER> 5,368 <F1>
<OTHER-ITEMS-ASSETS> 808 <F1>
<TOTAL-ASSETS> 154,259,690 <F1>
<PAYABLE-FOR-SECURITIES> 460,096 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 749,649 <F1>
<TOTAL-LIABILITIES> 1,209,745 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45,755,409
<SHARES-COMMON-STOCK> 3,421,515
<SHARES-COMMON-PRIOR> 3,192,071
<ACCUMULATED-NII-CURRENT> (57,582)<F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> (48,816)<F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 39,245,899 <F1>
<NET-ASSETS> 60,414,092
<DIVIDEND-INCOME> 4,260,507 <F1>
<INTEREST-INCOME> 1,219,948 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (2,560,459)<F1>
<NET-INVESTMENT-INCOME> 2,919,996 <F1>
<REALIZED-GAINS-CURRENT> 5,691,843 <F1>
<APPREC-INCREASE-CURRENT> 26,338,865 <F1>
<NET-CHANGE-FROM-OPS> 34,950,704 <F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> (1,538,296)
<DISTRIBUTIONS-OF-GAINS> (5,310,506)
<DISTRIBUTIONS-OTHER> (2,987,603)
<NUMBER-OF-SHARES-SOLD> 1,328,514
<NUMBER-OF-SHARES-REDEEMED> (1,639,476)
<SHARES-REINVESTED> 540,406
<NET-CHANGE-IN-ASSETS> 7,932,291
<ACCUMULATED-NII-PRIOR> 382,954 <F1>
<ACCUMULATED-GAINS-PRIOR> 7,464,449 <F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 939,137 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 2,560,459 <F1>
<AVERAGE-NET-ASSETS> 55,671,869
<PER-SHARE-NAV-BEGIN> 16.441
<PER-SHARE-NII> 0.429
<PER-SHARE-GAIN-APPREC> 3.909
<PER-SHARE-DIVIDEND> (0.480)
<PER-SHARE-DISTRIBUTIONS> (1.691)
<RETURNS-OF-CAPITAL> (0.951)
<PER-SHARE-NAV-END> 17.657
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</LEGEND>
<SERIES>
<NUMBER> 22
<NAME> UTILITY CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 114,033,895 <F1>
<INVESTMENTS-AT-VALUE> 153,279,794 <F1>
<RECEIVABLES> 973,720 <F1>
<ASSETS-OTHER> 5,368 <F1>
<OTHER-ITEMS-ASSETS> 808 <F1>
<TOTAL-ASSETS> 154,259,690 <F1>
<PAYABLE-FOR-SECURITIES> 460,096 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 749,649 <F1>
<TOTAL-LIABILITIES> 1,209,745 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 63,746,069
<SHARES-COMMON-STOCK> 4,921,099
<SHARES-COMMON-PRIOR> 5,067,268
<ACCUMULATED-NII-CURRENT> (57,582)<F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> (48,816)<F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 39,245,899 <F1>
<NET-ASSETS> 86,770,239
<DIVIDEND-INCOME> 4,260,507 <F1>
<INTEREST-INCOME> 1,219,948 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (2,560,459)<F1>
<NET-INVESTMENT-INCOME> 2,919,996 <F1>
<REALIZED-GAINS-CURRENT> 5,691,843 <F1>
<APPREC-INCREASE-CURRENT> 26,338,865 <F1>
<NET-CHANGE-FROM-OPS> 34,950,704 <F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> (1,714,845)
<DISTRIBUTIONS-OF-GAINS> (7,494,154)
<DISTRIBUTIONS-OTHER> (4,215,072)
<NUMBER-OF-SHARES-SOLD> 538,641
<NUMBER-OF-SHARES-REDEEMED> (1,388,187)
<SHARES-REINVESTED> 703,377
<NET-CHANGE-IN-ASSETS> 3,494,748
<ACCUMULATED-NII-PRIOR> 382,954 <F1>
<ACCUMULATED-GAINS-PRIOR> 7,464,449 <F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 939,137 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 2,560,459 <F1>
<AVERAGE-NET-ASSETS> 83,500,979
<PER-SHARE-NAV-BEGIN> 16.434
<PER-SHARE-NII> 0.309
<PER-SHARE-GAIN-APPREC> 3.891
<PER-SHARE-DIVIDEND> (0.360)
<PER-SHARE-DISTRIBUTIONS> (1.691)
<RETURNS-OF-CAPITAL> (0.951)
<PER-SHARE-NAV-END> 17.632
<EXPENSE-RATIO> 2.07
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</LEGEND>
<SERIES>
<NUMBER> 23
<NAME> UTILITY CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 114,033,895 <F1>
<INVESTMENTS-AT-VALUE> 153,279,794 <F1>
<RECEIVABLES> 973,720 <F1>
<ASSETS-OTHER> 5,368 <F1>
<OTHER-ITEMS-ASSETS> 808 <F1>
<TOTAL-ASSETS> 154,259,690 <F1>
<PAYABLE-FOR-SECURITIES> 460,096 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 749,649 <F1>
<TOTAL-LIABILITIES> 1,209,745 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,408,966
<SHARES-COMMON-STOCK> 332,912
<SHARES-COMMON-PRIOR> 299,404
<ACCUMULATED-NII-CURRENT> (57,582)<F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> (48,816)<F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 39,245,899 <F1>
<NET-ASSETS> 5,865,614
<DIVIDEND-INCOME> 4,260,507 <F1>
<INTEREST-INCOME> 1,219,948 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (2,560,459)<F1>
<NET-INVESTMENT-INCOME> 2,919,996 <F1>
<REALIZED-GAINS-CURRENT> 5,691,843 <F1>
<APPREC-INCREASE-CURRENT> 26,338,865 <F1>
<NET-CHANGE-FROM-OPS> 34,950,704 <F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> (108,102)
<DISTRIBUTIONS-OF-GAINS> (477,358)
<DISTRIBUTIONS-OTHER> (268,630)
<NUMBER-OF-SHARES-SOLD> 83,771
<NUMBER-OF-SHARES-REDEEMED> (83,492)
<SHARES-REINVESTED> 33,229
<NET-CHANGE-IN-ASSETS> 947,575
<ACCUMULATED-NII-PRIOR> 382,954 <F1>
<ACCUMULATED-GAINS-PRIOR> 7,464,449 <F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 939,137 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 2,560,459 <F1>
<AVERAGE-NET-ASSETS> 5,238,637
<PER-SHARE-NAV-BEGIN> 16.426
<PER-SHARE-NII> 0.308
<PER-SHARE-GAIN-APPREC> 3.887
<PER-SHARE-DIVIDEND> (0.360)
<PER-SHARE-DISTRIBUTIONS> (1.691)
<RETURNS-OF-CAPITAL> (0.951)
<PER-SHARE-NAV-END> 17.619
<EXPENSE-RATIO> 2.06
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 81
<NAME> AGGRESSIVE GROWTH CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 224,429,398<F1>
<INVESTMENTS-AT-VALUE> 294,482,400<F1>
<RECEIVABLES> 4,629,055<F1>
<ASSETS-OTHER> 61,275<F1>
<OTHER-ITEMS-ASSETS> 3,548<F1>
<TOTAL-ASSETS> 299,176,278<F1>
<PAYABLE-FOR-SECURITIES> 3,807,001<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 13,151,906<F1>
<TOTAL-LIABILITIES> 16,958,907<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77,375,241
<SHARES-COMMON-STOCK> 8,588,377
<SHARES-COMMON-PRIOR> 8,440,294
<ACCUMULATED-NII-CURRENT> (51,572)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 19,332,000<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 70,053,002<F1>
<NET-ASSETS> 117,451,248
<DIVIDEND-INCOME> 248,561<F1>
<INTEREST-INCOME> 595,465<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (4,542,243)<F1>
<NET-INVESTMENT-INCOME> (3,698,217)<F1>
<REALIZED-GAINS-CURRENT> 46,196,606<F1>
<APPREC-INCREASE-CURRENT> 30,931,626<F1>
<NET-CHANGE-FROM-OPS> 73,430,015<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,586,041
<NUMBER-OF-SHARES-REDEEMED> (9,437,958)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 33,486,244
<ACCUMULATED-NII-PRIOR> (34,878)<F1>
<ACCUMULATED-GAINS-PRIOR> (26,740,339)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,820,687<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4,948,423<F1>
<AVERAGE-NET-ASSETS> 106,023,771
<PER-SHARE-NAV-BEGIN> 9.948
<PER-SHARE-NII> (0.135)
<PER-SHARE-GAIN-APPREC> 3.863
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.676
<EXPENSE-RATIO> 1.44
<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> 82
<NAME> AGGRESSIVE GROWTH CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 224,429,398<F1>
<INVESTMENTS-AT-VALUE> 294,482,400<F1>
<RECEIVABLES> 4,629,055<F1>
<ASSETS-OTHER> 61,275<F1>
<OTHER-ITEMS-ASSETS> 3,548<F1>
<TOTAL-ASSETS> 299,176,278<F1>
<PAYABLE-FOR-SECURITIES> 3,807,001<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 13,151,906<F1>
<TOTAL-LIABILITIES> 16,958,907<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103,908,446
<SHARES-COMMON-STOCK> 11,023,802
<SHARES-COMMON-PRIOR> 9,548,967
<ACCUMULATED-NII-CURRENT> (51,572)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 19,332,000<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 70,053,002<F1>
<NET-ASSETS> 148,386,948
<DIVIDEND-INCOME> 248,561<F1>
<INTEREST-INCOME> 595,465<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (4,542,243)<F1>
<NET-INVESTMENT-INCOME> (3,698,217)<F1>
<REALIZED-GAINS-CURRENT> 46,196,606<F1>
<APPREC-INCREASE-CURRENT> 30,931,626<F1>
<NET-CHANGE-FROM-OPS> 73,430,015<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,875,397
<NUMBER-OF-SHARES-REDEEMED> (2,400,562)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 54,162,827
<ACCUMULATED-NII-PRIOR> (34,878)<F1>
<ACCUMULATED-GAINS-PRIOR> (26,740,339)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,820,687<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4,948,423<F1>
<AVERAGE-NET-ASSETS> 123,462,384
<PER-SHARE-NAV-BEGIN> 9.867
<PER-SHARE-NII> (0.204)
<PER-SHARE-GAIN-APPREC> 3.798
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.461
<EXPENSE-RATIO> 2.20
<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> 83
<NAME> AGGRESSIVE GROWTH CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 224,429,398<F1>
<INVESTMENTS-AT-VALUE> 294,482,400<F1>
<RECEIVABLES> 4,629,055<F1>
<ASSETS-OTHER> 61,275<F1>
<OTHER-ITEMS-ASSETS> 3,548<F1>
<TOTAL-ASSETS> 299,176,278<F1>
<PAYABLE-FOR-SECURITIES> 3,807,001<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 13,151,906<F1>
<TOTAL-LIABILITIES> 16,958,907<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,600,254
<SHARES-COMMON-STOCK> 1,216,007
<SHARES-COMMON-PRIOR> 1,098,257
<ACCUMULATED-NII-CURRENT> (51,572)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 19,332,000<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 70,053,002<F1>
<NET-ASSETS> 16,379,175
<DIVIDEND-INCOME> 248,561<F1>
<INTEREST-INCOME> 595,465<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (4,542,243)<F1>
<NET-INVESTMENT-INCOME> (3,698,217)<F1>
<REALIZED-GAINS-CURRENT> 46,196,606<F1>
<APPREC-INCREASE-CURRENT> 30,931,626<F1>
<NET-CHANGE-FROM-OPS> 73,430,015<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 476,868
<NUMBER-OF-SHARES-REDEEMED> (359,118)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,540,398
<ACCUMULATED-NII-PRIOR> (34,878)<F1>
<ACCUMULATED-GAINS-PRIOR> (26,740,339)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,820,687<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4,948,423<F1>
<AVERAGE-NET-ASSETS> 13,521,514
<PER-SHARE-NAV-BEGIN> 9.869
<PER-SHARE-NII> (0.203)
<PER-SHARE-GAIN-APPREC> 3.804
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.470
<EXPENSE-RATIO> 2.20
<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> 71
<NAME> VALUE CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,410,856<F1>
<INVESTMENTS-AT-VALUE> 1,578,947<F1>
<RECEIVABLES> 58,853<F1>
<ASSETS-OTHER> 20,106<F1>
<OTHER-ITEMS-ASSETS> 41,741<F1>
<TOTAL-ASSETS> 1,699,647<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 58,317<F1>
<TOTAL-LIABILITIES> 58,317<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,251,565
<SHARES-COMMON-STOCK> 104,285
<SHARES-COMMON-PRIOR> 91,821
<ACCUMULATED-NII-CURRENT> (20,691)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 82,668<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 168,091<F1>
<NET-ASSETS> 1,430,777
<DIVIDEND-INCOME> 15,205<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (21,083)<F1>
<NET-INVESTMENT-INCOME> (5,878)<F1>
<REALIZED-GAINS-CURRENT> 240,590<F1>
<APPREC-INCREASE-CURRENT> (38,155)<F1>
<NET-CHANGE-FROM-OPS> 196,557<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (9,412)
<DISTRIBUTIONS-OF-GAINS> (192,785)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7
<NUMBER-OF-SHARES-REDEEMED> (4,076)
<SHARES-REINVESTED> 16,533
<NET-CHANGE-IN-ASSETS> 115,823
<ACCUMULATED-NII-PRIOR> (4,069)<F1>
<ACCUMULATED-GAINS-PRIOR> 62,157<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 12,163<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 125,914<F1>
<AVERAGE-NET-ASSETS> 1,416,917
<PER-SHARE-NAV-BEGIN> 14.321
<PER-SHARE-NII> (0.032)
<PER-SHARE-GAIN-APPREC> 1.633
<PER-SHARE-DIVIDEND> (0.103)
<PER-SHARE-DISTRIBUTIONS> (2.100)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.719
<EXPENSE-RATIO> 1.44
<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> 72
<NAME> VALUE CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,410,856<F1>
<INVESTMENTS-AT-VALUE> 1,578,947<F1>
<RECEIVABLES> 58,853<F1>
<ASSETS-OTHER> 20,106<F1>
<OTHER-ITEMS-ASSETS> 41,741<F1>
<TOTAL-ASSETS> 1,699,647<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 58,317<F1>
<TOTAL-LIABILITIES> 58,317<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 80,397
<SHARES-COMMON-STOCK> 7,670
<SHARES-COMMON-PRIOR> 6,500
<ACCUMULATED-NII-CURRENT> (20,691)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 82,668<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 168,091<F1>
<NET-ASSETS> 105,268
<DIVIDEND-INCOME> 15,205<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (21,083)<F1>
<NET-INVESTMENT-INCOME> (5,878)<F1>
<REALIZED-GAINS-CURRENT> 240,590<F1>
<APPREC-INCREASE-CURRENT> (38,155)<F1>
<NET-CHANGE-FROM-OPS> 196,557<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (666)
<DISTRIBUTIONS-OF-GAINS> (13,647)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1,170
<NET-CHANGE-IN-ASSETS> 12,140
<ACCUMULATED-NII-PRIOR> (4,069)<F1>
<ACCUMULATED-GAINS-PRIOR> 62,157<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 12,163<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 125,914<F1>
<AVERAGE-NET-ASSETS> 103,353
<PER-SHARE-NAV-BEGIN> 14.327
<PER-SHARE-NII> (0.027)
<PER-SHARE-GAIN-APPREC> 1.626
<PER-SHARE-DIVIDEND> (0.102)
<PER-SHARE-DISTRIBUTIONS> (2.100)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.724
<EXPENSE-RATIO> 1.44
<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> 73
<NAME> VALUE CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,410,856<F1>
<INVESTMENTS-AT-VALUE> 1,578,947<F1>
<RECEIVABLES> 58,853<F1>
<ASSETS-OTHER> 20,106<F1>
<OTHER-ITEMS-ASSETS> 41,741<F1>
<TOTAL-ASSETS> 1,699,647<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 58,317<F1>
<TOTAL-LIABILITIES> 58,317<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 79,300
<SHARES-COMMON-STOCK> 7,670
<SHARES-COMMON-PRIOR> 6,500
<ACCUMULATED-NII-CURRENT> (20,691)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 82,668<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 168,091<F1>
<NET-ASSETS> 105,268
<DIVIDEND-INCOME> 15,205<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (21,083)<F1>
<NET-INVESTMENT-INCOME> (5,878)<F1>
<REALIZED-GAINS-CURRENT> 240,590<F1>
<APPREC-INCREASE-CURRENT> (38,155)<F1>
<NET-CHANGE-FROM-OPS> 196,557<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (666)
<DISTRIBUTIONS-OF-GAINS> (13,647)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1,170
<NET-CHANGE-IN-ASSETS> 12,157
<ACCUMULATED-NII-PRIOR> (4,069)<F1>
<ACCUMULATED-GAINS-PRIOR> 62,157<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 12,163<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 125,914<F1>
<AVERAGE-NET-ASSETS> 101,512
<PER-SHARE-NAV-BEGIN> 14.327
<PER-SHARE-NII> (0.026)
<PER-SHARE-GAIN-APPREC> 1.627
<PER-SHARE-DIVIDEND> (0.102)
<PER-SHARE-DISTRIBUTIONS> (2.100)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.726
<EXPENSE-RATIO> 1.44
<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> 41
<NAME> GREAT AMERICAN COS. A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,486,008<F1>
<INVESTMENTS-AT-VALUE> 1,787,137<F1>
<RECEIVABLES> 27,599<F1>
<ASSETS-OTHER> 20,106<F1>
<OTHER-ITEMS-ASSETS> 61,458<F1>
<TOTAL-ASSETS> 1,896,300<F1>
<PAYABLE-FOR-SECURITIES> 4,800<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 24,840<F1>
<TOTAL-LIABILITIES> 29,640<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,236,456
<SHARES-COMMON-STOCK> 100,925
<SHARES-COMMON-PRIOR> 88,566
<ACCUMULATED-NII-CURRENT> (20,810)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 195,495<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 301,129<F1>
<NET-ASSETS> 1,627,709
<DIVIDEND-INCOME> 16,979<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (20,418)<F1>
<NET-INVESTMENT-INCOME> (3,439)<F1>
<REALIZED-GAINS-CURRENT> 320,602<F1>
<APPREC-INCREASE-CURRENT> 103,002<F1>
<NET-CHANGE-FROM-OPS> 420,165<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (12,532)
<DISTRIBUTIONS-OF-GAINS> (154,061)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 12,359
<NET-CHANGE-IN-ASSETS> 366,935
<ACCUMULATED-NII-PRIOR> (2,999)<F1>
<ACCUMULATED-GAINS-PRIOR> 51,566<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11,450<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 137,343<F1>
<AVERAGE-NET-ASSETS> 1,424,317
<PER-SHARE-NAV-BEGIN> 14.235
<PER-SHARE-NII> (0.009)
<PER-SHARE-GAIN-APPREC> 3.784
<PER-SHARE-DIVIDEND> (0.142)
<PER-SHARE-DISTRIBUTIONS> (1.740)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.128
<EXPENSE-RATIO> 1.51
<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> 42
<NAME> GREAT AMERICAN COS. B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,486,008<F1>
<INVESTMENTS-AT-VALUE> 1,787,137<F1>
<RECEIVABLES> 27,599<F1>
<ASSETS-OTHER> 20,106<F1>
<OTHER-ITEMS-ASSETS> 61,458<F1>
<TOTAL-ASSETS> 1,896,300<F1>
<PAYABLE-FOR-SECURITIES> 4,800<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 24,840<F1>
<TOTAL-LIABILITIES> 29,640<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77,195
<SHARES-COMMON-STOCK> 7,407
<SHARES-COMMON-PRIOR> 6,500
<ACCUMULATED-NII-CURRENT> (20,810)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 195,495<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 301,129<F1>
<NET-ASSETS> 119,469
<DIVIDEND-INCOME> 16,979<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (20,418)<F1>
<NET-INVESTMENT-INCOME> (3,439)<F1>
<REALIZED-GAINS-CURRENT> 320,602<F1>
<APPREC-INCREASE-CURRENT> 103,002<F1>
<NET-CHANGE-FROM-OPS> 420,165<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (920)
<DISTRIBUTIONS-OF-GAINS> (11,306)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 907
<NET-CHANGE-IN-ASSETS> 26,931
<ACCUMULATED-NII-PRIOR> (2,999)<F1>
<ACCUMULATED-GAINS-PRIOR> 51,566<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11,450<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 137,343<F1>
<AVERAGE-NET-ASSETS> 104,541
<PER-SHARE-NAV-BEGIN> 14.237
<PER-SHARE-NII> (0.004)
<PER-SHARE-GAIN-APPREC> 3.778
<PER-SHARE-DIVIDEND> (0.142)
<PER-SHARE-DISTRIBUTIONS> (1.740)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.129
<EXPENSE-RATIO> 1.51
<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> 43
<NAME> GREAT AMERICAN COS. C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,486,008<F1>
<INVESTMENTS-AT-VALUE> 1,787,137<F1>
<RECEIVABLES> 27,599<F1>
<ASSETS-OTHER> 20,106<F1>
<OTHER-ITEMS-ASSETS> 61,458<F1>
<TOTAL-ASSETS> 1,896,300<F1>
<PAYABLE-FOR-SECURITIES> 4,800<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 24,840<F1>
<TOTAL-LIABILITIES> 29,640<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77,195
<SHARES-COMMON-STOCK> 7,407
<SHARES-COMMON-PRIOR> 6,898
<ACCUMULATED-NII-CURRENT> (20,810)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 195,495<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 301,129<F1>
<NET-ASSETS> 119,482
<DIVIDEND-INCOME> 16,979<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (20,418)<F1>
<NET-INVESTMENT-INCOME> (3,439)<F1>
<REALIZED-GAINS-CURRENT> 320,602<F1>
<APPREC-INCREASE-CURRENT> 103,002<F1>
<NET-CHANGE-FROM-OPS> 420,165<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (920)
<DISTRIBUTIONS-OF-GAINS> (11,306)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (398)
<SHARES-REINVESTED> 907
<NET-CHANGE-IN-ASSETS> 21,276
<ACCUMULATED-NII-PRIOR> (2,999)<F1>
<ACCUMULATED-GAINS-PRIOR> 51,566<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11,450<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 137,343<F1>
<AVERAGE-NET-ASSETS> 104,547
<PER-SHARE-NAV-BEGIN> 14.237
<PER-SHARE-NII> (0.008)
<PER-SHARE-GAIN-APPREC> 3.784
<PER-SHARE-DIVIDEND> (0.142)
<PER-SHARE-DISTRIBUTIONS> (1.740)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.131
<EXPENSE-RATIO> 1.51
<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
<LEGEND>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</LEGEND>
<SERIES>
<NUMBER> 51
<NAME> GROWTH CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 115,790,888 <F1>
<INVESTMENTS-AT-VALUE> 154,784,032 <F1>
<RECEIVABLES> 370,964 <F1>
<ASSETS-OTHER> 20,106 <F1>
<OTHER-ITEMS-ASSETS> 3,374 <F1>
<TOTAL-ASSETS> 155,178,476 <F1>
<PAYABLE-FOR-SECURITIES> 0 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 1,328,459 <F1>
<TOTAL-LIABILITIES> 1,328,459 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,142,115
<SHARES-COMMON-STOCK> 2,765,431
<SHARES-COMMON-PRIOR> 2,972,290
<ACCUMULATED-NII-CURRENT> (47,131)<F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> 3,378,184 <F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 38,993,144 <F1>
<NET-ASSETS> 64,885,052
<DIVIDEND-INCOME> 466,773 <F1>
<INTEREST-INCOME> 421,677 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (2,327,117)<F1>
<NET-INVESTMENT-INCOME> (1,438,667)<F1>
<REALIZED-GAINS-CURRENT> 12,903,865 <F1>
<APPREC-INCREASE-CURRENT> 31,450,153 <F1>
<NET-CHANGE-FROM-OPS> 42,915,351 <F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2,743,327)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 703,177
<NUMBER-OF-SHARES-REDEEMED> (1,052,014)
<SHARES-REINVESTED> 141,978
<NET-CHANGE-IN-ASSETS> 11,747,874
<ACCUMULATED-NII-PRIOR> (23,118)<F1>
<ACCUMULATED-GAINS-PRIOR> (1,783,047)<F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 1,014,540 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 2,713,156 <F1>
<AVERAGE-NET-ASSETS> 59,635,299
<PER-SHARE-NAV-BEGIN> 17.878
<PER-SHARE-NII> (0.136)
<PER-SHARE-GAIN-APPREC> 6.711
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.990)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 23.463
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</LEGEND>
<SERIES>
<NUMBER> 52
<NAME> GROWTH CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 115,790,888 <F1>
<INVESTMENTS-AT-VALUE> 154,784,032 <F1>
<RECEIVABLES> 370,964 <F1>
<ASSETS-OTHER> 20,106 <F1>
<OTHER-ITEMS-ASSETS> 3,374 <F1>
<TOTAL-ASSETS> 155,178,476 <F1>
<PAYABLE-FOR-SECURITIES> 0 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 1,328,459 <F1>
<TOTAL-LIABILITIES> 1,328,459 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,925,789
<SHARES-COMMON-STOCK> 3,440,655
<SHARES-COMMON-PRIOR> 3,091,364
<ACCUMULATED-NII-CURRENT> (47,131)<F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> 3,378,184 <F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 38,993,144 <F1>
<NET-ASSETS> 79,731,316
<DIVIDEND-INCOME> 466,773 <F1>
<INTEREST-INCOME> 421,677 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (2,327,117)<F1>
<NET-INVESTMENT-INCOME> (1,438,667)<F1>
<REALIZED-GAINS-CURRENT> 12,903,865 <F1>
<APPREC-INCREASE-CURRENT> 31,450,153 <F1>
<NET-CHANGE-FROM-OPS> 42,915,351 <F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (3,159,670)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 623,694
<NUMBER-OF-SHARES-REDEEMED> (440,708)
<SHARES-REINVESTED> 166,305
<NET-CHANGE-IN-ASSETS> 24,716,760
<ACCUMULATED-NII-PRIOR> (23,118)<F1>
<ACCUMULATED-GAINS-PRIOR> (1,783,047)<F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 1,014,540 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 2,713,156 <F1>
<AVERAGE-NET-ASSETS> 67,001,108
<PER-SHARE-NAV-BEGIN> 17.796
<PER-SHARE-NII> (0.270)
<PER-SHARE-GAIN-APPREC> 6.637
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.990)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 23.173
<EXPENSE-RATIO> 2.05
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</LEGEND>
<SERIES>
<NUMBER> 53
<NAME> GROWTH CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 115,790,888 <F1>
<INVESTMENTS-AT-VALUE> 154,784,032 <F1>
<RECEIVABLES> 370,964 <F1>
<ASSETS-OTHER> 20,106 <F1>
<OTHER-ITEMS-ASSETS> 3,374 <F1>
<TOTAL-ASSETS> 155,178,476 <F1>
<PAYABLE-FOR-SECURITIES> 0 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 1,328,459 <F1>
<TOTAL-LIABILITIES> 1,328,459 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,457,916
<SHARES-COMMON-STOCK> 398,471
<SHARES-COMMON-PRIOR> 464,855
<ACCUMULATED-NII-CURRENT> (47,131)<F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> 3,378,184 <F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 38,993,144 <F1>
<NET-ASSETS> 9,233,649
<DIVIDEND-INCOME> 466,773 <F1>
<INTEREST-INCOME> 421,677 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (2,327,117)<F1>
<NET-INVESTMENT-INCOME> (1,438,667)<F1>
<REALIZED-GAINS-CURRENT> 12,903,865 <F1>
<APPREC-INCREASE-CURRENT> 31,450,153 <F1>
<NET-CHANGE-FROM-OPS> 42,915,351 <F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (424,983)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 63,730
<NUMBER-OF-SHARES-REDEEMED> (147,921)
<SHARES-REINVESTED> 17,807
<NET-CHANGE-IN-ASSETS> 962,255
<ACCUMULATED-NII-PRIOR> (23,118)<F1>
<ACCUMULATED-GAINS-PRIOR> (1,783,047)<F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 1,014,540 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 2,713,156 <F1>
<AVERAGE-NET-ASSETS> 8,737,426
<PER-SHARE-NAV-BEGIN> 17.793
<PER-SHARE-NII> (0.311)
<PER-SHARE-GAIN-APPREC> 6.681
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.990)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 23.173
<EXPENSE-RATIO> 2.05
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> PROSPECTOR FUND CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,597,089<F1>
<INVESTMENTS-AT-VALUE> 1,816,020<F1>
<RECEIVABLES> 95,045<F1>
<ASSETS-OTHER> 20,867<F1>
<OTHER-ITEMS-ASSETS> 1,261<F1>
<TOTAL-ASSETS> 1,933,193<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 82,155<F1>
<TOTAL-LIABILITIES> 82,155<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,215,609
<SHARES-COMMON-STOCK> 101,359
<SHARES-COMMON-PRIOR> 91,217
<ACCUMULATED-NII-CURRENT> (16,067)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 281,283<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 218,931<F1>
<NET-ASSETS> 1,619,058
<DIVIDEND-INCOME> 33,513<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (21,059)<F1>
<NET-INVESTMENT-INCOME> 12,454<F1>
<REALIZED-GAINS-CURRENT> 373,394<F1>
<APPREC-INCREASE-CURRENT> 60,141<F1>
<NET-CHANGE-FROM-OPS> 445,989<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (25,473)
<DISTRIBUTIONS-OF-GAINS> (116,882)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 10,142
<NET-CHANGE-IN-ASSETS> 390,097
<ACCUMULATED-NII-PRIOR> 602<F1>
<ACCUMULATED-GAINS-PRIOR> 41,519<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11,782<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 124,703<F1>
<AVERAGE-NET-ASSETS> 1,473,547
<PER-SHARE-NAV-BEGIN> 13.473
<PER-SHARE-NII> 0.131
<PER-SHARE-GAIN-APPREC> 3.924
<PER-SHARE-DIVIDEND> (0.275)
<PER-SHARE-DISTRIBUTIONS> (1.279)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.974
<EXPENSE-RATIO> 1.28
<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> PROSPECTOR FUND CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,597,089<F1>
<INVESTMENTS-AT-VALUE> 1,816,020<F1>
<RECEIVABLES> 95,045<F1>
<ASSETS-OTHER> 20,867<F1>
<OTHER-ITEMS-ASSETS> 1,261<F1>
<TOTAL-ASSETS> 1,933,193<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 82,155<F1>
<TOTAL-LIABILITIES> 82,155<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75,641
<SHARES-COMMON-STOCK> 7,262
<SHARES-COMMON-PRIOR> 6,535
<ACCUMULATED-NII-CURRENT> (16,067)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 281,283<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 218,931<F1>
<NET-ASSETS> 115,990
<DIVIDEND-INCOME> 33,513<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (21,059)<F1>
<NET-INVESTMENT-INCOME> 12,454<F1>
<REALIZED-GAINS-CURRENT> 373,394<F1>
<APPREC-INCREASE-CURRENT> 60,141<F1>
<NET-CHANGE-FROM-OPS> 445,989<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,825)
<DISTRIBUTIONS-OF-GAINS> (8,374)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 727
<NET-CHANGE-IN-ASSETS> 27,946
<ACCUMULATED-NII-PRIOR> 602<F1>
<ACCUMULATED-GAINS-PRIOR> 41,519<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11,782<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 124,703<F1>
<AVERAGE-NET-ASSETS> 105,566
<PER-SHARE-NAV-BEGIN> 13.473
<PER-SHARE-NII> 0.131
<PER-SHARE-GAIN-APPREC> 3.923
<PER-SHARE-DIVIDEND> (0.275)
<PER-SHARE-DISTRIBUTIONS> (1.279)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.973
<EXPENSE-RATIO> 1.28
<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> PROSPECTOR FUND CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,597,089<F1>
<INVESTMENTS-AT-VALUE> 1,816,020<F1>
<RECEIVABLES> 95,045<F1>
<ASSETS-OTHER> 20,867<F1>
<OTHER-ITEMS-ASSETS> 1,261<F1>
<TOTAL-ASSETS> 1,933,193<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 82,155<F1>
<TOTAL-LIABILITIES> 82,155<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75,641
<SHARES-COMMON-STOCK> 7,262
<SHARES-COMMON-PRIOR> 6,535
<ACCUMULATED-NII-CURRENT> (16,067)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 281,283<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 218,931<F1>
<NET-ASSETS> 115,990
<DIVIDEND-INCOME> 33,513<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (21,059)<F1>
<NET-INVESTMENT-INCOME> 12,454<F1>
<REALIZED-GAINS-CURRENT> 373,394<F1>
<APPREC-INCREASE-CURRENT> 60,141<F1>
<NET-CHANGE-FROM-OPS> 445,989<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,825)
<DISTRIBUTIONS-OF-GAINS> (8,374)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 727
<NET-CHANGE-IN-ASSETS> 27,946
<ACCUMULATED-NII-PRIOR> 602<F1>
<ACCUMULATED-GAINS-PRIOR> 41,519<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 11,782<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 124,703<F1>
<AVERAGE-NET-ASSETS> 105,566
<PER-SHARE-NAV-BEGIN> 13.473
<PER-SHARE-NII> 0.131
<PER-SHARE-GAIN-APPREC> 3.923
<PER-SHARE-DIVIDEND> (0.275)
<PER-SHARE-DISTRIBUTIONS> (1.279)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.973
<EXPENSE-RATIO> 1.28
<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>
