<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders......................... 1
Performance Results............................ 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
</TABLE>
UTLF SAR 2/98
<PAGE> 2
LETTER TO SHAREHOLDERS
February 1, 1998
Dear Shareholder,
The new year ushers in what
promises to be an exciting and
challenging time for investors. The
Taxpayer Relief Act of 1997 signed [PHOTO]
into law by President Clinton in
August creates many new opportunities
for you and your family to take a more
active role in achieving your DENNIS J. MCDONNELL AND DON G. POWELL
long-term financial goals.
Most Americans will benefit from the bill's
$95 billion in tax cuts over five years. The so-called Kiddie Credit gives
parents $400 in immediate tax relief for every child under age 17, and families
will find it easier to save for their children's college expenses through the
new Education IRA. The bill also cuts capital gains tax rates for the first
time in over a decade and loosens restrictions on tax-deductible IRA
contributions. Perhaps the most exciting feature of all is the new Roth IRA,
which allows investment earnings to grow tax free, not just tax deferred.
This year more than ever, it could be important for you to talk with your
financial adviser about how to make the tax code work to your advantage. At Van
Kampen American Capital, we have prepared a variety of publications to help you
understand your choices under the new tax legislation. And with the help of your
adviser, we'll help you locate the many benefits hidden among the changing tax
landscape.
ECONOMIC OVERVIEW
These continue to be the best of times for the U.S. economy. Growth is
strong, consumers are optimistic, unemployment is low, the budget is headed for
surplus, and our nation's currency is rising around the world.
Despite the strength in the economy, there is no indication of troublesome
inflation. In fact, the producer price index fell by 1.2 percent during the
year, the largest annual decline in wholesale prices since 1986. Inflation at
the consumer level was also virtually nonexistent, with the consumer price index
rising by only 1.7 percent during 1997. A strong dollar and significant
productivity gains helped offset inflationary pressures caused by rising wages.
After increasing short-term interest rates by 0.25 percent in March, the
Federal Reserve Board left monetary policy unchanged for the remainder of the
year. In addition to signs that the economy was slowing modestly from its
breakneck pace of early 1997, Fed policy-makers were concerned about the impact
that higher U.S. interest rates might have on the struggling economies of
Southeast Asia. Generally, higher U.S. interest rates cause
Continued on page two
1
<PAGE> 3
the dollar to rise relative to other currencies. With nearly all Asian
currencies already down significantly, a hike in U.S. rates would force monetary
authorities in Asia to choose between letting their currencies decline further
or matching the rate increase, thereby slowing their already-sluggish economies.
MARKET OVERVIEW
Bolstered by solid economic growth and low inflation, stock prices continued
their advance during the reporting period. Over the 12 months through December,
the Wilshire 5000 Index, which measures the performance of all publicly traded
U.S. companies, gained 29.17 percent. And with its 22.64 percent advance in
1997, the Dow Jones Industrial Average ("DJIA") completed its third consecutive
year of 20 percent-plus gains for the first time in the history of the index.
But while U.S. stocks kept rising, volatility also picked up. During the
spring, stronger-than-expected economic growth and a subsequent hike in
short-term interest rates caused stock prices to fall by 10 percent. Later in
the year, investors were unnerved by the spreading economic crisis in Asia.
Between early August and late October, the DJIA fell by 16 percent before
rebounding sharply to close the reporting period near record-high territory.
Within the equity market, large stocks continued to outperform their
small-cap cousins. For the year, the Russell 1000 Index of large-cap companies
returned 30.49 percent, compared to 20.52 percent for the Russell 2000 Index of
small stocks. A wave of consolidations helped make Financial Services the
top-performing industry group. The Dow Jones Financial Index soared 48.44
percent during 1997.
OUTLOOK
We expect that the recent upheavals in Southeast Asia will have a mixed
impact on the U.S. economy and financial markets. Sales of American goods
overseas are likely to decline in coming months, and competition from relatively
inexpensive imports could pinch profit margins. However, lower currency values
in Asia will likely result in less inflation in the U.S. and a greater
likelihood of stable or falling interest rates. Such a scenario usually benefits
stock prices, and we believe that a portfolio of high-quality domestic stocks
should continue to perform well. We also anticipate that stock selection will
play a larger role in generating investment performance due to the uneven impact
of the Asian crisis on individual companies.
As we noted earlier, the Taxpayer Relief Act of 1997 provides attractive new
vehicles through which investors can save for a variety of goals, including
higher education and retirement. We encourage you to work with your financial
adviser to consider how the tax changes can work to your benefit.
Continued on page three
2
<PAGE> 4
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 through our diverse menu of
quality investments.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
3
<PAGE> 5
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1997
VAN KAMPEN AMERICAN CAPITAL UTILITY FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
Six-month total return based on NAV(1)... 18.94% 18.49% 18.43%
Six-month total return(2)................ 12.12% 14.49% 17.43%
One-year total return(2)................. 18.50% 20.69% 23.70%
Life-of-Fund average annual total
return(2).............................. 10.11% 10.49% 10.55%
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.
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 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 (FED): A seven-member group that oversees the operations
of the Federal Reserve System, the central bank system of the United States.
Currently led by Chairman Alan Greenspan, the Fed meets eight times a year to
establish monetary policy and monitor the country's economic pulse.
INFLATION: An economic state in which the amount of money supply and business
activity dramatically increases, 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. It 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 its current
price relative to its earnings.
5
<PAGE> 7
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL UTILITY FUND
We recently spoke with the management team of the Van Kampen American Capital
Utility Fund about the key events and economic forces that shaped the markets
during the past six months. The team is led by Christine Drusch, portfolio
manager, Matthew Hart, associate portfolio manager, and Alan T. Sachtleben,
chief investment officer for equity investments. The following excerpts reflect
their views on the Fund's performance during the period ended December 31, 1997.
Q WHAT FACTORS HAD THE GREATEST IMPACT ON THE FUND DURING THE REPORTING
PERIOD?
A During the past six months, moderate economic growth and historically low
inflation provided a favorable environment for equity investments and
drove the U.S. stock market to new heights. After peaking in early August,
heightened volatility in the Dow Jones Industrial Average (DJIA) during the last
few months of the year threatened to overshadow a very positive period for the
U.S. stock market. October was marked by turbulence, as economic weakness in
Asia created a worldwide ripple effect. The widespread collapse of currencies
and stock prices in the Far East led to weakening economies and widening trade
deficits with many Southeast Asian nations. In response, U.S. markets initially
suffered significant drops, but had largely recovered by the end of the
reporting period.
Encouraged by falling interest rates and in search of defensive investments,
many investors turned their attention toward utility investments. Utility stocks
returned the renewed attention in kind, bouncing back from troubles in the first
six months of 1997 with 17-percent plus returns.
Q HOW DID YOU MANAGE THE FUND IN RESPONSE TO THESE FACTORS?
A At the beginning of the reporting period, we found opportunities in both
stocks and bonds. Our equity position improved the Fund's growth
potential, while the Fund's debt component benefited from falling interest
rates. As the stock market gained new ground, however, equities became more
expensive, which led us to shift some sector weightings to maintain the Fund's
potential for appreciation.
We decreased the Fund's position in the electric utility sector to an
approximate 44 percent weighting in the portfolio. Deregulation in this industry
has increased competition on a national level, allowing companies with
generating capacity to distribute their services to individual electric
companies across the country. As a result, generating companies have become very
price competitive, particularly companies with nuclear power.
6
<PAGE> 8
Within the Fund's portfolio, we sold those companies that were reliant on
generating distributors, which were hurt by higher operating costs.
As we moved assets out of electric utilities, we increased the Fund's
holdings in natural gas companies, which now account for approximately 16
percent of the portfolio. Low inventories and increased consumption made this an
especially attractive sector during the period. As recent as a few years ago,
gas was overabundant, but that bubble has subsided and been met with rising
demand for environmentally "clean" fuel. We continue to see opportunity and
price potential in this sector, as well as in oil and gas distribution
companies, which gained increased representation in the portfolio.
Our holdings in the telephone industry continued to be defensive, due to the
ongoing competition between long-distance carriers and regional telephone
companies. The telephone companies we have added to the portfolio have
predominately been international. We did increase the Fund's holdings in
telecommunications equipment companies, which show increased growth potential
after a year marked by large-scale consolidations. This high-margin, high-growth
industry accounted for approximately one percent of the Fund's holdings six
months ago, and has grown to over three percent at year-end. For additional Fund
portfolio highlights, please refer to page nine.
Q HOW DID THE FUND PERFORM DURING THE FISCAL YEAR?
A For the six-month period ended December 31, 1997, the Fund generated a
total return of 18.94 percent(1) (Class A shares at net asset value). By
comparison, the Standard & Poor's 40 Utilities Index returned 20.38
percent, while the Lipper Utility Fund Index returned 17.04 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 or fees 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 four for additional Fund performance results.
Q WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A We believe that the economic uncertainty in Southeast Asia will be a
double-edged sword for the domestic economy and the stock market. On the
downside, we anticipate that U.S. corporate profits could be negatively
impacted by lower foreign sales and increased competition from imports. On the
upside, a slowdown in corporate profits could keep economic growth at a moderate
and sustainable level. Also, we expect that lower currency values in Asia will
result in low price inflation in the U.S. and stable or declining interest
rates--a favorable scenario for stocks.
7
<PAGE> 9
Remember that the U.S. stock market is still enjoying the best of all
possible environments: low inflation, moderate economic growth, and solid
corporate earnings. The economy continues to grow fast enough to produce further
earnings growth, and the absence of inflation suggests stable interest rates,
which in turn would provide support for high stock valuations.
In an area characterized by change, we will continue to seek out new and
profitable opportunities in all segments of the utility sector. And, in keeping
with the expectations of the Fund's shareholders, we continue to refrain from
taking extreme positions that we believe will expose the portfolio to
unwarranted risk. As always, we will search for what we believe are the best
investments at the best price, diversify broadly, and maintain a long-term
investment horizon.
[SIG]
Alan T. Sachtleben
Chief Investment Officer
Equity Investments
[SIG]
Christine Drusch
Portfolio Manager
Please see footnotes on page four
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AMERICAN CAPITAL UTILITY FUND
TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1997 JUNE 30, 1997
<S> <C> <C>
CMS Energy Corp.................. 3.3% ............ 2.9%
Pinnacle West Capital Corp....... 3.2% ............ 2.1%
Portugal Telecom SA-ADR.......... 3.2% ............ 1.7%
Boston Edison Co................. 3.1% ............ 2.3%
GPU, Inc. ....................... 3.0% ............ 2.8%
FPL Group, Inc. ................. 3.0% ............ 2.5%
Southern Co. .................... 2.9% ............ 2.6%
Firstenergy Corp................. 2.7% ............ N/A
OGE Energy Corp.................. 2.7% ............ 2.4%
SBC Communications, Inc. ........ 2.7% ............ 2.4%
</TABLE>
N/A = Not Applicable
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1997
<S> <C> <C> <C>
Electric Utilities.......... 44.0% Electric Utilities.......... 48.8%
Telecommunications.......... 33.4% Telecommunications.......... 30.2%
Oil, Gas, Pipeline and Oil, Gas, Pipeline and
Distribution.............. 13.3% Distribution.............. 12.3%
Real Estate Investment Real Estate Investment
Trusts.................... 4.3% Trusts.................... 4.1%
Natural Gas Pipeline and Natural Gas Pipeline and
Distribution.............. 3.5% Distribution.............. 3.0%
</TABLE>
ASSET ALLOCATION AS A PERCENTAGE OF TOTAL ASSETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1997
<S> <C> <C> <C>
Stocks .............. 87.1% Stocks .............. 81.2%
Bonds ............... 8.1% Bonds ............... 11.4%
Convertibles ........ 1.0% Convertibles ........ 1.9%
Cash and Short-term Cash and Short-term
Investments ....... 3.3% Investments ....... 3.5%
Other ............... 0.5% Other ............... 2.0%
</TABLE>
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 91.5%
ELECTRIC UTILITIES 42.5%
AES Corp. (a)............................................... 43,000 $ 2,004,875
Boston Edison Co. .......................................... 120,000 4,545,000
Calenergy Inc. ............................................. 25,000 718,750
Cinergy Corp. .............................................. 73,000 2,796,813
CMS Energy Corp. ........................................... 110,000 4,846,875
Consolidated Edison Co. .................................... 40,000 1,640,000
DTE Energy Co. ............................................. 50,000 1,734,375
Edison International........................................ 26,200 712,312
Firstenergy Corp. .......................................... 138,000 4,002,000
Florida Progress Corp. ..................................... 96,000 3,768,000
FPL Group, Inc. ............................................ 74,000 4,379,875
GPU, Inc. .................................................. 104,175 4,388,372
Houston Industries, Inc. ................................... 69,000 1,841,438
New Century Energies, Inc. ................................. 79,000 3,787,062
OGE Energy Corp. ........................................... 72,000 3,937,500
Pinnacle West Capital Corp. ................................ 111,600 4,729,050
Public Service Co. of New Mexico............................ 110,000 2,605,625
Sierra Pacific Resources.................................... 100,000 3,750,000
Southern Co. ............................................... 163,000 4,217,625
Texas Utilities Co. ........................................ 40,000 1,662,500
------------
62,068,047
------------
NATURAL GAS PIPELINE AND DISTRIBUTION 3.5%
Consolidated Natural Gas Co. ............................... 33,000 1,996,500
National Fuel Gas Co. NJ.................................... 31,000 1,509,313
Wicor, Inc. ................................................ 36,000 1,671,750
------------
5,177,563
------------
OIL, GAS, PIPELINE AND DISTRIBUTION 10.6%
Coastal Corp. .............................................. 54,000 3,344,625
Columbia Gas Systems, Inc. ................................. 37,000 2,906,812
El Paso Natural Gas Co. .................................... 50,000 3,325,000
MCN Corp. .................................................. 19,000 767,125
Nicor, Inc. ................................................ 50,000 2,109,375
Southwest Gas Corp. ........................................ 100,000 1,868,750
Tejas Gas Corp. (a)......................................... 20,000 1,225,000
------------
15,546,687
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS 4.3%
Excel Reality Trust, Inc. - Convertible Preferred........... 50,000 $ 1,517,188
Meditrust................................................... 90,120 3,300,645
Prentiss Properties Trust................................... 50,000 1,396,875
------------
6,214,708
------------
TELECOMMUNICATIONS 30.6%
Airtouch Communications, Inc. (a)........................... 50,000 2,078,125
Ameritech Corp. ............................................ 48,000 3,864,000
AT&T Corp. ................................................. 38,600 2,364,250
Bell Atlantic Corp. ........................................ 19,968 1,817,088
BellSouth Corp. ............................................ 67,000 3,772,938
Cable & Wireless, PLC - ADR (United Kingdom)................ 136,000 3,697,500
China Telecom-ADR (China) (a)............................... 82,000 2,752,125
Cincinnati Bell, Inc. ...................................... 86,000 2,666,000
France Telecom-ADR (France) (a) ............................ 20,000 720,000
Portugal Telecom SA - ADR (Portugal)........................ 100,000 4,700,000
SBC Communications, Inc. ................................... 53,000 3,882,250
Tele Denmark A/S - ADR (Denmark)............................ 50,000 1,540,625
Telecom Italia SPA - ADR (Italy)............................ 37,000 2,368,000
Telecomunicacoes Brasileiras - ADR (Brazil)................. 8,000 931,500
Teleport Communications Group (a)........................... 62,000 3,402,250
Telestra Corp. - ADR (Australia) (a)........................ 11,700 488,475
U.S. West Media Group....................................... 81,000 3,655,125
------------
44,700,251
------------
TOTAL COMMON AND PREFERRED STOCKS..................................... 133,707,256
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIXED INCOME SECURITIES 8.5%
CABLE TELEVISION 1.5%
$1,000 Continental Cablevision, Inc. .................. 8.300% 05/15/06 $ 1,091,500
1,000 Cox Communications, Inc. ....................... 6.875 06/15/05 1,035,700
------------
2,127,200
------------
ELECTRIC UTILITIES 1.5%
1,000 Texas Utilities Electric Co. ................... 8.250 04/01/04 1,096,394
1,000 Union Electric Co. ............................. 7.375 12/15/04 1,061,450
------------
2,157,844
------------
OIL, GAS, PIPELINE AND DISTRIBUTION 2.7%
1,000 Enron Corp. .................................... 7.125 05/15/07 1,045,300
1,000 NGC Corp. ...................................... 6.750 12/15/05 1,018,400
500 Panhandle Eastern Pipeline Co. ................. 7.875 08/15/04 540,860
100 Texas Eastern Transmission Corp. ............... 8.000 07/15/02 106,940
1,090 Texas Gas Transmission Corp. ................... 8.625 04/01/04 1,217,203
------------
3,928,703
------------
TELECOMMUNICATIONS 2.8%
1,000 360 Communications.............................. 7.125 03/01/03 1,023,720
900 GTE Corp. ...................................... 9.375 12/01/00 975,510
1,000 Sprint Corp. ................................... 8.125 07/15/02 1,070,200
1,000 Worldcom, Inc. ................................. 7.750 04/01/07 1,077,500
------------
4,146,930
------------
TOTAL FIXED INCOME SECURITIES............................................... 12,360,677
------------
TOTAL LONG-TERM INVESTMENTS 96.2%
(Cost $113,131,024)....................................................... 146,067,933
SHORT-TERM INVESTMENTS 3.3%
(Cost $5,033,392)......................................................... 5,033,392
------------
TOTAL INVESTMENTS 99.5%
(Cost $118,164,416)....................................................... 151,101,325
OTHER ASSETS IN EXCESS OF LIABILITIES 0.5%................................. 736,351
------------
NET ASSETS 100.0%.......................................................... $151,837,676
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $118,164,416)....................... $151,101,325
Cash........................................................ 5,088
Receivables:
Fund Shares Sold.......................................... 1,024,957
Dividends................................................. 210,693
Interest.................................................. 181,336
Unamortized Organizational Costs............................ 13,066
Other....................................................... 4,074
------------
Total Assets.......................................... 152,540,539
------------
LIABILITIES:
Payables:
Distributor and Affiliates................................ 227,492
Fund Shares Repurchased................................... 209,338
Investment Advisory Fee................................... 80,962
Trustees' Deferred Compensation and Retirement Plans........ 93,379
Accrued Expenses............................................ 91,692
------------
Total Liabilities..................................... 702,863
------------
NET ASSETS.................................................. $151,837,676
============
NET ASSETS CONSIST OF:
Capital..................................................... $129,366,692
Net Unrealized Appreciation................................. 32,936,909
Accumulated Undistributed Net Investment Income............. 213,377
Accumulated Net Realized Loss............................... (10,679,302)
------------
NET ASSETS.................................................. $151,837,676
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $60,745,006 and 3,656,931 shares of
beneficial interest issued and outstanding)............. $ 16.61
Maximum sales charge (5.75%* of offering price)......... 1.01
------------
Maximum offering price to public........................ $ 17.62
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $85,780,379 and 5,169,188 shares of
beneficial interest issued and outstanding)............. $ 16.59
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $5,312,291 and 320,369 shares of
beneficial interest issued and outstanding)............. $ 16.58
============
</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 Six Months Ended December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $205)........ $ 2,065,779
Interest.................................................... 675,835
-----------
Total Income............................................ 2,741,614
-----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $66,025, $406,222 and $24,922,
respectively)............................................. 497,169
Investment Advisory Fee..................................... 451,812
Shareholder Services........................................ 173,748
Custody..................................................... 36,840
Legal....................................................... 14,542
Trustees' Fees and Expenses................................. 13,018
Amortization of Organizational Costs........................ 11,592
Other....................................................... 116,116
-----------
Total Expenses.......................................... 1,314,837
-----------
NET INVESTMENT INCOME....................................... $ 1,426,777
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 2,604,122
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 12,907,034
End of the Period:
Investments............................................. 32,936,909
-----------
Net Unrealized Appreciation During the Period............... 20,029,875
-----------
NET REALIZED AND UNREALIZED GAIN............................ $22,633,997
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $24,060,774
===========
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1997
and the Year Ended June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1997 June 30, 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 1,426,777 $ 5,126,338
Net Realized Gain.................................... 2,604,122 10,817,404
Net Unrealized Appreciation
During the Period.................................. 20,029,875 1,002,087
------------ -------------
Change in Net Assets from Operations................. 24,060,774 16,945,829
------------ -------------
Distributions from Net Investment Income:
Class A Shares..................................... (729,396) (2,064,034)
Class B Shares..................................... (816,163) (2,700,742)
Class C Shares..................................... (50,795) (153,673)
------------ -------------
(1,596,354) (4,918,449)
------------ -------------
Distributions from Net Realized Gain:
Class A Shares..................................... (8,296,668) (683,737)
Class B Shares..................................... (11,705,218) (1,114,278)
Class C Shares..................................... (745,987) (63,379)
------------ -------------
(20,747,873) (1,861,394)
------------ -------------
Total Distributions.................................. (22,344,227) (6,779,843)
------------ -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... 1,716,547 10,165,986
------------ -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................ 20,979,428 50,324,196
Net Asset Value of Shares Issued Through Dividend
Reinvestment....................................... 19,557,769 5,538,900
Cost of Shares Repurchased........................... (31,091,399) (80,912,740)
------------ -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... 9,445,798 (25,049,644)
------------ -------------
TOTAL INCREASE/DECREASE IN NET ASSETS................ 11,162,345 (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 $213,377 and
$382,954, respectively)............................ $151,837,676 $ 140,675,331
============ =============
</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. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From July 28, 1993
(Commencement
Year Ended June 30, of Investment
Six Months Ended --------------------------- Operations) to
Class A Shares December 31, 1997 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......... .217 .637 .538 .595 .479
Net Realized and Unrealized
Gain/Loss................... 2.835 1.317 2.077 .485 (1.513)
------- ------- ------- ------- -------
Total from Investment
Operations.................. 3.052 1.954 2.615 1.080 (1.034)
------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income......... .240 .610 .703 .600 .323
Distributions from Net
Realized Gain............. 2.642 .201 -0- -0- .037
------- ------- ------- ------- -------
Total Distributions........... 2.882 .811 .703 .600 .360
------- ------- ------- ------- -------
Net Asset Value, End of the
Period...................... $16.611 $16.441 $15.298 $13.386 $12.906
======= ======= ======= ======= =======
Total Return (a).............. 18.94%* 13.20% 19.93% 8.70% (7.38%)*
Net Assets at End of the
Period
(In millions)............... $60.7 $52.5 $57.7 $50.4 $51.5
Ratio of Expenses to Average
Net Assets (b).............. 1.42% 1.41% 1.38% 1.34% 1.34%
Ratio of Net Investment Income
to Average Net Assets (b)... 2.50% 4.03% 3.61% 4.55% 4.10%
Portfolio Turnover............ 13%* 102% 121% 109% 102%*
Average Commission Paid Per
Equity Share Traded (c)..... $.0599 $.0601 $.0590 -- --
</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 VKAC
reimbursement of certain expenses was less than 0.01%
(c) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal periods prior to 1996.
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. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From July 28, 1993
(Commencement
Year Ended June 30, of Investment
Six Months Ended --------------------------- Operations) to
Class B Shares December 31, 1997 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......... .161 .519 .426 .507 .394
Net Realized and Unrealized
Gain/Loss................... 2.821 1.314 2.080 .461 (1.519)
------- ------- ------- ------- --------
Total from Investment
Operations.................. 2.982 1.833 2.506 .968 (1.125)
------- ------- ------- ------- --------
Less:
Distributions from Net
Investment Income......... .180 .494 .566 .492 .258
Distributions from Net
Realized Gain............. 2.642 .201 -0- -0- .037
------- ------- ------- ------- --------
Total Distributions........... 2.822 .695 .566 .492 .295
------- ------- ------- ------- --------
Net Asset Value, End of the
Period...................... $16.594 $16.434 $15.296 $13.356 $ 12.880
======= ======= ======= ======= ========
Total Return (a).............. 18.49%* 12.30% 19.08% 7.80% (8.02%)*
Net Assets at End of the
Period
(In millions)............... $85.8 $83.3 $92.9 $81.0 $83.7
Ratio of Expenses to Average
Net Assets (b).............. 2.18% 2.17% 2.13% 2.05% 2.06%
Ratio of Net Investment Income
to Average Net Assets (b)... 1.78% 3.27% 2.86% 3.84% 3.36%
Portfolio Turnover............ 13%* 102% 121% 109% 102%*
Average Commission Paid Per
Equity Share Traded (c)..... $.0599 $.0601 $.0590 -- --
</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 VKAC
reimbursement of certain expenses was less than 0.01%.
(c) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal periods prior to 1996.
See Notes to Financial Statements
17
<PAGE> 19
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From August 13, 1993
Year Ended June 30, (Commencement of
Six Months Ended --------------------------- Distribution) to
Class C Shares December 31, 1997 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... .159 .503 .470 .482 .330
Net Realized and
Unrealized
Gain/Loss............. 2.819 1.328 2.030 .498 (1.627)
------- ------- ------- ------- -------
Total from Investment
Operations............ 2.978 1.831 2.500 .980 (1.297)
------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income... .180 .494 .566 .492 .258
Distributions from Net
Realized Gain....... 2.642 .201 -0- -0- .037
------- ------- ------- ------- -------
Total Distributions..... 2.822 .695 .566 .492 .295
------- ------- ------- ------- -------
Net Asset Value, End of
the Period............ $16.582 $16.426 $15.290 $13.356 $12.868
======= ======= ======= ======= =======
Total Return (a)........ 18.43%* 12.37% 19.00% 7.88% (9.11%)*
Net Assets at End of the
Period (In
millions)............. $5.3 $4.9 $5.0 $1.3 $1.1
Ratio of Expenses to
Average Net Assets
(b)................... 2.18% 2.17% 2.13% 2.09% 2.05%
Ratio of Net Investment
Income to Average Net
Assets (b)............ 1.76% 3.23% 2.78% 3.80% 3.38%
Portfolio Turnover...... 13%* 102% 121% 109% 102%*
Average Commission Paid
Per Equity Share
Traded (c)............ $.0599 $.0601 $.0590 -- --
</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 VKAC
reimbursement of certain expenses was less than 0.01%.
(c) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal periods prior to 1996.
See Notes to Financial Statements
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Utility Fund (the "Fund") is organized as a series
of the Van Kampen American Capital 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 December 31, 1997, 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)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
along with other investment companies advised by Van Kampen American Capital
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 American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") 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 VKAC 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 December 31, 1997, for federal income tax purposes, cost of long- and
short-term investments is $118,164,416; the aggregate gross unrealized
appreciation is $33,258,162 and the aggregate gross unrealized depreciation is
$321,253, resulting in net unrealized appreciation of $32,936,909.
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)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ------------------------------------------------------------------------
<S> <C>
First $500 million...................................... .65 of 1%
Next $500 million....................................... .60 of 1%
Over $1 billion......................................... .55 of 1%
</TABLE>
For the six months ended December 31, 1997, the Fund recognized expenses of
approximately $5,000 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 six months ended December 31, 1997, the Fund recognized expenses of
approximately $39,600 representing VKAC's cost of providing accounting, cash
management and legal services to the Fund.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the six months ended
December 31, 1997, the Fund recognized expenses of approximately $125,100,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. 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 December 31, 1997, VKAC 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.
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
At December 31, 1997, capital aggregated $52,668,465, $72,260,347 and
$4,437,880 for Classes A, B and C, respectively. For the six months ended
December 31, 1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.......................................... 1,001,299 $ 17,156,319
Class B.......................................... 201,367 3,420,414
Class C.......................................... 23,559 402,695
---------- ------------
Total Sales........................................ 1,226,225 $ 20,979,428
========== ============
Dividend Reinvestment:
Class A.......................................... 502,538 $ 8,224,784
Class B.......................................... 661,824 10,823,114
Class C.......................................... 31,198 509,871
---------- ------------
Total Dividend Reinvestment........................ 1,195,560 $ 19,557,769
========== ============
Repurchases:
Class A.......................................... (1,038,977) $(17,496,506)
Class B.......................................... (761,271) (13,012,493)
Class C.......................................... (33,792) (582,400)
---------- ------------
Total Repurchases.................................. (1,834,040) $(31,091,399)
========== ============
</TABLE>
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
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)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Class B and 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 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 six months ended December 31, 1997, VKAC, as Distributor for the
Fund, received commissions on sales of the Fund's Class A shares of
approximately $5,000 and CDSC on redeemed shares of approximately $107,100.
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 $17,247,998 and $29,713,577,
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 six months ended December 31, 1997, are payments retained by VKAC
of approximately $311,300.
24
<PAGE> 26
VAN KAMPEN AMERICAN CAPITAL 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*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICING AGENT
ACCESS 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 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 American Capital Distributors, Inc., 1998
All rights reserved.
(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After June 30, 1998, the report, if used with prospective
investors, must be accompanied by a quarterly performance update.
25
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders.......................................... 1
Portfolio Management Review..................................... 3
Portfolio of Investments........................................ 6
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
</TABLE>
GAC SAR 2/98
<PAGE> 28
LETTER TO SHAREHOLDERS
February 1, 1998
Dear Shareholder,
The new year ushers in what promises to be an exciting and challenging time
for investors. The Taxpayer Relief Act of 1997 signed into law by President
Clinton in August creates many new opportunities for you and your family to take
a more active role in achieving your long-term financial goals.
Most Americans will benefit from the bill's $95 billion in tax cuts over
five years. The so-called Kiddie Credit gives parents $400 in immediate tax
relief for every child under age 17, and families will find it easier to save
for their children's college expenses through the new Education IRA. The bill
also cuts capital gains tax rates for the first time in over a decade and
loosens restrictions on tax-deductible IRA contributions. Perhaps the most
exciting feature of all is the new Roth IRA, which allows investment earnings to
grow tax free, not just tax deferred.
This year more than ever, it could be important for you to talk with your
financial adviser about how to make the tax code work to your advantage. At Van
Kampen American Capital, we have prepared a variety of publications to help you
understand your choices under the new tax legislation. And with the help of your
adviser, we'll help you locate the many benefits hidden among the changing tax
landscape.
ECONOMIC OVERVIEW
These continue to be the best of times for the U.S. economy. Growth is
strong, consumers are optimistic, unemployment is low, the budget is headed for
surplus, and our nation's currency is rising around the world.
Despite the strength in the economy, there is no indication of troublesome
inflation. In fact, the producer price index fell by 1.2 percent during the
year, the largest annual decline in wholesale prices since 1986. Inflation at
the consumer level was also virtually nonexistent, with the consumer price index
rising by only 1.7 percent during 1997. A strong dollar and significant
productivity gains helped offset inflationary pressures caused by rising wages.
After increasing short-term interest rates by 0.25 percent in March, the
Federal Reserve Board left monetary policy unchanged for the remainder of the
year. In addition to signs that the economy was slowing modestly from its
breakneck pace of early 1997, Fed policy-makers were concerned about the impact
that higher U.S. interest rates might have on the struggling economies of
Southeast Asia. Generally, higher U.S. interest rates cause the dollar to rise
relative to other currencies. With nearly all Asian currencies already down
significantly, a hike in U.S. rates would force monetary authorities in Asia to
choose between letting their currencies decline further or matching the rate
increase, thereby slowing their already-sluggish economies.
1 Continued on page two
<PAGE> 29
MARKET OVERVIEW
Bolstered by solid economic growth and low inflation, stock prices
continued their advance during the reporting period. Over the 12 months through
December, the Wilshire 5000 Index, which measures the performance of all
publicly traded U.S. companies, gained 29.17 percent. And with its 22.64 percent
advance in 1997, the Dow Jones Industrial Average (DJIA) completed its third
consecutive year of 20 percent-plus gains for the first time in the history of
the index.
But while U.S. stocks kept rising, volatility also picked up. During the
spring, stronger-than-expected economic growth and a subsequent hike in
short-term interest rates caused stock prices to fall by 10 percent. Later in
the year, investors were unnerved by the spreading economic crisis in Asia.
Between early August and late October, the DJIA fell by 16 percent before
rebounding sharply to close the reporting period near record-high territory.
Within the equity market, large stocks continued to outperform their
small-cap cousins. For the year, the Russell 1000 Index of large-cap companies
returned 30.49 percent, compared to 20.52 percent for the Russell 2000 Index of
small stocks. A wave of consolidations helped make Financial Services the
top-performing industry group. The Dow Jones Financial Index soared 48.44
percent during 1997.
OUTLOOK
We expect that the recent upheavals in Southeast Asia will have a mixed
impact on the U.S. economy and financial markets. Sales of American goods
overseas are likely to decline in coming months, and competition from relatively
inexpensive imports could pinch profit margins. However, lower currency values
in Asia will likely result in less inflation in the U.S. and a greater
likelihood of stable or falling interest rates. Such a scenario usually benefits
stock prices, and we believe that a portfolio of high-quality domestic stocks
should continue to perform well. We also anticipate that stock selection will
play a larger role in generating investment performance due to the uneven impact
of the Asian crisis on individual companies.
As we noted earlier, the Taxpayer Relief Act of 1997 provides
attractive new vehicles through which investors can save for a variety of goals,
including higher education and retirement. We encourage you to work with your
financial adviser to consider how the tax changes can work to your benefit.
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 American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
2
<PAGE> 30
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND
We recently spoke to the management team of the Van Kampen American Capital
Great American Companies Fund about the key events and economic forces that
shaped the markets during the past six months. The team includes Evan Harrel and
Stephen L. Boyd, portfolio comanagers, and Alan T. Sachtleben, chief investment
officer for equity investments. The following excerpts reflect their views on
the Fund's performance during the six-month period ended December 31, 1997.
Q WHAT WAS THE MARKET ENVIRONMENT FOR THE FUND DURING THE REPORTING PERIOD?
A Moderate economic growth and low inflation provided a very favorable
environment for equity investments and drove the stock market to record
levels. After peaking at 8259 in early August, the Dow Jones Industrial
Average (DJIA) entered several months of heightened volatility. This period
culminated in October, when the stock market became very sensitive to economic
turmoil in Southeast Asia and the DJIA dropped a record number of points in a
single day. The market rose back up to hover slightly below its all-time high
by year-end.
Market leadership took several twists and turns as well. Although
investors favored blue-chip stocks early in the year, by mid-year momentum had
switched to small-capitalization stocks, which outperformed large caps in almost
every major economic sector in the third quarter. In October, uncertainty
surrounding the situation in Asia prompted investors to seek out large,
well-established companies--as a result, small stocks began to struggle again
and large stocks regained their dominant position.
Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET
ITS OBJECTIVE?
A The Fund invests in successful, 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 outperform the broad market over time.
Although quality is our primary consideration, we also screen potential holdings
for attractive valuations relative to their growth rates. Finally, we diversify
the Fund among many market sectors to gain exposure to high-quality companies
across a spectrum of industries.
Using a "bottom-up" stock selection process, we look for companies with
the following criteria: First, the company should have a high return on equity,
which indicates strong cash flows. Second, the company should maintain a
lower-than-average ratio of debt to capital. And third, the company should
reinvest its profits at a high rate. The second and third points are important
because they suggest the company is reinvesting its cash, and this often
translates into sustained growth.
3
<PAGE> 31
Q WHAT SECTORS AND SECURITIES HAD A SIGNIFICANT IMPACT ON THE PORTFOLIO?
A The portfolio tends to reflect where we find the best opportunities on a
stock by stock basis, rather than indicating a preference for particular
industry sectors. However, we did find many attractive securities in the
retail or consumer distribution sector. Thanks to steady economic growth and low
unemployment, consumer income is thriving, which translates into increased
spending at the retail level. Most of the retailers in the portfolio are
domestically oriented, which has insulated them from the recent volatility in
the global markets, and valuations remain attractive. In one change to this
sector, we sold our holdings in Staples and established a position in Office
Max.
The moderate growth, low inflation, and favorable interest rates we've
enjoyed lately have been positive for the finance sector. The Fund was supported
by the performance of Allstate (personal property and casualty insurance) and
Nationwide Financial Services (annuity products). Another significant
contributor was consumer non-durables, where packaged food companies such as
Sara Lee Corp., CPC International, and Nabisco Holdings performed well. Sara Lee
Corp. recently announced the restructuring of several non-core businesses that
generated lower returns than its food operations, and its stock price
appreciated over 30 percent during the period. Past performance does not
guarantee future results.
Q WHAT FACTORS WORKED AGAINST THE FUND?
A One area that has suffered in the past six months is health maintenance
organizations (HMOs). HMOs have been squeezed between their accelerating
costs and their inability to raise prices, and many of these organizations
have seen a downward trend in stock prices. Aetna has been a big disappointment
for the Fund, as its stock price plummeted 34 percent during the period. We
sold most of our holdings before Aetna had its biggest price declines, which
minimized its impact on the portfolio. Also, the situation in Asia took a toll
on the technology sector, but our modest position there reduced its effect on
the Fund.
Q HOW DID THE FUND PERFORM DURING THE PAST SIX MONTHS?
A The Fund achieved a six-month total return of 10.52 percent for Class A
shares at net asset value. The Fund generated total returns of 4.15
percent, 22.47 percent, and 26.19 percent for Class A shares reflecting the
maximum sales charge for six-months, 12-months, and the life of the Fund,
respectively. By comparison, the Standard & Poor's 500-Stock Index returned
9.82 percent, and the Lipper Growth Fund Index, which more closely resembles
the Fund, returned 10.98 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.
4
<PAGE> 32
Q WHAT IS YOUR OUTLOOK FOR THE FUND IN THE NEXT SIX MONTHS?
A We believe the economic uncertainty in Southeast Asia will be a double-edged
sword for the domestic economy. On the downside, we anticipate that U.S.
corporate profits could be negatively impacted by lower foreign sales and
increased competition from imports. On the upside, a slowdown in corporate
profits could keep economic growth at a moderate and sustainable level. Also, we
expect that lower currency values in Asia will result in low price inflation in
the U.S. and stable or declining interest rates--a favorable scenario for
stocks.
The Fund will continue to invest in companies with solid earnings
outlooks that we believe can succeed in a variety of market environments and are
priced appropriately. Given the murky economic picture, we believe this is a
prudent approach. The Great American Companies Fund's focus on high-quality U.S.
companies is compatible with the growing trend in the market, as investor
sentiment shifts back to larger, well-established, domestically based companies.
Overall, we expect stock selection to play a growing role in investment
performance, as the stock market may offer more limited opportunities for strong
returns than the broad market advances of recent years.
[SIG]
Alan T. Sachtleben
Chief Investment Officer
Equity Investments
[SIG]
Evan Harrel
Portfolio Comanager
[SIG]
Stephen L. Boyd
Portfolio Comanager
5
<PAGE> 33
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND
PORTFOLIO OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 93.0%
CONSUMER DISTRIBUTION 8.8%
AutoZone, Inc. (a).............................. 500 $ 14,500
Federated Department Stores, Inc..(a) .......... 500 21,531
Kroger Co. (a).................................. 500 18,469
Lear Corp. (a).................................. 500 23,750
Office Max Inc..(a) ............................ 2,500 35,625
Sysco Corp...................................... 600 27,337
-------------
141,212
-------------
CONSUMER DURABLES 1.8%
Ford Motor Co................................... 600 29,213
-------------
CONSUMER NON-DURABLES 17.1%
Avon Products, Inc.............................. 500 30,687
Clorox Co....................................... 400 31,625
Colgate-Palmolive Co............................ 400 29,400
CPC International, Inc. (a)..................... 300 32,325
Dial Corp....................................... 1,500 31,219
Kimberly Clark Corp............................. 300 14,794
Nabisco Holdings Corp., Class A................. 800 38,750
Philip Morris Cos., Inc......................... 500 22,656
Sara Lee Corp................................... 500 28,156
Pepsico Inc..................................... 400 14,575
-------------
274,187
-------------
CONSUMER SERVICES 14.9%
Brinker International, Inc. (a)................. 1,000 16,000
Cox Communications, Inc., Class A (a)........... 900 36,056
Cracker Barrel Old Country Store, Inc. (a)...... 800 26,700
Host Marriott Corp. (a)......................... 1,500 29,438
New York Times Co., Class A..................... 400 26,450
Omnicom Group, Inc.............................. 800 33,900
TCI, Inc. Class A (a)........................... 600 16,763
TCI Ventures Group, Series A (a)................ 500 14,156
Time Warner, Inc................................ 400 24,800
Walt Disney Co.................................. 150 14,859
-------------
239,122
-------------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 34
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
ENERGY 8.8%
Amoco Corp.................................... 200 $ 17,025
Coastal Corp.................................. 400 24,775
Exxon Corp.................................... 600 36,713
Unocal Corp................................... 500 19,406
Western Atlas, Inc. (a)....................... 200 14,800
Williams Cos., Inc............................ 1,000 28,375
-------------
141,094
-------------
FINANCE 12.6%
Allstate Corp................................. 300 27,262
American Express Co........................... 200 17,850
American General Corp......................... 400 21,625
Chase Manhattan Corp.......................... 200 21,900
Conseco, Inc.................................. 400 18,175
Federal National Mortgage Assn................ 600 34,237
Household International, Inc.................. 200 25,513
MGIC Investment Corp.......................... 200 13,300
Nationwide Financial Services, Inc., Class A.. 600 21,675
-------------
201,537
-------------
HEALTHCARE 10.1%
Arterial Vascular Engineering, Inc. (a)....... 400 26,000
Bristol-Myers Squibb Co....................... 300 28,387
Guidant Corp.................................. 300 18,675
Lilly (Eli) & Co.............................. 400 27,850
MedPartners, Inc. (a)......................... 1,200 26,850
Pfizer, Inc................................... 300 22,369
Warner-Lambert Co............................. 100 12,400
-------------
162,531
-------------
PRODUCER MANUFACTURING 5.0%
Honeywell, Inc................................ 400 27,400
ITT Corp. (a)................................. 250 20,719
USA Waste Services, Inc. (a).................. 800 31,400
-------------
79,519
-------------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 35
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<Caption
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
RAW MATERIALS/PROCESSING INDUSTRIES 2.2%
International Paper Co. .......................... 600 $ 25,875
Praxair, Inc. .................................... 200 9,000
-------------
34,875
-------------
TECHNOLOGY 6.9%
America Online, Inc. (a) ......................... 200 17,837
Bay Networks, Inc. (a) ........................... 700 17,894
Citrix Systems, Inc. (a) ......................... 200 15,200
International Business Machines Corp. ............ 400 41,825
Texas Instruments, Inc. .......................... 200 9,000
VLSI Technology, Inc. (a) ........................ 400 9,450
-------------
111,206
-------------
TRANSPORTATION 1.4%
US Xpress Enterprises, Inc. Class A (a) .......... 1,000 22,125
-------------
UTILITIES 3.4%
AT & T Corp. ..................................... 500 30,625
SBC Communications, Inc. ......................... 100 7,325
Teleport Communications Group, Class A (a) ....... 300 16,463
-------------
54,413
-------------
TOTAL INVESTMENTS 93.0%
(Cost $1,303,282) ...................................... 1,491,034
OTHER ASSETS IN EXCESS OF LIABILITIES 7.0% ................. 112,781
-------------
NET ASSETS 100.0% .......................................... $ 1,603,815
=============
</TABLE>
(a) Non-income producing security as this stock does not currently declare
dividends.
See Notes to Financial Statements
8
<PAGE> 36
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $1,303,282) ................................................... $ 1,491,034
Cash .................................................................................. 111,398
Receivables:
Investments Sold .................................................................... 12,076
Dividends ........................................................................... 1,287
Unamortized Organizational Costs ...................................................... 24,071
---------------
Total Assets ...................................................................... 1,639,866
---------------
LIABILITIES:
Payables:
Investments Purchased ............................................................... 14,694
Distributor and Affiliates .......................................................... 1,445
Trustees' Deferred Compensation and Retirement Plans .................................. 19,912
---------------
Total Liabilities ................................................................. 36,051
---------------
NET ASSETS ............................................................................ $ 1,603,815
===============
NET ASSETS CONSIST OF:
Capital ............................................................................... $ 1,396,619
Net Unrealized Appreciation ........................................................... 187,752
Accumulated Net Realized Gain ......................................................... 37,916
Accumulated Net Investment Loss ....................................................... (18,472)
---------------
NET ASSETS ............................................................................ $ 1,603,815
===============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$1,393,058 and 100,925 shares of beneficial interest issued and outstanding) ...... $13.80
Maximum sales charge (5.75%* of offering price) ................................... 0.84
---------------
Maximum offering price to public .................................................. $14.64
===============
Class B Shares:
Net asset value and offering price per share (Based on net assets of
$102,247 and 7,407 shares of beneficial interest issued and outstanding) ......... $13.80
===============
Class C Shares:
Net asset value and offering price per share (Based on net assets of
$108,510 and 7,861 shares of beneficial interest issued and outstanding) ......... $13.80
===============
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
9
<PAGE> 37
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ................................................................................ $ 8,593
-----------
EXPENSES:
Accounting ............................................................................... 11,440
Shareholder Services ..................................................................... 8,760
Shareholder Reports ...................................................................... 6,975
Audit .................................................................................... 6,450
Legal .................................................................................... 5,850
Investment Advisory Fee .................................................................. 5,438
Amortization of Organizational Costs ..................................................... 4,032
Trustees' Fees and Expenses .............................................................. 4,010
Trustees' Retirement Plan ................................................................ 3,228
Custody .................................................................................. 3,031
Registration and Filing .................................................................. 1,200
Other .................................................................................... 1,702
-----------
Total Expenses .................................................................... 62,116
Less: Fees Waived and Expenses Reimbursed ($5,438 and $45,009, respectively)) ..... 50,447
Earnings Credits on Cash Balances ........................................... 2,031
-----------
Net Expenses ...................................................................... 9,638
-----------
NET INVESTMENT LOSS ......................................................................... $ (1,045)
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain ........................................................................ $ 163,717
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period ........................................................... 198,127
End of the Period ................................................................. 187,752
-----------
Net Unrealized Depreciation During the Period ............................................ (10,375)
-----------
NET REALIZED AND UNREALIZED GAIN ............................................................ $ 153,342
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS .................................................. $ 152,297
===========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 38
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1997
and the Year Ended June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1997 June 30, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss ........................................... $ (1,045) $ (369)
Net Realized Gain ............................................. 163,717 56,138
Net Unrealized Appreciation/Depreciation During the Period .... (10,375) 176,652
-------------- --------------
Change in Net Assets from Operations .......................... 152,297 232,421
-------------- --------------
Distributions from and in Excess of Net Investment Income:
Class A Shares ........................................ (12,532) (133)
Class B Shares ........................................ (920) (123)
Class C Shares ........................................ (976) (123)
-------------- --------------
(14,428) (379)
-------------- --------------
Distributions from Net Realized Gain:
Class A Shares ........................................ (154,061) (6,296)
Class B Shares ........................................ (11,307) (5,847)
Class C Shares ........................................ (11,999) (5,847)
-------------- --------------
(177,367) (17,990)
-------------- --------------
Total Distributions ........................................... (191,795) (18,369)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES ........... (39,498) 214,052
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold ..................................... 0 1,005,024
Net Asset Value of Shares Issued Through
Dividend Reinvestment .................................... 191,795 0
-------------- --------------
NET CHANGE IN NET ASETS FORM CAPITAL TRANSACTIONS ............. 191,795 1,005,024
-------------- --------------
TOTAL INCREASE IN NET ASSETS .................................. 152,297 1,219,076
NET ASSETS:
Beginning of the Period ....................................... 1,451,518 232,442
-------------- --------------
End of the Period (Including accumulated net investment
loss of $18,472 and $2,999, respectively) ............. $ 1,603,815 $ 1,451,518
============== ==============
</TABLE>
See Notes to Financial Statements
11
<PAGE> 39
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Six Months Ended Year Ended Operations) to
Class A Shares December 31, 1997 June 30, 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 ........................................ 0.011 (0.003) 0.019
Net Realized and Unrealized Gain .................................. 1.439 3.535 1.603
-------------- -------------- ---------------
Total from Investment Operations ....................................... 1.450 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 ..................................... $ 13.803 $ 14.235 $ 11.622
============== ============== ===============
Total Return * (a) ..................................................... 10.52%** 32.29% 16.10%**
Net Assets at End of the Period (In thousands) ......................... $1,393.1 $1,260.8 $81.4
Ratio of Expenses to Average Net Assets* (b) ........................... 1.50% 1.59% 1.37%
Ratio of Net Investment Income to Average Net Assets* .................. (0.13%) (0.08%) 0.33%
Portfolio Turnover ..................................................... 83%** 100% 48%**
Average Commission Paid Per Equity Share Traded (c) .................... $0.0437 $0.0320 $0.025
*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) ............................ 7.99% 17.82% 18.46%
Ratio of Net Investment Income to Average Net Assets ................... (6.62%) (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 .25%, .34% and .13% for the
periods ended December 31, 1997, June 30, 1997 and June 30, 1996,
respectively.
(c) Represents the average brokerage commission paid per equity share traded
during the periods for trades where commissions were applicable.
See Notes to Financial Statements
12
<PAGE> 40
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Six Months Ended Year Ended Operations) to
Class B Shares December 31, 1997 June 30, 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 ........................................ 0.017 (0.007) 0.019
Net Realized and Unrealized Gain .................................. 1.432 3.541 1.603
-------------- -------------- ---------------
Total from Investment Operations ....................................... 1.449 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 ..................................... $ 13.804 $ 14.237 $ 11.622
============== ============== ===============
Total Return * (a) ..................................................... 10.52%** 32.29% 16.10%**
Net Assets at End of the Period (In thousands) ......................... $102.2 $92.5 $75.5
Ratio of Expenses to Average Net Assets* (b) ........................... 1.50% 1.59% 1.37%
Ratio of Net Investment Income to Average Net Assets* .................. (0.13%) (0.05%) 0.33%
Portfolio Turnover ..................................................... 83%** 100% 48%**
Average Commission Paid Per Equity Share Traded (c) .................... $0.0437 $0.0320 $0.025
*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) ............................ 7.99% 17.82% 18.46%
Ratio of Net Investment Income to Average Net Assets ................... (6.62%) (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 .25%, .34% and .13% for the
periods ended December 31, 1997, June 30, 1997 and June 30, 1996,
respectively.
(c) Represents the average brokerage commission paid per equity share traded
during the periods for trades where commissions were applicable.
See Notes to Financial Statements
13
<PAGE> 41
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Six Months Ended Year Ended Operations) to
Class C Shares December 31, 1997 June 30, 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 ........................................ 0.017 (0.007) 0.019
Net Realized and Unrealized Gain .................................. 1.432 3.541 1.603
-------------- -------------- ---------------
Total from Investment Operations ....................................... 1.449 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 ..................................... $ 13.804 $ 14.237 $ 11.622
============== ============== ===============
Total Return * (a) ..................................................... 10.52%** 32.29% 16.10%**
Net Assets at End of the Period (In thousands) ......................... $108.5 $98.2 $75.5
Ratio of Expenses to Average Net Assets* (b) ........................... 1.50% 1.59% 1.37%
Ratio of Net Investment Income to Average Net Assets* .................. (0.13%) (0.05%) 0.33%
Portfolio Turnover ..................................................... 83%** 100% 48%**
Average Commission Paid Per Equity Share Traded (c) .................... $0.0437 $0.0320 $0.025
*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) ............................ 7.99% 17.82% 18.46%
Ratio of Net Investment Income to Average Net Assets ................... (6.62%) (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 .25%, .34% and .13% for the
periods ended December 31, 1997, June 30, 1997 and June 30, 1996,
respectively.
(c) Represents the average brokerage commission paid per equity share traded
during the periods for trades where commissions were applicable.
See Notes to Financial Statements
14
<PAGE> 42
VAN KAMPEN AMERICAN CAPITAL
GREAT AMERICAN COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Great American Companies Fund (the "Fund") is
organized as a series of the Van Kampen American Capital 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 American Capital 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 American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") 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 VKAC 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.
At December 31, 1997, for federal income tax purposes, cost of long-term
investments is $1,303,282; the aggregate gross unrealized appreciation is
$212,994 and the aggregate gross unrealized depreciation is $25,242, resulting
in net unrealized appreciation of $187,752.
F. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
annually from net investment income and, if any, net realized gains.
Distributions from net realized gains for book purpose may include short-term
capital gains which are included in ordinary income for tax purposes.
G. EXPENSE REDUCTIONS - During the six months ended December 31, 1997, the
Fund's custody fee was reduced by $2,031 as a result of credits earned on
overnight cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
Average Net Assets % Per Annum
- -----------------------------------------------------
<S> <C>
First $500 million .70 of 1%
Next $500 million .65 of 1%
Over $1 billion .60 of 1%
</TABLE>
15
<PAGE> 43
VAN KAMPEN AMERICAN CAPITAL
GREAT AMERICAN COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
For the six months ended December 31, 1997, 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 VKAC.
For the six months ended December 31, 1997, the Fund incurred expenses of
approximately $17,000, representing VKAC's cost of providing accounting and
legal services to the Fund. These services are provided by VKAC at cost. All of
this cost has been assumed by VKAC.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
December 31, 1997, the Fund recognized expenses of approximately $8,800,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit. All of this cost has been assumed by VKAC.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. 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 December 31, 1997, VKAC owned all shares of Classes A and B,
respectively, and 7,407 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 December 31, 1997, capital aggregated $1,236,456, $77,196 and $82,967
for Classes A, B and C, respectively. For the six months ended December 31,
1997, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------- ----------- --------------
<S> <C> <C>
Dividend Reinvestment:
Class A...................... 12,359 $166,593
Class B...................... 907 12,227
Class C...................... 963 12,975
----------- --------------
Total Dividend Reinvestment....... 14,229 $191,795
=========== ==============
</TABLE>
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:
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------- ----------- --------------
<S> <C> <C>
Sales:
Class A...................... 81,566 $1,000,000
Class B...................... 0 0
Class C...................... 398 5,024
----------- --------------
Total Sales: 81,964 $1,005,024
=========== ==============
</TABLE>
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.
<TABLE>
<CAPTION>
Contingent Deferred
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 period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $1,191,463 and $1,201,303, 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.
16
<PAGE> 44
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES 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*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Distributor
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICING AGENT
ACCESS 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 American Capital Distributors, Inc., 1998
All Rights Reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
- -----------------------------------------------
TAX NOTICE TO CORPORATE
SHAREHOLDERS
For 1997, 7.78% of the dividends taxable as
ordinary income qualified for the 70% dividends
received deduction for corporation.
- -----------------------------------------------
This report is submitted for the general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors unless
it has been preceded or is accompanied by an effective prospectus of the Fund
which contains additional information on how to purchase shares, the sales
charge, and other pertinent data. After June 30, 1998, the report, if used with
prospective investors, must be accompanied by a quarterly performance update.
17
<PAGE> 45
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 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
</TABLE>
GF SAR 2/98
<PAGE> 46
LETTER TO SHAREHOLDERS
February 1, 1998
Dear Shareholder,
The new year ushers in what
promises to be an exciting and
challenging time for investors. The
Taxpayer Relief Act of 1997 signed
into law by President Clinton in [PHOTO]
August creates many new opportunities
for you and your family to take a more
active role in achieving your
long-term financial goals.
Most Americans will benefit from DENNIS J. MCDONNELL AND DON G. POWELL
the bill's $95 billion in tax cuts
over five years. The so-called Kiddie
Credit gives parents $400 in immediate tax relief for every child under age 17,
and families will find it easier to save for their children's college expenses
through the new Education IRA. The bill also cuts capital gains tax rates for
the first time in over a decade and loosens restrictions on tax-deductible IRA
contributions. Perhaps the most exciting feature of all is the new Roth IRA,
which allows investment earnings to grow tax free, not just tax deferred.
This year more than ever, it could be important for you to talk with your
financial adviser about how to make the tax code work to your advantage. At Van
Kampen American Capital, we have prepared a variety of publications to help you
understand your choices under the new tax legislation. And with the help of your
adviser, we'll help you locate the many benefits hidden among the changing tax
landscape.
ECONOMIC OVERVIEW
These continue to be the best of times for the U.S. economy. Growth is
strong, consumers are optimistic, unemployment is low, the budget is headed for
surplus, and our nation's currency is rising around the world.
Despite the strength in the economy, there is no indication of troublesome
inflation. In fact, the producer price index fell by 1.2 percent during the
year, the largest annual decline in wholesale prices since 1986. Inflation at
the consumer level was also virtually nonexistent, with the consumer price index
rising by only 1.7 percent during 1997. A strong dollar and significant
productivity gains helped offset inflationary pressures caused by rising wages.
After increasing short-term interest rates by 0.25 percent in March, the
Federal Reserve Board left monetary policy unchanged for the remainder of the
year. In addition to signs that the economy was slowing modestly from its
breakneck pace of early 1997, Fed policy-makers were concerned about the impact
that higher U.S. interest rates might have on the struggling economies of
Southeast Asia. Generally, higher U.S. interest rates cause the dollar to rise
relative to other currencies. With nearly all Asian currencies already down
significantly, a hike in U.S. rates would force monetary authorities in Asia to
choose
Continued on page two
1
<PAGE> 47
between letting their currencies decline further or matching the rate increase,
thereby slowing their already-sluggish economies.
MARKET OVERVIEW
Bolstered by solid economic growth and low inflation, stock prices continued
their advance during the reporting period. Over the 12 months through December,
the Wilshire 5000 Index, which measures the performance of all publicly traded
U.S. companies, gained 29.17 percent. And with its 22.64 percent advance in
1997, the Dow Jones Industrial Average completed its third consecutive year of
20 percent-plus gains for the first time in the history of the index.
But while U.S. stocks kept rising, volatility also picked up. During the
spring, stronger-than-expected economic growth and a subsequent hike in
short-term interest rates caused stock prices to fall by 10 percent. Later in
the year, investors were unnerved by the spreading economic crisis in Asia.
Between early August and late October, the DJIA fell by 16 percent before
rebounding sharply to close the reporting period near record-high territory.
Within the equity market, large stocks continued to outperform their
small-cap cousins. For the year, the Russell 1000 Index of large-cap companies
returned 30.49 percent, compared to 20.52 percent for the Russell 2000 Index of
small stocks. A wave of consolidations helped make Financial Services the
top-performing industry group. The Dow Jones Financial Index soared 48.44
percent during 1997.
OUTLOOK
We expect that the recent upheavals in Southeast Asia will have a mixed
impact on the U.S. economy and financial markets. Sales of American goods
overseas are likely to decline in coming months, and competition from relatively
inexpensive imports could pinch profit margins. However, lower currency values
in Asia will likely result in less inflation in the U.S. and a greater
likelihood of stable or falling interest rates. Such a scenario usually benefits
stock prices, and we believe that a portfolio of high-quality domestic stocks
should continue to perform well. We also anticipate that stock selection will
play a larger role in generating investment performance due to the uneven impact
of the Asian crisis on individual companies.
As we noted earlier, the Taxpayer Relief Act of 1997 provides attractive new
vehicles through which investors can save for a variety of goals, including
higher education and retirement. We encourage you to work with your financial
adviser to consider how the tax changes can work to your benefit.
Continued on page three
2
<PAGE> 48
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 through our diverse menu of
quality investments.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
Continued on page four
3
<PAGE> 49
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1997
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV(1)... 11.30% 10.96% 10.96%
Six-month total return(2)................ 4.90% 5.96% 9.96%
One-year total return(2)................. 19.67% 20.99% 24.99%
Life-of-Fund average annual total
return(2).............................. 39.34% 41.88% 42.92%
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.
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 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.
4
<PAGE> 50
GLOSSARY OF TERMS
BLUE-CHIP STOCKS: Stocks of large, well-known companies that have a long record
of growth and a reputation for quality management. 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 position, quality of management, etc.
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
issued and outstanding shares of stock. Morningstar, Inc., 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, computed by deducting a
fund's liabilities from its total assets and dividing this amount by the number
of shares outstanding. It does not include any initial or contingent deferred
sales charge.
STANDARD AND POOR'S 500-STOCK INDEX: An index of the 500 largest, most actively
traded stocks on the New York Stock Exchange. It 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 its current price relative to earnings, revenue, book value,
and cash flow.
5
<PAGE> 51
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND
We recently spoke to the management team of the Van Kampen American Capital
Growth Fund about the key events and economic forces that shaped the markets
during the past six months. The team includes Jeff D. New, portfolio manager,
and Alan T. Sachtleben, chief investment officer for equity investments. The
following excerpts reflect their views on the Fund's performance during the
six-month period ended December 31, 1997.
Q WHAT WAS THE STOCK MARKET ENVIRONMENT FOR THE FUND DURING THE REPORTING
PERIOD?
A Moderate economic growth and low inflation provided a very favorable
environment for equity investments and drove the stock market to record
levels at the beginning of the reporting period. After peaking at 8259 in
early August, the Dow Jones Industrial Average (DJIA) experienced several months
of volatility. This period culminated in October, when the stock market reacted
to economic turmoil in Southeast Asia and the DJIA dropped a record number of
points in a single day. The market rose back up to hover slightly below its
all-time high by year-end.
Market leadership took several twists and turns as well. Although investors
favored blue-chip stocks early in the year, by mid-year momentum had switched to
small-capitalization stocks, which outperformed large caps in almost every major
economic sector in the third quarter. In October, uncertainty surrounding the
situation in Asia prompted investors to seek out large, well-established
companies--as a result, small stocks began to struggle again and large stocks
regained their dominant position.
Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET
ITS OBJECTIVE?
A We maintain a consistent strategy of stock selection, identifying
companies that we believe have positive future fundamentals at attractive
prices. In terms of fundamental criteria, we look for stocks that have one
or more of the following traits: consistent earnings growth, accelerating
earnings growth, better-than-expected fundamentals, or an underlying change in a
company, industry, or regulatory environment. By using a "bottom-up" selection
process, we evaluate stocks one by one and make purchases wherever we find good
opportunities. This strategy of owning companies with positive fundamentals at
attractive valuations, regardless of their industry sector, was successful for
the Fund during the reporting period.
Q WHAT SIGNIFICANT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE
REPORTING PERIOD?
A The most significant change in the portfolio was an increase in consumer
distribution from 13 percent to 18 percent of long-term investments during
the reporting period. In general, retail companies are operating their
businesses more
6
<PAGE> 52
efficiently and are more disciplined about store expansion. Plus, consumer
spending and confidence have been fairly strong this year due to the favorable
U.S. economy. Some positive performers for the Fund included Safeway, and TJX
Companies, and some new additions were Brylane, Profitts, and Rite Aid.
We slightly increased our exposure to the healthcare sector, and it is our
second-largest sector weight at 23 percent of long-term investments of the Fund.
We have found what we believe are sound opportunities in this area during
periods of market volatility, because the demand for health-care goods and
services has not been dependent upon the economy. ESC Medical Systems, the
Fund's second-largest holding at year-end, was our best-performing health-care
stock, appreciating 49 percent during the reporting period. ESC is a medical
device company that makes equipment used for non-invasive treatment of varicose
veins and other skin problems, and has introduced several new products during
the past six months. Other stocks that performed well included service companies
such as Renal Treatment Center and Lincare, and hospital systems such as Tenet
Healthcare and Universal Health Services. However, past performance is no
guarantee of future results and not all stocks in the portfolio performed as
favorably.
Finally, we reduced the Fund's allocation to the technology sector from 31
percent of long-term investments in June to 24 percent of long-term investments
at the end of the year. This change was primarily due to a potential earnings
slowdown related to the Asian crisis and overall increased competition in the
technology sector. For additional Fund portfolio highlights, please refer to
page ten.
Q WHAT FACTORS WORKED AGAINST THE FUND?
A Technology holdings were the largest drag on the Fund, and as we
mentioned, we have substantially reduced our allocation. During the
period, the situation in Asia took a toll on these stocks for several
reasons. First, many technology companies either sell their products overseas,
manufacture products for companies that do business overseas, or compete
directly with Asian companies. And second, U.S. corporate profits are expected
to slow down in the wake of the Asian crisis. When corporate profits are
reduced, budgets for items such as new technology are often reduced as well, and
this could potentially hurt future earnings of many technology companies.
Semiconductor stocks declined significantly during the reporting period,
because much of their revenues are dependent upon Asia. In response, we
eliminated several semiconductor names from the portfolio, such as Altera,
Applied Materials, and LSI Logic. Other areas of technology weathered the past
few months much better. For example, BMC Software (business software), Compuware
(business software), and Compaq Computer Corp. (personal computers) provided
positive returns for the Fund.
Along with our concerns about the Asian impact, we see technology becoming
more competitive. Purchasers are starting to consolidate the number of
technology suppliers they use, and they want these suppliers to provide a broad
range of products and services. We believe this trend will allow leading
companies to increase their market share and will reduce the number of overall
winners in this sector. As a result, we expect technology to
7
<PAGE> 53
continue to offer significant investment potential, but stock selection is more
important than ever.
Q HOW DID THE FUND'S PERFORMANCE DURING 1997 COMPARE TO ITS PERFORMANCE
DURING 1996?
A For the 12 months ended December 31, 1997, the Fund achieved a total
return of 27.01%(1) versus 61.99%(1) for the same period in 1996 (Class A
shares at net asset value). Prior to February 3, 1997, the Fund was not
widely distributed and was substantially smaller than it is today. The following
chart provides a quarter by quarter comparison of Fund performance(1) (Class A
shares at net asset value) during 1997 and 1996:
<TABLE>
<CAPTION>
QUARTER ENDED 1997 1996
------------- ---- ----
<S> <C> <C>
March 31.............................. (1.15)% 19.05%
June 30............................... 15.44% 14.17%
September 30.......................... 20.54% 10.07%
December 31........................... (7.66)% 8.28%
</TABLE>
The difference in Fund performance in 1997 versus 1996 was caused, in part,
by the impact which the turmoil in the Asian markets had on the markets in this
country during the fourth quarter of 1997. During the first nine months of 1997,
and prior to the October Asian financial crisis, the Fund achieved a total
return of 37.55%(1) (52.97%(1) on an annualized basis). Another factor impacting
the Fund's comparative performance was the Fund's investment in initial public
offerings (IPOs). While the Fund invested in substantially the same number of
IPOs in 1997 as it did in 1996 (29 versus 31), we believe IPOs purchased by the
Fund in 1996 had a significantly greater affect on Fund performance than the
IPOs purchased in 1997, in part because of the smaller size of the Fund in 1996.
We believe another contributing factor was that the market for IPOs was not
as strong in 1997 as it was in 1996.
Q HOW DID THE FUND PERFORM DURING THE PAST SIX MONTHS?
A The Fund achieved a six-month total return of 11.30 percent(1) (Class A
shares at net asset value) as of December 31, 1997. By comparison, the
Standard & Poor's 500-Stock Index returned 10.55 percent, and the Lipper
Growth Fund Index, which more closely resembles the Fund, returned 10.98
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
8
<PAGE> 54
or investments they represent. Please refer to the chart on page four for
additional Fund performance results.
Q WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A We believe the economic uncertainty in Southeast Asia will be a
double-edged sword for the domestic economy and stock market. On the
downside, we anticipate that lower foreign sales and increased competition
from imports could negatively impact U.S. corporate profits. On the upside, a
slowdown in corporate profits could keep economic growth at a moderate and
sustainable level. Also, we expect that lower currency values in Asia, combined
with controlled U.S. economic growth, will result in low price inflation in the
U.S. and stable or declining interest rates--a favorable scenario for stocks.
In our opinion, a key challenge for the Fund throughout the next year will
be potential earnings disappointments from individual companies, which
translates into poorly performing stocks. As result, we will concentrate more
than ever on owning companies that we believe will produce solid earnings,
despite any negative economic and market factors. This earnings focus is a key
element in managing the Growth Fund, as our basic philosophy is to own companies
with strong earnings growth that sell at reasonable prices.
[SIG.]
Alan T. Sachtleben
Chief Investment Officer
Equity Investments
[SIG.]
Jeff D. New
Portfolio Manager
Please see notes on page four
9
<PAGE> 55
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND
TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1997
<S> <C> <C>
Philip Morris Cos., Inc.................... 4.4% .................. 5.1%
ESC Medical Systems Ltd.................... 4.3% .................. 1.4%
Conseco, Inc............................... 3.8% .................. 4.5%
U.S. Office Products Co.................... 3.3% .................. 1.4%
Universal Health Services, Inc.,
Class B ................................. 2.8% .................. 1.9%
USA Waste Services, Inc. .................. 2.8% .................. 1.5%
Applied Voice Technology, Inc.............. 2.6% .................. N/A
TJX Cos., Inc.............................. 2.5% .................. 2.4%
Cendant Corp............................... 2.5% .................. N/A
EMC Corp................................... 2.3% .................. N/A
</TABLE>
N/A = Not Applicable
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1997
<S> <C> <C> <C>
Technology................. 24% Technology................. 31%
Health Care................ 23% Health Care................ 22%
Consumer Distribution...... 18% Consumer Distribution...... 13%
Finance.................... 12% Finance.................... 11%
Consumer Services.......... 9% Consumer Non-Durables...... 9%
</TABLE>
10
<PAGE> 56
PORTFOLIO OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 95.9%
CONSUMER DISTRIBUTION 16.9%
Brylane, Inc. (a)........................................... 40,000 $ 1,970,000
CDW Computer Centers, Inc. (a).............................. 20,000 1,042,500
Proffitt's, Inc. (a)........................................ 55,000 1,564,062
Rite Aid Corp. ............................................. 24,000 1,408,500
Ross Stores, Inc. .......................................... 39,000 1,418,625
Safeway, Inc. (a)........................................... 42,000 2,656,500
Sysco Corp. ................................................ 30,000 1,366,875
Tech Data Corp. (a)......................................... 56,000 2,177,000
TJX Cos., Inc. ............................................. 88,000 3,025,000
U.S. Office Products Co. (a)................................ 200,000 3,925,000
Wild Oats Markets, Inc. (a)................................. 17,000 613,063
------------
21,167,125
------------
CONSUMER NON-DURABLES 6.4%
Intimate Brands, Inc. Class A............................... 45,000 1,082,813
Nautica Enterprises, Inc. (a)............................... 41,000 953,250
Philip Morris Cos., Inc. ................................... 117,000 5,301,561
Tommy Hilfiger Corp. (a).................................... 21,000 737,625
------------
8,075,249
------------
CONSUMER SERVICES 8.4%
AccuStaff, Inc. (a)......................................... 63,000 1,449,000
Brinker International, Inc. (a)............................. 100,000 1,600,000
Cendant Corp. (a)........................................... 86,000 2,956,250
CMP Media, Inc. Class A (a)................................. 41,000 707,250
FIRSTPLUS Financial Group, Inc. (a)......................... 33,000 1,266,375
Imperial Credit Industries, Inc. (a)........................ 57,000 1,168,500
Showbiz Pizza Time, Inc. (a)................................ 58,000 1,334,000
------------
10,481,375
------------
ENERGY 1.1%
El Paso Natural Gas Co...................................... 21,000 1,396,500
------------
FINANCE 12.0%
Affiliated Managers Group, Inc. (a)......................... 42,000 1,218,000
Allstate Corp. ............................................. 18,000 1,635,750
Conseco, Inc. .............................................. 100,000 4,543,750
ContiFinancial Corp. (a).................................... 20,000 503,750
Finova Group, Inc. ......................................... 46,000 2,285,625
Money Store, Inc. .......................................... 63,000 1,323,000
</TABLE>
See Notes to Financial Statements
11
<PAGE> 57
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
SunAmerica, Inc. ........................................... 51,000 $ 2,180,250
Torchmark, Inc. ............................................ 31,000 1,303,938
------------
14,994,063
------------
HEALTHCARE 22.2%
Ameripath, Inc. (a)......................................... 100,000 1,700,000
Bristol-Myers Squibb Co. ................................... 27,000 2,554,875
ESC Medical Systems Ltd. (a)................................ 132,000 5,115,000
HBO & Co. .................................................. 36,000 1,728,000
Health Management Assn., Inc., Class A (a).................. 59,000 1,489,750
Healthsouth Corp. (a)....................................... 68,000 1,887,000
Lincare Holdings, Inc. (a).................................. 32,000 1,824,000
Mylan Laboratories, Inc. ................................... 60,000 1,256,250
Novacare, Inc. (a).......................................... 60,000 783,750
Renal Treatment Centers, Inc. (a)........................... 56,000 2,023,000
Schering-Plough Corp. ...................................... 28,000 1,739,500
Shared Medical Systems...................................... 23,000 1,518,000
Universal Health Services, Inc., Class B (a)................ 68,000 3,425,500
Wellpoint Health Networks, Inc., Class A (a)................ 20,000 845,000
------------
27,889,625
------------
PRODUCER MANUFACTURING 2.7%
USA Waste Services, Inc. (a)................................ 87,000 3,414,750
------------
RAW MATERIALS/PROCESSING INDUSTRIES 2.2%
International Specialty Prods............................... 65,000 970,938
Safeskin Corp. (a).......................................... 32,000 1,816,000
------------
2,786,938
------------
TECHNOLOGY 23.0%
Applied Voice Technology, Inc. (a).......................... 109,000 3,079,250
BMC Software, Inc. (a)...................................... 35,000 2,296,875
CHS Electronics, Inc. (a)................................... 100,000 1,712,500
CIENA Corp. (a)............................................. 17,000 1,039,125
Compaq Computer Corp. (a)................................... 40,000 2,257,500
Compuware Corp. (a)......................................... 18,000 576,000
Dell Computer Corp. (a)..................................... 10,000 840,000
Digital Microwave Corp. (a)................................. 77,000 1,116,500
EMC Corp. (a)............................................... 100,000 2,743,750
Hypercom Corp. (a).......................................... 98,000 1,384,250
</TABLE>
See Notes to Financial Statements
12
<PAGE> 58
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
JD Edwards & Co. (a)........................................ 19,000 $ 560,500
National Instruments Corp. (a).............................. 25,000 725,000
Networks Associates, Inc. (a)............................... 48,000 2,538,000
Radisys Corp. (a)........................................... 47,000 1,750,750
SCI Systems, Inc. (a)....................................... 43,000 1,873,187
Software Ag Systems, Inc. (a)............................... 75,000 1,087,500
Waters Corp. (a)............................................ 36,000 1,354,500
World Access, Inc. (a)...................................... 80,000 1,910,000
------------
28,845,187
------------
TRANSPORTATION 1.0%
AMR Corp. (a)............................................... 10,000 1,256,875
------------
TOTAL LONG-TERM INVESTMENTS 95.9%
(Cost $107,398,348).............................................. 120,307,687
REPURCHASE AGREEMENT 9.8%
Bank of America, ($12,350,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 12/31/97, to be sold
on 01/02/98 at $12,354,460)
(Cost $12,350,000)............................................... 12,350,000
------------
TOTAL INVESTMENTS 105.7%
(Cost $119,748,348).............................................. 132,657,687
LIABILITIES IN EXCESS OF OTHER ASSETS (5.7%)........................ (7,192,872)
------------
NET ASSETS 100.0%................................................... $125,464,815
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
13
<PAGE> 59
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $119,748,348)....................... $132,657,687
Cash........................................................ 1,035
Receivables:
Investments sold.......................................... 195,144
Dividends................................................. 96,826
Fund Shares Sold.......................................... 82,277
Unamortized Organizational Costs............................ 24,072
Other....................................................... 907
------------
Total Assets............................................ 133,057,948
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 5,658,336
Fund Shares Repurchased................................... 1,210,417
Distributor and Affiliates................................ 285,567
Investment Advisory Fee................................... 211,135
Accrued Expenses............................................ 188,164
Trustees' Deferred Compensation and Retirement Plans........ 39,514
------------
Total Liabilities....................................... 7,593,133
------------
NET ASSETS.................................................. $125,464,815
============
NET ASSETS CONSIST OF:
Capital..................................................... $113,283,848
Net Unrealized Appreciation................................. 12,909,339
Accumulated Net Realized Loss............................... (91,770)
Accumulated Net Investment Loss............................. (636,602)
------------
NET ASSETS.................................................. $125,464,815
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $54,171,003 and 2,874,478 shares of
beneficial interest issued and outstanding)............. $ 18.85
Maximum sales charge (5.75%* of offering price)......... 1.15
------------
Maximum offering price to public........................ $ 20.00
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $62,923,724 and 3,367,819 shares of
beneficial interest issued and outstanding)............. $ 18.68
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $8,370,088 and 447,980 shares of
beneficial interest issued and outstanding)............. $ 18.68
============
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
14
<PAGE> 60
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................... $ 254,216
Interest.................................................... 252,144
-----------
Total Income............................................ 506,360
-----------
EXPENSES:
Investment Advisory Fee..................................... 494,177
Distribution (12b-1) and Service Fees (Attributed to Class
A, B, and C of $75,271, $314,063 and $43,835,
respectively)............................................. 433,169
Shareholder Services........................................ 280,478
Trustees' Fees and Expenses................................. 15,749
Legal....................................................... 10,939
Amortization of Organizational Costs........................ 4,031
Custody..................................................... 989
Other....................................................... 63,687
-----------
Total Expenses.......................................... 1,303,219
Less Fees Deferred...................................... 183,375
-----------
Net Expenses............................................ 1,119,844
-----------
NET INVESTMENT LOSS......................................... $ (613,484)
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 7,741,033
Futures................................................... 278,325
-----------
Net Realized Gain........................................... 8,019,358
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 7,542,991
End of the Period......................................... 12,909,339
-----------
Net Unrealized Appreciation During the Period............... 5,366,348
-----------
NET REALIZED AND UNREALIZED GAIN............................ $13,385,706
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $12,772,222
===========
</TABLE>
See Notes to Financial Statements
15
<PAGE> 61
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1997
and the Year Ended June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1997 June 30, 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss.................................. $ (613,484) $ (86,224)
Net Realized Gain/Loss............................... 8,019,358 (1,757,194)
Net Unrealized Appreciation
During the Period.................................. 5,366,348 7,484,772
-------------- ------------
Change in Net Assets from Operations................. 12,772,222 5,641,354
-------------- ------------
Distributions from Net Realized Gain................. (6,328,081) (23,514)
Distributions in Excess of Net Realized Gain......... -0- (1,799)
-------------- ------------
Distributions from and in Excess of Net Realized
Gain*............................................ (6,328,081) (25,313)
Return of Capital Distribution*...................... -0- (21,887)
-------------- ------------
Total Distributions................................ (6,328,081) (47,200)
-------------- ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... 6,444,141 5,594,154
-------------- ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................ 14,837,886 122,206,757
Net Asset Value of Shares Issued Through Dividend
Reinvestment....................................... 5,825,754 2,031
Cost of Shares Repurchased........................... (18,066,094) (11,696,360)
-------------- ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... 2,597,546 110,512,428
-------------- ------------
TOTAL INCREASE IN NET ASSETS......................... 9,041,687 116,106,582
NET ASSETS:
Beginning of the Period.............................. 116,423,128 316,546
-------------- ------------
End of the Period (Including accumulated net
investment loss of $636,602 and $23,118,
respectively)...................................... $ 125,464,815 $116,423,128
============== ============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended
*Distributions by Class December 31, 1997 June 30, 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of Net
Realized Gain:
Class A Shares......................... $ (2,743,807) $ (24,246)
Class B Shares......................... (3,159,322) (537)
Class C Shares......................... (424,952) (530)
-------------- ----------
$ (6,328,081) $ (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> 62
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
Six Months (Commencement of
Ended Year Ended Investment Operations)
Class A Shares December 31, 1997 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....... (.054) .031 (.044)
Net Realized and Unrealized
Gain........................... 2.012 4.810 3.740
------- ------- -------
Total from Investment
Operations........................ 1.958 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........................... $18.846 $17.878 $13.696
======= ======= =======
Total Return* (b).................. 11.30%** 36.00% 37.00%**
Net Assets at End of the Period
(In millions).................... $ 54.1 $ 53.1 $ .1
Ratio of Expenses to Average Net
Assets*.......................... 1.29% 1.32% 1.46%
Ratio of Net Investment Income
to Average Net Assets*........... (.53%) .19% (.79%)
Portfolio Turnover................. 82%** 139% 94%**
Average Commission Paid Per Equity
Share Traded (c)................. $ .0600 $ .0507 $ .0280
* If certain fees 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........................... 1.57% 2.31% 15.69%
Ratio of Net Investment Income to
Average Net Assets............... (.81%) (.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.
(c) Represents the Average Brokerage Commission Paid Per Equity Share Traded
during the period for trades where commissions were applicable.
See Notes to Financial Statements
17
<PAGE> 63
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
Six Months (Commencement of
Ended Year Ended Investment Operations)
Class B Shares December 31, 1997 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................. (.116) (.093) (.045)
Net Realized and Unrealized Gain.... 1.994 4.853 3.740
------- ------- -------
Total from Investment Operations...... 1.878 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............................... $18.684 $17.796 $13.695
======= ======= =======
Total Return* (b)..................... 10.96%** 35.32% 37.00%**
Net Assets at End of the Period
(In millions)....................... $ 62.9 $ 55.0 $ .1
Ratio of Expenses to Average Net
Assets*............................. 2.04% 2.07% 1.46%
Ratio of Net Investment Income to
Average Net Assets*................. (1.27%) (.56%) (.74%)
Portfolio Turnover.................... 82%** 139% 94%**
Average Commission Paid Per Equity
Share Traded (c).................... $ .0600 $ .0507 $ .0280
* If certain fees 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.............................. 2.32% 3.04% 15.70%
Ratio of Net Investment Income to
Average Net Assets.................. (1.55%) (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.
(c) Represents the Average Brokerage Commission Paid Per Equity Share Traded
during the period for trades where commissions were applicable.
See Notes to Financial Statements
18
<PAGE> 64
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
Six Months (Commencement of
Ended Year Ended Investment Operations)
Class C Shares December 31, 1997 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.............. (.126) (.096) (.045)
Net Realized and Unrealized
Gain........................... 2.007 4.853 3.740
------- ------- -------
Total from Investment
Operations....................... 1.881 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........................... $18.684 $17.793 $13.695
======= ======= =======
Total Return* (b).................. 10.96%** 35.32% 37.00%**
Net Assets at End of the Period
(In millions).................... $8.4 $8.3 $.1
Ratio of Expenses to Average Net
Assets*.......................... 2.04% 2.07% 1.46%
Ratio of Net Investment Income to
Average Net Assets*.............. (1.27%) (.57%) (.74%)
Portfolio Turnover................. 82%** 139% 94%**
Average Commission Paid Per Equity
Share Traded (c)................. $ .0600 $ .0507 $ .0280
* If certain fees 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........................... 2.32% 3.04% 15.70%
Ratio of Net Investment Income to
Average Net Assets............... (1.55%) (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.
(c) Represents the Average Brokerage Commission Paid Per Equity Share Traded
during the period for trades where commissions were applicable.
See Notes to Financial Statements
19
<PAGE> 65
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
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 American Capital 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> 66
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
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 American
Capital Distributors, Inc. or its affiliates ("collectively VKAC") 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 VKAC 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 December 31, 1997, for federal income tax purposes the cost of long- and
short-term investments is $119,748,348; the aggregate gross unrealized
appreciation is $16,518,652 and the aggregate gross unrealized depreciation is
$3,609,313, resulting in net unrealized appreciation of $12,909,339.
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.
21
<PAGE> 67
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $500 million...................................... .75 of 1%
Next $500 million....................................... .70 of 1%
Over $1 billion......................................... .65 of 1%
</TABLE>
VKAC 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 six months ended December 31, 1997, the Fund recognized expenses of
approximately $10,200 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.
For the six months ended December 31, 1997, the Fund recognized expenses of
approximately $18,700 representing VKAC's cost of providing accounting services
to the Fund. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the six months ended
December 31, 1997, the Fund recognized expenses of approximately $191,200,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. 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 December 31, 1997, VKAC 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.
22
<PAGE> 68
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
At December 31, 1997, capital aggregated $48,354,620, $57,436,291, and
$7,492,937 for Classes A, B, and C, respectively. For the six months ended
December 31, 1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................... 400,630 $ 7,984,550
Class B................................... 301,155 6,017,261
Class C................................... 42,154 836,075
-------- ------------
Total Sales................................. 743,939 $ 14,837,886
======== ============
Dividend Reinvestment:
Class A................................... 141,978 $ 2,548,516
Class B................................... 166,308 2,960,278
Class C................................... 17,807 316,960
-------- ------------
Total Dividend Reinvestment................. 326,093 $ 5,825,754
======== ============
Repurchases:
Class A................................... (640,420) $(12,771,556)
Class B................................... (191,008) (3,804,673)
Class C................................... (76,836) (1,489,865)
-------- ------------
Total Repurchases........................... (908,264) $(18,066,094)
======== ============
</TABLE>
23
<PAGE> 69
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
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). 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> 70
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended December 31, 1997, VKAC, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $21,000 and CDSC on the redeemed shares of Classes B and C of
approximately $86,400. 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 $104,050,969 and $98,992,311,
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> 71
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in futures contracts for the six months ended December 31,
1997, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1997................................ 15
Futures Opened.............................................. 0
Futures Closed.............................................. (15)
--
Outstanding at December 31, 1997............................ 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 six months ended December 31, 1997, are payments retained by VKAC of
approximately $277,300.
26
<PAGE> 72
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International/Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
VKAC Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS International Magnum
MS Latin American
FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
MS Global Fixed Income
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Limited Maturity Government
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC 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 American Capital or Morgan Stanley fund
prospectus or to receive additional fund information, choose from one of the
following:
- visit our web site at WWW.VKAC.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.VKAC.COM and selecting Investors' Place
27
<PAGE> 73
VAN KAMPEN AMERICAN CAPITAL 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*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICING AGENT
ACCESS 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 1997, 3.51% 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 American Capital Distributors, Inc., 1998
All rights reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After June 30, 1998, the report, if used with prospective
investors, must be accompanied by a quarterly performance update.
28
<PAGE> 74
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders ............... 1
Portfolio Management Review .......... 3
Portfolio of Investments ............. 6
Statement of Assets and Liabilities .. 8
Statement of Operations .............. 9
Statement of Changes in Net Assets ... 10
Financial Highlights ................. 11
Notes to Financial Statements ........ 14
</TABLE>
PRS SAR 2/98
<PAGE> 75
LETTER TO SHAREHOLDERS
February 1, 1998
Dear Shareholder,
The new year ushers in what promises to be an exciting and challenging
time for investors. The Taxpayer Relief Act of 1997 signed into law by
President Clinton in August creates many new opportunities for you and your
family to take a more active role in achieving your long-term
financial goals.
Most Americans will benefit from the bill's $95 billion in tax cuts over
five years. The so-called Kiddie Credit gives parents $400 in immediate tax
relief for every child under age 17, and families will find it easier to save
for their children's college expenses through the new Education IRA. The bill
also cuts capital gains tax rates for the first time in over a decade and
loosens restrictions on tax-deductible IRA contributions. Perhaps the most
exciting feature of all is the new Roth IRA, which allows investment earnings
to grow tax free, not just tax deferred.
This year more than ever, it could be important for you to talk with your
financial adviser about how to make the tax code work to your advantage. At Van
Kampen American Capital, we have prepared a variety of publications to help you
understand your choices under the new tax legislation. And with the help of
your adviser, we'll help you locate the many benefits hidden among the changing
tax landscape.
ECONOMIC OVERVIEW
These continue to be the best of times for the U.S. economy. Growth is
strong, consumers are optimistic, unemployment is low, the budget is headed for
surplus, and our nation's currency is rising around the world.
Despite the strength in the economy, there is no indication of troublesome
inflation. In fact, the producer price index fell by 1.2 percent during the
year, the largest annual decline in wholesale prices since 1986. Inflation at
the consumer level was also virtually nonexistent, with the consumer price
index rising by only 1.7 percent during 1997. A strong dollar and significant
productivity gains helped offset inflationary pressures caused by rising wages.
After increasing short-term interest rates by 0.25 percent in March, the
Federal Reserve Board left monetary policy unchanged for the remainder of the
year. In addition to signs that the economy was slowing modestly from its
breakneck pace of early 1997, Fed policy-makers were concerned about the impact
that higher U.S. interest rates might have on the struggling economies of
Southeast Asia. Generally, higher U.S. interest rates cause the dollar to rise
relative to other currencies. With nearly all Asian currencies already down
significantly, a hike in U.S. rates would force monetary authorities in Asia to
choose between letting their currencies decline further or matching the rate
increase, thereby slowing their already-sluggish economies.
Continued on page two
1
<PAGE> 76
MARKET OVERVIEW
Bolstered by solid economic growth and low inflation, stock prices
continued their advance during the reporting period. Over the 12 months through
December, the Wilshire 5000 Index, which measures the performance of all
publicly traded U.S. companies, gained 29.17 percent.
And with its 22.64 percent advance in 1997, the Dow Jones Industrial Average
(DJIA) completed its third consecutive year of 20 percent-plus gains for the
first time in the history of the index.
But while U.S. stocks kept rising, volatility also picked up. During the
spring, stronger-than-expected economic growth and a subsequent hike in
short-term interest rates caused stock prices to fall by 10 percent. Later in
the year, investors were unnerved by the spreading economic crisis in Asia.
Between early August and late October, the DJIA fell by 16 percent before
rebounding sharply to close the reporting period near record-high territory.
Within the equity market, large stocks continued to outperform their
small-cap cousins. For the year, the Russell 1000 Index of large-cap companies
returned 30.49 percent, compared to 20.52 percent for the Russell 2000 Index of
small stocks. A wave of consolidations helped make Financial Services the
top-performing industry group. The Dow Jones Financial Index soared 48.44
percent during 1997.
OUTLOOK
We expect that the recent upheavals in Southeast Asia will have a mixed
impact on the U.S. economy and financial markets. Sales of American goods
overseas are likely to decline in coming months, and competition from
relatively inexpensive imports could pinch profit margins. However, lower
currency values in Asia will likely result in less inflation in the U.S. and a
greater likelihood of stable or falling interest rates. Such a scenario usually
benefits stock prices, and we believe that a portfolio of high-quality domestic
stocks should continue to perform well. We also anticipate that stock selection
will play a larger role in generating investment performance due to the uneven
impact of the Asian crisis on individual companies.
As we noted earlier, the Taxpayer Relief Act of 1997 provides attractive
new vehicles through which investors can save for a variety of goals, including
higher education and retirement. We encourage you to work with your financial
adviser to consider how the tax changes can work to your benefit.
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 American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
2
<PAGE> 77
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND
We recently spoke to the management team of the Van Kampen American Capital
Prospector Fund about the key events and economic forces that shaped the
markets during the past six months. The team includes B. Robert Baker, Jr. and
Jason Leder, portfolio comanagers, and Alan T. Sachtleben, chief investment
officer for equity investments. The following excerpts reflect their views on
the Fund's performance during the six-month period ended December 31, 1997.
Q WHAT WAS THE STOCK MARKET ENVIRONMENT FOR THE FUND DURING THE REPORTING
PERIOD?
A Moderate economic growth and low inflation provided a very favorable
environment for equity investments and drove the stock market to record
levels. After peaking at 8259 in early August, the Dow Jones Industrial
Average (DJIA) entered several months of heightened volatility. This period
culminated in October, when the stock market became very sensitive to
economic turmoil in Southeast Asia and the DJIA dropped a record number of
points in a single day. The market rose back up to hover slightly below its
all-time high by year-end.
Market leadership took several twists and turns as well. Although
investors favored blue-chip stocks early in the year, by mid-year momentum had
switched to small-capitalization stocks, which outperformed large caps in
almost every major economic sector in the third quarter. In October,
uncertainty surrounding the situation in Asia prompted investors to seek out
large, well-established companies--as a result, small stocks began to struggle
again and large stocks regained their dominant position.
Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET ITS
OBJECTIVE?
A Our basic investment strategy is to identify undervalued stocks that have
the potential for future price appreciation. To do this, we look for
companies that are temporarily out of favor in the marketplace--their stock
prices are usually lower than what we believe these companies are truly 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 the security
to the portfolio.
We use a "bottom-up" stock selection process, evaluating securities one by
one and making purchases wherever we find a good opportunity. In other words,
we don't mandate what percentage of the Fund's assets should be in any given
industry--instead, we select the stocks that best meet our criteria.
3
<PAGE> 78
Q WHAT FACTORS INFLUENCED THE PORTFOLIO DURING THE PERIOD?
A The Fund is heavily weighted in electric utility stocks, and some of our
strongest performers were in this sector. When we reported to you in June,
investor opinion for these stocks was very negative--many investors were
concerned about the impact of industry deregulation and competition, and stocks
were undervalued. However, we increased our holdings in electric utilities
because we believed they were positioned to appreciate, and that is exactly
what happened in the second half of 1997. Declining interest rates, as well as
diminishing competitive and regulatory concerns, led to strong performance in
the second half of the year.
Electric utilities have outperformed the stock market as a whole since
mid-year, and we still believe they offer favorable value opportunities in
today's market. Key holdings in this sector were Texas Utilities and Houston
Industries, which appreciated 20 percent and 17 percent, respectively, during
the past six months.
Dial Corp., a manufacturer of soap and other personal care products, is
currently the Fund's largest holding. The company is relatively inexpensive
compared to other stocks in the consumer nondurables sector, and we believe it
has been undervalued because of poor management and high costs. Dial recently
appointed an experienced CEO who is restructuring the company and cutting
expenses, and we think the market will eventually look more favorably upon the
company. In fact, its stock price rose nearly 34 percent in the second half of
the year.
Another strong holding was American Bankers Insurance Group, a specialty
insurance company. We initially purchased this stock in December of 1995 at
$18-1/2 per share. In December of 1997, the company announced that it agreed to
be acquired by American International Group for approximately $47 per share, so
the Fund should realize a notable gain. Tele-Communications Inc. (TCI), a cable
television operator, was a large position for the Fund throughout most of the
year. Its stock price appreciated more than 120 percent during the reporting
period, reaching what we believed was its fair market value, and we sold our
holdings.
Other contributors to performance included personal computer companies
such as Dell Computer and Compaq Computer. These stocks appeared to be
extraordinarily undervalued in the second quarter and did not reflect what we
thought were very exciting business prospects and outstanding execution by
management. We purchased Compaq in May at $35 per share, and the stock closed
the year at $55-1/8 per share--a gain of nearly 58 percent. However, we trimmed
our positions in these stocks toward the end of the year as valuations became
extended.
Q WHAT FACTORS WORKED AGAINST THE FUND?
A One area that performed poorly was raw materials--a sector that includes
paper and steel. Asia is a large consumer of U.S. raw materials, but
demand in that region has tapered off lately. In addition, many Asian
countries are desperate for cash, so they're selling reserves of paper products
very cheaply, forcing U.S. producers to lower their prices. We had a small
weighting in raw materials during the reporting period, which modestly hindered
the Fund's performance.
Also, we recently established a significant position in gold stocks, which
were among the market's worst performers in 1997. Economic problems in Asia
slowed the demand for gold, and
4
<PAGE> 79
worldwide central banks are questioning the need for large gold reserves to
support their currency, prompting the announcement of a sell-off of central
bank reserves. These events have caused the price of gold to drop sharply, and
some mines have been forced to close because the price of gold is less than the
cost to produce it. In short, negative sentiment for gold stocks is at an
all-time high. As value investors, we have a strong contrarian element to our
management style, and we see these extreme valuations as a buying opportunity.
Past performance does not guarantee future results.
Q HOW DID THE FUND PERFORM DURING THE PAST SIX MONTHS?
A The Fund achieved a six-month total return of 17.70 percent for Class A
shares at net asset value. The Fund generated total returns of 10.95
percent, 25.50 percent, and 27.01 percent for Class A shares reflecting
the maximum sales charge for six-months, 12-months, and the life of the Fund,
respectively. By comparison, the Standard & Poor's 500-Stock Index returned
9.82 percent, and the Lipper Growth and Income Fund Index, which more closely
resembles the Fund, returned 9.51 percent. The S&P 500-Stock Index is a
broad-based, unmanaged index that reflects the general performance of the stock
market, and the 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 they represent.
Q WHAT IS YOUR OUTLOOK FOR THE FUND FOR THE NEXT SIX MONTHS?
A We believe the economic situation in Asia will have little impact on
the Fund and our investment strategy. Many stocks that are likely to be
affected by Asia's problems--those with significant international
exposure--are relatively over valued and therefore not the kind of securities
we currently hold in the Fund's portfolio. And while U.S. corporate profits
might slow down because of lower foreign sales and intense competition
from imports, this could keep U.S. economic growth at a moderate and
sustainable level. Overall, we expect stock selection to play a growing role in
investment performance, as the stock market may offer more limited
opportunities for strong returns than the broad market advances of recent
years.
In our opinion, the stock market is still highly valued, and rising stock
prices can mean more risk for investors--expensive securities have farther to
fall in a market downturn than undervalued stocks. We believe investments such
as the Prospector Fund, which seeks out undervalued securities, may be suited
for this environment.
[SIG]
Alan T. Sachtleben
Chief Investment Officer
Equity Investments
[SIG]
B. Robert Baker, Jr.
Portfolio Comanager
[SIG]
Jason Leder
Portfolio Comanager
5
<PAGE> 80
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND
PORTFOLIO OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 95.1%
CONSUMER DISTRIBUTION 1.9%
Sears, Roebuck & Co................................... 700 $31,675
-------
CONSUMER NON-DURABLES 9.2%
Dial Corp............................................. 3,150 65,559
Kimberly-Clark Corp................................... 600 29,587
Philip Morris Cos., Inc............................... 690 31,266
RJR Nabisco Holdings Corp............................. 695 26,063
-------
152,475
-------
CONSUMER SERVICES 2.0%
International Game Technology......................... 700 17,675
Time Warner, Inc...................................... 250 15,500
-------
33,175
-------
ENERGY 3.0%
ENI SPA - ADR (Italy) (a)............................. 300 17,119
Texaco, Inc........................................... 300 16,313
YPF Sociedad Anonima - ADR (Argentina), Class D (a).. 450 15,384
-------
48,816
-------
FINANCE 13.4%
AMBAC, Inc............................................ 990 45,540
American Bankers Insurance Group, Inc................. 740 33,994
Banc One Corp......................................... 300 16,294
Bear Stearns Cos., Inc................................ 489 23,227
Chase Manhattan Corp.................................. 130 14,235
CMAC Investment Corp.................................. 300 18,112
Conseco, Inc.......................................... 630 28,626
First Union Corp...................................... 200 10,250
MBIA, Inc............................................. 250 16,703
United Asset Management Corp.......................... 600 14,663
-------
221,644
-------
HEALTHCARE 9.4%
American Home Products Corp........................... 400 30,600
Bausch & Lomb, Inc.................................... 400 15,850
Lincare Holdings, Inc. (a)............................ 310 17,670
Mylan Laboratories, Inc............................... 900 18,844
PacifiCare Health Systems, Class B (a)................ 750 39,281
Pharmacia & Upjohn, Inc............................... 900 32,962
-------
155,207
-------
PRODUCER MANUFACTURING 9.4%
Bouygues Offshore SA - ADR (France) (a)............... 1,620 35,235
Cognex Corp. (a)...................................... 645 17,576
ITT Corp. (a)......................................... 200 16,575
LucasVarity PLC - ADR (United Kingdom) (a)............ 900 31,388
Tubos de Acero de Mexico SA - ADR (Mexico) (a)........ 600 12,975
Waste Management, Inc................................. 1,500 41,250
-------
154,999
-------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 81
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
RAW MATERIALS/PROCESSING INDUSTRIES 12.0%
Barrick Gold Corp.................................... 1,700 31,662
Bethlehem Steel Corp. (a)............................ 2,000 17,250
Boise Cascade Corp................................... 825 24,956
British Steel PLC - ADR (United Kingdom)............. 2,000 42,875
Georgia Pacific Group................................ 150 9,113
Homestake Mining Co.................................. 2,000 17,750
Louisiana-Pacific Corp............................... 1,500 28,500
Newmont Mining Corp.................................. 900 26,438
---------
198,544
---------
TECHNOLOGY 11.7%
3Com Corp. (a)....................................... 700 24,456
Avnet, Inc........................................... 210 13,860
Compaq Computer Corp. (a)............................ 300 16,931
Dell Computer Corp. (a).............................. 200 16,800
Gateway 2000, Inc. (a)............................... 480 15,660
Micron Technology, Inc. (a).......................... 700 18,200
Quantum Corp. (a).................................... 1,600 32,100
SunGard Data Systems, Inc. (a)....................... 1,800 55,800
---------
193,807
---------
TRANSPORTATION 2.7%
Canadian National Railway Co......................... 950 44,887
---------
UTILITIES 20.5%
Boston Edison Co..................................... 500 18,938
CMS Energy Corp...................................... 750 33,047
Endesa SA - ADR (Spain).............................. 300 5,456
Houston Industries, Inc.............................. 1,800 48,037
Idaho Power Co....................................... 1,100 41,388
Northeast Utilities.................................. 1,300 15,356
OGE Energy Corp...................................... 800 43,750
Pinnacle West Capital Corp........................... 1,000 42,375
Public Service Co. of New Mexico..................... 1,030 24,398
Texas Utilities Co................................... 1,270 52,784
U.S. West Communications Group....................... 300 13,538
---------
339,067
---------
TOTAL LONG-TERM INVESTMENTS 95.1%
(Cost $1,352,975)................................... 1,574,296
OTHER ASSETS IN EXCESS OF LIABILITIES 4.9%......... 80,291
---------
NET ASSETS 100.0%................................. 1,654,587
=========
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
7
<PAGE> 82
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments, at Market Value (Cost $1,352,975).. $ 1,574,296
Cash.................................................. 80,681
Receivables:
Expense Reimbursement from Adviser.................. 38,240
Dividends Receivable................................ 3,859
Unamortized Organizational Costs...................... 24,952
------------
Total Assets..................................... 1,722,028
------------
LIABILITIES:
Payables:
Organizational Costs................................ 40,000
Investments Purchased............................... 6,962
Deferred Compensation and Retirement Plans............ 20,479
------------
Total Liabilities................................ 67,441
------------
NET ASSETS................................................. $ 1,654,587
============
NET ASSETS CONSIST OF:
Capital............................................... $ 1,362,845
Net Unrealized Appreciation........................... 221,322
Accumulated Net Realized Gain......................... 89,355
Accumulated Undistributed Net Investment Income....... (18,935)
------------
NET ASSETS................................................. $ 1,654,587
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share
(Based on net assets of $1,447,227 and 101,137
shares of beneficial interest issued and
outstanding)........................................ $ 14.31
Maximum sales charge (5.75%* of offering price)..... 0.87
------------
Maximum offering price to public.................... $ 15.18
============
Class B Shares:
Net asset value and offering price per share
(Based on net assets of $103,680 and 7,246
shares of beneficial interest issued and
outstanding)........................................ $ 14.31
============
Class C Shares:
Net asset value and offering price per share
(Based on net assets of $103,680 and 7,246
shares of beneficial interest issued and
outstanding)........................................ $ 14.31
============
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
8
<PAGE> 83
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ....................................... $ 15,327
---------------
EXPENSES:
Accounting ...................................... 10,907
Shareholder Services ............................ 7,800
Investment Advisory Fee ......................... 5,519
Trustees' Fees and Expenses ..................... 4,814
Shareholder Reports ............................. 4,650
Audit ........................................... 4,500
Amortization of Organizational Costs ............ 4,000
Legal ........................................... 1,100
Registration .................................... 1,050
Miscellaneous ................................... 4,979
---------------
Total Expenses .............................. 49,319
Less: Fees Waived and Expenses Reimbursed
($5,519 and $34,013, respectively) .... 39,532
---------------
Net Expenses ................................ 9,787
---------------
NET INVESTMENT INCOME ............................. $ 5,540
===============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain ............................... $ 181,466
---------------
Unrealized Appreciation/Depreciation:
Beginning of the Period ....................... 158,790
End of the Period ............................. 221,322
---------------
Net Unrealized Appreciation During the Period.... 62,532
---------------
NET REALIZED AND UNREALIZED GAIN .................. $ 243,998
===============
NET INCREASE IN NET ASSETS FROM OPERATIONS ........ $ 249,538
===============
</TABLE>
See Notes to Financial Statements
9
<PAGE> 84
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1997
and the Year Ended June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1997 June 30, 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income ................................... $ 5,540 $ 5,574
Net Realized Gain ....................................... 181,466 50,199
Net Unrealized Appreciation During the Period ........... 62,532 140,918
---------------- ----------------
Change in Net Assets from Operations .................... 249,538 196,691
---------------- ----------------
Distributions from Net Investment Income:
Class A Shares ........................................ (21,935) (4,041)
Class B Shares ........................................ (1,571) (1,023)
Class C Shares ........................................ (1,571) (1,023)
---------------- ----------------
(25,077) (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)
---------------- ----------------
Total Distributions ..................................... (158,707) (21,687)
---------------- ----------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES ..... 90,831 175,004
---------------- ----------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold ............................... 0 1,000,000
Net Asset Value of Shares Issued
Through Dividend Reinvestment ......................... 158,707 4,341
---------------- ----------------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS .......... 158,707 1,004,341
---------------- ----------------
TOTAL INCREASE IN NET ASSETS ............................ 249,538 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 $(18,935) and $602,
respectively) ........................................ $ 1,654,587 $ 1,405,049
================ ================
</TABLE>
See Notes to Financial Statements
10
<PAGE> 85
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Six Months Ended Year Ended Operations) to
Class A Shares December 31, 1997 June 30, 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............................................. 0.071 0.115 0.072
Net Realized and Unrealized Gain.................................. 2.284 2.996 1.239
---------- ---------- ----------
Total from Investment Operations.................................... 2.355 3.111 1.311
---------- ---------- ----------
Less:
Distributions from Net Investment Income.......................... 0.24 0.143 0.026
Distributions from Net Realized Gain.............................. 1.279 0.780 0.000
---------- ---------- ----------
Total Distributions................................................. 1.519 0.923 0.026
---------- ---------- ----------
Net Asset Value, End of the Period.................................. $ 14.309 $ 13.473 $ 11.285
========== ========== ==========
Total Return* (b)................................................... 17.70%** 29.11% 13.10%**
Net Assets at End of the Period (In millions)....................... $ 1.4 $ 1.2 $ 0.1
Ratio of Expenses to Average Net Assets* (c)........................ 1.24% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets*............... 0.70% 1.19% 1.34%
Portfolio Turnover.................................................. 47%** 104% 69%**
Average Commission Paid Per Equity Share Traded (d)................. $ 0.0532 $ 0.0388 $ 0.0319
**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 (c)......................... 6.25% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets................ (4.31%) (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 .30% and .04% for the periods
ending on June 30, 1997 and June 30, 1996, respectively.
(d) Represents the average brokerage commissions paid per equity share traded
during the periods for trades where commissions were applicable.
See Notes to Financial Statements
11
<PAGE> 86
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Six Months Ended Year Ended Operations) to
Class B Shares December 31, 1997 June 30, 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............................................ 0.071 0.113 0.072
Net Realized and Unrealized Gain................................. 2.284 3.020 1.239
---------- ---------- ----------
Total from Investment Operations................................... 2.355 3.133 1.311
---------- ---------- ----------
Less:
Distributions from Net Investment Income......................... 0.240 0.165 0.026
Distributions from Net Realized Gain............................. 1.279 0.780 0.000
---------- ---------- ----------
Total Distributions................................................ 1.519 0.945 0.026
---------- ---------- ----------
Net Asset Value, End of the Period................................. $ 14.309 $ 13.473 $ 11.285
========== ========== ==========
Total Return* (b).................................................. 17.70%** 29.11% 13.19%**
Net Assets at End of the Period (In thousands)..................... $ 103.7 $ 88.0 $ 73.4
Ratio of Expenses to Average Net Assets* (c)....................... 1.24% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets*.............. 0.70% 0.86% 1.34%
Portfolio Turnover................................................. 47%** 104% 69%**
Average Commission Paid Per Equity Share Traded (d)................ $ 0.0532 $ 0.0388 $ 0.0319
*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 (c)........................ 6.25% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets............... (4.30%) (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 .30% and .04% for the periods
ending on June 30, 1997 and June 30, 1996, respectively.
(d) Represents the average brokerage commissions paid per equity share traded
during the periods for trades where commissions were applicable.
See Notes to Financial Statements
12
<PAGE> 87
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Six Months Ended Year Ended Operations) to
Class C Shares December 31, 1997 June 30, 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............................................. 0.071 0.113 0.072
Net Realized and Unrealized Gain on Investments................... 2.284 3.020 1.239
---------- ---------- ----------
Total from Investment Operations.................................... 2.355 3.133 1.311
---------- ---------- ----------
Less:
Distributions from Net Investment Income.......................... 0.240 0.165 0.026
Distributions from Net Realized Gain on Investments (Note 1)...... 1.279 0.780 0.000
---------- ---------- ----------
Total Distributions................................................. 1.519 0.945 0.026
---------- ---------- ----------
Net Asset Value, End of the Period.................................. $ 14.309 $ 13.473 $ 11.285
========== ========== ==========
Total Return* (b)................................................... 17.70%** 29.11% 13.19%**
Net Assets at End of the Period (In thousands)...................... $ 103.7 $ 88.0 $ 73.4
Ratio of Expenses to Average Net Assets* (c)........................ 1.24% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets*............... 0.70% 0.86% 1.34%
Portfolio Turnover.................................................. 47%** 104% 69%**
Average Commission Paid Per Equity Share Traded (d)................. $ 0.0532 $ 0.0388 $ 0.0319
*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 (c)......................... 6.25% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets................ (4.30%) (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 .30% and .04% for the periods
ending on June 30, 1997 and June 30, 1996, respectively.
(d) Represents the average brokerage commissions paid per equity share traded
during the periods for trades where commissions were applicable.
See Notes to Financial Statements
13
<PAGE> 88
VAN KAMPEN AMERICAN CAPITAL
PROSPECTOR FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Prospector Fund (the "Fund") is organized as a
series of Van Kampen American Capital 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 American Capital 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 American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") 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 VKAC 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.
At December 31, 1997, for federal income tax purposes, cost of long-term
investments is $1,346,013; the aggregate gross unrealized appreciation is
$270,454, and the aggregate gross unrealized depreciation is $42,171, resulting
in net unrealized appreciation of $228,283.
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.
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............. .70%
Next $500 million.............. .65%
Over $1 billion................ .60%
</TABLE>
For the six months ended December 31, 1997, 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 VKAC.
For the six months ended December 31, 1997, the Fund incurred expenses of
approximately $15,700 representing VKAC's cost of providing accounting and
legal services to the Fund. These services are provided by VKAC at cost. All
of this cost has been assumed by VKAC.
14
<PAGE> 89
VAN KAMPEN AMERICAN CAPITAL
PROSPECTOR FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months
ended December 31, 1997, the Fund recognized expenses of approximately $7,500,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit. All of this cost has been assumed by VKAC.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are
officers of VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. 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 December 31, 1997, VKAC 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 December 31, 1997 capital aggregated $1,212,069, $75,388 and $75,388
for classes A, B, and C, respectively. For the six months ended December 31,
1997, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
- -----------------------------------------------------
<S> <C> <C>
Sales:
Class A..................... -0- $ -0-
Class B..................... -0- -0-
Class C..................... -0- -0-
------ --------
Total Sales -0- $ -0-
====== ========
Dividend Reinvestment:
Class A..................... 9,920 $138,817
Class B..................... 711 9,945
Class C..................... 711 9,945
------ ---------
Total Dividend Reinvestments 11,342 $158,707
====== ========
</TABLE>
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:
<TABLE>
<CAPTION>
Shares Value
- -----------------------------------------------------
<S> <C> <C>
Sales:
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
====== ==========
</TABLE>
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.
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
Year of Redemption Class B Shares Class C 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 six months ended December 31, 1997, the cost of purchases and
proceeds from sales of investments, excluding short-term investments, were
$714,786 and $10,026 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.
15
<PAGE> 90
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR 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*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICING AGENT
ACCESS 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 1997, 10.67% of the dividends
taxable as ordinary income
qualified for the 70% dividends
received deduction for corporation.
* "Interested" persons of the Fund, as defined in the
Investment Company Act of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1998
All Rights Reserved.
(sm) denotes a service mark of Van Kampen American Capital
Distributors, Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund
which contains additional information on how to purchase shares, the sales
charge, and other pertinent data. After June 30, 1998, the report, if used
with prospective investors, must be accompanied by a quarterly performance
update.
<PAGE> 91
TABLE OF CONTENTS
Letter to Shareholders........................................... 1
Portfolio Management Review...................................... 3
Portfolio of Investments......................................... 6
Statement of Assets and Liabilities.............................. 8
Statement of Operations.......................................... 9
Statement of Changes in Net Assets............................... 10
Financial Highlights............................................. 11
Notes to Financial Statements.................................... 14
VALF SAR 2/98
<PAGE> 92
LETTER TO SHAREHOLDERS
February 1, 1998
Dear Shareholder,
The new year ushers in what promises to be an exciting and challenging time
for investors. The Taxpayer Relief Act of 1997 signed into law by President
Clinton in August creates many new opportunities for you and your family to take
a more active role in achieving your long-term financial goals.
Most Americans will benefit from the bill's $95 billion in tax cuts over
five years. The so-called Kiddie Credit gives parents $400 in immediate tax
relief for every child under age 17, and families will find it easier to save
for their children's college expenses through the new Education IRA. The bill
also cuts capital gains tax rates for the first time in over a decade and
loosens restrictions on tax-deductible IRA contributions. Perhaps the most
exciting feature of all is the new Roth IRA, which allows investment earnings to
grow tax free, not just tax deferred.
This year more than ever, it could be important for you to talk with your
financial adviser about how to make the tax code work to your advantage. At Van
Kampen American Capital, we have prepared a variety of publications to help you
understand your choices under the new tax legislation. And with the help of your
adviser, we'll help you locate the many benefits hidden among the changing tax
landscape.
ECONOMIC OVERVIEW
These continue to be the best of times for the U.S. economy. Growth is
strong, consumers are optimistic, unemployment is low, the budget is headed for
surplus, and our nation's currency is rising around the world.
Despite the strength in the economy, there is no indication of troublesome
inflation. In fact, the producer price index fell by 1.2 percent during the
year, the largest annual decline in wholesale prices since 1986. Inflation at
the consumer level was also virtually nonexistent, with the consumer price index
rising by only 1.7 percent during 1997. A strong dollar and significant
productivity gains helped offset inflationary pressures caused by rising wages.
After increasing short-term interest rates by 0.25 percent in March, the
Federal Reserve Board left monetary policy unchanged for the remainder of the
year. In addition to signs that the economy was slowing modestly from its
breakneck pace of early 1997, Fed policy-makers were concerned about the impact
that higher U.S. interest rates might have on the struggling economies of
Southeast Asia. Generally, higher U.S. interest rates cause the dollar to rise
relative to other currencies. With nearly all Asian currencies already down
significantly, a hike in U.S. rates would force monetary authorities in Asia to
choose between letting their currencies decline further or matching the rate
increase, thereby slowing their already-sluggish economies.
1 Continued on page two
<PAGE> 93
MARKET OVERVIEW
Bolstered by solid economic growth and low inflation, stock prices
continued their advance during the reporting period. Over the 12 months through
December, the Wilshire 5000 Index, which measures the performance of all
publicly traded U.S. companies, gained 29.17 percent. And with its 22.64 percent
advance in 1997, the Dow Jones Industrial Average (DJIA) completed its third
consecutive year of 20 percent-plus gains for the first time in the history of
the index.
But while U.S. stocks kept rising, volatility also picked up. During the
spring, stronger-than-expected economic growth and a subsequent hike in
short-term interest rates caused stock prices to fall by 10 percent. Later in
the year, investors were unnerved by the spreading economic crisis in Asia.
Between early August and late October, the DJIA fell by 16 percent before
rebounding sharply to close the reporting period near record-high territory.
Within the equity market, large stocks continued to outperform their
small-cap cousins. For the year, the Russell 1000 Index of large-cap companies
returned 30.49 percent, compared to 20.52 percent for the Russell 2000 Index of
small stocks. A wave of consolidations helped make Financial Services the
top-performing industry group. The Dow Jones Financial Index soared 48.44
percent during 1997.
OUTLOOK
We expect that the recent upheavals in Southeast Asia will have a mixed
impact on the U.S. economy and financial markets. Sales of American goods
overseas are likely to decline in coming months, and competition from relatively
inexpensive imports could pinch profit margins. However, lower currency values
in Asia will likely result in less inflation in the U.S. and a greater
likelihood of stable or falling interest rates. Such a scenario usually benefits
stock prices, and we believe that a portfolio of high-quality domestic stocks
should continue to perform well. We also anticipate that stock selection will
play a larger role in generating investment performance due to the uneven impact
of the Asian crisis on individual companies.
As we noted earlier, the Taxpayer Relief Act of 1997 provides
attractive new vehicles through which investors can save for a variety of goals,
including higher education and retirement. We encourage you to work with your
financial adviser to consider how the tax changes can work to your benefit.
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,
Don G. Powell Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Investment Advisory Corp. Investment Advisory Corp.
2
<PAGE> 94
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 six months. The team is led by James A. Gilligan and Bret W.
Stanley, portfolio managers, and Alan T. Sachtleben, chief investment officer
for equity investments. The following excerpts reflect their views on the Fund's
performance during the six-month period ended December 31, 1997.
Q WHAT WAS THE MARKET ENVIRONMENT FOR THE FUND DURING THE REPORTING PERIOD?
A Moderate economic growth and low inflation provided a very favorable
environment for equity investments and drove the stock market to record levels.
After peaking at 8259 in early August, the Dow Jones Industrial Average (DJIA)
entered several months of heightened volatility. This period culminated in
October, when the stock market became very sensitive to economic turmoil in
Southeast Asia and the DJIA dropped a record number of points in a single day.
The market rose back up to hover slightly below its all-time high by year-end.
Market leadership took several twists and turns as well. Although
investors favored blue-chip stocks early in the year, by mid-year momentum had
switched to small-capitalization stocks, which outperformed large caps in almost
every major economic sector in the third quarter. In October, uncertainty
surrounding the situation in Asia prompted investors to seek out large,
well-established companies--as a result, small stocks began to struggle again
and large stocks regained their dominant position.
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 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 two- to three-year holding period--thereby seeking to increase the
return of the Fund while potentially limiting the risk of a permanent loss of
capital.
3
<PAGE> 95
Q WHAT AREAS OF THE MARKET SUPPORTED THE FUND'S PERFORMANCE?
A The Fund benefited from our investments in retail, consumer services,
health care, and energy. In retail, investor anxiety and low valuations yielded
to positive fundamentals and propelled Federated Department Stores and Gap Inc.
to new highs. H&R Block, a tax accounting firm, has been a long-time holding
for the Fund and benefited from the proposed sale of CompuServe, an Internet
access provider. In health care, the value of our investment in Nellcor Puritan
Bennett was quickly realized when Mallinckrodt acquired the company at a
significant premium to our cost. McDermott International, an oil service and
manufacturing company, was purchased earlier in the year because of an
aggressive restructuring and senior management change. During the year, the
stock doubled as new CEO Roger Tetrault aggressively reduced the company's cost
structure. With the shares near their intrinsic value, we have significantly
reduced our position.
Q WHAT FACTORS CHALLENGED THE FUND DURING THE REPORTING PERIOD?
A A number of our holdings were negatively impacted by the economic turmoil
in Asia. We purchased Fluor, an engineering and construction services firm,
based on a 20-year valuation bottom and a restructuring announcement--a
favorable combination of factors for our value strategy. However, Fluor's Asian
exposure sent its stock price to even lower valuations. In addition, our
positions in Philips Electronics and Nokia lost much of their profits due to
the market's reaction to events in Asia, even though these companies haven't
missed their earnings targets or anticipated any shortfalls. Despite their
exposure to Southeast Asia, we continue to hold Fluor, Philips Electronics, and
Nokia because of the positive fundamentals in their non-Asian businesses and
the significant discounts to intrinsic values. Another area that suffered in
the past six months was health maintenance organizations (HMOs). HMOs have been
squeezed between accelerating costs and an inability to raise prices, and many
have underperformed the market. We continue to believe the industry is at an
inflection point, and restructurings at Aetna and PacifiCare Health Systems
should magnify the expected improvement in industry profitability. In
particular, PacifiCare hurt the Fund's performance, but the company has taken
some corrective actions that we believe will significantly increase its
profitability. Past performance does not guarantee future results.
Q HOW DID THE FUND PERFORM DURING THE PAST SIX MONTHS?
A The Fund achieved a six-month total return of 2.51 percent for Class A
shares at net asset value. The Fund generated total returns of -3.36 percent,
13.62 percent, and 20.53 percent for Class A shares reflecting the maximum sales
charge for six-months, 12-months, and the life of the Fund, respectively. By
comparison, the Standard & Poor's 500-Stock Index returned 10.55 percent, and
the Standard & Poor's Mid-Cap Index, which more closely resembles the Fund,
returned 16.66 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 commission or sales
charges that would be paid by an investor purchasing the securities or
investments they represent.
4
<PAGE> 96
Q WHAT IS YOUR OUTLOOK FOR THE FUND FOR THE NEXT SIX MONTHS?
A We believe the economic uncertainty in Southeast Asia will be a double-edged
sword for the domestic economy. On the downside, we anticipate that U.S.
corporate profits could be negatively impacted by lower foreign sales and
increased competition from imports. On the upside, a slowdown in corporate
profits could keep economic growth at a moderate and sustainable level. Also, we
expect that lower currency values in Asia will result in low price inflation in
the U.S. and stable or declining interest rates--a favorable scenario for
stocks. Overall, we expect stock selection to play a growing role in investment
performance, as the stock market may offer more limited opportunities for strong
returns than the broad market advances of recent years.
In our opinion, the stock market is still highly valued, and rising stock
prices can mean more risk for investors because expensive securities have
farther to fall in a market downturn than undervalued stocks. We believe that
investments such as the Value Fund, which seeks out undervalued securities, may
be well suited for this environment.
Alan T. Sachtleben James A. Gilligan Bret W. Stanley
Alan T. Sachtleben James A. Gilligan Bret W. Stanley
Chief Investment Officer Portfolio Manager Portfolio Manager
Equity Investments
5
<PAGE> 97
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Description Shares Market Value
- -----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 95.7%
CONSUMER DISTRIBUTION 2.9%
Federated Department Stores, Inc. (a) 290 $ 12,488
Gymboree Corp. (a) 1,170 32,029
----------
44,517
----------
CONSUMER DURABLES 2.5%
Black & Decker Corp. 1,000 39,062
----------
CONSUMER NON-DURABLES 9.2%
Nabisco Holdings Corp., Class A 870 42,140
Philip Morris Cos., Inc. 1,270 57,547
Tommy Hilfiger Corp. (a) 1,200 42,150
----------
141,837
----------
CONSUMER SERVICES 11.9%
Applebees International, Inc. 1,800 32,513
Bell & Howell Co. (a) 1,890 45,714
H & R Block, Inc. 1,360 60,945
Lone Star Steakhouse & Saloon (a) 2,480 43,400
----------
182,572
----------
ENERGY 1.7%
McDermott International, Inc. 700 25,638
----------
FINANCE 15.6%
American Bankers Insurance Group, Inc. 1,000 45,937
Amerus Life Holdings, Inc., Class A 800 29,500
Chase Manhattan Corp. 380 41,610
Conseco, Inc. 640 29,080
ESG Re Ltd. (a) 2,000 47,000
Provident Cos., Inc. 1,240 47,895
----------
241,022
----------
HEALTHCARE 11.6%
Aetna, Inc. 250 17,641
Beckman Instruments, Inc. 900 36,000
PacifiCare Health Systems, Class B (a) 1,190 62,326
Pharmacia & Upjohn, Inc. 1,200 43,950
Watson Pharmaceuticals, Inc. (a) 600 19,463
----------
179,380
----------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 98
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Description Shares Market Value
- -----------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING 16.2%
AGCO Corp. 2,200 $ 64,350
Flowserve Corp. 1,800 50,287
Fluor Corp. 850 31,769
Johnson Controls, Inc. 850 40,588
Philips Electronics N.V. - N.Y. Registered Shares 770 46,585
(Netherlands)
Waste Management, Inc. 600 16,500
-----------
250,079
-----------
RAW MATERIALS/PROCESSING INDUSTRIES 2.5%
Alumax, Inc. (a) 1,140 38,760
-----------
TECHNOLOGY 14.8%
3Com Corp. (a) 1,100 38,431
Cabletron Systems, Inc. (a) 2,000 30,000
Creative Technology Ltd. (a) 1,800 39,600
Nokia Corp. - ADR (Finland) 640 44,800
SunGard Data Systems, Inc. (a) 1,300 40,300
VLSI Technology, Inc. (a) 1,500 35,438
-----------
228,569
-----------
UTILITIES 6.8%
AT&T Corp. 500 30,625
Consolidated Edison Co. 400 16,400
GPU, Inc. 400 16,850
Notheast Utilities 2,200 25,987
PG&E Corp. 500 15,219
-----------
105,081
TOTAL INVESTMENTS 95.7% -----------
(Cost $1,374,955) 1,476,517
OTHER ASSETS IN EXCESS OF LIABILITIES 4.3% 65,800
-----------
NET ASSETS 100.0% $ 1,542,317
</TABLE> ===========
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
7
<PAGE> 99
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
ASSETS:
<S> <C>
Total Investments (Cost $1,374,955) $ 1,476,517
Cash 61,891
Dividends Receivable 2,871
Unamortized Organizational Costs 24,071
Other 924
------------
Total Assets 1,566,274
------------
LIABILITIES:
Distributor & Affiliates Payable 3,497
Trustees' Deferred Compensation and Retirement Plans 20,460
------------
Total Liabilities 23,957
------------
NET ASSETS $ 1,542,317
============
NET ASSETS CONSIST OF:
Capital $ 1,473,290
Net Unrealized Appreciation 101,562
Accumulated Net Realized Loss (14,737)
Accumulated Net Investment Loss (17,798)
------------
NET ASSETS $ 1,542,317
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$1,347,517 and 108,357 shares of beneficial interest issued and outstanding) $ 12.44
Maximum sales charge (5.75%* of offering price) 0.76
------------
Maximum offering price to public $ 13.20
============
Class B Shares:
Net asset value and offering price per share (Based on net assets of $99,369
and 7,988 shares of beneficial interest issued and outstanding) $ 12.44
============
Class C Shares:
Net asset value and offering price per share (Based on net assets of $95,431
and 7,670 shares of beneficial interest issued and outstanding) $ 12.44
============
* On sales of $50,000 or more, the sales charge will be reduced.
</TABLE>
See Notes to Financial Statements
8
<PAGE> 100
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends $ 7,455
---------
EXPENSES:
Accounting 10,909
Shareholder Services 7,800
Investment Advisory Fee 6,056
Shareholder Reports 4,650
Audit 4,500
Amortization of Organizational Costs 4,032
Trustees' Fees and Expenses 3,996
Trustees' Retirement Plan 3,228
Legal 1,099
Registration 1,050
Custody 752
Other 1,716
---------
Total Expenses 49,788
Less: Fees Waived and Expenses Reimbursed ($6,056 and $32,568, respectively) 38,624
Earnings Credits on Cash Balances 752
---------
Net Expenses 10,412
---------
NET INVESTMENT LOSS $ (2,957)
=========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 143,749
---------
Unrealized Appreciation/Depreciation:
Beginning of the Period 206,246
End of the Period 101,562
---------
Net Unrealized Depreciation During the Period (104,684)
---------
NET REALIZED AND UNREALIZED GAIN $ 39,065
=========
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 36,108
=========
</TABLE>
9
See Notes to Financial Statements
<PAGE> 101
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
AND THE YEAR ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1997 June 30, 1997
------------------- -------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss $ (2,957) $ (1,438)
Net Realized Gain 143,749 64,043
Net Unrealized Appreciation/ Depreciation During the Period (104,684) 185,690
----------- -----------
Change in Net Assets from Operations 36,108 248,295
----------- -----------
Distributions from Net Investment Income:
Class A Shares (9,412) (174)
Class B Shares (694) (111)
Class C Shares (666) (111)
----------- -----------
(10,772) (396)
----------- -----------
Distributions from Net Realized Gain:
Class A Shares (192,785) (6,330)
Class B Shares (14,211) (4,004)
Class C Shares (13,647) (4,004)
----------- -----------
(220,643) (14,338)
----------- -----------
Total Distributions (231,415) (14,734)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES (195,307) 233,561
----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold 4,998 1,000,000
Net Asset Value of Shares Issued Through Dividend Reinvestment 231,416 2,074
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 236,414 1,002,074
----------- -----------
TOTAL INCREASE IN NET ASSETS 41,107 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 $(17,798) and $(4,069), respectively) $ 1,542,317 $ 1,501,210
=========== ===========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 102
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. (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
SIX MONTHS OF INVESTMENT
ENDED YEAR ENDED OPERATIONS) TO
CLASS A SHARES DECEMBER 31, 1997 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 (0.002) (0.014) 0.018
Net Realized and Unrealized Gain 0.319 3.559 1.391
------------ ------------- -----------
Total from Investment Operations 0.317 3.545 1.409
------------ ------------- -----------
Less:
Distributions from Net Investment Income 0.103 0.017 -0-
Distributions from Net Realized Gain 2.099 0.616 -0-
------------ ------------- -----------
Total Distributions 2.202 0.633 -0-
------------ ------------- -----------
Net Asset Value, End of the Period $ 12.436 $ 14.321 $ 11.409
============ ============= ===========
Total Return * (a) 2.51%** 32.39% 14.00%**
Net Assets at End of the Period (In thousands) $ 1,347.5 $ 1,315.0 $ 117.2
Ratio of Expenses to Average Net Assets* (b) 1.29% 1.48% 1.38%
Ratio of Net Investment Income/Loss to Average Net Assets* (.37%) (.31%) 0.38%
Portfolio Turnover 61%** 85% 41%**
Average Commission Paid Per Equity Share Traded (c) $ 0.0498 $ 0.0369 $ 0.0250
*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) 6.07% 17.19% 17.57%
Ratio of Net Investment Income/Loss to Average Net Assets (5.15%) (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 .05%,.18% and .08%
for the periods ended on December 31, 1997, on June 30, 1997 and June
30, 1996, respectively.
(c) Represents the average brokerage commissions paid per equity share
traded during the period where commissions were applicable.
See Notes to Financial Statements
11
<PAGE> 103
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. (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
SIX MONTHS OF INVESTMENT
ENDED YEAR ENDED OPERATIONS) TO
CLASS B SHARES DECEMBER 31, 1997 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 (0.001) (0.017) 0.024
Net Realized and Unrealized Gain 0.316 3.567 1.386
------------ ----------- ----------
Total from Investment Operations 0.315 3.550 1.410
------------ ----------- ----------
Less:
Distributions from Net Investment Income 0.103 0.017 -0-
Distributions from Net Realized Gain 2.099 0.616 -0-
------------ ----------- ----------
Total Distributions 2.202 0.633 -0-
------------ ----------- ----------
Net Asset Value, End of the Period $ 12.440 $ 14.327 $ 11.410
============ =========== ==========
Total Return * (a) 2.44%** 32.48% 14.00%**
Net Assets at End of the Period (In thousands) $ 99.4 $ 93.1 $ 74.2
Ratio of Expenses to Average Net Assets* (b) 1.29% 1.48% 1.38%
Ratio of Net Investment Income/Loss to Average Net Assets* (.37%) (.14%) 0.44%
Portfolio Turnover 61%** 85% 41%**
Average Commission Paid Per Equity Share Traded (c) $ 0.0498 $ 0.0369 $ 0.0250
*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) 6.07% 17.19% 17.57%
Ratio of Net Investment Income/Loss to Average Net Assets (5.15%) (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 .05%,.18% and .08%
for the periods ended on December 31, 1997, on June 30, 1997 and June
30, 1996, respectively.
(c) Represents the average brokerage commissions paid per equity share
traded during the period where commissions were applicable.
See Notes to Financial Statements
12
<PAGE> 104
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. (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
SIX MONTHS OF INVESTMENT
ENDED YEAR ENDED OPERATIONS) TO
CLASS C SHARES DECEMBER 31, 1997 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 (0.002) (0.017) 0.024
Net Realized and Unrealized Gain 0.319 3.567 1.386
Total from Investment Operations 0.317 3.550 1.410
Less:
Distributions from Net Investment Income 0.103 0.017 -0-
Distributions from Net Realized Gain 2.099 0.616 -0-
Total Distributions 2.202 0.633 -0-
Net Asset Value, End of the Period $ 12.442 14.327 $ 11.410
Total Return * (a) 2.44%** 32.48% 14.00%**
Net Assets at End of the Period (In thousands) $ 95.4 $ 93.1 $ 74.2
Ratio of Expenses to Average Net Assets* (b) 1.29% 1.48% 1.38%
Ratio of Net Investment Income/Loss to Average Net Assets* (.37%) (.14%) 0.44%
Portfolio Turnover 61%** 85% 41%**
Average Commission Paid Per Equity Share Traded (c) $ 0.0498 $ 0.0369$ $ 0.0250
*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) 6.07% 17.19% 17.57%
Ratio of Net Investment Income/Loss to Average Net Assets (5.15%) (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 .05%,.18% and .08%
for the periods ended on December 31, 1997, on June 30, 1997 and June
30, 1996, respectively.
(c) Represents the average brokerage commissions paid per equity share
traded during the period where commissions were applicable.
See Notes to Financial Statements
13
<PAGE> 105
VAN KAMPEN AMERICAN CAPITAL
VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Value Fund (the "Fund") is organized as a series of
Van Kampen American Capital 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 American Capital 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 American Capital
Distributors, Inc. or its affiliates ("collectively VKAC") 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 VKAC 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.
At December 31, 1997, for federal income tax purposes, the cost of
long-term investments is $1,374,955; the aggregate gross unrealized appreciation
is $193,736 and the aggregate gross unrealized depreciation is $92,174,
resulting in net unrealized appreciation of $101,562.
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.
G. EXPENSE REDUCTIONS - During the six months ended December 31, 1997, the
Fund's custody fee was reduced by $752 as a result of credits earned on
overnight cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- -------------------------------------
<S> <C>
First $500 million .75%
Next $500 million .70%
Over $1 billion .65%
</TABLE>
For the six months ended December 31, 1997, the Fund incurred expenses
of approximately $300
14
<PAGE> 106
VAN KAMPEN AMERICAN CAPITAL
VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 (UNAUDITED)
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 VKAC.
For the six months ended December 31, 1997, the Fund incurred expenses
of approximately $15,700 representing VKAC's cost of providing accounting and
legal services to the Fund. These services are provided by VKAC at cost. All of
this cost has been assumed by VKAC.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the six months ended
December 31, 1997, the Fund recognized expenses of approximately $7,500,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit. All of this cost has been assumed by VKAC.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. 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 December 31, 1997, VKAC owned 108,357 shares of Class A, 7,988 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 December 31, 1997, capital aggregated $1,309,148, $84,841 and $79,301
for Classes A, B and C, respectively. For the six months ended December 31,
1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
------------- ----------------
<S> <C> <C>
Sales:
Class A 3 $50
Class B 269 4,948
============= ================
Total Sales 272 $4,998
============= ================
Dividend Reinvestment:
Class A 16,533 $202,198
Class B 1,219 14,905
Class C 1,170 14,313
============= ================
Total Dividend Reinvestment 18,922 $231,416
============= ================
</TABLE>
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:
<TABLE>
<CAPTION>
SHARES VALUE
------------- ----------------
<S> <C> <C>
Sales:
Class A 81,367 $1,000,000
============= ================
Dividend Reinvestment:
Class A 177 $2,074
============= ================
</TABLE>
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.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
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 period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $928,297 and $976,140, 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.
15
<PAGE> 107
VAN KAMPEN AMERICAN CAPITAL VALUE FUND
<TABLE>
<S><C>
BOARD OF TRUSTEES INVESTMENT ADVISER
J. MILES BRANAGAN VAN KAMPEN AMERICAN CAPITAL
RICHARD M. DEMARTINI* INVESTMENT ADVISORY CORP.
LINDA HUTTON HEAGY One Parkview Plaza
R. CRAIG KENNEDY Oakbrook Terrace, Illinois 60181
DENNIS J. MCDONNELL*
JACK E. NELSON DISTRIBUTOR
DON G. POWELL*
PHILIP B. ROONEY VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
FERNANDO SISTO One Parkview Plaza
WAYNE W. WHALEN* - Chairman Oakbrook Terrace, Illinois 60181
OFFICERS SHAREHOLDER SERVICING AGENT
DENNIS J. MCDONNELL* ACCESS 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*
ALAN T. SACHTLEBEN* KPMG PEAT MARWICK LLP
PAUL R. WOLKENBERG* Peat Marwick Plaza
Vice Presidents 303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the --------------------------------------------
Investment Company Act of 1940. TAX NOTICE TO CORPORATE
SHAREHOLDERS
For 1997, 6.26% of the dividends taxable as
copyright Van Kampen American Capital Distributors, Inc., 1998 ordinary income qualified for the 70%
All Rights Reserved. dividends received deduction for corporation.
SM denotes a service mark of Van Kampen American Capital --------------------------------------------
Distributors, Inc.
</TABLE>
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After June 30, 1998, the report, if used with prospective
investors, must be accompanied by a Quarterly performance update.
16
<PAGE> 108
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 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
</TABLE>
AGG SAR 2/98
<PAGE> 109
LETTER TO SHAREHOLDERS
February 1, 1998
Dear Shareholder,
The new year ushers in what
promises to be an exciting and
challenging time for investors. The
Taxpayer Relief Act of 1997 signed
into law by President Clinton in [PHOTO]
August creates many new opportunities
for you and your family to take a
more active role in achieving your
long-term financial goals. DENNIS J. MCDONNELL AND DON G. POWELL
Most Americans will benefit from
the bill's $95 billion in tax cuts
over five years. The so-called Kiddie Credit gives parents $400 in immediate tax
relief for every child under age 17, and families will find it easier to save
for their children's college expenses through the new Education IRA. The bill
also cuts capital gains tax rates for the first time in over a decade and
loosens restrictions on tax-deductible IRA contributions. Perhaps the most
exciting feature of all is the new Roth IRA, which allows investment earnings to
grow tax free, not just tax deferred.
This year more than ever, it could be important for you to talk with your
financial adviser about how to make the tax code work to your advantage. At Van
Kampen American Capital, we have prepared a variety of publications to help you
understand your choices under the new tax legislation. And with the help of your
adviser, we'll help you locate the many benefits hidden among the changing tax
landscape.
ECONOMIC OVERVIEW
These continue to be the best of times for the U.S. economy. Growth is
strong, consumers are optimistic, unemployment is low, the budget is headed for
surplus, and our nation's currency is rising around the world.
Despite the strength in the economy, there is no indication of troublesome
inflation. In fact, the producer price index fell by 1.2 percent during the
year, the largest annual decline in wholesale prices since 1986. Inflation at
the consumer level was also virtually nonexistent, with the consumer price index
rising by only 1.7 percent during 1997. A strong dollar and significant
productivity gains helped offset inflationary pressures caused by rising wages.
After increasing short-term interest rates by 0.25 percent in March, the
Federal Reserve Board left monetary policy unchanged for the remainder of the
year. In addition to signs that the economy was slowing modestly from its
breakneck pace of early 1997, Fed policy-makers were concerned about the impact
that higher U.S. interest rates might have on the struggling economies of
Southeast Asia. Generally, higher U.S. interest rates cause the dollar to rise
relative to other currencies. With nearly all Asian currencies already down
Continued on page two
1
<PAGE> 110
significantly, a hike in U.S. rates would force monetary authorities in Asia to
choose between letting their currencies decline further or matching the rate
increase, thereby slowing their already-sluggish economies.
MARKET OVERVIEW
Bolstered by solid economic growth and low inflation, stock prices continued
their advance during the reporting period. Over the 12 months through December,
the Wilshire 5000 Index, which measures the performance of all publicly traded
U.S. companies, gained 29.17 percent. And with its 22.64 percent advance in
1997, the Dow Jones Industrial Average completed its third consecutive year of
20 percent-plus gains for the first time in the history of the index.
But while U.S. stocks kept rising, volatility also picked up. During the
spring, stronger-than-expected economic growth and a subsequent hike in
short-term interest rates caused stock prices to fall by 10 percent. Later in
the year, investors were unnerved by the spreading economic crisis in Asia.
Between early August and late October, the DJIA fell by 16 percent before
rebounding sharply to close the reporting period near record-high territory.
Within the equity market, large stocks continued to outperform their
small-cap cousins. For the year, the Russell 1000 Index of large-cap companies
returned 30.49 percent, compared to 20.52 percent for the Russell 2000 Index of
small stocks. A wave of consolidations helped make Financial Services the
top-performing industry group. The Dow Jones Financial Index soared 48.44
percent during 1997.
OUTLOOK
We expect that the recent upheavals in Southeast Asia will have a mixed
impact on the U.S. economy and financial markets. Sales of American goods
overseas are likely to decline in coming months, and competition from relatively
inexpensive imports could pinch profit margins. However, lower currency values
in Asia will likely result in less inflation in the U.S. and a greater
likelihood of stable or falling interest rates. Such a scenario usually benefits
stock prices, and we believe that a portfolio of high-quality domestic stocks
should continue to perform well. We also anticipate that stock selection will
play a larger role in generating investment performance due to the uneven impact
of the Asian crisis on individual companies.
As we noted earlier, the Taxpayer Relief Act of 1997 provides attractive new
vehicles through which investors can save for a variety of goals, including
higher education and retirement. We encourage you to work with your financial
adviser to consider how the tax changes can work to your benefit.
Continued on page three
2
<PAGE> 111
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 through our diverse menu of
quality investments.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
3
<PAGE> 112
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1997
VAN KAMPEN AMERICAN CAPITAL AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV(1)... 14.70% 14.33% 14.32%
Six-month total return(2)................ 8.07% 9.33% 13.32%
One-year total return(2)................. 7.15% 7.72% 11.82%
Life-of-Fund average annual total
return(2)................................ 8.46% 9.37% 11.80%
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.
4
<PAGE> 113
GLOSSARY OF TERMS
BLUE-CHIP STOCKS: Stocks of large, well-known companies that have a long record
of growth and a reputation for quality management. 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.
MARKET CAPITALIZATION: The size of a company, as measured by the value of its
issued and outstanding shares of stock. Morningstar, Inc., 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, computed by deducting a
fund's liabilities from its total assets and dividing this amount by the number
of shares outstanding. It does not include any initial or contingent deferred
sales charge.
STANDARD AND POOR'S 500-STOCK INDEX: An index of the 500 largest, most actively
traded stocks on the New York Stock Exchange. It 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 its current
price relative to its earnings.
5
<PAGE> 114
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL AGGRESSIVE GROWTH FUND
We recently spoke to the management team of the Van Kampen American Capital
Aggressive Growth Fund about the key events and economic forces that shaped the
markets during the past six months. The team includes Gary M. Lewis, portfolio
manager, and Alan T. Sachtleben, chief investment officer for equity
investments. The following excerpts reflect their views on the Fund's
performance during the six-month period ended December 31, 1997.
Q WHAT WAS THE STOCK MARKET ENVIRONMENT FOR THE FUND DURING THE REPORTING
PERIOD?
A Moderate economic growth and low inflation provided a very favorable
environment for equity investments and drove the stock market to record
levels. After peaking at 8259 in early August, the Dow Jones Industrial
Average (DJIA) entered several months of heightened volatility. This period
culminated in October, when the stock market became very sensitive to economic
turmoil in Southeast Asia, and the DJIA dropped a record number of points in a
single day. The market rose back up to hover slightly below its all-time high by
year-end.
Market leadership took several twists and turns as well. Although investors
favored blue-chip stocks early in the year, by mid-year momentum had switched to
small-capitalization stocks, which outperformed large caps in almost every major
economic sector in the third quarter. In October, uncertainty surrounding the
situation in Asia prompted investors to seek out large, well-established
companies--as a result, small stocks began to struggle again and large stocks
regained their dominant position.
Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET
ITS OBJECTIVE?
A Our fundamental investment strategy for the Fund remains consistent: we
look for stocks with rising earnings expectations and rising valuations.
We select stocks based on a company's potential to outperform earnings
expectations--to produce a positive earnings surprise. Conversely, we sell
stocks 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 a good opportunity, rather than maintaining defined
sector allocations. In other words, we don't mandate what percentage of the
Fund's assets should be in any given industry--instead, we select the stocks
that best meet our criteria. Finally, we normally keep the portfolio fully
invested in equity investments, rather than holding a large percentage of the
Fund's assets in cash.
6
<PAGE> 115
Q WHAT SECTORS HAD THE MOST SIGNIFICANT IMPACT ON THE FUND?
A Technology and energy both drove up and pulled down the performance of the
Fund at various times during the reporting period. The situation in Asia
took a toll on the technology sector for several reasons. First, many
technology companies either sell their products overseas, manufacture products
for companies that do business overseas, or compete directly with Asian
companies--any of which would have hindered performance during the reporting
period. And second, U.S. corporate profits are expected to slow down in the wake
of the Asian crisis. When corporate profits are reduced, budgets for items such
as new technology are often reduced as well, and this bodes ill for the future
earnings of many technology companies. The Fund is moderately weighted in this
sector, given these concerns. Although we eliminated several battered
semiconductor stocks from the portfolio, including Applied Materials, other
areas of the technology sector recorded favorable returns. Compuware and Dell
Computer continue to be large positions for the Fund.
We have a substantial weighting in the energy sector, primarily due to our
focus on oil industry service providers. Currently, supply and demand in the oil
industry are in balance, but the United States is starting to deplete its
reserves. Drillers and manufacturers of land rig equipment seem to be especially
well positioned to take advantage of this environment, and most exploration
companies are in a growth cycle. A bout of profit-taking at year-end caused a
dip in stock prices, so we sold some of our holdings, including Diamond
Offshore, and trimmed Atwood Oceanics. Despite this decline, oil industry
service providers still have the strong fundamentals that propelled their stocks
throughout most of the year, and earnings estimates are favorable. We believe
that conditions are in place for a long up-cycle for this sector.
Q WHAT SPECIFIC HOLDINGS SUPPORTED THE FUND'S PERFORMANCE?
A Many of the assets we took out of the technology sector went into retail.
Our holdings here included Best Buy, which cut operating costs and
recently enjoyed an earnings surprise. Stage Stores is an attractive
holding--it is an upscale department store chain that targets rural markets,
where competition is minimal and demand is high. It's been a profitable niche
for Stage Stores, and its stock price has risen over 50 percent in the past six
months. Finally, we've been impressed by the fast growth of smaller grocery
store chains, and Wild Oats Markets fits into this category.
Health care has offered some impressive opportunities as well. Guidant and
Arterial Vascular Engineering are two of the world's leading manufacturers of
stents, which are devices used in heart bypass surgery. These stocks advanced
steadily during the reporting period. Also, we've seen solid growth from
Safeskin, a manufacturer of latex gloves used throughout the health-care
industry--its stock price has appreciated more than 90 percent in the past six
months. Finally, we increased our position in HBO & Co., a company that
specializes in information systems and technology for the healthcare field. For
additional
7
<PAGE> 116
Fund portfolio highlights, please refer to page nine. There is no guarantee that
these stocks will perform as favorably in the future.
Q HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS?
A The Fund achieved a six-month total return of 14.70 percent(1) (Class A
shares at net asset value) as of December 31, 1997. By comparison, the
Standard & Poor's 500-Stock Index returned 9.82 percent, and the Russell
2000-Stock Index, which more closely resembles the Fund, returned 11.04 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.
Keep in mind that these indices are unmanaged statistical composites that do
not include any commissions, fees or sales charges that would be paid by an
investor purchasing the securities or investments they represent. Please refer
to the chart on page four for additional Fund performance results.
Q WHAT IS YOUR OUTLOOK FOR THE FUND FOR THE NEXT SIX MONTHS?
A We believe the economic uncertainty in Southeast Asia will be a
double-edged sword for the domestic economy and stock market. On the
downside, we anticipate that U.S. corporate profits could be negatively
impacted by lower foreign sales and increased competition from imports. On the
upside, a slowdown in corporate profits could keep economic growth at a moderate
and sustainable level. Also, we expect that lower currency values in Asia will
result in low price inflation in the U.S. and stable or declining interest
rates--a favorable scenario for stocks.
Although small-cap stocks have outperformed large caps over the long term,
the entire small-cap universe has been challenged in the past six months.
However, we believe that small caps are positioned for a rebound, albeit a
gradual and perhaps volatile one. Small caps typically are more expensive than
large-cap stocks on a relative basis, but currently their valuations are at the
low end of their historical range. In the past, such an environment has preceded
a bounce-back in small-company stock prices. We anticipate that stock selection
will play a growing role in investment performance, as the stock market may
offer more limited opportunities for strong returns than the broad market
advances of recent years.
[SIG]
Alan T. Sachtleben
Chief Investment Officer
Equity Investments
[SIG]
Gary M. Lewis
Portfolio Manager
Please see footnotes on page four
8
<PAGE> 117
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AMERICAN CAPITAL AGGRESSIVE GROWTH FUND
TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1997 JUNE 30, 1997
<S> <C> <C>
Dell Computer Corp. ....... 2.8%....... 4.2%
Suiza Foods Corp. ......... 2.0%....... N/A
American Disposal Services,
Inc. ................... 1.6%....... N/A
Arterial Vascular
Engineering, Inc. ...... 1.6%....... N/A
Compuware Corp. ........... 1.4%....... 2.1%
Applied Graphics
Technologies, Inc. ..... 1.3%....... 0.5%
HBO & Co. ................. 1.3%....... N/A
Safeskin Corp. ............ 1.3%....... N/A
Guidant Corp. ............. 1.2%....... 1.4%
Clear Channel
Communications, Inc. ... 1.2%....... 1.2%
</TABLE>
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1997
<S> <C> <C> <C>
Technology ................ 29%........ Technology ................ 35%........
Consumer Distribution ..... 14%........ Consumer Distribution ..... 9%........
Consumer Services ......... 14%........ Consumer Services ......... 10%........
Health Care ............... 13%........ Health Care ............... 10%........
Energy .................... 10%........ Energy .................... 10%........
</TABLE>
9
<PAGE> 118
PORTFOLIO OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 96.2%
CONSUMER DISTRIBUTION 13.9%
Abacus Direct Corp. (a)..................................... 60,000 $ 2,460,000
Abercrombie & Fitch Co., Class A (a)........................ 50,000 1,562,500
American Eagle Outfitters, Inc. (a)......................... 50,000 1,743,750
AmeriCredit Corp. (a)....................................... 40,000 1,107,500
Barnes & Noble, Inc. (a).................................... 40,000 1,335,000
Best Buy Co., Inc. (a)...................................... 60,000 2,212,500
CompUSA, Inc. (a)........................................... 70,000 2,170,000
Consolidated Stores Corp. (a)............................... 25,000 1,098,438
General Nutrition Cos., Inc. (a)............................ 65,000 2,210,000
Herman Miller, Inc.......................................... 25,000 1,364,062
Insight Enterprises, Inc. (a)............................... 60,000 2,205,000
Jacor Communications, Inc., Class A (a)..................... 30,000 1,593,750
Maximus, Inc. (a)........................................... 26,300 636,131
Party City Corp. (a)........................................ 60,000 1,935,000
Proffitt's, Inc. (a)........................................ 80,000 2,275,000
Ross Stores, Inc............................................ 30,000 1,091,250
Stage Stores, Inc. (a)...................................... 70,000 2,616,250
The Earthgrains Co.......................................... 40,000 1,880,000
Wild Oats Markets, Inc. (a)................................. 35,000 1,262,188
------------
32,758,319
------------
CONSUMER DURABLES 0.7%
Windmere-Durable Holdings, Inc. (a)......................... 80,000 1,805,000
------------
CONSUMER NON-DURABLES 5.3%
Action Performance Cos., Inc. (a)........................... 35,000 1,325,625
Canandaigua Brands, Inc., Class A (a)....................... 40,000 2,215,000
Interstate Bakeries Corp.................................... 50,000 1,868,750
Linens 'N Things, Inc. (a).................................. 35,000 1,526,875
Suiza Foods Corp. (a)....................................... 76,500 4,556,531
Tefron, Ltd. (a)............................................ 41,000 943,000
------------
12,435,781
------------
CONSUMER SERVICES 13.6%
American Disposal Services, Inc. (a)........................ 100,000 3,650,000
Bright Horizons, Inc. (a)................................... 16,900 316,875
Capstar Hotel Co. (a)....................................... 60,000 2,058,750
Caribiner International, Inc. (a)........................... 60,000 2,670,000
</TABLE>
See Notes to Financial Statements
10
<PAGE> 119
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
Chancellor Media Corp. (a).................................. 15,000 $ 1,119,375
Cinar Films, Inc., Class B (a).............................. 21,000 816,375
CKE Restaurants, Inc........................................ 50,000 2,106,250
Clear Channel Communications, Inc. (a)...................... 35,000 2,780,312
Consolidated Graphics, Inc. (a)............................. 50,000 2,331,250
Heftel Broadcasting Corp., Class A (a)...................... 40,000 1,870,000
Mail-Well, Inc. (a)......................................... 60,000 2,430,000
Medialink Worldwide, Inc. (a)............................... 65,000 877,500
Outdoor Systems, Inc. (a)................................... 35,000 1,343,125
Romac International, Inc. (a)............................... 60,000 1,466,250
Snyder Communications, Inc. (a)............................. 35,000 1,277,500
Staffmark, Inc. (a)......................................... 60,000 1,897,500
Valassis Communications, Inc. (a)........................... 50,000 1,850,000
Whittman-Hart, Inc. (a)..................................... 35,000 1,198,750
------------
32,059,812
------------
ENERGY 9.4%
Cliffs Drilling Co. (a)..................................... 15,000 748,125
Coflexip SA - ADR (France) (a).............................. 25,000 1,387,500
Cooper Cameron Corp. (a).................................... 36,000 2,196,000
Dril-Quip, Inc. (a)......................................... 6,500 228,313
ENSCO International, Inc.................................... 30,000 1,005,000
EVI, Inc. (a)............................................... 40,000 2,070,000
Friede Goldman International, Inc. (a)...................... 69,800 2,085,275
Grey Wolf, Inc. (a)......................................... 125,000 671,875
IRI International Corp. (a)................................. 75,000 1,050,000
Key Energy Group, Inc. (a).................................. 50,000 1,084,375
Marine Drilling Cos., Inc. (a).............................. 45,000 933,750
Mitcham Industries, Inc. (a)................................ 40,000 730,000
Nabors Industries, Inc. (a)................................. 30,000 943,125
National Oilwell, Inc. (a).................................. 60,000 2,051,250
Patterson Energy, Inc. (a).................................. 50,000 1,934,375
Stolt Comex Seaway S.A. (a)................................. 25,000 1,250,000
Varco International, Inc. (a)............................... 80,000 1,715,000
------------
22,083,963
============
</TABLE>
See Notes to Financial Statements
11
<PAGE> 120
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE 5.1%
American Capital Strategies, Ltd. (a)....................... 25,000 $ 453,125
Bank United Corp., Class A.................................. 25,000 1,223,437
Capital One Financial Corp.................................. 20,000 1,083,750
Conseco, Inc................................................ 25,000 1,135,938
Fidelity National Financial, Inc............................ 35,000 1,089,375
First Alliance Corp. (a).................................... 45,000 826,875
Imperial Bancorp (a)........................................ 30,000 1,479,375
Imperial Credit Commercial Mortgage Investment Corp. (a).... 125,000 1,828,125
Providian Financial Corp.................................... 40,000 1,807,500
Sirrom Capital Corp......................................... 20,000 1,042,500
------------
11,970,000
------------
HEALTHCARE 12.4%
Advance Paradigm, Inc. (a).................................. 40,000 1,270,000
Arterial Vascular Engineering, Inc. (a)..................... 55,000 3,575,000
Cooper Cos., Inc. (a)....................................... 45,000 1,839,375
Dura Pharmaceuticals, Inc. (a).............................. 25,000 1,146,875
ESC Medical Systems, Ltd. (a)............................... 60,000 2,325,000
Guidant Corp................................................ 45,000 2,801,250
HBO & Co.................................................... 60,000 2,880,000
Medical Manager Corp. (a)................................... 60,000 1,080,000
Medicis Pharmaceutical Corp., Class A (a)................... 33,562 1,715,857
MedQuist, Inc. (a).......................................... 50,000 1,737,500
Parexel International Corp. (a)............................. 40,000 1,480,000
Renal Care Group, Inc. (a).................................. 30,000 960,000
Rexall Sundown, Inc. (a).................................... 60,000 1,811,250
Sunrise Assisted Living, Inc. (a)........................... 30,000 1,293,750
Theragenics Corp. (a)....................................... 28,000 1,008,000
Total Renal Care Holdings, Inc. (a)......................... 83,333 2,291,658
------------
29,215,515
------------
PRODUCER MANUFACTURING 3.0%
Allied Waste Industries, Inc. (a)........................... 75,000 1,748,437
Casella Waste Systems, Inc., Class A (a).................... 2,500 65,938
Newpark Resources, Inc. (a)................................. 120,000 2,100,000
SIPEX Corp. (a)............................................. 60,000 1,815,000
The Shaw Group, Inc. (a).................................... 56,000 1,288,000
------------
7,017,375
============
</TABLE>
See Notes to Financial Statements
12
<PAGE> 121
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
RAW MATERIALS/PROCESSING INDUSTRIES 1.6%
Maverick Tube Corp. (a)..................................... 40,000 $ 1,012,500
Safeskin Corp. (a).......................................... 50,000 2,837,500
------------
3,850,000
------------
TECHNOLOGY 27.8%
Advantage Learning Systems, Inc. (a)........................ 50,000 1,068,750
Analysts International Corp................................. 38,000 1,311,000
Applied Graphics Technologies, Inc. (a)..................... 55,000 2,928,750
Aspect Development, Inc. (a)................................ 25,000 1,300,000
Barra, Inc. (a)............................................. 22,500 542,812
BMC Software, Inc. (a)...................................... 30,000 1,968,750
CBT Group PLC - ADR (Ireland) (a)........................... 25,000 2,053,125
Check Point Software Technologies, Ltd. (a)................. 28,000 1,141,000
Citrix Systems, Inc. (a).................................... 30,000 2,280,000
Computer Learning Centers, Inc. (a)......................... 20,000 1,225,000
Compuware Corp. (a)......................................... 100,000 3,200,000
Concord Communications, Inc. (a)............................ 29,700 616,275
Daou Systems, Inc. (a)...................................... 40,000 1,250,000
Dell Computer Corp. (a)..................................... 75,000 6,300,000
Digital Lightwave, Inc. (a)................................. 50,000 656,250
EFTC Corp. (a).............................................. 80,000 1,300,000
EMC Corp. (a)............................................... 70,000 1,920,625
Engineering Animation, Inc. (a)............................. 20,000 920,000
International Telecommunication Data Systems, Inc. (a)...... 4,500 144,000
J.D. Edwards & Co. (a)...................................... 40,000 1,180,000
Keane, Inc. (a)............................................. 40,000 1,625,000
Legato Systems, Inc. (a).................................... 30,000 1,320,000
Manugistics Group, Inc. (a)................................. 30,000 1,338,750
Mastech Corp. (a)........................................... 70,000 2,222,500
MICROS Systems, Inc. (a).................................... 24,000 1,080,000
Network Appliance, Inc. (a)................................. 50,000 1,775,000
Peoplesoft, Inc. (a)........................................ 40,000 1,560,000
QuadraMed Corp. (a)......................................... 75,000 2,062,500
Sapient Corp. (a)........................................... 21,000 1,286,250
Saville Systems PLC - ADR (Ireland) (a)..................... 40,000 1,660,000
Siebel Systems, Inc. (a).................................... 30,000 1,254,375
Systems & Computer Technology Corp. (a)..................... 24,000 1,191,000
</TABLE>
See Notes to Financial Statements
13
<PAGE> 122
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Uniphase Corp. (a).......................................... 35,000 $ 1,448,125
Veritas DGC, Inc. (a)....................................... 35,000 1,382,500
VERITAS Software Corp. (a).................................. 40,000 2,040,000
Visio Corp. (a)............................................. 40,000 1,535,000
Vitesse Semiconductor Corp. (a)............................. 30,000 1,132,500
Waters Corp. (a)............................................ 50,000 1,881,250
Yahoo!, Inc. (a)............................................ 40,000 2,770,000
Yurie Systems, Inc. (a)..................................... 80,000 1,615,000
------------
65,486,087
------------
TRANSPORTATION 1.6%
Airborne Freight Corp....................................... 35,000 2,174,375
Halter Marine Group, Inc. (a)............................... 60,000 1,732,500
------------
3,906,875
------------
UTILITIES 1.8%
AES Corp. (a)............................................... 40,000 1,865,000
AirTouch Communications, Inc. (a)........................... 60,000 2,493,750
------------
4,358,750
------------
TOTAL LONG-TERM INVESTMENTS 96.2%
(Cost $180,354,686)................................................ 226,947,477
------------
REPURCHASE AGREEMENT 4.4%
BA Securities ($10,305,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 12/31/97, to be sold
on 01/02/98 at $10,308,721)
(Cost $10,305,000)............................................... 10,305,000
------------
TOTAL INVESTMENTS 100.6%
(Cost $190,659,686)................................................ 237,252,477
LIABILITIES IN EXCESS OF OTHER ASSETS (0.6%)........................ (1,482,451)
------------
NET ASSETS 100.0%................................................... $235,770,026
-----------
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
14
<PAGE> 123
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $190,659,686)....................... $237,252,477
Cash........................................................ 876
Receivables:
Investments Sold.......................................... 2,433,555
Fund Shares Sold.......................................... 1,711,199
Dividends................................................. 24,825
Unamortized Organizational Costs............................ 71,688
------------
Total Assets.......................................... 241,494,620
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 4,566,639
Fund Shares Repurchased................................... 749,399
Distributor and Affiliates................................ 261,856
Investment Advisory Fee................................... 50,949
Accrued Expenses............................................ 48,464
Trustees' Deferred Compensation and Retirement Plans........ 47,287
------------
Total Liabilities..................................... 5,724,594
------------
NET ASSETS.................................................. $235,770,026
============
NET ASSETS CONSIST OF:
Capital..................................................... $197,493,815
Net Unrealized Appreciation................................. 46,592,791
Accumulated Net Investment Loss............................. (1,618,518)
Accumulated Net Realized Loss............................... (6,698,062)
------------
NET ASSETS.................................................. $235,770,026
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $103,271,485 and 9,066,096 shares of
beneficial interest issued and outstanding)............. $ 11.39
Maximum sales charge (5.75%* of offering price)......... .69
------------
Maximum offering price to public........................ $ 12.08
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $119,558,005 and 10,622,816 shares of
beneficial interest issued and outstanding)............. $ 11.25
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $12,940,536 and 1,149,255 shares of
beneficial interest issued and outstanding)............. $ 11.26
============
*On sales of $50,000 or more, the sales charge will be
reduced.
</TABLE>
See Notes to Financial Statements
15
<PAGE> 124
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 284,608
Dividends................................................... 90,802
------------
Total Income............................................ 375,410
------------
EXPENSES:
Investment Advisory Fee..................................... 858,021
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $126,015, $575,442 and $64,479,
respectively)............................................. 765,936
Shareholder Services........................................ 549,434
Trustees' Fees and Expenses................................. 15,512
Amortization of Organizational Costs........................ 10,586
Legal....................................................... 9,557
Custody..................................................... 875
Other....................................................... 155,309
------------
Total Expenses.......................................... 2,365,230
Less Fees Deferred...................................... 406,180
------------
Net Expenses............................................ 1,959,050
------------
NET INVESTMENT LOSS......................................... $ (1,583,640)
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 20,042,277
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 39,121,376
End of the Period......................................... 46,592,791
------------
Net Unrealized Appreciation During the Period............... 7,471,415
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 27,513,692
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 25,930,052
============
</TABLE>
See Notes to Financial Statements
16
<PAGE> 125
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1997 and the Year Ended
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1997 June 30, 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss................................ $ (1,583,640) $ (1,683,612)
Net Realized Gain/Loss............................. 20,042,277 (25,868,909)
Net Unrealized Appreciation During the Period...... 7,471,415 39,073,042
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES....................................... 25,930,052 11,520,521
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.......................... 95,455,248 183,003,605
Cost of Shares Repurchased......................... (74,643,176) (65,305,867)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS..................................... 20,812,072 117,697,738
------------ ------------
TOTAL INCREASE IN NET ASSETS....................... 46,742,124 129,218,259
NET ASSETS:
Beginning of the Period............................ 189,027,902 59,809,643
------------ ------------
End of the Period (Including accumulated net
investment loss of $1,618,518 and $34,878,
respectively).................................... $235,770,026 $189,027,902
============ ============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 126
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 29, 1996
(Commencement
of Investment
Six Months Ended Year Ended Operations) to
Class A Shares December 31, 1997 June 30, 1997 June 30, 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period................................. $ 9.948 $ 9.118 $9.430
------- ------- ------
Net Investment Loss.................... (.055) (.065) (.002)
Net Realized and Unrealized
Gain/Loss............................ 1.498 .895 (.310)
------- ------- ------
Total from Investment Operations......... 1.443 .830 (.312)
------- ------- ------
Net Asset Value, End of the Period....... $11.391 $ 9.948 $9.118
======= ======= ======
Total Return (a)......................... 14.70%** 9.10% (3.29%)**
Net Assets at End of the Period (In
millions).............................. $103.3 $ 84.0 $30.3
Ratio of Expenses to Average Net
Assets*................................ 1.29% 1.30% 1.29%
Ratio of Net Investment Loss to Average
Net Assets*............................ (.96%) (.81%) (.50%)
Portfolio Turnover....................... 84%** 186% 4%**
Average Commission Paid Per Equity Share
Traded (b)............................. $ .0611 $ .0568 $.0310
</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.
(b) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable.
* If certain expenses had not been assumed by VKAC, 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................................. 1.64% 1.61% 2.05%
Ratio of Net Investment Loss to Average
Net Assets............................. (1.31%) (1.12%) (1.25%)
</TABLE>
**Non-Annualized
See Notes to Financial Statements
18
<PAGE> 127
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the
Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 29, 1996
(Commencement
of Investment
Six Months Ended Year Ended Operations) to
Class B Shares December 31, 1997 June 30, 1997 June 30, 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period................................ $ 9.867 $ 9.112 $9.430
------- ------- ------
Net Investment Loss................... (.090) (.105) (.006)
Net Realized and Unrealized
Gain/Loss........................... 1.477 .860 (.312)
------- ------- ------
Total from Investment Operations........ 1.387 .755 (.318)
------- ------- ------
Net Asset Value, End of the Period...... $11.254 $ 9.867 $9.112
======= ======= ======
Total Return (a)........................ 14.33%** 8.34% (3.39%)**
Net Assets at End of the Period (In
millions)............................. $119.6 $ 94.2 $ 25.5
Ratio of Expenses to Average Net
Assets*............................... 2.05% 2.05% 2.06%
Ratio of Net Investment Loss to Average
Net Assets*........................... (1.72%) (1.55%) (1.28%)
Portfolio Turnover...................... 84%** 186% 4%**
Average Commission Paid Per Equity Share
Traded (b)............................ $ .0611 $ .0568 $.0310
</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.
(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable.
* If certain expenses had not been assumed by VKAC, 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................................ 2.40% 2.35% 2.81%
Ratio of Net Investment Loss to Average
Net Assets............................ (2.07%) (1.86%) (2.04%)
</TABLE>
**Non-Annualized
See Notes to Financial Statements
19
<PAGE> 128
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 29, 1996
(Commencement
of Investment
Six Months Ended Year Ended Operations) to
Class C Shares December 31, 1997 June 30, 1997 June 30, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................... $ 9.869 $9.113 $ 9.430
------- ------ -------
Net Investment Loss.................. (.095) (.103) (.006)
Net Realized and Unrealized
Gain/Loss.......................... 1.486 .859 (.311)
------- ------ -------
Total from Investment Operations....... 1.391 .756 (.317)
------- ------ -------
Net Asset Value, End of the Period..... $11.260 $9.869 $ 9.113
======= ====== =======
Total Return (a)....................... 14.32%** 8.34% (3.39%)**
Net Assets at End of the Period (In
millions)............................ $12.9 $ 10.8 $3.9
Ratio of Expenses to Average Net
Assets*.............................. 2.04% 2.05% 2.05%
Ratio of Net Investment Loss to Average
Net Assets*.......................... (1.72%) (1.54%) (1.28%)
Portfolio Turnover..................... 84%** 186% 4%**
Average Commission Paid Per Equity
Share Traded (b)..................... $ .0611 $.0568 $ .0310
</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.
(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable.
* If certain expenses had not been assumed by VKAC, 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............................... 2.40% 2.35% 2.81%
Ratio of Net Investment Loss to Average
Net Assets........................... (2.07%) (1.85%) (2.04%)
</TABLE>
**Non-Annualized
See Notes to Financial Statements
20
<PAGE> 129
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Aggressive Growth Fund (the "Fund") is organized as
a separate diversified series of Van Kampen American Capital 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 American Capital 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> 130
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
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 American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") 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 VKAC 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.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset these losses against any future realized capital
gains. At June 30, 1997, the Fund had an accumulated capital loss carryforward
for tax purposes of $6,166,547 which will expire on June 30, 2005.
At December 31, 1997, for federal income tax purposes, cost of long- and
short-term investments is $190,659,686; the aggregate gross unrealized
appreciation is $53,324,902 and the aggregate gross unrealized depreciation is
$6,732,111 resulting in net unrealized appreciation of $46,592,791.
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.
22
<PAGE> 131
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $500 million...................................... .75 of 1%
Next $500 million....................................... .70 of 1%
Over $1 billion......................................... .65 of 1%
</TABLE>
For the six months ended December 31, 1997, the Fund recognized expenses of
approximately $8,800 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended December 31, 1997, the Fund recognized expenses of
approximately $31,700, representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting
services to the Fund. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as the
shareholder servicing agent for the Fund. For the six months ended December 31,
1997, the Fund recognized expenses of approximately $413,500, representing
ACCESS' cost of providing transfer agency and shareholder services plus a
profit.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. 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 December 31, 1997, VKAC 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> 132
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
At December 31, 1997, capital aggregated $85,649,766, $100,900,885 and
$10,943,164 for Classes A, B, and C, respectively. For the period ended December
31, 1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 5,813,366 $ 67,741,269
Class B.................................... 2,145,577 24,688,031
Class C.................................... 259,837 3,025,948
----------- ------------
Total Sales.................................. 8,218,780 $ 95,455,248
=========== ============
Repurchases:
Class A.................................... (5,187,564) $(60,220,184)
Class B.................................... (1,071,728) (12,027,097)
Class C.................................... (208,839) (2,395,895)
----------- ------------
Total Repurchases............................ (6,468,131) $(74,643,176)
=========== ============
</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). 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> 133
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<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 six months ended December 31, 1997, VKAC, as Distributor for the
Fund, received commissions on sales of the Fund's Class A shares of
approximately $70,500 and CDSC on redeemed shares of approximately $177,800.
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 $198,286,460 and $181,495,974,
respectively.
5. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the six months ended December 31, 1997, are payments retained by VKAC of
approximately $467,200.
25
<PAGE> 134
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International/Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
VKAC Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS International Magnum
MS Latin American
FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
MS Global Fixed Income
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Limited Maturity Government
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC 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 American Capital or Morgan Stanley fund
prospectus or to receive additional fund information, choose from one of the
following:
- visit our web site at www.vkac.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.vkac.com and selecting Investors' Place
26
<PAGE> 135
VAN KAMPEN AMERICAN CAPITAL 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*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICING AGENT
ACCESS 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 American Capital Distributors, Inc., 1998 All rights reserved.
SM denotes a service mark of Van Kampen American Capital Distributors,
Inc. This report is submitted for the general information of the
shareholders of the Fund. It is not authorized for distribution to
prospective investors unless it has been preceded or is accompanied by an
effective prospectus of the Fund which contains additional information on
how to purchase shares, the sales charge, and other pertinent data. After
June 30, 1998 the report, if used with prospective investors, must be
accompanied by a quarterly performance update.
27
<PAGE> 136
VAN KAMPEN AMERICAN CAPITAL AGGRESSIVE GROWTH FUND
THIS PAGE INTENTIONALLY LEFT BLANK
28
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> UTILITY CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 118,164,416<F1>
<INVESTMENTS-AT-VALUE> 151,101,325<F1>
<RECEIVABLES> 1,416,986<F1>
<ASSETS-OTHER> 17,140<F1>
<OTHER-ITEMS-ASSETS> 5,088<F1>
<TOTAL-ASSETS> 152,540,539<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 702,863<F1>
<TOTAL-LIABILITIES> 702,863<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52,668,465
<SHARES-COMMON-STOCK> 3,656,931
<SHARES-COMMON-PRIOR> 3,192,071
<ACCUMULATED-NII-CURRENT> 213,377<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (10,679,302)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 32,936,909<F1>
<NET-ASSETS> 60,745,006
<DIVIDEND-INCOME> 2,065,779<F1>
<INTEREST-INCOME> 675,835<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,314,837)<F1>
<NET-INVESTMENT-INCOME> 1,426,777<F1>
<REALIZED-GAINS-CURRENT> 2,604,122<F1>
<APPREC-INCREASE-CURRENT> 20,029,875<F1>
<NET-CHANGE-FROM-OPS> 24,060,774<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (729,396)
<DISTRIBUTIONS-OF-GAINS> (8,296,668)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,001,299
<NUMBER-OF-SHARES-REDEEMED> (1,038,977)
<SHARES-REINVESTED> 502,538
<NET-CHANGE-IN-ASSETS> 8,263,205
<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> 451,812<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,314,837<F1>
<AVERAGE-NET-ASSETS> 52,401,660
<PER-SHARE-NAV-BEGIN> 16.441
<PER-SHARE-NII> 0.217
<PER-SHARE-GAIN-APPREC> 2.835
<PER-SHARE-DIVIDEND> (0.240)
<PER-SHARE-DISTRIBUTIONS> (2.642)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.611
<EXPENSE-RATIO> 1.42
<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> 022
<NAME> UTILITY CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 118,164,416<F1>
<INVESTMENTS-AT-VALUE> 151,101,325<F1>
<RECEIVABLES> 1,416,986<F1>
<ASSETS-OTHER> 17,140<F1>
<OTHER-ITEMS-ASSETS> 5,088<F1>
<TOTAL-ASSETS> 152,540,539<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 702,863<F1>
<TOTAL-LIABILITIES> 702,863<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 72,260,347
<SHARES-COMMON-STOCK> 5,169,188
<SHARES-COMMON-PRIOR> 5,067,268
<ACCUMULATED-NII-CURRENT> 213,377<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (10,679,302)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 32,936,909<F1>
<NET-ASSETS> 85,780,379
<DIVIDEND-INCOME> 2,065,779<F1>
<INTEREST-INCOME> 675,835<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,314,837)<F1>
<NET-INVESTMENT-INCOME> 1,426,777<F1>
<REALIZED-GAINS-CURRENT> 2,604,122<F1>
<APPREC-INCREASE-CURRENT> 20,029,875<F1>
<NET-CHANGE-FROM-OPS> 24,060,774<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (816,163)
<DISTRIBUTIONS-OF-GAINS> (11,705,218)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 201,367
<NUMBER-OF-SHARES-REDEEMED> (761,271)
<SHARES-REINVESTED> 661,824
<NET-CHANGE-IN-ASSETS> 2,504,888
<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> 451,812<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,314,837<F1>
<AVERAGE-NET-ASSETS> 80,609,190
<PER-SHARE-NAV-BEGIN> 16.434
<PER-SHARE-NII> 0.161
<PER-SHARE-GAIN-APPREC> 2.821
<PER-SHARE-DIVIDEND> (0.180)
<PER-SHARE-DISTRIBUTIONS> (2.642)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.594
<EXPENSE-RATIO> 2.18
<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> 023
<NAME> UTILITY CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 118,164,416<F1>
<INVESTMENTS-AT-VALUE> 151,101,325<F1>
<RECEIVABLES> 1,416,986<F1>
<ASSETS-OTHER> 17,140<F1>
<OTHER-ITEMS-ASSETS> 5,088<F1>
<TOTAL-ASSETS> 152,540,539<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 702,863<F1>
<TOTAL-LIABILITIES> 702,863<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,437,880
<SHARES-COMMON-STOCK> 320,369
<SHARES-COMMON-PRIOR> 299,404
<ACCUMULATED-NII-CURRENT> 213,377<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (10,679,302)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 32,936,909<F1>
<NET-ASSETS> 5,312,291
<DIVIDEND-INCOME> 2,065,779<F1>
<INTEREST-INCOME> 675,835<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,314,837)<F1>
<NET-INVESTMENT-INCOME> 1,426,777<F1>
<REALIZED-GAINS-CURRENT> 2,604,122<F1>
<APPREC-INCREASE-CURRENT> 20,029,875<F1>
<NET-CHANGE-FROM-OPS> 24,060,774<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (50,795)
<DISTRIBUTIONS-OF-GAINS> (745,987)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,559
<NUMBER-OF-SHARES-REDEEMED> (33,792)
<SHARES-REINVESTED> 31,198
<NET-CHANGE-IN-ASSETS> 394,252
<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> 451,812<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,314,837<F1>
<AVERAGE-NET-ASSETS> 4,945,915
<PER-SHARE-NAV-BEGIN> 16.426
<PER-SHARE-NII> 0.159
<PER-SHARE-GAIN-APPREC> 2.819
<PER-SHARE-DIVIDEND> (0.180)
<PER-SHARE-DISTRIBUTIONS> (2.642)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.582
<EXPENSE-RATIO> 2.18
<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> 041
<NAME> GREAT AMERICAN COS. A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,303,282<F1>
<INVESTMENTS-AT-VALUE> 1,491,034<F1>
<RECEIVABLES> 13,363<F1>
<ASSETS-OTHER> 24,071<F1>
<OTHER-ITEMS-ASSETS> 111,398<F1>
<TOTAL-ASSETS> 1,639,866<F1>
<PAYABLE-FOR-SECURITIES> 14,694<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 21,357<F1>
<TOTAL-LIABILITIES> 36,051<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,236,456
<SHARES-COMMON-STOCK> 100,925
<SHARES-COMMON-PRIOR> 88,566
<ACCUMULATED-NII-CURRENT> (18,472)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 37,916<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 187,752<F1>
<NET-ASSETS> 1,393,058
<DIVIDEND-INCOME> 8,593<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (9,638)<F1>
<NET-INVESTMENT-INCOME> (1,045)<F1>
<REALIZED-GAINS-CURRENT> 163,717<F1>
<APPREC-INCREASE-CURRENT> (10,375)<F1>
<NET-CHANGE-FROM-OPS> 152,297<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> 132,284
<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> 5,438<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 62,116<F1>
<AVERAGE-NET-ASSETS> 1,339,424
<PER-SHARE-NAV-BEGIN> 14.235
<PER-SHARE-NII> 0.011
<PER-SHARE-GAIN-APPREC> 1.439
<PER-SHARE-DIVIDEND> (0.142)
<PER-SHARE-DISTRIBUTIONS> (1.740)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.803
<EXPENSE-RATIO> 1.50
<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> 042
<NAME> GREAT AMERICAN COS. B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,303,282<F1>
<INVESTMENTS-AT-VALUE> 1,491,034<F1>
<RECEIVABLES> 13,363<F1>
<ASSETS-OTHER> 24,071<F1>
<OTHER-ITEMS-ASSETS> 111,398<F1>
<TOTAL-ASSETS> 1,639,866<F1>
<PAYABLE-FOR-SECURITIES> 14,694<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 21,357<F1>
<TOTAL-LIABILITIES> 36,051<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77,196
<SHARES-COMMON-STOCK> 7,407
<SHARES-COMMON-PRIOR> 6,500
<ACCUMULATED-NII-CURRENT> (18,472)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 37,916<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 187,752<F1>
<NET-ASSETS> 102,247
<DIVIDEND-INCOME> 8,593<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (9,638)<F1>
<NET-INVESTMENT-INCOME> (1,045)<F1>
<REALIZED-GAINS-CURRENT> 163,717<F1>
<APPREC-INCREASE-CURRENT> (10,375)<F1>
<NET-CHANGE-FROM-OPS> 152,297<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (920)
<DISTRIBUTIONS-OF-GAINS> (11,307)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 907
<NET-CHANGE-IN-ASSETS> 9,709
<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> 5,438<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 62,116<F1>
<AVERAGE-NET-ASSETS> 98,310
<PER-SHARE-NAV-BEGIN> 14.237
<PER-SHARE-NII> 0.017
<PER-SHARE-GAIN-APPREC> 1.432
<PER-SHARE-DIVIDEND> (0.142)
<PER-SHARE-DISTRIBUTIONS> (1.740)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.804
<EXPENSE-RATIO> 1.50
<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> 043
<NAME> GREAT AMERICAN COS. C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,303,282<F1>
<INVESTMENTS-AT-VALUE> 1,491,034<F1>
<RECEIVABLES> 13,363<F1>
<ASSETS-OTHER> 24,071<F1>
<OTHER-ITEMS-ASSETS> 111,398<F1>
<TOTAL-ASSETS> 1,639,866<F1>
<PAYABLE-FOR-SECURITIES> 14,694<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 21,357<F1>
<TOTAL-LIABILITIES> 36,051<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82,967
<SHARES-COMMON-STOCK> 7,861
<SHARES-COMMON-PRIOR> 6,898
<ACCUMULATED-NII-CURRENT> (18,472)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 37,916<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 187,752<F1>
<NET-ASSETS> 108,510
<DIVIDEND-INCOME> 8,593<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (9,638)<F1>
<NET-INVESTMENT-INCOME> (1,045)<F1>
<REALIZED-GAINS-CURRENT> 163,717<F1>
<APPREC-INCREASE-CURRENT> (10,375)<F1>
<NET-CHANGE-FROM-OPS> 152,297<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (976)
<DISTRIBUTIONS-OF-GAINS> (11,999)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 963
<NET-CHANGE-IN-ASSETS> 10,304
<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> 5,438<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 62,116<F1>
<AVERAGE-NET-ASSETS> 104,332
<PER-SHARE-NAV-BEGIN> 14.237
<PER-SHARE-NII> 0.017
<PER-SHARE-GAIN-APPREC> 1.432
<PER-SHARE-DIVIDEND> (0.142)
<PER-SHARE-DISTRIBUTIONS> (1.740)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.804
<EXPENSE-RATIO> 1.50
<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> 051
<NAME> GROWTH CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 119,748,348<F1>
<INVESTMENTS-AT-VALUE> 132,657,687<F1>
<RECEIVABLES> 374,247<F1>
<ASSETS-OTHER> 24,979<F1>
<OTHER-ITEMS-ASSETS> 1,035<F1>
<TOTAL-ASSETS> 133,057,948<F1>
<PAYABLE-FOR-SECURITIES> 5,658,336<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,934,797<F1>
<TOTAL-LIABILITIES> 7,593,133<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 48,354,620
<SHARES-COMMON-STOCK> 2,874,478
<SHARES-COMMON-PRIOR> 2,972,290
<ACCUMULATED-NII-CURRENT> (636,602)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (91,770)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 12,909,339<F1>
<NET-ASSETS> 54,171,003
<DIVIDEND-INCOME> 254,216<F1>
<INTEREST-INCOME> 252,144<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,119,844)<F1>
<NET-INVESTMENT-INCOME> (613,484)<F1>
<REALIZED-GAINS-CURRENT> 8,019,358<F1>
<APPREC-INCREASE-CURRENT> 5,366,348<F1>
<NET-CHANGE-FROM-OPS> 12,772,222<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2,743,807)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 400,630
<NUMBER-OF-SHARES-REDEEMED> (640,420)
<SHARES-REINVESTED> 141,978
<NET-CHANGE-IN-ASSETS> 1,033,825
<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> 494,177<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,303,219<F1>
<AVERAGE-NET-ASSETS> 59,764,798
<PER-SHARE-NAV-BEGIN> 17.878
<PER-SHARE-NII> (0.054)
<PER-SHARE-GAIN-APPREC> 2.012
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.990)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.846
<EXPENSE-RATIO> 1.29
<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> 052
<NAME> GROWTH CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 119,748,348<F1>
<INVESTMENTS-AT-VALUE> 132,657,687<F1>
<RECEIVABLES> 374,247<F1>
<ASSETS-OTHER> 24,979<F1>
<OTHER-ITEMS-ASSETS> 1,035<F1>
<TOTAL-ASSETS> 133,057,948<F1>
<PAYABLE-FOR-SECURITIES> 5,658,336<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,934,797<F1>
<TOTAL-LIABILITIES> 7,593,133<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57,436,291
<SHARES-COMMON-STOCK> 3,367,819
<SHARES-COMMON-PRIOR> 3,091,364
<ACCUMULATED-NII-CURRENT> (636,602)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (91,770)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 12,909,339<F1>
<NET-ASSETS> 62,923,724
<DIVIDEND-INCOME> 254,216<F1>
<INTEREST-INCOME> 252,144<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,119,844)<F1>
<NET-INVESTMENT-INCOME> (613,484)<F1>
<REALIZED-GAINS-CURRENT> 8,019,358<F1>
<APPREC-INCREASE-CURRENT> 5,366,348<F1>
<NET-CHANGE-FROM-OPS> 12,772,222<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (3,159,322)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 301,155
<NUMBER-OF-SHARES-REDEEMED> (191,008)
<SHARES-REINVESTED> 166,308
<NET-CHANGE-IN-ASSETS> 7,909,168
<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> 494,177<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,303,219<F1>
<AVERAGE-NET-ASSETS> 62,331,721
<PER-SHARE-NAV-BEGIN> 17.796
<PER-SHARE-NII> (0.116)
<PER-SHARE-GAIN-APPREC> 1.994
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.990)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.684
<EXPENSE-RATIO> 2.04
<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> 053
<NAME> GROWTH CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 119,748,348 <F1>
<INVESTMENTS-AT-VALUE> 132,657,687 <F1>
<RECEIVABLES> 374,247 <F1>
<ASSETS-OTHER> 24,979 <F1>
<OTHER-ITEMS-ASSETS> 1,035 <F1>
<TOTAL-ASSETS> 133,057,948 <F1>
<PAYABLE-FOR-SECURITIES> 5,658,336 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 1,934,797 <F1>
<TOTAL-LIABILITIES> 7,593,133 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,492,937
<SHARES-COMMON-STOCK> 447,980
<SHARES-COMMON-PRIOR> 464,855
<ACCUMULATED-NII-CURRENT> (636,602)<F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> (91,770)<F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 12,909,339 <F1>
<NET-ASSETS> 8,370,088
<DIVIDEND-INCOME> 254,216 <F1>
<INTEREST-INCOME> 252,144 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (1,119,844)<F1>
<NET-INVESTMENT-INCOME> (613,484)<F1>
<REALIZED-GAINS-CURRENT> 8,019,358 <F1>
<APPREC-INCREASE-CURRENT> 5,366,348 <F1>
<NET-CHANGE-FROM-OPS> 12,772,222 <F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (424,952)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 42,154
<NUMBER-OF-SHARES-REDEEMED> (76,836)
<SHARES-REINVESTED> 17,807
<NET-CHANGE-IN-ASSETS> 98,694
<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> 494,177 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 1,303,219 <F1>
<AVERAGE-NET-ASSETS> 8,698,779
<PER-SHARE-NAV-BEGIN> 17.793
<PER-SHARE-NII> (0.126)
<PER-SHARE-GAIN-APPREC> 2.007
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.990)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.684
<EXPENSE-RATIO> 2.04
<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 as a
class basis.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 061
<NAME> PROSPECTOR FUND CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,352,975<F1>
<INVESTMENTS-AT-VALUE> 1,574,296<F1>
<RECEIVABLES> 42,099<F1>
<ASSETS-OTHER> 24,952<F1>
<OTHER-ITEMS-ASSETS> 80,681<F1>
<TOTAL-ASSETS> 1,722,028<F1>
<PAYABLE-FOR-SECURITIES> 6,962<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 60,479<F1>
<TOTAL-LIABILITIES> 67,441<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,212,069
<SHARES-COMMON-STOCK> 101,137
<SHARES-COMMON-PRIOR> 91,217
<ACCUMULATED-NII-CURRENT> (18,935)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 89,355<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 221,322<F1>
<NET-ASSETS> 1,447,227
<DIVIDEND-INCOME> 15,327<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (9,787)<F1>
<NET-INVESTMENT-INCOME> 5,540<F1>
<REALIZED-GAINS-CURRENT> 181,466<F1>
<APPREC-INCREASE-CURRENT> 62,532<F1>
<NET-CHANGE-FROM-OPS> 249,538<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (21,935)
<DISTRIBUTIONS-OF-GAINS> (116,882)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 9,920
<NET-CHANGE-IN-ASSETS> 218,266
<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> 5,519<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 49,319<F1>
<AVERAGE-NET-ASSETS> 1,369,705
<PER-SHARE-NAV-BEGIN> 13.473
<PER-SHARE-NII> 0.071
<PER-SHARE-GAIN-APPREC> 2.284
<PER-SHARE-DIVIDEND> (0.240)
<PER-SHARE-DISTRIBUTIONS> (1.279)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.309
<EXPENSE-RATIO> 1.24
<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> 062
<NAME> PROSPECTOR FUND CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,352,975<F1>
<INVESTMENTS-AT-VALUE> 1,574,296<F1>
<RECEIVABLES> 42,099<F1>
<ASSETS-OTHER> 24,952<F1>
<OTHER-ITEMS-ASSETS> 80,681<F1>
<TOTAL-ASSETS> 1,722,028<F1>
<PAYABLE-FOR-SECURITIES> 6,962<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 60,479<F1>
<TOTAL-LIABILITIES> 67,441<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75,388
<SHARES-COMMON-STOCK> 7,246
<SHARES-COMMON-PRIOR> 6,535
<ACCUMULATED-NII-CURRENT> (18,935)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 89,355<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 221,322<F1>
<NET-ASSETS> 103,680
<DIVIDEND-INCOME> 15,327<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (9,787)<F1>
<NET-INVESTMENT-INCOME> 5,540<F1>
<REALIZED-GAINS-CURRENT> 181,466<F1>
<APPREC-INCREASE-CURRENT> 62,532<F1>
<NET-CHANGE-FROM-OPS> 249,538<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,571)
<DISTRIBUTIONS-OF-GAINS> (8,374)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 711
<NET-CHANGE-IN-ASSETS> 15,636
<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> 5,519<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 49,319<F1>
<AVERAGE-NET-ASSETS> 98,127
<PER-SHARE-NAV-BEGIN> 13.473
<PER-SHARE-NII> 0.071
<PER-SHARE-GAIN-APPREC> 2.284
<PER-SHARE-DIVIDEND> (0.240)
<PER-SHARE-DISTRIBUTIONS> (1.279)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.309
<EXPENSE-RATIO> 1.24
<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> 063
<NAME> PROSPECTOR FUND CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,352,975<F1>
<INVESTMENTS-AT-VALUE> 1,574,296<F1>
<RECEIVABLES> 42,099<F1>
<ASSETS-OTHER> 24,952<F1>
<OTHER-ITEMS-ASSETS> 80,681<F1>
<TOTAL-ASSETS> 1,722,028<F1>
<PAYABLE-FOR-SECURITIES> 6,962<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 60,479<F1>
<TOTAL-LIABILITIES> 67,441<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75,388
<SHARES-COMMON-STOCK> 7,246
<SHARES-COMMON-PRIOR> 6,535
<ACCUMULATED-NII-CURRENT> (18,935)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 89,355<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 221,322<F1>
<NET-ASSETS> 103,680
<DIVIDEND-INCOME> 15,327<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (9,787)<F1>
<NET-INVESTMENT-INCOME> 5,540<F1>
<REALIZED-GAINS-CURRENT> 181,466<F1>
<APPREC-INCREASE-CURRENT> 62,532<F1>
<NET-CHANGE-FROM-OPS> 249,538<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,571)
<DISTRIBUTIONS-OF-GAINS> (8,374)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 711
<NET-CHANGE-IN-ASSETS> 15,636
<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> 5,519<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 49,319<F1>
<AVERAGE-NET-ASSETS> 98,127
<PER-SHARE-NAV-BEGIN> 13.473
<PER-SHARE-NII> 0.071
<PER-SHARE-GAIN-APPREC> 2.284
<PER-SHARE-DIVIDEND> (0.240)
<PER-SHARE-DISTRIBUTIONS> (1.279)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.309
<EXPENSE-RATIO> 1.24
<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> 071
<NAME> VALUE CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,374,955<F1>
<INVESTMENTS-AT-VALUE> 1,476,517<F1>
<RECEIVABLES> 2,871<F1>
<ASSETS-OTHER> 24,071<F1>
<OTHER-ITEMS-ASSETS> 62,815<F1>
<TOTAL-ASSETS> 1,566,274<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 23,957<F1>
<TOTAL-LIABILITIES> 23,957<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,309,148
<SHARES-COMMON-STOCK> 108,357
<SHARES-COMMON-PRIOR> 91,821
<ACCUMULATED-NII-CURRENT> (17,798)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (14,737)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 101,562<F1>
<NET-ASSETS> 1,347,517
<DIVIDEND-INCOME> 7,455<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (10,412)<F1>
<NET-INVESTMENT-INCOME> (2,957)<F1>
<REALIZED-GAINS-CURRENT> 143,749<F1>
<APPREC-INCREASE-CURRENT> (104,684)<F1>
<NET-CHANGE-FROM-OPS> 36,108<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (9,412)
<DISTRIBUTIONS-OF-GAINS> (192,785)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 16,533
<NET-CHANGE-IN-ASSETS> 32,563
<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> 6,056<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 49,788<F1>
<AVERAGE-NET-ASSETS> 1,400,100
<PER-SHARE-NAV-BEGIN> 14.321
<PER-SHARE-NII> (0.002)
<PER-SHARE-GAIN-APPREC> 0.319
<PER-SHARE-DIVIDEND> (0.103)
<PER-SHARE-DISTRIBUTIONS> (2.099)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.436
<EXPENSE-RATIO> 1.29
<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> 072
<NAME> VALUE CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,374,955<F1>
<INVESTMENTS-AT-VALUE> 1,476,517<F1>
<RECEIVABLES> 2,871<F1>
<ASSETS-OTHER> 24,071<F1>
<OTHER-ITEMS-ASSETS> 62,815<F1>
<TOTAL-ASSETS> 1,566,274<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 23,957<F1>
<TOTAL-LIABILITIES> 23,957<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 84,841
<SHARES-COMMON-STOCK> 7,988
<SHARES-COMMON-PRIOR> 6,500
<ACCUMULATED-NII-CURRENT> (17,798)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (14,737)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 101,562<F1>
<NET-ASSETS> 99,369
<DIVIDEND-INCOME> 7,455<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (10,412)<F1>
<NET-INVESTMENT-INCOME> (2,957)<F1>
<REALIZED-GAINS-CURRENT> 143,749<F1>
<APPREC-INCREASE-CURRENT> (104,684)<F1>
<NET-CHANGE-FROM-OPS> 36,108<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (694)
<DISTRIBUTIONS-OF-GAINS> (14,211)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 269
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1,219
<NET-CHANGE-IN-ASSETS> 6,241
<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> 6,056<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 49,788<F1>
<AVERAGE-NET-ASSETS> 102,561
<PER-SHARE-NAV-BEGIN> 14.327
<PER-SHARE-NII> (0.001)
<PER-SHARE-GAIN-APPREC> 0.316
<PER-SHARE-DIVIDEND> (0.103)
<PER-SHARE-DISTRIBUTIONS> (2.099)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.440
<EXPENSE-RATIO> 1.29
<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> 073
<NAME> VALUE CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,374,955<F1>
<INVESTMENTS-AT-VALUE> 1,476,517<F1>
<RECEIVABLES> 2,871<F1>
<ASSETS-OTHER> 24,071<F1>
<OTHER-ITEMS-ASSETS> 62,815<F1>
<TOTAL-ASSETS> 1,566,274<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 23,957<F1>
<TOTAL-LIABILITIES> 23,957<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 79,301
<SHARES-COMMON-STOCK> 7,670
<SHARES-COMMON-PRIOR> 6,500
<ACCUMULATED-NII-CURRENT> (17,798)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (14,737)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 101,562<F1>
<NET-ASSETS> 95,431
<DIVIDEND-INCOME> 7,455<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (10,412)<F1>
<NET-INVESTMENT-INCOME> (2,957)<F1>
<REALIZED-GAINS-CURRENT> 143,749<F1>
<APPREC-INCREASE-CURRENT> (104,684)<F1>
<NET-CHANGE-FROM-OPS> 36,108<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> 2,303
<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> 6,056<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 49,788<F1>
<AVERAGE-NET-ASSETS> 99,156
<PER-SHARE-NAV-BEGIN> 14.327
<PER-SHARE-NII> (0.002)
<PER-SHARE-GAIN-APPREC> 0.319
<PER-SHARE-DIVIDEND> (0.103)
<PER-SHARE-DISTRIBUTIONS> (2.099)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.442
<EXPENSE-RATIO> 1.29
<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> 081
<NAME> AGGRESSIVE GROWTH CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998<F1>
<PERIOD-START> JUL-01-1997<F1>
<PERIOD-END> DEC-31-1997<F1>
<INVESTMENTS-AT-COST> 190,659,686<F1>
<INVESTMENTS-AT-VALUE> 237,252,477<F1>
<RECEIVABLES> 4,169,579<F1>
<ASSETS-OTHER> 71,688<F1>
<OTHER-ITEMS-ASSETS> 876<F1>
<TOTAL-ASSETS> 241,494,620<F1>
<PAYABLE-FOR-SECURITIES> 4,566,639<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,157,955<F1>
<TOTAL-LIABILITIES> 5,724,594<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 85,649,766
<SHARES-COMMON-STOCK> 9,066,096
<SHARES-COMMON-PRIOR> 8,440,294
<ACCUMULATED-NII-CURRENT> (1,618,518)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (6,698,062)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 46,592,791<F1>
<NET-ASSETS> 103,271,485
<DIVIDEND-INCOME> 90,802<F1>
<INTEREST-INCOME> 284,608<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,959,050)<F1>
<NET-INVESTMENT-INCOME> (1,583,640)<F1>
<REALIZED-GAINS-CURRENT> 20,042,277<F1>
<APPREC-INCREASE-CURRENT> 7,471,415<F1>
<NET-CHANGE-FROM-OPS> 25,930,052<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,813,366
<NUMBER-OF-SHARES-REDEEMED> (5,187,564)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 19,306,481
<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> 858,021<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,365,230<F1>
<AVERAGE-NET-ASSETS> 100,180,925
<PER-SHARE-NAV-BEGIN> 9.948
<PER-SHARE-NII> (0.055)
<PER-SHARE-GAIN-APPREC> 1.498
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.391
<EXPENSE-RATIO> 1.29
<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> 082
<NAME> AGGRESSIVE GROWTH CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998<F1>
<PERIOD-START> JUL-01-1997<F1>
<PERIOD-END> DEC-31-1997<F1>
<INVESTMENTS-AT-COST> 190,859,686<F1>
<INVESTMENTS-AT-VALUE> 237,252,477<F1>
<RECEIVABLES> 4,169,579<F1>
<ASSETS-OTHER> 71,688<F1>
<OTHER-ITEMS-ASSETS> 876<F1>
<TOTAL-ASSETS> 241,494,620<F1>
<PAYABLE-FOR-SECURITIES> 4,566,639<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,157,955<F1>
<TOTAL-LIABILITIES> 5,724,594<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,900,885
<SHARES-COMMON-STOCK> 10,622,816
<SHARES-COMMON-PRIOR> 9,548,967
<ACCUMULATED-NII-CURRENT> (1,618,518)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (6,698,062)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 46,592,791<F1>
<NET-ASSETS> 119,558,005
<DIVIDEND-INCOME> 90,802<F1>
<INTEREST-INCOME> 284,608<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,959,050)<F1>
<NET-INVESTMENT-INCOME> (1,583,640)<F1>
<REALIZED-GAINS-CURRENT> 20,042,277<F1>
<APPREC-INCREASE-CURRENT> 7,471,415<F1>
<NET-CHANGE-FROM-OPS> 25,930,052<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,145,577
<NUMBER-OF-SHARES-REDEEMED> (1,071,728)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 25,333,884
<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> 858,021<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,365,230<F1>
<AVERAGE-NET-ASSETS> 114,275,941
<PER-SHARE-NAV-BEGIN> 9.867
<PER-SHARE-NII> (0.090)
<PER-SHARE-GAIN-APPREC> 1.477
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.254
<EXPENSE-RATIO> 2.05
<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> 083
<NAME> AGGRESSIVE GROWTH CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998<F1>
<PERIOD-START> JUL-01-1997<F1>
<PERIOD-END> DEC-31-1997<F1>
<INVESTMENTS-AT-COST> 190,659,686<F1>
<INVESTMENTS-AT-VALUE> 237,252,477<F1>
<RECEIVABLES> 4,169,579<F1>
<ASSETS-OTHER> 71,688<F1>
<OTHER-ITEMS-ASSETS> 876<F1>
<TOTAL-ASSETS> 241,494,620<F1>
<PAYABLE-FOR-SECURITIES> 4,566,639<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,157,955<F1>
<TOTAL-LIABILITIES> 5,724,594<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,943,164
<SHARES-COMMON-STOCK> 1,149,255
<SHARES-COMMON-PRIOR> 1,098,257
<ACCUMULATED-NII-CURRENT> (1,618,518)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (6,698,062)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 46,592,791<F1>
<NET-ASSETS> 12,940,536
<DIVIDEND-INCOME> 90,802<F1>
<INTEREST-INCOME> 284,608<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,959,050)<F1>
<NET-INVESTMENT-INCOME> (1,583,640)<F1>
<REALIZED-GAINS-CURRENT> 20,042,277<F1>
<APPREC-INCREASE-CURRENT> 7,471,415<F1>
<NET-CHANGE-FROM-OPS> 25,930,052<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 259,837
<NUMBER-OF-SHARES-REDEEMED> (208,839)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,101,759
<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> 858,021<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,365,230<F1>
<AVERAGE-NET-ASSETS> 12,802,936
<PER-SHARE-NAV-BEGIN> 9.869
<PER-SHARE-NII> (0.095)
<PER-SHARE-GAIN-APPREC> 1.486
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.260
<EXPENSE-RATIO> 2.04
<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>
