<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders......................... 1
Performance Results............................ 3
Glossary of Terms.............................. 4
Portfolio Management Review.................... 5
Portfolio Highlights........................... 8
Portfolio of Investments....................... 9
Statement of Assets and Liabilities............ 12
Statement of Operations........................ 13
Statement of Changes in Net Assets............. 14
Financial Highlights........................... 15
Notes to Financial Statements.................. 18
</TABLE>
UTLF SAR 11/98
<PAGE> 2
LETTER TO SHAREHOLDERS
October 22, 1998
Dear Shareholder,
These continue to be dramatic and
highly unusual times for global
financial markets. Despite a severe
crisis of confidence in many emerging
economies, the United States has been
relatively unscathed by the turmoil.
However, volatility increased in the
U.S. equity market as the Asian crisis [PHOTO]
spread to Russia and Latin America
during the reporting period. Fixed-
income investors were not entirely
unaffected, as volatility forced yield
spreads to widen between Treasuries and DENNIS J. MCDONNELL AND DON G. POWELL
high-yield securities, corporate bonds,
and mortgage-backed securities.
We expect that volatility will remain high until the situation overseas
stabilizes. In this environment, it is important to stay focused on long-term
investment goals and to view daily fluctuations as relatively minor in the
larger picture. As we explain elsewhere in this letter, the U.S. economy remains
among the healthiest in the world, and Federal Reserve policymakers have
demonstrated an ability to make prudent decisions with regard to monetary
policy. These factors bode well for investors during the months ahead.
ECONOMIC OVERVIEW
Growth in the U.S. economy moderated during the reporting period as fallout
from the global financial crisis finally began to hit home. Weak demand for
American goods in Asia and Latin America caused the U.S. trade deficit to hit a
record $56.5 billion during the second quarter, undermining corporate profits.
Weak earnings, in turn, caused job growth to slow and unemployment to increase
modestly from the 28-year low set earlier this year. Manufacturing activity fell
in September for the fourth consecutive month.
Psychological factors played a role in the deceleration of U.S. economic
growth. In a recent speech, Federal Reserve Chairman Alan Greenspan noted that
Americans suddenly have acquired a strong aversion to risk that had been notably
absent in recent years. This risk-averse attitude manifested itself in slower
retail sales growth and a mild drop in housing activity. Also, the clear
preference among investors for safety and liquidity caused interest rates on
lower-quality debt to balloon, leading to fears of a credit crunch for U.S.
businesses. Such concerns were at least partially responsible for the Fed's
decision to cut short-term interest rates by 0.25 percent on September 29 and
again on October 15.
Despite the slowdown, we believe that the American economy remains
fundamentally sound. Inflation at the consumer level increased by just 1.4
percent during the 12 months through September, while wholesale prices actually
fell during the same period.
Continued on page 2
1
<PAGE> 3
MARKET OVERVIEW
After a steady eight-year climb, the U.S. equity market dropped sharply
during the third quarter. From its peak on July 17, the S&P 500-Stock Index fell
19.3 percent through August 31 before beginning a modest rally. For the three
months through September, the Dow Jones Industrial Average slid 12.4 percent,
the index's worst performance since 1990. Small-capitalization stocks were even
harder hit, with the Russell 2000-Stock Index falling 20.5 percent during the
quarter.
Several factors combined to produce the abrupt sell-off in U.S. stocks.
First, the collapse of the Russian ruble upset the market for emerging market
securities and financial concerns spread to Latin America, a major U.S. export
market. Also, the continuing lack of progress at resolving a severe banking
crisis in Japan stalled prospects for an economic recovery in many Asian
nations. Finally, the near certainty of an economic slowdown in the United
States caused investors to worry about corporate profits.
Despite the broad-based nature of the decline, defensive sectors such as
tobacco, drugs, electric utilities, and food companies each posted positive
returns during the quarter. Conversely, cyclical industries like clothing,
securities brokers, and heavy machinery posted large losses. Concerns about the
possible impact of the equity market's roughly $2 trillion decline on consumer
spending likely played a role in the Fed's recent decision to cut interest
rates.
OUTLOOK
As we've noted, the stock market had enjoyed an eight-year advance until the
decline from the peak in July. Whether market historians will declare this
period to have been a bear market or correction is not clear. Semantics aside,
our focus remains on managing through this volatile market and keeping focused
on our longer-term investment goals.
It is our view that the decline will turn out to be relatively mild by
historical standards. While conditions in the global economy remain highly
uncertain, the domestic backdrop includes such favorable factors as a bias
toward a more liberal monetary policy, benign inflation, and low bond yields. We
believe that in this environment it is unlikely that stocks will enter a severe
decline from current levels.
We caution that volatile conditions are likely to linger. Sectors of the
market that had become the most highly valued have yet to fall in concert with
broader indices. Often, declines don't end until those stocks that had been the
leaders of the previous uptrend encounter profit-taking as well. Accordingly, we
believe that the next bull phase will be set to begin when market leadership
becomes more equally balanced across all capitalization and style sectors.
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998
VAN KAMPEN UTILITY FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Three-month total return based on
NAV(1)................................. 0.47% 0.30% 0.30%
One-year total return(2)................. 14.95% 17.01% 20.03%
Five-year average annual total
return(2)................................ 9.69% 9.93% 10.18%
Life-of-Fund average annual total
return(2)................................ 10.27% 10.55% 10.54%
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. Market volatility may have adversely affected
fund performance since September 30, 1998. 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.
- --------------------------------------------------------------------------------
On July 31, 1998, the Fund's Board of Trustees voted to change the Fund's fiscal
year end from June 30 to March 31. As a result, this semi-annual report reflects
the three-month period commencing on July 1, 1998, and ending on September 30,
1998.
- --------------------------------------------------------------------------------
3
<PAGE> 5
GLOSSARY OF TERMS
BEAR MARKET: A market in which prices of securities are falling or are expected
to fall.
CLASS A SHARES: When Class A shares of a fund are purchased, the share price
includes the net asset value plus a one-time sales charge (or "load").
Generally, there is no redemption fee (Contingent Deferred Sales Charge).
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: The oldest and most widely recognized stock market
average, which reflects the performance of 30 actively traded stocks of
well-established, blue-chip companies.
DOW JONES UTILITY AVERAGE: A market indicator composed of 15 utilities stocks.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its
policy-making committee, called the Federal Open Market Committee, meets
eight times a year to establish monetary policy and monitor the economic
pulse of the United States.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from 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.
RECESSION: A period of no or negative economic growth and high unemployment.
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
4
<PAGE> 6
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN UTILITY FUND
We recently spoke to the management team of the Van Kampen Utility Fund about
the key events and economic forces that shaped the markets during the reporting
period. The team includes Christine Drusch, portfolio manager; Matthew Hart,
portfolio comanager; and Stephen L. Boyd, chief investment officer for equity
investments.
The Fund's fiscal year end was recently changed from June 30 to March 31.
Going forward, your semiannual reports will be dated September 30, and your
annual reports will be dated March 31. The following interview discusses the
Fund's performance during the three-month period since your last report, from
June 30, 1998, to September 30, 1998.
Q HOW WOULD YOU DESCRIBE THE MARKET ENVIRONMENT DURING THE REPORTING PERIOD?
A The U.S. stock market was exceptionally volatile during the three-month
reporting period. On July 17 the Dow Jones Industrial Average reached a
record high, reflecting investors' confidence in the economy. Trouble was
on the horizon, however, as uncertainty over Asia, Russia, and Latin America led
to fears that many U.S. companies would announce earnings problems resulting
from international exposure. By August 31 the Dow had fallen 19 percent from its
high. With inflation in check and growth slowing but still healthy, the U.S.
economy remained fundamentally sound. Investors recognized this fact and
returned to the stock market, making up some of the losses incurred during the
previous weeks.
In response to the market's volatility, investors sought safety and quality
in Treasuries and other defensive investments, such as utilities. In response,
utility stocks performed strongly during the period, with the Dow Jones Utility
Average increasing 4.4 percent during the reporting period.
Q HOW DID YOU MANAGE THE FUND IN RESPONSE TO MARKET VOLATILITY?
A We have been more defensive in recent months, opting primarily for
high-quality domestic utilities. The Fund performed well during the
reporting period, largely because we limited our exposure to higher-risk,
more growth-oriented utility companies--particularly telecommunications firms
that conduct significant amounts of business in international markets. Energy
companies have also done poorly recently, so we've sought to reduce our exposure
to that area too. While we continue to own both telecommunications and energy
companies because we remain optimistic about their long-term prospects, our
decision to reduce the Fund's weighting in these areas benefited the Fund's
shareholders.
5
<PAGE> 7
Q WHAT INDUSTRIES HAD THE MOST SIGNIFICANT IMPACT ON THE FUND?
A Eastern electric utilities were among the Fund's best performers during
the reporting period. Normal summer weather in the region helped ensure
that the supply of electricity was adequate to meet demand. Moreover,
eastern electricity providers in the United States are generally the farthest
along in the deregulation process--a situation investors favor because they
believe deregulated companies have brighter growth prospects. Among the Fund's
best electricity holdings in that region were GPU and Consolidated Edison.
In other regions, hot summer temperatures in the central and southern United
States forced electricity providers to pay suppliers high premiums to meet the
enormous consumer demand. In the West, meanwhile, investors were concerned that
the deregulatory process in that region wasn't moving quickly enough. Despite
these problems, a number of the Fund's electric utility holdings performed well
during the reporting period, including OGE Energy, Texas Utilities, New Century
Energies, DTE Energy, and Southern Co., all of which were at or near their highs
on September 30.
Telecommunications firms that did most of their business in the U.S. were
excellent performers during the reporting period. Companies such as U.S. West
and Ameritech were among the Fund's successes. International telecommunications
companies, however, did not fare as well. Although the Fund's international
holdings are limited, we do maintain weighting in these companies for increased
diversification and growth opportunities. China Telecom had a difficult quarter,
due to investors' concerns about Asia and fears that China would devalue its
currency. We believe better days are ahead for this stock, however, because the
company is a government monopoly in a huge marketplace with lots of pent-up
demand. Exposure to Brazil hurt Portugal Telecom, while British
telecommunications firm Cable & Wireless also saw its stock price decline
substantially during the period. For additional Fund portfolio highlights,
please refer to page 8.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A The Fund performed relatively well, as did utilities in general, during a
difficult market environment. For the three-month period ended September
30, 1998, the Fund generated a total return of 0.47 percent(1) (Class A
shares at net asset value). By comparison, the Standard & Poor's 40 Utilities
Index returned 4.57 percent, while the Lipper Utility Fund Index returned -1.03
percent for the period. The S&P Utilities Index is a broad-based, unmanaged
index that reflects the general performance of utility stocks and does not
reflect any commissions that would be paid by an investor purchasing the
securities it represents. The Lipper Utility Fund Index reflects the average
performance of utility funds and does not reflect any sales charges that would
be paid by an investor purchasing the securities it represents. Please refer to
page 3 for additional Fund performance results.
6
<PAGE> 8
Q WHAT DO YOU SEE AHEAD FOR THE MARKETS AND THE FUND?
A The U.S. economy remains fundamentally strong, although clear signs of a
slowdown are now evident. Markets are extremely volatile right now, and
the possibility of a recession is increasing. Until we see clear signs of
a turnaround, we will continue to invest in what we believe are companies with
the promise of solid, consistent growth.
During periods of uncertainty such as what we're currently experiencing, we
should expect to see domestic utility companies outperform. For several reasons
utilities are an excellent choice for investors seeking some protection from the
market's ups and downs. First, even highly diversified utility companies see
large portions of their income come from regulated sources, which means that,
given the current regulatory environment, these companies should have a
generally consistent flow of income and a level of protection from economic
downturns. Moreover, as a result of their relatively predictable earnings,
utility stocks tend to be somewhat sensitive to changes in interest rates. As a
result, utilities will likely benefit if, as expected, the Federal Reserve Board
continues to cut rates. These factors help make the Utility Fund an attractive
investment option in what promises to be a challenging market environment ahead.
[SIG]
Christine Drusch
Portfolio Manager
[SIG]
Matthew Hart
Portfolio Comanager
[SIG]
Stephen L. Boyd
Chief Investment Officer
Equity Investments
Please see footnotes on page 3
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN UTILITY FUND
PORTFOLIO HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOP TEN HOLDINGS THESE INVESTMENTS
AS OF SEPTEMBER 30, 1998 THREE MONTHS AGO
<S> <C> <C>
Texas Utilities Co. ....... 3.7% ................... 2.8%
BEC Energy................. 3.5% ................... 3.3%
BellSouth Corp. ........... 3.4% ................... 3.0%
Pinnacle West Capital
Corp. ................... 3.4% ................... 3.4%
SBC Communications, Inc. .. 3.2% ................... 2.8%
Ameritech Corp. ........... 3.1% ................... 2.9%
CMS Energy Group........... 2.9% ................... 2.9%
FirstEnergy Corp........... 2.9% ................... 2.8%
U.S. West, Inc............. 2.9% ................... 2.6%
Florida Progress Corp. .... 2.8% ................... 2.6%
</TABLE>
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998 AS OF JUNE 30, 1998
<S> <C> <C> <C>
Electric Utilities........... 47.6% Electric Utilities........... 43.4%
Telecommunications........... 34.2% Telecommunications........... 36.9%
Oil, Gas, Pipeline and Oil, Gas, Pipeline and
Distribution............... 13.0% Distribution................. 14.9%
Natural Gas Pipeline and Natural Gas Pipeline and
Distribution............... 3.4% Distribution................. 3.3%
Cable Television............. 1.5% Cable Television............. 1.5%
</TABLE>
ASSET ALLOCATION AS A PERCENTAGE OF TOTAL ASSETS
<TABLE>
<CAPTION>
As of September 30, 1998 As of June 30, 1998
<S> <C> <C> <C>
Stocks 86.1% Stocks 86.4%
Bonds 8.5% Bonds 8.1%
Convertibles 2.4% Convertibles 2.3%
Cash and Short-Term Cash and Short-Term
Investments 2.2% Investments 2.6%
Other 0.8% Other 0.6%
</TABLE>
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 89.0%
ELECTRIC UTILITIES 44.9%
BEC Energy.................................................. 120,000 $ 5,227,500
Cinergy Corp. .............................................. 73,000 2,792,250
CMS Energy Group............................................ 99,800 4,347,537
Consolidated Edison, Inc. .................................. 40,000 2,085,000
DQE Inc. ................................................... 77,800 3,005,025
DTE Energy Co............................................... 50,000 2,259,375
Edison International........................................ 26,200 673,013
FirstEnergy Corp. .......................................... 138,000 4,286,625
Florida Progress Corp. ..................................... 96,000 4,158,000
FPL Group, Inc. ............................................ 16,200 1,128,938
GPU, Inc. .................................................. 85,675 3,641,187
Houston Industries, Inc. ................................... 114,800 3,573,150
Illinova Corp. ............................................. 80,500 2,309,344
New Century Energies, Inc. ................................. 79,000 3,846,312
Niagara Mohawk Power Corp. (a).............................. 45,700 702,638
OGE Energy Corp. ........................................... 144,000 4,158,000
Pinnacle West Capital Corp. ................................ 111,600 5,001,075
Public Service Co. of New Mexico............................ 110,000 2,440,625
Sierra Pacific Resources.................................... 100,000 3,881,250
Southern Co................................................. 87,100 2,564,006
Texas Utilities Co.......................................... 73,800 3,436,312
Texas Utilities Co., Convertible Preferred, PRIDES.......... 14,800 832,500
Wisconsin Energy Corp. ..................................... 51,400 1,622,313
------------
67,971,975
------------
NATURAL GAS PIPELINE AND DISTRIBUTION 3.3%
Consolidated Natural Gas Co. ............................... 33,000 1,798,500
National Fuel Gas Co. NJ.................................... 31,000 1,457,000
Wicor, Inc. ................................................ 72,000 1,719,000
------------
4,974,500
------------
OIL, GAS, PIPELINE AND DISTRIBUTION 10.7%
Coastal Corp. .............................................. 108,000 3,645,000
Columbia Energy Group....................................... 55,500 3,253,687
El Paso Energy Capital Trust I -- Convertible Preferred..... 41,750 1,915,281
El Paso Energy Corp. ....................................... 41,000 1,329,938
Enron Corp. ................................................ 36,400 1,922,375
Nicor, Inc. ................................................ 50,000 2,071,875
Southwest Gas Corp. ........................................ 100,000 2,043,750
------------
16,181,906
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS 29.8%
Airtouch Communications, Inc. (a)........................... 50,000 $ 2,850,000
Ameritech Corp. ............................................ 96,000 4,548,000
AT&T Corp. ................................................. 67,650 3,953,297
Bell Atlantic Corp. ........................................ 39,900 1,932,656
BellSouth Corp. ............................................ 67,000 5,041,750
Cable & Wireless, PLC -- ADR (United Kingdom)............... 136,000 3,689,000
China Telecom -- ADR (China) (a)............................ 82,000 2,460,000
Cincinnati Bell, Inc. ...................................... 41,000 1,066,000
France Telecom -- ADR (France).............................. 20,000 1,175,000
Nextlink Communications, Inc. -- Convertible Preferred,
144A -- Private Placement (b)............................. 26,800 974,850
Portugal Telecom SA -- ADR (Portugual)...................... 36,600 1,317,600
SBC Communications, Inc. ................................... 106,000 4,710,375
Sprint Corp. ............................................... 23,400 1,684,800
Tele Denmark A/S ADS (Denmark).............................. 50,000 2,406,250
Telecom Italia S.P.A. -- ADR (Italy)........................ 37,000 2,479,000
Telstra Corp. -- ADR (Australia), 144A -- Private
Placement (a) (b)......................................... 11,700 650,813
U.S. West, Inc. ............................................ 81,000 4,247,437
------------
45,186,828
------------
TECHNOLOGY 0.3%
NorthEast Optic Network, Inc. (a) .......................... 60,000 502,500
------------
TOTAL COMMON AND PREFERRED STOCKS 89.0%.............................. 134,817,709
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED INCOME SECURITIES 8.5%
CABLE TELEVISION 1.5%
$1,000 Continental Cablevision, Inc. ................... 8.300% 05/15/06 $ 1,141,300
1,000 Cox Communications, Inc. ........................ 6.875 06/15/05 1,087,500
------------
2,228,800
------------
ELECTRIC UTILITIES 1.5%
1,000 Texas Utilities Electric Co. .................... 8.250 04/01/04 1,140,500
1,000 Union Electric Co. .............................. 7.375 12/15/04 1,125,900
------------
2,266,400
------------
OIL, GAS, PIPELINE AND DISTRIBUTION 2.0%
1,000 Enron Corp. ..................................... 7.125 05/15/07 1,092,600
500 Panhandle Eastern Pipeline Co. .................. 7.875 08/15/04 575,775
100 Texas Eastern Transmission Corp. ................ 8.000 07/15/02 109,950
1,090 Texas Gas Transmission Corp. .................... 8.625 04/01/04 1,252,323
------------
3,030,648
------------
TELECOMMUNICATIONS 3.5%
1,000 360 Communications............................... 7.125 03/01/03 1,080,220
1,000 Century Telephone Enterprises, Inc. Senior Note
Series F......................................... 6.300 01/15/08 1,056,200
900 GTE Corp. ....................................... 9.375 12/01/00 978,084
1,000 Sprint Corp. .................................... 8.125 07/15/02 1,104,950
1,000 Worldcom, Inc. .................................. 7.750 04/01/07 1,149,800
------------
5,369,254
------------
TOTAL FIXED INCOME SECURITIES................................................ 12,895,102
------------
TOTAL LONG-TERM INVESTMENTS 97.5%
(Cost $110,083,525)........................................................ 147,712,811
SHORT-TERM INVESTMENTS 2.2%
(Cost $3,362,496).......................................................... 3,362,496
------------
TOTAL INVESTMENTS 99.7%
(Cost $113,446,021)........................................................ 151,075,307
OTHER ASSETS IN EXCESS OF LIABILITIES 0.3%.................................. 399,203
------------
NET ASSETS 100.0%........................................................... $151,474,510
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
PRIDES -- Preferred redeemable increased dividend equity, traded in shares
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $113,446,021)....................... $151,075,307
Cash........................................................ 729
Receivables:
Fund Shares Sold.......................................... 739,447
Interest.................................................. 298,647
Dividends................................................. 187,148
Other....................................................... 1,555
------------
Total Assets.......................................... 152,302,833
------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 388,978
Distributor and Affiliates................................ 147,330
Investment Advisory Fee................................... 77,714
Trustees' Deferred Compensation and Retirement Plans........ 121,816
Accrued Expenses............................................ 92,485
------------
Total Liabilities..................................... 828,323
------------
NET ASSETS.................................................. $151,474,510
============
NET ASSETS CONSIST OF:
Capital..................................................... $112,736,441
Net Unrealized Appreciation................................. 37,629,286
Accumulated Net Realized Gain............................... 1,366,190
Accumulated Distributions in Excess of Net Investment
Income.................................................... (257,407)
------------
NET ASSETS.................................................. $151,474,510
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $60,016,735
and 3,406,529 shares of beneficial interest issued and
outstanding)............................................ $ 17.62
Maximum sales charge (5.75%* of offering price)......... 1.07
------------
Maximum offering price to public........................ $ 18.69
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $85,644,473 and
4,869,237 shares of beneficial interest issued and
outstanding)............................................ $ 17.59
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $5,813,302 and
330,726 shares of beneficial interest issued and
outstanding)............................................ $ 17.58
============
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 1998,
and the Year Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Year Ended
September 30, 1998 June 30, 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $1,130,830 $ 4,260,507
Interest............................................. 202,081 1,219,948
---------- -----------
Total Income..................................... 1,332,911 5,480,455
---------- -----------
EXPENSES:
Distribution (12b-1) and Services Fees (Attributed to
Classes A, B and C of $36,966, $211,467 and
$14,025, respectively, for the three months ended
9/30/98 and $139,079, $835,949 and $52,350,
respectively, for the year ended 6/30/98).......... 262,458 1,027,378
Investment Advisory Fee.............................. 243,069 939,137
Shareholder Services................................. 58,986 298,606
Trustees' Fees and Expenses.......................... 19,441 34,021
Legal................................................ 3,340 16,828
Custody.............................................. 1,890 27,417
Amortization of Organizational Costs................. 1,663 22,995
Other................................................ 75,293 194,077
---------- -----------
Total Expenses................................... 666,140 2,560,459
---------- -----------
NET INVESTMENT INCOME................................ $ 666,771 $2,919,996
========== ===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain.................................... $1,415,006 $ 5,691,843
---------- -----------
Unrealized Appreciation/Depreciation:
Beginning of the Period............................ 39,245,899 12,907,034
End of the Period:
Investments...................................... 37,629,286 39,245,899
---------- -----------
Net Unrealized Appreciation/Depreciation During the
Period............................................. (1,616,613) 26,338,865
---------- -----------
NET REALIZED AND UNREALIZED GAIN/LOSS................ $ (201,607) $32,030,708
========== ===========
NET INCREASE IN NET ASSETS FROM OPERATIONS........... $ 465,164 $34,950,704
========== ===========
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF CHANGES IN NET ASSETS
For the Three Months Ended September 30, 1998,
and the Years Ended June 30, 1998 and 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Year Ended Year Ended
September 30, 1998 June 30, 1998 June 30, 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income........................ $ 666,771 $ 2,919,996 $ 5,126,338
Net Realized Gain............................ 1,415,006 5,691,843 10,817,404
Net Unrealized Appreciation/Depreciation
During the Period.......................... (1,616,613) 26,338,865 1,002,087
------------ ------------ ------------
Change in Net Assets from Operations......... 465,164 34,950,704 16,945,829
------------ ------------ ------------
Distributions from Net Investment Income..... (666,771) (3,302,950) (4,918,449)
Distributions in Excess of Net Investment
Income..................................... (199,825) (58,293) -0-
------------ ------------ ------------
Distributions from and in Excess of Net
Investment Income*......................... (866,596) (3,361,243) (4,918,449)
------------ ------------ ------------
Distributions from Net Realized Gain......... -0- (13,156,292) (1,861,394)
Distributions in Excess of Net Realized
Gain....................................... -0- (125,726) -0-
------------ ------------ ------------
Distributions from and in Excess of Net
Realized Gain*............................. -0- (13,282,018) (1,861,394)
------------ ------------ ------------
Return of Capital Distribution*.............. -0- (7,471,305) -0-
------------ ------------ ------------
Total Distributions.......................... (866,596) (24,114,566) (6,779,843)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................. (401,432) 10,836,138 10,165,986
------------ ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.................... 7,253,272 33,570,538 50,324,196
Net Asset Value of Shares Issued Through
Dividend Reinvestment...................... 707,344 21,003,724 5,538,900
Cost of Shares Repurchased................... (9,134,619) (53,035,786) (80,912,740)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS............................... (1,174,003) 1,538,476 (25,049,644)
------------ ------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS........ (1,575,435) 12,374,614 (14,883,658)
NET ASSETS:
Beginning of the Period...................... 153,049,945 140,675,331 155,558,989
------------ ------------ ------------
End of the Period (Including accumulated
undistributed net investment income of
$(257,407), $(57,582) and $382,954,
respectively).............................. $151,474,510 $153,049,945 $140,675,331
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Year Ended Year Ended
*Distributions by Class September 30, 1998 June 30, 1998 June 30, 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Distributions from and in
Excess of Net Investment
Income:
Class A Shares............... $ (403,605) $ (1,538,296) $ (2,064,034)
Class B Shares............... (434,941) (1,714,845) (2,700,742)
Class C Shares............... (28,050) (108,102) (153,673)
------------- ------------- -------------
$ (866,596) $ (3,361,243) $ (4,918,449)
============= ============= =============
Distributions from and in
Excess of Net Realized Gain:
Class A Shares............... $ -0- $ (5,310,506) $ (683,737)
Class B Shares............... -0- (7,494,154) (1,114,278)
Class C Shares............... -0- (477,358) (63,379)
------------- ------------- -------------
$ -0- $ (13,282,018) $ (1,861,394)
============= ============= =============
Return of Capital Distribution:
Class A Shares............... $ -0- $ (2,987,603) $ -0-
Class B Shares............... -0- (4,215,072) -0-
Class C Shares............... -0- (268,630) -0-
------------- ------------- -------------
$ -0- $ (7,471,305) $ -0-
============= ============= =============
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
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
Three Months Ended ------------------------------------- Operations) to
Class A Shares September 30, 1998 1998 1997 1996 1995 June 30, 1994
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
the Period................. $17.657 $16.441 $15.298 $13.386 $12.906 $ 14.300
------- ------- ------- ------- ------- ---------
Net Investment Income........ .099 .429 .637 .538 .595 .479
Net Realized and Unrealized
Gain/Loss.................. (.018) 3.909 1.317 2.077 .485 (1.513)
------- ------- ------- ------- ------- ---------
Total from Investment
Operations................. .081 4.338 1.954 2.615 1.080 (1.034)
------- ------- ------- ------- ------- ---------
Less:
Distributions from and in
Excess of Net Investment
Income................... .120 .480 .610 .703 .600 .323
Distributions from and in
Excess of Net Realized
Gain..................... -0- 1.691 .201 -0- -0- .037
Return of Capital
Distribution............. -0- .951 -0- -0- -0- -0-
------- ------- ------- ------- ------- ---------
Total Distributions.......... .120 3.122 .811 .703 .600 .360
------- ------- ------- ------- ------- ---------
Net Asset Value, End of the
Period..................... $17.618 $17.657 $16.441 $15.298 $13.386 $ 12.906
======= ======= ======= ======= ======= =========
Total Return (a)............. .47%* 28.17% 13.20% 19.93% 8.70% (7.38%)*
Net Assets at End of the
Period (In millions)....... $ 60.0 $ 60.4 $ 52.5 $ 57.7 $ 50.4 $ 51.5
Ratio of Expenses to Average
Net Assets (b)............. 1.32% 1.30% 1.41% 1.38% 1.34% 1.34%
Ratio of Net Investment
Income to Average Net
Assets (b)................. 2.24% 2.47% 4.03% 3.61% 4.55% 4.10%
Portfolio Turnover........... 5%* 23% 102% 121% 109% 102%*
</TABLE>
*Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended June 30, 1997, and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
15
<PAGE> 17
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
Three Months Ended ------------------------------------- Operations) to
Class B Shares September 30, 1998 1998 1997 1996 1995 June 30, 1994
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of
the Period................. $17.632 $16.434 $15.296 $13.356 $12.880 $ 14.300
------- ------- ------- ------- ------- ---------
Net Investment Income........ .065 .309 .519 .426 .507 .394
Net Realized and Unrealized
Gain/Loss.................. (.018) 3.891 1.314 2.080 .461 (1.519)
------- ------- ------- ------- ------- ---------
Total from Investment
Operations................. .047 4.200 1.833 2.506 .968 (1.125)
------- ------- ------- ------- ------- ---------
Less:
Distributions from and in
Excess of Net Investment
Income................... .090 .360 .494 .566 .492 .258
Distributions from and in
Excess of Net Realized
Gain..................... -0- 1.691 .201 -0- -0- .037
Return of Capital
Distribution............. -0- .951 -0- -0- -0- -0-
------- ------- ------- ------- ------- ---------
Total Distributions.......... .090 3.002 .695 .566 .492 .295
------- ------- ------- ------- ------- ---------
Net Asset Value, End of the
Period..................... $17.589 $17.632 $16.434 $15.296 $13.356 $ 12.880
======= ======= ======= ======= ======= =========
Total Return (a)............. .30%* 27.20% 12.30% 19.08% 7.80% (8.02%)*
Net Assets at End of the
Period (In millions)....... $ 85.6 $ 86.8 $ 83.3 $ 92.9 $ 81.0 $ 83.7
Ratio of Expenses to Average
Net Assets (b)............. 2.08% 2.07% 2.17% 2.13% 2.05% 2.06%
Ratio of Net Investment
Income to Average Net
Assets (b)................. 1.48% 1.74% 3.27% 2.86% 3.84% 3.36%
Portfolio Turnover........... 5%* 23% 102% 121% 109% 102%*
</TABLE>
*Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended June 30, 1997, and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
16
<PAGE> 18
FINANCIAL HIGHLIGHTS -- CONTINUED
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From August 13, 1993,
Year Ended June 30, (Commencement of
Three Months Ended ------------------------------------- Distribution) to
Class C Shares September 30, 1998 1998 1997 1996 1995 June 30, 1994
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning
of the Period............ $17.619 $16.426 $15.290 $13.356 $12.868 $ 14.460
------- ------- ------- ------- --------- ----------
Net Investment Income...... .070 .308 .503 .470 .482 .330
Net Realized and Unrealized
Gain/Loss................ (.022) 3.887 1.328 2.030 .498 (1.627)
------- ------- ------- ------- ------- -----------
Total from Investment
Operations............... 0.048 4.195 1.831 2.500 .980 (1.297)
------- ------- ------- ------- ------- -----------
Less:
Distributions from and in
Excess of Net
Investment Income...... .090 .360 .494 .566 .492 .258
Distributions from and in
Excess of Net Realized
Gain................... -0- 1.691 .201 -0- -0- .037
Return of Capital
Distribution........... -0- .951 -0- -0- -0- -0-
------- ------- ------- ------- ------- ----------
Total Distributions........ .090 3.002 .695 .566 .492 .295
------- ------- ------- ------- ------- ----------
Net Asset Value, End of the
Period................... $17.577 $17.619 $16.426 $15.290 $13.356 $ 12.868
======= ======= ======= ======= ======= ==========
Total Return (a)........... .30%* 27.14% 12.37% 19.00% 7.88% (9.11%)*
Net Assets at End of the
Period (In millions)..... $5.8 $5.9 $4.9 $5.0 $1.3 $1.1
Ratio of Expenses to
Average Net Assets (b)... 2.09% 2.06% 2.17% 2.13% 2.09% 2.05%
Ratio of Net Investment
Income to Average Net
Assets (b)............... 1.52% 1.73% 3.23% 2.78% 3.80% 3.38%
Portfolio Turnover......... 5%* 23% 102% 121% 109% 102%*
</TABLE>
*Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended June 30, 1997, and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Utility Fund (the "Fund") is organized as a series of the Van Kampen
Equity Trust, a Delaware business trust and is registered as a diversified
open-end management investment company under the Investment Company Act of 1940,
as amended. The Fund's investment objective is to provide its shareholders with
capital appreciation and current income, through investment in common stocks and
income securities of companies engaged in the utilities industry. The Fund
commenced investment operations on July 28, 1993, with two classes of common
shares, Class A and Class B shares. The distribution of the Fund's Class C
shares commenced on August 13, 1993. In July 1998, the Fund's Board of Trustees
approved a change in the Fund's fiscal year end from June 30 to March 31. As a
result, this financial report reflects the three month period commencing on July
1, 1998, and ending on September 30, 1998.
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 September 30, 1998, there were no
when issued or delayed delivery purchase commitments.
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date;
interest income is recorded on an accrual basis. Bond discount is amortized over
the expected life of each applicable security. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class of
shares.
D. ORGANIZATIONAL COSTS--The Fund has reimbursed Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $115,000. These costs were amortized on a
straight line basis over the 60-month period ending July 28, 1998.
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 September 30, 1998, for federal income tax purposes, cost of long- and
short-term investments is $113,446,021; the aggregate gross unrealized
appreciation is $38,949,758 and the aggregate gross unrealized depreciation is
$1,320,472, resulting in net unrealized appreciation of $37,629,286.
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.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and for
federal income tax purposes, permanent book and tax differences have been
reclassified. For the year ended June 30, 1998, $77,621 has been reclassified
from capital with $711 posted to accumulated undistributed net investment income
and $76,910 posted to accumulated net realized gain/loss. These differences
relate to the character of gain/loss recognized on the sale of and distributions
received from REIT's and the impact of the amortization of organizational costs
on tax basis earnings and profits.
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 three months ended September 30, 1998, and the year ended June 30,
1998, the Fund recognized expenses of approximately $1,100 and $5,400,
respectively, 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 three months ended September 30, 1998, and the year ended June 30,
1998, the Fund recognized expenses of approximately $24,800 and $64,700,
respectively, representing Van Kampen's cost of providing accounting and legal
services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent of the Fund. For the three months ended
September 30, 1998, and the year ended June 30, 1998, the Fund recognized
expenses of approximately $47,000 and $212,500, respectively. Beginning in 1998,
the transfer agency fees are determined through negotiations with the Fund's
Board of Trustees and are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
retirement plan are payable for a ten-year period and are based upon each
trustee's years of service to the Fund. The maximum annual benefit per Trustee
under the plan is $2,500.
At September 30, 1998, Van Kampen owned 100 shares each of Classes A, B and
C, respectively.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At September 30, 1998, capital aggregated $45,508,657, $62,839,738 and
$4,388,046 for Classes A, B and C, respectively. For the three months ended
September 30, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.......................................... 157,372 $ 2,740,164
Class B.......................................... 211,757 3,664,474
Class C.......................................... 49,447 848,634
---------- -----------
Total Sales........................................ 418,576 $ 7,253,272
========== ===========
Dividend Reinvestment:
Class A.......................................... 19,442 $ 333,824
Class B.......................................... 20,817 357,011
Class C.......................................... 963 16,509
---------- -----------
Total Dividend Reinvestment........................ 41,222 $ 707,344
========== ===========
Repurchases:
Class A.......................................... (191,800) $(3,320,740)
Class B.......................................... (284,436) (4,927,816)
Class C.......................................... (52,596) (886,063)
---------- -----------
Total Repurchases.................................. (528,832) $(9,134,619)
========== ===========
</TABLE>
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
At June 30, 1998, capital aggregated $45,755,409, $63,746,069 and $4,408,966
for Classes A, B and C, respectively. For the year ended June 30, 1998,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.......................................... 1,328,514 $ 22,835,462
Class B.......................................... 538,641 9,290,235
Class C.......................................... 83,771 1,444,841
---------- ------------
Total Sales........................................ 1,950,926 $ 33,570,538
========== ============
Dividend Reinvestment:
Class A.......................................... 540,406 $ 8,897,389
Class B.......................................... 703,377 11,560,470
Class C.......................................... 33,229 545,865
---------- ------------
Total Dividend Reinvestment........................ 1,277,012 $ 21,003,724
========== ============
Repurchases:
Class A.......................................... (1,639,476) $(27,743,068)
Class B.......................................... (1,388,187) (23,874,869)
Class C.......................................... (83,492) (1,417,849)
---------- ------------
Total Repurchases.................................. (3,111,155) $(53,035,786)
========== ============
</TABLE>
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (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)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC will be imposed on most redemptions made within six years of
the purchase for Class B and one year of the purchase for Class C as detailed in
the following schedule.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------------------------------------------------------------------
<S> <C> <C>
First.............................................. 4.00% 1.00%
Second............................................. 3.75% None
Third.............................................. 3.50% None
Fourth............................................. 2.50% None
Fifth.............................................. 1.50% None
Sixth.............................................. 1.00% None
Seventh and Thereafter............................. None None
</TABLE>
For the three months ended September 30, 1998, and the year ended June 30,
1998, Van Kampen, as Distributor for the Fund, received net commissions on sales
of the Fund's Class A shares of approximately $3,500 and $16,000, respectively,
and CDSC on redeemed shares of approximately $28,800 and $181,300, respectively.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
For the three months ended September 30, 1998, the cost of purchases and
proceeds from sales of investments, excluding short-term investments, were
$6,845,775 and $8,127,952, respectively. For the year ended June 30, 1998, the
cost of purchases and proceeds from sales of investments, excluding short-term
investments, were $32,564,835 and $51,249,647, respectively.
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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 three months ended September 30, 1998, and the year ended June 30,
1998, are payments retained by Van Kampen of approximately $163,100 and
$643,300, respectively.
6. YEAR 2000 COMPLIANCE
Van Kampen utilizes a number of computer programs across its entire operation
relying on both internal software systems as well as external software systems
provided by third parties. In 1996 Van Kampen initiated a CountDown 2000 Project
to review both the internal systems and external vendor connections. The goal of
this project is to position its business to continue unaffected as a result of
the century change. At this time, there can be no assurance that the steps taken
will be sufficient to avoid any adverse impact to the Fund, but Van Kampen does
not anticipate that the move to Year 2000 will have a material impact on its
ability to continue to provide the Fund with service at current levels. In
addition, it is possible that the securities markets in which the Fund invests
may be detrimentally affected by computer failures throughout the financial
services industry beginning January 1, 2000. Improperly functioning trading
systems may result in settlement problems and liquidity issues.
25
<PAGE> 27
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
U.S. Real Estate
Utility
Value
International/Global
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our web site at
WWW.VANKAMPEN.COM -- to view a prospectus, select Download Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)
- - e-mail us by visiting
WWW.VANKAMPEN.COM and selecting Contact Us
26
<PAGE> 28
VAN KAMPEN UTILITY FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN*--Chairman
PAUL G. YOVOVICH
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief
Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR
SERVICES INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1998 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After March 31, 1999, the report, if used with prospective
investors, must be accompanied by a quarterly performance update.
27
<PAGE> 29
VAN KAMPEN UTILITY FUND
THIS PAGE INTENTIONALLY LEFT BLANK
28
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 4
Glossary of Terms................................ 5
Portfolio Management Review...................... 6
Portfolio Highlights............................. 9
Portfolio of Investments......................... 10
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>
AGG SAR 11/98
<PAGE> 31
LETTER TO SHAREHOLDERS
PHOTO OF MCDONNELL & POWELL
DENNIS J. MCDONNELL AND DON G.
POWELL
October 22, 1998
Dear Shareholder,
These continue to be dramatic and
highly unusual times for global
financial markets. Despite a severe
crisis of confidence in many emerging
economies, the United States has been
relatively unscathed by the turmoil.
However, volatility increased in the
U.S. equity market as the Asian
crisis spread to Russia and Latin
America during the reporting period.
Fixed-income investors were not
entirely unaffected, as volatility forced yield spreads to widen between
Treasuries and high-yield securities, corporate bonds, and mortgage-backed
securities.
We expect that volatility will remain high until the situation overseas
stabilizes. In this environment, it is important to stay focused on long-term
investment goals and to view daily fluctuations as relatively minor in the
larger picture. As we explain elsewhere in this letter, the U.S. economy remains
among the healthiest in the world, and Federal Reserve policymakers have
demonstrated an ability to make prudent decisions with regard to monetary
policy. These factors bode well for investors during the months ahead.
ECONOMIC OVERVIEW
Growth in the U.S. economy moderated during the reporting period as fallout
from the global financial crisis finally began to hit home. Weak demand for
American goods in Asia and Latin America caused the U.S. trade deficit to hit a
record $56.5 billion during the second quarter, undermining corporate profits.
Weak earnings, in turn, caused job growth to slow and unemployment to increase
modestly from the 28-year low set earlier this year. Manufacturing activity fell
in September for the fourth consecutive month.
Psychological factors played a role in the deceleration of U.S. economic
growth. In a recent speech, Federal Reserve Chairman Alan Greenspan noted that
Americans suddenly have acquired a strong aversion to risk that had been notably
absent in recent years. This risk-averse attitude manifested itself in slower
retail sales growth and a mild drop in housing activity. Also, the clear
preference among investors for safety and liquidity caused interest rates on
lower-quality debt to balloon, leading to fears of a credit crunch for U.S.
businesses. Such concerns were at least partially responsible for the Fed's
decision to cut short-term interest rates by 0.25 percent on September 29 and
again on October 15.
Continued on page 2
1
<PAGE> 32
Despite the slowdown, we believe that the American economy remains
fundamentally sound. Inflation at the consumer level increased by just 1.4
percent during the 12 months through September, while wholesale prices actually
fell during the same period.
MARKET OVERVIEW
After a steady eight-year climb, the U.S. equity market dropped sharply
during the third quarter. From its peak on July 17, the S&P 500-Stock Index fell
19.3 percent through August 31 before beginning a modest rally. For the three
months through September, the Dow Jones Industrial Average slid 12.4 percent,
the index's worst performance since 1990. Small-capitalization stocks were even
harder hit, with the Russell 2000-Stock Index falling 20.5 percent during the
quarter.
Several factors combined to produce the abrupt sell-off in U.S. stocks.
First, the collapse of the Russian ruble upset the market for emerging market
securities and financial concerns spread to Latin America, a major U.S. export
market. Also, the continuing lack of progress at resolving a severe banking
crisis in Japan stalled prospects for an economic recovery in many Asian
nations. Finally, the near certainty of an economic slowdown in the United
States caused investors to worry about corporate profits.
Despite the broad-based nature of the decline, defensive sectors such as
tobacco, drugs, electric utilities, and food companies each posted positive
returns during the quarter. Conversely, cyclical industries like clothing,
securities brokers, and heavy machinery posted large losses. Concerns about the
possible impact of the equity market's roughly $2 trillion decline in consumer
spending likely played a role in the Fed's recent decision to cut interest
rates.
OUTLOOK
As we've noted, the stock market had enjoyed an eight-year advance until the
decline from the peak in July. Whether market historians will declare this
period to have been a bear market or correction is not clear. Semantics aside,
our focus remains on managing through this volatile market and keeping focused
on our longer-term investment goals.
It is our view that the decline will turn out to be relatively mild by
historical standards. While conditions in the global economy remain highly
uncertain, the domestic backdrop includes such favorable factors as a bias
toward a more liberal monetary policy, benign inflation, and low bond yields. We
believe that in this environment it is unlikely that stocks will enter a severe
decline from current levels.
We caution that volatile conditions are likely to linger. Sectors of the
market that had become the most highly valued have yet to fall in concert with
broader indices. Often, declines don't end until those stocks that had been the
leaders of the previous uptrend encounter profit-taking as well. Accordingly, we
believe that the next bull phase will be set to begin when market leadership
becomes more equally balanced across all capitalization and style sectors.
Continued on page 3
2
<PAGE> 33
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
Continued on page 4
3
<PAGE> 34
PERFORMANCE RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998
VAN KAMPEN AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Three-month total return based on
NAV(1)................................. (15.13%) (15.31%) (15.29%)
One-year total return based on NAV(1).... (8.58%) (9.38%) (9.30%)
One-year total return(2)................. (13.81%) (13.91%) (10.21%)
Life-of-Fund average annual total
return(2)................................ 6.54% 7.04% 8.49%
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. Market volatility may have adversely affected
fund performance since September 30, 1998. 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.
On July 31, 1998, the Fund's Board of Trustees voted to change the Fund's fiscal
year end from June 30 to March 31. As a result, this semiannual report reflects
the three-month period commencing on July 1, 1998, and ending on September 30,
1998.
4
<PAGE> 35
GLOSSARY OF TERMS
CLASS A SHARES: When Class A shares of a fund are purchased, the share price
includes the net asset value plus a one-time sales charge (or "load").
Generally, there is no redemption fee (Contingent Deferred Sales Charge).
DOW JONES INDUSTRIAL AVERAGE: The oldest and most widely recognized stock market
average, which reflects the performance of 30 actively traded stocks of
well-established, blue-chip companies.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
MARKET CAPITALIZATION: The size of a company, as measured by the value of its
stock. Morningstar, an independent mutual fund rating service, defines
market capitalization categories as follows:
SMALL-CAP: less than $1 billion
MID-CAP: between $1 billion and $5 billion
LARGE-CAP: more than $5 billion
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from its total assets and dividing this amount by the
number of shares outstanding. The NAV does not include any initial or
contingent deferred sales charge.
STANDARD & POOR'S 500-STOCK INDEX: A broad-based measurement of changes in
stock-market conditions based on the average performance of 500 widely held
common stocks. The index, which tracks industrial, transportation,
financial, and utility stocks, provides a guide to the overall health of
the U.S. stock market. The S&P 500 is a much broader index than the Dow
Jones Industrial Average and reflects the stock market more accurately.
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
5
<PAGE> 36
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AGGRESSIVE GROWTH FUND
We recently spoke to the management team of the Van Kampen Aggressive Growth
Fund about the key events and economic forces that shaped the markets during the
reporting period. The team includes Gary M. Lewis, portfolio manager; Dudley
Brickhouse, David Walker, and Janet Willis Luby, portfolio comanagers; and
Stephen L. Boyd, chief investment officer for equity investments.
The Fund's fiscal year end was recently changed from June 30 to March 31.
Going forward, your semiannual reports will be dated September 30, and your
annual reports will be dated March 31. The following interview discusses the
Fund's performance during the three-month period since your last report, from
June 30, 1998, to September 30, 1998.
Q
CAN YOU DESCRIBE THE STOCK MARKET ENVIRONMENT FOR THE FUND DURING THE
REPORTING PERIOD?
A
The U.S. stock market was exceptionally volatile during the three-month
reporting period. On July 17 the Dow Jones Industrial Average reached a
record high, reflecting investors' confidence in continued economic growth
and low inflation. Trouble was on the horizon, however, as uncertainty about
Asia, Russia, and Latin America led to fears that many U.S. companies would
announce earnings problems resulting from international exposure. By August 31
the Dow had fallen 19 percent from its high. With inflation in check and growth
slowing but still healthy, the U.S. economy remained fundamentally sound.
Investors recognized this fact and returned to the stock market in September,
slightly reducing the losses incurred during the previous weeks.
Q
GIVEN THIS ENVIRONMENT, HOW DID YOU MANAGE THE FUND TO MEET ITS OBJECTIVE?
A
The current market environment has not really affected our management
strategy--we continue to look for companies with rising earnings
expectations and rising valuations. This is more difficult in volatile
markets--such as our current one--because volatile markets lead to declining
valuations in most companies. In this case, we look to identify those companies
whose valuations are declining the least.
As has been the trend for much of this year, investors generally have favored
established large-cap names, seeking the greater relative security of market
leaders. The stock market's preference for large companies during the reporting
period presented a challenge for the Fund, which invests primarily in small and
medium-sized companies. In response, we continued to keep larger, more liquid
holdings as the Fund's largest positions--an action designed to help boost
performance and add stability to the portfolio. Toward the end of the reporting
period, there were signs that small caps may be reversing their considerable
recent underperformance. We are closely monitoring the performance of small-cap
stocks and may alter our portfolio accordingly if the current trend strengthens.
6
<PAGE> 37
Q
WHICH STOCKS HAD A POSITIVE IMPACT ON THE FUND'S PERFORMANCE DURING THE
REPORTING PERIOD?
A
As a group, technology stocks were the Fund's best performers during the
past three months, because of the Internet's continued growth and the
increasingly urgent need for companies to resolve Year 2000-related
problems. As a result, companies that address network management needs were some
of the Fund's most successful holdings. These stocks included Legato Systems,
VERITAS Software, Peregrine Systems, Concord Communications, and Network
Appliance.
A number of other technology companies enjoyed excellent results. Yahoo!, a
well-known Internet company, was an exceptional performer for the Fund, with its
stock price increasing 67 percent between June 30 and September 30. Dell
Computer, a leading computer manufacturer and the Fund's largest holding, also
had an excellent quarter: its stock price increased nearly 46 percent. Other
successful technology holdings for the Fund included Dendrite International
(customer-management systems), EMC (data storage), and Biogen (biotechnology).
Although the retail sector did not generally perform as well, two of the
Fund's retail holdings, Best Buy (consumer electronics) and Duane Reade (drug
store chain) did have a positive impact on the Fund's returns.
Q
WHAT STOCKS HURT THE FUND'S PERFORMANCE?
A
Because of the current market environment, a number of companies have seen
their stock prices decline. This has been especially true of smaller-cap
stocks, which have been particularly hard-hit by investor nervousness and
negative press accounts. For example, after a poor report in the Wall Street
Journal, Bally Total Fitness's stock experienced a significant price decline.
The Fund had owned Bally at the time of the report, but we soon sold the stock
in response to these changing perceptions. Similarly, despite no real changes in
their earnings expectations, Steiner Leisure (cruise ship spa operator), Finish
Line (athletic apparel retailer), and Party City (party supplies retailer) all
saw their stock prices fall during the reporting period. Faced with these
declines, we sold all of these holdings before these companies' fundamentals
followed suit.
Other than technology stocks, few industries had positive returns during the
quarter. In the consumer service area, radio company stocks such as Clear
Channel Communications, which lost 10.5 percent during the reporting period, had
a difficult three months. We have kept our holdings in Clear Channel and in
other radio companies, however, because they have been outstanding performers
for the Fund, and we don't believe the fundamentals have changed for these
companies. Airline stocks were also hit, as investors worried about how a
slowing economy and the prospect of increasing oil prices might affect these
firms. For additional Fund portfolio highlights, please refer to page 9.
Q
HOW DID THE FUND PERFORM OVER THE REPORTING PERIOD?
A
July and August were difficult months for the Fund, while its performance
in September helped balance some of the losses from the previous two
months. During the reporting period, the Fund returned -15.13 percent(1)
(Class A shares at net
7
<PAGE> 38
asset value). By comparison, the Standard & Poor's 500-Stock Index returned -9.9
percent, and the Russell 2000-Stock Index, which more closely resembles the
Fund, returned -20.5 percent. The S&P 500-Stock Index, is a broad-based,
unmanaged index that reflects the general performance of the stock market, and
the Russell 2000-Stock Index reflects the general performance of smaller-cap
stocks. These indices are statistical composites that do not include any
commissions that would be paid by an investor purchasing the securities or
investments represented by these indices. Please refer to the chart on page 4
for additional Fund performance results.
Q
WHAT DO YOU SEE AHEAD FOR THE FUND?
A
We think that more companies will revise their earnings estimates downward
both in response to a slowing economy in the U.S. and Europe and to
reduced exports to Asia and other regions. Because our stock selection
discipline is intended not only to uncover the stocks that are outperforming,
but also to screen out the stocks that aren't, we will avoid as many of these
downward revisions as we can. Not all of our selections will be winners, of
course, but our discipline is designed to make the odds of disappointment as low
as possible.
We continue to be optimistic about the future of small-cap stocks. As we've
stated in previous reports, small-cap stock valuations are at historically low
levels relative to those of large-cap stocks. This trend has lasted for a year
and a half and could continue for the foreseeable future, but when valuations
are comparatively low, as they are now, small stocks have the potential to
realize substantial price appreciation because they are inexpensive compared to
large-cap stocks. Small-cap stocks do tend to be more volatile, and we don't
know when this rebound will take place. When it does, however, we will be well
positioned to take advantage of the situation.
GARY M. LEWIS SIG
Gary M. Lewis
Portfolio Manager
DAVID WALKER SIG
David Walker
Portfolio Comanager
STEPHEN L. BOYD SIG
Stephen L. Boyd
Chief Investment Officer
Equity Investments
DUDLEY BRICKHOUSE SIG
Dudley Brickhouse
Portfolio Comanager
JANET WILLIS LUBY SIG
Janet Willis Luby
Portfolio Comanager
Please see footnotes on page 4
8
<PAGE> 39
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AGGRESSIVE GROWTH FUND
PORTFOLIO HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOP TEN HOLDINGS THESE INVESTMENTS
AS OF SEPTEMBER 30, 1998 THREE MONTHS AGO
<S> <C> <C>
Dell Computer Corp. ...... 4.7% .................. 2.9%
Legato Systems, Inc. ..... 2.2% .................. 0.8%
Geotel Communications
Corp. .................. 2.2% .................. 1.1%
Dendrite International,
Inc. ................... 2.0% .................. 1.2%
Staples, Inc. ............ 1.9% .................. 1.6%
Peregrine Systems, Inc. .. 1.7% .................. N/A
EMC Corp. ................ 1.7% .................. 1.1%
MedQuist, Inc. ........... 1.6% .................. 1.3%
Concord Communications,
Inc. ................... 1.6% .................. N/A
Meta Group, Inc. ......... 1.6% .................. N/A
</TABLE>
N/A = Not Applicable
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998 AS OF JUNE 30, 1998
<S> <C> <C> <C>
Technology................. 47% Technology................. 36%
Consumer Distribution...... 15% Consumer Distribution...... 17%
Consumer Services.......... 9% Consumer Services.......... 14%
Health Care................ 9% Health Care................ 5%
Finance.................... 9% Finance.................... 11%
</TABLE>
9
<PAGE> 40
PORTFOLIO OF INVESTMENTS
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 95.3%
CONSUMER DISTRIBUTION 14.4%
Abacus Direct Corp. (a)..................................... 30,000 $ 1,530,000
Abercrombie & Fitch Co., Class A (a)........................ 80,000 3,520,000
AnnTaylor Stores Corp. (a).................................. 100,000 2,031,250
Best Buy Co., Inc. (a)...................................... 80,000 3,320,000
Chico's Fas, Inc. (a)....................................... 50,000 806,250
Duane Reade, Inc. (a)....................................... 75,000 2,845,312
Goody's Family Clothing, Inc. (a)........................... 15,000 180,000
Insight Enterprises, Inc. (a)............................... 100,000 2,825,000
Jacor Communications, Inc., Class A (a)..................... 30,000 1,518,750
Kohl's Corp. (a)............................................ 25,000 975,000
Lason Holdings, Inc. (a).................................... 45,000 2,306,250
Lexmark International Group, Inc., Class A (a).............. 35,000 2,425,938
Lowe's Cos., Inc............................................ 40,000 1,272,500
O'Reilly Automotive, Inc. (a)............................... 40,000 1,450,000
Pacific Sunwear of California (a)........................... 90,000 2,002,500
Staples, Inc. (a)........................................... 150,000 4,406,250
U.S. Foodservice, Inc. (a).................................. 60,000 2,497,500
------------
35,912,500
------------
CONSUMER DURABLES 1.9%
Helen of Troy Ltd. (a)...................................... 60,000 1,162,500
Mohawk Industries, Inc. (a)................................. 50,000 1,368,750
Pulte Corp.................................................. 85,000 2,087,813
------------
4,619,063
------------
CONSUMER NON-DURABLES 0.7%
Linens 'N Things, Inc. (a).................................. 65,000 1,787,500
------------
CONSUMER SERVICES 9.0%
Chancellor Media Corp. (a).................................. 50,000 1,668,750
Clear Channel Communications, Inc. (a)...................... 70,000 3,325,000
Earthlink Network, Inc. (a)................................. 30,000 1,237,500
Ebay, Inc. (a).............................................. 18,000 811,125
International Network Services (a).......................... 65,000 2,697,500
International Speedway Corp., Class A....................... 25,000 748,438
Macrovision Corp. (a)....................................... 50,000 1,462,500
Meta Group, Inc............................................. 115,000 3,759,063
Metris Cos., Inc............................................ 45,000 2,098,125
Outdoor Systems, Inc. (a)................................... 78,750 1,535,625
Petersen Cos., Inc. (a)..................................... 25,000 712,500
</TABLE>
See Notes to Financial Statements
10
<PAGE> 41
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
Tele-Communications, Inc., Class A (a)...................... 40,000 $ 1,467,500
TMP Worldwide, Inc. (a)..................................... 25,000 820,312
------------
22,343,938
------------
FINANCE 9.3%
Capital One Financial Corp.................................. 35,000 3,622,500
Fidelity National Financial, Inc............................ 75,000 2,535,937
First American Financial Corp............................... 30,000 960,000
J.D. Edwards & Co. (a)...................................... 60,000 2,880,000
LandAmerica Financial Group, Inc............................ 45,000 2,306,250
National Commerce Bancorp................................... 70,000 1,155,000
Nationwide Financial Services, Inc., Class A................ 35,000 1,590,313
North Fork Bancorp, Inc..................................... 52,500 1,050,000
Protective Life Corp........................................ 40,000 1,440,000
Providian Financial Corp.................................... 35,000 2,968,437
Star Banc Corp.............................................. 20,000 1,322,500
US Trust Corp............................................... 20,000 1,327,500
------------
23,158,437
------------
HEALTHCARE 8.8%
Allegiance Corp............................................. 95,000 2,826,250
Alpharma, Inc............................................... 75,000 1,968,750
Arterial Vascular Engineering, Inc. (a)..................... 55,000 2,035,000
Biogen, Inc. (a)............................................ 40,000 2,632,500
Healthworld Corp. (a)....................................... 20,000 310,000
MedQuist, Inc. (a).......................................... 120,000 3,795,000
MiniMed, Inc. (a)........................................... 40,000 2,640,000
Province Healthcare Co. (a)................................. 75,000 2,554,687
Xomed Surgical Products, Inc. (a)........................... 75,000 3,084,375
------------
21,846,562
------------
PRODUCER MANUFACTURING 3.8%
Allied Waste Industries, Inc. (a)........................... 60,000 1,402,500
Century Business Services, Inc. (a)......................... 75,000 1,528,125
Dycom Industries, Inc. (a).................................. 25,000 778,125
Eastern Environmental Services, Inc. (a).................... 100,000 3,025,000
Metromedia Fiber Network (a)................................ 80,000 2,620,000
------------
9,353,750
------------
RAW MATERIALS/PROCESSING INDUSTRIES 0.8%
Safeskin Corp. (a).......................................... 65,000 2,051,563
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 42
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY 43.8%
America Online, Inc. (a).................................... 30,000 $ 3,337,500
American Management Systems, Inc. (a)....................... 40,000 1,095,000
Applied Micro Circuits Corp. (a)............................ 50,000 743,750
Aspect Development, Inc. (a)................................ 45,000 1,771,875
AVT Corp. (a)............................................... 135,000 3,054,375
BMC Software, Inc. (a)...................................... 55,000 3,303,437
Ciber, Inc. (a)............................................. 45,000 908,438
Citrix Systems, Inc. (a).................................... 25,000 1,775,000
Compuware Corp. (a)......................................... 60,000 3,532,500
Concord Communications, Inc. (a)............................ 95,000 3,776,250
CSG Systems International, Inc. (a)......................... 7,000 309,750
Dell Computer Corp. (a)..................................... 170,000 11,177,500
Dendrite International, Inc. (a)............................ 200,000 4,775,000
EMC Corp. (a)............................................... 70,000 4,003,125
Engineering Animation, Inc. (a)............................. 37,500 1,790,625
Gemstar Group Ltd. (a)...................................... 25,000 1,159,375
Geotel Communications Corp. (a)............................. 190,000 5,106,250
Gilat Satellite Networks Ltd. (a)........................... 60,000 2,700,000
HNC Software, Inc. (a)...................................... 25,000 1,015,625
Inspire Insurance Solutions, Inc. (a)....................... 40,000 945,000
Intervoice, Inc. (a)........................................ 100,000 2,293,750
Keane, Inc. (a)............................................. 30,000 1,053,750
Legato Systems, Inc. (a).................................... 100,000 5,137,500
Mercury Interactive Corp. (a)............................... 65,000 2,579,687
Metro Information Services, Inc. (a)........................ 40,000 1,275,000
MICROS Systems, Inc. (a).................................... 78,000 2,340,000
Microstrategy, Inc., Class A (a)............................ 50,000 1,875,000
Mindspring Enterprises, Inc. (a)............................ 75,000 3,112,500
Network Appliance, Inc. (a)................................. 55,000 2,784,375
New Era Of Networks, Inc. (a)............................... 45,000 1,833,750
NOVA Corp. (a).............................................. 50,050 1,535,909
Peregrine Systems, Inc. (a)................................. 100,000 4,025,000
Policy Management Systems Corp. (a)......................... 30,000 1,215,000
Qlogic Corp. (a)............................................ 30,600 1,996,650
QuadraMed Corp. (a)......................................... 50,000 1,006,250
SEI Investments Co.......................................... 15,000 1,042,500
Software AG Systems, Inc. (a)............................... 18,000 306,000
SPR, Inc. (a)............................................... 82,500 1,897,500
Symbol Technologies, Inc.................................... 50,000 2,565,625
</TABLE>
See Notes to Financial Statements
12
<PAGE> 43
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
VERITAS Software Corp. (a).................................. 55,000 $ 3,038,750
Vitesse Semiconductor Corp. (a)............................. 40,000 945,000
Waters Corp. (a)............................................ 50,000 3,350,000
Xircom, Inc. (a)............................................ 100,000 2,450,000
Yahoo!, Inc. (a)............................................ 22,000 2,849,000
------------
108,788,871
------------
TRANSPORTATION 1.5%
Atlantic Coast Airlines, Inc. (a)........................... 65,000 1,519,375
Comair Holdings, Inc........................................ 40,000 1,150,000
Skywest, Inc................................................ 50,000 956,250
------------
3,625,625
------------
UTILITIES 1.3%
RF Micro Devices, Inc. (a).................................. 70,000 1,268,750
Transwitch Corp. (a)........................................ 135,000 2,016,563
------------
3,285,313
------------
TOTAL LONG-TERM INVESTMENTS 95.3%
(Cost $192,791,534)................................................ 236,773,122
REPURCHASE AGREEMENT 6.3%
DLJ Mortgage Acceptance Corp. ($15,530,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 09/30/98, to
be sold on 10/01/98 at $15,532,286)
(Cost $15,530,000)................................................. 15,530,000
------------
TOTAL INVESTMENTS 101.6%
(Cost $208,321,534)................................................ 252,303,122
LIABILITIES IN EXCESS OF OTHER ASSETS (1.6%)........................ (3,886,883)
------------
NET ASSETS 100.0%................................................... $248,416,239
-----------
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
13
<PAGE> 44
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $208,321,534)....................... $252,303,122
Cash........................................................ 5,623
Receivables:
Investments Sold.......................................... 6,821,184
Fund Shares Sold.......................................... 702,682
Dividends................................................. 23,975
Unamortized Organizational Costs............................ 55,982
Other....................................................... 753
------------
Total Assets.......................................... 259,913,321
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 5,472,797
Fund Shares Repurchased................................... 5,348,629
Distributor and Affiliates................................ 250,790
Investment Advisory Fee................................... 152,473
Accrued Expenses............................................ 214,923
Trustees' Deferred Compensation and Retirement Plans........ 57,470
------------
Total Liabilities..................................... 11,497,082
------------
NET ASSETS.................................................. $248,416,239
============
NET ASSETS CONSIST OF:
Capital..................................................... $202,879,564
Net Unrealized Appreciation................................. 43,981,588
Accumulated Net Realized Gain............................... 2,757,665
Accumulated Net Investment Loss............................. (1,202,578)
------------
NET ASSETS.................................................. $248,416,239
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $102,526,338 and 8,831,042 shares of
beneficial interest issued and outstanding)............. $ 11.61
Maximum sales charge (5.75%* of offering price)......... .71
------------
Maximum offering price to public........................ $ 12.32
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $131,392,252 and 11,521,113 shares of
beneficial interest issued and outstanding)............. $ 11.40
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $14,497,649 and 1,270,298 shares of
beneficial interest issued and outstanding)............. $ 11.41
============
*On sales of $50,000 or more, the sales charge will be
reduced.
</TABLE>
See Notes to Financial Statements
14
<PAGE> 45
STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 1998 and the
Year Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Year Ended
September 30, 1998 June 30, 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest.............................................. $ 210,537 $ 595,465
Dividends............................................. 63,559 248,561
------------ ------------
Total Income...................................... 274,096 844,026
------------ ------------
EXPENSES:
Investment Advisory Fee............................... 511,304 1,820,687
Distribution (12b-1) and Service Fees (Attributed to
Classes A, B and C of $71,432, $356,795 and $39,512,
respectively, for the three months ended 9/30/98 and
$264,715, $1,233,496 and $135,103, respectively, for
the year ended 6/30/98)............................. 467,739 1,633,314
Shareholder Services.................................. 334,464 1,106,755
Legal................................................. 11,995 15,344
Amortization of Organizational Costs.................. 5,293 20,998
Trustees' Fees and Expenses........................... 2,359 23,085
Custody............................................... 2,098 1,659
Other................................................. 89,850 326,581
------------ ------------
Total Expenses.................................... 1,425,102 4,948,423
Less Fees Waived.................................. -0- 406,180
------------ ------------
Net Expenses...................................... 1,425,102 4,542,243
------------ ------------
NET INVESTMENT LOSS................................... $ (1,151,006) $ (3,698,217)
------------- -----------
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain/Loss................................ $(16,574,335) $ 46,196,606
------------ ------------
Unrealized Appreciation/Depreciation:
Beginning of the Period............................. 70,053,002 39,121,376
End of the Period................................... 43,981,588 70,053,002
------------ ------------
Net Unrealized Appreciation/Depreciation During the
Period.............................................. (26,071,414) 30,931,626
------------ ------------
NET REALIZED AND UNREALIZED GAIN/LOSS................. $(42,645,749) $ 77,128,232
------------- -----------
NET INCREASE/DECREASE IN NET ASSETS FROM OPERATIONS... $(43,796,755) $ 73,430,015
------------- -----------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 46
STATEMENT OF CHANGES IN NET ASSETS
For the Three Months Ended September 30, 1998 and the
Years Ended June 30, 1998 and 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Year Ended Year Ended
September 30, 1998 June 30, 1998 June 30, 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss.................... $ (1,151,006) $ (3,698,217) $ (1,683,612)
Net Realized Gain/Loss................. (16,574,335) 46,196,606 (25,868,909)
Net Unrealized
Appreciation/Depreciation During the
Period............................... (26,071,414) 30,931,626 39,073,042
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES................ (43,796,755) 73,430,015 11,520,521
------------ ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.............. 65,569,488 165,163,266 183,003,605
Cost of Shares Repurchased............. (55,573,865) (145,403,812) (65,305,867)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS......................... 9,995,623 19,759,454 117,697,738
------------ ------------ ------------
TOTAL INCREASE/DECREASE IN NET
ASSETS............................... (33,801,132) 93,189,469 129,218,259
NET ASSETS:
Beginning of the Period................ 282,217,371 189,027,902 59,809,643
------------ ------------ ------------
End of the Period (Including
accumulated net investment loss of
$1,202,578, $51,572 and $34,878,
respectively)........................ $248,416,239 $282,217,371 $189,027,902
------------- ----------- -----------
</TABLE>
See Notes to Financial Statements
16
<PAGE> 47
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
Year Ended June 30 of Investment
Three Months Ended ------------------ Operations) to
Class A Shares September 30, 1998 1998 1997 June 30, 1996
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of the Period.... $13.676 $ 9.948 $9.118 $9.430
------- ------- ------ ------
Net Investment Loss....................... (.042) (.135) (.065) (.002)
Net Realized and Unrealized Gain/Loss..... (2.024) 3.863 .895 (.310)
------- ------- ------ ------
Total from Investment Operations............ (2.066) 3.728 .830 (.312)
------- ------- ------ ------
Net Asset Value, End of the Period.......... $11.610 $13.676 $9.948 $9.118
======= ======= ====== ======
Total Return (a)............................ (15.13%)** 37.49% 9.10% (3.29%)**
Net Assets at End of the Period (In
millions)................................. $ 102.5 $ 117.5 $ 84.0 $ 30.3
Ratio of Expenses to Average Net Assets*.... 1.65% 1.44% 1.30% 1.29%
Ratio of Net Investment Loss to Average Net
Assets*................................... (1.24%) (1.09%) (.81%) (.50%)
Portfolio Turnover.......................... 53%** 185% 186% 4%**
* If certain expenses had not been waived by
Van Kampen, Total Return would have been
lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets..... N/A 1.61% 1.61% 2.05%
Ratio of Net Investment Loss to Average Net
Assets.................................... N/A (1.26%) (1.12%) (1.25%)
</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.
N/A=Not Applicable
See Notes to Financial Statements
17
<PAGE> 48
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
Year Ended June 30 of Investment
Three Months Ended ------------------ Operations) to
Class B Shares September 30, 1998 1998 1997 June 30, 1996
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of the Period.... $13.461 $ 9.867 $9.112 $9.430
------- ------- ------ ------
Net Investment Loss....................... (.060) (.204) (.105) (.006)
Net Realized and Unrealized Gain/Loss..... (1.997) 3.798 .860 (.312)
------- ------- ------ ------
Total from Investment Operations............ (2.057) 3.594 .755 (.318)
------- ------- ------ ------
Net Asset Value, End of the Period.......... $11.404 $13.461 $9.867 $9.112
======= ======= ====== ======
Total Return (a)............................ (15.31%)** 36.37% 8.34% (3.39%)**
Net Assets at End of the Period (In
millions)................................. $ 131.4 $ 148.4 $ 94.2 $ 25.5
Ratio of Expenses to Average Net Assets*.... 2.42% 2.20% 2.05% 2.06%
Ratio of Net Investment Loss to Average Net
Assets*................................... (2.02%) (1.85%) (1.55%) (1.28%)
Portfolio Turnover.......................... 53%** 185% 186% 4%**
* If certain expenses had not been waived by
Van Kampen, Total Return would have been
lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets..... N/A 2.37% 2.35% 2.81%
Ratio of Net Investment Loss to Average Net
Assets.................................... N/A (2.02%) (1.86%) (2.04%)
</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.
N/A=Not Applicable
See Notes to Financial Statements
18
<PAGE> 49
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 29, 1996
(Commencement
Year Ended June 30 of Investment
Three Months Ended ------------------ Operations) to
Class C Shares September 30, 1998 1998 1997 June 30, 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of the
Period.................................. $13.470 $ 9.869 $9.113 $9.430
------- ------- ------ ------
Net Investment Loss..................... (.060) (.203) (.103) (.006)
Net Realized and Unrealized Gain/Loss... (1.997) 3.804 .859 (.311)
------- ------- ------ ------
Total from Investment Operations.......... (2.057) 3.601 .756 (.317)
------- ------- ------ ------
Net Asset Value, End of the Period........ $11.413 $13.470 $9.869 $9.113
======= ======= ====== ======
Total Return (a).......................... (15.29%)** 36.47% 8.34% (3.39%)**
Net Assets at End of the Period (In
millions)............................... $ 14.5 $ 16.4 $ 10.8 $ 3.9
Ratio of Expenses to Average Net
Assets*................................. 2.42% 2.20% 2.05% 2.05%
Ratio of Net Investment Loss to Average
Net Assets*............................. (2.01%) (1.85%) (1.54%) (1.28%)
Portfolio Turnover........................ 53%** 185% 186% 4%**
* If certain expenses had not been waived
by Van Kampen, Total Return would have
been lower and the ratios would have
been as follows:
Ratio of Expenses to Average Net Assets... N/A 2.36% 2.35% 2.81%
Ratio of Net Investment Loss to Average
Net Assets.............................. N/A (2.02%) (1.85%) (2.04%)
</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.
N/A=Not Applicable
See Notes to Financial Statements
19
<PAGE> 50
NOTES TO FINANCIAL STATEMENTS
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Aggressive Growth Fund (the "Fund") is organized as a separate
diversified series of Van Kampen Equity Trust (the "Trust"), a Delaware business
trust, which is registered as an open-end management investment company under
the Investment Company Act of 1940, as amended. The Fund's investment objective
is to seek capital growth by investing primarily in a diversified portfolio of
common stocks and other equity securities. The Fund commenced investment
operations on May 29, 1996 with three classes of common shares, Class A, Class B
and Class C. In July, 1998, the Fund's Board of Trustees approved a change in
the Fund's fiscal year end from June 30 to March 31. As a result, this financial
report reflects the three-month period commencing on July 1, 1998, and ending on
September 30, 1998.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Investments in securities not listed on a securities exchange are valued based
on their last sales price or, if not available, their fair value as determined
using procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are collateralized by the underlying debt security. The
Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of
20
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
the custodian bank. The seller is required to maintain the value of the
underlying security at not less than the repurchase proceeds due the Fund.
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class of
shares.
D. ORGANIZATIONAL COSTS--The Fund will reimburse Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $105,000. These costs are being amortized
on a straight line basis over the 60 month period ending May 28, 2001. The
Adviser has agreed that in the event any of the initial shares of the Fund
originally purchased by Van Kampen are redeemed by the Fund during the
amortization period, the Fund will be reimbursed for any unamortized
organizational costs in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.
E. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At September 30, 1998, for federal income tax purposes, cost of long- and
short-term investments is $208,321,534; the aggregate gross unrealized
appreciation is $54,808,627 and the aggregate gross unrealized depreciation is
$10,827,039 resulting in net unrealized appreciation on long- and short-term
investments of $43,981,588.
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.
For the year ended June 30, 1998, short-term capital gains totaling
$124,267 were offset against the 1998 tax basis net operating loss resulting in
a reclassification from accumulated net realized gains to accumulated net
investment loss. The $3,557,256 of remaining tax basis net operating loss was
reclassified from accumulated net operating loss to capital.
21
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $500 million...................................... .75 of 1%
Next $500 million....................................... .70 of 1%
Over $1 billion......................................... .65 of 1%
</TABLE>
For the three months ended September 30, 1998 and the year ended June 30,
1998, the Fund recognized expenses of approximately $1,800 and $4,600,
respectively, 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 three months ended September 30, 1998 and the year ended June 30,
1998, the Fund recognized expenses of approximately $49,900 and $86,100,
respectively, representing Van Kampen's cost of providing accounting and legal
services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the three months ended
September 30, 1998 and the year ended June 30, 1998, the Fund recognized
expenses of approximately $265,700 and $865,100, respectively. Beginning in
1998, the transfer agency fees are determined through negotiations with the
Fund's Board of Trustees and are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
At September 30, 1998, Van Kampen owned 100 shares each of Classes A, B and
C.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
22
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
At September 30, 1998, capital aggregated $80,316,283, $110,215,433 and
$12,347,848 for Classes A, B, and C, respectively. For the three months ended
September 30, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A..................................... 3,912,491 $ 49,307,890
Class B..................................... 1,171,234 14,476,015
Class C..................................... 141,098 1,785,583
---------- ------------
Total Sales................................... 5,224,823 $ 65,569,488
========== ============
Repurchases:
Class A..................................... (3,669,826) $(46,366,848)
Class B..................................... (673,923) (8,169,028)
Class C..................................... (86,807) (1,037,989)
---------- ------------
Total Repurchases............................. (4,430,556) $(55,573,865)
========== ============
</TABLE>
At June 30, 1998, capital aggregated $77,375,241, $103,908,446 and
$11,600,254 for Classes A, B, and C, respectively. For the year ended June 30,
1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................... 9,586,041 $ 113,481,993
Class B................................... 3,875,397 46,006,833
Class C................................... 476,868 5,674,440
----------- -------------
Total Sales................................. 13,938,306 $ 165,163,266
=========== =============
Repurchases:
Class A................................... (9,437,958) $(112,683,409)
Class B................................... (2,400,562) (28,531,040)
Class C................................... (359,118) (4,189,363)
----------- -------------
Total Repurchases........................... (12,197,638) $(145,403,812)
=========== =============
</TABLE>
23
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
At June 30, 1997, capital aggregated $78,128,681, $88,239,951 and
$10,313,111 for Classes A, B, and C, respectively. For the year ended June 30,
1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................... 9,770,450 $ 92,970,307
Class B................................... 8,682,864 81,053,761
Class C................................... 950,840 8,979,537
----------- -------------
Total Sales................................. 19,404,154 $ 183,003,605
=========== =============
Repurchases:
Class A................................... (4,658,667) $ (44,877,839)
Class B................................... (1,934,698) (17,864,738)
Class C................................... (284,968) (2,563,290)
----------- -------------
Total Repurchases........................... (6,878,333) $ (65,305,867)
=========== =============
</TABLE>
Class B and C Shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B Shares will
automatically convert to Class A Shares after the eighth year following
purchase. The CDSC for Class B and C shares will be imposed on most redemptions
made within five years of the purchase for Class B and one year of the purchase
for Class C as detailed in the following schedule.
<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 three months ended September 30, 1998 and the year ended June 30,
1998, Van Kampen, as Distributor for the Fund, received commissions on sales of
the Fund's Class A shares of approximately $38,400 and $140,600, respectively,
and CDSC on redeemed shares of approximately $87,000 and $412,300, respectively.
Sales charges do not represent expenses of the Fund.
24
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
For the three months ended September 30, 1998, the cost of purchases and
proceeds from sales of investments, excluding short-term investments, were
$132,959,729 and $126,678,258, respectively. For the year ended June 30, 1998,
the cost of purchases and proceeds from sales of investments, excluding
short-term investments, were $447,463,505 and $431,097,637, respectively.
5. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the three months ended September 30, 1998 and the year ended June 30, 1998,
are payments retained by Van Kampen of approximately $286,600 and $983,700,
respectively.
6. YEAR 2000 COMPLIANCE
Van Kampen utilizes a number of computer programs across its entire operation
relying on both internal software systems as well as external software systems
provided by third parties. In 1996 Van Kampen initiated a CountDown 2000 Project
to review both the internal systems and external vendor connections. The goal of
this project is to position its business to continue unaffected as a result of
the century change. At this time, there can be no assurance that the steps taken
will be sufficient to avoid any adverse impact to the Fund, but Van Kampen does
not anticipate that the move to Year 2000 will have a material impact on its
ability to continue to provide the Fund with service at current levels. In
addition, it is possible that the securities markets in which the Fund invests
may be detrimentally affected by computer failures throughout the financial
services industry beginning January 1, 2000. Improperly functioning trading
systems may result in settlement problems and liquidity issues.
25
<PAGE> 56
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
U.S. Real Estate
Utility
Value
International/Global
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our web site at
WWW.VANKAMPEN.COM -- to view a prospectus, select Download Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)
- - e-mail us by visiting
WWW.VANKAMPEN.COM and selecting Contact Us
26
<PAGE> 57
VAN KAMPEN AGGRESSIVE GROWTH FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
PAUL G. YOVOVICH
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief
Financial Officer
CURTIS W. MORRELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR
SERVICES INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1998 All rights reserved.
SM denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After March 31, 1999 the report, if used with prospective
investors, must be accompanied by a quarterly performance update.
27
<PAGE> 58
VAN KAMPEN AGGRESSIVE GROWTH FUND
THIS PAGE INTENTIONALLY LEFT BLANK
28
<PAGE> 59
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Glossary of Terms................................ 4
Portfolio Management Review...................... 5
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 12
Statement of Operations.......................... 13
Statement of Changes in Net Assets............... 14
Financial Highlights............................. 15
Notes to Financial Statements.................... 18
</TABLE>
GF SAR 11/98
<PAGE> 60
LETTER TO SHAREHOLDERS
October 22, 1998
Dear Shareholder,
These continue to be dramatic and
highly unusual times for global
financial markets. Despite a severe
crisis of confidence in many emerging
economies, the United States has been
relatively unscathed by the turmoil.
However, volatility increased in the
U.S. equity market as the Asian crisis
spread to Russia and Latin America
during the reporting period.
Fixed-income investors were not
entirely unaffected, as volatility
forced yield spreads to widen between
Treasuries and high-yield securities, corporate bonds, and mortgage-backed
securities.
We expect that volatility will remain high until the situation overseas
stabilizes. In this environment, it is important to stay focused on long-term
investment goals and to view daily fluctuations as relatively minor in the
larger picture. As we explain elsewhere in this letter, the U.S. economy remains
among the healthiest in the world, and Federal Reserve policymakers have
demonstrated an ability to make prudent decisions with regard to monetary
policy. These factors bode well for investors during the months ahead.
ECONOMIC OVERVIEW
Growth in the U.S. economy moderated during the reporting period as fallout
from the global financial crisis finally began to hit home. Weak demand for
American goods in Asia and Latin America caused the U.S. trade deficit to hit a
record $56.5 billion during the second quarter, undermining corporate profits.
Weak earnings, in turn, caused job growth to slow and unemployment to increase
modestly from the 28-year low set earlier this year. Manufacturing activity fell
in September for the fourth consecutive month.
Psychological factors played a role in the deceleration of U.S. economic
growth. In a recent speech, Federal Reserve Chairman Alan Greenspan noted that
Americans suddenly have acquired a strong aversion to risk that had been notably
absent in recent years. This risk-averse attitude manifested itself in slower
retail sales growth and a mild drop in housing activity. Also, the clear
preference among investors for safety and liquidity caused interest rates on
lower-quality debt to balloon, leading to fears of a credit crunch for U.S.
businesses. Such concerns were at least partially responsible for the Fed's
decision to cut short-term interest rates by 0.25 percent on September 29 and
again on October 15.
Despite the slowdown, we believe that the American economy remains
fundamentally sound. Inflation at the consumer level increased by just 1.4
percent during the 12 months through September, while wholesale prices actually
fell during the same period.
MARKET OVERVIEW
After a steady eight-year climb, the U.S. equity market dropped sharply
during the third quarter. From its peak on July 17, the S&P 500-Stock Index fell
19.3 percent
Continued on page 2
1
[PHOTO]
DENNIS J. MCDONNELL AND DON G. POWELL
<PAGE> 61
through August 31 before beginning a modest rally. For the three months through
September, the Dow Jones Industrial Average slid 12.4 percent, the index's worst
performance since 1990. Small-capitalization stocks were even harder hit, with
the Russell 2000-Stock Index falling 20.5 percent during the quarter.
Several factors combined to produce the abrupt sell-off in U.S. stocks.
First, the collapse of the Russian ruble upset the market for emerging market
securities and financial concerns spread to Latin America, a major U.S. export
market. Also, the continuing lack of progress at resolving a severe banking
crisis in Japan stalled prospects for an economic recovery in many Asian
nations. Finally, the near certainty of an economic slowdown in the United
States caused investors to worry about corporate profits.
Despite the broad-based nature of the decline, defensive sectors such as
tobacco, drugs, electric utilities, and food companies each posted positive
returns during the quarter. Conversely, cyclical industries like clothing,
securities brokers, and heavy machinery posted large losses. Concerns about the
possible impact of the equity market's roughly $2 trillion decline in consumer
spending likely played a role in the Fed's recent decision to cut interest
rates.
OUTLOOK
As we've noted, the stock market had enjoyed an eight-year advance until the
decline from the peak in July. Whether market historians will declare this
period to have been a bear market or correction is not clear. Semantics aside,
our focus remains on managing through this volatile market and keeping focused
on our longer-term investment goals.
It is our view that the decline will turn out to be relatively mild by
historical standards. While conditions in the global economy remain highly
uncertain, the domestic backdrop includes such favorable factors as a bias
toward a more liberal monetary policy, benign inflation, and low bond yields. We
believe that in this environment it is unlikely that stocks will enter a severe
decline from current levels.
We caution that volatile conditions are likely to linger. Sectors of the
market that had become the most highly valued have yet to fall in concert with
broader indices. Often, declines don't end until those stocks that had been the
leaders of the previous uptrend encounter profit-taking as well. Accordingly, we
believe that the next bull phase will be set to begin when market leadership
becomes more equally balanced across all capitalization and style sectors.
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
2
<PAGE> 62
PERFORMANCE RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998
VAN KAMPEN GROWTH FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Three-month total return based on
NAV(1)................................. (22.85%) (23.00%) (23.00%)
One-year total return(2)................. (16.42%) (16.17%) (12.83%)
Life-of-Fund average annual total
return(2).............................. 25.62% 25.99% 27.70%
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. Fund shares, when redeemed, may be worth more
or less than their original cost.
Since the Fund's inception, certain fees were waived and expenses were
reimbursed by the Fund's adviser which had a material effect on the Fund's total
return.
The Fund's investments in less seasoned companies, special situations involving
new management, special projects and techniques, unusual developments, mergers,
or liquidations involve greater risks than more conservative investments.
Securities of foreign issuers may magnify volatility due to changes in foreign
exchange rates, the political and economic uncertainties in foreign countries,
and the potential lack of liquidity, government supervision, and regulation.
Market forecasts provided in this report may not necessarily come to pass.
On July 31, 1998, the Fund's Board of Trustees voted to change the Fund's fiscal
year end from June 30 to March 31. As a result, this semi-annual report reflects
the 3-month period commencing on July 1, 1998 and ending on September 30, 1998.
3
<PAGE> 63
GLOSSARY OF TERMS
CLASS A SHARES: When Class A shares of a fund are purchased, the share price
includes the net asset value plus a one-time sales charge (or "load").
Generally, there is no redemption fee (Contingent Deferred Sales Charge).
DOW JONES INDUSTRIAL AVERAGE: The oldest and most widely recognized stock market
average, which reflects the performance of 30 actively traded stocks of
well-established, blue-chip companies.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
MARKET CAPITALIZATION: The size of a company, as measured by the value of its
stock. Morningstar, an independent mutual fund rating service, defines
market capitalization categories as follows:
SMALL-CAP: less than $1 billion
MID-CAP: between $1 billion and $5 billion
LARGE-CAP: more than $5 billion
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from its total assets and dividing this amount by the
number of shares outstanding. The NAV does not include any initial or
contingent deferred sales charge.
STANDARD & POOR'S 500-STOCK INDEX: A broad-based measurement of changes in
stock-market conditions based on the average performance of 500 widely held
common stocks. The index, which tracks industrial, transportation,
financial, and utility stocks, provides a guide to the overall health of
the U.S. stock market. The S&P 500 is a much broader index than the Dow
Jones Industrial Average and reflects the stock market more accurately.
VALUATION: The estimated or determined worth of a stock, based on financial
measures such as the stock's current price relative to earnings, revenue,
book value, and cash flow.
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
4
<PAGE> 64
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN GROWTH FUND
We recently spoke to the management team of the Van Kampen Growth Fund about the
key events and economic forces that shaped the markets during the reporting
period. The team includes Jeff D. New, portfolio manager; Michael Davis,
portfolio comanager; Mary Jayne Maly, portfolio comanager; and Stephen L. Boyd,
chief investment officer for equity investments.
The Fund's fiscal year end was recently changed from June 30 to March 31.
Going forward, your semiannual reports will be dated September 30, and your
annual reports will be dated March 31. The following interview discusses the
Fund's performance during the three-month period since your last report, from
June 30, 1998, to September 30, 1998.
Q
HOW WOULD YOU CHARACTERIZE THE STOCK MARKET ENVIRONMENT FOR THE FUND
DURING THE REPORTING PERIOD?
A
The U.S. stock market was exceptionally volatile during the three-month
reporting period. On July 17 the Dow Jones Industrial Average reached a
record high, reflecting investors' confidence in continued economic growth
and low inflation. Trouble was on the horizon, however, as significantly
deteriorating economic conditions in Asia, Russia, and Latin America led to
fears that U.S. corporate earnings would be negatively affected by companies'
exposure to international markets. By August 31 the Dow had fallen 19 percent
from its high.
With inflation in check and growth slowing but still healthy, the U.S.
economy remained fundamentally sound. Investors recognized this fact and
returned to the stock market in September, slightly reducing the losses incurred
during the previous weeks. The Dow nevertheless lost 12 percent during the
quarter. As has been true for the past several years, large capitalization
stocks continued to outperform smaller capitalization stocks, reflecting
investors' current preference for established companies with more stable
earnings prospects. This disparity is apparent when comparing the performance of
the Russell 1000 during the reporting period to that of the Russell 2000. The
Russell 1000--the stock market's 1,000 largest companies--lost 10.7 percent
between June 30 and September 30, while the Russell 2000--the market's 2,000
next-largest companies--declined 20.5 percent during the same period.
Q
GIVEN THIS MARKET CLIMATE, HOW DID YOU MANAGE THE FUND TO ACHIEVE ITS
OBJECTIVE?
A
Our strategy for managing the Fund remains consistent: We seek to find
companies with a combination of positive future fundamentals and
attractive current prices. By our definition, a company with positive
future fundamentals includes at least one 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. This approach to stock selection has been effective, so we continue
to rely upon this strategy. However, we are currently even more diligent in
5
<PAGE> 65
applying this strategy, as fewer companies currently meet our strict selection
criteria because of a slowing economic environment.
Q
CAN YOU NAME SOME STOCKS THAT HELPED THE FUND'S PERFORMANCE?
A
Most growth stocks did not perform well during the period. The Fund's
successes included a handful of technology holdings. EMC Corp., a leader
in data storage products, gained 28 percent during the reporting period
and was one of the Fund's best performers. Another technology standout was
Waters Corp., which specializes in high performance liquid chromatography
instruments; its stock price rose 14 percent during the period. BMC Software, a
leading global provider of systems management software solutions, also performed
well. A number of nontechnology stocks saw their stock prices rise, including
Schering-Plough (pharmaceutical and health care products) and Safeway (food
supermarket).
As mentioned in our last report, we have been optimistic about Philip
Morris, which had not performed well earlier in the year because of ongoing
litigation involving the entire tobacco industry. We continued to hold the stock
because the company's fundamentals were still strong and the price was extremely
attractive. Our patience was rewarded during the reporting period, as Philip
Morris gained 17 percent. The gain was due to several factors: a low valuation,
the company's attractiveness to investors seeking a more defensive posture, and
less pessimism about the company's potential legal liability.
Of course, not all stocks in the portfolio performed as favorably, and there
is no guarantee that any of these stocks will perform as well in the future. For
additional Fund portfolio highlights, please refer to page 8.
Q
WHAT STOCKS WORKED AGAINST THE FUND?
A
A number of stocks did not perform as well as expected. We owned ESC
Medical Systems, a stock whose value declined 79 percent due to
disappointing earnings news during the period's final week. We continue to
own the stock but, consistent with our discipline, did reduce our position
because the company's fundamental outlook had deteriorated.
Retail companies in general fared poorly during the reporting period,
because investors were uncertain if recent stock market losses would negatively
affect consumers' spending habits. An example of this phenomenon can be found in
Ross Stores, a discount apparel retailer. Despite the company's strong
fundamentals, its stock price fell signifi-cantly during the period. Another of
the Fund's holdings, Brylane, a women's and men's apparel retailer, declined 65
percent as a result of poor sales. We sold the stock once we saw signs of
declining fundamentals--helping to limit the Fund's losses.
Other companies that performed poorly were United Road Services (auto
transportation and towing) and CKE Restaurants (fast-food chain operator).
Despite these firms' recent poor stock performance, we continue to hold these
securities because they fit our investment discipline of strong fundamentals at
an attractive price.
6
<PAGE> 66
Q
HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A
Overall during the reporting period, the Fund had a total return of -22.85
percent(1) (Class A shares at net asset value). By comparison, the
Standard & Poor's 500-Stock Index had a return of -9.9 percent, and the
Lipper Growth Fund Index, which more closely resembles the Fund, had a return of
- -11.4 percent. The S&P 500-Stock Index is a broad-based, unmanaged index that
reflects the general performance of the stock market, and the Lipper Growth Fund
Index reflects the average performance of the 30 largest growth funds. Keep in
mind that these indices are statistical composites that do not include any
commissions or sales charges that would be paid by an investor purchasing the
securities or investments represented by these indices. Please refer to the
chart on page 3 for additional Fund performance results.
One reason for our weaker performance during the past three months is that
some companies experienced rapid and unexpected negative fundamental
developments, leading to significant stock price declines before we could take
action. Another reason that the Fund performed poorly is that the Growth Fund
invests predominantly in small- and mid-cap stocks, which, as mentioned earlier,
significantly underperformed large-cap stocks during the reporting period. It is
impossible to tell when small- and mid-cap stocks will begin to outperform
large-cap stocks, but over the long term we believe that companies with strong
fundamentals at attractive valuations will perform well regardless of their
size.
Q
WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A
While the U.S. economy is currently still growing and experiencing low
inflation, we don't believe the full impact of Asian, Russian, and Latin
American economic difficulties has been felt yet on U.S. companies. As
domestic firms begin to report their third quarter 1998 earnings, we expect to
see more evidence that companies have been negatively affected by economic
weakness abroad. In the near term, this will likely result in continued
volatility for the stock market and the Fund. Over the long term, we expect that
investors will continue to seek companies with strong fundamentals, consistent
track records, promising growth prospects, and attractive valuations. The Growth
Fund, with its emphasis on identifying such companies, should be well
positioned. The last few months have been difficult for the Fund, but we intend
to stick with our investment discipline.
JEFF D. NEW
Jeff D. New
Portfolio Manager
MARY JAYNE MALY
Mary Jayne Maly
Portfolio Comanager
MICHAEL DAVIS
Michael Davis
Portfolio Comanager
STEPHEN L. BOYD
Stephen L. Boyd
Chief Investment Officer
Equity Investments
Please see footnotes on page 3
7
<PAGE> 67
PORTFOLIO HIGHLIGHTS
VAN KAMPEN GROWTH FUND
PORTFOLIO HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOP TEN HOLDINGS THESE INVESTMENTS
AS OF SEPTEMBER 30, 1998 THREE MONTHS AGO
<S> <C> <C>
EMC Corp. ................ 4.1% .................. 2.3%
Waste Management, Inc. ... 3.4% .................. N/A
Avt Corp. ................ 3.2% .................. N/A
Safeway, Inc. ............ 3.0% .................. 1.9%
TJX Cos., Inc. ........... 2.4% .................. 2.4%
Network Associates,
Inc. ................... 2.3% .................. 2.2%
CKE Restaurants, Inc...... 2.3% .................. 2.3%
Bristol-Myers Squibb
Co. .................... 2.3% .................. 1.8%
Lincare Holdings, Inc. ... 2.3% .................. 1.8%
Waters Corp. ............. 2.2% .................. 1.4%
</TABLE>
N/A = Not Applicable
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998 AS OF JUNE 30, 1998
<S> <C> <C> <C>
Technology................. 30% Technology................. 26%
Health Care................ 20% Health Care................ 25%
Consumer Distribution...... 20% Consumer Distribution...... 17%
Consumer Services.......... 13% Consumer Services.......... 13%
Finance.................... 7% Finance.................... 8%
</TABLE>
8
<PAGE> 68
PORTFOLIO OF INVESTMENTS
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 94.4%
CONSUMER DISTRIBUTION 18.5%
Chico's Fas, Inc. (a)....................................... 99,000 $ 1,596,375
Elder-Beerman Stores Corp. (a).............................. 59,000 1,025,125
Goody's Family Clothing, Inc. (a)........................... 60,000 720,000
Ingram Micro, Inc., Class A (a)............................. 29,000 1,553,312
Lexmark International Group, Inc., Class A (a).............. 12,700 880,269
Lowe's Cos., Inc............................................ 42,800 1,361,575
Pacific Sunwear of California, Inc. (a)..................... 67,500 1,501,875
Rite Aid Corp............................................... 48,000 1,704,000
Ross Stores, Inc............................................ 39,000 1,116,375
Safeway, Inc. (a)........................................... 72,000 3,339,000
Saks, Inc................................................... 26,500 594,594
TJX Cos., Inc............................................... 150,000 2,671,875
Trans World Entertainment Corp. (a)......................... 75,000 1,368,750
Wal-Mart Stores, Inc........................................ 38,000 2,075,750
------------
21,508,875
------------
CONSUMER NON-DURABLES 2.6%
Philip Morris Cos., Inc..................................... 46,000 2,118,875
Tommy Hilfiger Corp. (a).................................... 21,000 861,000
------------
2,979,875
------------
CONSUMER SERVICES 12.1%
AccuStaff, Inc. (a)......................................... 63,000 917,438
Brinker International, Inc. (a)............................. 100,000 1,875,000
Capstar Broadcasting Corp., Class A (a)..................... 26,300 406,006
CEC Entertainment, Inc. (a)................................. 56,000 1,134,000
Cendant Corp. (a)........................................... 76,000 883,500
Chancellor Media Corp., Class A (a)......................... 59,000 1,969,125
CKE Restaurants, Inc........................................ 84,000 2,499,000
Ebay Inc. (a)............................................... 8,500 383,031
United Road Services, Inc. (a).............................. 140,000 1,671,250
Young & Rubicam, Inc. (a)................................... 80,000 2,270,000
------------
14,008,350
------------
FINANCE 7.0%
Affiliated Managers Group, Inc. (a)......................... 42,000 756,000
Allstate Corp............................................... 36,000 1,500,750
Conseco, Inc................................................ 37,500 1,146,094
Finova Group, Inc........................................... 35,000 1,747,812
</TABLE>
See Notes to Financial Statements
9
<PAGE> 69
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
Star Banc Corp.............................................. 18,000 $ 1,190,250
U.S. Bancorp................................................ 48,800 1,735,450
------------
8,076,356
------------
HEALTHCARE 19.0%
Ameripath, Inc. (a)......................................... 130,000 1,933,750
Amgen, Inc. (a)............................................. 20,000 1,511,250
Bristol-Myers Squibb Co..................................... 24,000 2,493,000
ESC Medical Systems Ltd..................................... 126,000 885,938
Guidant Corp................................................ 20,000 1,485,000
HBO & Co.................................................... 32,000 924,000
Health Management Assn., Inc., Class A (a).................. 88,500 1,615,125
Healthsouth Corp. (a)....................................... 101,000 1,066,812
Idexx Laboratories, Inc. (a)................................ 41,000 978,875
Lincare Holdings, Inc. (a).................................. 64,000 2,480,000
Mylan Laboratories, Inc..................................... 60,000 1,770,000
Schering-Plough Corp........................................ 22,000 2,278,375
Total Renal Care Holdings, Inc. (a)......................... 74,760 1,794,240
Universal Health Services, Inc., Class B (a)................ 20,700 864,225
------------
22,080,590
------------
PRODUCER MANUFACTURING 3.2%
Waste Management, Inc....................................... 77,000 3,700,812
------------
RAW MATERIALS/PROCESSING INDUSTRIES 1.5%
Safeskin Corp. (a).......................................... 56,000 1,767,500
------------
TECHNOLOGY 28.1%
America Online, Inc. (a).................................... 13,000 1,446,250
Ascend Communications, Inc. (a)............................. 42,000 1,911,000
Avt Corp. (a)............................................... 154,000 3,484,250
BMC Software, Inc. (a)...................................... 40,000 2,402,500
Check Point Software Tech (a)............................... 37,000 735,375
Computer Associates Intl, Inc............................... 35,000 1,295,000
Computer Sciences Corp. (a)................................. 38,000 2,071,000
Compuware Corp. (a)......................................... 33,000 1,942,875
EMC Corp. (a)............................................... 78,000 4,460,625
Microsoft Corp. (a)......................................... 13,600 1,496,850
Network Associates, Inc. (a)................................ 72,000 2,556,000
Software Ag Systems, Inc.................................... 25,600 435,200
Softworks, Inc. (a)......................................... 180,000 900,000
Sterling Software, Inc. (a)................................. 73,000 2,012,062
Storage Technology Corp..................................... 45,000 1,144,688
</TABLE>
See Notes to Financial Statements
10
<PAGE> 70
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Walker Interactive Systems (a).............................. 120,000 $ 1,046,250
Waters Corp. (a)............................................ 36,000 2,412,000
World Access, Inc. (a)...................................... 40,000 810,000
------------
32,561,925
------------
TRANSPORTATION 0.9%
AMR Corp. (a)............................................... 20,000 1,108,750
------------
UTILITIES 1.5%
Transwitch Corp. (a)........................................ 115,000 1,717,813
------------
TOTAL LONG-TERM INVESTMENTS 94.4%
(Cost $103,372,060).............................................. 109,510,846
REPURCHASE AGREEMENT 5.8%
DLJ Mortgage Acceptance Corp., ($6,625,000 par collateralized by
U.S. Government obligations in a pooled cash account, dated
9/30/98, to be sold on 10/01/98 at $6,710,987)
(Cost $6,710,000)................................................ 6,710,000
------------
TOTAL INVESTMENTS 100.2%
(Cost $110,082,060).............................................. 116,220,846
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2%)........................ (260,715)
------------
NET ASSETS 100.0%................................................... $115,960,131
-----------
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
11
<PAGE> 71
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $110,082,060)....................... $116,220,846
Cash........................................................ 2,005
Receivables:
Investments Sold.......................................... 5,643,200
Fund Shares Sold.......................................... 102,287
Dividends................................................. 64,437
Unamortized Organizational Costs............................ 18,090
Other....................................................... 209,914
------------
Total Assets............................................ 122,260,779
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 5,658,880
Fund Shares Repurchased................................... 304,023
Distributor and Affiliates................................ 144,313
Investment Advisory Fee................................... 73,922
Accrued Expenses............................................ 71,133
Trustees' Deferred Compensation and Retirement Plans........ 48,377
------------
Total Liabilities....................................... 6,300,648
------------
NET ASSETS.................................................. $115,960,131
----------
NET ASSETS CONSIST OF:
Capital..................................................... $108,678,368
Net Unrealized Appreciation................................. 6,138,786
Accumulated Net Realized Gain............................... 1,716,813
Accumulated Net Investment Loss............................. (573,836)
------------
NET ASSETS.................................................. $115,960,131
----------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $49,320,775 and 2,725,518 shares of
beneficial interest issued and outstanding)............. $ 18.10
Maximum sales charge (5.75%* of offering price)......... 1.10
------------
Maximum offering price to public........................ $ 19.20
----------
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $59,877,248 and 3,357,009 shares of
beneficial interest issued and outstanding)............. $ 17.84
----------
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $6,762,108 and 379,108 shares of
beneficial interest issued and outstanding)............. $ 17.84
----------
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
12
<PAGE> 72
STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 1998
and the Year Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Year Ended
September 30, 1998 June 30, 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................ $ 98,848 $ 466,773
Interest................................................. 73,581 421,677
----------- -----------
Total Income......................................... 172,429 888,450
----------- -----------
EXPENSES:
Investment Advisory Fee.................................. 257,123 1,014,540
Distribution (12b-1) and Service Fees (Attributed to
Class A, B, and C of $36,326, $177,566 and $20,089,
respectively, for the three months ended 9/30/98 and
$148,958, $669,433 and $87,301, respectively, for the
year ended 6/30/98).................................... 233,981 905,692
Shareholder Services..................................... 158,630 574,734
Legal.................................................... 10,757 14,323
Trustees' Fees and Expenses.............................. 2,678 24,916
Amortization of Organizational Costs..................... 2,016 7,997
Custody.................................................. 1,207 2,177
Other.................................................... 75,207 168,777
----------- -----------
Total Expenses....................................... 741,599 2,713,156
Less Fees Waived..................................... 42,465 386,039
----------- -----------
Net Expenses......................................... 699,134 2,327,117
----------- -----------
NET INVESTMENT LOSS...................................... $ (526,705) $(1,438,667)
=========== ===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................ $(1,661,371) $12,625,540
Futures................................................ -0- 278,325
----------- -----------
Net Realized Gain/Loss................................... (1,661,371) 12,903,865
----------- -----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................ 38,993,144 7,542,991
End of the Period...................................... 6,138,786 38,993,144
----------- -----------
Net Unrealized Appreciation/Depreciation During the
Period................................................. (32,854,358) 31,450,153
----------- -----------
NET REALIZED AND UNREALIZED GAIN/LOSS.................... $(34,515,729) $44,354,018
=========== ===========
NET INCREASE/DECREASE IN NET ASSETS FROM OPERATIONS...... $(35,042,434) $42,915,351
=========== ===========
</TABLE>
See Notes to Financial Statements
13
<PAGE> 73
STATEMENT OF CHANGES IN NET ASSETS
For the Three Months Ended September 30, 1998
and the Years Ended June 30, 1998 and 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Year Ended Year Ended
September 30, 1998 June 30, 1998 June 30, 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss......................... $ (526,705) $ (1,438,667) $ (86,224)
Net Realized Gain/Loss...................... (1,661,371) 12,903,865 (1,757,194)
Net Unrealized Appreciation/Depreciation
During the Period......................... (32,854,358) 31,450,153 7,484,772
----------- ------------ ------------
Change in Net Assets from Operations........ (35,042,434) 42,915,351 5,641,354
----------- ------------ ------------
Distributions from Net Realized Gain/Loss... -0- (6,327,980) (23,514)
Distributions in Excess of Net Realized
Gain/Loss................................. -0- -0- (1,799)
----------- ------------ ------------
Distributions from and in Excess of Net
Realized Gain*.......................... -0- (6,327,980) (25,313)
Return of Capital Distribution*............. -0- -0- (21,887)
----------- ------------ ------------
Total Distributions....................... -0- (6,327,980) (47,200)
----------- ------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................ (35,042,434) 36,587,371 5,594,154
----------- ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................... 7,021,558 28,476,433 122,206,757
Net Asset Value of Shares Issued Through
Dividend Reinvestment..................... -0- 5,825,754 2,031
Cost of Shares Repurchased.................. (9,869,010) (33,462,669) (11,696,360)
----------- ------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.............................. (2,847,452) 839,518 110,512,428
----------- ------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS....... (37,889,886) 37,426,889 116,106,582
NET ASSETS:
Beginning of the Period..................... 153,850,017 116,423,128 316,546
----------- ------------ ------------
End of the Period (Including accumulated net
investment loss of $573,836, $47,131, and
$23,118 respectively)..................... $115,960,131 $153,850,017 $116,423,128
=========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Year Ended Year Ended
*Distributions by Class September 30, 1998 June 30, 1998 June 30, 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Distributions from and in Excess of
Net Realized Gain:
Class A Shares.................... $ -0- $(2,743,327) $(24,246)
Class B Shares.................... -0- (3,159,670) (537)
Class C Shares.................... -0- (424,983) (530)
----------- ----------- -------
$ -0- $(6,327,980) $(25,313)
=========== =========== =======
Return of Capital Distribution:
Class A Shares.................... $ -0- $ -0- $(20,964)
Class B Shares.................... -0- -0- (465)
Class C Shares.................... -0- -0- (458)
----------- ----------- -------
$ -0- $ -0- $(21,887)
=========== =========== =======
</TABLE>
See Notes to Financial Statements
14
<PAGE> 74
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
Three Months (Commencement of
Ended Year Ended Year Ended Investment Operations)
Class A Shares September 30, 1998 June 30, 1998 June 30, 1997(a) to June 30, 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning
of the Period............ $23.463 $17.878 $13.696 $10.000
------- ------- ------- -------
Net Investment
Income/Loss............ (.058) (.136) .031 (.044)
Net Realized and
Unrealized Gain/Loss... (5.309) 6.711 4.810 3.740
------- ------- ------- -------
Total from Investment
Operations............... (5.367) 6.575 4.841 3.696
------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Realized
Gain................... -0- .990 .353 -0-
Return of Capital
Distribution........... -0- -0- .306 -0-
------- ------- ------- -------
Total Distributions....... -0- .990 .659 -0-
------- ------- ------- -------
Net Asset Value, End of
the Period............... $18.096 $23.463 $17.878 $13.696
======= ======= ======= =======
Total Return* (b)......... (22.85%)** 38.52% 36.00% 37.00%**
Net Assets at End of the
Period (In millions)..... $49.3 $64.9 $53.1 $.1
Ratio of Expenses to
Average Net Assets*...... 1.60% 1.30% 1.32% 1.46%
Ratio of Net Investment
Income to Average Net
Assets*.................. (1.10%) (.64%) .19% (.79%)
Portfolio Turnover........ 16%** 125% 139% 94%**
* If certain fees had not
been assumed by Van
Kampen, Total Return
would have been lower
and the ratios would
have been as follows:
Ratio of Expenses to
Average Net Assets....... 1.73% 1.58% 2.31% 15.69%
Ratio of Net Investment
Income to Average Net
Assets................... (1.22%) (.92%) (.80%) (15.02%)
</TABLE>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
See Notes to Financial Statements
15
<PAGE> 75
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
Three Months (Commencement of
Ended Year Ended Year Ended Investment Operations)
Class B Shares September 30, 1998 June 30, 1998 June 30, 1997(a) to June 30, 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period............ $23.173 $17.796 $13.695 $10.000
------- ------- ------- -------
Net Investment Loss...... (.099) (.270) (.093) (.045)
Net Realized and
Unrealized Gain/Loss... (5.238) 6.637 4.853 3.740
------- ------- ------- -------
Total from Investment
Operations............... (5.337) 6.367 4.760 3.695
------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Realized
Gain................... -0- .990 .353 -0-
Return of Capital
Distribution........... -0- -0- .306 -0-
------- ------- ------- -------
Total Distributions....... -0- .990 .659 -0-
------- ------- ------- -------
Net Asset Value, End of
the Period............... $17.836 $23.173 $17.796 $13.695
======= ======= ======= =======
Total Return* (b)......... (23.00%)** 37.56% 35.32% 37.00%**
Net Assets at End of the
Period (In millions)..... $59.9 $79.7 $55.0 $.1
Ratio of Expenses to
Average Net Assets*...... 2.37% 2.05% 2.07% 1.46%
Ratio of Net Investment
Income to Average Net
Assets*.................. (1.87%) (1.40%) (.56%) (.74%)
Portfolio Turnover........ 16%** 125% 139% 94%**
* If certain fees had not
been assumed by Van
Kampen, Total Return
would have been lower
and the ratios would
have been as follows:
Ratio of Expenses to
Average Net Assets....... 2.50% 2.34% 3.04% 15.70%
Ratio of Net Investment
Income to Average Net
Assets................... (1.99%) (1.68%) (1.53%) (14.97%)
</TABLE>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
See Notes to Financial Statements
16
<PAGE> 76
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
Three Months (Commencement of
Ended Year Ended Year Ended Investment Operations)
Class C Shares September 30, 1998 June 30, 1998 June 30, 1997(a) to June 30, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period.............. $23.173 $17.793 $13.695 $10.000
------- ------- ------- -------
Net Investment Loss........ (.099) (.311) (.096) (.045)
Net Realized and Unrealized
Gain..................... (5.237) 6.681 4.853 3.740
------- ------- ------- -------
Total from Investment
Operations................. (5.336) 6.370 4.757 3.695
------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Realized
Gain..................... -0- .990 .353 -0-
Return of Capital
Distribution............. -0- -0- .306 -0-
------- ------- ------- -------
Total Distributions......... -0- .990 .659 -0-
------- ------- ------- -------
Net Asset Value, End of
the Period................. $17.837 $23.173 $17.793 $13.695
======= ======= ======= =======
Total Return* (b)........... (23.00%)** 37.56% 35.32% 37.00%**
Net Assets at End of the
Period (In millions)....... $6.8 $9.2 $8.3 $.1
Ratio of Expenses to Average
Net Assets*................ 2.38% 2.05% 2.07% 1.46%
Ratio of Net Investment
Income to Average Net
Assets*.................... (1.88%) (1.39%) (.57%) (.74%)
Portfolio Turnover.......... 16%** 125% 139% 94%**
* If certain fees had not
been assumed by Van
Kampen, Total Return would
have been lower and the
ratios would have been as
follows:
Ratio of Expenses to Average
Net Assets................. 2.51% 2.34% 3.04% 15.70%
Ratio of Net Investment
Income to Average Net
Assets..................... (2.01%) (1.68%) (1.55%) (14.97%)
</TABLE>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
See Notes to Financial Statements
17
<PAGE> 77
NOTES TO FINANCIAL STATEMENTS
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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. In July, 1998, the Fund's Board of
Trustees approved a change in the Fund's fiscal year end from June 30 to March
31. As a result, this financial report reflects the three month period
commencing on July 1, 1998, and ending on September 30, 1998.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Investments in securities not listed on a securities exchange are valued based
on their last quoted bid price or, if not available, their fair value as
determined by the Board of Trustees. Short-term securities with remaining
maturities of 60 days or less are valued at amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade basis.
Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank.
18
<PAGE> 78
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
The seller is required to maintain the value of the underlying security at not
less than the repurchase proceeds due the Fund.
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Original issue discount on debt
securities purchased are amortized over the expected life of each applicable
security. Premiums on debt securities are not amortized. Expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. ORGANIZATIONAL COSTS--The Fund has agreed to reimburse Van Kampen Funds Inc.
or its affiliates ("collectively Van Kampen") for costs incurred in connection
with the Fund's organization in the amount of $40,000. These costs are being
amortized on a straight line basis over the 60 month period ending December 27,
2000. The Adviser has agreed that in the event any of the initial shares of the
Fund originally purchased by Van Kampen are redeemed during the amortization
period, the Fund will be reimbursed for any unamortized organizational costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.
E. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of losses from wash sales and post October 31
losses which are not recognized for tax purposes until the first day of the
following fiscal year.
At September 30, 1998, for federal income tax purposes the cost of long- and
short-term investments is $110,082,060, the aggregate gross unrealized
appreciation is $19,929,210 and the aggregate gross unrealized depreciation is
$13,790,424, resulting in net unrealized appreciation on long- and short-term
investments of $6,138,786.
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.
19
<PAGE> 79
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the year ended June 30, 1998 have been identified and appropriately
reclassified. A permanent difference related to net operating loss which may be
used as an offset against short-term gains for tax purposes totalling $1,414,654
has been reclassified from accumulated net investment loss to accumulated net
realized gain.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $500 million...................................... .75 of 1%
Next $500 million....................................... .70 of 1%
Over $1 billion......................................... .65 of 1%
</TABLE>
For the three months ended September 30, 1998 and the year ended June 30,
1998, the Adviser voluntarily waived approximately $42,000 and $386,000,
respectively, of its investment advisory fees. Van Kampen 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. This agreement was
voluntarily continued through July 31, 1998 and was discontinued on August 1,
1998.
For the three months ended September 30, 1998 and the year ended June 30,
1998, the Fund recognized expenses of approximately $1,200 and $3,000,
respectively, 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 three months ended September 30, 1998 and the year ended June 30,
1998, the Fund recognized expenses of approximately $28,600 and $50,100,
respectively, representing Van Kampen's cost of providing accounting and legal
services to the Fund.
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the three months
ended September 30, 1998 and the year ended June 30, 1998, the Fund recognized
expenses of approximately $123,000 and $412,300, respectively. Beginning in
1998, the transfer agency fees are determined through negotiations with the
Fund's Board of Trustees and are based on competitive market benchmarks.
20
<PAGE> 80
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
At September 30, 1998, Van Kampen owned 7,000 shares of Class A and 1,500
shares each of Classes B and C, respectively.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At September 30, 1998, capital aggregated $45,329,905, $57,314,713, and
$6,033,750 for Classes A, B, and C, respectively. For the three months ended
September 30, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 193,278 $ 3,970,340
Class B.................................... 136,960 2,787,849
Class C.................................... 13,611 263,369
-------- -----------
Total Sales.................................. 343,849 $ 7,021,558
======== ===========
Dividend Reinvestment:
Class A.................................... -0- $ -0-
Class B.................................... -0- -0-
Class C.................................... -0- -0-
-------- -----------
Total Dividend Reinvestment.................. -0- $ -0-
======== ===========
Repurchases:
Class A.................................... (233,191) $(4,782,550)
Class B.................................... (220,606) (4,398,925)
Class C.................................... (32,974) (687,535)
-------- -----------
Total Repurchases............................ (486,771) $(9,869,010)
======== ===========
</TABLE>
21
<PAGE> 81
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
At June 30, 1998, capital aggregated $46,142,115, $58,925,789, and
$6,457,916 for Classes A, B, and C, respectively. For the year ended June 30,
1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 703,177 $ 14,445,936
Class B.................................. 623,694 12,750,067
Class C.................................. 63,730 1,280,430
---------- ------------
Total Sales................................ 1,390,601 $ 28,476,433
========== ============
Dividend Reinvestment:
Class A.................................. 141,978 $ 2,548,516
Class B.................................. 166,305 2,960,278
Class C.................................. 17,807 316,960
---------- ------------
Total Dividend Reinvestment................ 326,090 $ 5,825,754
========== ============
Repurchases:
Class A.................................. (1,052,014) $(21,445,447)
Class B.................................. (440,708) (9,047,981)
Class C.................................. (147,921) (2,969,241)
---------- ------------
Total Repurchases.......................... (1,640,643) $(33,462,669)
========== ============
</TABLE>
22
<PAGE> 82
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (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). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC for Class B and C shares will be imposed on most redemptions
made within five years of the purchase for Class B and one year of the purchase
for Class C as detailed in the following schedule.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- -----------------------------------------------------------------------------
<S> <C> <C>
First.......................................... 5.00% 1.00%
Second......................................... 4.00% None
Third.......................................... 3.00% None
Fourth......................................... 2.50% None
Fifth.......................................... 1.50% None
Sixth and thereafter........................... None None
</TABLE>
23
<PAGE> 83
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
For the three months ended September 30, 1998 and the year ended June 30,
1998, Van Kampen, as Distributor for the Fund, received net commissions on sales
of the Fund's Class A shares of approximately $8,000 and $38,700, respectively
and CDSC on the redeemed shares of Classes B and C of approximately $72,100 and
$191,300, respectively. Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
For the three months ended September 30, 1998, the cost of purchases and
proceeds from sales of investments, excluding short-term investments, were
$19,364,277 and $28,541,740, respectively. For the year ended June 30, 1998, the
cost of purchases and proceeds from sales of investment excluding short-term
investments, were $167,989,019 and $160,998,244, respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In these instances,
the recognition of gain or loss is postponed until the disposal of the security
underlying futures contract.
The Fund may invest 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).
The Fund did not enter into any futures transactions for the three months
ended September 30, 1998.
24
<PAGE> 84
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in futures contracts for the year ended June 30, 1998, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1997................................ 15
Futures Opened.............................................. -0-
Futures Closed.............................................. (15)
--
Outstanding at June 30, 1998................................ -0-
--
</TABLE>
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the three months ended September 30, 1998 and the year ended June 30, 1998,
are payments retained by Van Kampen of approximately $151,300 and $568,400,
respectively.
7. YEAR 2000 COMPLIANCE
Van Kampen utilizes a number of computer programs across its entire operation
relying on both internal software systems as well as external software systems
provided by third parties. In 1996 Van Kampen initiated a CountDown 2000 Project
to review both the internal systems and external vendor connections. The goal of
this project is to position its business to continue unaffected as a result of
the century change. At this time, there can be no assurance that the steps taken
will be sufficient to avoid any adverse impact to the Fund, but Van Kampen does
not anticipate that the move to Year 2000 will have a material impact on its
ability to continue to provide the Fund with service at current levels. In
addition, it is possible that the securities markets in which the Fund invests
may be detrimentally affected by computer failures throughout the financial
services industry beginning January 1, 2000. Improperly functioning trading
systems may result in settlement problems and liquidity issues.
25
<PAGE> 85
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
U.S. Real Estate
Utility
Value
International/Global
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our web site at
WWW.VANKAMPEN.COM -- to view a prospectus, select Download Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)
- - e-mail us by visiting
WWW.VANKAMPEN.COM and selecting Contact Us
26
<PAGE> 86
VAN KAMPEN GROWTH FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
PAUL G. YOVOVICH
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN
INVESTOR SERVICES INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1998 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After March 31, 1999, the report, if used with prospective
investors, must be accompanied by a quarterly performance update.
27
<PAGE> 87
VAN KAMPEN GROWTH FUND
THIS PAGE INTENTIONALLY LEFT BLANK
28
<PAGE> 88
VAN KAMPEN
GREAT AMERICAN
COMPANIES FUND
Semiannual Report
September 30, 1998
Van Kampen
Funds
<PAGE> 89
Table of Contents
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
GAC SAR 11/98
<PAGE> 90
On July 31, 1998, the Fund's Board of Trustees voted to change the Fund's fiscal
year end from June 30 to March 31. As a result, this semiannual report reflects
the 3-month period commencing on July 1, 1998, and ending on September 30, 1998.
Letter to Shareholders
October 20, 1998
Dear Shareholder,
These continue to be dramatic and highly unusual times for global
financial markets. Despite a severe crisis of confidence in many emerging
economies, the United States has been relatively unscathed by the turmoil.
However, volatility increased in the U.S. equity market as the Asian crisis
spread to Russia and Latin America during the reporting period. Fixed-income
investors were not entirely unaffected, as volatility forced yield spreads to
widen between Treasuries and high-yield securities, corporate bonds, and
mortgage-backed securities.
We expect that volatility will remain high until the situation overseas
stabilizes. In this environment, it is important to stay focused on long-term
investment goals and to view daily fluctuations as relatively minor in the
larger picture. As we explain elsewhere in this letter, the U.S. economy remains
among the healthiest in the world, and Federal Reserve policymakers have
demonstrated an ability to make prudent decisions with regard to monetary
policy. These factors bode well for investors during the months ahead.
Economic Overview
Growth in the U.S. economy moderated during the reporting period as
fallout from the global financial crisis finally began to hit home. Weak demand
for American goods in Asia and Latin America caused the U.S. trade deficit to
hit a record $56.5 billion during the second quarter, undermining corporate
profits. Weak earnings, in turn, caused job growth to slow and unemployment to
increase modestly from the 28-year low set earlier this year. Manufacturing
activity fell in September for the fourth consecutive month.
Psychological factors played a role in the deceleration of U.S.
economic growth. In a recent speech, Federal Reserve Chairman Alan Greenspan
noted that Americans suddenly have acquired a strong aversion to risk that had
been notably absent in recent years. This risk-averse attitude manifested itself
in slower retail sales growth and a mild drop in housing activity. Also, the
clear preference among investors for safety and liquidity caused interest rates
on lower-quality debt to balloon, leading to fears of a credit crunch for U.S.
businesses. Such concerns were at least partially responsible for the Fed's
decision to cut short-term interest rates by 0.25 percent on September 29 and
again on October 15.
Despite the slowdown, we believe that the American economy remains
fundamentally sound. Inflation at the consumer level increased by just 1.4
percent during the 12 months through September, while wholesale prices actually
fell during the same period.
Market Overview
After a steady eight-year climb, the U.S. equity market dropped sharply
during the third quarter. From its peak on July 17, the S&P 500-Stock Index fell
19.3 percent through August 31 before beginning a modest rally. For the three
months through September, the Dow Jones Industrial Average slid 12.4 percent,
the index's worst performance since 1990. Small-capitalization stocks were even
harder hit, with the Russell 2000-Stock Index falling 20.5 percent during the
quarter.
1
<PAGE> 91
Several factors combined to produce the abrupt sell-off in U.S. stocks.
First, the collapse of the Russian ruble upset the market for emerging market
securities and financial concerns spread to Latin America, a major U.S. export
market. Also, the continuing lack of progress at resolving a severe banking
crisis in Japan stalled prospects for an economic recovery in many Asian
nations. Finally, the near certainty of an economic slowdown in the United
States caused investors to worry about corporate profits.
Despite the broad-based nature of the decline, defensive sectors such
as tobacco, drugs, electric utilities, and food companies each posted positive
returns during the quarter. Conversely, cyclical industries like clothing,
securities brokers, and heavy machinery posted large losses. Concerns about the
possible impact of the equity market's roughly $2 trillion decline on consumer
spending likely played a role in the Fed's recent decision to cut interest
rates.
Outlook
As we've noted, the stock market had enjoyed an eight-year advance
until the decline from the peak in July. Whether market historians will declare
this period to have been a bear market or correction is not clear. Semantics
aside, our focus remains on managing through this volatile market and keeping
focused on our longer-term investment goals.
It is our view that the decline will turn out to be relatively mild by
historical standards. While conditions in the global economy remain highly
uncertain, the domestic backdrop includes such favorable factors as a bias
toward a more liberal monetary policy, benign inflation, and low bond yields. We
believe that in this environment it is unlikely that stocks will enter a severe
decline from current levels.
We caution that volatile conditions are likely to linger. Sectors of
the market that had become the most highly valued have yet to fall in concert
with broader indices. Often, declines don't end until those stocks that had been
the leaders of the previous uptrend encounter profit-taking as well.
Accordingly, we believe that the next bull phase will be set to begin when
market leadership becomes more equally balanced across all capitalization and
style sectors.
Additional details about your Fund, including a question-and-answer
section with your portfolio management team, are provided in this report. As
always, we are pleased to have the opportunity to share with you the progress of
your investment.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
2
<PAGE> 92
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
We recently spoke to the management team of the Van Kampen Great American
Companies Fund about the key events and economic forces that shaped the markets
during the reporting period. The team includes Jeff D. New, portfolio manager;
Michael Davis, portfolio comanager; and Stephen L. Boyd, chief investment
officer for equity investments. The Fund's fiscal year end was recently changed
from June 30 to March 31. Going forward, your semiannual reports will be dated
September 30, and your annual reports will be dated March 31. The following
interview discusses the Fund's performance during the three-month period since
your last report, from June 30, 1998, to September 30, 1998.
Q HOW WOULD YOU CHARACTERIZE THE STOCK MARKET ENVIRONMENT FOR THE FUND DURING
THE REPORTING PERIOD?
A The U.S. stock market was exceptionally volatile during the three-month
reporting period. On July 17 the Dow Jones Industrial Average reached a record
high, reflecting investors' confidence in the economy. Trouble was on the
horizon, however, as significantly deteriorating economic conditions in Asia,
Russia, and Latin America led to fears that U.S. corporate earnings would be
negatively affected by companies' exposure to international markets. By August
31 the Dow had fallen 19 percent from its high.
With inflation in check and growth slowing but still healthy, the U.S.
economy remained fundamentally sound. Investors recognized this fact and
returned to the stock market, making up some of the losses incurred during the
previous weeks. The Dow nevertheless lost 12 percent during the three-month
reporting period. As has been true for the past several years, large
capitalization stocks continued to outperform smaller capitalization stocks,
reflecting investors' current preference for established companies with more
stable earnings prospects.
Q GIVEN THIS MARKET CLIMATE, HOW DID YOU MANAGE THE FUND TO ACHIEVE ITS
OBJECTIVE?
A The Fund invests primarily in established U.S. companies that have been market
leaders in their respective fields. We believe these companies will be able to
sustain their position and produce superior performance over time. Although
quality is a primary consideration, we also evaluate potential holdings for
attractive valuations relative to their growth rates. In this volatile market
environment, we are maintaining our investment strategy because we believe it is
especially important to have a consistent discipline in changing market
conditions.
Q WHICH STOCKS HELPED THE FUND'S PERFORMANCE DURING THE REPORTING PERIOD?
A Besides the utility sector, which often does well when investors are concerned
with the overall economic environment, all other sectors in the Fund declined
during the period. As a result, the Fund's success stories tended to be on a
stock-by-stock basis.
3
<PAGE> 93
One of the Fund's top performers was utility company SBC Communications, whose
stock price increased 11 percent during the reporting period. In the technology
area, EMC Corp., a leader in data storage products, gained 28 percent. Other
positive performers for the Fund included Schering Plough (pharmaceutical and
health care products) and Cox Communications (media and communications company).
As mentioned in our last report, we have been optimistic about Philip
Morris, which had not performed well earlier in the year because of ongoing
litigation involving the entire tobacco industry. We held onto the stock because
the company's fundamentals were still strong and the price was extremely
attractive. Our patience was rewarded during the reporting period, as Philip
Morris gained 17 percent. The gain was due to several factors: a low valuation,
the company's attractiveness to investors seeking a more defensive posture, and
less pessimism about the company's potential legal liability. Of course, not all
stocks in the portfolio performed as favorably, and there is no guarantee that
any of these stocks will perform as well in the future.
Q WHAT STOCKS WORKED AGAINST THE FUND?
A Financial stocks generally performed poorly during the reporting period, as
investors became concerned about weakening worldwide economies and deteriorating
credit quality. During the past three months, some of the Fund's disappointments
in the financial sector included BankBoston, Chase Manhattan, Travelers, and
MGIC Investment Corp. Because we share some of the concerns over financial
companies, we have reduced our weighting in this sector. Retail companies in
general also had a difficult quarter, due to investor concerns about how recent
stock market losses would affect consumers' buying power and disposable income.
One retail company that performed poorly for the Fund was TJX Companies, which
declined 26 percent during the reporting period. Despite its decline, we
maintained our position in TJX because we believe the company's fundamentals
remain strong and that its valuation is still attractive.
The Fund also owned Healthsouth (health care rehabilitation services),
whose stock price suffered a severe decline of 61 percent. This decline resulted
partly from increased pricing pressure from HMOs, one of the firm's major
customer groups. Despite its poor recent performance, we have maintained our
holding in Healthsouth. The company's earnings growth expectations have
moderated but are still well above the industry average, and the stock appears
very attractively valued.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A Overall, the Fund had a total return of -14.38 percent (Class A shares at net
asset value) for the three months ended September 30, 1998. By comparison, the
Standard & Poor's 500-Stock Index returned -9.9 percent, and the Lipper Growth
Fund Index, which more closely resembles the Fund, returned -11.4 percent. The
S&P 500-Stock Index is a broad-based, unmanaged index that reflects the general
performance of the stock market, and the Lipper Growth Fund Index reflects the
average performance of the 30 largest growth funds. Keep in mind that these
indices are statistical composites that do not include any commissions or sales
charges that would be paid by an investor purchasing the securities or
investments represented by these indices.
4
<PAGE> 94
Q WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A While the U.S. economy is currently still growing and experiencing low
inflation, we don't believe the full impact of Asian, Russian, and Latin
American economic difficulties has been felt yet on U.S. companies. As domestic
firms begin to report their third quarter 1998 earnings, we expect to see more
evidence that companies have been negatively affected by economic weakness
abroad. In the near term, this will likely result in continued volatility for
the stock market and the Fund. Over the long term, we expect that investors will
continue to seek companies with strong fundamentals, consistent track records,
promising growth prospects, and attractive valuations.
/s/ Jeff D. New /s/ Michael Davis /s/ Stephen L. Boyd
Jeff D. New Michael Davis Stephen L. Boyd
Portfolio Manager Portfolio Comanager Chief Investment Officer
Equity Investments
5
<PAGE> 95
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
<S> <C> <C>
Common Stocks 93.4%
Consumer Distribution 11.3%
Dayton Hudson Corp. 400 $ 14,300
Kroger Co. (a) 400 20,000
Lear Corp. (a) 500 21,875
Lowe's Cos., Inc. 800 25,450
Pacific Sunwear of California, Inc. (a) 750 16,688
Ross Stores, Inc. 500 14,313
Safeway, Inc. (a) 500 23,187
TJX Cos., Inc. 1,000 17,812
Wal-Mart Stores, Inc. 500 27,312
--------
180,937
--------
Consumer Durables 1.8%
Ford Motor Co. 600 28,163
--------
Consumer Non-Durables 4.6%
Colgate-Palmolive Co. 400 27,400
Dial Corp. 700 14,437
Philip Morris Cos., Inc. 700 32,244
--------
74,081
--------
Consumer Services 14.0%
Brinker International, Inc. (a) 1,000 18,750
CBS Corp. 900 21,825
Chancellor Media Corp., Class A (a) 800 26,700
CKE Restaurants, Inc. 600 17,850
Cox Communications, Inc., Class A (a) 900 49,162
Omnicom Group, Inc. 800 36,000
TCI Ventures Group, Series A (a) 1,000 17,938
Time Warner, Inc. 400 35,025
--------
223,250
--------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 96
[CAPTION]
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1998 (UNAUDITED)
DESCRIPTION SHARES MARKET VALUE
[S] [C] [C]
Energy 2.0%
Enron Corp. 600 $ 31,687
--------
Finance 12.2%
Allstate Corp. 600 25,013
American General Corp. 400 25,550
Associates First Capital Corp., Class A 157 10,244
Chase Manhattan Corp. 200 8,650
Conseco, Inc. 500 15,281
Federal National Mortgage Assn 600 38,550
Household International, Inc. 450 16,875
MGIC Investment Corp. 200 7,375
Star Banc Corp. 100 6,613
Travelers Group, Inc. 250 9,375
U.S. Bancorp 450 16,003
Washington Mutual, Inc. 450 15,188
--------
194,717
--------
Healthcare 17.4%
Abbott Laboratories, Inc. 600 26,063
American Home Products Corp. 550 28,806
Amgen, Inc. (a) 300 22,669
Baxter International, Inc. 450 26,775
Becton, Dickinson & Co. 740 30,432
Bristol-Myers Squibb Co. 300 31,162
Guidant Corp. 200 14,850
Healthsouth Corp. (a) 1,600 16,900
Pfizer, Inc. 100 10,594
Schering Plough Corp. 300 31,069
Tenet Healthcare Corp. (a) 700 20,125
Total Renal Care Holdings, Inc. (a) 800 19,200
--------
278,645
--------
See Notes to Financial Statements
7
<PAGE> 97
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
DESCRIPTION SHARES MARKET VALUE
<S> <C> <C>
Producer Manufacturing 5.8%
Republic Services, Inc., Class A (a) 1,000 $ 19,500
Tyco International, Ltd. 350 19,337
United Technologies Corp. 200 15,288
Waste Management, Inc. 800 38,450
--------
92,575
--------
Technology 20.9%
America Online, Inc. (a) 330 36,712
Ascend Communications, Inc. (a) 500 22,750
BMC Software, Inc. (a) 600 36,037
Cisco Systems, Inc. (a) 450 27,816
Citrix Systems, Inc. (a) 300 21,300
Compaq Computer Corp. 500 15,813
Computer Associates Intl, Inc. 400 14,800
Computer Sciences Corp. (a) 640 34,880
Compuware Corp. (a) 400 23,550
EMC Corp. (a) 500 28,594
Microsoft Corp. (a) 200 22,013
Networks Associates, Inc. (a) 700 24,850
Sterling Software, Inc. (a) 900 24,806
--------
333,921
--------
Utilities 3.4%
AT & T Corp. 300 17,531
Duke Energy Corp. 300 19,856
SBC Communications, Inc. 400 17,775
--------
55,162
--------
Total Investments 93.4%
(Cost $1,390,894) 1,493,138
Other Assets in Excess of Liabilities 6.6% 105,158
----------
Net Assets 100% $1,598,296
==========
</TABLE>
(a) Non-income producing security as this stock does not currently declare
dividends.
See Notes to Financial Statements
8
<PAGE> 98
<TABLE>
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998 (Unaudited)
<CAPTION>
<S> <C>
ASSETS:
Total Investments (Cost $1,390,894) $ 1,493,138
Cash 111,099
Receivables:
Investments Sold 25,427
Dividends 1,165
Unamortized Organizational Costs 18,090
Other 87
-----------
Total Assets 1,649,006
-----------
LIABILITIES:
Trustees' Deferred Compensation and Retirement Plans 32,216
Payable for Investments Purchased 12,638
Accrued Expenses 5,856
-----------
Total Liabilities 50,710
-----------
NET ASSETS $ 1,598,296
===========
NET ASSETS CONSIST OF:
Capital $ 1,390,846
Net Unrealized Appreciation 102,244
Accumulated Net Realized Gain 128,231
Accumulated Net Investment Loss (23,025)
-----------
NET ASSETS $ 1,598,296
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$1,393,698 and 100,925 shares of beneficial interest issued and outstanding) $ 13.81
Maximum sales charge (5.75%* of offering price) 0.84
-----------
Maximum offering price to public $ 14.65
===========
Class B Shares:
Net asset value and offering price per share (Based on net assets of
$102,294 and 7,407 shares of beneficial interest issued and
outstanding) $ 13.81
===========
Class C Shares:
Net asset value and offering price per share (Based on net assets of
$102,304 and 7,407 shares of beneficial interest issued and
outstanding) $ 13.81
===========
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
9
</TABLE>
<PAGE> 99
<TABLE>
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 1998, and
the Year Ended June 30, 1998 (Unaudited)
<CAPTION>
Three Months Ended Year Ended
September 30, 1998 June 30, 1998
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 3,272 $ 16,979
--------- ---------
EXPENSES:
Accounting 15,725 28,709
Shareholder Reports 9,000 25,938
Trustees' Fees and Expenses 6,026 9,477
Legal 5,781 9,020
Audit 4,600 11,992
Shareholder Services 3,907 15,259
Trustees' Retirement Plan 3,533 5,572
Investment Advisory Fee 3,081 11,450
Custody 2,329 7,307
Amortization of Organizational Costs 2,016 7,997
Registration and Filing Fees 1,383 2,731
Other 124 1,891
--------- ---------
Total Expenses 57,505 137,343
Less: Fees Waived and Expenses Reimbursed ($3,081 and $47,489, 50,570 112,756
respectively, for the three months ended 9/30/98 and $11,450
and $101,306, respectively, for the year ended 6/30/98)
Credits Earned on Cash Balances 1,448 4,169
--------- ---------
Net Expenses 5,487 20,418
--------- ---------
NET INVESTMENT LOSS $ (2,215) $ (3,439)
========= =========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain/Loss $ (67,264) $ 320,602
--------- ---------
Unrealized Appreciation/Depreciation:
Beginning of the Period 301,129 198,127
End of the Period 102,244 301,129
--------- ---------
Net Unrealized Appreciation/Depreciation During the Period (198,885) 103,002
--------- ---------
NET REALIZED AND UNREALIZED GAIN/LOSS $(266,149) $ 423,604
========= =========
NET INCREASE/DECREASE IN NET ASSETS FROM OPERATIONS $(268,364) $ 420,165
========= =========
See Notes to Financial Statements
10
</TABLE>
<PAGE> 100
<TABLE>
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
STATEMENT OF CHANGES IN NET ASSETS For the Three Months Ended September 30,
1998, and the Years Ended June 30, 1998 and 1997 (Unaudited)
<CAPTION>
Three Months Ended Year Ended Year Ended
September 30, 1998 June 30, 1998 June 30, 1997
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss $ (2,215) $ (3,439) $ (369)
Net Realized Gain/Loss (67,264) 320,602 56,138
Net Unrealized Appreciation/Depreciation During the Period (198,885) 103,002 176,652
----------- ----------- -----------
Change in Net Assets from Operations (268,364) 420,165 232,421
----------- ----------- -----------
Distributions from and in Excess of Net Investment Income:
Class A Shares 0 (12,532) (133)
Class B Shares 0 (920) (123)
Class C Shares 0 (920) (123)
----------- ----------- -----------
0 (14,372) (379)
----------- ----------- -----------
Distributions from Net Realized Gain:
Class A Shares 0 (154,061) (6,296)
Class B Shares 0 (11,306) (5,847)
Class C Shares 0 (11,306) (5,847)
----------- ----------- -----------
0 (176,673) (17,990)
----------- ----------- -----------
Total Distributions 0 (191,045) (18,369)
----------- ----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES (268,364) 229,120 214,052
----------- ----------- -----------
FROM CAPITAL TRANSACTIONS:
Net Asset Value of Shares Issued Through
Dividend Reinvestment 0 191,045 0
Cost of Shares Repurchased 0 (5,023) 1,005,024
----------- ----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 0 186,022 1,005,024
----------- ----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS (268,364) 415,142 1,219,076
NET ASSETS:
Beginning of the Period 1,866,660 1,451,518 232,442
----------- ----------- -----------
End of the Period (Including accumulated net investment
loss of $23,025, $20,810 and $2,999, respectively) $ 1,598,296 $ 1,866,660 $ 1,451,518
=========== =========== ===========
See Notes to Financial Statements
11
</TABLE>
<PAGE> 101
<TABLE>
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
<CAPTION>
December 27, 1995
(Commencement
of Investment
Three Months Ended Year Ended June 30, Operations) to
Class A Shares September 30, 1998 1998 1997 June 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 16.128 $ 14.235 $ 11.622 $ 10.000
-------------- -------------- -------------- -----------
Net Investment Income/Loss (0.019) (0.009) (0.003) 0.019
Net Realized and Unrealized Gain (2.300) 3.784 3.535 1.603
-------------- -------------- -------------- -----------
Total from Investment Operations (2.319) 3.775 3.532 1.622
-------------- -------------- -------------- -----------
Less:
Distributions from and in Excess of
Net Investment Income -- 0.142 0.019 --
Distributions from Net Realized Gain -- 1.740 0.900 --
-------------- -------------- -------------- -----------
Total Distributions -- 1.882 0.919 --
-------------- -------------- -------------- -----------
Net Asset Value, End of the Period $ 13.809 $ 16.128 $ 14.235 $ 11.622
============== ============== ============== ===========
Total Return * (a) (14.38%)** 29.08% 32.29% 16.10%**
Net Assets at End of the Period (In thousands) $ 1,393.7 $ 1,627.7 $ 1,260.8 $ 81.4
Ratio of Expenses to Average Net Assets* (b) 1.58% 1.51% 1.59% 1.37%
Ratio of Net Investment Income/Loss to Average
Net Assets* (0.50%) (0.21%) (0.08%) 0.33%
Portfolio Turnover 21%** 150% 100% 48%**
*If certain expenses had not been assumed by Van Kampen,
total return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (b) 13.10% 8.41% 17.82% 18.46%
Ratio of Net Investment Income/Loss to Average Net Assets (12.02%) (7.11%) (16.31%) (16.76%)
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .33% for the three months ended
September 30, 1998 and .26%, .34% and .13% for the years ended, June 30, 1998,
1997 and 1996, respectively.
See Notes to Financial Statements
12
</TABLE>
<PAGE> 102
<TABLE>
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
<CAPTION>
December 27, 1995
(Commencement
of Investment
Three Months Ended Year Ended June 30, Operations) to
Class B Shares September 30, 1998 1998 1997 June 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 16.129 $ 14.237 $ 11.622 $ 10.000
------------ ------------ ------------ -----------
Net Investment Income/Loss (0.019) (0.004) (0.007) 0.019
Net Realized and Unrealized Gain (2.300) 3.778 3.541 1.603
------------ ------------ ------------ -----------
Total from Investment Operations (2.319) 3.774 3.534 1.622
------------ ------------ ------------ -----------
Less:
Distributions from and in Excess of Net Investment Income -- 0.142 0.019 --
Distributions from Net Realized Gain -- 1.740 0.900 --
------------ ------------ ------------ -----------
Total Distributions -- 1.882 0.919 --
------------ ------------ ------------ -----------
Net Asset Value, End of the Period $ 13.810 $ 16.129 $ 14.237 $ 11.622
============ ============ ============ ============
Total Return * (a) (14.38%)** 29.08% 32.29% 16.10%**
Net Assets at End of the Period (In thousands) $ 102.3 $ 119.5 $ 92.5 $ 75.5
Ratio of Expenses to Average Net Assets* (b) 1.58% 1.51% 1.59% 1.37%
Ratio of Net Investment Income/Loss to Average Net Assets* (0.50%) (0.21%) (0.05%) 0.33%
Portfolio Turnover 21%** 150% 100% 48%**
*Ifcertain expenses had not been assumed by Van Kampen,
total return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (b) 13.10% 8.41% 17.82% 18.46%
Ratio of Net Investment Income/Loss to Average Net Assets (12.02%) (7.11%) (16.28%) (16.76%)
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .33% for the three months ended
September 30, 1998 and .26%, .34% and .13% for the years ended, June 30, 1998,
1997 and 1996, respectively.
See Notes to Financial Statements
13
</TABLE>
<PAGE> 103
<TABLE>
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
<CAPTION>
December 27, 1995
(Commencement
of Investment
Three Months Ended Year Ended June 30, Operations) to
Class C Shares September 30, 1998 1998 1997 June 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 16.131 $ 14.237 $ 11.622 $ 10.000
------------ ------------ ------------ -----------
Net Investment Income/Loss (0.019) (0.008) (0.007) 0.019
Net Realized and Unrealized Gain (2.300) 3.784 3.541 1.603
------------ ------------ ------------ -----------
Total from Investment Operations (2.319) 3.776 3.534 1.622
------------ ------------ ------------ -----------
Less:
Distributions from and in Excess of Net Investment Income -- 0.142 0.019 --
Distributions from Net Realized Gain -- 1.740 0.900 --
------------ ------------ ------------ -----------
Total Distributions -- 1.882 0.919 --
------------ ------------ ------------ -----------
Net Asset Value, End of the Period $ 13.812 $ 16.131 $ 14.237 $ 11.622
============ ============ ============ ===========
Total Return * (a) (14.38%)** 29.08% 32.29% 16.10%**
Net Assets at End of the Period (In thousands) $ 102.3 $ 119.5 $ 98.2 $ 75.5
Ratio of Expenses to Average Net Assets* (b) 1.58% 1.51% 1.59% 1.37%
Ratio of Net Investment Income/Loss to Average
Net Assets* (0.50%) (0.21%) (0.05%) 0.33%
Portfolio Turnover 21%** 150% 100% 48%**
*If certain expenses had not been assumed by Van Kampen,
total return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (b) 13.10% 8.41% 17.82% 18.46%
Ratio of Net Investment Income/Loss to Average Net Assets (12.02%) (7.11%) (16.28%) (16.76%)
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .33% for the three months ended
September 30, 1998 and .26%, .34% and .13% for the years ended, June 30, 1998,
1997 and 1996, respectively.
See Notes to Financial Statements
14
</TABLE>
<PAGE> 104
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
Notes to Financial Statements
September 30, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Great American Companies Fund (the "Fund") is organized as a series
of the Van Kampen Equity Trust (the "Trust"), a Delaware business trust, and is
registered as a diversified open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to seek long-term growth of capital by investing principally in common stocks
and other equity securities. The Fund commenced investment operations on
December 27, 1995, with three classes of common shares, Class A, Class B and
Class C shares. In July 1998, the Fund's Board of Trustees approved a change in
the Fund's fiscal year end from June 30 to March 31. As a result, this financial
report reflects the three month period commencing on July 1, 1998, and ending on
September 30, 1998.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Investments in securities not listed on a securities exchange are
valued based on their last quoted bid price or, if not available, their fair
value as determined by the Board of Trustees. Short-term securities with
remaining maturities of 60 days or less are valued at amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
C. INCOME AND EXPENSES - Dividend income is recorded on the ex-dividend date
and interest income is recorded on an accrual basis. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class
of shares.
D. ORGANIZATIONAL COSTS - The Fund will reimburse Van Kampen Funds Inc. or its
affiliates' (collectively "Van Kampen") for costs incurred in connection with
the Fund's organization in the amount of $40,000. These costs are being
amortized on a straight-line basis over the 60 month period ending December 27,
2000. The Adviser has agreed that in the event any of the initial shares of the
Fund originally purchased by Van Kampen are redeemed during the amortization
period, the Fund will be reimbursed for any unamortized organizational costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.
E. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required. Net
realized gains or losses may differ for financial reporting and tax purposes
primarily as a result of wash sales.
At September 30, 1998, for federal income tax purposes, cost of
long-term investments is $1,391,869; the aggregate gross unrealized appreciation
is $228,201 and the aggregate gross unrealized depreciation is $126,932,
resulting in net unrealized appreciation on long- and short-term investments of
$101,269.
F. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
annually from net investment income. Net realized gains, if any, are distributed
annually. Distributions from net realized gains for book purpose may include
short-term capital gains which are included in ordinary income for tax purposes.
G. EXPENSE REDUCTIONS - During the three months ended September 30, 1998 and
the year ended June 30, 1998, the Fund's custody fee was reduced by $1,448 and
$4,169, respectively 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:
15
<PAGE> 105
AVERAGE NET ASSETS % PER ANNUM
First $500 million .70 of 1%
Next $500 million .65 of 1%
Over $1 billion .60 of 1%
For the three months ended September 30, 1998 and the year ended June
30, 1998 the Adviser voluntarily capped the expenses of the Fund at 1.25% of
average net assets. As such, the Adviser waived $3,081 and $11,450,
respectively, of its investment advisory fees and assumed $47,489 and $101,306,
respectively, of the Fund's other expenses. This waiver is voluntary in nature
and can be discontinued at the Adviser's discretion.
For the three months ended September 30, 1998, and the year ended June
30, 1998, the Fund recognized expenses of approximately $100 and $500,
respectively, representing legal services provided by Skadden, Arps, Slate,
Meagher & Flom (Illinois), counsel to the Fund of which a trustee of the Fund is
an affiliated person. All of this cost has been assumed by Van Kampen.
For the three months ended September 30, 1998, and the year ended
June 30, 1998, the Fund incurred expenses of approximately $21,400 and $37,300,
respectively, representing Van Kampen's cost of providing accounting and legal
services to the Fund. All of this cost has been assumed by Van Kampen.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves
as the shareholder servicing agent for the Fund. For the three months ended
September 30, 1998 and the year ended June 30, 1998, the Fund recognized
expenses of approximately $3,800 and $15,000, respectively. All of this cost has
been assumed by Van Kampen. Beginning in 1998, the transfer agency fees are
determined through negotiations with the Fund's Board of Trustees and are based
on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and
directors of Van Kampen. The Fund does not compensate its officers or trustees
who are officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500. At September 30, 1998, Van
Kampen owned all shares of Classes A, B and C, respectively.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial
interest, Classes A, B and C, each with a par value of $.01 per share. There are
an unlimited number of shares of each class authorized.
At September 30, 1998, capital aggregated $1,236,456, $77,195 and $77,195 for
Classes A, B and C, respectively. For the three months ended September 30, 1998
there were no capital transactions in the Fund.
At June 30, 1998, capital aggregated $1,236,456, $77,195 and $77,195 for
Classes A, B and C, respectively. For the year ended June 30, 1998,
transactions were as follows:
SHARES VALUE
Dividend Reinvestment:
Class A 12,359 $166,593
Class B 907 12,226
Class C 907 12,226
Total Dividend Reinvestment 14,173 $191,045
Cost of Shares Repurchased:
Class C (398) $(5,023)
At June 30, 1997, capital aggregated $1,069,863, $64,969 and $69,992
for Classes A, B and C, respectively. For the year ended June 30, 1997,
transactions were as follows:
SHARES VALUE
Sales:
Class A 81,566 $1,000,000
Class B 0 0
Class C 398 5,024
Total Dividend Reinvestment 81,964 $1,005,024
Class B and Class C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within five years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule.
16
<PAGE> 106
CONTINGENT DEFERRED
SALES CHARGE VALUE
YEAR OF REDEMPTION CLASS B SHARES CLASS C SHARES
First 5.00% 1.00%
Second 4.00% None
Third 3.00% None
Fourth 2.50% None
Fifth 1.50% None
Sixth and Thereafter None None
4. INVESTMENT TRANSACTIONS
For the three months ended September 30, 1998, the cost of purchases and
proceeds from sales of investments, excluding short-term investments, were
$340,789 and $368,639, respectively. For the year ended June 30, 1998, the cost
of purchases and proceeds from sales of investments, excluding short-term
investments were $2,298,298 and $2,282,313, respectively.
5. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
The Fund's net assets are subject to annual fees under the Plans of up
to .25% for Class A net assets and 1.00% each for Class B and Class C net
assets. No fees related to the Plans have been accrued by the Fund as the Fund
is currently owned solely by affiliated persons.
YEAR 2000 COMPLIANCE
Van Kampen utilizes a number of computer programs across its entire operation
relying on both internal software systems as well as external software systems
provided by third parties. In 1996 Van Kampen initiated a CountDown 2000 Project
to review both the internal systems and external vendor connections. The goal of
this project is to position its business to continue unaffected as a result of
the century change. At this time, there can be no assurance that the steps taken
will be sufficient to avoid any adverse impact to the Fund, but Van Kampen does
not anticipate that the move to Year 2000 will have a material impact on its
ability to continue to provide the Fund with service at current levels. In
addition, it is possible that the securities markets in which the Fund invests
may be detrimentally affected by computer failures throughout the financial
services industry beginning January 1, 2000. Improperly functioning trading
systems may result in settlement problems and liquidity issues.
17
<PAGE> 107
Van Kampen 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
Paul G. Yovovich
Officers
Dennis J. McDonnell*
President
Ronald A. Nyberg*
Vice President and Secretary
John L. Sullivan*
Vice President, Treasurer and Chief
Financial Officer
Curtis W. Morell*
Vice President and Chief Accounting Officer
Tanya M. Loden*
Controller
Peter W. Hegel*
Paul R. Wolkenberg*
Edward C. Wood, III*
Vice Presidents
Investment Adviser
Van Kampen
Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Distributor
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Shareholder Servicing Agent
Van Kampen Investor Services Inc.
P.O. Box 418256
Kansas City, Missouri 64141-9256
Custodian
State Street Bank and Trust Company
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Independent Accountants
KPMG Peat Marwick LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act
of 1940.
Van Kampen Funds Inc., 1998 All Rights Reserved.
SM denotes a service mark of Van Kampen Funds Inc.
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.
<PAGE> 108
VAN KAMPEN
PROSPECTOR FUND
Semiannual Report
September 30, 1998
VAN KAMPEN
FUNDS
<PAGE> 109
<TABLE>
<CAPTION>
Table of Contents
<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>
PRS SAR 11/98
On July 31, 1998, the Fund's Board of Trustees voted to change the
Fund's fiscal year end from June 30 to March 31. As a result, this financial
report reflects the 3-month transition period commencing on July 1, 1998 and
ending on September 30, 1998.
<PAGE> 110
Letter to Shareholders
October 20, 1998
Dear Shareholder,
These continue to be dramatic and highly unusual times for global
financial markets. Despite a severe crisis of confidence in many emerging
economies, the United States has been relatively unscathed by the turmoil.
However, volatility increased in the U.S. equity market as the Asian crisis
spread to Russia and Latin America during the reporting period. Fixed-income
investors were not entirely unaffected, as volatility forced yield spreads to
widen between Treasuries and high-yield securities, corporate bonds, and
mortgage-backed securities.
We expect that volatility will remain high until the situation overseas
stabilizes. In this environment, it is important to stay focused on long-term
investment goals and to view daily fluctuations as relatively minor in the
larger picture. As we explain elsewhere in this letter, the U.S. economy remains
among the healthiest in the world, and Federal Reserve policymakers have
demonstrated an ability to make prudent decisions with regard to monetary
policy. These factors bode well for investors during the months ahead.
Economic Overview
Growth in the U.S. economy moderated during the reporting period as
fallout from the global financial crisis finally began to hit home. Weak demand
for American goods in Asia and Latin America caused the U.S. trade deficit to
hit a record $56.5 billion during the second quarter, undermining corporate
profits. Weak earnings, in turn, caused job growth to slow and unemployment to
increase modestly from the 28-year low set earlier this year. Manufacturing
activity fell in September for the fourth consecutive month.
Psychological factors played a role in the deceleration of U.S.
economic growth. In a recent speech, Federal Reserve Chairman Alan Greenspan
noted that Americans suddenly have acquired a strong aversion to risk that had
been notably absent in recent years. This risk-averse attitude manifested itself
in slower retail sales growth and a mild drop in housing activity. Also, the
clear preference among investors for safety and liquidity caused interest rates
on lower-quality debt to balloon, leading to fears of a credit crunch for U.S.
businesses. Such concerns were at least partially responsible for the Fed's
decision to cut short-term interest rates by 0.25 percent on September 29 and
again on October 15.
Despite the slowdown, we believe that the American economy remains
fundamentally sound. Inflation at the consumer level increased by just 1.4
percent during the 12 months through September, while wholesale prices actually
fell during the same period.
Market Overview
After a steady eight-year climb, the U.S. equity market dropped sharply
during the third quarter. From its peak on July 17, the S&P 500-Stock Index fell
19.3 percent through August 31 before beginning a modest rally. For the three
months through September, the Dow Jones Industrial Average slid 12.4 percent,
the index's worst performance since 1990. Small-capitalization stocks were even
harder hit, with the Russell 2000-Stock Index falling 20.5 percent during the
quarter.
1
<PAGE> 111
Several factors combined to produce the abrupt sell-off in U.S. stocks.
First, the collapse of the Russian ruble upset the market for emerging market
securities and financial concerns spread to Latin America, a major U.S. export
market. Also, the continuing lack of progress at resolving a severe banking
crisis in Japan stalled prospects for an economic recovery in many Asian
nations. Finally, the near certainty of an economic slowdown in the United
States caused investors to worry about corporate profits.
Despite the broad-based nature of the decline, defensive sectors such
as tobacco, drugs, electric utilities, and food companies each posted positive
returns during the quarter. Conversely, cyclical industries like clothing,
securities brokers, and heavy machinery posted large losses. Concerns about the
possible impact of the equity market's roughly $2 trillion decline on consumer
spending likely played a role in the Fed's recent decision to cut interest
rates.
Outlook
As we've noted, the stock market had enjoyed an eight-year advance
until the decline from the peak in July. Whether market historians will declare
this period to have been a bear market or correction is not clear. Semantics
aside, our focus remains on managing through this volatile market and keeping
focused on our longer-term investment goals.
It is our view that the decline will turn out to be relatively mild by
historical standards. While conditions in the global economy remain highly
uncertain, the domestic backdrop includes such favorable factors as a bias
toward a more liberal monetary policy, benign inflation, and low bond yields. We
believe that in this environment it is unlikely that stocks will enter a severe
decline from current levels.
We caution that volatile conditions are likely to linger. Sectors of
the market that had become the most highly valued have yet to fall in concert
with broader indices. Often, declines don't end until those stocks that had been
the leaders of the previous uptrend encounter profit-taking as well.
Accordingly, we believe that the next bull phase will be set to begin when
market leadership becomes more equally balanced across all capitalization and
style sectors.
Additional details about your Fund, including a question-and-answer
section with your portfolio management team, are provided in this report. As
always, we are pleased to have the opportunity to share with you the progress of
your investment.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
2
<PAGE> 112
Portfolio Management Review
Van Kampen Prospector Fund
We recently spoke to the management team of the Van Kampen Prospector Fund about
the key events and economic forces that shaped the markets during the reporting
period. The team includes B. Robert Baker, Jr., portfolio manager; Jason Leder
and Edie Terreson, portfolio comanagers; and Stephen L. Boyd, chief investment
officer for equity investments.
The Fund's fiscal year end was recently changed from June 30 to March
31. Going forward, your semiannual reports will be dated September 30, and your
annual reports will be dated March 31. The following interview discusses the
Fund's performance during the three-month period since your last report, from
June 30, 1998, to September 30, 1998.
Q Can you describe the stock market environment for the Fund during the
reporting period?
A The past three months were very turbulent for the U.S. stock market. The
quarter began auspiciously, as the Dow Jones Industrial Average reached a record
high of 9337 in July, reflecting economic growth and low inflation. However,
continued turmoil among overseas markets overflowed into the domestic economy,
precipitating hefty declines in the stock market. Many analysts slashed their
earnings estimates for U.S. companies amid concerns about the health of the
global economy, and stock prices reacted accordingly. After tumbling to 7539 in
August, the Dow closed the reporting period down 12 percent, marking its worst
quarterly performance in eight years.
Q Given these events, what was your strategy in managing the Fund to meet its
objective?
A We consistently seek to identify undervalued stocks that we believe have the
potential for future price appreciation. To do this, we look for companies that
are temporarily out of favor in the marketplace, because their stock prices are
usually lower than what we believe these companies are actually worth. Then, we
look for factors that might move the stock from being undervalued to being
fairly valued. This catalyst could come from within the company in the form of
new management, operational enhancements, restructuring, or reorganization. It
could also be an external factor, such as an improvement in industry conditions
or a regulatory change. When we find a company that is undervalued and has an
identifiable catalyst, we consider adding that company to the portfolio.
Q Which stocks made the greatest contributions to positive performance?
A The Fund's electric utility stocks performed well during the reporting period.
Throughout the past year, we built up a substantial position in electric
utilities, because they represented one of the few undervalued areas of the
market. These stocks typically haven't been greatly affected by economic factors
and they have limited foreign exposure, so they have performed well recently
compared to the broad market. We believe that electric utility stocks are
reaching fair value, so we're not adding to our holdings in this sector.
3
<PAGE> 113
The Fund has held a significant position in gold stocks for much of the
year. Prices had been low and negative sentiment was high--conditions that we
perceived as a buying opportunity for the Fund. Lately, several factors have
worked to the advantage of this sector. The U.S. dollar has weakened relative to
the Japanese yen, alleviating some of gold's price pressures. Also, a flight to
quality has made gold more attractive to investors wary of the global economic
environment. Newmont Mining and Barrick Gold both appreciated more than 45
percent in September, though their stock prices were nearly unchanged for the
three-month period.
Amoco was a strong holding, benefiting from the announcement that the
firm would be acquired by British Petroleum. Amoco's stock price rose from
$42-1/2 to $57 per share during the reporting period. Generally, we've been
finding value among oil company stocks, whose prices are depressed because oil
prices are very low. Keep in mind that not all stocks in the portfolio performed
favorably, and there is no guarantee that any of these stocks will perform as
well in the future.
Q What factors worked against the Fund?
A Cyclical stocks in the capital goods and commodities markets saw major
declines during the reporting period. These included our holdings in steel
companies (Bethlehem Steel) and paper/paper products (Stone Container, Boise
Cascade), which dragged down the Fund's performance. However, valuations in
these industries are attractive relative to the overall market, so we've begun
to make investments here.
Q In the last report, tobacco stocks had hindered Fund performance. How have
these stocks performed lately?
A Tobacco stocks, such as Philip Morris and RJR Nabisco, continue to be
relatively cheap, though their prices rose in the third quarter. Legislative
developments and several favorable court rulings helped tobacco stocks
outperform the market during the last three months. We are confident in the
earnings growth of these companies, in part because the earnings of tobacco
companies aren't typically pegged to the strength of the economy. As such, we
believe these stocks are well suited to the current market environment.
Q How did the Fund perform during the past year?
A The Fund had a three-month total return of -4.70 percent(1) (Class A shares at
net asset value) as of September 30, 1998. In addition, the Fund generated total
returns of -11.31 percent, 2.96 percent, and 21.91 percent for six months,
twelve months, and the life of the Fund, respectively (Class A shares at maximum
sales charge).
By comparison, the Standard & Poor's 500-Stock Index returned -9.93
percent, and the Lipper Growth and Income Fund Index, which more closely
resembles the Fund, returned -12.47 percent for the three-month period ended
September 30, 1998. The S&P 500-Stock Index is a broad-based index that reflects
the general performance of the stock market, and the Lipper Growth and Income
Fund.
4
<PAGE> 114
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 remainder of the year?
A U.S. economic growth remains healthy and inflation is in check, but we still
don't believe we've felt the full impact of global economic difficulties. As
domestic firms begin to report third quarter earnings, we expect to see more
evidence that companies have been hurt by weakness abroad. Already, most U.S.
stocks have fallen precipitously from their summertime highs. These conditions
provide more buying opportunities for the Prospector Fund, which seeks to invest
in stocks that are undervalued. We believe the Fund may be well suited for this
environment.
/s/ B. Robert Baker, Jr. /s/ Jason Leder /s/ Edie Terreson
B. Robert Baker, Jr. Jason Leder Edie Terreson
Portfolio Manager Portfolio Comanager Portfolio Comanager
/s/ Stephen L. Boyd
Stephen L. Boyd
Chief Investment Officer
Equity Investments
5
<PAGE> 115
Van Kampen Prospector Fund
Portfolio of Investments
September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Common Stocks 95.0%
Consumer Distribution 3.6%
CompUSA, Inc. (a) 1,740 $30,124
Payless Shoesource, Inc. (a) 400 16,550
Saks, Inc. (a) 730 16,379
------------
63,053
------------
Consumer Non-Durables 9.7%
Dial Corp. 1,760 36,300
Philip Morris Cos., Inc. 1,690 77,846
RJR Nabisco Holdings Corp. 2,295 57,805
------------
171,951
------------
Energy 12.2%
Amoco Corp. 380 20,472
Atlantic Richfield Co. 400 28,375
British Petroleum Co. PLC - ADR (United Kingdom) 300 26,175
Burlington Resources, Inc. 500 18,688
Chevron Corp. 290 24,378
Halliburton Co. 300 8,569
Mobil Corp. 300 22,781
R & B Falcon Corp. (a) 500 6,000
Texaco, Inc. 280 17,553
Unocal Corp. 300 10,875
YPF Sociedad Anonima, Class D -
ADR (Argentina) (a) 1,230 31,980
------------
215,846
------------
Finance 8.2%
AMBAC Financial Group, Inc. 830 39,840
CMAC Investment Corp. 460 20,010
Conseco, Inc. 470 14,364
LandAmerica Financial Group, Inc. 570 29,213
Norwest Corp. 500 17,906
United Asset Management Corp. 400 8,600
Washington Mutual, Inc. 420 14,175
------------
144,108
------------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 116
Van Kampen Prospector Fund
Portfolio of Investments (Continued)
September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Healthcare 12.2%
American Home Products Corp. 930 $48,709
Healthsouth Corp. (a) 1,000 10,563
Mylan Laboratories, Inc. 660 19,470
PacifiCare Health Systems, Class B (a) 300 22,350
Rhone-Poulenc, SA, Class A - ADR (France) 940 39,245
Tenet Healthcare Corp. (a) 2,600 74,750
------------
215,087
------------
Producer Manufacturing 8.2%
American Power Conversion Corp. (a) 1,150 43,341
Cognex Corp. (a) 2,615 30,399
Ingersoll-Rand Co. 200 7,588
Kennametal Inc. 600 16,162
Parker Hannifin Corp. 400 11,875
U. S. Filter Corp. (a) 960 15,360
Waste Management, Inc. 407 19,561
------------
144,286
------------
Raw Materials/Processing Industries 15.5%
Barrick Gold Corp. 800 16,000
Bethlehem Steel Corp. (a) 2,000 16,500
Boise Cascade Corp. 1,155 29,236
British Steel PLC - ADR (United Kingdom) 830 15,096
Champion International Corp. 500 15,656
Freeport-McMoRan Copper & Gold, Inc., Class B 1,540 18,287
Georgia Pacific Group 300 13,688
Homestake Mining Co. 1,740 21,097
Imperial Chemical Industries PLC- ADR
(United Kingdom) 700 22,225
Louisiana-Pacific Corp. 860 17,523
Newmont Mining Corp. 600 14,550
Placer Dome, Inc. 1,200 16,575
Stone Container Corp. (a) 1,900 16,388
Union Camp Corp. 500 19,687
USX - U.S. Steel, Inc. 900 21,487
------------
273,995
------------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 117
Van Kampen Prospector Fund
Portfolio of Investments (Continued)
September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Technology 6.3%
Amkor Technology, Inc. (a) 2,630 $12,821
Avnet, Inc. 210 7,731
Eletronics for Imaging, Inc. (a) 460 9,717
Etec Systems, Inc. (a) 330 8,601
Micron Technology, Inc. (a) 460 14,001
Quantum Corp. (a) 1,070 16,986
SunGard Data Systems, Inc. (a) 1,130 35,595
VLSI Technology, Inc. (a) 740 5,643
------------
111,095
------------
Utilities 19.1%
BEC Energy 400 17,425
Bell Atlantic Corp. 500 24,219
Houston Industries, Inc. 1,400 43,575
Idaho Power Co. 1,000 33,562
Illinova Corp. 1,100 31,556
Northeast Utilities (a) 410 6,868
OGE Energy Corp. 1,000 28,875
PacifiCorp 1,700 32,619
Pinnacle West Capital Corp. 400 17,925
Public Service Co. of New Mexico 730 16,197
Texas Utilities Co. 1,470 68,447
US WEST, Inc. 300 15,731
------------
336,999
------------
Total Long-Term Investments 95.0%
(Cost $1,595,148) 1,676,420
Other Assets in Excess of Liabilities 5.0% 87,388
------------
Net Assets 100.0% $1,763,808
============
(a) Non-income producing security as this stock currently does not declare
dividends.
</TABLE>
See notes to Financial Statements.
8
<PAGE> 118
<TABLE>
<CAPTION>
VAN KAMPEN PROSPECTOR FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998 (Unaudited)
<S> <C>
ASSETS:
Total Investments (Cost $1,595,148) $ 1,676,420
Cash 102,227
Receivables:
Expense Reimbursement from Adviser 23,348
Investments Sold 11,151
Dividends 3,696
Unamortized Organizational Costs 18,046
Other 86
-----------
Total Assets 1,834,974
-----------
LIABILITIES:
Deferred Compensation and Retirement Plans 32,206
Payable to Distributor and Affliates 12,400
Investments Purchased 9,415
Reports to Shareholders 9,018
Audit 4,600
Accrued Expenses 3,527
-----------
Total Liabilities 71,166
-----------
NET ASSETS $ 1,763,808
===========
NET ASSETS CONSIST OF:
Capital $ 1,366,891
Accumulated Net Realized Gain 326,380
Net Unrealized Appreciation 81,272
Accumulated Net Investment Loss (10,735)
-----------
NET ASSETS $ 1,763,808
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$1,542,760 and 101,359 shares of beneficial interest issued and outstanding) $ 15.22
Maximum sales charge (5.75%* of offering price) 0.93
-----------
Maximum offering price to public $ 16.15
===========
Class B Shares:
Net asset value and offering price per share (Based on net assets of $110,524
and 7,262 shares of beneficial interest issued and outstanding) $ 15.22
===========
Class C Shares:
Net asset value and offering price per share (Based on net assets of $110,524
and 7,262 shares of beneficial interest issued and outstanding) $ 15.22
===========
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
9
<PAGE> 119
VAN KAMPEN PROSPECTOR FUND
STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 1998 and the
Year Ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
September 30, 1998 June 30, 1998
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 10,929 $ 33,513
--------- ---------
EXPENSES:
Accounting 15,725 28,861
Shareholder Reports 9,000 22,389
Trustees' Fees and Expenses 6,354 8,483
Legal 5,658 5,934
Audit 4,600 11,992
Shareholder Services 3,933 15,036
Trustee Retirement Benefit 3,523 5,572
Investment Advisory Fee 3,134 11,782
Amortization of Organizational Costs 2,016 7,997
Registration 1,383 1,800
Custody 729 2,145
Miscellaneous 149 2,712
--------- ---------
Total Expenses 56,204 124,703
Less: Fees Waived and Expenses Reimbursed
($3,134 and $47,331, respectively, for the
three months ended 9/30/98 and
$11,782 and $91,388, respectively, for the
year ended 6/30/98) 50,465 103,170
Credits earned on Overnight Cash Balances 142 474
--------- ---------
Net Expenses 5,597 21,059
--------- ---------
NET INVESTMENT INCOME $ 5,332 $ 12,454
========= =========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 45,097 $ 373,394
--------- ---------
Unrealized Appreciation/Depreciation:
Beginning of the Period 218,931 158,790
End of the Period 81,272 218,931
--------- ---------
Net Unrealized Appreciation/Depreciation During the Period (137,659) 60,141
--------- ---------
NET REALIZED AND UNREALIZED GAIN/LOSS $ (92,562) $ 433,535
========= =========
NET INCREASE/DECREASE IN NET ASSETS FROM OPERATIONS $ (87,230) $ 445,989
========= =========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 120
VAN KAMPEN PROSPECTOR FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Three Months Ended September 30, 1998 and the Years Ended June 30, 1998
and 1997 (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Year Ended Year Ended
September 30, 1998 June 30, 1998 June 30, 1997
FROM INVESTMENT ACTIVITIES:
<S> <C> <C> <C>
Operations:
Net Investment Income $ 5,332 $ 12,454 $ 5,574
Net Realized Gain 45,097 373,394 50,199
Net Unrealized Appreciation/Depreciation During the Period (137,659) 60,141 140,918
----------- ----------- -----------
Change in Net Assets from Operations (87,230) 445,989 196,691
----------- ----------- -----------
Distributions from Net Investment Income -0- (13,056) (6,087)
Distributions in Excess of Net Investment Income -0- (16,067) -0-
----------- ----------- -----------
Distributions from and in Excess of Net Investment Income * -0- (29,123) (6,087)
Distributions from Net Realized Gain * -0- (133,630) (15,600)
----------- ----------- -----------
Total Distributions -0- (162,753) (21,687)
----------- ----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES (87,230) 283,236 175,004
----------- ----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold -0- -0- 1,000,000
Net Asset Value of Shares Issued Through Dividend Reinvestment -0- 162,753 4,341
----------- ----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS (87,230) 445,989 1,179,345
NET ASSETS:
Beginning of the Period 1,851,038 1,405,049 225,704
----------- ----------- -----------
End of the Period (Including accumulated undistributed net investment
income of $(10,735), $(16,067) and $602, respectively) $ 1,763,808 $ 1,851,038 $ 1,405,049
=========== =========== ===========
<CAPTION>
Three Months Ended Year Ended Year Ended
*Distributions by Class September 30, 1998 June 30, 1998 June 30, 1997
<S> <C> <C> <C>
Distributions from and in excess of Net Investment Income:
Class A Shares $ -0- $ (25,473) $ (4,041)
Class B Shares -0- (1,825) (1,023)
Class C Shares -0- (1,825) (1,023)
----------- ----------- -----------
$ -0- $ (29,123) $ (6,087)
=========== =========== ===========
Distributions from Net Realized Gain:
Class A Shares $ -0- $ (116,882) $ (5,460)
Class B Shares -0- (8,374) (5,070)
Class C Shares -0- (8,374) (5,070)
----------- ----------- -----------
$ -0- $ (133,630) $ (15,600)
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 121
VAN KAMPEN 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
Three Months Ended Year Ended June 30, Operations) to
Class A Shares September 30, 1998 1998 1997 (a) June 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 15.974 $ 13.473 $ 11.285 $10.000
-------- -------- -------- -------
Net Investment Income 0.046 0.131 0.115 0.072
Net Realized and Unrealized Gain/Loss (0.799) 3.924 2.996 1.239
-------- -------- -------- -------
Total from Investment Operations (0.753) 4.055 3.111 1.311
-------- -------- -------- -------
Less:
Distributions from and in Excess of
Net Investment Income -0- 0.275 0.143 0.026
Distributions from Net Realized Gain -0- 1.279 0.780 0.000
-------- -------- -------- -------
Total Distributions -0- 1.554 0.923 0.026
-------- -------- -------- -------
Net Asset Value, End of the Period $ 15.221 $ 15.974 $ 13.473 $11.285
======== ======== ======== =======
Total Return * (b) (4.70%)** 31.65% 29.11% 13.10%**
Net Assets at End of the Period (In thousands) $1,542.8 $1,619.1 $1,229.0 $ 78.9
Ratio of Expenses to Average Net Assets* (c) 1.25% 1.28% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets* 1.19% 0.74% 1.19% 1.34%
Portfolio Turnover 37%** 132% 104% 69%**
*If certain expenses had not been assumed by Van Kampen,
total return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (c) 12.52% 7.40% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets (10.08%) (5.38%) (15.97%) (18.07%)
</TABLE>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .03%, .30% and .04% for the years ended
June 30, 1998 and 1997, and for the period ending June 30, 1996, respectively.
See Notes to Financial Statements
12
<PAGE> 122
VAN KAMPEN 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
Three Months Ended Year Ended June 30, Operations) to
Class B Shares September 30, 1998 1998 1997 (a) June 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 15.973 $ 13.473 $ 11.285 $10.000
-------- -------- -------- -------
Net Investment Income 0.046 0.131 0.113 0.072
Net Realized and Unrealized Gain/Loss (0.800) 3.923 3.020 1.239
-------- -------- -------- -------
Total from Investment Operations (0.754) 4.054 3.133 1.311
-------- -------- -------- -------
Less:
Distributions from and in Excess of
Net Investment Income -0- 0.275 0.165 0.026
Distributions from Net Realized Gain -0- 1.279 0.780 0.000
-------- -------- -------- -------
Total Distributions -0- 1.554 0.945 0.026
-------- -------- -------- -------
Net Asset Value, End of the Period $ 15.219 $ 15.973 $ 13.473 $11.285
======== ======== ======== =======
Total Return * (b) (4.70%)** 31.65% 29.11% 13.19%**
Net Assets at End of the Period (In thousands) $110.5 $116.0 $88.0 $73.4
Ratio of Expenses to Average Net Assets* (c) 1.25% 1.28% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets* 1.19% 0.74% 0.86% 1.34%
Portfolio Turnover 37%** 132% 104% 69%**
*If certain expenses had not been assumed by Van Kampen,
total return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (c) 12.52% 7.40% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets (10.08%) (5.38%) (16.30%) (18.07%)
</TABLE>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .03%, .30% and .04% for the years ended
June 30, 1998 and 1997, and for the period ending June 30, 1996, respectively.
See Notes to Financial Statements
13
<PAGE> 123
VAN KAMPEN 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
Three Months Ended Year Ended June 30, Operations) to
Class C Shares September 30, 1998 1998 1997 (a) June 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 15.973 $ 13.473 $ 11.285 $10.000
-------- -------- -------- -------
Net Investment Income 0.046 0.131 0.113 0.072
Net Realized and Unrealized Gain/Loss (0.800) 3.923 3.020 1.239
-------- -------- -------- -------
Total from Investment Operations (0.754) 4.054 3.133 1.311
-------- -------- -------- -------
Less:
Distributions from and in Excess of
Net Investment Income -0- 0.275 0.165 0.026
Distributions from Net Realized Gain -0- 1.279 0.780 0.000
-------- -------- -------- -------
Total Distributions -0- 1.554 0.945 0.026
-------- -------- -------- -------
Net Asset Value, End of the Period $ 15.219 $ 15.973 $ 13.473 $11.285
======== ======== ======== =======
Total Return * (b) (4.70%)** 31.65% 29.11% 13.19%**
Net Assets at End of the Period (In thousands) $110.5 $116.0 $88.0 $73.4
Ratio of Expenses to Average Net Assets* (c) 1.25% 1.28% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets* 1.19% 0.74% 0.86% 1.34%
Portfolio Turnover 37%** 132% 104% 69%**
*If certain expenses had not been assumed by Van Kampen,
total return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (c) 12.52% 7.40% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets (10.08%) (5.38%) (16.30%) (18.07%)
</TABLE>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .03%, .30% and .04% for the years ended
June 30, 1998 and 1997, and for the period ending June 30, 1996, respectively.
See Notes to Financial Statements
14
<PAGE> 124
VAN KAMPEN PROSPECTOR FUND
Notes to Financial Statements
September 30, 1998 (Unaudited)
1. Significant Accounting Policies
Van Kampen Prospector Fund (the "Fund") is organized as a series of the Van
Kampen Equity Trust, a Delaware business trust (the "Trust") and is registered
as a diversified open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to seek
capital growth and income through investing principally in income producing
equity securities and other equity securities. The Fund commenced investment
operations on December 27, 1995, with three classes of common shares, Class A,
Class B and Class C shares. In July, 1998, the Fund's Board of Trustees approved
a change in the Fund's fiscal year end from June 30 to March 31. As a result,
this financial report reflects the three-month period commencing on July 1, 1998
and ending on September 30, 1998.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuation - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange or, if not available, their fair market value as determined in
accordance with procedures established in good faith by the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost.
B. Security Transactions - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. The Fund may
invest independently in repurchase agreements, or transfer uninvested cash
balances into a pooled cash account along with other investment companies
advised by Van Kampen Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
C. Income and Expenses - Dividend income is recorded on the ex-dividend date.
Expenses of the Fund are allocated on a pro rata basis to each class of shares,
except for distribution and service fees and transfer agency costs which are
unique to each class of shares.
D. Organizational Costs - The Fund will reimburse Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $40,000. These costs are being amortized on
a straight line basis over the 60 month period ending December 26, 2000. The
Adviser has agreed that in the event any of the initial shares of the Fund
originally purchased by Van Kampen are redeemed during the amortization period,
the Fund will be reimbursed for any unamortized organizational costs in the same
proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.
E. Federal Income Taxes - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and gains,
if any, to its shareholders. Therefore, no provision for federal income taxes is
required. Net realized gains or losses may differ for financial reporting and
tax purposes primarily as a result of wash sales.
At September 30, 1998, for federal income tax purposes, cost of long-term
investments is $1,613,701; the aggregate gross unrealized appreciation is
$206,626, and the aggregate gross unrealized depreciation is $143,907, resulting
in net unrealized appreciation of $62,719.
F. Distribution of Income and Gains - The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included in ordinary income for
tax purposes.
Due to inherent differences in the recognition of expenses under generally
accepted accounting principles and federal income tax purposes, the amount of
distributed net investment income may differ for a particular period. These
differences are temporary in nature, but may result in book basis distribution
in excess of net investment income for certain periods.
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 three months ended September 30, 1998 and the year ended June 30,
1998 the Adviser voluntarily capped the expenses of the Fund at 1.25% of average
net assets. As such, the Adviser waived $3,134 and $11,782, respectively, of its
investment advisory fees and assumed $47,331 and $91,388, respectively, of the
Fund's other expenses. This waiver is voluntary in nature and can be
discontinued at the Adviser's discretion.
15
<PAGE> 125
VAN KAMPEN PROSPECTOR FUND
Notes to Financial Statements (Continued)
September 30, 1998 (Unaudited)
For the three months ended September 30, 1998 and the year ended June 30,
1998, the Fund recognized expenses of approximately $0 and $300, respectively,
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated
person. All of this cost has been assumed by Van Kampen.
For the three months ended September 30, 1998 and the year ended June 30,
1998, the Fund incurred expenses of approximately $21,400 and $35,400,
respectively, representing Van Kampen's cost of providing accounting and legal
services to the Fund. All of this cost has been assumed by Van Kampen.
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the three months
ended September 30, 1998 and the year ended June 30, 1998, the Fund recognized
expenses of approximately $3,800 and $15,000, respectively. Beginning in 1998,
the transfer agency fees are determined through negotiations with the Fund's
Board of Trustees and are based on competitive market benchmarks. All of this
cost has been assumed by Van Kampen.
Certain officers and trustees of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
At September 30, 1998, Van Kampen owned all shares of Classes A, B and C,
respectively.
3. Capital Transactions
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At September 30, 1998 capital aggregated $1,215,609, $75,641 and $75,641
for classes A, B, and C, respectively. For the three months ended September 30,
1998, there were no capital transactions.
At June 30, 1998 capital aggregated $1,215,609, $75,641 and $75,641 for
classes A, B, and C, respectively. For the year ended June 30, 1998,
transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
------------- -----------------
Dividend Reinvestment:
<S> <C> <C>
Class A 10,142 $ 142,357
Class B 727 10,198
Class C 727 10,198
------------- -----------------
Total Dividend Reinvestments 11,596 $162,753
============= =================
</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
============= =================
<CAPTION>
Shares Value
------------- -----------------
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). Class B and Class C shares
will automatically convert to Class A shares after the seventh and tenth years,
respectively, following purchase. The CDSC will be imposed on most redemptions
made within five years of the purchase for Class B and one year of the purchase
for Class C as detailed in the following schedule.
<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
For the three months ended September 30, 1998, the cost of purchases and
proceeds from sales of investments, excluding short-term investments, were
$633,366 and $680,405, respectively. For the year ended June 30, 1998, the cost
of purchases and proceeds from sales of investments, excluding short-term
investments, were $2,180,788 and $2,223,842, respectively.
5. Distribution and Service Plans
The Fund and its Shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
The Fund's net assets are subject to annual fees under the Plans of up to
.25% for Class A net assets and 1.00% each for Class B and Class C net assets.
No fees related to the Plans have been accrued by the Fund as the Fund is
currently owned solely by affiliated persons.
16
<PAGE> 126
VAN KAMPEN PROSPECTOR FUND
Notes to Financial Statements (Continued)
September 30, 1998 (Unaudited)
6. Year 2000 Compliance
Van Kampen utilizes a number of computer programs across its entire operation
relying on both internal software systems as well as external software systems
provided by third parties. In 1996 Van Kampen initiated a CountDown 2000 Project
to review both the internal systems and external vendor connections. The goal of
this project is to position its business to continue unaffected as a result of
the century change. At this time, there can be no assurance that the steps taken
will be sufficient to avoid any adverse impact to the Fund, but Van Kampen does
not anticipate that the move to Year 2000 will have a material impact on its
ability to continue to provide the Fund with service at current levels. In
addition, it is possible that the securities markets in which the Fund invests
may be detrimentally affected by computer failures throughout the financial
services industry beginning January 1, 2000. Improperly functioning trading
systems may result in settlement problems and liquidity issues.
17
<PAGE> 127
VAN KAMPEN PROSPECTOR FUND
<TABLE>
<CAPTION>
Board of Trustees Investment Adviser
<S> <C>
J. Miles Branagan Van Kampen Investment Advisory Corp.
Richard M. DeMartini 1 Parkview Plaza
Linda Hutton Heagy P.O. Box 5555
R. Craig Kennedy Oakbrook Terrace, Illinois 60181
Jack E. Nelson
Don G. Powell* Distributor
Phillip B. Rooney
Fernando Sisto Van Kampen Funds Inc.
Wayne W. Whalen* - Chairman 1 Parkview Plaza
Paul G. Yovovich P.O. Box 5555
Oakbrook Terrace, Illinois 60181
Officers Shareholder Servicing Agent
Dennis J. McDonnell* Van Kampen Investor Services Inc.
President P.O. Box 418256
Kansas City, Missouri 64141-9256
Ronald A. Nyberg*
Vice President and Secretary Custodian
John L. Sullivan* State Street Bank and Trust Company
Vice President, Treasurer 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
Tanya M. Loden*
Controller Skadden, Arps, Slate, Meagher
& Flom (Illinois)
333 West Wacker Drive
Peter W. Hegel* Chicago, Illinois 60606
Paul R. Wolkenberg*
Edward C. Wood, III* Independent Accountants
Vice Presidents
KPMG Peat Marwick LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
</TABLE>
* "Interested" persons of the Fund, as defined in the Investment
Company Act of 1940.
(C) Van Kampen Funds Inc., 1998 All Rights Reserved.
SM denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the
shareholders of the Fund. It is not authorized for distribution to prospective
investors unless it has been preceded or is accompanied by an effective
prospectus of the Fund which contains additional information on how to purchase
shares, the sales charge, and other pertinent data. After March 31, 1999, the
report, if used with prospective investors, must be accompanied by a quarterly
performance update.
18
<PAGE> 128
VAN KAMPEN
MID CAP VALUE FUND
Semiannual Report
September 30, 1998
Van Kampen
Funds
<PAGE> 129
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
- --------------------------------------------------------------------------------
CHANGE IN FISCAL YEAR END
On July 31, 1998, the Fund's Board of Trustees voted to change the
Fund's fiscal year end from June 30 to March 31. As a result, this
semi-annual report reflects the 3-month period commencing on July 1, 1998,
and ending on September 30, 1998.
- --------------------------------------------------------------------------------
VALF SAR 11/98
<PAGE> 130
LETTER TO SHAREHOLDERS
October 20, 1998
Dear Shareholder,
These continue to be dramatic and highly unusual times for global
financial markets. Despite a severe crisis of confidence in many emerging
economies, the United States has been relatively unscathed by the turmoil.
However, volatility increased in the U.S. equity market as the Asian crisis
spread to Russia and Latin America during the reporting period. Fixed-income
investors were not entirely unaffected, as volatility forced yield spreads to
widen between Treasuries and high-yield securities, corporate bonds, and
mortgage-backed securities.
We expect that volatility will remain high until the situation overseas
stabilizes. In this environment, it is important to stay focused on long-term
investment goals and to view daily fluctuations as relatively minor in the
larger picture. As we explain elsewhere in this letter, the U.S. economy remains
among the healthiest in the world, and Federal Reserve policymakers have
demonstrated an ability to make prudent decisions with regard to monetary
policy. These factors bode well for investors during the months ahead.
ECONOMIC OVERVIEW
Growth in the U.S. economy moderated during the reporting period as
fallout from the global financial crisis finally began to hit home. Weak demand
for American goods in Asia and Latin America caused the U.S. trade deficit to
hit a record $56.5 billion during the second quarter, undermining corporate
profits. Weak earnings, in turn, caused job growth to slow and unemployment to
increase modestly from the 28-year low set earlier this year. Manufacturing
activity fell in September for the fourth consecutive month.
Psychological factors played a role in the deceleration of U.S.
economic growth. In a recent speech, Federal Reserve Chairman Alan Greenspan
noted that Americans suddenly have acquired a strong aversion to risk that had
been notably absent in recent years. This risk-averse attitude manifested itself
in slower retail sales growth and a mild drop in housing activity. Also, the
clear preference among investors for safety and liquidity caused interest rates
on lower-quality debt to balloon, leading to fears of a credit crunch for U.S.
businesses. Such concerns were at least partially responsible for the Fed's
decision to cut short-term interest rates by 0.25 percent on September 29 and
again on October 15.
Despite the slowdown, we believe that the American economy remains
fundamentally sound. Inflation at the consumer level increased by just 1.4
percent during the 12 months through September, while wholesale prices actually
fell during the same period.
MARKET OVERVIEW
After a steady eight-year climb, the U.S. equity market dropped sharply
during the third quarter. From its peak on July 17, the S&P 500-Stock Index fell
19.3 percent through August 31 before beginning a modest rally. For the three
months through September, the Dow Jones Industrial Average slid 12.4 percent,
the index's worst performance since 1990. Small-capitalization stocks were even
harder hit, with the Russell 2000-Stock Index falling 20.5 percent during the
quarter.
1
<PAGE> 131
Several factors combined to produce the abrupt sell-off in U.S. stocks.
First, the collapse of the Russian ruble upset the market for emerging market
securities and financial concerns spread to Latin America, a major U.S. export
market. Also, the continuing lack of progress at resolving a severe banking
crisis in Japan stalled prospects for an economic recovery in many Asian
nations. Finally, the near certainty of an economic slowdown in the United
States caused investors to worry about corporate profits.
Despite the broad-based nature of the decline, defensive sectors such
as tobacco, drugs, electric utilities, and food companies each posted positive
returns during the quarter. Conversely, cyclical industries like clothing,
securities brokers, and heavy machinery posted large losses. Concerns about the
possible impact of the equity market's roughly $2 trillion decline on consumer
spending likely played a role in the Fed's recent decision to cut interest
rates.
OUTLOOK
As we've noted, the stock market had enjoyed an eight-year advance
until the decline from the peak in July. Whether market historians will declare
this period to have been a bear market or correction is not clear. Semantics
aside, our focus remains on managing through this volatile market and keeping
focused on our longer-term investment goals.
It is our view that the decline will turn out to be relatively mild by
historical standards. While conditions in the global economy remain highly
uncertain, the domestic backdrop includes such favorable factors as a bias
toward a more liberal monetary policy, benign inflation, and low bond yields. We
believe that in this environment it is unlikely that stocks will enter a severe
decline from current levels.
We caution that volatile conditions are likely to linger. Sectors of
the market that had become the most highly valued have yet to fall in concert
with broader indices. Often, declines don't end until those stocks that had been
the leaders of the previous uptrend encounter profit-taking as well.
Accordingly, we believe that the next bull phase will be set to begin when
market leadership becomes more equally balanced across all capitalization and
style sectors.
Additional details about your Fund, including a question-and-answer
section with your portfolio management team, are provided in this report. As
always, we are pleased to have the opportunity to share with you the progress of
your investment.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
2
<PAGE> 132
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN MID CAP VALUE FUND
We recently spoke to the management team of the Van Kampen Mid Cap Value Fund
about the key events and economic forces that shaped the markets during the
reporting period. The team is led by James A. Gilligan, portfolio manager; Scott
Carroll, portfolio comanager; and Stephen L. Boyd, chief investment officer for
equity investments.
The Fund's name was changed to the Van Kampen Mid Cap Value Fund on
October 23, 1998. In adding the words "Mid Cap" to its name, the Fund's
prospectus was also amended to reflect a non-fundamental investment policy
stating that at least 65 percent of the Fund's total assets will be invested in
securities of mid-capitalization companies. These companies will have a market
capitalization consistent with the companies included in the Standard & Poor's
MidCap 400 Index. The Fund has, since the commencement of its investment
operations, operated consistently with this policy. The policy and name were
formalized with regard to securities of medium-capitalization companies in
connection with the overall Van Kampen brand name changes and in an effort to
better distinguish the Fund from other Van Kampen funds.
Additionally, the Fund's fiscal year end was recently changed from June
30 to March 31. Going forward, your semiannual reports will be dated September
30, and your annual reports will be dated March 31. The following interview
discusses the Fund's performance during the three-month period since your last
report, from June 30, 1998, to September 30, 1998.
Q CAN YOU DESCRIBE THE STOCK MARKET ENVIRONMENT FOR THE FUND DURING THE
REPORTING PERIOD?
A During this brief reporting period, the major impetus for volatility found its
roots in the Asian instability we described in the last report. Currency
devaluations in that corner of the world initiated a domino effect in other
areas, including Eastern Europe, Russia and, closer to U.S. borders, Latin
America. As these countries struggled to meet debt obligations, investors fled
risk-sensitive securities and embraced the security of Treasuries. After the Dow
Jones Industrial Average reached a record high in the third week of July, it
promptly gave way to the ensuing volatility and lost approximately 1,000 points
during the remainder of the reporting period.
In the final days of September, however, a lull settled over the market
as the Federal Reserve Board implemented its first rate cut in two years.
Investors, recognizing that the U.S. economy remained fundamentally sound
despite global uncertainty, returned to the stock market, slightly reducing the
losses incurred during the previous weeks.
As has been true for the past several years, large-capitalization
stocks continued to outperform mid- and small-capitalization stocks, reflecting
investors' preference for established companies with more stable earnings
prospects. However, mid- and small-cap stocks waged a comeback at the end of the
period, as blue-chip companies such as Coca-Cola and Gillette posted earnings
disappointments.
Q HOW DID YOU MANAGE THE FUND'S PORTFOLIO IN RESPONSE TO MARKET CONDITIONS?
A We maintained our strategy of identifying stocks that meet our criteria of
attractive valuations and appreciation potential. In a market that was battered
by volatility, we found ample opportunity to
3
<PAGE> 133
add what we felt were overlooked stocks to the Fund's portfolio at compelling
prices. With this in mind, we increased the Fund's allocation to health care,
particularly hospital and retirement services companies, which are emerging from
a difficult period of adjustment to changes in Medicare. Many stocks in this
sector boasted growth potential and low price-to-earnings ratios, creating some
desirable value situations. This was the case for two of the new securities we
added during the period, HCR Manor Care and Quorum Health Group.
In addition to health care, we favored the technology sector during the
period. As we discussed in your last report, this sector had been one of the
portfolio's most troubled performers earlier in the year, but we have seen a
large number of technology stocks begin to turn in improved performance.
After a disappointing year in which the Asian contagion created an oppressive
supply-and-demand imbalance, computer companies have started to reap benefits
from increased seasonal demand for personal computers. The renewed phase of
restocking computer inventories after months of depletion translated into
healthier returns for the Fund's holdings in Micron Technology. Not all stocks
in the portfolio performed as favorably, and there is no guarantee that any of
these stocks will perform as well in the future.
We continued to search for stocks with potential turnaround stories
thanks to merger and acquisition activity or changes in management. Two of the
securities we recently added to the portfolio met those standards. Whitman is
one of the largest bottlers for Pepsi-Cola; because Pepsi is currently
reevaluating its bottling processes, we believe there will be upcoming
consolidations that will work to this company's advantage. Our second example is
Seagull Energy, an independent exploration and production company that was
wounded in the recent fall in oil prices. After Seagull ushered in a new CEO
from well-run Duke Energy, we saw the potential for a turnaround.
Q WERE THERE ANY DISAPPOINTMENTS IN THE PORTFOLIO?
A In the last report, we mentioned some of the factors that negatively affected
Philip Morris for much of the year. Although that stock's net return is still
depressed, we have seen some improvement in the last month as investors have
gravitated toward more defensive stocks. Another disappointment in the consumer
non-durables sector was Tommy Hilfiger. This stock has been fairly volatile and
has showed signs of weakness in the last month amid fears of a possible
recession. Finance companies have also fared poorly due to their perceived
economics. This sector included positions such as Avis Rent A Car, which lost 13
percent of its value during the quarter, and Chase Manhattan, which we reduced
significantly in the last month.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A The Fund achieved a three-month total return of -13.70 percent (Class A shares
at net asset value) as of September 30, 1998. In addition, the Fund generated
total returns of -18.68, -21.69 percent, -18.15 percent, and 12.61 percent for
three months, six months, 12 months, and the life of the Fund, respectively
(Class A shares at maximum sales charge). The Fund's inception date was December
27, 1995.
By comparison, the Standard & Poor's 500-Stock Index returned -9.93
percent for the reporting period, and the Standard & Poor's 400 Mid-Cap Index,
which more closely resembles the Fund, returned -14.45 percent. The S&P
500-Stock Index is a broad-based index that reflects the
4
<PAGE> 134
general performance of the stock market, and the S&P Mid-Cap Index reflects the
general performance of mid-cap stocks. These indices are statistical composites
that do not include any commissions that would be paid by an investor purchasing
the securities or investments represented by these indices.
Q WHAT IS YOUR OUTLOOK FOR THE FUND FOR THE REST OF THE YEAR?
A While the U.S. economy is still growing and experiencing low inflation,
we don't believe the full impact of global economic difficulties has been felt
yet on U.S. companies. As domestic firms begin to report their third-quarter
1998 earnings, we expect to see more evidence that companies have been
negatively affected by economic weakness abroad. In the near term, this will
likely result in continued volatility for the stock market and the Fund. Over
the long term, we believe that investors will continue to seek companies with
strong fundamentals, consistent historical track records, promising growth
prospects, and attractive valuations. We feel that the Mid Cap Value Fund,
with its emphasis on seeking to identify such companies, should be well
positioned in this environment. Although the last few months have been difficult
for the Fund, we intend to stick with our investment discipline.
/s/ James A. Gilligan /s/ Scott Carroll /s/ Stephen L. Boyd
James A. Gilligan Scott Carroll Stephen L. Boyd
Portfolio Manager Portfolio Comanager Chief Investment Officer
Equity Investments
5
<PAGE> 135
VAN KAMPEN MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Market
Description Shares Value
<S> <C> <C>
Common Stocks 97.8%
Consumer Distribution 1.3%
Federated Department Stores, Inc. (a) 490 $ 17,824
----------
Consumer Durables 1.2%
Black & Decker Corp. 400 16,650
----------
Consumer Non-Durables 8.9%
Philip Morris Cos., Inc. 1,470 67,712
Tommy Hilfiger Corp. (a) 700 28,700
Whitman Corp. 1,850 29,484
----------
125,896
----------
Consumer Services 2.7%
Bell & Howell Co. (a) 1,090 28,272
H & R Block, Inc. 260 10,757
----------
39,029
----------
Energy 4.1%
Nabors Industries, Inc. (a) 1,400 21,263
Seagull Energy Corp. (a) 3,000 36,937
----------
58,200
----------
Finance 15.0%
Aetna, Inc. 550 38,225
Arden Realty, Inc. 1,200 26,775
Avis Rent A Car, Inc. (a) 1,900 40,969
Chase Manhattan Corp. 560 24,220
ESG Re Ltd. 2,000 30,250
Exel Ltd., Class A 500 31,500
Washington Mutual, Inc. 600 20,250
----------
212,189
----------
Healthcare 19.9%
American Home Products Corp. 800 41,900
Beckman Coulter, Inc. 1,200 61,950
HCR Manor Care, Inc. (a) 900 26,381
PacifiCare Health Systems, Class B (a) 1,100 81,950
Pharmacia & Upjohn, Inc. 700 35,131
Quorum Health Group, Inc. (a) 1,700 27,625
Rhodia, SA - SP ADR (France) (a) 500 7,313
----------
282,250
----------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 136
VAN KAMPEN MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Market
Description Shares Value
<S> <C> <C>
Producer Manufacturing 9.2%
Cognex Corp. (a) 1,000 $ 11,625
MagneTek Inc. (a) 2,500 27,344
Philips Electronics N.V. - N.Y. Registered Shares (Netherlands) 550 29,356
Waste Management, Inc. 1,290 62,001
----------
130,326
----------
Raw Materials/Processing Industries 2.7%
Raychem Corp. 1,600 39,002
----------
Technology 18.2%
3Com Corp. (a) 1,100 33,069
Adaptec, Inc. (a) 2,900 27,550
Adobe Systems, Inc. 1,200 41,625
First Data Corp. 1,300 30,550
Micron Technology, Inc. (a) 1,400 42,612
Nokia Corp. - ADR (Finland) 280 21,963
Quantum Corp. (a) 1,800 28,575
SunGard Data Systems, Inc. (a) 1,000 31,500
----------
257,444
----------
Utilities 14.6%
GPU, Inc. 800 34,000
Illinova Corp. 1,000 28,687
Niagara Mohawk Power Corp. (a) 5,200 79,948
Northeast Utilities (a) 1,900 31,825
Texas Utilities Co. 700 32,594
----------
207,054
----------
Total Investments 97.8%
(Cost $1,397,494) 1,385,864
Other Assets in Excess of Liabilities 2.2% 30,482
----------
Net Assets 100.0% $1,416,346
==========
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
7
<PAGE> 137
<TABLE>
VAN KAMPEN MID CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998 (Unaudited)
<CAPTION>
ASSETS:
<S> <C>
Total Investments (Cost $1,397,494) $ 1,385,864
Cash 50,156
Receivable from Adviser 12,432
Unamortized Organizational Costs 18,090
Other 2,879
-----------
Total Assets 1,469,421
-----------
LIABILITIES:
Trustees' Deferred Compensation and Retirement Plans 32,205
Reports to Shareholders 7,056
Investments Purchased 5,526
Audit Fees 4,600
Other Accrued Expenses 3,688
-----------
Total Liabilities 53,075
-----------
NET ASSETS $ 1,416,346
===========
NET ASSETS CONSIST OF:
Capital $ 1,411,262
Accumulated Net Realized Gain 38,617
Net Unrealized Depreciation (11,630)
Accumulated Net Investment Loss (21,903)
-----------
NET ASSETS $ 1,416,346
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $1,234,655 and 104,285 shares of beneficial interest
issued and outstanding) $ 11.84
Maximum sales charge (5.75%* of offering price) 0.72
-----------
Maximum offering price to public $ 12.56
===========
Class B Shares:
Net asset value and offering price per share (Based on net assets of $90,838
and 7,670 shares of beneficial interest issued and outstanding) $ 11.84
===========
Class C Shares:
Net asset value and offering price per share (Based on net assets of $90,853
and 7,670 shares of beneficial interest issued and outstanding) $ 11.85
===========
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
8
</TABLE>
<PAGE> 138
<TABLE>
VAN KAMPEN MID CAP VALUE FUND
STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 1998
and the Year Ended June 30, 1998 (Unaudited)
Three Months
Ended Year Ended
September 30, 1998 June 30, 1998
INVESTMENT INCOME:
Dividends $ 3,814 $ 15,205
--------- ---------
<S> <C> <C>
EXPENSES:
Accounting 15,726 29,582
Shareholder Reports 9,000 20,885
Trustees' Fees and Expenses 6,199 7,383
Legal 5,709 5,184
Audit 4,600 11,991
Shareholder Services 4,449 16,558
Trustees' Retirement Plan 3,523 5,572
Investment Advisory Fee 2,906 12,163
Amortization of Organizational Costs 2,016 7,997
Registration 1,383 1,285
Custody 1,224 4,623
Other 122 2,691
--------- ---------
Total Expenses 56,857 125,914
Less: Fees Waived and Expenses Reimbursed ($2,906 and
$48,581 respectively, for the three months ended September 30, 1998
and $12,163 and $90,382, respectively, for the year ended June 30, 1998) 51,487 102,545
Credits Earned on Cash Balances 344 2,286
--------- ---------
Net Expenses 5,026 21,083
--------- ---------
NET INVESTMENT LOSS $ (1,212) $ (5,878)
========= =========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain/Loss $ (44,051) $ 240,590
--------- ---------
Unrealized Appreciation/Depreciation:
Beginning of the Period 168,091 206,246
End of the Period (11,630) 168,091
--------- ---------
Net Unrealized Depreciation During the Period (179,721) (38,155)
--------- ---------
NET REALIZED AND UNREALIZED GAIN/LOSS $(223,772) $ 202,435
========= =========
NET INCREASE/DECREASE IN NET ASSETS FROM OPERATIONS $(224,984) $ 196,557
========= =========
See Notes to Financial Statements
9
</TABLE>
<PAGE> 139
<TABLE>
VAN KAMPEN MID CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS For the Three Months Ended September 30, 1998
and the Years Ended June 30, 1998 and 1997 (Unaudited)
<CAPTION>
Three Months
Ended Year Ended Year Ended
September 30, 1998 June 30, 1998 June 30, 1997
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss $ (1,212) $ (5,878) $ (1,438)
Net Realized Gain/Loss (44,051) 240,590 64,043
Net Unrealized Appreciation/Depreciation During the Period (179,721) (38,155) 185,690
------------- ----------- -----------
Change in Net Assets from Operations (224,984) 196,557 248,295
------------- ----------- -----------
Distributions in Excess of Net Investment Income:
Class A Shares -0- (9,412) (174)
Class B Shares -0- (666) (111)
Class C Shares -0- (666) (111)
------------- ----------- -----------
-0- (10,744) (396)
------------- ----------- -----------
Distributions from Net Realized Gain:
Class A Shares -0- (192,785) (6,330)
Class B Shares -0- (13,647) (4,004)
Class C Shares -0- (13,647) (4,004)
------------- ----------- -----------
-0- (220,079) (14,338)
------------- ----------- -----------
Total Distributions -0- (230,823) (14,734)
------------- ----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES (224,984) (34,266) 233,561
------------- ----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold -0- 1,196 1,000,000
Net Asset Value of Shares Issued Through Dividend Reinvestment -0- 230,823 2,074
Cost of Capital Stock Repurchased -0- (57,633) -0-
------------- ----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS -0- 174,386 1,002,074
------------- ----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS (224,984) 140,120 1,235,635
NET ASSETS:
Beginning of the Period 1,641,330 1,501,210 265,575
------------- ----------- -----------
End of the Period (Including accumulated net investment
loss of $21,903, $20,691 and $4,069, respectively) $ 1,416,346 $ 1,641,330 $ 1,501,210
============= =========== ===========
See Notes to Financial Statements
10
</TABLE>
<PAGE> 140
<TABLE>
VAN KAMPEN MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
<CAPTION>
December 27, 1995
(Commencement
Three Months of Investment
Ended Year Ended Year Ended Operations) to
Class A Shares September 30, 1998 June 30, 1998 June 30, 1997 June 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.719 $ 14.321 $ 11.409 $ 10.000
------------ ----------- ------------- -----------
Net Investment Income/Loss (0.010) (0.032) (0.014) 0.018
Net Realized and Unrealized Gain/Loss (1.870) 1.633 3.559 1.391
------------ ----------- ------------- -----------
Total from Investment Operations (1.880) 1.601 3.545 1.409
------------ ----------- ------------- -----------
Less:
Distributions from Net Investment Income -0- 0.103 0.017 -0-
Distributions from Net Realized Gain -0- 2.100 0.616 -0-
------------ ----------- ------------- -----------
Total Distributions -0- 2.203 0.633 -0-
------------ ----------- ------------- -----------
Net Asset Value, End of the Period $ 11.839 $ 13.719 $ 14.321 $ 11.409
============ =========== ============= ===========
Total Return * (a) (13.70)%** 13.06% 32.39% 14.00%**
Net Assets at End of the Period (In thousands) $1,234.7 $1,430.7 $1,315.0 $117.2
Ratio of Expenses to Average Net Assets* (b) 1.39% 1.44% 1.48% 1.38%
Ratio of Net Investment Income/Loss to Average
Net Assets* (0.31)% (0.36)% (0.31)% 0.38%
Portfolio Turnover 17%** 109% 85% 41%**
*If certain expenses had not been assumed by Van Kampen,
total return would have been lower and the ratios
would have been as follows:
Ratio of Expenses to Average Net Assets (b) 14.71% 7.76% 17.19% 17.57%
Ratio of Net Investment Income/Loss to Average Net Assets (13.63)% (6.69)% (16.01)% (15.81)%
** 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 .09%, .14%, .18% and .08% for the periods
ended on September 30, 1998, June 30, 1998, June 30, 1997 and June 30, 1996
respectively.
See Notes to Financial Statements
11
</TABLE>
<PAGE> 141
<TABLE>
VAN KAMPEN MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
<CAPTION>
December 27, 1995
(Commencement
Three Months of Investment
Ended Year Ended Year Ended Operations) to
Class B Shares September 30, 1998 June 30, 1998 June 30, 1997 June 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.724 $ 14.327 $ 11.410 $ 10.000
------------ ----------- ------------- -----------
Net Investment Income/Loss (0.010) (0.027) (0.017) 0.024
Net Realized and Unrealized Gain/Loss (1.871) 1.626 3.567 1.386
------------ ----------- ------------- -----------
Total from Investment Operations (1.881) 1.599 3.550 1.410
------------ ----------- ------------- -----------
Less:
Distributions from Net Investment Income -0- 0.102 0.017 -0-
Distributions from Net Realized Gain -0- 2.100 0.616 -0-
------------ ----------- ------------- -----------
Total Distributions -0- 2.202 0.633 -0-
------------ ----------- ------------- -----------
Net Asset Value, End of the Period $ 11.843 $ 13.724 $ 14.327 $ 11.410
============ =========== ============ ===========
Total Return * (a) (13.70)%** 12.98% 32.48% 14.00%**
Net Assets at End of the Period (In thousands) $90.8 $105.3 $93.1 $74.2
Ratio of Expenses to Average Net Assets* (b) 1.39% 1.44% 1.48% 1.38%
Ratio of Net Investment Income/Loss to Average
Net Assets* (0.31)% (0.36)% (0.14)% 0.44%
Portfolio Turnover 17%** 109% 85% 41%**
*If certain expenses had not been assumed by Van Kampen,
total return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (b) 14.71% 7.76% 17.19% 17.57%
Ratio of Net Investment Income/Loss to Average Net Assets (13.63)% (6.69)% (15.79)% (15.75)%
** 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 .09%, .14%, .18% and .08%
for the periods ended on September 30, 1998, June 30, 1998, June 30, 1997 and
June 30, 1996 respectively.
See Notes to Financial Statements
12
</TABLE>
<PAGE> 142
<TABLE>
VAN KAMPEN MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
<CAPTION>
December 27, 1995
(Commencement
Three Months of Investment
Ended Year Ended Year Ended Operations) to
Class C Shares September 30, 1998 June 30, 1998 June 30, 1997 June 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.726 $ 14.327 $ 11.410 $ 10.000
------------ ----------- ------------- -----------
Net Investment Income/Loss (0.010) (0.026) (0.017) 0.024
Net Realized and Unrealized Gain/Loss (1.871) 1.627 3.567 1.386
------------ ----------- ------------- -----------
Total from Investment Operations (1.881) 1.601 3.550 1.410
------------ ----------- ------------- -----------
Less:
Distributions from Net Investment Income -0- 0.102 0.017 -0-
Distributions from Net Realized Gain -0- 2.100 0.616 -0-
------------ ----------- ------------- -----------
Total Distributions -0- 2.202 0.633 -0-
------------ ----------- ------------- -----------
Net Asset Value, End of the Period $ 11.845 $ 13.726 $ 14.327 $ 11.410
============ =========== ============= ===========
Total Return * (a) (13.69)%** 13.06% 32.48% 14.00%**
Net Assets at End of the Period (In thousands) $90.9 $105.3 $93.1 $74.2
Ratio of Expenses to Average Net Assets* (b) 1.39% 1.44% 1.48% 1.38%
Ratio of Net Investment Income/Loss to Average
Net Assets* (0.31)% (0.36)% (0.14)% 0.44%
Portfolio Turnover 17%** 109% 85% 41%**
*If certain expenses had not been assumed by Van Kampen,
total return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (b) 14.71% 7.76% 17.19% 17.57%
Ratio of Net Investment Income/Loss to Average Net Assets (13.63)% (6.68)% (15.79)% (15.75)%
** 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 .09%, .14%, .18% and .08% for the periods
ended on September 30, 1998, June 30, 1998, June 30, 1997 and June 30,
1996 respectively.
See Notes to Financial Statements
13
</TABLE>
<PAGE> 143
VAN KAMPEN MID CAP VALUE FUND
Notes to Financial Statements
September 30, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Mid Cap Value Fund, formerly known as Van Kampen American Capital
Value Fund, (the "Fund") is organized as a series of Van Kampen Equity Trust
(the "Trust"), a Delaware business trust, and is registered as a diversified
open-end management investment company under the Investment Company Act of 1940,
as amended. The Fund's investment objective is to seek long-term growth of
capital by investing primarily in a diversified portfolio of common stocks and
other equity securities of medium and larger capitalization companies. The Fund
commenced investment operations on December 27, 1995, with three classes of
common shares, Class A, Class B and Class C. In July, 1998, the Fund's Board of
Trustees approved a change in the Fund's fiscal year end from June 30 to March
31. As a result, this financial report reflects the three month period
commencing on July 1, 1998, and ending on September 30, 1998.
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 Investment Advisory Corp. Inc. (the "Adviser")
or its affiliates, the daily aggregate of which is invested in repurchase
agreements. Repurchase agreements are fully collateralized by the underlying
debt security. The Fund will make payment for such securities only upon physical
delivery or evidence of book entry transfer to the account of the custodian
bank. The seller is required to maintain the value of the underlying security at
not less than the repurchase proceeds due the fund.
C. INCOME AND EXPENSES - Dividend income is recorded on the ex-dividend date
and interest income is recorded on an accrual basis. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class
of shares.
D. ORGANIZATIONAL COSTS - The Fund will reimburse Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $40,000. These costs are being amortized on
a straight line basis over the 60 month period ending December 27, 2000. The
Adviser has agreed that in the event any of the initial shares of the Fund
originally purchased by Van Kampen are redeemed during the amortization period,
the Fund will be reimbursed for any unamortized organizational costs in the same
proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.
E. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and gains to
its shareholders. Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial purposes primarily as a
result of wash sales at September 30, 1998.
At September 30, 1998, for federal income tax purposes, the cost of
long-term investments is $1,397,573; the aggregate gross unrealized appreciation
is $135,514 and the aggregate gross unrealized depreciation is $147,223,
resulting in net unrealized depreciation of $11,709.
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 three months ended September 30, 1998 and the
year ended June 30, 1998, respectively, the Fund's custody fee was reduced by
$344 and $2,286, respectively, 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:
14
<PAGE> 144
VAN KAMPEN MID CAP VALUE FUND
Notes to Financial Statements (Continued)
September 30, 1998 (Unaudited)
AVERAGE NET ASSETS % PER ANNUM
- ------------------ -----------
First $500 million .75%
Next $500 million .70%
Over $1 billion .65%
For the three months ended September 30, 1998 and year ended June 30, 1998 the
Adviser voluntarily capped the expenses of the Fund at 1.30% of average net
assets. As such, the Adviser waived $2,906 and $12,163, respectively, of its
investment advisory fees and assumed $48,581 and $90,382, respectively, of the
Fund's other expenses. This waiver is voluntary in nature and can be
discontinued at the Adviser's discretion.
For the three months ended September 30, 1998 and year ended June 30,
1998, respectively, the Fund incurred expenses of approximately $5,700 and
$5,200, respectively, representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinios), counsel to the Fund, of which a trustee of the
Fund is an affiliated person. All of this cost has been assumed by Van Kampen.
For the three months ended September 30, 1998 and year ended June 30,
1998, respectively, the Fund incurred expenses of approximately $15,700 and
$34,800, respectively, representing Van Kampen's cost of providing accounting
and legal services to the Fund. All of this cost has been assumed by Van Kampen.
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the
Adviser, serves as the shareholder servicing agent of the Fund. For the three
months ended September 30, 1998 and June 30, 1998, respectively, the Fund
recognized expenses of approximately $3,800 and $15,000, respectively. All of
this cost has been assumed by Van Kampen. Beginning in 1998, the transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and
directors of Van Kampen. The Fund does not compensate its officers or trustees
who are officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
At September 30, 1998, Van Kampen owned 104,277 shares of Class A,
7,670 shares of Class B, and 7,670 shares of Class C.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial
interest, Classes A, B and C, each with a par value of $.01 per share. There are
an unlimited number of shares of each class authorized.
At September 30, 1998, capital aggregated $1,251,565, $80,397 and
$79,300 for Classes A, B and C, respectively. For the three months ended
September 30, 1998, there were no capital transactions.
At June 30, 1998, capital aggregated $1,251,565, $80,397 and $79,300
for Classes A, B and C, respectively. For the twelve months ended June 30, 1998,
transactions were as follows:
SHARES VALUE
Sales:
Class A 7 $ 100
Class B 0 1,096
---------- ----------
Total Sales 7 $ 1,196
========== ==========
Dividend Reinvestment:
Class A 16,533 $ 202,197
Class B 1,170 14,313
Class C 1,170 14,313
---------- ----------
Total Dividend Reinvestment 18,873 $ 230,823
========== ==========
Shares Repurchased:
Class A (4,076) $ 57,633)
========== ==========
At June 30, 1997, capital aggregated $1,106,900, $64,988 and $64,988
for Classes A, B, and C respectively. For the year ended June 30, 1997,
transactions were as follows:
SHARES VALUE
Sales: 81,367 $1,000,000
---------- ----------
Dividend Reinvestment:
Class A 177 $ 2,074
---------- ----------
Class B and Class C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC will be imposed on most redemptions made within five years of
the purchase for Class B and one year of the purchase for Class C as detailed in
the following schedule.
15
<PAGE> 145
VAN KAMPEN MID CAP VALUE FUND
Notes to Financial Statements (Continued)
September 30, 1998 (Unaudited)
CONTINGENT DEFERRED
SALES CHARGE
CLASS B CLASS C
Year of Redemption Shares Shares
First 5.00% 1.00%
Second 4.00% None
Third 3.00% None
Fourth 2.50% None
Fifth 1.50% None
Sixth and Thereafter None None
4. INVESTMENT TRANSACTIONS
For the three months ended September 30, 1998, the cost of purchases and
proceeds from sales of investments, excluding short-term investments were
$275,166 and $244,477 respectively. For the year ended June 30, 1998, the cost
of purchases and proceeds of sales of investments, excluding short-term
investments were $1,697,057 and $1,565,249, respectively.
5. DISTRIBUTION AND SERVICE PLANS
The Fund and its Shareholders have adopted a distribution plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940 and a service plan
(collectively the "Plans"). The Plans govern payments for the distribution of
the Fund's shares, ongoing shareholder services and maintenance of
shareholder accounts.
The Fund's net assets are subject to annual fees under the Plans of up
to .25% for Class A shares and 1.00% each for Class B and Class C shares. No
fees related to the Plans have been accrued by the Fund, as the Fund is
currently owned solely by affiliated persons.
6. YEAR 2000 COMPLIANCE
Van Kampen utilizes a number of computer programs across its entire operation
relying on both internal software systems as well as external software systems
provided by third parties. In 1996 Van Kampen initiated a CountDown 2000 Project
to review both the internal systems and external vendor connections. The goal of
this project is to position its business to continue unaffected as a result of
the century change. At this time, there can be no assurance that the steps taken
will be sufficient to avoid any adverse impact to the Fund, but Van Kampen does
not anticipate that the move to Year 2000 will have a material impact on its
ability to continue to provide the Fund with service at current levels. In
addition, it is possible that the securities markets in which the Fund invests
may be detrimentally affected by computer failures throughout the financial
services industry beginning January 1, 2000. Improperly functioning trading
systems may result in settlement problems and liquidity issues.
16
<PAGE> 146
VAN KAMPEN MID CAP VALUE FUND
Board of Trustees Investment Adviser
J. Miles Branagan Van Kampen Investment Advisory Corp.
Richard M. DeMartini* 1 Parkview Plaza
Linda Hutton Heagy P.O. Box 5555
R. Craig Kennedy Oakbrook Terrace, Illinois 60181-5555
Jack E. Nelson
Don G. Powell* Distributor
Phillip B. Rooney
Fernando Sisto Van Kampen Funds Inc.
Wayne W. Whalen* - Chairman 1 Parkview Plaza
Paul G. Yovovich P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Officers
Shareholder Servicing Agent
Dennis J. McDonnell*
President Van Kampen Investor Services Inc.
P.O. Box 418256
Ronald A. Nyberg* Kansas City, Missouri 64141-9256
Vice President and Secretary
Custodian
John L. Sullivan*
Vice President, Treasurer and State Street Bank and Trust Company
Chief Financial Officer 225 Franklin Street
P.O. Box 1713
Curtis W. Morell* Boston, Massachusetts 02105
Vice President and
Chief Accounting Officer
Legal Counsel
Tanya M. Loden*
Controller Skadden, Arps, Slate,
Meagher & Flom (Illinois)
333 West Wacker Drive
Peter W. Hegel* Chicago, Illinois 60606
Paul R. Wolkenberg*
Edward C. Wood, III* Independent Accountants
Vice Presidents
KPMG Peat Marwick LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act
of 1940.
(C) Van Kampen Funds Inc., 1998 All Rights Reserved.
SM denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After March 31, 1999, the report, if used with prospective
investors, must be accompanied by a quarterly performance update.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 21
<NAME> UTILITY CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 113,446,021<F1>
<INVESTMENTS-AT-VALUE> 151,075,307<F1>
<RECEIVABLES> 1,225,242<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 2,284<F1>
<TOTAL-ASSETS> 152,302,833<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 828,323<F1>
<TOTAL-LIABILITIES> 828,323<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45,508,657
<SHARES-COMMON-STOCK> 3,406,529
<SHARES-COMMON-PRIOR> 3,421,515
<ACCUMULATED-NII-CURRENT> (257,407)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,366,190<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 37,629,286<F1>
<NET-ASSETS> 60,016,735
<DIVIDEND-INCOME> 1,130,830<F1>
<INTEREST-INCOME> 202,081<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (666,140)<F1>
<NET-INVESTMENT-INCOME> 666,771<F1>
<REALIZED-GAINS-CURRENT> 1,415,006<F1>
<APPREC-INCREASE-CURRENT> (1,616,613)<F1>
<NET-CHANGE-FROM-OPS> 465,164<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (403,605)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 157,372
<NUMBER-OF-SHARES-REDEEMED> (191,800)
<SHARES-REINVESTED> 19,442
<NET-CHANGE-IN-ASSETS> (397,357)
<ACCUMULATED-NII-PRIOR> (57,582)<F1>
<ACCUMULATED-GAINS-PRIOR> (48,816)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 243,069<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 666,140<F1>
<AVERAGE-NET-ASSETS> 58,739,435
<PER-SHARE-NAV-BEGIN> 17.657
<PER-SHARE-NII> 0.099
<PER-SHARE-GAIN-APPREC> (0.018)
<PER-SHARE-DIVIDEND> (0.120)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.618
<EXPENSE-RATIO> 1.32
<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> 22
<NAME> UTILITY CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 113,446,021<F1>
<INVESTMENTS-AT-VALUE> 151,075,307<F1>
<RECEIVABLES> 1,225,242<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 2,284<F1>
<TOTAL-ASSETS> 152,302,833<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 828,323<F1>
<TOTAL-LIABILITIES> 828,323<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 62,839,738
<SHARES-COMMON-STOCK> 4,869,237
<SHARES-COMMON-PRIOR> 4,921,099
<ACCUMULATED-NII-CURRENT> (257,407)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,366,190<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 37,629,286<F1>
<NET-ASSETS> 85,644,473
<DIVIDEND-INCOME> 1,130,830<F1>
<INTEREST-INCOME> 202,081<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (666,140)<F1>
<NET-INVESTMENT-INCOME> 666,771<F1>
<REALIZED-GAINS-CURRENT> 1,415,006<F1>
<APPREC-INCREASE-CURRENT> (1,616,613)<F1>
<NET-CHANGE-FROM-OPS> 465,164<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (434,941)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 211,757
<NUMBER-OF-SHARES-REDEEMED> (284,436)
<SHARES-REINVESTED> 20,817
<NET-CHANGE-IN-ASSETS> (1,125,766)
<ACCUMULATED-NII-PRIOR> (57,582)<F1>
<ACCUMULATED-GAINS-PRIOR> (48,816)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 243,069<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 666,140<F1>
<AVERAGE-NET-ASSETS> 84,004,330
<PER-SHARE-NAV-BEGIN> 17.632
<PER-SHARE-NII> 0.065
<PER-SHARE-GAIN-APPREC> (0.018)
<PER-SHARE-DIVIDEND> (0.090)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.589
<EXPENSE-RATIO> 2.08
<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> 23
<NAME> UTILITY CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 113,446,021<F1>
<INVESTMENTS-AT-VALUE> 151,075,307<F1>
<RECEIVABLES> 1,225,242<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 2,284<F1>
<TOTAL-ASSETS> 152,302,833<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 828,323<F1>
<TOTAL-LIABILITIES> 828,323<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,388,046
<SHARES-COMMON-STOCK> 330,726
<SHARES-COMMON-PRIOR> 332,912
<ACCUMULATED-NII-CURRENT> (257,407)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,366,190<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 37,629,286<F1>
<NET-ASSETS> 5,813,302
<DIVIDEND-INCOME> 1,130,830<F1>
<INTEREST-INCOME> 202,081<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (666,140)<F1>
<NET-INVESTMENT-INCOME> 666,771<F1>
<REALIZED-GAINS-CURRENT> 1,415,006<F1>
<APPREC-INCREASE-CURRENT> (1,616,613)<F1>
<NET-CHANGE-FROM-OPS> 465,164<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (28,050)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 49,447
<NUMBER-OF-SHARES-REDEEMED> (52,596)
<SHARES-REINVESTED> 963
<NET-CHANGE-IN-ASSETS> (52,312)
<ACCUMULATED-NII-PRIOR> (57,582)<F1>
<ACCUMULATED-GAINS-PRIOR> (48,816)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 243,069<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 666,140<F1>
<AVERAGE-NET-ASSETS> 5,573,018
<PER-SHARE-NAV-BEGIN> 17.619
<PER-SHARE-NII> 0.070
<PER-SHARE-GAIN-APPREC> (0.022)
<PER-SHARE-DIVIDEND> (0.090)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.577
<EXPENSE-RATIO> 2.09
<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> 81
<NAME> AGGRESSIVE GROWTH CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> SEP-30-1998<F1>
<INVESTMENTS-AT-COST> 208,321,534<F1>
<INVESTMENTS-AT-VALUE> 252,303,122<F1>
<RECEIVABLES> 7,547,841<F1>
<ASSETS-OTHER> 55,982<F1>
<OTHER-ITEMS-ASSETS> 6,376<F1>
<TOTAL-ASSETS> 259,913,321<F1>
<PAYABLE-FOR-SECURITIES> 5,472,797<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 6,024,285<F1>
<TOTAL-LIABILITIES> 11,497,082<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 80,316,283
<SHARES-COMMON-STOCK> 8,831,042
<SHARES-COMMON-PRIOR> 8,588,377
<ACCUMULATED-NII-CURRENT> (1,202,578)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 2,757,665<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 43,981,588<F1>
<NET-ASSETS> 102,526,338
<DIVIDEND-INCOME> 63,559<F1>
<INTEREST-INCOME> 210,537<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,425,102)<F1>
<NET-INVESTMENT-INCOME> (1,151,006)<F1>
<REALIZED-GAINS-CURRENT> (16,574,335)<F1>
<APPREC-INCREASE-CURRENT> (26,071,414)<F1>
<NET-CHANGE-FROM-OPS> (43,796,755)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,912,491
<NUMBER-OF-SHARES-REDEEMED> (3,669,826)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (14,924,910)
<ACCUMULATED-NII-PRIOR> (51,572)<F1>
<ACCUMULATED-GAINS-PRIOR> 19,332,000<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 511,304<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,425,102<F1>
<AVERAGE-NET-ASSETS> 112,923,620
<PER-SHARE-NAV-BEGIN> 13.676
<PER-SHARE-NII> (0.042)
<PER-SHARE-GAIN-APPREC> (2.024)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.610
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 82
<NAME> AGGRESSIVE GROWTH B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> SEP-30-1998<F1>
<INVESTMENTS-AT-COST> 208,321,534<F1>
<INVESTMENTS-AT-VALUE> 252,303,122<F1>
<RECEIVABLES> 7,547,841<F1>
<ASSETS-OTHER> 55,982<F1>
<OTHER-ITEMS-ASSETS> 6,376<F1>
<TOTAL-ASSETS> 259,913,321<F1>
<PAYABLE-FOR-SECURITIES> 5,472,797<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 6,024,285<F1>
<TOTAL-LIABILITIES> 11,497,082<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 110,215,433<F1>
<SHARES-COMMON-STOCK> 11,521,113
<SHARES-COMMON-PRIOR> 11,023,802
<ACCUMULATED-NII-CURRENT> (1,202,578)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 2,757,665<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 43,981,588<F1>
<NET-ASSETS> 131,392,252
<DIVIDEND-INCOME> 63,559<F1>
<INTEREST-INCOME> 210,537<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,425,102)<F1>
<NET-INVESTMENT-INCOME> (1,151,006)<F1>
<REALIZED-GAINS-CURRENT> (16,574,335)<F1>
<APPREC-INCREASE-CURRENT> (26,071,414)<F1>
<NET-CHANGE-FROM-OPS> (43,796,755)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,171,234
<NUMBER-OF-SHARES-REDEEMED> (673,923)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (16,994,696)
<ACCUMULATED-NII-PRIOR> (51,572)<F1>
<ACCUMULATED-GAINS-PRIOR> 19,332,000<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 511,304<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,425,102<F1>
<AVERAGE-NET-ASSETS> 140,991,113
<PER-SHARE-NAV-BEGIN> 13,461
<PER-SHARE-NII> (0.060)
<PER-SHARE-GAIN-APPREC> (1.997)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.404
<EXPENSE-RATIO> 2.42
<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> 83
<NAME> AGGRESSIVE GROWTH CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> SEP-30-1998<F1>
<INVESTMENTS-AT-COST> 208,321,534<F1>
<INVESTMENTS-AT-VALUE> 252,303,122<F1>
<RECEIVABLES> 7,547,841<F1>
<ASSETS-OTHER> 55,982<F1>
<OTHER-ITEMS-ASSETS> 6,376<F1>
<TOTAL-ASSETS> 259,913,321<F1>
<PAYABLE-FOR-SECURITIES> 5,472,797<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 6,024,285<F1>
<TOTAL-LIABILITIES> 11,497,082<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,347,848
<SHARES-COMMON-STOCK> 1,270,298
<SHARES-COMMON-PRIOR> 1,216,007
<ACCUMULATED-NII-CURRENT> (1,202,578)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 2,757,665<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 43,981,588<F1>
<NET-ASSETS> 14,497,649
<DIVIDEND-INCOME> 63,559<F1>
<INTEREST-INCOME> 210,537<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,425,102)<F1>
<NET-INVESTMENT-INCOME> (1,151,006)<F1>
<REALIZED-GAINS-CURRENT> (16,574,335)<F1>
<APPREC-INCREASE-CURRENT> (26,071,414)<F1>
<NET-CHANGE-FROM-OPS> (43,796,755)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 141,098
<NUMBER-OF-SHARES-REDEEMED> (86,807)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,881,526)
<ACCUMULATED-NII-PRIOR> (51,572)<F1>
<ACCUMULATED-GAINS-PRIOR> 19,332,000<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 511,304<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,425,102<F1>
<AVERAGE-NET-ASSETS> 15,612,000
<PER-SHARE-NAV-BEGIN> 13.470
<PER-SHARE-NII> (0.060)
<PER-SHARE-GAIN-APPREC> (1.997)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.413
<EXPENSE-RATIO> 2.42
<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> 51
<NAME> GROWTH CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 110,082,060<F1>
<INVESTMENTS-AT-VALUE> 116,220,846<F1>
<RECEIVABLES> 5,809,924<F1>
<ASSETS-OTHER> 228,004<F1>
<OTHER-ITEMS-ASSETS> 2,005<F1>
<TOTAL-ASSETS> 122,260,779<F1>
<PAYABLE-FOR-SECURITIES> 5,658,880<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 641,768<F1>
<TOTAL-LIABILITIES> 6,300,648<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45,329,905
<SHARES-COMMON-STOCK> 2,725,518
<SHARES-COMMON-PRIOR> 2,765,431
<ACCUMULATED-NII-CURRENT> (573,836)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,716,813<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 6,138,786<F1>
<NET-ASSETS> 49,320,775
<DIVIDEND-INCOME> 98,848<F1>
<INTEREST-INCOME> 73,581<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (699,134)<F1>
<NET-INVESTMENT-INCOME> (526,705)<F1>
<REALIZED-GAINS-CURRENT> (1,661,371)<F1>
<APPREC-INCREASE-CURRENT> (32,854,358)<F1>
<NET-CHANGE-FROM-OPS> (35,042,434)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 193,278
<NUMBER-OF-SHARES-REDEEMED> (233,191)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (15,564,277)
<ACCUMULATED-NII-PRIOR> (47,131)<F1>
<ACCUMULATED-GAINS-PRIOR> 3,378,184<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 257,123<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 741,599<F1>
<AVERAGE-NET-ASSETS> 57,383,784
<PER-SHARE-NAV-BEGIN> 23.463
<PER-SHARE-NII> (0.058)
<PER-SHARE-GAIN-APPREC> (5.309)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.096
<EXPENSE-RATIO> 1.60
<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> 52
<NAME> GROWTH CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 110,082,060<F1>
<INVESTMENTS-AT-VALUE> 116,220,846<F1>
<RECEIVABLES> 5,809,924<F1>
<ASSETS-OTHER> 228,004<F1>
<OTHER-ITEMS-ASSETS> 2,005<F1>
<TOTAL-ASSETS> 122,260,779<F1>
<PAYABLE-FOR-SECURITIES> 5,658,880<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 641,768<F1>
<TOTAL-LIABILITIES> 6,300,648<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57,314,713
<SHARES-COMMON-STOCK> 3,357,009
<SHARES-COMMON-PRIOR> 3,440,655
<ACCUMULATED-NII-CURRENT> (573,836)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,716,813<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 6,138,786<F1>
<NET-ASSETS> 59,877,248
<DIVIDEND-INCOME> 98,848<F1>
<INTEREST-INCOME> 73,581<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (699,134)<F1>
<NET-INVESTMENT-INCOME> (526,705)<F1>
<REALIZED-GAINS-CURRENT> (1,661,371)<F1>
<APPREC-INCREASE-CURRENT> (32,854,358)<F1>
<NET-CHANGE-FROM-OPS> (35,042,434)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 136,960
<NUMBER-OF-SHARES-REDEEMED> (220,606)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (19,854,068)
<ACCUMULATED-NII-PRIOR> (47,131)<F1>
<ACCUMULATED-GAINS-PRIOR> 3,378,184<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 257,123<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 741,599<F1>
<AVERAGE-NET-ASSETS> 70,117,250
<PER-SHARE-NAV-BEGIN> 23.173
<PER-SHARE-NII> (0.099)
<PER-SHARE-GAIN-APPREC> (5.238)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.836
<EXPENSE-RATIO> 2.37
<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> 53
<NAME> GROWTH CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 110,082,060<F1>
<INVESTMENTS-AT-VALUE> 116,220,846<F1>
<RECEIVABLES> 5,809,924<F1>
<ASSETS-OTHER> 228,004<F1>
<OTHER-ITEMS-ASSETS> 2,005<F1>
<TOTAL-ASSETS> 122,260,779<F1>
<PAYABLE-FOR-SECURITIES> 5,658,880<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 641,768<F1>
<TOTAL-LIABILITIES> 6,300,648<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,033,750
<SHARES-COMMON-STOCK> 379,108
<SHARES-COMMON-PRIOR> 398,471<F1>
<ACCUMULATED-NII-CURRENT> (573,836)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,716,813<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 6,138,786<F1>
<NET-ASSETS> 6,762,108
<DIVIDEND-INCOME> 98,848<F1>
<INTEREST-INCOME> 73,581<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (699,134)<F1>
<NET-INVESTMENT-INCOME> (526,705)<F1>
<REALIZED-GAINS-CURRENT> (1,661,371)<F1>
<APPREC-INCREASE-CURRENT> (32,854,358)<F1>
<NET-CHANGE-FROM-OPS> (35,042,434)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,611
<NUMBER-OF-SHARES-REDEEMED> (32,974)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2,471,541)
<ACCUMULATED-NII-PRIOR> (47,131)<F1>
<ACCUMULATED-GAINS-PRIOR> 3,378,184<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 257,123<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 741,599<F1>
<AVERAGE-NET-ASSETS> 7,932,301
<PER-SHARE-NAV-BEGIN> 23.173
<PER-SHARE-NII> (0.099)
<PER-SHARE-GAIN-APPREC> (5.237)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.837
<EXPENSE-RATIO> 2.38
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>THIS ITEM RELATES TO THE FUND ON A COMPOSITE BASIS AND NOT ON A CLASS BASIS.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 41
<NAME> GREAT AMERICAN COS. A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 1,390,894<F1>
<INVESTMENTS-AT-VALUE> 1,493,138<F1>
<RECEIVABLES> 26,592<F1>
<ASSETS-OTHER> 18,177<F1>
<OTHER-ITEMS-ASSETS> 111,099<F1>
<TOTAL-ASSETS> 1,649,006<F1>
<PAYABLE-FOR-SECURITIES> 12,638<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 38,072<F1>
<TOTAL-LIABILITIES> 50,710<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,236,456
<SHARES-COMMON-STOCK> 100,925
<SHARES-COMMON-PRIOR> 100,925
<ACCUMULATED-NII-CURRENT> (23,025)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 128,231<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 102,244<F1>
<NET-ASSETS> 1,393,698
<DIVIDEND-INCOME> 3,272<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,487)<F1>
<NET-INVESTMENT-INCOME> (2,215)<F1>
<REALIZED-GAINS-CURRENT> (67,264)<F1>
<APPREC-INCREASE-CURRENT> (198,885)<F1>
<NET-CHANGE-FROM-OPS> (268,364)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (234,011)
<ACCUMULATED-NII-PRIOR> (20,810)<F1>
<ACCUMULATED-GAINS-PRIOR> 195,495<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 3,081<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 57,505<F1>
<AVERAGE-NET-ASSETS> 1,518,666
<PER-SHARE-NAV-BEGIN> 16.128
<PER-SHARE-NII> (0.019)
<PER-SHARE-GAIN-APPREC> (2.300)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.809
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 42
<NAME> GREAT AMERICAN COS. B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 1,390,894<F1>
<INVESTMENTS-AT-VALUE> 1,493,138<F1>
<RECEIVABLES> 26,592<F1>
<ASSETS-OTHER> 18,177<F1>
<OTHER-ITEMS-ASSETS> 111,099<F1>
<TOTAL-ASSETS> 1,649,006<F1>
<PAYABLE-FOR-SECURITIES> 12,638<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 38,072<F1>
<TOTAL-LIABILITIES> 50,710<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77,195
<SHARES-COMMON-STOCK> 7,407
<SHARES-COMMON-PRIOR> 7,407
<ACCUMULATED-NII-CURRENT> (23,025)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 128,231<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 102,244<F1>
<NET-ASSETS> 102,294
<DIVIDEND-INCOME> 3,272<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,487)<F1>
<NET-INVESTMENT-INCOME> (2,215)<F1>
<REALIZED-GAINS-CURRENT> (67,264)<F1>
<APPREC-INCREASE-CURRENT> (198,885)<F1>
<NET-CHANGE-FROM-OPS> (268,364)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (17,175)
<ACCUMULATED-NII-PRIOR> (20,810)<F1>
<ACCUMULATED-GAINS-PRIOR> 195,495<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 3,081<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 57,505<F1>
<AVERAGE-NET-ASSETS> 111,466
<PER-SHARE-NAV-BEGIN> 16.129
<PER-SHARE-NII> (0.019)
<PER-SHARE-GAIN-APPREC> (2.300)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.810
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 43
<NAME> GREAT AMERICAN COS. C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 1,390,894<F1>
<INVESTMENTS-AT-VALUE> 1,493,138<F1>
<RECEIVABLES> 26,592<F1>
<ASSETS-OTHER> 18,177<F1>
<OTHER-ITEMS-ASSETS> 111,099<F1>
<TOTAL-ASSETS> 1,649,006<F1>
<PAYABLE-FOR-SECURITIES> 12,638<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 38,072<F1>
<TOTAL-LIABILITIES> 50,710<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77,195
<SHARES-COMMON-STOCK> 7,407
<SHARES-COMMON-PRIOR> 7,407
<ACCUMULATED-NII-CURRENT> (23,025)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 128,231<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 102,244<F1>
<NET-ASSETS> 102,304
<DIVIDEND-INCOME> 3,272<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,487)<F1>
<NET-INVESTMENT-INCOME> (2,215)<F1>
<REALIZED-GAINS-CURRENT> (67,264)<F1>
<APPREC-INCREASE-CURRENT> (198,885)<F1>
<NET-CHANGE-FROM-OPS> (268,364)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (17,178)
<ACCUMULATED-NII-PRIOR> (20,810)<F1>
<ACCUMULATED-GAINS-PRIOR> 195,495<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 3,081<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 57,505<F1>
<AVERAGE-NET-ASSETS> 111,477
<PER-SHARE-NAV-BEGIN> 16.131
<PER-SHARE-NII> (0.019)
<PER-SHARE-GAIN-APPREC> (2.300)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.812
<EXPENSE-RATIO> 1.58
<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> 11
<NAME> PROSPECTOR FUND CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> SEP-30-1998<F1>
<INVESTMENTS-AT-COST> 1,595,148<F1>
<INVESTMENTS-AT-VALUE> 1,676,420<F1>
<RECEIVABLES> 38,195<F1>
<ASSETS-OTHER> 18,046<F1>
<OTHER-ITEMS-ASSETS> 102,313<F1>
<TOTAL-ASSETS> 1,834,974<F1>
<PAYABLE-FOR-SECURITIES> 9,415<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 61,751<F1>
<TOTAL-LIABILITIES> 71,166<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,215,609
<SHARES-COMMON-STOCK> 101,359
<SHARES-COMMON-PRIOR> 101,359
<ACCUMULATED-NII-CURRENT> (10,735)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 326,380<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 81,272<F1>
<NET-ASSETS> 1,542,760
<DIVIDEND-INCOME> 10,929<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,597)<F1>
<NET-INVESTMENT-INCOME> 5,332<F1>
<REALIZED-GAINS-CURRENT> 45,097<F1>
<APPREC-INCREASE-CURRENT> (137,659)<F1>
<NET-CHANGE-FROM-OPS> (87,230)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (76,298)
<ACCUMULATED-NII-PRIOR> (16,067)<F1>
<ACCUMULATED-GAINS-PRIOR> 281,283<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 3,134<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 56,204<F1>
<AVERAGE-NET-ASSETS> 1,553,806
<PER-SHARE-NAV-BEGIN> 15.974
<PER-SHARE-NII> 0.046
<PER-SHARE-GAIN-APPREC> (0.799)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.221
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>THIS ITEM RELATES TO THE FUND ON A COMPOSITE BASIS AND NOT ON A CLASS BASIS.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> PROSPECTOR FUND CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> SEP-30-1998<F1>
<INVESTMENTS-AT-COST> 1,595,148<F1>
<INVESTMENTS-AT-VALUE> 1,676,420<F1>
<RECEIVABLES> 38,195<F1>
<ASSETS-OTHER> 18,046<F1>
<OTHER-ITEMS-ASSETS> 102,313<F1>
<TOTAL-ASSETS> 1,834,974<F1>
<PAYABLE-FOR-SECURITIES> 9,415<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 61,751<F1>
<TOTAL-LIABILITIES> 71,166<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75,641
<SHARES-COMMON-STOCK> 7,262
<SHARES-COMMON-PRIOR> 7,262
<ACCUMULATED-NII-CURRENT> (10,735)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 326,380<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 81,272<F1>
<NET-ASSETS> 110,524
<DIVIDEND-INCOME> 10,929<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,597)<F1>
<NET-INVESTMENT-INCOME> 5,332<F1>
<REALIZED-GAINS-CURRENT> 45,097<F1>
<APPREC-INCREASE-CURRENT> (137,659)<F1>
<NET-CHANGE-FROM-OPS> (87,230)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (5,466)
<ACCUMULATED-NII-PRIOR> (16,067)<F1>
<ACCUMULATED-GAINS-PRIOR> 281,283<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 3,134<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 56,204<F1>
<AVERAGE-NET-ASSETS> 111,316
<PER-SHARE-NAV-BEGIN> 15.973
<PER-SHARE-NII> 0.046
<PER-SHARE-GAIN-APPREC> (0.800)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.219
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>THIS ITEM RELATES TO THE FUND ON A COMPOSITE BASIS AND NOT ON A CLASS BASIS.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> PROSPECTOR FUND CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> SEP-30-1998<F1>
<INVESTMENTS-AT-COST> 1,595,148<F1>
<INVESTMENTS-AT-VALUE> 1,676,420<F1>
<RECEIVABLES> 38,195<F1>
<ASSETS-OTHER> 18,046<F1>
<OTHER-ITEMS-ASSETS> 102,313<F1>
<TOTAL-ASSETS> 1,834,974<F1>
<PAYABLE-FOR-SECURITIES> 9,415<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 61,751<F1>
<TOTAL-LIABILITIES> 71,166<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75,641
<SHARES-COMMON-STOCK> 7,262
<SHARES-COMMON-PRIOR> 7,262
<ACCUMULATED-NII-CURRENT> (10,735)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 326,380<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 81,272<F1>
<NET-ASSETS> 110,524
<DIVIDEND-INCOME> 10,929<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,597)<F1>
<NET-INVESTMENT-INCOME> 5,332<F1>
<REALIZED-GAINS-CURRENT> 45,097<F1>
<APPREC-INCREASE-CURRENT> (137,659)<F1>
<NET-CHANGE-FROM-OPS> (87,230)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (5,466)
<ACCUMULATED-NII-PRIOR> (16,067)<F1>
<ACCUMULATED-GAINS-PRIOR> 281,283<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 3,134<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 56,204<F1>
<AVERAGE-NET-ASSETS> 111,316
<PER-SHARE-NAV-BEGIN> 15.973
<PER-SHARE-NII> 0.046
<PER-SHARE-GAIN-APPREC> (0.800)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.219
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>THIS ITEM RELATES TO THE FUND ON A COMPOSITE BASIS AND NOT ON A CLASS BASIS.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 71
<NAME> MID CAP VALUE CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> SEP-30-1998<F1>
<INVESTMENTS-AT-COST> 1,397,494<F1>
<INVESTMENTS-AT-VALUE> 1,385,864<F1>
<RECEIVABLES> 12,432<F1>
<ASSETS-OTHER> 18,090<F1>
<OTHER-ITEMS-ASSETS> 53,035<F1>
<TOTAL-ASSETS> 1,469,421<F1>
<PAYABLE-FOR-SECURITIES> 5,526<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 47,549<F1>
<TOTAL-LIABILITIES> 53,075<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,251,565
<SHARES-COMMON-STOCK> 104,285
<SHARES-COMMON-PRIOR> 104,285
<ACCUMULATED-NII-CURRENT> (21,903)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 38,617<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (11,630)<F1>
<NET-ASSETS> 1,234,655
<DIVIDEND-INCOME> 3,814<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,026)<F1>
<NET-INVESTMENT-INCOME> (1,212)<F1>
<REALIZED-GAINS-CURRENT> (44,051)<F1>
<APPREC-INCREASE-CURRENT> (179,721)<F1>
<NET-CHANGE-FROM-OPS> (224,984)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (196,122)
<ACCUMULATED-NII-PRIOR> (20,691)<F1>
<ACCUMULATED-GAINS-PRIOR> 82,668<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,906<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 56,857<F1>
<AVERAGE-NET-ASSETS> 1,337,093
<PER-SHARE-NAV-BEGIN> 13.719
<PER-SHARE-NII> (0.010)
<PER-SHARE-GAIN-APPREC> (1.870)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.839
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>THIS ITEM RELATES TO THE FUND ON A COMPOSITE BASIS AND NOT ON A CLASS BASIS.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 72
<NAME> MID CAP VALUE CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> SEP-30-1998<F1>
<INVESTMENTS-AT-COST> 1,397,494<F1>
<INVESTMENTS-AT-VALUE> 1,385,864<F1>
<RECEIVABLES> 12,432<F1>
<ASSETS-OTHER> 18,090<F1>
<OTHER-ITEMS-ASSETS> 53,035<F1>
<TOTAL-ASSETS> 1,469,421<F1>
<PAYABLE-FOR-SECURITIES> 5,526<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 47,549<F1>
<TOTAL-LIABILITIES> 53,075<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 80,397
<SHARES-COMMON-STOCK> 7,670
<SHARES-COMMON-PRIOR> 7,670
<ACCUMULATED-NII-CURRENT> (21,903)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 38,617<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (11,630)<F1>
<NET-ASSETS> 90,838
<DIVIDEND-INCOME> 3,814<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,026)<F1>
<NET-INVESTMENT-INCOME> (1,212)<F1>
<REALIZED-GAINS-CURRENT> (44,051)<F1>
<APPREC-INCREASE-CURRENT> (179,721)<F1>
<NET-CHANGE-FROM-OPS> (224,984)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (14,430)
<ACCUMULATED-NII-PRIOR> (20,691)<F1>
<ACCUMULATED-GAINS-PRIOR> 82,668<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,906<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 56,857<F1>
<AVERAGE-NET-ASSETS> 98,375
<PER-SHARE-NAV-BEGIN> 13.724
<PER-SHARE-NII> (0.010)
<PER-SHARE-GAIN-APPREC> (1.871)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.843
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>THIS ITEM RELATES TO THE FUND ON A COMPOSITE BASIS AND NOT ON A CLASS BASIS.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 73
<NAME> MID CAP VALUE CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> SEP-30-1998<F1>
<INVESTMENTS-AT-COST> 1,397,494<F1>
<INVESTMENTS-AT-VALUE> 1,385,864<F1>
<RECEIVABLES> 12,432<F1>
<ASSETS-OTHER> 18,090<F1>
<OTHER-ITEMS-ASSETS> 53,035<F1>
<TOTAL-ASSETS> 1,469,421<F1>
<PAYABLE-FOR-SECURITIES> 5,526<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 47,549<F1>
<TOTAL-LIABILITIES> 53,075<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 79,300
<SHARES-COMMON-STOCK> 7,670
<SHARES-COMMON-PRIOR> 7,670
<ACCUMULATED-NII-CURRENT> (21,903)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 38,617<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (11,630)<F1>
<NET-ASSETS> 90,853
<DIVIDEND-INCOME> 3,814<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,026)<F1>
<NET-INVESTMENT-INCOME> (1,212)<F1>
<REALIZED-GAINS-CURRENT> (44,051)<F1>
<APPREC-INCREASE-CURRENT> (179,721)<F1>
<NET-CHANGE-FROM-OPS> (224,984)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (14,432)
<ACCUMULATED-NII-PRIOR> (20,691)<F1>
<ACCUMULATED-GAINS-PRIOR> 82,668<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,906<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 56,857<F1>
<AVERAGE-NET-ASSETS> 98,391
<PER-SHARE-NAV-BEGIN> 13.726
<PER-SHARE-NII> (0.010)
<PER-SHARE-GAIN-APPREC> (1.871)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.845
<EXPENSE-RATIO> 1.39
<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>
