<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 8
Portfolio Highlights............................. 9
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 19
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
October 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the Asian crisis appears to be behind us, new concerns are always
emerging. In the coming months, we'll likely hear more about how the year 2000
computer problem may affect the markets or that we're overdue for a correction.
While the markets could undoubtedly suffer as a result of these or any number of
other events, we encourage you to focus on your long-term investment goals.
Although nothing is certain, history has shown us that over time, the markets
tend to recover--and most investors want to be positioned to take advantage of
any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree, keeping the economy growing at a
healthy pace. High levels of consumer confidence fueled this heavy retail
purchasing activity, pushing the personal savings rate down to a record low as
spending rates outpaced income growth. Although we experienced a slowdown during
the second quarter of 1999, economic growth accelerated toward the end of the
reporting period. The growth rate of the nation's gross domestic product (GDP)
dipped to 1.6 percent for the second quarter of 1999, but climbed back up to 4.8
percent in the third quarter.
EMPLOYMENT SITUATION
The strong job market helped to support the health of the economy. During
the reporting period, the unemployment rate reached its lowest level in almost
30 years, and wages continued to climb. The wage pressures were balanced
somewhat by productivity gains, but they ultimately pushed the cost of labor
higher, as evidenced by the sharp jump in the Employment Cost Index in the
second quarter of 1999.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index (CPI) report. The Federal Reserve remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
two of its interest rate cuts from the fall of 1998, raising rates in June and
August 1999 to keep the economy from overheating.
INTEREST RATES AND INFLATION
September 30, 1997, through September 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Sep 1997 5.5000 2.2000
6.2500 2.2000
5.7500 2.1000
Dec 1997 5.6875 1.8000
6.5000 1.7000
5.5625 1.6000
Mar 1998 5.6250 1.4000
6.1250 1.4000
5.6250 1.4000
Jun 1998 5.6875 1.7000
6.0000 1.7000
5.5625 1.7000
Sep 1998 5.9375 1.6000
5.7500 1.5000
5.2500 1.5000
Dec 1998 4.8750 1.5000
4.0000 1.6000
4.8125 1.7000
Mar 1999 4.8750 1.6000
5.1250 1.7000
4.9375 2.3000
Jun 1999 4.5000 2.1000
4.0000 2.0000
4.7500 2.1000
Sep 1999 5.4375 2.3000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 1999
VAN KAMPEN UTILITY FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV(1)... 8.97% 8.53% 8.53%
Six-month total return(2)................ 2.68% 4.53% 7.53%
One-year total return(2)................. 4.01% 5.52% 8.53%
Five-year average annual total
return(2)............................. 14.24% 14.53% 14.71%
Life-of-Fund average annual total
return(2)............................. 10.28% 10.52% 10.37%
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 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.
Because the Fund concentrates investments in the utility industry, it may be
more susceptible to any economic, political or regulatory occurrence effecting
this industry. Foreign securities involve the risk of fluctuations in foreign
exchange rates, future political and economic developments. Lower-rated
securities are referred to as "junk bonds"' and are considered speculative with
regards to payment of interest and principal.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN UTILITY FUND
We recently spoke to the portfolio managers of the Van Kampen Utility Fund about
the key events and economic forces that shaped the markets during the past six
months. The managers include Christine Drusch, senior portfolio manager, who has
managed the Fund since August 1997 and has worked in the investment industry
since 1985. She is joined by Matthew Hart and David McLaughlin, portfolio
managers, and Stephen L. Boyd, chief investment officer for equity investments.
The following excerpts reflect their views on the Fund's performance during the
six months ended September 30, 1999.
Q COULD YOU DESCRIBE THE MARKET ENVIRONMENT IN WHICH THE FUND OPERATED
DURING THE REPORTING PERIOD?
A As has been its trademark recently, the stock market was volatile during
the past two quarters. Early in the reporting period, the Dow Jones
Industrial Average continued its upward trend, passing the 11,000
milestone in early May. Soon after, the market reversed course, as investors
anticipated an increase in interest rates. This anticipation placed downward
pressure on the market but generally helped utility stocks, which benefited from
a "flight to quality "--or a preference for less volatile, less risky
investments. In an attempt to moderate economic growth, the Federal Reserve
Board did increase rates twice during the reporting period. Following the first
increase, the stock market rose slightly because the rate hike was widely
expected. The market response to the second rate increase was less favorable.
The Dow reached a record high the following day but went on to lose nearly 9
percent of its value. In this environment, electric utilities, which are
sensitive to rising interest rates, were poor performers.
Other market factors affected the electric utility markets during the last
two quarters. A proposed utility-rate decrease by the British government
threatened to curtail utility companies' earnings not only in the United
Kingdom, but also for U.S. companies with exposure to that country. Investors
also continued to be skeptical about the economic viability of a number of
industry mergers. In response to these conditions, many electric utilities
performed poorly.
Q IN LIGHT OF THIS ENVIRONMENT, WHAT WAS YOUR STRATEGY IN MANAGING THE
FUND, AND HOW DID THIS STRATEGY AFFECT THE FUND'S PERFORMANCE?
A We sought to moderate the Fund's volatility by maintaining a significant
weighting in electric utilities. This weighting hurt the Fund's return,
because, as we mentioned, these types of companies were not popular
investments for much of the reporting period. In response to this sector's
underperformance, we slightly reduced our weighting in this area.
4
<PAGE> 6
However, the Fund did benefit by actively investing in telecommunications
companies. Except for our holdings in businesses that provide long-distance
service, which as a group did not perform well, the telecommunications area was
a bright spot for the Fund. These companies have been reaping the rewards of
this industry's explosive growth and exciting potential. During the reporting
period, we took advantage of opportunities to invest further in businesses in
this area.
Q COULD YOU PROVIDE EXAMPLES OF TELECOMMUNICATIONS STOCKS THAT HELPED THE
FUND?
A Vodaphone, a provider of cellular service, performed extremely well. After
its recent merger with Airtouch, Vodaphone is now one of the world's
largest cellular providers, with coverage in the United States, the United
Kingdom, and continental Europe. Going forward, we continue to be optimistic
about this company's prospects--a recent joint venture with Bell Atlantic could
further expand the company's reach and market penetration in the United States.
Another telecommunications company that helped the Fund's performance was
China Telecom. In your last report, we cited this company as one of our
disappointments; the company was hurt by last year's Asian economic
difficulties. We maintained our position in China Telecom, however, because
China represents a burgeoning market for telecommunications services, and we
felt strongly that the company provided significant potential for growth. During
the reporting period, our patience was rewarded with this stock, which responded
favorably to improving international economic conditions.
Q DID ANY COMPANIES OUTSIDE THE TELECOMMUNICATIONS INDUSTRY CONTRIBUTE
POSITIVELY TO THE FUND'S PERFORMANCE?
A Calpine, the Fund's largest holding at the period's end, was an excellent
performer. As an independent energy producer, Calpine can operate more
effectively than more traditional, state-regulated utilities can. As a result,
the firm has operated very flexibly--and profitably--in this environment.
We benefited from our ownership of Northeast Optic Networks. This company is
laying fiber optic cabling throughout the northeastern United States, where
heavy demand for data transmission is accompanied by a shortage of the necessary
infrastructure. As reflected in its stock price during the reporting period,
Northeast Optics Network has been efficiently meeting this demand
Natural gas companies also performed well for the Fund. For example,
Coastal, which saw its stock track a rise in natural gas prices, provided a nice
return. Similarly, we benefited from our investment in Enron. Like Calpine,
Enron is taking advantage of new opportunities in a gradually deregulating
utility environment. The company sells natural gas and electricity products and
is also diversifying into telecommunications services.
5
<PAGE> 7
Q WHAT ARE SOME STOCKS THAT HURT THE FUND?
A As we mentioned, electric utilities were generally disappointments during
the reporting period. Texas Utilities was one such company whose recent
performance dragged the Fund's return. In response to the British
government's utility rate decrease, analysts reduced their earnings estimates
for the company, as the rate reduction will cut into the revenues of Texas
Utilities' U.K. subsidiary. GPU, another of the Fund's holdings, also lost value
in response to the British government's action.
The Fund was also hurt by our investment in DyCom Industries, which provides
engineering and construction services to utility companies. The company was
negatively affected by concerns that its accounting methods were overstating the
firm's projected growth. In response to this uncertainty, investors quickly sold
the stock. We sold our holdings as well, though not before incurring a
significant loss on the investment.
As referred to earlier, despite the generally positive performance of
telecommunications companies, businesses that offer long-distance service did
not fare well in recent months. Investors feared that lower long-distance rates
would lead to reduced revenues for companies such as AT&T and MCI Worldcom, both
of which were significant holdings in the Fund. Some analysts believe that lower
prices may eventually encourage consumers to make more long-distance calls,
possibly making up for the decreased revenue. In the short-term, however, this
is not anticipated; as a result, these companies underperformed and hurt the
Fund's return.
Telecommunications company Cincinnati Bell also hurt the Fund during the
reporting period. The company acquired IXC Communications, a much larger
business that provides long-distance services. Investors were skeptical whether
Cincinnati Bell could capably integrate IXC, and Cincinnati Bell's valuation
fell accordingly. For additional Fund portfolio highlights, please refer to page
9.
Q HOW DID THE FUND PERFORM OVERALL?
A For the six-month period ended September 30, 1999, the Fund generated a
total return of 8.97 percent(1) (Class A shares at net asset value). By
comparison, the Standard & Poor's 40 Utilities Index returned 6.30
percent, while the Lipper Utility Fund Index returned 7.14 percent for the
period. We attribute the Fund's outperformance to successful stock selection,
especially in the telecommunications area.
The S&P Utilities Index is an unmanaged broad-based index that reflects the
general performance of utility stocks, while the unmanaged Lipper Utility Fund
Index reflects the average performance of utility funds.
Please refer to the chart and footnotes on page 3 for additional Fund
performance results. Past performance does not guarantee future results.
6
<PAGE> 8
Q WHAT DO YOU SEE AHEAD FOR THE FUND?
A We're anticipating continued market volatility, especially in the
short-term as investors deal with uncertainties surrounding how the
markets will respond to year 2000 (Y2K) concerns. These concerns are
particularly important in the utility industry, where Y2K preparedness is
critical. We anticipate that, going forward, we will moderate our weighting in
this industry, choosing to invest selectively as attractive opportunities
present themselves. Meanwhile, we continue to be optimistic about the
prospective growth of the telecommunications industry and expect to increase our
investments in companies that we believe can capitalize on the exploding demand
for communications services.
[SIG]
Christine Drusch
Senior Portfolio Manager
[SIG]
David McLaughlin
Portfolio Manager
[SIG]
Matthew Hart
Portfolio Manager
[SIG]
Stephen L. Boyd
Chief Investment Officer
Equity Investments
7
<PAGE> 9
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"). In
most cases, there is no redemption fee (contingent deferred sales charge).
DEFENSIVE INVESTMENT STRATEGY: A method of portfolio allocation and management
aimed at minimizing the risk of losing principal. Defensive investors place
a high percentage of their investable assets in bonds, cash equivalents, and
stocks that are less volatile than average.
DOW JONES INDUSTRIAL AVERAGE: The oldest and most widely recognized stock market
average, which reflects the performance of 30 actively traded stocks of
well-established, blue-chip companies.
FLIGHT TO QUALITY: The flow of funds toward safer investments in times of
marketplace uncertainty or fear.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a
year to establish monetary policy and monitor the economic pulse of the
United States.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from the total assets in its portfolio and dividing
this amount by the number of shares outstanding. The NAV does not include
any initial or contingent deferred sales charge.
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS
VAN KAMPEN UTILITY FUND
TOP TEN PORTFOLIO HOLDINGS AS OF SEPTEMBER 30, 1999*
<TABLE>
<S> <C>
CALPINE, an independent power producer, operates geothermal
power facilities and sells electricity and steam in the
United States and in selected international markets......... 5.1%
AMERITECH offers a full range of communications services,
including local and long-distance telephone and data,
cellular, paging, security, cable television, and
Internet.................................................... 4.4%
VODAFONE AIRTOUCH operates analog and digital cellular
networks offering voice communications, messaging, paging,
and mobile data services.................................... 4.1%
SPRINT is a global communications company whose operations
include long distance, local telephone, product
distribution, and directory publishing...................... 3.6%
CHINA TELECOM offers cellular phone services in the
Guangdong, Zhejiang, and Jiangsu provinces of China......... 3.5%
NSTAR offers electricity and natural gas services to
Massachusetts customers..................................... 3.0%
COASTAL is a diversified energy company whose business
segments include natural gas, petroleum, chemicals, power
plants, and trucking........................................ 3.0%
DQE is a multi-utility delivery and services company whose
subsidiaries include the generation, distribution and sale
of electricity.............................................. 2.9%
ENRON is a leading natural gas producer and wholesale power
marketer. The company also offers services in risk
management, energy consulting, and construction and
engineering................................................. 2.7%
PINNACLE WEST CAPITAL owns three subsidiaries: APS, an
Arizona electric utility concern; SunCor, a residential,
commercial, and industrial developer; and Eldorado, a
venture capital unit........................................ 2.6%
</TABLE>
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ --------------
<S> <C> <C>
Electric Utilities 43.1 44.6
Telecommunications 37.2 38.3
Oil,Gas Pipeline and Distribution 9.4 9.2
Natural Gas Pipeline and Distribution 4.8 4.9
Technology 3 0.6
</TABLE>
* As a percentage of long-term investments
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Description Shares Market Value
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 84.5%
CONSUMER SERVICES 1.1%
Quanta Services, Inc. (a)............................. 60,000 $ 1,758,750
------------
ELECTRIC UTILITIES 38.3%
Allegheny Energy, Inc................................. 47,000 1,495,187
Calpine Corp. (a)..................................... 88,350 7,515,272
Cinergy Corp.......................................... 63,500 1,797,844
CMS Energy Corp....................................... 94,400 3,203,700
Consolidated Edison, Inc.............................. 40,000 1,660,000
DQE, Inc.............................................. 109,900 4,299,837
DTE Energy Co......................................... 50,000 1,806,250
Edison International.................................. 36,200 880,113
FirstEnergy Corp...................................... 138,000 3,519,000
GPU, Inc.............................................. 43,975 1,434,684
Illinova Corp......................................... 80,500 2,259,031
Independent Energy Holdings, PLC...................... 75,000 1,439,063
Montana Power Co...................................... 45,800 1,394,038
New Century Energies, Inc............................. 49,000 1,638,437
Niagara Mohawk Holdings, Inc. (a)..................... 127,700 1,971,369
Northeast Utilities................................... 45,900 843,413
NSTAR................................................. 114,600 4,440,750
OGE Energy Corp....................................... 75,200 1,673,200
PECO Energy Co........................................ 60,700 2,276,250
Pinnacle West Capital Corp............................ 104,700 3,808,462
Public Service Co. of New Mexico...................... 88,500 1,615,125
Reliant Energy, Inc................................... 114,800 3,106,775
Sierra Pacific Resources.............................. 134,928 3,002,148
Southern Co........................................... 75,800 1,951,850
Texas Utilities Co.................................... 29,300 1,093,256
Texas Utilities Co.--Convertible Preferred, PRIDES.... 14,800 729,825
------------
60,854,879
------------
NATURAL GAS PIPELINE AND DISTRIBUTION 4.4%
National Fuel Gas Co. NJ.............................. 31,000 1,462,812
NICOR, Inc............................................ 50,000 1,859,375
Southwest Gas Corp.................................... 58,800 1,583,925
WICOR, Inc............................................ 72,000 2,092,500
------------
6,998,612
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Description Shares Market Value
- ------------------------------------------------------------------------------
<S> <C> <C>
OIL & GAS PIPELINE AND DISTRIBUTION 8.0%
Coastal Corp.......................................... 108,000 $ 4,421,250
Columbia Energy Group................................. 55,500 3,073,313
El Paso Energy Capital Trust I--Convertible
Preferred........................................... 41,750 2,186,656
Enron Corp............................................ 72,800 3,003,000
------------
12,684,219
------------
TELECOMMUNICATIONS 29.9%
AirGate PCS, Inc. (a)................................. 8,500 211,438
ALLTEL Corp........................................... 49,300 3,469,487
Ameritech Corp........................................ 96,000 6,450,000
Bell Atlantic Corp.................................... 39,900 2,685,769
BellSouth Corp........................................ 69,400 3,123,000
Cable & Wireless, PLC--ADR (United Kingdom)........... 100,700 3,335,687
China Telecom--ADR (China)............................ 82,000 5,068,625
Cincinnati Bell, Inc.................................. 41,000 796,938
France Telecom--ADR (France).......................... 20,000 1,741,250
Global Crossing Ltd. (a).............................. 56,580 1,499,370
Nextlink Communications, Inc.--Convertible Preferred,
144A--Private Placement (b)......................... 10,100 1,229,675
SBC Communications, Inc............................... 42,700 2,180,369
Sprint Corp. (PCS Group).............................. 61,800 3,352,650
Sprint Corp. PCS, Ser I (a)........................... 11,700 872,381
Tele Danmark A/S ADS (Denmark)........................ 100,000 2,962,500
U.S. West, Inc........................................ 44,400 2,533,575
Vodafone AirTouch, PLC--ADR (United Kingdom).......... 25,000 5,943,750
------------
47,456,464
------------
TECHNOLOGY 2.8%
NorthEast Optic Network, Inc. (a)..................... 60,000 2,265,000
PSINet, Inc.--Convertible Preferred Ser C............. 16,000 644,000
Verio, Inc.--Convertible Preferred Ser
A,--144A--Private Placement (b)....................... 11,600 484,300
Winstar Communications, Inc.--Convertible Preferred
Ser D................................................. 21,075 998,428
------------
4,391,728
------------
TOTAL COMMON AND PREFERRED STOCKS 84.5%....................... $134,144,652
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED INCOME SECURITIES 7.5%
CABLE TELEVISION 1.3%
$1,000 Continental Cablevision, Inc............. 8.300% 05/15/06 $ 1,044,109
1,000 Cox Communications, Inc.................. 6.875 06/15/05 980,291
------------
2,024,400
------------
ELECTRIC UTILITIES 1.3%
1,000 Texas Utilities Electric Co.............. 8.250 04/01/04 1,049,608
1,000 Union Electric Co........................ 7.375 12/15/04 1,033,010
------------
2,082,618
------------
OIL & GAS PIPELINE AND DISTRIBUTION 0.6%
1,000 Enron Corp............................... 7.125 05/15/07 976,518
------------
TELECOMMUNICATIONS 4.3%
1,000 360 Communications....................... 7.125 03/01/03 1,012,435
900 GTE Corp................................. 9.375 12/01/00 930,800
1,000 Sprint Corp.............................. 8.125 07/15/02 1,033,340
3,000 Telefonos de Mexico, SA.................. 4.250 06/15/04 2,827,500
1,000 Worldcom, Inc............................ 7.750 04/01/07 1,039,927
------------
6,844,002
------------
TOTAL FIXED INCOME SECURITIES........................................ 11,927,538
------------
TOTAL LONG-TERM INVESTMENTS 92.0%
(Cost $105,447,674)................................................ 146,072,190
SHORT-TERM INVESTMENTS 7.7%
(Cost $12,127,248)................................................. 12,127,248
------------
TOTAL INVESTMENTS 99.7%
(Cost $117,574,922)................................................ 158,199,438
OTHER ASSETS IN EXCESS OF LIABILITIES 0.3%.......................... 506,203
------------
NET ASSETS 100.0%................................................... $158,705,641
============
</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.
ADR -- American Depository Receipts
ADS -- American Depository Shares
PRIDES -- Preferred redeemable increased dividend equity, traded in shares.
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $117,574,922)....................... $158,199,438
Cash........................................................ 1,328
Receivables:
Investments Purchased..................................... 2,037,983
Interest.................................................. 270,570
Dividends................................................. 187,916
Fund Shares Sold.......................................... 124,258
Other....................................................... 8,581
------------
Total Assets.......................................... 160,830,074
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,228,125
Fund Shares Repurchased................................... 419,630
Distributor and Affiliates................................ 191,039
Investment Advisory Fee................................... 86,001
Trustees' Deferred Compensation and Retirement Plans........ 144,326
Accrued Expenses............................................ 55,312
------------
Total Liabilities..................................... 2,124,433
------------
NET ASSETS.................................................. $158,705,641
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $109,228,759
Net Unrealized Appreciation................................. 40,624,516
Accumulated Net Realized Gain............................... 8,702,425
Accumulated Undistributed Net Investment Income............. 149,941
------------
NET ASSETS.................................................. $158,705,641
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $66,090,607 and 3,505,256 shares of
beneficial interest issued and outstanding)............. $ 18.85
Maximum sales charge (5.75%* of offering price)......... 1.15
------------
Maximum offering price to public........................ $ 20.00
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $85,867,151 and 4,562,224 shares of
beneficial interest issued and outstanding)............. $ 18.82
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $6,747,883 and 358,773 shares of
beneficial interest issued and outstanding)............. $ 18.81
============
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
September 30, 1999
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends................................................... $ 2,168,462
Interest.................................................... 550,919
------------
Total Income............................................ 2,719,381
------------
EXPENSES:
Distribution (12b-1) and Services Fees (Attributed to
Classes A, B and C of $84,929, $451,495 and $34,268,
respectively)............................................. 570,692
Investment Advisory Fee..................................... 536,874
Shareholder Services........................................ 134,818
Trustees' Fees and Related Expenses......................... 19,565
Legal....................................................... 11,680
Custody..................................................... 8,039
Other....................................................... 116,961
------------
Total Expenses.......................................... 1,398,629
------------
NET INVESTMENT INCOME....................................... $ 1,320,752
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 6,641,826
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 35,241,774
End of the Period:
Investments............................................. 40,624,516
------------
Net Unrealized Appreciation During the Period............... 5,382,742
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 12,024,568
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 13,345,320
============
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended September 30, 1999, the Nine Months Ended
March 31, 1999 and the Year Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Nine Months Ended Year Ended
September 30, 1999 March 31, 1999 June 30, 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................... $ 1,320,752 $ 2,146,231 $ 2,919,996
Net Realized Gain........................ 6,641,826 3,971,978 5,691,843
Net Unrealized Appreciation/Depreciation
During the Period....................... 5,382,742 (4,004,125) 26,338,865
------------ ------------ ------------
Change in Net Assets from Operations..... 13,345,320 2,114,084 34,950,704
------------ ------------ ------------
Distributions from Net Investment
Income.................................. (1,188,991) (2,070,469) (3,302,950)
Distributions in Excess of Net Investment
Income.................................. -0- -0- (58,293)
------------ ------------ ------------
Distributions from and in Excess of Net
Investment Income*...................... (1,188,991) (2,070,469) (3,361,243)
------------ ------------ ------------
Distributions from Net Realized Gain..... -0- (1,862,563) (13,156,292)
Distributions in Excess of Net Realized
Gain.................................... -0- -0- (125,726)
------------ ------------ ------------
Distributions from and in Excess of Net
Realized Gain*.......................... -0- (1,862,563) (13,282,018)
------------ ------------ ------------
Return of Capital Distribution*.......... -0- -0- (7,471,305)
------------ ------------ ------------
Total Distributions...................... (1,188,991) (3,933,032) (24,114,566)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.............................. 12,156,329 (1,818,948) 10,836,138
------------ ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................ 11,629,622 25,006,965 33,570,538
Net Asset Value of Shares Issued Through
Dividend Reinvestment................... 988,476 3,332,371 21,003,724
Cost of Shares Repurchased............... (19,179,915) (26,459,204) (53,035,786)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS............................ (6,561,817) 1,880,132 1,538,476
------------ ------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS.... 5,594,512 61,184 12,374,614
NET ASSETS:
Beginning of the Period.................. 153,111,129 153,049,945 140,675,331
------------ ------------ ------------
End of the Period (Including accumulated
undistributed net investment income of
$149,941, $18,180 and $(57,582),
respectively)........................... $158,705,641 $153,111,129 $153,049,945
============ ============ ============
*Distributions by Class
- -------------------------------------------------------------------------------------------------
Distributions from and in Excess of Net
Investment Income:
Class A Shares.......................... $ (636,167) $ (1,031,678) $ (1,538,296)
Class B Shares.......................... (513,994) (970,381) (1,714,845)
Class C Shares.......................... (38,830) (68,410) (108,102)
------------ ------------ ------------
$ (1,188,991) $ (2,070,469) $ (3,361,243)
============ ============ ============
Distributions from and in Excess of Net
Realized Gain:
Class A Shares.......................... $ -0- $ (740,901) $ (5,310,506)
Class B Shares.......................... -0- (1,048,593) (7,494,154)
Class C Shares.......................... -0- (73,069) (477,358)
------------ ------------ ------------
$ -0- $ (1,862,563) $(13,282,018)
============ ============ ============
Return of Capital Distribution:
Class A Shares.......................... $ -0- $ -0- $ (2,987,603)
Class B Shares.......................... -0- -0- (4,215,072)
Class C Shares.......................... -0- -0- (268,630)
------------ ------------ ------------
$ -0- $ -0- $ (7,471,305)
============ ============ ============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine Months
Ended Ended Year Ended June 30,
September 30, March 31, -------------------------------------
Class A Shares 1999 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period............... $17.465 $17.657 $16.441 $15.298 $13.386 $12.906
------- ------- ------- ------- ------- -------
Net Investment
Income............... .197 .310 .429 .637 .538 .595
Net Realized and
Unrealized
Gain/Loss............ 1.372 .013 3.909 1.317 2.077 .485
------- ------- ------- ------- ------- -------
Total from Investment
Operations........... 1.569 .323 4.338 1.954 2.615 1.080
------- ------- ------- ------- ------- -------
Less:
Distributions from
and in Excess of
Net Investment
Income............. .180 .300 .480 .610 .703 .600
Distributions from
and in Excess of
Net Realized
Gain............... -0- .215 1.691 .201 -0- -0-
Return of Capital
Distribution....... -0- -0- .951 -0- -0- -0-
------- ------- ------- ------- ------- -------
Total Distributions.... .180 .515 3.122 .811 .703 .600
------- ------- ------- ------- ------- -------
Net Asset Value, End of
the Period........... $18.854 $17.465 $17.657 $16.441 $15.298 $13.386
======= ======= ======= ======= ======= =======
Total Return (a)....... 8.97%* 1.72%* 28.17% 13.20% 19.93% 8.70%
Net Assets at End of
the Period (In
millions)............ $ 66.1 $ 62.1 $ 60.4 $ 52.5 $ 57.7 $ 50.4
Ratio of Expenses to
Average Net
Assets (b)........... 1.25% 1.24% 1.30% 1.41% 1.38% 1.34%
Ratio of Net Investment
Income to Average Net
Assets (b)........... 2.04% 2.29% 2.47% 4.03% 3.61% 4.55%
Portfolio Turnover..... 17%* 13%* 23% 102% 121% 109%
</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>
Six Months Nine Months
Ended Ended Year Ended June 30,
September 30, March 31, -------------------------------------
Class B Shares 1999 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period............... $17.437 $17.632 $16.434 $15.296 $13.356 $12.880
------- ------- ------- ------- ------- -------
Net Investment
Income............... .125 .208 .309 .519 .426 .507
Net Realized and
Unrealized
Gain/Loss............ 1.369 .012 3.891 1.314 2.080 .461
------- ------- ------- ------- ------- -------
Total from Investment
Operations........... 1.494 .220 4.200 1.833 2.506 .968
------- ------- ------- ------- ------- -------
Less:
Distributions from
and in Excess of
Net Investment
Income............. .110 .200 .360 .494 .566 .492
Distributions from
and in Excess of
Net Realized
Gain............... -0- .215 1.691 .201 -0- -0-
Return of Capital
Distribution....... -0- -0- .951 -0- -0- -0-
------- ------- ------- ------- ------- -------
Total Distributions.... .110 .415 3.002 .695 .566 .492
------- ------- ------- ------- ------- -------
Net Asset Value, End of
the Period........... $18.821 $17.437 $17.632 $16.434 $15.296 $13.356
======= ======= ======= ======= ======= =======
Total Return (a)....... 8.53%* 1.21%* 27.20% 12.30% 19.08% 7.80%
Net Assets at End of
the Period (In
millions)............ $ 85.9 $ 84.1 $ 86.8 $ 83.3 $ 92.9 $ 81.0
Ratio of Expenses to
Average Net
Assets (b)........... 2.00% 1.99% 2.07% 2.17% 2.13% 2.05%
Ratio of Net Investment
Income to Average Net
Assets (b)........... 1.29% 1.53% 1.74% 3.27% 2.86% 3.84%
Portfolio Turnover..... 17%* 13%* 23% 102% 121% 109%
</TABLE>
*Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended June 30, 1997, and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
17
<PAGE> 19
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine Months
Ended Ended Year Ended June 30,
September 30, March 31, -------------------------------------
Class C Shares 1999 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period............... $17.426 $17.619 $16.426 $15.290 $13.356 $12.868
------- ------- ------- ------- ------- -------
Net Investment
Income............... .127 .209 .308 .503 .470 .482
Net Realized and
Unrealized
Gain/Loss............ 1.365 .013 3.887 1.328 2.030 .498
------- ------- ------- ------- ------- -------
Total from Investment
Operations........... 1.492 .222 4.195 1.831 2.500 .980
------- ------- ------- ------- ------- -------
Less:
Distributions from
and in Excess of
Net Investment
Income............. .110 .200 .360 .494 .566 .492
Distributions from
and in Excess of
Net Realized
Gain............... -0- .215 1.691 .201 -0- -0-
Return of Capital
Distribution....... -0- -0- .951 -0- -0- -0-
------- ------- ------- ------- ------- -------
Total Distributions.... .110 .415 3.002 .695 .566 .492
------- ------- ------- ------- ------- -------
Net Asset Value, End of
the Period........... $18.808 $17.426 $17.619 $16.426 $15.290 $13.356
======= ======= ======= ======= ======= =======
Total Return (a)....... 8.53%* 1.22%* 27.14% 12.37% 19.00% 7.88%
Net Assets at End of
the Period (In
millions)............ $ 6.7 $ 7.0 $ 5.9 $ 4.9 $ 5.0 $ 1.3
Ratio of Expenses to
Average Net Assets
(b).................. 2.00% 1.99% 2.06% 2.17% 2.13% 2.09%
Ratio of Net Investment
Income to Average Net
Assets (b)........... 1.31% 1.53% 1.73% 3.23% 2.78% 3.80%
Portfolio Turnover..... 17%* 13%* 23% 102% 121% 109%
</TABLE>
*Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended June 30, 1997, and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 (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.
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, 1999, there were no
when issued or delayed delivery purchase commitments.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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. Income and expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At September 30, 1999, for federal income tax purposes the cost of long- and
short-term investments is $117,574,922, the aggregate gross unrealized
appreciation is $43,220,383 and the aggregate gross unrealized depreciation is
$2,595,867, resulting in net unrealized appreciation on long- and short-term
investments of $40,624,516.
E. 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.
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>
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended September 30, 1999, the Fund recognized expenses of
approximately $6,100 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended September 30, 1999 the Fund recognized expenses of
approximately $45,900 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 six months ended September
30, 1999 the Fund recognized expenses of approximately $107,900. Transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per Trustee under the plan is $2,500.
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
At September 30, 1999, capital aggregated $47,288,717, $57,023,068 and
$4,916,974 for Classes A, B and C, respectively. For the six ended September 30,
1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A...................................... 271,462 $ 5,213,766
Class B...................................... 284,727 5,441,920
Class C...................................... 50,786 973,936
---------- ------------
Total Sales.................................... 609,975 $ 11,629,622
========== ============
Dividend Reinvestment:
Class A...................................... 28,023 $ 541,659
Class B...................................... 21,865 422,267
Class C...................................... 1,273 24,550
---------- ------------
Total Dividend Reinvestment.................... 51,161 $ 988,476
========== ============
Repurchases:
Class A...................................... (348,265) $ (6,659,001)
Class B...................................... (566,362) (10,795,215)
Class C...................................... (92,503) (1,725,699)
---------- ------------
Total Repurchases.............................. 1,007,130 $(19,179,915)
========== ============
</TABLE>
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 1999, capital aggregated $48,192,293, $61,954,096 and
$5,644,187 for Classes A, B and C, respectively. For the nine months ended March
31, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A...................................... 544,379 $ 9,808,618
Class B...................................... 673,415 12,063,204
Class C...................................... 174,359 3,135,143
---------- ------------
Total Sales.................................... 1,392,153 $ 25,006,965
========== ============
Dividend Reinvestment:
Class A...................................... 85,041 $ 1,531,265
Class B...................................... 95,052 1,711,764
Class C...................................... 4,958 89,342
---------- ------------
Total Dividend Reinvestment.................... 185,051 $ 3,332,371
========== ============
Repurchases:
Class A...................................... (496,899) $ (8,902,999)
Class B...................................... (867,572) (15,566,941)
Class C...................................... (113,012) (1,989,264)
---------- ------------
Total Repurchases.............................. (1,477,483) $(26,459,204)
========== ============
</TABLE>
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (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>
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (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 purchased
on or after June 1, 1996 will automatically convert to Class A shares after the
eighth year following purchase. Class B shares purchased before June 1, 1996
automatically convert to Class A shares after the sixth year following purchase.
For the six months ended September 30, 1999, 77,254 Class B shares automatically
converted to Class A shares. The CDSC will be imposed on most redemptions made
within six years of the purchase for Class B and one year of the purchase for
Class C as detailed in the following schedule.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ---------------------------------------------------------------------------
<S> <C> <C>
First........................................ 4.00% 1.00%
Second....................................... 3.75% None
Third........................................ 3.50% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Sixth........................................ 1.00% None
Seventh and Thereafter....................... None None
</TABLE>
For the six months ended September 30, 1999, Van Kampen, as Distributor for
the Fund, received net commissions on sales of the Fund's Class A shares of
approximately $11,500 and CDSC on redeemed shares of approximately $67,800.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
For the six months ended September 30, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $26,639,578
and $40,500,810, respectively.
5. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% for Class A net assets and 1.00%
each for Class B and Class C net assets are accrued daily. Included in these
fees for the six months ended September 30, 1999 are payments retained by Van
Kampen of approximately $351,500.
25
<PAGE> 27
VAN KAMPEN FUNDS
GROWTH
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Pace
Small Cap Value
Technology
GROWTH AND INCOME
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Fixed Income
Global Franchise
Global Government Securities
Global Managed Assets
International Magnum
Latin American
Short-Term Global Income*
Strategic Income
Worldwide High Income
INCOME
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN
Prime Rate Income Trust
Senior Floating Rate
TAX FREE
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
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing 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
* Closed to new investors
26
<PAGE> 28
VAN KAMPEN UTILITY FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN*--Chairman
SUZANNE H. WOOLSEY, PH.D.
PAUL G. YOVOVICH
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and Chief Investment Officer
A THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
STEPHEN L. BOYD*
PETER W. HEGEL*
MICHAEL H. SANTO*
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 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
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., 1999. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After March 31, 2000, the report, if used with prospective
investors, must be accompanied by a quarterly performance update.
27
<PAGE> 29
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
28
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 8
Portfolio Highlights............................. 9
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 16
Statement of Operations.......................... 17
Statement of Changes in Net Assets............... 18
Financial Highlights............................. 19
Notes to Financial Statements.................... 22
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 31
LETTER TO SHAREHOLDERS
October 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the Asian crisis appears to be behind us, new concerns are always
emerging. In the coming months, we'll likely hear more about how the year 2000
computer problem may affect the markets or that we're overdue for a correction.
While the markets could undoubtedly suffer as a result of these or any number of
other events, we encourage you to focus on your long-term investment goals.
Although nothing is certain, history has shown us that over time, the markets
tend to recover--and most investors want to be positioned to take advantage of
any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
1
<PAGE> 32
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree, keeping the economy growing at a
healthy pace. High levels of consumer confidence fueled this heavy retail
purchasing activity, pushing the personal savings rate down to a record low as
spending rates outpaced income growth. Although we experienced a slowdown during
the second quarter of 1999, economic growth accelerated toward the end of the
reporting period. The growth rate of the nation's gross domestic product (GDP)
dipped to 1.6 percent for the second quarter of 1999, but climbed back up to 4.8
percent in the third quarter.
EMPLOYMENT SITUATION
The strong job market helped to support the health of the economy. During
the reporting period, the unemployment rate reached its lowest level in almost
30 years, and wages continued to climb. The wage pressures were balanced
somewhat by productivity gains, but they ultimately pushed the cost of labor
higher, as evidenced by the sharp jump in the Employment Cost Index in the
second quarter of 1999.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index (CPI) report. The Federal Reserve remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
two of its interest rate cuts from the fall of 1998, raising rates in June and
August 1999 to keep the economy from overheating.
INTEREST RATES AND INFLATION
September 30, 1997, through September 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Sep 1997 5.5000 2.2000
6.2500 2.2000
5.7500 2.1000
Dec 1997 5.6875 1.8000
6.5000 1.7000
5.5625 1.6000
Mar 1998 5.6250 1.4000
6.1250 1.4000
5.6250 1.4000
Jun 1998 5.6875 1.7000
6.0000 1.7000
5.5625 1.7000
Sep 1998 5.9375 1.6000
5.7500 1.5000
5.2500 1.5000
Dec 1998 4.8750 1.5000
4.0000 1.6000
4.8125 1.7000
Mar 1999 4.8750 1.6000
5.1250 1.7000
4.9375 2.3000
Jun 1999 4.5000 2.1000
4.0000 2.0000
4.7500 2.1000
Sep 1999 5.4375 2.3000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 33
PERFORMANCE RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 1999
VAN KAMPEN AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV(1)... 24.04% 23.58% 23.75%
Six-month total return(2)................ 16.82% 18.52% 22.69%
One-year total return(2)................. 83.94% 88.79% 92.98%
Life-of-Fund average annual total
return(2)........................... 27.75% 28.65% 29.14%
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 shares 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 shares and C shares).
See the Comparative 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.
The Fund invests in equity securities of small- and mid-sized companies. These
types of companies may have limited product lines, markets or financial
resources and their securities may be subject to more erratic market movements
than those of larger companies. Foreign investments may magnify volatility due
to changes in foreign exchange rates, the political and economic uncertainties
in foreign countries, and the potential lack of liquidity, government
supervision, and regulation.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 34
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AGGRESSIVE GROWTH FUND
We recently spoke to the portfolio managers of the Van Kampen Aggressive Growth
Fund about the key events and economic forces that shaped the markets during the
past six months. The portfolio managers include Gary M. Lewis, senior portfolio
manager, who has managed the Fund since inception in 1996 and whose investment
experience dates from 1979. He is joined by Dudley Brickhouse, Janet Luby, and
David Walker, portfolio managers, and Stephen L. Boyd, chief investment officer
for equity investments. The following discussion reflects their views on the
Fund's performance during the six months ended September 30, 1999.
Q COULD YOU DESCRIBE THE MARKET ENVIRONMENT IN WHICH THE FUND OPERATED
DURING THE REPORTING PERIOD?
A As has been its trademark recently, the stock market was volatile during
the past two quarters. Early in the reporting period, the Dow Jones
Industrial Average continued its upward trend, passing the 11,000
milestone in early May. Soon after, the market reversed course, as investors
anticipated an increase in interest rates. This anticipation placed downward
pressure on the market in general and growth stocks in particular. To attempt to
moderate economic growth, the Fed did increase rates twice during the reporting
period. Following the first increase, the stock market rose slightly because the
rate hike was widely expected. The market response to the second rate hike was
less favorable. The Dow reached a record high the following day but went on to
lose nearly 9 percent by the end of the reporting period.
During the last six months, technology stocks continued to be among the
market's strongest performers. Companies in the financial services and retail
industries fared less well, as these businesses are especially sensitive to
rising interest rates.
Q IN LIGHT OF THIS ENVIRONMENT, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND,
AND HOW DID THIS STRATEGY AFFECT THE FUND'S PERFORMANCE?
A Our investment strategy--to look for stocks with rising earnings and
rising valuations--has worked well for us in the past, so we didn't change
our approach to stock selection as market conditions fluctuated. We
invested in those companies we believed had the potential to outperform earnings
expectations, and we sold stocks if their underlying companies' earnings
estimates or valuations were declining. We consistently manage the Portfolio
from the "bottom up," meaning that we evaluate each company individually before
deciding to invest. Overall, our focus on a bottom-up stock-selection strategy
benefited the Fund, as we were successful in identifying a number of stocks that
performed well during the reporting period. As a result, positive stock
selection contributed to the Fund's overall return.
4
<PAGE> 35
Q WHICH INVESTMENTS PARTICULARLY HELPED THE FUND'S PERFORMANCE?
A As a group, technology stocks performed very well during the reporting
period. This trend benefited the Fund, as we invested in a broad range of
companies that make extensive use of technology. Because the Fund was so
heavily weighted in technology companies, the stocks that had the most
significant effect on performance were all in this area.
As the Internet and electronic commerce continue their rapid growth, demand
for interactive services and high-speed data transmission has driven strong
performance in companies that supply the necessary infrastructure. Many of our
investments in this area were top contributors to the Fund's performance during
the reporting period and included the following companies:
- Harmonic and JDS Uniphase, which provide components for the next
generation of cable and data networks;
- TranSwitch, a producer of semiconductors that improve the speed at which
data can be transmitted over computer networks; and
- Emulex, which manufactures equipment used in the development of computer
storage networks.
RF Micro Devices, Inc., which makes an assortment of equipment for wireless
communications products, was also a very strong performer for the Fund over the
reporting period. The company is benefiting from the strong global growth of
wireless networks.
Of course, not all of the stocks in the Fund performed as favorably, nor is
there any guarantee that any of the stocks mentioned above will continue to
perform as well in the future. For additional Fund portfolio highlights, please
turn to page 9.
Q DID ANY STOCKS HURT THE FUND'S RETURN?
A As we mentioned, technology companies were excellent performers during the
past six months. Nevertheless, because the Fund owns so many stocks in the
technology area, many of our weakest contributors also came from this sector.
The largest drag on the Fund's performance came from our investment in
telecommunications equipment manufacturer Carrier Access. This company, which
manufactures equipment to enhance voice and high-speed data services, declined
in value because of concerns about accelerating competition and declining
prices.
New Era of Networks (NEON), a developer of software technology that helps
businesses share data with their customers, also hurt the Fund's performance.
The firm fared poorly in part because of fears that its customers would reduce
spending on NEON's products to address issues relating to the year 2000 problem.
Other concerns included more competition and the company's reliance upon a small
number of customers for much of its business. Similar fears of competition and
customer concentration negatively affected MIPS Technologies, which licenses its
semiconductor technology to companies that
5
<PAGE> 36
produce video games, TV set-top boxes, handheld PCs, and other high-volume
electronics products.
Meanwhile, in the retail industry, Bebe Stores, a women's apparel business,
was a disappointing performer that negatively affected the Fund's return. During
the reporting period, concerns regarding inventory management, the difficulty of
exceeding the previous year's sales levels, and fears of a broad slowdown in
consumer spending hurt the valuation of the company's shares.
Q HOW DID THE FUND PERFORM?
A The Fund performed exceptionally well during the reporting period,
achieving a six-month total return of 24.04 percent(1) as of September 30,
1999 (Class A shares at net asset value). By comparison, the Russell 2000
Index returned 8.25 percent, and the Russell 2500 Growth Index, which more
closely resembles the Fund, returned 12.75 percent. The Russell 2000 reflects
the general performance of small- and mid-cap stocks, and the Russell 2500
Growth Index measures the performance of those Russell 2500 companies with
higher price-to-book ratios and higher forecasted growth values. These indexes
are unmanaged statistical composites.
We attribute the Fund's healthy return to successful stock selection and a
substantial weighting in technology stocks. However, returns for both the Fund
and the indices were also enhanced by the calendar--the reporting period began
shortly after a substantial market decline had depressed stock prices.
Compared to its peers, the Fund has performed extremely well. For the
12-month period ended September 30, 1999, the Fund's total return (Class A
shares at net asset value) ranked it 4 out of 277 funds in the capital
appreciation category, according to Lipper Analytical Services. The Fund also
ranked 13 out of 173 for the three-year period. Lipper calculations are based on
changes in net asset value with dividends reinvested. The calculations also
don't include sales charges; if they had, results might have been less
favorable. Please refer to the chart and footnotes on page 3 for additional Fund
performance results. Past performance does not guarantee future performance.
Q WHAT DO YOU SEE AHEAD FOR THE FUND DURING THE NEXT SIX MONTHS?
A Concerns about further increases in interest rates will make for an
interesting six months. Questions about the year 2000 problem will also
affect investors' decisions--although to what extent is uncertain. We do,
however, think that corporate spending on the year 2000 problem will lead to a
slowdown in the software industry, because firms may delay their purchases of
new software until after the new year. Finally, we continue to adjust to a new
"day trading" stock market culture, which has led to a new standard of market
volatility.
As we have mentioned in a number of past reports, small-cap stocks remain
valued at absolute and historic lows relative to large-cap stocks. We have
managed to perform well despite this less-than-ideal situation for the Fund,
which invests largely in smaller
6
<PAGE> 37
companies. Although there's no way to know when valuations will return to more
traditional levels, we believe the Fund is well positioned to benefit if a
reversal does occur.
Through all of these developments, we will continue to do what has worked
well for us in the past, which is to invest according to our discipline. In
volatile times, our job is more difficult because it can be challenging to find
stocks that meet our criteria. In that case, we continue to search for stocks
whose valuations are increasing or for those stocks whose valuations are
declining the least. Either way, we have confidence in our investment strategy
and stick with it during all types of market conditions.
[SIG]
Gary M. Lewis
Senior Portfolio Manager
[SIG]
David Walker
Portfolio Manager
[SIG]
Stephen L. Boyd
Chief Investment Officer
Equity Investments
[SIG]
Dudley Brickhouse
Portfolio Manager
[SIG]
Janet Luby
Portfolio Manager
7
<PAGE> 38
GLOSSARY OF TERMS
BOTTOM-UP INVESTING: A management style that emphasizes the analysis of
individual stocks, rather than economic and market cycles.
CLASS A SHARES: When Class A shares of a fund are purchased, the share price
includes the net asset value plus a one-time sales charge (or "load"). In
most cases, there is no redemption fee (contingent deferred sales charge).
EARNINGS ESTIMATES: A forecast for a company's net income during a given period.
Earnings estimates can come from the company's management as well as from
independent analysts.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a
year to establish monetary policy and monitor the economic pulse of the
United States.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
MARKET CAPITALIZATION: The size of a company, as measured by the value of its
issued and outstanding stock.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from the total assets in its portfolio and dividing
this amount by the number of shares outstanding. The NAV does not include
any initial or contingent deferred sales charge.
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.
8
<PAGE> 39
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AGGRESSIVE GROWTH FUND
TOP TEN PORTFOLIO HOLDINGS AS OF SEPTEMBER 30, 1999*
<TABLE>
<S> <C>
HARMONIC develops and manufactures fiber-optic transmission
equipment for cable, satellite, and wireless networks....... 3.2%
RF MICRO DEVICES creates radio-frequency integrated circuits
used in wireless communications products.................... 2.3%
JDS UNIPHASE develops a range of products used by systems
manufacturers to develop optical networks for the
telecommunications and cable television industries.......... 2.2%
EMULEX designs three types of network connectivity products:
network access servers, printer servers, and high-speed
fiber channel products...................................... 2.1%
TRANSWITCH designs digital and mixed-signal
semiconductors.............................................. 2.0%
SDL sells bandwidth-enhancing products to companies that
operate fiber-optic, cable television, and satellite
communication networks...................................... 1.9%
APPLIED MICRO CIRCUITS develops integrated circuits for
tele- and data communications that transmit large amounts of
complex data at high speeds................................. 1.6%
QLOGIC makes integrated circuits and adapter boards that
connect peripheral devices to computers..................... 1.5%
BUSINESS OBJECTS produces software that helps nontechnical
executives access and analyze information stored in their
companies' computer databases............................... 1.5%
HAMBRECHT & QUIST is a leading underwriter of public
offerings for emerging growth companies that focus on the
health-care, technology, and branded-consumer industries.... 1.4%
</TABLE>
TOP FIVE PORTFOLIO SECTORS*(1)
[BAR GRAPH]
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ --------------
<S> <C> <C>
Technology 54.2 43.7
Healthcare 8.9 12.7
Consumer Services 8.6 13.4
Consumer Distribution 8.5 11.9
Utilities 8.0 4.7
</TABLE>
* As a Percentage of Long-Term Investments
(1)These sector categories represent broad groupings of related industries.
9
<PAGE> 40
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 95.2%
CONSUMER DISTRIBUTION 8.1%
Abacus Direct Corp. (a)................................ 40,000 $ 4,875,000
American Eagle Outfitters, Inc. (a).................... 85,000 4,117,188
Bally Total Fitness Holdings Corp. (a)................. 75,000 2,292,188
Best Buy Co., Inc. (a)................................. 75,000 4,654,687
Cost Plus, Inc. (a).................................... 225,000 10,912,500
Emulex Corp. (a)....................................... 200,000 17,175,000
JAKKS Pacific, Inc. (a)................................ 150,000 5,625,000
Lands End, Inc. (a).................................... 130,000 8,580,000
Talbots, Inc........................................... 100,000 4,493,750
Williams Sonoma, Inc. (a).............................. 69,300 3,365,381
Zale Corp. (a)......................................... 75,000 2,873,437
------------
68,964,131
------------
CONSUMER DURABLES 0.4%
Copart, Inc. (a)....................................... 200,000 3,687,500
------------
CONSUMER NON-DURABLES 1.1%
Fossil, Inc. (a)....................................... 225,000 6,089,063
Kenneth Cole Productions, Inc., Class A (a)............ 85,000 3,176,875
------------
9,265,938
------------
CONSUMER SERVICES 8.2%
Acme Communications, Inc. (a).......................... 6,600 204,600
Argosy Gaming Corp. (a)................................ 80,000 1,060,000
CEC Entertainment, Inc. (a)............................ 145,000 5,201,875
Digital Insight Corp. (a).............................. 6,600 99,000
Emmis Communications Corp., Class A (a)................ 50,000 3,303,125
Hispanic Broadcasting Corp. (a)........................ 115,000 8,754,375
Internet Capital Group, Inc. (a)....................... 34,400 3,022,900
Macrovision Corp. (a).................................. 120,000 5,325,000
Profit Recovery Group International, Inc. (a).......... 125,000 5,578,125
Proxicom, Inc. (a)..................................... 55,000 3,217,500
Radio One, Inc., Class A (a)........................... 80,600 3,344,900
Sonic Corp. (a)........................................ 100,000 3,043,750
Speedway Motorsports, Inc. (a)......................... 115,000 4,980,938
Startek, Inc. (a)...................................... 92,300 5,076,500
</TABLE>
See Notes to Financial Statements
10
<PAGE> 41
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
Station Casinos, Inc. (a).............................. 210,000 $ 4,882,500
TiVo, Inc. (a)......................................... 46,200 1,383,113
Univision Communications, Inc., Class A (a)............ 85,000 6,916,875
Valassis Communications, Inc. (a)...................... 50,000 2,196,875
Wink Communications, Inc. (a).......................... 51,100 2,232,431
------------
69,824,382
------------
ENERGY 3.0%
Apache Corp............................................ 175,000 7,557,812
Basin Exploration, Inc. (a)............................ 150,000 3,600,000
Newfield Exploration Co. (a)........................... 150,000 4,940,625
Stone Energy Corp. (a)................................. 150,000 7,631,250
Vastar Resources, Inc. ................................ 30,000 1,876,875
------------
25,606,562
------------
FINANCE 1.3%
Hambrecht & Quist Group (a)............................ 225,000 11,010,937
------------
HEALTHCARE 7.2%
Advance Paradigm, Inc. (a)............................. 50,000 2,737,500
Andrx Corp. (a)........................................ 145,000 8,487,031
Arthrocare Corp. (a)................................... 60,000 3,277,500
Gilead Sciences, Inc. (a).............................. 65,000 4,172,188
Hooper Holmes, Inc. ................................... 175,000 4,484,375
Jones Pharma, Inc. .................................... 75,000 2,472,656
King Pharmaceuticals, Inc. (a)......................... 100,000 3,500,000
MedImmune, Inc. (a).................................... 100,000 9,965,625
MiniMed, Inc. (a)...................................... 20,000 1,965,000
Priority Healthcare Corp. (a).......................... 100,000 3,087,500
QLT Phototherapeutics, Inc. (a)........................ 90,000 6,879,375
Syncor International Corp. (a)......................... 75,000 2,812,500
Taro Pharmaceutical Industries Ltd. (a)................ 50,000 762,500
VISX, Inc. (a)......................................... 62,200 4,919,631
Zoll Medical Corp. (a)................................. 60,000 1,815,000
------------
61,338,381
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 42
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING 4.0%
ANTEC Corp. (a)........................................ 175,000 $ 9,296,875
Cree Research, Inc. (a)................................ 250,000 8,484,375
Creo Products, Inc. (a)................................ 34,500 847,406
Helix Technology Corp. ................................ 150,000 4,987,500
Insituform Technologies, Inc. (a)...................... 175,000 4,375,000
Power-One, Inc. (a).................................... 75,000 1,912,500
Zebra Technologies Corp. (a)........................... 85,000 3,864,844
------------
33,768,500
------------
RAW MATERIALS/PROCESSING INDUSTRIES 2.7%
ChiRex, Inc. (a)....................................... 150,000 3,871,875
Elcor Corp. ........................................... 75,000 1,875,000
Millipore Corp. ....................................... 145,000 5,446,563
Mobile Mini, Inc. (a).................................. 135,000 2,953,125
Optical Coating Laboratory, Inc. ...................... 100,000 9,206,250
------------
23,352,813
------------
TECHNOLOGY 51.6%
Advanced Digital Information Corp. (a)................. 300,000 8,343,750
Alpha Industries, Inc. (a)............................. 150,000 8,460,937
Alteon Websystems, Inc. (a)............................ 19,800 1,861,200
ANADIGICS, Inc. (a).................................... 150,000 4,218,750
Applied Micro Circuits Corp. (a)....................... 230,000 13,110,000
ATMI, Inc. (a)......................................... 125,000 4,664,062
AVT Corp. (a).......................................... 78,200 2,394,875
AVX Corp. ............................................. 125,000 4,390,625
Bluestone Software, Inc. (a)........................... 20,500 474,063
BroadVision, Inc. (a).................................. 40,000 5,322,500
Brocade Communications Systems, Inc. (a)............... 28,000 5,880,000
Business Objects SA -- ADR (France) (a)................ 200,000 11,800,000
Check Point Software Technologies, Ltd. (a)............ 50,000 4,221,875
CommScope, Inc. (a).................................... 250,000 8,125,000
Conexant Systems, Inc. (a)............................. 150,000 10,898,437
Copper Mountain Networks, Inc. (a)..................... 60,000 5,257,500
Credence Systems Corp. (a)............................. 150,000 6,731,250
</TABLE>
See Notes to Financial Statements
12
<PAGE> 43
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
CTS Corp. ............................................. 80,000 $ 4,600,000
Cymer, Inc. (a)........................................ 150,000 5,203,125
Dendrite International, Inc. (a)....................... 100,000 4,725,000
DuPont Photomasks, Inc. (a)............................ 50,000 2,303,125
E.piphany, Inc. (a).................................... 18,600 906,750
Efficient Networks, Inc. (a)........................... 35,000 1,273,125
Electronics for Imaging, Inc. (a)...................... 60,000 3,084,375
Exodus Communications, Inc. (a)........................ 100,000 7,206,250
Extreme Networks, Inc. (a)............................. 65,000 4,115,313
FactSet Research Systems, Inc.......................... 27,500 1,564,063
Foundry Networks, Inc. (a)............................. 37,100 4,674,600
Gadzoox Networks, Inc. (a)............................. 30,000 1,616,250
Galileo Technology Ltd. (a)............................ 250,000 6,250,000
Gemstar International Group Ltd. (a)................... 129,600 10,125,000
Hadco Corp. (a)........................................ 100,000 4,325,000
Harmonic, Inc. (a)..................................... 200,000 26,162,500
hi/fn, inc. (a)........................................ 85,000 9,371,250
Integrated Device Technology, Inc. (a)................. 200,000 3,700,000
ITXC Corp. (a)......................................... 36,800 1,170,700
JDS Uniphase Corp. (a)................................. 160,000 18,210,000
Juniper Networks, Inc. (a)............................. 16,900 3,076,856
Kana Communications, Inc. (a).......................... 13,300 663,338
KEMET Corp. (a)........................................ 200,000 6,393,750
Lam Research Corp. (a)................................. 75,000 4,575,000
Legato Systems, Inc. (a)............................... 175,000 7,628,906
LSI Logic Corp. (a).................................... 200,000 10,300,000
Micrel, Inc. (a)....................................... 230,000 9,976,250
Micromuse, Inc. (a).................................... 125,000 8,031,250
MTI Technology Corp. (a)............................... 100,000 2,306,250
NetIQ Corp. (a)........................................ 20,700 613,238
Netsolve, Inc. (a)..................................... 18,400 326,600
NetZero, Inc. (a)...................................... 72,500 1,885,000
Paradyne Corp. (a)..................................... 51,800 1,450,400
</TABLE>
See Notes to Financial Statements
13
<PAGE> 44
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Peregrine Systems, Inc. (a)............................ 125,000 $ 5,093,750
Pervasive Software, Inc. (a)........................... 70,000 2,415,000
Phone.Com, Inc. (a).................................... 20,500 3,105,750
Pinnacle Systems, Inc. (a)............................. 150,000 6,356,250
Power Integrations, Inc. (a)........................... 100,000 6,925,000
Powerwave Technologies, Inc. (a)....................... 140,000 6,750,625
QLogic Corp. (a)....................................... 170,000 11,868,125
QUALCOMM, Inc. (a)..................................... 30,000 5,675,625
Radisys Corp. (a)...................................... 50,000 1,962,500
Red Hat, Inc. (a)...................................... 27,400 2,630,400
SanDisk Corp. (a)...................................... 75,000 4,889,062
Scientific-Atlanta, Inc. .............................. 140,000 6,938,750
SDL, Inc. (a).......................................... 200,000 15,262,500
Semtech Corp. (a)...................................... 230,000 8,423,750
Teradyne, Inc. (a)..................................... 150,000 5,287,500
TriQuint Semiconductor, Inc. (a)....................... 175,000 10,007,812
Tweeter Home Entertainment Group, Inc. (a)............. 75,000 2,803,125
VeriSign, Inc. (a)..................................... 100,000 10,650,000
Verity, Inc. (a)....................................... 160,000 11,010,000
Vitria Technology, Inc. (a)............................ 8,000 294,000
Waters Corp. (a)....................................... 150,000 9,084,375
Western Wireless Corp. (a)............................. 125,000 5,605,469
Zomax, Inc. (a)........................................ 300,000 7,762,500
Zoran Corp. (a)........................................ 175,000 4,746,875
------------
439,516,831
------------
UTILITIES 7.6%
AirGate PCS, Inc. (a).................................. 45,300 1,126,838
Calpine Corp. (a)...................................... 95,000 8,080,937
Clarent Corp. (a)...................................... 35,000 1,782,813
Price Communications Corp. (a)......................... 232,500 5,827,031
RF Micro Devices, Inc. (a)............................. 400,000 18,300,000
Rural Cellular Corp., Class A (a)...................... 60,000 2,752,500
</TABLE>
See Notes to Financial Statements
14
<PAGE> 45
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
TranSwitch Corp. (a)................................... 285,000 $ 16,245,000
United States Cellular Corp. (a)....................... 160,000 10,880,000
------------
64,995,119
------------
TOTAL LONG-TERM INVESTMENTS 95.2%
(Cost $568,534,802)......................................... 811,331,094
REPURCHASE AGREEMENT 7.3%
DLJ Mortgage Acceptance Corp., ($62,355,000 par collateralized
by U.S. Government obligations in a pooled cash account, dated
09/30/99, to be sold on 10/01/99 at $62,363,877)
(Cost $62,355,000)............................................ 62,355,000
------------
TOTAL INVESTMENTS 102.5%
(Cost $630,889,802)......................................... 873,686,094
LIABILITIES IN EXCESS OF OTHER ASSETS -2.5%.................... (21,679,510)
------------
NET ASSETS 100.0%.............................................. $852,006,584
============
</TABLE>
(a) Non-income producing security as this stock currently does
not declare dividends.
ADR--American Depositary Receipt.
See Notes to Financial Statements
15
<PAGE> 46
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $630,889,802)....................... $873,686,094
Receivables:
Investments Sold.......................................... 8,873,434
Fund Shares Sold.......................................... 7,311,666
Dividends................................................. 15,805
Unamortized Organizational Costs............................ 34,984
Other....................................................... 22,644
------------
Total Assets............................................ 889,944,627
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 31,000,879
Fund Shares Repurchased................................... 5,371,114
Distributor and Affiliates................................ 820,631
Investment Advisory Fee................................... 495,950
Custodian Bank............................................ 3,869
Accrued Expenses............................................ 166,715
Trustees' Deferred Compensation and Retirement Plans........ 78,885
------------
Total Liabilities....................................... 37,938,043
------------
NET ASSETS.................................................. $852,006,584
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $521,269,467
Net Unrealized Appreciation................................. 242,796,292
Accumulated Net Realized Gain............................... 92,428,058
Accumulated Net Investment Loss............................. (4,487,233)
------------
NET ASSETS.................................................. $852,006,584
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $422,538,995 and 19,878,924 shares of
beneficial interest issued and outstanding)............. $ 21.26
Maximum sales charge (5.75%* of offering price)......... 1.30
------------
Maximum offering price to public........................ $ 22.56
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $372,131,217 and 17,980,715 shares of
beneficial interest issued and outstanding)............. $ 20.70
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $57,336,372 and 2,764,815 shares of
beneficial interest issued and outstanding)............. $ 20.74
============
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
16
<PAGE> 47
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 1,173,001
Dividends................................................... 94,207
------------
Total Income............................................ 1,267,208
------------
EXPENSES:
Investment Advisory Fee..................................... 2,462,085
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $426,746, $1,449,600 and $190,662,
respectively)............................................. 2,067,008
Shareholder Services........................................ 806,677
Custody..................................................... 43,767
Trustees' Fees and Related Expenses......................... 17,318
Amortization of Organizational Costs........................ 10,528
Legal....................................................... 7,003
Other....................................................... 276,975
------------
Total Expenses.......................................... 5,691,361
Less Credits Earned on Overnight Cash Balances.......... 3,177
------------
Net Expenses............................................ 5,688,184
------------
NET INVESTMENT LOSS......................................... $ (4,420,976)
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 74,921,195
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 168,181,463
End of the Period......................................... 242,796,292
------------
Net Unrealized Appreciation During the Period............... 74,614,829
------------
NET REALIZED AND UNREALIZED GAIN............................ $149,536,024
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $145,115,048
============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 48
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended September 30, 1999, Nine Months Ended March 31, 1999
and the Year Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
September 30, Nine Months Ended Year Ended
1999 March 31, 1999 June 30, 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss................. $ (4,420,976) $ (3,914,828) $ (3,698,217)
Net Realized Gain................... 74,921,195 17,607,525 46,196,606
Net Unrealized Appreciation During
the Period........................ 74,614,829 98,128,461 30,931,626
------------ ------------ ------------
Change in Net Assets from
Operations........................ 145,115,048 111,821,158 73,430,015
------------ ------------ ------------
Distributions from Net Realized
Gain:
Class A Shares.................... -0- (8,188,984) -0-
Class B Shares.................... -0- (10,090,918) -0-
Class C Shares.................... -0- (1,152,760) -0-
------------ ------------ ------------
Total Distributions................. -0- (19,432,662) -0-
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES............. 145,115,048 92,388,496 73,430,015
------------ ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold........... 319,597,103 293,035,698 165,163,266
Net Asset Value of Shares Issued
Through Dividend Reinvestment..... -0- 18,218,328 -0-
Cost of Shares Repurchased.......... (114,419,521) (184,145,939) (145,403,812)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM
CAPITAL TRANSACTIONS.............. 205,177,582 127,108,087 19,759,454
------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS........ 350,292,630 219,496,583 93,189,469
NET ASSETS:
Beginning of the Period............. 501,713,954 282,217,371 189,027,902
------------ ------------ ------------
End of the Period (Including
accumulated net investment loss of
$4,487,233, $66,257 and $51,572,
respectively)..................... $852,006,584 $501,713,954 $282,217,371
============ ============ ============
</TABLE>
See Notes to Financial Statements
18
<PAGE> 49
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
Six Months Nine Months Year Year (Commencement
Ended Ended Ended Ended of Investment
September 30, March 31, June 30, June 30, Operations) to
Class A Shares 1999(b) 1999(b) 1998 1997 June 30, 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period............... $17.137 $13.676 $ 9.948 $ 9.118 $9.430
------- ------- ------- ------- ------
Net Investment Loss....... (.090) (.125) (.135) (.065) (.002)
Net Realized and
Unrealized Gain/Loss.... 4.209 4.445 3.863 .895 (.310)
------- ------- ------- ------- ------
Total from Investment
Operations................ 4.119 4.320 3.728 .830 (.312)
Less Distributions from Net
Realized Gain............. -0- .859 -0- -0- -0-
------- ------- ------- ------- ------
Net Asset Value, End of the
Period.................... $21.256 $17.137 $13.676 $ 9.948 $9.118
======= ======= ======= ======= ======
Total Return (a)............ 24.04%** 33.72%** 37.49% 9.10% (3.29%)**
Net Assets at End of the
Period (In millions)...... $ 422.5 $ 242.6 $ 117.5 $ 84.0 $ 30.3
Ratio of Expenses to Average
Net Assets*............... 1.32% 1.56% 1.44% 1.30% 1.29%
Ratio of Net Investment Loss
to Average Net Assets*.... (.94%) (1.22%) (1.09%) (.81%) (.50%)
Portfolio Turnover.......... 88%** 126%** 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 N/A 1.61% 1.61% 2.05%
Ratio of Net Investment Loss
to Average Net Assets..... N/A 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.
(b) Based on average shares outstanding.
N/A=Not Applicable
See Notes to Financial Statements
19
<PAGE> 50
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 29, 1996
Six Months Nine Months Year Year (Commencement
Ended Ended Ended Ended of Investment
September 30, March 31, June 30, June 30, Operations) to
Class B Shares 1999(b) 1999(b) 1998 1997 June 30, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $16.747 $13.461 $ 9.867 $9.112 $9.430
------- ------- ------- ------ ------
Net Investment Loss........ (.158) (.197) (.204) (.105) (.006)
Net Realized and Unrealized
Gain/Loss................ 4.107 4.342 3.798 .860 (.312)
------- ------- ------- ------ ------
Total from Investment
Operations................. 3.949 4.145 3.594 .755 (.318)
Less Distributions from Net
Realized Gain.............. -0- .859 -0- -0- -0-
------- ------- ------- ------ ------
Net Asset Value, End of the
Period..................... $20.696 $16.747 $13.461 $9.867 $9.112
======= ======= ======= ====== ======
Total Return (a)............. 23.58%** 32.99%** 36.37% 8.34% (3.39%)**
Net Assets at End of the
Period (In millions)....... $ 372.1 $ 231.8 $ 148.4 $ 94.2 $ 25.5
Ratio of Expenses to Average
Net Assets*................ 2.08% 2.33% 2.20% 2.05% 2.06%
Ratio of Net Investment Loss
to Average Net Assets*..... (1.70%) (1.99%) (1.85%) (1.55%) (1.28%)
Portfolio Turnover........... 88%** 126%** 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 N/A 2.37% 2.35% 2.81%
Ratio of Net Investment Loss
to Average Net Assets...... N/A 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.
(b) Based on average shares outstanding.
N/A=Not Applicable
See Notes to Financial Statements
20
<PAGE> 51
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
Six Months Nine Months Year Year (Commencement
Ended Ended Ended Ended of Investment
September 30, March 31, June 30, June 30, Operations) to
Class C Shares 1999(b) 1999(b) 1998 1997 June 30, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $16.762 $13.470 $ 9.869 $9.113 $9.430
------- ------- ------- ------ ------
Net Investment Loss........ (.160) (.197) (.203) (.103) (.006)
Net Realized and Unrealized
Gain/Loss................ 4.136 4.348 3.804 .859 (.311)
------- ------- ------- ------ ------
Total from Investment
Operations................. 3.976 4.151 3.601 .756 (.317)
Less Distributions from Net
Realized Gain.............. -0- .859 -0- -0- -0-
------- ------- ------- ------ ------
Net Asset Value, End of the
Period..................... $20.738 $16.762 $13.470 $9.869 $9.113
======= ======= ======= ====== ======
Total Return (a)............. 23.75%** 32.96%** 36.47% 8.34% (3.39%)**
Net Assets at End of the
Period (In millions)....... $ 57.3 $ 27.4 $ 16.4 $ 10.8 $ 3.9
Ratio of Expenses to Average
Net Assets*................ 2.08% 2.33% 2.20% 2.05% 2.05%
Ratio of Net Investment Loss
to Average Net Assets*..... (1.70%) (1.98%) (1.85%) (1.54%) (1.28%)
Portfolio Turnover........... 88%** 126%** 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 N/A 2.36% 2.35% 2.81%
Ratio of Net Investment Loss
to Average Net Assets...... N/A 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.
(b) Based on average shares outstanding.
N/A=Not Applicable
See Notes to Financial Statements
21
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 (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.
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.
Unlisted securities and listed securities for which the last sales price is not
available are valued at the mean of the bid and asked prices. For those
securities where quotations or prices are not available, valuations are
determined in accordance with procedures established in good faith by the Board
of Trustees. Short-term securities with remaining maturities of 60 days or less
are valued at amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen 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
22
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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. Income and expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. 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.
Accumulated net realized gain/loss differs for financial and tax reporting
purposes as a result of the deferral for tax purposes of losses resulting from
wash sales.
At September 30, 1999, for federal income tax purposes, cost of long- and
short-term investments is $630,889,802; the aggregate gross unrealized
appreciation is $254,596,870 and the aggregate gross unrealized depreciation is
$11,800,578, resulting in net unrealized appreciation on long- and short-term
investments of $242,796,292.
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 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
nine months ended March 31, 1999 and for the year ended June 30, 1998 have been
identified and appropriately reclassified. For the nine months ended March 31,
1999, a permanent difference related
23
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
to a net operating loss totaling $3,900,143 has been reclassified from
accumulated net investment loss to capital. For the year ended June 30, 1998, a
permanent difference related to net operating loss which may be used as an
offset against short-term gains for tax purposes totaling $124,267 has been
reclassified 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 investment loss to capital.
G. EXPENSE REDUCTIONS--During the six months ended September 30, 1999, the
Fund's custody fee was reduced by $3,177 as a result of credits earned on
overnight cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- --------------------------------------------------------------------
<S> <C>
First $500 million..................................... .75 of 1%
Next $500 million...................................... .70 of 1%
Over $1 billion........................................ .65 of 1%
</TABLE>
For the six months ended September 30, 1999, the Fund recognized expenses of
approximately $3,500, representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended September 30, 1999, the Fund recognized expenses of
approximately $80,200, 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 six months ended September
30, 1999, the Fund recognized expenses of approximately $610,900. Transfer
agency fees are determined through negotiations with the Fund's Board of
Trustees and are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
24
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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, 1999, Van Kampen owned 100 shares each of Classes A, B and
C.
3. CAPITAL TRANSACTIONS
At September 30, 1999, capital aggregated $262,931,265, $219,334,000 and
$39,004,202 for Classes A, B, and C, respectively. For the six months ended
September 30, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................... 10,124,100 $ 188,502,139
Class B................................... 5,625,316 105,803,699
Class C................................... 1,318,476 25,291,265
----------- -------------
Total Sales................................. 17,067,892 $ 319,597,103
=========== =============
Repurchases:
Class A................................... (4,399,433) $ (83,113,512)
Class B................................... (1,485,313) (27,842,689)
Class C................................... (186,582) (3,463,320)
----------- -------------
Total Repurchases........................... (6,071,328) $(114,419,521)
=========== =============
</TABLE>
25
<PAGE> 56
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 1999, capital aggregated $157,542,638, $141,372,990 and
$17,176,257 for Classes A, B, and C, respectively. For the nine months ended
March 31, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 16,304,723 $ 225,416,282
Class B.................................... 4,260,040 58,630,954
Class C.................................... 654,046 8,988,462
----------- -------------
Total Sales.................................. 21,218,809 $ 293,035,698
=========== =============
Dividend Reinvestment:
Class A.................................... 617,711 $ 7,881,994
Class B.................................... 748,531 9,356,636
Class C.................................... 78,313 979,698
----------- -------------
Total Dividend Reinvestment.................. 1,444,555 $ 18,218,328
=========== =============
Repurchases:
Class A.................................... (11,356,554) $(151,245,333)
Class B.................................... (2,191,661) (28,721,224)
Class C.................................... (315,445) (4,179,382)
----------- -------------
Total Repurchases............................ (13,863,660) $(184,145,939)
=========== =============
</TABLE>
26
<PAGE> 57
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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>
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>
For the six months ended September 30, 1999, Van Kampen, as Distributor for
the Fund, received commissions on sales of the Fund's Class A shares of
approximately $263,400, and CDSC on redeemed shares of approximately $221,500.
Sales charges do not represent expenses of the Fund.
27
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $761,610,627 and $550,526,376,
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 to generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the futures contract.
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 to provide the return of
an index without purchasing all of the securities underlying the index or to
manage the Fund's overall exposure to the equity markets.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, cash or liquid 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). During the six months ended
September 30, 1999, the fund did not invest in future contracts.
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the six months ended September 30, 1999, are payments retained by Van Kampen
of approximately $1,103,700.
28
<PAGE> 59
VAN KAMPEN FUNDS
GROWTH
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Pace
Small Cap Value
Technology
GROWTH AND INCOME
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Fixed Income
Global Franchise
Global Government Securities
Global Managed Assets
International Magnum
Latin American
Short-Term Global Income*
Strategic Income
Worldwide High Income
INCOME
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN
Prime Rate Income Trust
Senior Floating Rate
TAX FREE
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
To find out more about any of these
funds, ask your financial advisor for
a prospectus, which contains more
complete information, including sales
charges, risks, and ongoing 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
* Closed to new investors
29
<PAGE> 60
VAN KAMPEN AGGRESSIVE GROWTH FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY, PH.D.
PAUL G. YOVOVICH
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief
Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
STEPHEN L. BOYD*
PETER W. HEGEL*
MICHAEL H. SANTO*
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 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
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., 1999. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After March 31, 2000, the report, if used with prospective
investors, must be accompanied by a quarterly performance update.
30
<PAGE> 61
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
31
<PAGE> 62
VAN KAMPEN FUNDS
YOUR NOTES:
32
<PAGE> 63
VAN KAMPEN
MID CAP VALUE FUND
SEMIANNUAL REPORT
SEPTEMBER 30, 1999
VAN KAMPEN FUNDS
TABLE OF CONTENTS
Letter to Shareholders.......................................... 1
Portfolio Management Review..................................... 2
Portfolio of Investments........................................ 5
Statement of Assets and Liabilities............................. 7
Statement of Operations......................................... 8
Statement of Changes in Net Assets.............................. 9
Financial Highlights............................................ 10
Notes to Financial Statements................................... 13
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 64
LETTER TO SHAREHOLDERS
October 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how
your portfolio is structured to respond to these events, we encourage you to
contact your financial advisor. Your advisor can talk with you about sustaining
a long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
/s/ Richard F. Powers, III /s/ Dennis J. McDonnell
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
1
<PAGE> 65
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN MID CAP VALUE FUND
We recently spoke with the representatives of the advisor of the Van Kampen Mid
Cap Value Fund about the key events and economic forces that shaped the markets
during the six-month period ended September 30, 1999. The managers are led by
James A. Gilligan, senior portfolio manager, who has managed the Fund since
December 1995 and worked in the investment industry since 1985. He is joined by
Scott Carroll and James Roeder, portfolio managers, and Stephen L. Boyd, chief
investment officer for equity investments. The following discussion reflects
their views on the Fund's performance during this time.
Q HOW WOULD YOU DESCRIBE THE MARKET DURING THE PAST SIX MONTHS?
A The stock market continued its volatile path, soaring to new highs early in
the reporting period and falling late in the second quarter of 1999. After
riding the market past the 11,000 point milestone in early May, investors became
spooked by fears of rising interest rates, prompting the market to lose steam.
These fears were validated when the Federal Reserve Board raised rates in two
consecutive meetings. Although the market reacted with relief following the
first increase, the second rate hike prompted the Dow Jones Industrial Average
to fall nearly nine percent by the end of the reporting period.
With the exception of a brief rally in April and May, value stocks
continued to underperform growth stocks during the reporting period--and, once
again, large-capitalization stocks outperformed their small- and mid-cap
cousins. Generally, the only sectors that enjoyed strong overall returns in this
narrow market were technology and energy.
Q WHAT WAS YOUR STRATEGY FOR MANAGING THE FUND IN THIS ENVIRONMENT?
A In seeking good value investments, we continued to focus on companies that we
believed were underappreciated by the market and demonstrated a catalyst for
positive change. For example, our search for value investments in the technology
sector, one of the best-performing sectors during the period, led us to add
securities such as Electronics for Imaging. This company, an industry leader in
linking computer networks to printers and copiers, enjoyed strong performance
during the period.
We also scrutinized existing holdings in the Fund's portfolio and
looked for opportunities to readjust positions based on their performance and
value criteria. For example, the Fund's position in Adobe was one of the
strongest contributors to performance early in the reporting period. As the
shares appreciated and the stock no longer fit our value criteria, we gradually
reduced and ultimately eliminated this name from the portfolio. We pursued a
similar strategy with Qualcomm, which also posted strong returns and contributed
to the Fund's positive performance before being sold from the portfolio.
2
<PAGE> 66
Q IN WHAT OTHER AREAS DID YOU FIND VALUE INVESTMENTS?
A We looked to the energy and utilities sectors, which also experienced good
returns relative to the universe of value stocks. Two of our standout holdings
in these sectors benefited from consolidation within the industry--Dynegy, a
large energy trading company, and Illinova, an electric utility company. We
added Dynegy to the portfolio last year and were pleased with its returns, so
when a merger was announced with Illinova, we took advantage of the opportunity
to increase our weighting in Illinova. This decision benefited the Fund's return
as both stocks turned in solid performance, although we ultimately trimmed our
exposure to Dynegy when we felt the combined weighting of the two companies
became too large. Of course, not all the stocks in the portfolio performed as
favorably, and there is no guarantee that any of these stocks will perform as
well or that they will continue to be owned by the Fund in the future.
Finally, our holdings in energy companies Nabors Industries and Apache
were small but beneficial to the portfolio, as they turned in strong returns,
buoyed by the resurgence in the energy industry. Once again, we began selling
these stocks on the way up, eliminating them from the portfolio by the end of
the reporting period.
Q WERE THERE ANY DISAPPOINTMENTS IN THE FUND'S PORTFOLIO?
A As was the case six months ago, the financial sector continued to turn in poor
returns because of rising interest rates and earnings deceleration. Fortunately,
we had decreased our position in this sector at the beginning of the period. As
a result, we fared better than other value-oriented mutual funds, which tended
to hold higher exposure to finance stocks. Although we still have some holdings
in finance, we eliminated our positions in Chase Manhattan and XL Capital during
the period.
Our biggest disappointment was the health-care sector, which had been
one of the better-performing areas six months ago and continued to occupy the
top spot in the Fund's sector profile. At the beginning of the reporting period,
we believed that HMO stocks were due to emerge from a long period of
underperformance, as customer rate increases promised to outweigh projected cost
increases. This belief was confirmed as our holdings in this sector performed
well going into the summer. However, the threat of legislation to increase the
liability of HMOs and the announcement of class-action lawsuits late in the
period caused us to reevaluate holdings such as Aetna and United HealthCare. As
a result, we sold more than half of our position in United HealthCare at an
attractive price.
Having said that, we still see good opportunities for improvement in
the health-care sector, and have continued to search for underappreciated
companies in various areas of the industry. For example, we added battered
pharmaceutical company American Homes Product during the period because of its
attractive valuation and our belief in its potential for improvement. After
purchasing this stock at a very low price late in the period, we watched it
return approximately 10 percent in a relatively short period of time. For
similar reasons, we added Columbia Hospital and medical services supplier
Laboratory Corporation of America. Finally, we continued to monitor existing
holdings in pharmaceutical companies Dura and Schein for signs of improvement.
3
<PAGE> 67
Q HOW DID THE FUND PERFORM DURING THE PAST SIX MONTHS?
A Although some of our holdings in the health-care and finance sectors hurt the
Fund's return, we enjoyed gains in other areas, particularly technology. As a
result, the Fund achieved a total return of 7.10 percent (Class A shares at net
asset value) for the six-month period ended September 30, 1999. In addition, the
Fund generated total returns of 16.78 percent, 13.43 percent, and 15.50 percent
for 12 months, three years, and the life of the Fund, respectively (Class A
shares at maximum sales charge).
By comparison, the Standard & Poor's 500 Index returned 0.37 percent
for the six-month reporting period, and the Standard & Poor's 400 Mid-Cap Index,
which more closely resembles the Fund, returned 4.57 percent. The S&P 500 Index
is an unmanaged, broad-based index that reflects the general performance of the
stock market. The S&P 400 Mid-Cap Index reflects the general performance of
mid-cap stocks, or companies in the capitalization range of approximately $215.4
million to $12.9 billion as of September 30, 1999. Of course, past performance
is no guarantee of comparable future results. 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. Past performance does not guarantee future results.
Q WHAT IS YOUR OUTLOOK FOR THE FUND?
A We expect this challenging market environment to continue in the short term,
as skittish investors prepare for year end. Although we foresee a continuation
of the rising interest-rate environment, we look for interest rates to
eventually stabilize, which would bring some relief to the market in general,
and provide opportunities for depressed sectors such as finance to recover. We
also continue to focus our attention on the health-care sector, which seems
poised for improved returns. Ultimately, our hope is that the market will
broaden, which would pave the way for value stocks to surpass the overvalued,
narrow band of growth stocks currently dominating the market. In this scenario,
we believe the value-oriented portfolio of the Mid Cap Value Fund would be
well-positioned.
/s/ Stephen L. Boyd /s/ James A. Gilligan
Stephen L. Boyd James A. Gilligan
Chief Investment Officer Portfolio Manager
Equity Investments
/s/ Scott Carroll /s/ James Roeder
Scott Carroll James Roeder
Portfolio Manager Portfolio Manager
4
<PAGE> 68
VAN KAMPEN MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
Description Shares Market Value
- --------------------------------------------------------------------------------
COMMON & PREFERRED STOCK 97.7%
Consumer Non-Durables 8.4%
Benckiser N.V., Class B - ADR (Netherlands) 900 $ 55,800
Pepsi Bottling Group, Inc. 2,900 49,481
Whitman Corp. 3,000 42,750
------------
148,031
------------
ENERGY 4.9%
Dynegy Inc. 1,500 31,031
Ocean Energy Inc. (a) 5,400 55,013
------------
86,044
------------
FINANCE 12.6%
Bank of Tokyo - Mitsubishi, Ltd. - ADR (Japan) 4,000 61,250
Jefferson-Pilot Corp. 1,100 69,507
Radian Group Inc. 1,100 47,231
Washington Mutual, Inc. 1,500 43,875
------------
221,863
------------
HEALTHCARE 23.5%
Aetna, Inc. 600 29,550
American Home Products Corp. 1,000 41,500
Beckman Coulter, Inc. 800 36,100
Columbia / HCA Healthcare Corp. 2,200 46,613
Dura Pharmaceuticals, Inc. (a) 5,000 69,687
Laboratory Corp. of America Holdings (a) 20,000 55,000
MedPartners, Inc. - Convertible Preferred 6,400 54,000
Oxford Health Plans, Inc. (a) 2,800 35,000
Schein Pharmaceutical, Inc. (a) 2,700 25,313
United HealthCare Corp. 400 19,475
------------
412,238
------------
PRODUCER MANUFACTURING 8.1%
Koninklijke Philips Electronics N.V. - ADR
(Netherlands) 552 55,752
Minnesota Mining & Manufacturing Co. 400 38,425
Scott Technologies, Inc. (a) 2,400 47,400
------------
141,577
------------
RAW MATERIALS/PROCESSING INDUSTRIES 12.2%
Bethlehem Steel Corp. (a) 7,000 51,625
Boise Cascade Corp. 1,300 47,369
Cabot Corp. 2,000 47,500
Pall Corp. 2,900 67,244
------------
213,738
------------
See Notes to Financial Statements
5
<PAGE> 69
VAN KAMPEN MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1999 (UNAUDITED)
Description Shares Market Value
- --------------------------------------------------------------------------------
TECHNOLOGY 15.1%
Alcatel SA - ADR (France) 1,500 $ 41,625
Cadence Design Systems, Inc. (a) 1,500 19,875
Electronics for Imaging, Inc. (a) 900 46,266
First Data Corp. 800 35,100
J.D. Edwards & Co. (a) 1,500 31,078
Nippon Telegraph & Telephone Corp - ADR (Japan) 700 43,181
SunGard Data Systems, Inc. (a) 1,800 47,362
------------
264,487
------------
UTILITIES 12.9%
Illinova Corp. 2,000 56,125
NCR Corp. (a) 1,400 46,287
Niagara Mohawk Holdings, Inc. (a) 5,200 80,275
Northeast Utilities 2,400 44,100
------------
226,787
------------
TOTAL INVESTMENTS 97.7%
(Cost $1,622,746) 1,714,765
OTHER ASSETS IN EXCESS OF LIABILITIES 2.3% 40,251
------------
NET ASSETS 100.0% $ 1,755,016
------------
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR - American Depositary Receipt
See Notes to Financial Statements
6
<PAGE> 70
VAN KAMPEN MID CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999 (Unaudited)
ASSETS:
Total Investments (Cost $1,622,746) $ 1,714,765
Cash 119,453
Receivables:
Investments Sold 69,365
Expense Reimbursement From Adviser 19,301
Dividends 576
Other 1,144
----------------
Total Assets 1,924,604
----------------
LIABILITIES:
Payables:
Investments Purchased 86,786
Distributor and Affiliates 15,419
Reports to Shareholders 8,705
Trustees' Deferred Compensation and Retirement Plans 44,697
Other Accrued Expenses 13,981
----------------
Total Liabilities 169,588
----------------
NET ASSETS $ 1,755,016
================
NET ASSETS CONSIST OF:
Capital (Par value $.01 per share with
an unlimited number of shares authorized) $ 1,499,541
Accumulated Net Realized Gain 191,191
Net Unrealized Appreciation 92,019
Accumulated Net Investment Loss (27,735)
----------------
NET ASSETS $ 1,755,016
================
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per
share (Based on net assets of $1,529,960
and 110,323 shares of beneficial interest
issued and outstanding) $ 13.87
Maximum sales charge (5.75%* of
offering price) 0.85
----------------
Maximum offering price to public $ 14.72
================
Class B Shares:
Net asset value and offering price per share
(Based on net assets of $112,519 and 8,111
shares of beneficial interest issued and
outstanding) $ 13.87
================
Class C Shares:
Net asset value and offering price per share
(Based on net assets of $112,537 and 8,111
shares of beneficial interest issued and
outstanding) $ 13.87
================
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
7
<PAGE> 71
VAN KAMPEN MID CAP VALUE FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
INVESTMENT INCOME:
Dividends $ 11,249
----------------
EXPENSES:
Accounting 20,129
Audit 17,222
Amortization of Organizational Costs 14,102
Trustees' Fees and Related Expenses 10,338
Shareholder Reports 9,026
Shareholder Services 8,842
Custody 7,800
Investment Advisory Fee 6,886
Legal 5,927
Other 1,218
----------------
Total Expenses 101,490
Expense Reduction ($6,886 related to Advisory Fees
and $80,905 related to Other Expenses) 87,791
Less Credits Earned on Cash Balances 1,745
----------------
Net Expenses 11,954
----------------
NET INVESTMENT LOSS $ (705)
================
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 158,354
----------------
Unrealized Appreciation/Depreciation:
Beginning of the Period 133,065
End of the Period 92,019
----------------
Net Unrealized Depreciation During the Period (41,046)
----------------
NET REALIZED AND UNREALIZED GAIN $ 117,308
================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 116,603
================
See Notes to Financial Statements
8
<PAGE> 72
VAN KAMPEN MID CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999, THE NINE MONTHS ENDED MARCH 31,
1999 AND THE YEAR ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Nine Months
Ended Ended Year Ended
September 30, 1999 March 31, 1999 June 30, 1998
------------------ ---------------- ----------------
FROM INVESTMENT ACTIVITIES:
Operations:
<S> <C> <C> <C>
Net Investment Loss $ (705) $ (3,061) $ (5,878)
Net Realized Gain 158,354 34,570 240,590
Net Unrealized Depreciation During the Period (41,046) (35,026) (38,155)
--------------- ---------------- ----------------
Change in Net Assets from Operations 116,603 (3,517) 196,557
--------------- ---------------- ----------------
Distributions in Excess of Net Investment Income* -0- (3,278) (10,744)
Distributions from Net Realized Gain* -0- (84,401) (220,079)
--------------- ---------------- ----------------
Total Distributions -0- (87,679) (230,823)
--------------- ---------------- ----------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES 116,603 (91,196) (34,266)
--------------- ---------------- ----------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold 250 350 1,196
Net Asset Value of Shares Issued Through Dividend
Reinvestment -0- 87,679 230,823
Cost of Capital Stock Repurchased -0- -0- (57,633)
--------------- ---------------- ----------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 250 88,029 174,386
--------------- ---------------- ----------------
TOTAL INCREASE/DECREASE IN NET ASSETS 116,853 (3,167) 140,120
NET ASSETS:
Beginning of the Period 1,638,163 1,641,330 1,501,210
--------------- ---------------- ----------------
End of the Period (Including accumulated net
investment loss of $27,735, $27,030 and
$20,691, respectively) $ 1,755,016 $ 1,638,163 $ 1,641,330
================ ================ ================
*Distribution by Class
- ---------------------------------------------------------------------------------------------------------------
Distributions in Excess of Net Investment Income:
Class A Shares $ -0- $ (2,858) $ (9,412)
Class B Shares -0- (210) (666)
Class C Shares -0- (210) (666)
--------------- ---------------- ----------------
$ -0- $ (3,278) $ (10,744)
================ ================ ================
Distributions from Net Realized Gain:
Class A Shares $ -0- $ (73,579) $ (192,785)
Class B Shares -0- (5,411) (13,647)
Class C Shares -0- (5,411) (13,647)
--------------- ---------------- ----------------
$ -0- $ (84,401) $ (220,079)
================ ================ ================
</TABLE>
See Notes to Financial Statements
9
<PAGE> 73
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)
<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
SIX MONTHS NINE MONTHS OF INVESTMENT
ENDED ENDED YEAR ENDED YEAR ENDED OPERATIONS) TO
CLASS A SHARES SEPT. 30, 1999 MARCH 31, 1999 JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 12.946 $ 13.719 $ 14.321 $ 11.409 10.000
------------- --------------- -------------- -------------- ------------------
Net Investment Income/Loss (0.006) (0.013) (0.032) (0.014) 0.018
Net Realized and Unrealized Gain/Loss 0.928 (0.027) 1.633 3.559 1.391
------------- --------------- -------------- -------------- ------------------
Total from Investment Operations 0.922 (0.040) 1.601 3.545 1.409
------------- --------------- -------------- -------------- ------------------
Less:
Distributions in Excess of Net Investment
Income -0- 0.027 0.103 0.017 -0-
Distributions from Net Realized Gain -0- 0.706 2.100 0.616 -0-
------------- --------------- -------------- -------------- ------------------
Total Distributions -0- 0.733 2.203 0.633 -0-
------------- --------------- -------------- -------------- ------------------
Net Asset Value, End of the Period $ 13.868 $ 12.946 $ 13.719 $ 14.321 11.409
------------- --------------- -------------- -------------- ------------------
Total Return * (a) 7.10% ** (0.19)% ** 13.06% 32.39% 14.00% **
Net Assets at End of the Period
(In thousands) $1,530.0 $1,428.1 $1,430.7 $1,315.0 $117.2
Ratio of Expenses to Average Net Assets* (b) 1.49% 1.54% 1.44% 1.48% 1.38%
Ratio of Net Investment Income/Loss to
Average Net Assets* (0.08)% (0.26)% (0.36)% (0.31)% 0.38%
Portfolio Turnover 73% ** 70% ** 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) 11.04% 10.52% 7.76% 17.19% 17.57%
Ratio of Net Investment Income/Loss to
Average Net Assets (9.62)% (9.24)% (6.69)% (16.01)% (15.81)%
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .19% for the six months ended
September 30, 1999, .24% for the nine months ended March 31, 1999, and
.14%, .18%, and .08% for the years ended June 30, 1998, June 30, 1997 and
June 30, 1996, respectively.
See Notes to Financial Statements
10
<PAGE> 74
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)
<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
SIX MONTHS NINE MONTHS OF INVESTMENT
ENDED ENDED YEAR ENDED YEAR ENDED OPERATIONS) TO
CLASS B SHARES SEPT. 30, 1999 MARCH 31, 1999 JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 12.950 $ 13.724 $ 14.327 $ 11.410 10.000
------------- --------------- -------------- -------------- ------------------
Net Investment Income/Loss (0.006) (0.014) (0.027) (0.017) 0.024
Net Realized and Unrealized Gain/Loss 0.928 (0.027) 1.626 3.567 1.386
------------- --------------- -------------- -------------- ------------------
Total from Investment Operations 0.922 (0.041) 1.599 3.550 1.410
------------- --------------- -------------- -------------- ------------------
Less:
Distributions in Excess of Net
Investment Income -0- 0.027 0.102 0.017 -0-
Distributions from Net Realized Gain -0- 0.706 2.100 0.616 -0-
------------- --------------- -------------- -------------- ------------------
Total Distributions -0- 0.733 2.202 0.633 -0-
------------- --------------- -------------- -------------- ------------------
Net Asset Value, End of the Period $ 13.872 $ 12.950 $ 13.724 $ 14.327 11.410
------------- --------------- -------------- -------------- ------------------
Total Return * (a) 7.10% ** (0.19)% ** 12.98% 32.48% 14.00% **
Net Assets at End of the Period
(In thousands) $112.5 $105.0 $105.3 $93.1 $74.2
Ratio of Expenses to Average Net Assets* (b) 1.49% 1.54% 1.44% 1.48% 1.38%
Ratio of Net Investment Income/Loss to
Average Net Assets* (0.08)% (0.26)% (0.36)% (0.14)% 0.44%
Portfolio Turnover 73% ** 70% ** 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) 11.04% 10.52% 7.76% 17.19% 17.57%
Ratio of Net Investment Income/Loss to
Average Net Assets (9.63)% (9.24)% (6.69)% (15.79)% (15.75)%
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .19% for the six months ended
September 30, 1999, .24% for the nine months ended March 31, 1999, and
.14%, .18%, and .08% for the years ended June 30, 1998, June 30, 1997 and
June 30, 1996, respectively.
See Notes to Financial Statements
11
<PAGE> 75
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)
<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
SIX MONTHS NINE MONTHS OF INVESTMENT
ENDED ENDED YEAR ENDED YEAR ENDED OPERATIONS) TO
CLASS C SHARES SEPT. 30, 1999 MARCH 31, 1999 JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 12.953 $ 13.726 $ 14.327 $ 11.410 10.000
------------- --------------- -------------- -------------- ------------------
Net Investment Income/Loss (0.006) (0.014) (0.026) (0.017) 0.024
Net Realized and Unrealized Gain/Loss 0.927 (0.026) 1.627 3.567 1.386
------------- --------------- -------------- -------------- ------------------
Total from Investment Operations 0.921 (0.040) 1.601 3.550 1.410
------------- --------------- -------------- -------------- ------------------
Less:
Distributions in Excess of Net
Investment Income -0- 0.027 0.102 0.017 -0-
Distributions from Net Realized Gain -0- 0.706 2.100 0.616 -0-
------------- --------------- -------------- -------------- ------------------
Total Distributions -0- 0.733 2.202 0.633 -0-
------------- --------------- -------------- -------------- ------------------
Net Asset Value, End of the Period $ 13.874 $ 12.953 $ 13.726 $ 14.327 11.410
------------- --------------- -------------- -------------- ------------------
Total Return * (a) 7.18% ** (0.26)% ** 13.06% 32.48% 14.00% **
Net Assets at End of the Period
(In thousands) $112.5 $105.1 $105.3 $93.1 $74.2
Ratio of Expenses to Average Net Assets* (b) 1.49% 1.54% 1.44% 1.48% 1.38%
Ratio of Net Investment Income/Loss to
Average Net Assets* (0.08)% (0.26)% (0.36)% (0.14)% 0.44%
Portfolio Turnover 73% ** 70% ** 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) 11.04% 10.52% 7.76% 17.19% 17.57%
Ratio of Net Investment Income/Loss to
Average Net Assets (9.62)% (9.24)% (6.68)% (15.79)% (15.75)%
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .19% for the six months ended
September 30, 1999, .24% for the nine months ended March 31, 1999, and
.14%, .18%, and .08% for the years ended June 30, 1998, June 30, 1997 and
June 30, 1996, respectively.
See Notes to Financial Statements
12
<PAGE> 76
VAN KAMPEN MID CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Mid Cap Value Fund (the "Fund") is organized as a series of Van
Kampen Equity Trust (the "Trust"), a Delaware business trust, and is registered
as a diversified open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to seek
long-term growth of capital by investing primarily in a diversified portfolio of
common stocks and other equity securities of medium and larger capitalization
companies. The Fund commenced investment operations on December 27, 1995, with
three classes of common shares, Class A, Class B and Class C.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sales price as of the close of such securities
exchange. Investments in securities not listed on a securities exchange are
valued based on the mean of the bid and asked prices 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. Income and expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. 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 $40,000. These costs were originally
scheduled to be amortized on a straight-line basis over the 60-month period
ending December 27, 2000. Pursuant to the AICPA Statement of Position 98-5, any
unamortized organizational costs were expensed on April 1, 1999 the first
business day of the 2000 fiscal year.
E. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and gains to
its shareholders. Therefore, no provision for federal income taxes is required.
At September 30, 1999, for federal income tax purposes, the cost of
long-term investments is $1,622,746; the aggregate gross unrealized appreciation
is $192,274 and the aggregate gross unrealized depreciation is $100,255,
resulting in net unrealized appreciation of $92,019.
F. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
annually from net investment income and net realized gains on securities, if
any. Distributions from net realized gains for book purposes may include
short-term capital gains which are included in ordinary income for tax purposes.
G. EXPENSE REDUCTIONS - During the six months ended September 30, 1999, the
Fund's custody fee was reduced by $1,745 as a result of credits earned on
overnight cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
AVERAGE NET ASSETS % PER ANNUM
- -------------------------------- ---------------------
First $500 million .75%
Next $500 million .70%
Over $1 billion .65%
13
<PAGE> 77
VAN KAMPEN MID CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999 (UNUADITED)
For the six months ended September 30, 1999, the Adviser voluntarily
capped the expenses of the Fund at 1.30% of average net assets, prior to any
credits earned on overnight cash balances. As such, the Adviser waived $6,886 of
its investment advisory fees and assumed $80,905 of the Fund's other expenses.
This waiver is voluntary in nature and can be discontinued at the Adviser's
discretion.
For the six months ended September 30, 1999, the Fund incurred expenses of
approximately $100 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 six months ended September 30, 1999, the Fund incurred expenses
of approximately $26,000 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 of the Fund. For the six months ended September
30, 1999, the Fund recognized expenses of approximately $7,500. All of this cost
has been assumed by Van Kampen. 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, 1999, Van Kampen owned 110,271 shares of Class A, 8,111
shares of Class B, and 8,111 shares of Class C.
3. CAPITAL TRANSACTIONS
At September 30, 1999, capital aggregated $1,328,601, $86,018 and $84,922 for
Classes A, B and C, respectively. For the six months ended September 30, 1999,
transactions were as follows:
SHARES VALUE
------------- ----------------
Sales:
Class A 17 $250
============= ================
Total Sales 17 $250
============= ================
At March 31, 1999, capital aggregated $1,328,351, $86,018 and $84,922 for
Classes A, B and C, respectively. For the nine months ended March 31, 1999,
transactions were as follows:
SHARES VALUE
------------- ----------------
Sales:
Class A 26 $350
============= ================
Total Sales 26 $350
============= ================
Dividend Reinvestment:
Class A 5,995 $76,436
Class B 441 5,621
Class C 441 5,622
============= ================
Total Dividend Reinvestment 6,877 $87,679
============= ================
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 $202,198
Class B 1,170 14,313
Class C 1,170 14,312
============= ================
Total Dividend Reinvestment 18,873 $230,823
============= ================
Shares Repurchased:
Class A (4,076) ($57,633)
============= ================
14
<PAGE> 78
VAN KAMPEN MID CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999 (UNUADITED)
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.
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 six months ended September 30, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $1,377,962 and
$1,266,477, respectively.
5. DISTRIBUTION AND SERVICE PLANS
The Fund and its Shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
The Fund's net assets are subject to annual fees under the Plans of up to
.25% for Class A shares and 1.00% each for Class B and Class C shares. No fees
related to the Plans have been accrued by the Fund, as the Fund is currently
owned solely by affiliated persons.
15
<PAGE> 79
VAN KAMPEN MID CAP VALUE FUND
BOARD OF TRUSTEES INVESTMENT ADVISER
J. MILES BRANAGAN VAN KAMPEN INVESTMENT ADVISORY CORP.
JERRY D. CHOATE 1 Parkview Plaza
RICHARD M. DEMARTINI* P.O. Box 5555
LINDA HUTTON HEAGY Oakbrook Terrace, Illinois 60181-5555
R. CRAIG KENNEDY
JACK E. NELSON DISTRIBUTOR
DON G. POWELL*
PHILLIP B. ROONEY VAN KAMPEN FUNDS INC.
FERNANDO SISTO 1 Parkview Plaza
WAYNE W. WHALEN* - CHAIRMAN P.O. Box 5555
SUZANNE H. WOOSLEY, PH. D. Oakbrook Terrace, Illinois 60181-5555
PAUL G. YOVOVICH
SHAREHOLDER SERVICING AGENT
OFFICERS
VAN KAMPEN INVESTOR SERVICES INC.
RICHARD F. POWERS, III* P.O. Box 218256
President Kansas City, Missouri 64121-8256
DENNIS J. MCDONNELL* CUSTODIAN
Executive Vice President and
Chief Investment Officer STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
A. THOMAS SMITH III* P.O. Box 1713
Vice President and Secretary Boston, Massachusetts 02105
JOHN L. SULLIVAN* LEGAL COUNSEL
Vice President, Treasurer and
Chief Financial Officer SKADDEN, ARPS, SLATE, MEAGHER & FLOM
(Illinois)
333 West Wacker Drive
CURTIS W. MORELL* Chicago, Illinois 60606
Vice President and Chief
Accounting Officer
INDEPENDENT ACCOUNTANTS
TANYA M. LODEN*
Controller KPMG LLP
303 East Wacker Drive
STEPHEN L. BOYD* Chicago, Illinois 60601
PETER W. HEGEL*
MICHAEL H. SANTO*
EDWARD C. WOOD, III*
Vice Presidents
* "Interested" persons of the Fund, as defined in the Investment Company Act
of 1940.
(C) Van Kampen Funds Inc., 1999 All Rights Reserved.
SM denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data.
<PAGE> 80
- --------------------------------------------------------------------------------
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that is uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
- --------------------------------------------------------------------------------
<PAGE> 81
VAN KAMPEN
GREAT AMERICAN
COMPANIES FUND
Semiannual Report
September 30, 1999
Van Kampen Funds
TABLE OF CONTENTS
Letter to Shareholders.......................................... 1
Portfolio Management Review..................................... 2
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
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 82
LETTER TO SHAREHOLDERS
October 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how
your portfolio is structured to respond to these events, we encourage you to
contact your financial advisor. Your advisor can talk with you about sustaining
a long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
/s/ Richard F. Powers, III /s/ Dennis J. McDonnell
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
1
<PAGE> 83
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
We recently spoke to the representatives of the advisor of the Van Kampen Great
American Companies Fund about the key events and economic forces that shaped the
markets during the past six months. The managers include Jeff D. New, senior
portfolio manager, who has managed the Fund since its inception (December 1995)
and worked in the investment industry since 1987. He is joined by Michael Davis
and Mary Jayne Maly, portfolio managers, and Stephen L. Boyd, chief investment
officer for equity investments. The following excerpts reflect their views on
the Fund's performance during the six months ended September 30, 1999.
Q COULD YOU DESCRIBE THE MARKET ENVIRONMENT IN WHICH THE FUND OPERATED DURING
THE REPORTING PERIOD?
A As has been its trademark recently, the stock market was volatile during the
past two quarters. Early in the reporting period, the Dow Jones Industrial
Average continued its upward trend, passing the 11,000 milestone in early May.
Soon after, the market reversed course, as investors anticipated an increase in
interest rates. This anticipation placed downward pressure on the market in
general and growth stocks in particular. In an attempt to moderate economic
growth, the Fed did increase rates twice during the reporting period. Following
the first increase, the stock market rose slightly because the rate hike was
widely expected. The market response to the second rate hike was less favorable.
The Dow reached a record high the following day but went on to lose nearly 9
percent by the end of the reporting period.
Large-cap growth stocks, in which the Fund primarily invests,
underperformed small-cap growth stocks during the reporting period. The reverse
has been true in recent years. During the last six months, technology
stocks--especially in the semiconductor industry--continued to be among the
market's strongest performers. Companies in the financial services industry
fared less well, as these firms are especially sensitive to rising interest
rates and expectations of a weakening economy.
Q GIVEN THIS ENVIRONMENT, HOW DID YOU MANAGE THE FUND, AND HOW DID THAT
MANAGEMENT AFFECT PERFORMANCE?
A The Fund invests primarily in U.S. companies that are market leaders in their
respective fields and have positive fundamentals. We especially seek to invest
in companies that are increasing their market dominance and appear to be able to
sustain that dominance. We believe that such companies can produce superior
performance over time. Although quality is a primary consideration, we also
evaluate potential holdings for attractive valuations relative to their growth
rates.
Although we believe in the long-term potential of this strategy, the
Fund significantly underperformed the Lipper Growth Fund Index, the Fund's
benchmark. We believe that this
2
<PAGE> 84
underperformance can be attributed to two primary factors. First, the stock
market strength was very narrow during the reporting period--in other words,
overall market gains were driven by a relatively small number of stocks. Second,
some stocks in the Fund simply didn't perform well during the last six months,
even though the companies' fundamentals remained sound. For example, two of the
Fund's longtime holdings--pharmaceutical company Schering-Plough and clothing
retailer TJX Companies--fared very poorly during the reporting period, hurting
the Fund's return.
Q WHY DID THESE STOCKS DECLINE IN VALUE?
A Schering-Plough declined, along with most other pharmaceutical companies,
because of concerns that growth in these companies' earnings was becoming less
attractive relative to that of more economically sensitive companies. A robust
economy helps profit growth for many firms, while the earnings of pharmaceutical
businesses tend to be more insulated from economic movements. TJX Companies,
meanwhile, saw its valuation fall as a result of concerns about rising interest
rates and the potentially negative impact on consumer spending. Despite its
recent poor performance, however, we believe that the fundamentals for this
company continue to be excellent. We continue to own both Schering-Plough and
TJX Companies, as they still fit our investment profile.
Q WHAT WERE SOME POSITIVE INFLUENCES ON THE FUND'S RETURN?
A As we mentioned earlier, companies in the technology area generally performed
very well during the previous six months. In an effort to capitalize on the
industry's recent success, we increased our weighting in technology throughout
the reporting period, helping the Fund's performance. For example, Lexmark
International Group, a manufacturer of computer laser printers, was a very
successful investment for the Fund, as was Texas Instruments, a semiconductor
maker that develops a key component in cellular phones. The company has
been--and, we expect, will continue to be--a big beneficiary of the boom in
cellular technology.
BMC Software had performed poorly in previous reporting periods because
investors feared that the company's earnings would suffer if corporate customers
spent their software budgets on fixing the year 2000 problem (Y2K) instead of
buying BMC's products. But BMC's earnings continued to be strong, and analysts
now believe that Y2K will have a limited effect on the company's bottom line.
BMC's stock price has risen accordingly. During the reporting period, we were
rewarded for our willingness to hold this stock in good times and bad. [Editor's
note: A few days after the reporting period, BMC indicated that its earnings for
the September quarter would be very slightly below expectations because of some
contracts signed in early October rather than September. The Fund's management
continues to own the stock because of their confidence in BMC's future
fundamentals.]
3
<PAGE> 85
Q DID ANY NON-TECHNOLOGY COMPANIES HELP THE FUND'S PERFORMANCE?
A A stock that contributed to the Fund's return was Univision, the dominant
Spanish-language television network in the United States. In a reflection of the
increasing economic importance of the country's Spanish-speaking population,
this stock performed extremely well during the reporting period.
The Fund also benefited from its investment in Enron, a diversified
utilities services business. Enron, which has been wisely diversifying its
product lines beyond its traditional natural gas and electricity business,
offers a glimpse of how forward-thinking utility companies are looking to take
advantage of opportunities in a deregulating marketplace.
Q ASIDE FROM SCHERING-PLOUGH AND TJX COMPANIES, WHICH YOU MENTIONED EARLIER,
WERE THERE OTHER STOCKS WHOSE PERFORMANCE HURT THE FUND'S RETURN?
A As we mentioned earlier, poor stock selection and limited market breadth were
the two primary reasons for the Fund's relative underperformance during the
reporting period. As a result, our results were shaped largely on a
stock-by-stock basis.
In the health-care area, drug manufacturer American Home Products was a
poor performer that influenced the Fund's performance negatively. The company's
poor results could be largely attributed to concern over litigation surrounding
its popular diet drugs. [Editor's note: In early October 1999, after the
reporting period, the company announced a comprehensive settlement to resolve
this litigation.]
Because of its outstanding performance in late 1998 and early 1999,
Internet service provider America Online had grown to occupy a substantial part
of the portfolio. However, during the last six months, the stock declined by
approximately 29 percent. This decline could be attributed to two primary
factors--subscriber growth, though still strong, appeared to be moderating; and
investors were concerned about the company's ability to respond to competition
from new "free" Internet service providers. In response to these fundamental
developments, we sold most of our position in AOL during the period.
Firstar, which operates banks in the midwestern United States, was a
financial stock that hurt the Fund's overall return. The stock performed poorly
not just because of interest-rate fears, but also because of investor skepticism
about Firstar's ability to integrate recent acquisitions.
Finally, after it became clear that accounting irregularities would
require Waste Management to restate their earnings, the company's stock began to
fall dramatically. We sold this stock in response to this sudden change
in fundamentals, but not in time to escape damage to the Fund's return.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A The Fund had a six-month total return of -4.11 percent (Class A shares at net
asset value) as of September 30, 1999. In addition, the Fund generated total
returns of 25.06 percent, 20.94
4
<PAGE> 86
percent, and 22.15 percent for 12 months, three years, and the life of the Fund,
respectively (Class A shares at maximum sales charge).
By comparison, the Standard & Poor's 500 Index had a return of 0.37
percent, while the Lipper Growth Fund Index, which more closely resembles the
Fund, had a return of 0.97 percent. The S&P 500 Index is a broad-based,
unmanaged index that reflects the general performance of the stock market, and
the Lipper Growth Fund Index reflects the average performance of the 30 largest
growth funds. Keep in mind that these indices are statistical composites that do
not include any commissions or sales charges that would be paid by an investor
purchasing the securities or investments they represent. It is not possible to
invest directly in an index. Past performance does not guarantee future results.
Q WHAT DO YOU SEE AHEAD FOR THE FUND DURING THE NEXT SIX MONTHS?
A Regardless of market conditions, we maintain a consistent management strategy
of focusing on leading companies that appear to be maintaining or improving
their dominant position. The market continues to be volatile, but we are
confident in our approach to stock selection and believe that it will lead us to
attractive investment opportunities.
/s/ Jeff D. New /s/ Michael Davis
Jeff D. New Michael Davis
Senior Portfolio Manager Portfolio Manager
/s/ Mary Jayne Maly /s/ Stephen L. Boyd
Mary Jayne Maly Stephen L. Boyd
Portfolio Manager Chief Investment Officer
Equity Investments
5
<PAGE> 87
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
DESCRIPTION SHARES MARKET VALUE
COMMON STOCKS 96.6%
CONSUMER DISTRIBUTION 11.0%
Best Buy Co., Inc. (a) 200 $12,413
Circuit City Stores-Circuit City Group 400 16,875
Dayton Hudson Corp. 400 24,025
Federated Department Stores, Inc. (a) 400 17,475
Home Depot, Inc. 400 27,450
Kroger Co. (a) 800 17,650
Safeway, Inc. (a) 600 22,838
Tandy Corp. 600 31,012
TJX Cos., Inc. 900 25,256
Wal-Mart Stores, Inc. 800 38,050
----------
233,044
----------
CONSUMER NON-DURABLES 6.4%
Anheuser-Busch Cos., Inc. 300 21,019
Kimberly Clark Corp. 400 21,000
Nike, Inc., Class B 200 11,375
Pepsi Bottling Group, Inc. 1,000 17,062
Procter & Gamble Co. 300 28,125
Quaker Oats Co. 600 37,125
----------
135,706
----------
CONSUMER SERVICES 7.4%
Brinker International, Inc. (a) 400 10,850
CBS Corp. 500 23,125
Comcast Corp., Class A 400 15,950
Harrah's Entertainment, Inc. (a) 400 11,100
MGM Grand, Inc. (a) 200 10,238
Omnicom Group, Inc. 300 23,756
Time Warner, Inc. 200 12,150
Univision Communications, Inc., Class A (a) 600 48,825
----------
155,994
----------
ENERGY 3.9%
Baker Hughes, Inc. 1,300 37,700
Enron Corp. 600 24,750
Halliburton Co. 500 20,500
----------
82,950
----------
See Notes to Financial Statements
6
<PAGE> 88
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
DESCRIPTION SHARES MARKET VALUE
FINANCE 8.0%
American Express Co. 100 $13,462
American International Group, Inc. 250 21,734
AXA Financial, Inc. 300 16,744
Bank of America Corp. 200 11,138
Citigroup, Inc. 325 14,300
Federal Home Loan Mortgage Corp. 400 20,800
Firstar Corp. 900 23,062
Marsh & McLennan Cos., Inc. 300 20,550
MGIC Investment Corp. 400 19,100
Providian Financial Corp. 100 7,919
----------
168,809
----------
HEALTHCARE 13.6%
Abbott Laboratories, Inc. 500 18,375
American Home Products Corp. 600 24,900
Amgen, Inc. (a) 300 24,450
Baxter International, Inc. 250 15,063
Bristol-Myers Squibb Co. 1,000 67,500
Guidant Corp. (a) 500 26,813
Johnson & Johnson, Inc. 300 27,562
Lilly Eli & Co. 400 25,600
Pfizer, Inc. 300 10,781
Schering-Plough Corp. 700 30,537
Wellpoint Health Networks, Inc., Class A (a) 300 17,100
----------
288,681
----------
PRODUCER MANUFACTURING 7.1%
Corning, Inc. 500 34,281
General Electric Co. 200 23,713
Honeywell, Inc. 300 33,394
Tyco International Ltd. 350 36,137
United Technologies Corp. 400 23,725
----------
151,250
----------
RAW MATERIALS/PROCESSING INDUSTRIES 1.3%
Boise Cascade Corp. 500 18,219
USX - U.S. Steel, Inc. 400 10,300
----------
28,519
----------
See Notes to Financial Statements
7
<PAGE> 89
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
DESCRIPTION SHARES MARKET VALUE
TECHNOLOGY 34.3%
America Online, Inc. (a) 320 $33,280
Applied Materials, Inc. (a) 400 31,075
BMC Software, Inc. (a) 400 28,625
Cisco Systems, Inc. (a) 1,300 89,131
EMC Corp. (a) 500 35,719
First Data Corp. 500 21,938
General Instrument Corp. (a) 400 19,250
Intel Corp. 1,000 74,312
International Business Machines Corp. 400 48,550
LSI Logic Corp. (a) 400 20,600
Lexmark International Group, Inc., Class A (a) 300 24,150
Lucent Technologies, Inc. 655 42,493
Microsoft Corp. (a) 1,100 99,619
Motorola, Inc. 300 26,400
Oracle Corp. (a) 1,200 54,600
Sun Microsystems, Inc. (a) 300 27,900
Texas Instruments, Inc. 600 49,350
----------
726,992
----------
UTILITIES 3.6%
ALLTEL Corp. 500 35,187
MCI WorldCom, Inc. (a) 300 21,563
SBC Communications, Inc. 400 20,425
----------
77,175
----------
TOTAL INVESTMENTS 96.6%
(Cost $1,684,651) 2,049,120
OTHER ASSETS IN EXCESS OF LIABILITIES 3.4% 71,924
----------
NET ASSETS 100.0% $2,121,044
----------
(a) Non-income producing security as this stock does not currently declare
dividends.
See Notes to Financial Statements
8
<PAGE> 90
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999 (Unaudited)
ASSETS:
Total Investments (Cost $1,684,651) $ 2,049,120
Cash 184,387
Receivables:
Investments Sold 24,633
Expense Reimbursement from Adviser 11,526
Dividends 1,237
Other 1,153
-----------------
Total Assets 2,272,056
-----------------
LIABILITIES:
Payables:
Investments Purchased 61,873
Distributor and Affiliates 17,504
Trustees' Deferred Compensation and Retirement Plans 44,898
Accrued Expenses 26,737
-----------------
Total Liabilities 151,012
-----------------
NET ASSETS $ 2,121,044
-----------------
NET ASSETS CONSIST OF:
Capital (Par Value of $.01 per share with an
unlimited number of shares authorized) $ 1,590,553
Net Unrealized Appreciation 364,469
Accumulated Net Realized Gain 204,217
Accumulated Net Investment Loss (38,195)
-----------------
NET ASSETS $ 2,121,044
-----------------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,849,532 and 113,163 shares of beneficial
interest issued and outstanding) $16.34
Maximum sales charge (5.75%* of offering price) 1.00
-----------------
Maximum offering price to public $17.34
-----------------
Class B Shares:
Net asset value and offering price per share (Based on net assets of
$135,749 and 8,305 shares of beneficial
interest issued and outstanding) $16.35
-----------------
Class C Shares:
Net asset value and offering price per share (Based on net assets of
$135,763 and 8,305 shares of beneficial
interest issued and outstanding) $16.35
-----------------
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
9
<PAGE> 91
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1999 (Unaudited)
INVESTMENT INCOME:
Dividends $ 7,657
-----------------
EXPENSES:
Accounting 19,779
Audit 17,222
Amortization of Organizational Costs 14,102
Custody 9,920
Trustees' Fees and Related Expenses 9,410
Shareholder Reports 9,026
Shareholder Services 7,842
Investment Advisory Fee 7,697
Legal 6,119
Other 2,300
-----------------
Total Expenses 103,417
Expense Reduction ($7,697 related to Advisory
Fees and $80,274 related to Other
Expenses) 87,971
Less Credits Earned on Cash Balances 1,685
-----------------
Net Expenses 13,761
-----------------
NET INVESTMENT LOSS $ (6,104)
-----------------
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 239,784
-----------------
Unrealized Appreciation/Depreciation:
Beginning of the Period 688,705
End of the Period 364,469
-----------------
Net Unrealized Depreciation During the Period (324,236)
-----------------
NET REALIZED AND UNREALIZED LOSS $ (84,452)
-----------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (90,556)
-----------------
See Notes to Financial Statements
10
<PAGE> 92
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended September 30, 1999,
the Nine Months Ended March 31, 1999,
and the Year Ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1999 MARCH 31, 1999 JUNE 30, 1998
FROM INVESTMENT ACTIVITIES:
Operations:
<S> <C> <C> <C>
Net Investment Loss $ (6,104) $ (8,044) $ (3,439)
Net Realized Gain/Loss 239,784 (34,592) 320,602
Net Unrealized Appreciation/Depreciation
During the Period (324,236) 387,576 103,002
------------------ ----------------- -------------
Change in Net Assets from Operations (90,556) 344,940 420,165
------------------ ----------------- -------------
Distributions in Excess of Net Investment Income * 0 (3,237) (14,372)
Distributions from Net Realized Gain * 0 (196,470) (176,673)
------------------ ----------------- -------------
Total Distributions 0 (199,707) (191,045)
------------------ ----------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES (90,556) 145,233 229,120
------------------ ----------------- -------------
FROM CAPITAL TRANSACTIONS:
Net Asset Value of Shares Issued Through
Dividend Reinvestment 0 199,707 191,045
Cost of Shares Repurchased 0 0 (5,023)
------------------ ----------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 0 199,707 186,022
------------------ ----------------- -------------
TOTAL INCREASE/DECREASE IN NET ASSETS (90,556) 344,940 415,142
NET ASSETS:
Beginning of the Period 2,211,600 1,866,660 1,451,518
------------------ ----------------- -------------
End of the Period (Including Accumulated Net
Investment Loss of $38,195, $32,091 and
$20,810, respectively) $ 2,121,044 $ 2,211,600 $ 1,866,660
------------------ ----------------- -------------
* Distributions by Class
- ----------------------------------------------------------------------------------------------------------------------
Distributions in Excess of Net Investment Income:
Class A Shares $ 0 $ (2,823) $ (12,532)
Class B Shares 0 (207) (920)
Class C Shares 0 (207) (920)
------------------ ----------------- -------------
$ 0 $ (3,237) $ (14,372)
------------------ ----------------- -------------
Distributions from Net Realized Gain:
Class A Shares $ 0 $ (171,322) $ (154,061)
Class B Shares 0 (12,574) (11,306)
Class C Shares 0 (12,574) (11,306)
------------------ ----------------- -------------
$ 0 $ (196,470) $ (176,673)
------------------ ----------------- -------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 93
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)
<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
SIX MONTHS NINE MONTHS OF INVESTMENT
ENDED ENDED YEAR ENDED JUNE 30, OPERATIONS) TO
CLASS A SHARES SEPTEMBER 30, 1999 MARCH 31, 1999 1998 1997 JUNE 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 17.042 $ 16.128 $ 14.235 $ 11.622 $ 10.000
------------ -------------- ------------- ----------- ----------
Net Investment Income/Loss (0.047) (0.040) (0.009) (0.003) 0.019
Net Realized and Unrealized Gain/Loss (0.651) 2.680 3.784 3.535 1.603
------------ -------------- ------------- ----------- ----------
Total from Investment Operations (0.698) 2.640 3.775 3.532 1.622
------------ -------------- ------------- ----------- ----------
Less:
Distributions from and in Excess of
Net Investment Income --- 0.028 0.142 0.019 ---
Distributions from Net Realized Gain --- 1.698 1.740 0.900 ---
------------ -------------- ------------- ----------- ----------
Total Distributions --- 1.726 1.882 0.919 ---
------------ -------------- ------------- ----------- ----------
Net Asset Value, End of the Period $ 16.344 $ 17.042 $ 16.128 $ 14.235 $ 11.622
============ ============== ============= =========== ==========
Total Return * (a) (4.11)% ** 18.45% ** 29.08% 32.29% 16.10% **
Net Assets at End of the Period
(In thousands) $ 1,849.5 $ 1,928.5 $ 1,627.7 $ 1,260.8 $ 81.4
Ratio of Expenses to Average Net Assets* (b) 1.40% 1.37% 1.51% 1.59% 1.37%
Ratio of Net Investment Income/Loss to
Average Net Assets* (0.55%) (0.58%) (0.21%) (0.08%) 0.33%
Portfolio Turnover 64% ** 74% ** 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) 9.39% 8.89% 8.41% 17.82% 18.46%
Ratio of Net Investment Income/Loss to
Average Net Assets (8.55%) (8.09%) (7.11%) (16.31%) (16.76%)
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .15% for the six months ended
September 30, 1999, .12% for the nine months ended March 31, 1999 and .26%,
.34% and .13% for the years ended June 30, 1998, 1997 and 1996,
respectively.
See Notes to Financial Statements
12
<PAGE> 94
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
SIX MONTHS NINE MONTHS OF INVESTMENT
ENDED ENDED YEAR ENDED JUNE 30, OPERATIONS) TO
Class B Shares SEPTEMBER 30, 1999 MARCH 31, 1999 1998 1997 JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 17.043 $ 16.129 $ 14.237 $ 11.622 $ 10.000
------------ ------------ ------------ ------------ ------------
Net Investment Income/Loss (0.047) (0.036) (0.004) (0.007) 0.019
Net Realized and Unrealized Gain/Loss (0.651) 2.676 3.778 3.541 1.603
------------ ------------ ------------ ------------ ------------
Total from Investment Operations (0.698) 2.640 3.774 3.534 1.622
------------ ------------ ------------ ------------ ------------
Less:
Distributions from and in Excess of Net
Investment Income --- 0.028 0.142 0.019 --
Distributions from Net Realized Gain --- 1.698 1.740 0.900 --
------------ ------------ ------------ ------------ ------------
Total Distributions --- 1.726 1.882 0.919 --
------------ ------------ ------------ ------------ ------------
Net Asset Value, End of the Period $ 16.345 $ 17.043 $ 16.129 $ 14.237 $ 11.622
============ ============ ============ ============ ============
Total Return * (a) (4.11)% ** 18.52% ** 29.08% 32.29% 16.10% **
Net Assets at End of the Period
(In thousands) $ 135.7 $ 141.5 $ 119.5 $ 92.5 $ 75.5
Ratio of Expenses to Average Net Assets* (b) 1.40% 1.37% 1.51% 1.59% 1.37%
Ratio of Net Investment Income/Loss to
Average Net Assets* (0.55%) (0.58%) (0.21%) (0.05%) 0.33%
Portfolio Turnover 64% ** 74% ** 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) 9.39% 8.89% 8.41% 17.82% 18.46%
Ratio of Net Investment Income/Loss to
Average Net Assets (8.55%) (8.09%) (7.11%) (16.28%) (16.76%)
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .15% for the six months ended
September 30, 1999, .12% for the nine months ended March 31, 1999 and .26%,
.34% and .13% for the years ended June 30, 1998, 1997 and 1996,
respectively.
See Notes to Financial Statements
13
<PAGE> 95
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)
<TABLE>
<CAPTION>
December 27, 1995
(COMMENCEMENT
SIX MONTHS NINE MONTHS OF INVESTMENT
ENDED ENDED YEAR ENDED JUNE 30, OPERATIONS) TO
Class C Shares SEPTEMBER 30, 1999 MARCH 31, 1999 1998 1997 JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 17.045 $ 16.131 $ 14.237 $ 11.622 $ 10.000
------------ -------------- ------------- ----------- -----------
Net Investment Income/Loss (0.047) (0.036) (0.008) (0.007) 0.019
Net Realized and Unrealized Gain/Loss (0.651) 2.676 3.784 3.541 1.603
------------ -------------- ------------- ----------- -----------
Total from Investment Operations (0.698) 2.640 3.776 3.534 1.622
------------ -------------- ------------- ----------- -----------
Less:
Distributions from and in Excess of Net
Investment Income --- 0.028 0.142 0.019 ---
Distributions from Net Realized Gain --- 1.698 1.740 0.900 ---
------------ -------------- ------------- ----------- -----------
Total Distributions --- 1.726 1.882 0.919 ---
------------ -------------- ------------- ----------- -----------
Net Asset Value, End of the Period $ 16.347 $ 17.045 $ 16.131 $ 14.237 $ 11.622
============ ============== ============= =========== ===========
Total Return * (a) (4.11)% ** 18.52% ** 29.08% 32.29% 16.10% **
Net Assets at End of the Period
(In thousands) $ 135.8 $ 141.6 $ 119.5 $ 98.2 $ 75.5
Ratio of Expenses to Average Net Assets* (b) 1.40% 1.37% 1.51% 1.59% 1.37%
Ratio of Net Investment Income/Loss to
Average Net Assets* (0.55%) (0.58%) (0.21%) (0.05%) 0.33%
Portfolio Turnover 64% ** 74% ** 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) 9.39% 8.89% 8.41% 17.82% 18.46%
Ratio of Net Investment Income/Loss to
Average Net Assets (8.55%) (8.09%) (7.11%) (16.28%) (16.76%)
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .15% for the six months ended
September 30, 1999, .12% for the nine months ended March 31, 1999 and .26%,
.34% and .13% for the years ended June 30, 1998, 1997 and 1996,
respectively.
See Notes to Financial Statements
14
<PAGE> 96
VAN KAMPEN
GREAT AMERICAN COMPANIES FUND
Notes to Financial Statements
September 30, 1999 (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.
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 the mean of the bid and asked prices 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. Interest and expenses of the
Fund are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. 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 $40,000. These costs were originally
scheduled to be amortized on a straight-line basis over the 60 month period
ending December 27, 2000. Pursuant to AICPA Statement of Position 98-5, any
unamortized organizational costs were expensed on April 1, 1999, the first
business day of the 2000 fiscal year.
E. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws
which allow it to carry a realized capital loss forward for eight years
following the year of loss and offset such losses against any future realized
capital gains. At March 31, 1999, the Fund had an accumulated capital loss
carryforward for tax purposes of $34,593 which will expire on March 31, 2007.
Net realized gains or losses may differ for financial reporting and tax purposes
primarily as a result of the deferral of losses relating to wash sale
transactions.
At September 30, 1999, for federal income tax purposes the cost of
long-term investments is $1,685,627, the aggregate gross unrealized appreciation
is $433,287 and the aggregate gross unrealized depreciation is $69,794,
resulting in net unrealized appreciation on long-term investments of $363,493.
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 six months ended
September 30, 1999, the Fund's custody fee was reduced by $1,685 as a result of
credits earned on overnight cash balances.
15
<PAGE> 97
VAN KAMPEN
GREAT AMERICAN COMPANIES FUND
Notes to Financial Statements (Continued)
September 30, 1999 (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:
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 six months ended September 30, 1999, the Adviser voluntarily
capped the expenses of the Fund at 1.25% of average net assets, prior to any
credits earned on overnight cash balances. As such, the Adviser waived $7,697 of
its investment advisory fees and assumed $80,274 of the Fund's other expenses.
This waiver is voluntary in nature and can be discontinued at the Adviser's
discretion.
For the six months ended September 30, 1999, the Fund recognized expenses
of approximately $100 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 six months ended September 30, 1999, the Fund incurred expenses of
approximately $25,800 representing Van Kampen's cost of providing accounting and
legal services to the Fund. All of this cost has been assumed by Van Kampen.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the six months ended September
30, 1999, the Fund recognized expenses of approximately $7,500. All of this cost
has been assumed by Van Kampen. 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, 1999, Van Kampen owned all shares of Classes A, B and C,
respectively.
3. CAPITAL TRANSACTIONS
At September 30, 1999, capital aggregated $1,410,601, $89,976 and $89,976
for Classes A, B and C, respectively. For the six months ended September 30,
1999, there were no capital transactions.
At March 31, 1999, capital aggregated $1,410,601, $89,976 and $89,976 for
Classes A, B and C, respectively. For the nine months ended March 31, 1999,
transactions were as follows:
Shares Value
- ----------------------------------- ------------ ----------------
Dividend Reinvestment:
Class A 12,238 $174,145
Class B 898 12,781
Class C 898 12,781
============ ================
Total Dividend Reinvestment 14,034 $199,707
============ ================
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)
============ ================
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.
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 six months ended September 30, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $1,361,511 and
$1,370,920, respectively.
16
<PAGE> 98
VAN KAMPEN
GREAT AMERICAN COMPANIES FUND
Notes to Financial Statements (Continued)
September 30, 1999 (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.
The Fund's net assets are subject to annual fees under the Plans of up to
.25% for Class A net assets and 1.00% each for Class B and Class C net assets.
No fees related to the Plans have been accrued by the Fund as the Fund is
currently owned solely by affiliated persons.
17
<PAGE> 99
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
BOARD OF TRUSTEES INVESTMENT ADVISER
J. MILES BRANAGAN VAN KAMPEN
JERRY D. CHOATE 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
SUZANNE H. WOOSLEY, PH.D. P.O. Box 5555
PAUL G. YOVOVICH Oakbrook Terrace, Illinois 60181-5555
OFFICERS SHAREHOLDER SERVICING AGENT
RICHARD F. POWERS, III* VAN KAMPEN INVESTOR SERVICES INC.
President P.O. Box 218256
Kansas City, Missouri 64121-8256
DENNIS J. MCDONNELL*
Executive Vice President and CUSTODIAN
Chief Investment Officer
STATE STREET BANK AND TRUST COMPANY
A. THOMAS SMITH III* 225 FRANKLIN STREET
Vice President and Secretary P.O. Box 1713
Boston, Massachusetts 02105
JOHN L. SULLIVAN*
Vice President, Treasurer and LEGAL COUNSEL
Chief Financial Officer
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
(ILLINOIS)
CURTIS W. MORELL* 333 West Wacker Drive
Vice President and Chief Chicago, Illinois 60606
Accounting Officer
TANYA M. LODEN* INDEPENDENT ACCOUNTANTS
Controller
KPMG LLP
STEPHEN L. BOYD* 303 East Wacker Drive
PETER W. HEGEL* Chicago, Illinois 60601
MICHAEL H. SANTO*
EDWARD C. WOOD, III*
Vice Presidents
* "Interested" persons of the Fund, as defined in the Investment Company Act
of 1940.
(C) Van Kampen Funds Inc., 1999 All Rights Reserved.
SM denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data.
18
<PAGE> 100
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<PAGE> 101
TABLE OF CONTENTS
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
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
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 102
LETTER TO SHAREHOLDERS
October 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the Asian crisis appears to be behind us, new concerns are always
emerging. In the coming months, we'll likely hear more about how the year 2000
computer problem may affect the markets or that we're overdue for a correction.
While the markets could undoubtedly suffer as a result of these or any number of
other events, we encourage you to focus on your long-term investment goals.
Although nothing is certain, history has shown us that over time, the markets
tend to recover--and most investors want to be positioned to take advantage of
any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
1
<PAGE> 103
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree, keeping the economy growing at a
healthy pace. High levels of consumer confidence fueled this heavy retail
purchasing activity, pushing the personal savings rate down to a record low as
spending rates outpaced income growth. Although we experienced a slowdown during
the second quarter of 1999, economic growth accelerated toward the end of the
reporting period. The growth rate of the nation's gross domestic product (GDP)
dipped to 1.6 percent for the second quarter of 1999, but climbed back up to 4.8
percent in the third quarter.
EMPLOYMENT SITUATION
The strong job market helped to support the health of the economy. During
the reporting period, the unemployment rate reached its lowest level in almost
30 years, and wages continued to climb. The wage pressures were balanced
somewhat by productivity gains, but they ultimately pushed the cost of labor
higher, as evidenced by the sharp jump in the Employment Cost Index in the
second quarter of 1999.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index (CPI) report. The Federal Reserve remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
two of its interest rate cuts from the fall of 1998, raising rates in June and
August 1999 to keep the economy from overheating.
INTEREST RATES AND INFLATION
September 30, 1997, through September 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Sep 1997 5.5000 2.2000
6.2500 2.2000
5.7500 2.1000
Dec 1997 5.6875 1.8000
6.5000 1.7000
5.5625 1.6000
Mar 1998 5.6250 1.4000
6.1250 1.4000
5.6250 1.4000
Jun 1998 5.6875 1.7000
6.0000 1.7000
5.5625 1.7000
Sep 1998 5.9375 1.6000
5.7500 1.5000
5.2500 1.5000
Dec 1998 4.8750 1.5000
4.0000 1.6000
4.8125 1.7000
Mar 1999 4.8750 1.6000
5.1250 1.7000
4.9375 2.3000
Jun 1999 4.5000 2.1000
4.0000 2.0000
4.7500 2.1000
Sep 1999 5.4375 2.3000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 104
PERFORMANCE RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 1999
VAN KAMPEN GROWTH FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV(1)... 5.32% 4.94% 4.81%
Six-month total return(2)................ (0.73%) (0.02%) 3.85%
One-year total return(2)................. 31.50% 33.53% 37.36%
Life-of-Fund average annual total
return(2)................................ 29.16% 30.16% 30.43%
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 Comparative Performance section of the current prospectus. An investment
should be made with an understanding of the risks that an investment in equity
securities entails. These include the risk that the financial condition of the
issuers of the securities in the portfolio, or the condition of the stock market
in general, may worsen and therefore, the value of Fund shares may decline. Past
performance does not guarantee future results. Investment return and net asset
value will fluctuate with market conditions. Fund shares, when redeemed, may be
worth more or less than their original cost.
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. Had these fees not been waived and expenses reimbursed, the Fund's total
return would have been lower.
One factor impacting the Fund's total return for the life of the Fund was the
Fund's investments in initial public offerings (IPOs) in 1996. These investments
had a greater effect on fund performance in 1996 than similar investments made
in subsequent years, in part because of the smaller size of the Fund in 1996.
There is no assurance that the Fund's future investments in IPOs will have the
same impact on performance as they did in 1996.
The Fund's investments in less seasoned companies, special situations involving
new management, special projects and techniques, unusual developments, mergers,
or liquidations involve greater risks than more conservative investments.
Securities of foreign issuers may magnify volatility due to changes in foreign
exchange rates, the political and economic uncertainties in foreign countries,
and the potential lack of liquidity, government supervision, and regulation.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 105
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN GROWTH FUND
We recently spoke with the representatives of the advisor of the Van Kampen
Growth Fund about the key events and economic forces that shaped the markets
during the past six months. The managers include Jeff D. New, senior portfolio
manager, who has managed the Fund since December 1995 and worked in the
investment industry since 1987. He is joined by Michael Davis and Mary Jayne
Maly, portfolio managers, and Stephen L. Boyd, chief investment officer for
equity investments. The following discussion reflects their views on the Fund's
performance during the six months ended September 30, 1999.
Q COULD YOU DESCRIBE THE MARKET ENVIRONMENT IN WHICH THE FUND OPERATED
DURING THE REPORTING PERIOD?
A As has been its trademark recently, the stock market was volatile during
the past two quarters. Early in the reporting period, the Dow Jones
Industrial Average continued its upward trend, passing the 11,000
milestone in early May. Soon after, the market reversed course, as investors
anticipated an increase in interest rates. This placed downward pressure on the
market in general and growth stocks in particular. To attempt to moderate
economic growth, the Fed did increase rates twice during the reporting period.
Following the first increase, the stock market rose slightly because the rate
hike was widely expected. The market response to the second rate hike was less
favorable. The Dow reached a record high the following day but went on to lose
nearly 9 percent by the end of the reporting period.
During the last six months, technology stocks--especially in the
semiconductor industry--continued to be among the market's strongest performers.
Companies in the financial services and retail industries fared less well, as
these businesses are especially sensitive to rising interest rates and
expectations of a weakening economy.
Q IN LIGHT OF THIS ENVIRONMENT, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND,
AND HOW DID THIS STRATEGY AFFECT THE FUND'S PERFORMANCE?
A As we have stressed in prior reports, our investment discipline leads us
to purchase stocks that meet our criteria of positive future fundamentals
and attractive current prices. By our definition, a company with positive
future fundamentals possesses 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. We evaluate stocks from the "bottom up"--in other words, on a
company by company basis.
In response to the excellent fundamentals of many technology companies, we
increased the Fund's weighting in this area. This increase, in conjunction with
our overall stock-selection methods, helped the Fund's return. At the same time,
the Fund was generally hurt by its exposure to companies in the financial
services and retail industries. In response to market conditions, we scaled back
the Fund's holdings in these areas.
4
<PAGE> 106
Q WHAT WERE SOME OF THE STOCKS OR SECTORS THAT MOST HELPED THE FUND'S RETURN
DURING THE REPORTING PERIOD?
A We were invested heavily in technology companies, which helped the Fund's
performance. For example, Lexmark International Group, a manufacturer of
computer laser printers, was a very successful investment for the Fund, as was
TranSwitch, which makes semiconductors that improve the speed at which data can
be transmitted over computer networks. Electronics retailer Tandy, another
investment that boosted our return, benefited from increased demand for personal
computers and cellular phone services. And Polycom, which specializes in
products that enhance business telephone conferencing, also performed very well
during the reporting period.
Outside of technology, we found success investing in several media companies
that have benefited from the increase in the country's Spanish-speaking
population. These businesses--namely, television network company Univision and
radio broadcast company Hispanic Broadcasting--contributed favorably to the
Fund's results. The Fund also benefited from its investments in biotechnology
firms such as Biogen and Amgen. Biogen had a particularly favorable impact--the
company's stock performed well because of the success of its popular multiple
sclerosis drug, Avonex.
Please keep in mind that not all stocks in the Fund performed as well, nor
is there any guarantee that these stocks will perform as well in the future.
This report identifies the Fund's investments on September 30, 1999. These
holdings are subject to change. For additional Fund portfolio highlights, please
refer to page 8.
Q WHICH STOCKS OR SECTORS HURT THE FUND?
A As we mentioned earlier, the financial and retail sectors were
disappointments. Firstar, a very high-quality bank that operates in the
midwestern United States, was one financial stock that hurt the Fund's
overall return. The stock performed poorly not just because of interest-rate
fears, but also because of investor skepticism about Firstar's ability to
integrate recent acquisitions.
TJX and Lowe's were two weak retail performers that, earlier in the
reporting period, were fairly sizeable holdings of the Fund. We continue to own
a modest position in TJX--which operates the well-known TJ Maxx and Marshalls
brands--because we continue to believe that fundamentals are strong for this
company. Home-products company Lowe's, however, is no longer in the Fund's
portfolio.
Due to its outstanding performance in late 1998 and early 1999, Internet
service provider America Online had grown to occupy a substantial part of the
portfolio. However, during the last six months, the stock declined by
approximately 25 percent. This decline could be attributed to two primary
factors--subscriber growth, though still strong, appeared to be moderating; and
investors were concerned about the company's ability to respond to competition
from new "free" Internet service providers. In response to these fundamental
developments, we sold most of the Fund's position in AOL during the period.
In the area of health care services, the Fund's return was hurt by the
purchase of HealthSouth, a stock the Fund has owned before. We bought this stock
for the Fund's portfolio because we believed it was attractively valued and
because we believed that the
5
<PAGE> 107
company's plans to split its business into two parts would be rewarded by the
market. However, the company subsequently reported disappointing earnings and
decided to postpone the planned split. These conditions drove HealthSouth's
stock price significantly downward. In response to these conditions, we sold our
entire position in the company.
Q HOW DID THE FUND PERFORM OVERALL?
A As a result of our stock-selection strategy and, to a lesser extent, the
recent outperformance of technology companies, the Fund had a six-month
total return of 5.32 percent(1) (Class A shares at net asset value) as of
September 30, 1999. By comparison, the Standard & Poor's 500 Index had a return
of 0.37 percent, while the Lipper Growth Fund Index, which more closely
resembles the Fund, had a return of 0.97 percent. The S&P 500 Index is a
broad-based index that reflects the general performance of the stock market, and
the Lipper Growth Fund Index reflects the average performance of the 30 largest
growth funds. These indices are statistical composites that do not include any
commissions or sales charges that would be paid by an investor purchasing the
securities or investments represented by these indices. It is impossible to
invest directly in an index.
Please refer to the chart and footnotes on page 3 for additional Fund
performance results. Past performance does not guarantee future performance.
Q GOING FORWARD, HOW DO YOU EXPECT TO MANAGE THE FUND?
A Regardless of market conditions, we maintain a consistent management
strategy: to continue to focus on growth companies with strong
fundamentals. The market remains volatile, but we are confident in our
approach to stock selection and believe that it will continue to lead us to
attractive investment opportunities.
JEFF D. NEW MICHAEL DAVIS
Jeff D. New Senior Portfolio Michael Davis Portfolio Manager
Manager
MARY JAYNE MALY STEPHEN L. BOYD
Mary Jayne Maly Portfolio Stephen L. Boyd Chief Investment
Manager Officer Equity Investments
6
<PAGE> 108
GLOSSARY OF TERMS
BOTTOM-UP INVESTING: A management style that emphasizes the analysis of
individual stocks, rather than economic and market cycles.
CLASS A SHARES: When Class A shares of a fund are purchased, the share price
includes the net asset value plus a one-time sales charge (or "load"). In
most cases, there is no redemption fee (contingent deferred sales charge).
DOW JONES INDUSTRIAL AVERAGE: The oldest and most widely recognized stock market
average, which reflects the performance of 30 actively traded stocks of
well-established, blue-chip companies.
EARNINGS ESTIMATES: A forecast for a company's net income during a given period.
Earnings estimates can come from the company's management as well as from
independent analysts.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a
year to establish monetary policy and monitor the economic pulse of the
United States.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
GROWTH INVESTING: An investment strategy that seeks to identify stocks that tend
to offer greater-than-average earnings growth. Growth stocks typically trade
at higher prices relative to their earnings than value stocks, due to their
higher expected earnings growth.
MARKET CAPITALIZATION: The size of a company, as measured by the value of its
issued and outstanding stock.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from the total assets in its portfolio and dividing
this amount by the number of shares outstanding. The NAV does not include
any initial or contingent deferred sales charge.
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.
7
<PAGE> 109
PORTFOLIO HIGHLIGHTS
VAN KAMPEN GROWTH FUND
TOP TEN PORTFOLIO HOLDINGS AS OF SEPTEMBER 30, 1999*
<TABLE>
<S> <C>
TRANSWITCH designs digital and mixed-signal
semiconductors.............................................. 3.2%
UNIVISION is a leading Spanish-language television network
in the United States........................................ 2.5%
BIOGEN researches, develops, and markets biopharmaceuticals
to treat a variety of ailments.............................. 2.4%
ELECTRONICS FOR IMAGING makes products that link computer
networks to color copiers and desktop laser printers........ 2.0%
JDS UNIPHASE develops a range of products used by systems
manufacturers to develop optical networks for the
telecommunications and cable television industries.......... 2.0%
CORNING is a global, technology-based corporation which
operates in three broadly based business segments:
telecommunications, advanced materials, and information
display..................................................... 2.0%
BAKER HUGHES provides products and services for the global
petroleum market............................................ 1.8%
ALTERA is a leading maker of high-density logic devices,
standard integrated circuits that customers can program..... 1.7%
POLYCOM makes long-distance video-, audio-, and
data-conferencing products.................................. 1.7%
WATERS CORPORATION makes high-performance
liquid-chromatography instruments that researchers,
scientists, and engineers use to separate and identify
chemicals and materials..................................... 1.6%
</TABLE>
TOP FIVE PORTFOLIO SECTORS*(1)
[BAR GRAPH]
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ --------------
<S> <C> <C>
Technology 42.10 34.30
Consumer Distribution 16.10 29.00
Health Care 11.90 12.90
Consumer Services 10.00 6.10
Utilities 5.70 4.83
</TABLE>
* As a percentage of long-term investments
(1) These sector categories represent broad groupings of related industries
8
<PAGE> 110
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 96.9%
CONSUMER DISTRIBUTION 15.6%
Ames Department Stores, Inc. (a)..................... 40,000 $ 1,275,000
AnnTaylor Stores Corp. (a)........................... 25,000 1,021,875
Best Buy Co., Inc. (a)............................... 16,000 993,000
Chico's Fas, Inc. (a)................................ 53,000 1,444,250
Circuit City Stores, Inc............................. 32,000 1,350,000
Cost Plus, Inc. (a).................................. 30,000 1,455,000
Family Dollar Stores, Inc............................ 56,000 1,183,000
Intimate Brands, Inc................................. 23,100 899,456
Lexmark International Group, Inc., Class A (a)....... 20,400 1,642,200
Pacific Sunwear of California, Inc. (a).............. 49,500 1,387,547
Polycom, Inc. (a).................................... 45,000 2,144,531
Sunglass Hut International, Inc...................... 80,000 845,000
Tandy Corp........................................... 27,000 1,395,562
TJX Cos., Inc........................................ 41,000 1,150,563
Tommy Hilfiger Corp. (a)............................. 46,900 1,321,994
Too, Inc. (a)........................................ 76,000 1,363,250
------------
20,872,228
------------
CONSUMER DURABLES 0.6%
Harley Davidson, Inc................................. 15,000 750,938
------------
CONSUMER NON-DURABLES 4.5%
Adolph Coors Co...................................... 27,000 1,461,375
Jones Apparel Group, Inc. (a)........................ 30,000 862,500
Pepsi Bottling Group, Inc............................ 42,000 716,625
Quaker Oats Co....................................... 20,000 1,237,500
Viad Corp............................................ 60,000 1,770,000
------------
6,048,000
------------
CONSUMER SERVICES 9.7%
Acme Communications, Inc............................. 1,000 31,000
Brinker International, Inc. (a)...................... 49,000 1,329,125
Digital Insight Corp................................. 1,000 15,000
Hispanic Broadcasting Corp. (a)...................... 20,000 1,522,500
Internet Capital Group, Inc. (a)..................... 6,800 597,550
Park Place Entertainment Corp. (a)................... 113,000 1,412,500
</TABLE>
See Notes to Financial Statements
9
<PAGE> 111
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
Radio One, Inc. (a).................................. 19,400 $ 805,100
TiVo, Inc. (a)....................................... 7,300 218,544
Univision Communications, Inc., Class A (a).......... 40,000 3,255,000
Valassis Communications, Inc. (a).................... 39,000 1,713,562
Young & Rubicam, Inc. (a)............................ 47,000 2,068,000
------------
12,967,881
------------
ENERGY 2.2%
Apache Corp.......................................... 15,000 647,813
Baker Hughes, Inc.................................... 79,000 2,291,000
------------
2,938,813
------------
FINANCE 3.2%
AFLAC, Inc........................................... 28,000 1,172,500
Firstar Corp......................................... 54,000 1,383,750
Providian Financial Corp............................. 7,000 554,312
Zions Bancorp. ...................................... 21,000 1,157,625
------------
4,268,187
------------
HEALTHCARE 11.5%
Allergan, Inc........................................ 9,800 1,078,000
Alpharma, Inc., Class A.............................. 35,000 1,235,937
Amgen, Inc. (a)...................................... 16,000 1,304,000
Andrx Corp. (a)...................................... 8,000 468,250
Biogen, Inc. (a)..................................... 40,000 3,152,500
Guidant Corp......................................... 17,000 911,625
King Pharmaceuticals, Inc. (a)....................... 37,000 1,295,000
Lincare Holdings, Inc. (a)........................... 74,000 1,972,562
Medimmune, Inc. (a).................................. 8,000 797,250
PE Corp.--PE Biosystems Group........................ 9,000 650,250
Schering-Plough Corp................................. 18,000 785,250
United HealthCare Corp............................... 11,000 535,563
VISX, Inc. (a)....................................... 5,000 395,469
Wellpoint Health Networks, Inc., Class A (a)......... 14,000 798,000
------------
15,379,656
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 112
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING 2.0%
Corning, Inc......................................... 37,000 $ 2,536,812
Creo Products, Inc................................... 6,600 162,113
------------
2,698,925
------------
RAW MATERIALS/PROCESSING INDUSTRIES 1.2%
Pall Corp............................................ 67,000 1,553,563
------------
TECHNOLOGY 40.8%
Adaptec, Inc. (a).................................... 16,000 635,000
Adobe Systems Inc.................................... 8,000 908,000
ADTRAN, Inc. (a)..................................... 20,000 766,250
Alteon Websystems, Inc. (a).......................... 3,200 300,800
Altera Corp. (a)..................................... 50,000 2,168,750
America Online, Inc. (a)............................. 10,000 1,040,000
Analog Devices, Inc. (a)............................. 29,000 1,486,250
Apple Computer, Inc. (a)............................. 16,000 1,013,000
Applied Micro Circuits Corp. (a)..................... 20,000 1,140,000
Avt Corp. (a)........................................ 30,000 918,750
Bluestone Software, Inc. (a)......................... 3,300 76,313
BMC Software, Inc. (a)............................... 21,000 1,502,812
Broadcom Corp., Class A (a).......................... 8,000 872,000
Citrix Systems, Inc. (a)............................. 24,000 1,486,500
Comverse Technology, Inc. (a)........................ 15,000 1,414,687
Conexant Systems, Inc. (a)........................... 12,000 871,875
Electronic Arts, Inc. (a)............................ 9,000 651,375
Electronics for Imaging, Inc. (a).................... 51,000 2,621,719
EMC Corp. (a)........................................ 17,000 1,214,437
Exodus Communications, Inc. (a)...................... 7,000 504,438
General Instrument Corp. (a)......................... 27,000 1,299,375
Jabil Circuit, Inc. (a).............................. 8,000 396,000
JDS Uniphase Corp. (a)............................... 23,000 2,617,687
Juniper Networks, Inc. (a)........................... 3,600 655,425
Kana Communications, Inc. (a)........................ 2,100 104,738
KLA--Tencor Corp. (a)................................ 11,000 715,000
Linear Technology Corp............................... 16,000 940,500
</TABLE>
See Notes to Financial Statements
11
<PAGE> 113
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
LSI Logic Corp. (a).................................. 34,000 $ 1,751,000
Microsoft Corp. (a).................................. 12,000 1,086,750
Network Appliance, Inc. (a).......................... 12,000 859,500
NetZero, Inc. (a).................................... 8,100 210,600
Nokia Corp.--ADR (Finland)........................... 16,000 1,437,000
Novell, Inc. (a)..................................... 27,000 558,563
PMC Sierra, Inc. (a)................................. 12,000 1,110,000
QLogic Corp. (a)..................................... 10,000 698,125
Qualcomm, Inc. (a)................................... 3,000 567,563
Rational Software Corp. (a).......................... 35,000 1,024,844
RealNetworks, Inc. (a)............................... 4,000 418,250
Red Hat, Inc. (a).................................... 5,200 499,200
RF Micro Devices, Inc. (a)........................... 18,000 823,500
Sanmina Corp. (a).................................... 16,000 1,238,000
Scientific Atlanta, Inc.............................. 20,000 991,250
Siebel Systems, Inc. (a)............................. 19,000 1,265,875
Solectron Corp. (a).................................. 19,000 1,364,437
Teradyne, Inc. (a)................................... 26,000 916,500
Unisys Corp. (a)..................................... 39,000 1,759,875
VeriSign, Inc. (a)................................... 6,000 639,000
VERITAS Software Corp. (a)........................... 26,000 1,974,375
Vitesse Semiconductor Corp. (a)...................... 13,000 1,109,875
Vitria Technology, Inc. (a).......................... 1,300 47,775
Waters Corp. (a)..................................... 35,000 2,119,687
Xilinx, Inc. (a)..................................... 26,000 1,703,812
------------
54,497,037
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 114
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES 5.6%
Calpine Corp. (a).................................... 8,000 $ 680,500
Nextel Communications, Inc. (a)...................... 28,000 1,898,750
NEXTLINK Communications Inc., Class A (a)............ 13,000 673,969
Transwitch Corp. (a)................................. 73,000 4,161,000
------------
7,414,219
------------
TOTAL LONG-TERM INVESTMENTS 96.9%
(Cost $96,882,894)............................................ 129,389,447
REPURCHASE AGREEMENT 4.8%
SBC Warburg, Corp. ($6,470,000 par collateralized by U.S.
Government obligations in a pooled cash account dated
09/30/99, to be sold on 10/01/99 at $6,470,954) (Cost
$6,470,000)................................................... 6,470,000
------------
TOTAL INVESTMENTS 101.7%
(Cost $103,352,894)........................................... 135,859,447
LIABILITIES IN EXCESS OF OTHER ASSETS -1.7%.................... (2,335,288)
------------
NET ASSETS 100.0%.............................................. $133,524,159
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR--American Depositary Receipt
See Notes to Financial Statements
13
<PAGE> 115
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $103,352,894)....................... $135,859,447
Cash........................................................ 1,691
Receivables:
Investments Sold.......................................... 2,968,141
Dividends................................................. 31,855
Fund Shares Sold.......................................... 23,866
Unamortized Organizational Costs............................ 10,093
Other....................................................... 6,456
------------
Total Assets.......................................... 138,901,549
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 4,471,304
Fund Shares Repurchased................................... 488,891
Distributor and Affiliates................................ 186,389
Investment Advisory Fee................................... 83,937
Accrued Expenses............................................ 81,448
Trustees' Deferred Compensation and Retirement Plans........ 65,421
------------
Total Liabilities..................................... 5,377,390
------------
NET ASSETS.................................................. $133,524,159
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $ 85,601,800
Net Unrealized Appreciation................................. 32,506,553
Accumulated Net Realized Gain............................... 16,538,141
Accumulated Net Investment Loss............................. (1,122,335)
------------
NET ASSETS.................................................. $133,524,159
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $58,353,104 and 2,378,121 shares of
beneficial interest issued and outstanding)............. $ 24.54
Maximum sales charge (5.75%* of offering price)........... 1.50
------------
Maximum offering price to public.......................... $ 26.04
============
Class B Shares:
Net asset value and offering price per share (Based on net
assets of $68,021,391 and 2,834,075 shares of beneficial
interest issued and outstanding)........................ $ 24.00
============
Class C Shares:
Net asset value and offering price per share (Based on net
assets of $7,149,664 and 298,286 shares of beneficial
interest issued and outstanding)........................ $ 23.97
============
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
14
<PAGE> 116
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 160,442
Interest................................................... 109,137
------------
Total Income........................................... 269,579
------------
EXPENSES:
Investment Advisory Fee.................................... 516,946
Distribution (12b-1) and Service Fees (Attributed to Class
A, B, and C of $74,265, $355,293 and $36,373,
respectively)............................................ 465,931
Shareholder Services....................................... 216,014
Custody.................................................... 17,562
Trustees' Fees and Related Expenses........................ 13,084
Amortization of Organizational Costs....................... 4,010
Legal...................................................... 3,660
Other...................................................... 100,748
------------
Total Expenses......................................... 1,337,955
Less Credits Earned on Overnight Cash Balances......... 657
------------
Net Expenses........................................... 1,337,298
------------
NET INVESTMENT LOSS........................................ $ (1,067,719)
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain.......................................... $ 20,783,298
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period.................................. 45,329,746
End of the Period........................................ 32,506,553
------------
Net Unrealized Depreciation During the Period.............. (12,823,193)
------------
NET REALIZED AND UNREALIZED GAIN........................... $ 7,960,105
============
NET INCREASE IN NET ASSETS FROM OPERATIONS................. $ 6,892,386
============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 117
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended September 30, 1999, the Nine Months Ended
March 31, 1999 and the Year Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Nine Months Ended Year Ended
September 30, 1999 March 31, 1999 June 30, 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss..................... $(1,067,719) $ (1,603,898) $ (1,438,667)
Net Realized Gain/Loss.................. 20,783,298 (3,953,208) 12,903,865
Net Unrealized Appreciation/Depreciation
During the Period..................... (12,823,193) 6,336,602 31,450,153
----------- ------------ ------------
Change in Net Assets from Operations.... 6,892,386 779,496 42,915,351
----------- ------------ ------------
Distributions from Net Realized
Gain/Loss............................. -0- (3,378,184) (6,327,980)
Distributions in Excess of Net Realized
Gain/Loss............................. -0- (291,949) -0-
----------- ------------ ------------
Distributions from and in Excess of
Net Realized Gain*.................. -0- (3,670,133) (6,327,980)
----------- ------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES............................ 6,892,386 (2,890,637) 36,587,371
----------- ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............... 4,646,567 12,933,199 28,476,433
Net Asset Value of Shares Issued Through
Dividend Reinvestment................. -0- 3,395,527 5,825,754
Cost of Shares Repurchased.............. (18,352,716) (26,950,184) (33,462,669)
----------- ------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.......................... (13,706,149) (10,621,458) 839,518
----------- ------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS... (6,813,763) (13,512,095) 37,426,889
NET ASSETS:
Beginning of the Period................. 140,337,922 153,850,017 116,423,128
----------- ------------ ------------
End of the Period (Including accumulated
net investment loss of $1,122,335,
$54,616 and $47,131 respectively)..... $133,524,159 $140,337,922 $153,850,017
=========== ============ ============
*Distributions by Class
Distributions from and in Excess of Net
Realized Gain:
Class A Shares........................ $ -0- $ (1,555,668) $ (2,743,327)
Class B Shares........................ -0- (1,907,640) (3,159,670)
Class C Shares........................ -0- (206,825) (424,983)
----------- ------------ ------------
$ -0- $ (3,670,133) $ (6,327,980)
=========== ============ ============
</TABLE>
See Notes to Financial Statements
16
<PAGE> 118
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
Nine (Commencement
Six Months Months Year Year of Investment
Ended Ended Ended Ended Operations)
eptember 30, March 31, June 30, June 30, to June 30,
Class A Shares 1999(a) 1999(a) 1998 1997(a) 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period................................ $ 23.298 $ 23.463 $ 17.878 $ 13.696 $ 10.000
----------- ----------- -------- -------- -----------
Net Investment Income/Loss............ (.134) (.185) (.136) .031 (.044)
Net Realized and Unrealized Gain...... 1.373 .604 6.711 4.810 3.740
----------- ----------- -------- -------- -----------
Total from Investment Operations....... 1.239 .419 6.575 4.841 3.696
----------- ----------- -------- -------- -----------
Less:
Distributions from and in Excess of
Net Realized Gain................... -0- .584 .990 .353 -0-
Return of Capital Distribution........ -0- -0- -0- .306 -0-
----------- ----------- -------- -------- -----------
Total Distributions.................... -0- .584 .990 .659 -0-
----------- ----------- -------- -------- -----------
Net Asset Value, End of the Period..... $ 24.537 $ 23.298 $ 23.463 $ 17.878 $ 13.696
=========== =========== ======== ======== ===========
Total Return* (b)...................... 5.32%** 2.18%** 38.52% 36.00% 37.00%**
Net Assets at End of the Period (In
millions)............................. $58.4 $60.1 $64.9 $53.1 $.1
Ratio of Expenses to Average Net
Assets*............................... 1.51% 1.64% 1.30% 1.32% 1.46%
Ratio of Net Investment Income/Loss to
Average Net Assets*................... (1.11%) (1.19%) (.64%) .19% (.79%)
Portfolio Turnover..................... 79%** 82%** 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............................ N/A 1.68% 1.58% 2.31% 15.69%
Ratio of Net Investment Loss to Average
Net Assets............................ N/A (1.23%) (.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.
N/A = Not Applicable
See Notes to Financial Statements
17
<PAGE> 119
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
Nine (Commencement
Six Months Months Year Year of Investment
Ended Ended Ended Ended Operations)
September 30, March 31, June 30, June 30, to June 30,
Class B Shares 1999(a) 1999(a) 1998 1997(a) 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................. $ 22.869 $ 23.173 $ 17.796 $ 13.695 $ 10.000
----------- ----------- ----------- ----------- -----------
Net Investment Loss................ (0.221) (.299) (.270) (.093) (.045)
Net Realized and Unrealized Gain... 1.353 .579 6.637 4.853 3.740
----------- ----------- ----------- ----------- -----------
Total from Investment Operations.... 1.132 .280 6.367 4.760 3.695
----------- ----------- ----------- ----------- -----------
Less:
Distributions from and in Excess of
Net Realized Gain................ -0- .584 .990 .353 -0-
Return of Capital Distribution..... -0- -0- -0- .306 -0-
----------- ----------- ----------- ----------- -----------
Total Distributions................. -0- .584 .990 .659 -0-
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of the
Period............................. $ 24.001 $ 22.869 $ 23.173 $ 17.796 $ 13.695
=========== =========== =========== =========== ===========
Total Return* (b)................... 4.94%** 1.60%** 37.56% 35.32% 37.00%**
Net Assets at End of the Period (In
millions).......................... $68.0 $72.8 $79.7 $55.0 $.1
Ratio of Expenses to Average Net
Assets*............................ 2.27% 2.40% 2.05% 2.07% 1.46%
Ratio of Net Investment Loss to
Average Net Assets*................ (1.88%) (1.95%) (1.40%) (.56%) (.74%)
Portfolio Turnover.................. 79%** 82%** 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............................. N/A 2.44% 2.34% 3.04% 15.70%
Ratio of Net Investment Loss to
Average Net Assets................. N/A (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.
N/A = Not Applicable
See Notes to Financial Statements
18
<PAGE> 120
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
Nine (Commencement
Six Months Months Year Year of Investment
Ended Ended Ended Ended Operations)
September 30, March 31, June 30, June 30, to June 30,
Class C Shares 1999(a) 1999(a) 1998 1997(a) 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................... $22.867 $23.173 $17.793 $13.695 $10.000
------- ------- ------- ------- -------
Net Investment Loss................... (0.222) (.300) (.311) (.096) (.045)
Net Realized and Unrealized Gain...... 1.324 .578 6.681 4.853 3.740
------- ------- ------- ------- -------
Total from Investment Operations....... 1.102 .278 6.370 4.757 3.695
------- ------- ------- ------- -------
Less:
Distributions from and in Excess of
Net Realized Gain................... -0- .584 .990 .353 -0-
Return of Capital Distribution........ -0- -0- -0- .306 -0-
------- ------- ------- ------- -------
Total Distributions.................... -0- .584 .990 .659 -0-
------- ------- ------- ------- -------
Net Asset Value, End of the Period..... $23.969 $22.867 $23.173 $17.793 $13.695
======= ======= ======= ======= =======
Total Return* (b)...................... 4.81%** 1.60%** 37.56% 35.32% 37.00%**
Net Assets at End of the Period (In
millions)............................. $7.1 $7.4 $9.2 $8.3 $.1
Ratio of Expenses to Average Net
Assets*............................... 2.28% 2.41% 2.05% 2.07% 1.46%
Ratio of Net Investment Loss to Average
Net Assets*........................... (1.88%) (1.96%) (1.39%) (.57%) (.74%)
Portfolio Turnover..................... 79%** 82%** 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................................ N/A 2.45% 2.34% 3.04% 15.70%
Ratio of Net Investment Loss to Average
Net Assets............................ N/A (2.00%) (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.
N/A = Not Applicable
See Notes to Financial Statements
19
<PAGE> 121
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 (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.
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.
Unlisted securities and listed securities for which the last sales price is not
available are valued at the mean of the bid and asked prices. For those
securities where quotations or prices are not available, valuations are
determined in accordance with procedures established in good faith by the Board
of Trustees. Short-term securities with remaining maturities of 60 days or less
are valued at amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments 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.
20
<PAGE> 122
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (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. Discount on debt securities
purchased are amortized over the expected life of each applicable security.
Premiums on debt securities are not amortized. Income and expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. 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 relating to wash sale transactions and
post October 31 losses which are not recognized for tax purposes until the first
day of the following fiscal year.
At September 30, 1999, for federal income tax purposes the cost of long- and
short-term investments is $103,627,099, the aggregate gross unrealized
appreciation is $36,233,326 and the aggregate gross unrealized depreciation is
$4,000,978, resulting in net unrealized appreciation on long- and short-term
investments of $32,232,348.
F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
annually from net investment income and net realized gains, if any.
Distributions from net
21
<PAGE> 123
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
realized gains for book purposes may include short-term capital gains and gains
on futures transactions. All short-term capital gains are included in ordinary
income for tax purposes.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the nine months ended March 31, 1999 and for the year ended June 30, 1998
have been identified and appropriately reclassified. For the nine months ended
March 31, 1999, a permanent difference related to a net operating loss totaling
$1,596,413 has been reclassified from accumulated net investment loss to
capital. For the year ended June 30, 1998, a permanent difference related to net
operating loss which may be used as an offset against short-term gains for tax
purposes totaling $1,414,654 has been reclassified from accumulated net
investment loss to accumulated net realized gain.
G. EXPENSE REDUCTIONS--During the six months ended September 30, 1999, the
Fund's custody fee was reduced by $657 as a result of credits earned on
overnight cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- --------------------------------------------------------------------
<S> <C>
First $500 million..................................... .75 of 1%
Next $500 million...................................... .70 of 1%
Over $1 billion........................................ .65 of 1%
</TABLE>
For the six months ended September 30, 1999, the Fund recognized expenses of
approximately $1,800, representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended September 30, 1999, the Fund recognized expenses of
approximately $39,100 representing Van Kampen's cost of providing accounting and
legal services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent of the Fund. For the six months ended September
30, 1999, the Fund recognized expenses of approximately $151,000. Transfer
agency fees are determined through negotiations with the Fund's Board of
Trustees and are based on competitive market benchmarks.
22
<PAGE> 124
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (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, 1999, Van Kampen owned 7,000 shares of Class A and 6,500
shares each of Classes B and C, respectively.
3. CAPITAL TRANSACTIONS
At September 30, 1999, capital aggregated $36,723,000, $44,680,623, and
$4,198,177 for Classes A, B, and C, respectively. For the six months ended
September 30, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................... 111,971 $ 2,673,077
Class B................................... 78,526 1,843,169
Class C................................... 6,053 130,321
-------- ------------
Total Sales................................. 196,550 $ 4,646,567
======== ============
Dividend Reinvestment:
Class A................................... 0 $ 0
Class B................................... 0 0
Class C................................... 0 0
-------- ------------
Total Dividend Reinvestment................. 0 $ 0
======== ============
Repurchases:
Class A................................... (314,687) $ (7,541,217)
Class B................................... (428,142) (10,069,528)
Class C................................... (31,399) (741,971)
-------- ------------
Total Repurchases........................... (774,228) $(18,352,716)
======== ============
</TABLE>
23
<PAGE> 125
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 1999, capital aggregated $41,591,140, $52,906,982, and
$4,809,827 for Classes A, B, and C, respectively. For the nine months ended
March 31, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 337,597 $ 7,019,197
Class B.................................. 269,887 5,504,113
Class C.................................. 19,753 409,889
---------- ------------
Total Sales................................ 627,237 $ 12,933,199
========== ============
Dividend Reinvestment:
Class A.................................. 71,540 $ 1,449,407
Class B.................................. 89,988 1,793,457
Class C.................................. 7,660 152,663
---------- ------------
Total Dividend Reinvestment................ 169,188 $ 3,395,527
========== ============
Repurchases:
Class A.................................. (593,731) $(12,335,516)
Class B.................................. (616,839) (12,488,158)
Class C.................................. (102,252) (2,126,510)
---------- ------------
Total Repurchases.......................... (1,312,822) $(26,950,184)
========== ============
</TABLE>
24
<PAGE> 126
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (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>
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>
25
<PAGE> 127
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended September 30, 1999, Van Kampen, as Distributor for
the Fund, received net commissions on sales of the Fund's Class A shares of
approximately $15,000 and CDSC on the redeemed shares of Classes B and C of
approximately $240,700. Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
For the six months ended September 30, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $189,640,181
and $214,612,625, 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, cash
or liquid 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 six months
ended September 30, 1999.
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").
26
<PAGE> 128
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
The Plans govern payments for the distribution of the Fund's shares, ongoing
shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the six months ended September 30, 1999, are payments retained by Van Kampen
of approximately $321,000.
27
<PAGE> 129
VAN KAMPEN GROWTH FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY, PH.D.
PAUL G. YOVOVICH
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
STEPHEN L. BOYD*
PETER W. HEGEL*
MICHAEL H. SANTO*
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 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
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., 1999 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data.
28
<PAGE> 130
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<PAGE> 131
VAN KAMPEN
PROSPECTOR FUND
Semiannual Report
September 30, 1999
Van Kampen Funds
TABLE OF CONTENTS
Letter to Shareholders........................................... 1
Portfolio Management Review...................................... 2
Portfolio of Investments......................................... 5
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
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 132
LETTER TO SHAREHOLDERS
October 20, 1999
Dear Shareholder, With the volatility that we've experienced recently
in many financial markets, some investors have sold securities because of
uncertainty about where the markets were going, only to be left rethinking
whether they made the right decision. We've witnessed this kind of market
activity numerous times over the past several years, sparked by concerns such as
the impact of the Asian economic crisis, high stock valuations, or, most
recently, the stability of many high-flying technology companies. While these
fears eventually subsided, investors who may have sold during this period were
unable to reap the benefits of the subsequent rally. That's partly because most
of the recent big gains happened in relatively short periods of time. This kind
of volatility--and the danger of making short-term decisions--highlights the
importance of investing for the long term, in accordance with your individual
financial objectives.
Although the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how
your portfolio is structured to respond to these events, we encourage you to
contact your financial advisor. Your advisor can talk with you about sustaining
a long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
/s/ Richard F. Powers, III /s/ Dennis J. McDonnell
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
1
<PAGE> 133
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN PROSPECTOR FUND
We recently spoke to representatives of the advisor of the Van Kampen Prospector
Fund about the key events and economic forces that shaped the markets during the
past six months. The managers include B. Robert Baker Jr., senior portfolio
manager, who has managed the Fund since 1995 and worked in the investment
industry since 1979. He is joined by Jason Leder and Edie Terreson, portfolio
managers, and Stephen L. Boyd, chief investment officer for equity investments.
The following excerpts reflect their views on the Fund's performance during the
six months ended September 30, 1999.
Q COULD YOU DESCRIBE THE MARKET ENVIRONMENT IN WHICH THE FUND OPERATED DURING
THE REPORTING PERIOD?
A As has been its trademark recently, the stock market was volatile during the
past two quarters. Early in the reporting period, the Dow Jones Industrial
Average continued its upward trend, passing the 11,000 milestone in early May.
Soon after, the market reversed course, as investors anticipated an increase in
interest rates; this placed downward pressure on the market. To attempt to
moderate economic growth, the Fed did increase rates twice during the reporting
period. Following the first increase, the stock market rose slightly because the
rate hike was widely expected. The market response to the second rate increase
was less favorable. The Dow reached a record high the following day but went on
to lose nearly 9 percent by the end of the reporting period. During the past six
months, with the exception of a period in April and May, value stocks continued
their underperformance relative to growth stocks.
Q IN LIGHT OF THIS ENVIRONMENT, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND, AND
HOW DID IT AFFECT THE FUND'S PERFORMANCE?
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 whose
stock prices are lower than we believe they should be. Generally, these are
firms that are out of favor in the marketplace. Then, we apply basic fundamental
analysis to determine whether we believe the businesses are sound and have the
potential to reach fair value. When we find a company that is undervalued and
that we believe is fundamentally solid, we consider adding it to the portfolio.
During the reporting period, the Fund's value-oriented strategy led to
relatively poor performance compared to the broader market, which, as we
mentioned, continued to favor growth investments.
Q WHAT AREAS OF THE MARKET WERE ESPECIALLY ATTRACTIVE TO YOU?
A Electric utilities continued to play a large part in the portfolio. At the
start of the reporting period, we held a substantial position in this group,
because they represented one of the few undervalued areas of the market. Lately,
performance among electric utilities has suffered as
2
<PAGE> 134
investors have largely ignored slower-growth stocks in an environment of rising
interest rates. Consequently, our overweight position in electric utilities has
hindered the Fund's performance. The fundamentals of this sector remain sound
and valuations are attractive, so we have maintained our exposure. In addition
to electric utilities, we've also been adding to our holdings in the financial
industry--especially the banking sector, which we feel offers a number of
attractively priced companies due to recent poor performance.
Q WHAT STOCKS OR SECTORS HAD THE GREATEST POSITIVE EFFECT ON THE FUND'S
PERFORMANCE?
A As a group, technology stocks have been the best-performing area of the
market; consequently, several of the Fund's technology holdings were the
strongest contributors to overall return. Because these technology stocks have
performed very well in recent months, they have acquired high price/earnings
ratios. Due to their relatively high valuations, we have already cut back on our
holdings in this area and will be quick to sell more if these companies'
fundamentals change.
Check Point Software, which makes software that protects corporate
computer networks from unauthorized access, had the greatest positive effect on
the Fund's performance. Other technology stocks that most benefited the Fund
during the reporting period included the following:
o BMC Software, which develops software tools for corporate networked
computers;
o Cognex, which makes hardware and software that replaces human vision in
manufacturing processes; and
o American Power Conversion, a producer of uninterruptible power supply (UPS)
devices, surge protectors, and related items.
Several stocks in the oil services area--namely Rowan Companies and
ENSCO International--also performed very well during the reporting period,
enhancing the Fund's return. Companies in this industry, which had been
extremely depressed at the end of last year and early this year, have benefited
from an increase in oil prices. As with the technology stocks we mentioned
earlier, we no longer consider these companies to be inexpensive.
Of course, not all the stocks in the Fund performed as well, nor is
there any guarantee that these stocks will perform as well in the future.
Q DID ANY AREAS OF THE MARKET HURT THE FUND?
A Waste Management, which provides trash collection and disposal services, was a
big disappointment during the reporting period, as the company suffered some
widely publicized management problems that caused the stock to plummet. In
response to these conditions, we sold our position in the stock, but not in time
to escape damage to the Fund's return.
Several health-care companies were also problematic investments for the
Fund. Both HealthSouth and Tenet Healthcare performed poorly, due in part to
investor concern that cuts in Medicare reimbursement levels would hurt the
earnings of companies in the health-care industry. HealthSouth, like Waste
Management, also was hurt by management problems.
Other companies that detracted from the Fund's return included the
following:
o upscale retailer Saks, which announced earnings that were below analysts'
expectations;
3
<PAGE> 135
o Washington Mutual, which, along with many stocks in the financial services
industry, suffered in response to concerns of rising interest rates; and
o Pepsi Bottling Company, which, despite its attractive fundamentals, has
recently performed very poorly, perhaps because of the similarly poor
performance of PepsiCo. We think Pepsi Bottling is attractively priced,
however, and we believe that this stock could turn around.
Q HOW DID THE FUND PERFORM?
A The Fund had a six-month total return of 5.76 percent (Class A shares at net
asset value) as of September 30, 1999. In addition, the Fund generated total
returns of 14.57 percent, 21.28 percent, and 21.79 percent for 12 months, three
years, and the life of the Fund respectively (Class A shares at maximum sales
charge). Past performance does not guarantee future results.
By comparison, the Standard & Poor's 500 Index returned 0.37 percent,
and the Russell Mid Cap Value Index, which more closely resembles the Fund,
returned -0.64 percent for the six-month period. The S&P 500 Index is an
unmanaged broad-based index that reflects the general performance of the stock
market, and the unmanaged Russell Mid Cap Value Index measures the performance
of mid-cap companies with lower price-to-book ratios and lower forecasted growth
values. (In past reports, we included references to the Lipper Growth and Income
Fund Index as a more narrowly defined index than the S&P 500. We believe that
the Russell Mid Cap Value Index provides a more accurate comparison for the
Fund.) 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. It is not possible to
invest directly in an index.
Q WHAT DO YOU SEE AHEAD FOR THE FUND?
A Value stocks are currently very attractively priced relative to the broader
market, which we believe is highly valued. If market sentiment were to shift
away from growth investing, value-oriented funds such as the Prospector Fund may
outperform as investors begin to seek the market's less expensive stocks.
/s/ B. Robert Baker, Jr. /s/ Jason Leder
B. Robert Baker, Jr. Jason Leder
Senior Portfolio Manager Portfolio Manager
/s/ Edie Terreson /s/ Stephen L. Boyd
Edie Terreson Stephen L. Boyd
Portfolio Manager Chief Investment Officer
Equity Investments
4
<PAGE> 136
VAN KAMPEN PROSPECTOR FUND
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
DESCRIPTION SHARES MARKET VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS 99.8%
CONSUMER DISTRIBUTION 3.8%
Consolidated Stores Corp. (a) 1,200 $26,475
Federated Department Stores, Inc. (a) 400 17,475
Payless ShoeSource, Inc. (a) 500 25,250
Saks, Inc. (a) 830 12,606
------------
81,806
------------
CONSUMER NON-DURABLES 8.5%
Dial Corp. 660 16,830
Kimberly-Clark Corp. 800 42,000
Pepsi Bottling Group, Inc. 3,400 58,013
Philip Morris Cos., Inc. 1,890 64,614
------------
181,457
------------
CONSUMER SERVICES 1.0%
Gartner Group, Inc., Class A (a) 1,300 20,719
------------
ENERGY 8.5%
BP Amoco PLC - ADR (United Kingdom) 185 20,500
Chevron Corp. 290 25,738
Conoco, Inc., Class A 600 16,650
Diamond Offshore Drilling, Inc. 900 30,037
ENSCO International, Inc. 900 16,256
EOG Resources, Inc. 1,300 27,625
Ultramar Diamond Shamrock Corp. 900 22,950
Unocal Corp. 600 22,238
------------
181,994
------------
FINANCE 17.1%
Aetna, Inc. 200 9,850
AMBAC Financial Group, Inc. 1,030 48,796
Aon Corp. 600 17,738
Bank One Corp. 600 20,887
BankAmerica Corp. 400 22,275
5
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 137
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
DESCRIPTION SHARES MARKET VALUE
- --------------------------------------------------------------------------------
FINANCE (CONTINUED)
Bear Stearns Cos., Inc. 430 $16,528
Chubb Corp. 400 19,925
LandAmerica Financial Group, Inc. 1,070 21,132
Providian Financial Corp. 900 71,269
Torchmark Corp. 800 20,700
U.S. Bancorp 900 27,169
Washington Mutual, Inc. 1,720 50,310
Wells Fargo Co. 500 19,813
------------
366,392
------------
HEALTHCARE 9.5%
American Home Products Corp. 330 13,695
Columbia / HCA Healthcare Corp. 800 16,950
Rhone-Poulenc, SA, Class A - ADR (France)(a) 1,240 63,550
Tenet Healthcare Corp. (a) 4,600 80,787
United HealthCare Corp. 600 29,213
------------
204,195
------------
Producer Manufacturing 5.3%
American Power Conversion Corp. (a) 2,100 39,900
Cognex Corp. (a) 1,015 30,640
Republic Services, Inc., Class A (a) 4,000 43,500
------------
114,040
------------
RAW MATERIALS/PROCESSING INDUSTRIES 13.4%
Barrick Gold Corp. 700 15,225
Bethlehem Steel Corp. (a) 7,300 53,837
Boise Cascade Corp. 655 23,866
Champion International Corp. 400 20,550
Freeport-McMoRan Copper & Gold, Inc., Class B (a) 1,340 20,854
Homestake Mining Co. 1,040 9,555
Imperial Chemical Industries PLC - ADR (United Kingdom) 500 21,594
Louisiana-Pacific Corp. 1,160 18,125
Newmont Mining Corp. 1,000 25,875
Placer Dome, Inc. 1,000 14,875
Smurfit-Stone Container Corp. (a) 1,081 23,377
Temple-Inland, Inc. 300 18,150
USX - U.S. Steel, Inc. 800 20,600
------------
286,483
------------
6
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 138
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
DESCRIPTION SHARES MARKET VALUE
Technology 12.2%
BMC Software, Inc. (a) 700 $ 50,094
Check Point Software Technologies Ltd. (a) 1,500 126,656
ECI Telecommunications Ltd. 300 7,406
Etec Systems, Inc. (a) 800 30,100
SunGard Data Systems, Inc. (a) 1,830 48,152
------------
262,408
------------
UTILITIES 20.5%
Central & South West Corp. 800 16,900
Constellation Energy Group 800 22,500
DTE Energy Co. 1,000 36,125
FirstEnergy Corp. 600 15,300
IDACORP, Inc. 700 21,088
Illinova Corp. 1,700 47,706
New Century Energies, Inc. 1,500 50,156
Northern States Power Co. 700 15,094
NSTAR 1,107 42,896
OGE Energy Corp. 1,400 31,150
Pinnacle West Capital Corp. 300 10,913
Public Service Co. of New Mexico 1,030 18,798
Reliant Energy, Inc. 1,800 48,712
Texas Utilities Co. 1,070 39,924
Unicom Corp. 600 22,162
------------
439,424
------------
TOTAL INVESTMENTS 99.8%
(Cost $2,014,164) 2,138,918
OTHER ASSETS IN EXCESS OF LIABILITIES 0.2% 3,592
------------
NET ASSETS 100.0% $2,142,510
============
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR - American Depositary Receipt
7
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 139
VAN KAMPEN PROSPECTOR FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999 (UNAUDITED)
ASSETS:
Total Investments (Cost $2,014,164) $ 2,138,918
Cash 80,320
Receivables:
Expense Reimbursement from Adviser 11,492
Investments Sold 8,653
Dividends 3,974
Other 1,166
------------
Total Assets 2,244,523
------------
LIABILITIES:
Payables:
Distributor and Affiliates 16,793
Investments Purchased 13,655
Reports to Shareholders 11,336
Audit 8,256
Trustees' Deferred Compensation and Retirement 44,905
Accrued Expenses 7,068
------------
Total Liabilities 102,013
------------
NET ASSETS $ 2,142,510
============
NET ASSETS CONSIST OF:
Capital (Par value $.01 per share with
an unlimited number of shares authorized) $ 1,774,971
Accumulated Net Realized Gain 264,576
Net Unrealized Appreciation 124,754
Accumulated Distributions in
Excess of Net Investment Income (21,791)
------------
NET ASSETS $ 2,142,510
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $1,874,004 and 127,413 shares of beneficial
interest issued and outstanding) $ 14.71
Maximum sales charge (5.75%* of offering price) 0.90
------------
Maximum offering price to public $ 15.61
============
Class B Shares:
Net asset value and offering price per share
(Based on net assets of $134,253
and 9,128 shares of beneficial interest
issued and outstanding) $ 14.71
============
Class C Shares:
Net asset value and offering price per share
(Based on net assets of $134,253
and 9,128 shares of beneficial interest
issued and outstanding) $ 14.71
============
* On sales of $50,000 or more, the sales charge will be reduced.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 140
VAN KAMPEN PROSPECTOR FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
INVESTMENT INCOME:
Dividends $ 22,926
------------
EXPENSES:
Accounting 20,279
Audit 17,222
Amortization of Organizational Costs 14,059
Custody 9,897
Trustees' Fees and Related Expenses 9,804
Shareholder Reports 9,026
Investment Advisory Fee 7,986
Shareholder Services 7,842
Legal 5,927
Other 2,281
------------
Total Expenses 104,323
Expense Reduction ($7,986 related to
Advisory Fees and $79,992 related to
Other Expenses) 87,978
Less Credits Earned on Cash Balances 2,062
------------
Net Expenses 14,283
------------
NET INVESTMENT INCOME $ 8,643
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 186,632
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period 203,278
End of the Period 124,754
------------
Net Unrealized Depreciation During the Period (78,524)
------------
NET REALIZED AND UNREALIZED GAIN $ 108,108
============
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 116,751
============
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 141
VAN KAMPEN PROSPECTOR FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999, THE NINE MONTHS ENDED MARCH 31,1999
AND THE YEAR ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Nine Months Ended Year Ended
September 30, 1999 March 31, 1999 June 30, 1998
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income $ 8,643 $ 9,969 $ 12,454
Net Realized Gain 186,632 180,405 373,394
Net Unrealized Appreciation/Depreciation During the Period (78,524) (15,653) 60,141
--------------- --------------- ----------------
Change in Net Assets from Operations 116,751 174,721 445,989
--------------- --------------- ----------------
Distributions from Net Investment Income -0- (9,969) (13,056)
Distributions in Excess of Net Investment Income -0- (14,367) (16,067)
--------------- --------------- ----------------
Distributions from and in Excess of Net Investment Income * -0- (24,336) (29,123)
Distributions from Net Realized Gain * -0- (383,744) (133,630)
--------------- --------------- ----------------
Total Distributions -0- (408,080) (162,753)
--------------- --------------- ----------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES 116,751 (233,359) 283,236
--------------- --------------- ----------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold -0- -0- -0-
Net Asset Value of Shares Issued Through Dividend Reinvestment -0- 408,080 162,753
--------------- --------------- ----------------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS -0- 408,080 162,753
--------------- --------------- ----------------
TOTAL INCREASE IN NET ASSETS 116,751 174,721 445,989
NET ASSETS:
Beginning of the Period 2,025,759 1,851,038 1,405,049
--------------- --------------- ----------------
End of the Period (Including accumulated distributions in
excess of income of $21,791, $30,434 and
$16,067 respectively) $ 2,142,510 $ 2,025,759 $ 1,851,038
=============== =============== ================
*Distributions by Class
=========================================================================================================================
Distributions from and in excess of Net Investment Income:
Class A Shares $ -0- $ (21,286) $ (25,473)
Class B Shares -0- (1,525) (1,825)
Class C Shares -0- (1,525) (1,825)
--------------- --------------- ----------------
$ -0- $ (24,336) $ (29,123)
=============== =============== ================
Distributions from Net Realized Gain:
Class A Shares $ -0- $ (335,652) $ (116,882)
Class B Shares -0- (24,046) (8,374)
Class C Shares -0- (24,046) (8,374)
--------------- --------------- ----------------
$ -0- $ (383,744) $ (133,630)
=============== =============== ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 142
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
YEAR ENDED JUNE 30, OF INVESTMENT
SIX MONTHS ENDED NINE MONTHS ENDED ------------------------ OPERATIONS) TO
CLASS A SHARES SEPTEMBER 30, 1999 MARCH 31, 1999 1998 1997 (A) JUNE 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.907 $ 15.974 $ 13.473 $ 11.285 $ 10.000
---------------- ---------------- ----------- --------- ---------------
Net Investment Income 0.059 0.140 0.131 0.115 0.072
Net Realized and Unrealized Gain 0.742 1.315 3.924 2.996 1.239
---------------- ---------------- ----------- --------- ---------------
Total from Investment Operations 0.801 1.455 4.055 3.111 1.311
---------------- ---------------- ----------- --------- ---------------
Less:
Distributions from and in Excess
of Net Investment Income - 0.210 0.275 0.143 0.026
Distributions from Net Realized Gain - 3.312 1.279 0.780 0.000
---------------- ---------------- ----------- --------- ---------------
Total Distributions - 3.522 1.554 0.923 0.026
---------------- ---------------- ----------- --------- ---------------
Net Asset Value, End of the Period $ 14.708 $ 13.907 $ 15.974 $ 13.473 $ 11.285
================ ================ =========== ========= ===============
Total Return * (b) 5.76%** 9.49%** 31.65% 29.11% 13.10%**
Net Assets at End of the Period (In thousands) $1,874.0 $ 1,771.9 $ 1,619.1 $ 1,229.0 $ 78.9
Ratio of Expenses to Average Net Assets* (c) 1.43% 1.41% 1.28% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets* 0.76% 0.70% 0.74% 1.19% 1.34%
Portfolio Turnover 43%** 103%** 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) 9.13% 8.57% 7.40% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets (6.94%) (6.47%) (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 do not reflect credits earned on
overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .18% for the six months ended
September 30, 1999, .16% for the nine months ended March 31, 1999 and .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
11
<PAGE> 143
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
YEAR ENDED JUNE 30, OF INVESTMENT
SIX MONTHS ENDED NINE MONTHS ENDED ------------------------ OPERATIONS) TO
CLASS B SHARES SEPTEMBER 30, 1999 MARCH 31, 1999 1998 1997 (A) JUNE 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.906 $ 15.973 $ 13.473 $ 11.285 $ 10.000
---------------- --------------- --------- ---------- ---------------
Net Investment Income 0.059 0.140 0.131 0.113 0.072
Net Realized and Unrealized Gain 0.743 1.315 3.923 3.020 1.239
---------------- --------------- --------- ---------- ---------------
Total from Investment Operations 0.802 1.455 4.054 3.133 1.311
---------------- --------------- --------- ---------- ---------------
Less:
Distributions from and in
Excess of Net Investment Income - 0.210 0.275 0.165 0.026
Distributions from Net Realized Gain - 3.312 1.279 0.780 0.000
---------------- ---------------- --------- ---------- ---------------
Total Distributions - 3.522 1.554 0.945 0.026
---------------- ---------------- ---------- --------- ---------------
Net Asset Value, End of the Period $ 14.708 $ 13.906 $ 15.973 $ 13.473 $ 11.285
================ ============== ========== ========= ===============
Total Return * (b) 5.77%** 9.49%** 31.65% 29.11% 13.19%**
Net Assets at End of the Period (In thousands) $134.3 $ 126.9 $ 116.0 $ 88.0 $ 73.4
Ratio of Expenses to Average Net Assets* (c) 1.43% 1.41% 1.28% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets* 0.76% 0.69% 0.74% 0.86% 1.34%
Portfolio Turnover 43%** 103%** 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) 9.13% 8.57% 7.40% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets (6.94%) (6.47%) (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 do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .18% for the six months ended
September 30, 1999, .16% for the nine months ended March 31, 1999 and .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> 144
VAN KAMPEN PROSPECTOR FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
YEAR ENDED JUNE 30, OF INVESTMENT
SIX MONTHS ENDED NINE MONTHS ENDED ------------------------ OPERATIONS) TO
CLASS C SHARES SEPTEMBER 30, 1999 MARCH 31, 1999 1998 1997 (A) JUNE 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.906 $ 15.973 $ 13.473 $ 11.285 $ 10.000
---------------- --------------- ----------- ---------- ---------------
Net Investment Income 0.059 0.140 0.131 0.113 0.072
Net Realized and Unrealized Gain 0.743 1.315 3.923 3.020 1.239
---------------- --------------- ----------- ---------- ---------------
Total from Investment Operations 0.802 1.455 4.054 3.133 1.311
---------------- --------------- ----------- ---------- ---------------
Less:
Distributions from and in Excess
of Net Investment Income - 0.210 0.275 0.165 0.026
Distributions from Net Realized Gain - 3.312 1.279 0.780 0.000
---------------- --------------- ----------- ---------- ---------------
Total Distributions - 3.522 1.554 0.945 0.026
---------------- --------------- ----------- ---------- ---------------
Net Asset Value, End of the Period $ 14.708 $ 13.906 $ 15.973 $ 13.473 $ 11.285
================ =============== =========== ========== ===============
Total Return * (b) 5.77%** 9.49%** 31.65% 29.11% 13.19%**
Net Assets at End of the Period (In thousands) $134.3 $ 126.9 $ 116.0 $ 88.0 $ 73.4
Ratio of Expenses to Average Net Assets* (c) 1.43% 1.41% 1.28% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets* 0.76% 0.69% 0.74% 0.86% 1.34%
Portfolio Turnover 43%** 103%** 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) 9.13% 8.57% 7.40% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets (6.94%) (6.47%) (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 do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .18% for the six months ended
September 30, 1999, .16% for the nine months ended March 31, 1999 and .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> 145
VAN KAMPEN PROSPECTOR FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (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.
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 the mean of the bid and asked prices 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.
Income and expenses of the Fund are allocated on a pro rata basis to each class
of shares, except for distribution and service fees and transfer agency costs
which are unique to each class of shares.
D. 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 $40,000. These costs were originally
scheduled to be amortized on a straight-line basis over the 60 month period
ending December 26, 2000. Pursuant to AICPA Statement of Position 98-5, any
unamortized organizational costs were expensed on April 1, 1999, the first
business day of the 2000 fiscal year.
E. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
<PAGE> 146
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 the deferral of losses relating to wash
sale transactions.
At September 30, 1999, for federal income tax purposes, cost of
long-term investments is $2,002,491; the aggregate gross unrealized appreciation
is $306,402 and the aggregate gross unrealized depreciation is $189,975,
resulting in net unrealized appreciation on long-term investments of $116,427.
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.
G. EXPENSE REDUCTIONS - During the six months ended September 30, 1999, the
Fund's custody fee was reduced by $2,062 as a result of credits earned on
overnight cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under
the terms of the Fund's Investment Advisory Agreement, the Adviser will provide
investment advice and facilities to the Fund for an annual fee payable monthly
as follows:
Average Net Assets % Per Annum
- ------------------ -----------
First $500 million .70%
Next $500 million .65%
Over $1 billion .60%
For the six months ended September 30, 1999, the Adviser voluntarily
capped the expenses of the Fund at 1.25% of average net assets, prior to any
credits earned on overnight cash balances. As such, the Adviser waived $7,986 of
its investment advisory fees and assumed $79,992 of the Fund's other expenses.
This waiver is voluntary in nature and can be discontinued at the Adviser's
discretion.
For the six months ended September 30, 1999, the Fund recognized
expenses of approximately $100 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 six months ended September 30, 1999, the Fund
14
<PAGE> 147
VAN KAMPEN PROSPECTOR FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
incurred expenses of approximately $26,100 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 six months ended
September 30, 1999, the Fund recognized expenses of approximately $7,500.
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, 1999, Van Kampen owned all shares of Classes A, B and
C, respectively.
3. CAPITAL TRANSACTIONS
At September 30, 1999 capital aggregated $1,572,545, $101,213 and $101,213 for
classes A, B, and C, respectively. For the six months ended September 30, 1999,
there were no capital transactions.
At March 31, 1999 capital aggregated $1,572,545, $101,213 and $101,213
for classes A, B, and C, respectively. For the nine months ended March 31, 1999,
transactions were as follows:
Shares Value
------------- -----------------
Dividend Reinvestment:
Class A 26,054 $ 356,936
Class B 1,866 25,572
Class C 1,866 25,572
------------- -----------------
Total Dividend Reinvestments 29,786 $ 408,080
------------- -----------------
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:
Shares Value
------------- -----------------
Dividend Reinvestment:
Class A 10,142 $ 142,357
Class B 727 10,198
Class C 727 10,198
------------- -----------------
Total Dividend Reinvestments 11,596 $ 162,753
------------- -----------------
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 eighth 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.
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
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $990,445 and $948,712, respectively
5. DISTRIBUTION AND SERVICE PLANS
The Fund and its Shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
The Fund's net assets are subject to annual fees under the Plans of up
to .25% for Class A net assets and 1.00% each for Class B and Class C net
assets. No fees related to the Plans have been accrued by the Fund as the Fund
is currently owned solely by affiliated persons.
15
<PAGE> 148
VAN KAMPEN PROSPECTOR FUND
BOARD OF TRUSTEES INVESTMENT ADVISER
J. MILES BRANAGAN VAN KAMPEN INVESTMENT ADVISORY CORP.
JERRY D. CHOATE 1 Parkview Plaza
RICHARD M. DEMARTINI* P.O. Box 5555
LINDA HUTTON HEAGY Oakbrook Terrace, Illinois 60181 - 5555
R. CRAIG KENNEDY
JACK E. NELSON DISTRIBUTOR
DON G. POWELL*
PHILLIP B. ROONEY VAN KAMPEN FUNDS INC.
FERNANDO SISTO 1 Parkview Plaza
WAYNE W. WHALEN* - Chairman P.O. Box 5555
SUZANNE H. WOOLSEY, PH.D. Oakbrook Terrace, Illinois 60181 - 5555
PAUL G. YOVOVICH
SHAREHOLDER SERVICING AGENT
OFFICERS VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 218256
RICHARD F. POWERS, III* Kansas City, Missouri 64121-8256
President
CUSTODIAN
DENNIS J. MCDONNELL*
Executive Vice President and
Chief Investment Officer STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
A. THOMAS SMITH III* P.O. Box 1713
Vice President and Secretary Boston, Massachusetts 02105
JOHN L. SULLIVAN* LEGAL COUNSEL
Vice President, Treasurer and
Chief Financial Officer
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
(Illinois)
CURTIS W. MORELL* 333 West Wacker Drive
Vice President and Chief Chicago, Illinois 60606
Accounting Officer
TANYA M. LODEN* INDEPENDENT ACCOUNTANTS
Controller
KPMG LLP
STEPHEN L. BOYD* 303 East Wacker Drive
PETER W. HEGEL* Chicago, Illinois 60601
MICHAEL H. SANTO*
EDWARD C. WOOD, III*
Vice Presidents
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1999 All Rights Reserved.
<PAGE> 149
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> 150
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<PAGE> 151
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 18
Statement of Operations.......................... 19
Statement of Changes in Net Assets............... 20
Financial Highlights............................. 21
Notes to Financial Statements.................... 24
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 152
LETTER TO SHAREHOLDERS
October 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the Asian crisis appears to be behind us, new concerns are always
emerging. In the coming months, we'll likely hear more about how the year 2000
computer problem may affect the markets or that we're overdue for a correction.
While the markets could undoubtedly suffer as a result of these or any number of
other events, we encourage you to focus on your long-term investment goals.
Although nothing is certain, history has shown us that over time, the markets
tend to recover--and most investors want to be positioned to take advantage of
any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
1
<PAGE> 153
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree, keeping the economy growing at a
healthy pace. High levels of consumer confidence fueled this heavy retail
purchasing activity, pushing the personal savings rate down to a record low as
spending rates outpaced income growth. Although we experienced a slowdown during
the second quarter of 1999, economic growth accelerated toward the end of the
reporting period. The growth rate of the nation's gross domestic product (GDP)
dipped to 1.6 percent for the second quarter of 1999, but climbed back up to 4.8
percent in the third quarter.
EMPLOYMENT SITUATION
The strong job market helped to support the health of the economy. During
the reporting period, the unemployment rate reached its lowest level in almost
30 years, and wages continued to climb. The wage pressures were balanced
somewhat by productivity gains, but they ultimately pushed the cost of labor
higher, as evidenced by the sharp jump in the Employment Cost Index in the
second quarter of 1999.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index (CPI) report. The Federal Reserve remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
two of its interest rate cuts from the fall of 1998, raising rates in June and
August 1999 to keep the economy from overheating.
INTEREST RATES AND INFLATION
September 30, 1997, through September 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Sep 1997 5.5000 2.2000
6.2500 2.2000
5.7500 2.1000
Dec 1997 5.6875 1.8000
6.5000 1.7000
5.5625 1.6000
Mar 1998 5.6250 1.4000
6.1250 1.4000
5.6250 1.4000
Jun 1998 5.6875 1.7000
6.0000 1.7000
5.5625 1.7000
Sep 1998 5.9375 1.6000
5.7500 1.5000
5.2500 1.5000
Dec 1998 4.8750 1.5000
4.0000 1.6000
4.8125 1.7000
Mar 1999 4.8750 1.6000
5.1250 1.7000
4.9375 2.3000
Jun 1999 4.5000 2.1000
4.0000 2.0000
4.7500 2.1000
Sep 1999 5.4375 2.3000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 154
PERFORMANCE RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 1999
VAN KAMPEN SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Since inception total return based on
NAV(1)................................... (3.40%) (3.70%) (3.70%)
Since inception total return(2).......... (8.95%) (8.51%) (4.66%)
Commencement date........................ 06/21/99 06/21/99 06/21/99
</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 Comparative Performance section of the current prospectus. An investment
should be made with an understanding of the risks that an investment in equity
securities entails. The Fund invests principally in common stocks, but can
invest in preferred and convertible stock as well. Investing in such companies
involves risks not ordinarily associated with investments in larger, more
established 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. Additionally, equity
securities of small cap companies may be less liquid than larger, more
established companies, or the stock market in general. During an overall market
decline, stock prices of small-sized companies often fluctuate more and fall
more than prices of larger company stocks. Finally, the Fund may invest up to
10% of its total assets in the securities of foreign issuers. This may magnify
volatility due to changes in foreign exchange rates, the political and economic
uncertainties of foreign countries, and the potential lack of liquidity,
government supervision, and regulation. 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.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 155
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN SMALL CAP VALUE FUND
We recently spoke to the portfolio managers of the Van Kampen Small Cap Value
Fund about the key events and economic forces that shaped the markets since the
Fund's inception on June 21, 1999. The managers include John Cunniff, senior
portfolio manager, who has managed the Fund since inception and whose investment
experience dates from 1992. He is joined by Thomas Copper, portfolio manager,
and Stephen L. Boyd, chief investment officer for equity investments. The
following excerpts reflect their views on the Fund's performance between its
inception and September 30, 1999.
Q WHAT WERE SOME OF THE MARKET FACTORS THAT AFFECTED THE FUND DURING THE
REPORTING PERIOD?
A Fears of inflation and higher interest rates helped limit the overall
stock market's growth during the brief reporting period. On August 24, as
expected, the Federal Reserve Board raised short-term interest rates for
the second time in three months, reversing two of the three rate decreases from
late 1998. Overall, small-cap value stocks lost ground to large-cap stocks
during the three-month period, as indicated by the Russell 2000 Value Index's
return of -6.57 percent and the Standard & Poor's 500 Index's return of -4.29
percent.
Q WHAT IS YOUR INVESTMENT STRATEGY IN SELECTING STOCKS FOR THE FUND, AND
HOW, IF AT ALL, DID RECENT MARKET CONDITIONS AFFECT YOUR MANAGEMENT?
A Our investment strategy is commonly referred to as "value with a
catalyst." We search for undervalued small-cap companies by using common
valuation measures--for example, a lower-than-average price/earnings
ratio. For each stock we select, we search for a spark (catalyst)--new
management, a new product, or new industry regulations, among others--that may
ignite a company's growth prospects and reveal the potentially hidden value
represented in the current stock price. We also look for rising earnings
expectations, which we believe can indicate that a catalyst is present. Finally,
we avoid investing in companies that we believe practice aggressive accounting
tactics--for example, recognizing revenue in advance or delaying current-year
expenses to later years. If a stock meets our criteria, we then consider it for
investment. Our stock-selection process is "bottom up," the Fund is diversified
across multiple industries, and we normally remain fully invested in most market
conditions.
Because we believe in our management strategy, we maintained it even in a
market environment that was generally unfavorable to small-cap value investing.
During the reporting period, the Fund, like many other value-oriented funds,
performed relatively poorly in what was still a growth-dominated stock market.
4
<PAGE> 156
Q WHICH STOCKS IN THE FUND HAD AN ESPECIALLY POSITIVE IMPACT ON PERFORMANCE
DURING THE REPORTING PERIOD?
A During the reporting period, technology stocks--especially semiconductor
companies--were among the market's best performers. As a result, the
Fund's performance was enhanced by two businesses whose profits are tied to the
semiconductor industry.
Lam Research, which makes capital equipment for semiconductor manufacturers,
reported earnings in August that far exceeded analysts' expectations. This, in
conjunction with the industry's positive fundamentals stemming from the
worldwide rise in semiconductor prices, helped propel Lam Research's stock
upward. Amkor Technology, a provider of semiconductor packaging and testing
services, has benefited from these same industry fundamentals.
Also benefiting the Fund's performance was TransMontaigne, a holding company
that provides petroleum-product services to the energy industry. On the last day
of the reporting period, the company announced a new CEO. This announcement was
favorably received, as the firm's stock price rose 16 percent on the news. Keep
in mind not all stocks performed as favorably, and there is no guarantee these
stocks will continue to perform.
Q HOW DID ACQUISITIONS AFFECT THE FUND'S PERFORMANCE?
A During the reporting period, several companies owned in the Fund were
acquired or announced pending acquisitions. In the latter case, most of
these companies were purchased at a premium to their stock price before
the announcements. Examples of stocks whose performance helped the Fund as a
result of acquisition included Lone Star Industries, Unitrode, National
Processing Industries, Sky Financial Group, Herbalife, and Guarantee Life
Insurance. For additional Fund portfolio highlights, please refer to page 8.
Q DID ANY STOCKS HURT THE FUND?
A The stocks that most hurt the Fund's performance during the reporting
period were Province Healthcare, Crossman Communities, and Bindley Western
Industries:
- Investors have been concerned about the financial health of companies that
provide long-term care, such as Province Healthcare, which acquires and
operates rural hospitals. These concerns largely center around the likely
impact of changes in Medicare reimbursement levels brought about by the
Balanced Budget Act of 1997.
- Home-building companies, such as Crossman Communities, have been hurt by
worries about how rising interest rates would affect consumer demand for
new homes.
- Bindley Western Industries, the nation's fifth-largest drug wholesaler,
has suffered due to what many investors believe to be company-specific
problems at competing firms McKesson and Bergen Brunswig. These companies
have recently struggled to integrate acquisitions, and this has cast a
cloud over the entire drug wholesaling industry. We believe, however, that
the fundamentals for Bindley Western remain solid.
5
<PAGE> 157
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A The Fund achieved a total return of -3.40 percent(1)for the slightly more
than three-month period ending September 30, 1999 (Class A shares at net
asset value). By comparison, the Russell 2000 Value Index, the Fund's
benchmark, returned -6.01 percent for the same period of time. Because we manage
the Fund from the bottom up, we attribute this relative outperformance to
successful stock selection. As we mentioned earlier, however, current market
conditions were not favorable for many small-cap value stocks, so the Fund's
performance lagged that of the broader market.
The Russell 2000 Value Index is an unmanaged broad-based index that measures
the performance of those Russell 2000 companies with lower price-to-book ratios
and lower forecasted growth values. Please refer to the chart and footnotes on
page 3 for additional Fund performance results. Past performance does not
guarantee future performance.
Q WHAT DO YOU SEE AHEAD FOR THE FUND IN THE UPCOMING SIX MONTHS?
A Both value and small-cap stocks are currently very attractively priced
relative to the broader market, which we believe is highly valued. If
market sentiment were to shift away from large-cap growth investments,
small-cap-value-oriented funds such as the Small Cap Value Fund may outperform
as investors begin to seek the market's less expensive stocks.
[SIG.]
John Cunniff
Senior Portfolio Manager
[SIG.]
Thomas Copper
Portfolio Manager
[SIG.]
Stephen L. Boyd
Chief Investment Officer
Equity Investments
6
<PAGE> 158
GLOSSARY OF TERMS
BOTTOM-UP INVESTING: A management style that emphasizes the analysis of
individual stocks, rather than economic and market cycles.
CLASS A SHARES: When Class A shares of a fund are purchased, the share price
includes the net asset value plus a one-time sales charge (or "load"). In
most cases, there is no redemption fee (contingent deferred sales charge).
EARNINGS ESTIMATES: A forecast for a company's net income during a given period.
Earnings estimates can come from the company's management as well as from
independent analysts.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a
year to establish monetary policy and monitor the economic pulse of the
United States.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
GROWTH INVESTING: An investment strategy that seeks to identify stocks that tend
to offer greater-than-average earnings growth. Growth stocks typically trade
at higher prices relative to their earnings than value stocks, due to their
higher expected earnings growth.
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
issued and outstanding stock.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from the total assets in its portfolio and dividing
this amount by the number of shares outstanding. The NAV does not include
any initial or contingent deferred sales charge.
P/E RATIO: The price-to-earnings ratio shows the "multiple" of earnings at which
a stock is selling. The P/E ratio is calculated by dividing a stock's
current price by its current earnings per share. A high multiple means that
investors are optimistic about future growth and have bid up the stock's
price.
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.
VALUE INVESTING: A strategy that seeks to identify stocks that are sound
investments but are temporarily out of favor in the marketplace. As a
result, the stocks trade at prices below the value that value investors
believe they are actually worth.
7
<PAGE> 159
PORTFOLIO HIGHLIGHTS
VAN KAMPEN SMALL CAP VALUE FUND
TOP TEN PORTFOLIO HOLDINGS AS OF SEPTEMBER 30, 1999*
<TABLE>
<S> <C>
US FREIGHTWAYS is one of the leading regional trucking
companies in the United States.............................. 0.8%
EG&G designs, manufactures, and markets optoelectronic,
mechanical, and electromechanical components and instruments
for manufacturers and end-user customers.................... 0.8%
TRANSMONTAIGNE gathers, transports, stores, and markets
refined petroleum products and crude oil in the
mid-continent and Rocky Mountain regions of the United
States and in Texas......................................... 0.8%
APRIA HEALTHCARE GROUP provides home-based health-care
services, including respiratory therapy, delivery of
respiratory medication, infusion therapy, medical equipment,
and related clinical services............................... 0.8%
TEKTRONIX is the leading maker of test and measurement
equipment and color Printers................................ 0.8%
TEXAS INDUSTRIES produces steel, cement, and concrete
products for the construction and manufacturing
industries.................................................. 0.7%
HELMERICH & PAYNE operates land and offshore platform
drilling rigs in the United States and overseas............. 0.7%
LAM RESEARCH designs, manufactures, markets, and services
semiconductor processing equipment used in the fabrication
of integrated circuits...................................... 0.7%
H.B. FULLER produces specialty chemical products that
include formulating, compounding, and marketing adhesives,
sealants, paints, and specialty waxes....................... 0.7%
ONEOK produces, gathers, stores, transports, distributes,
and markets natural gas and environmentally clean fuels and
products....................................................
</TABLE>
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------
<S> <C>
Finance 22.3
Technology 13.2
Raw Materials/Processing Industries 10.8
Utilities 10.0
Consumer Non-Durables 7.1
</TABLE>
* As a percentage of long-term investments
8
<PAGE> 160
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 95.3%
BUILDING & MATERIALS 3.7%
Astec Industries, Inc. (a)................................ 150 $ 3,619
Crossmann Communities, Inc. (a)........................... 250 4,078
D.R. Horton, Inc. ........................................ 700 9,056
Granite Construction, Inc. ............................... 350 9,122
NCI Building Systems, Inc. (a)............................ 100 1,656
Nortek, Inc. (a) ......................................... 250 8,531
Pulte Corp. .............................................. 500 10,875
Texas Industries, Inc. ................................... 350 12,950
US Home Corp. ............................................ 300 8,344
----------
68,231
----------
BUSINESS SERVICES 3.1%
ABM Industries, Inc. ..................................... 300 7,613
CDI Corp. (a)............................................. 300 8,194
John H. Harland Co. ...................................... 600 11,662
United Stationers, Inc. .................................. 450 9,591
URS Corp. (a)............................................. 400 9,800
Wallace Computer Services, Inc. .......................... 550 11,137
----------
57,997
----------
CAPITAL GOODS 3.6%
Applied Industrial Technologies, Inc. .................... 600 10,800
Boise Cascade Office Products Corp. (a)................... 600 6,525
Donaldson, Inc. .......................................... 300 6,956
Manitowoc, Inc. .......................................... 250 8,531
Metals USA, Inc. (a) ..................................... 450 4,585
Moog, Inc., Class A (a)................................... 200 5,775
Sauer, Inc. .............................................. 500 6,094
Standard Register Co. .................................... 200 4,700
Tecumseh Products Co., Class A............................ 50 2,506
Terex Corp. .............................................. 300 9,450
----------
65,922
----------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 161
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISTRIBUTION 3.2%
AnnTaylor Stores Corp. (a) ............................... 150 $ 6,131
Cato Corp., Class A....................................... 400 5,638
Footstar, Inc. (a) ....................................... 300 10,575
Furniture Brands International, Inc. (a) ................. 450 8,859
Group 1 Automotive, Inc. (a) ............................. 250 4,578
PEP Boys-Manny, Moe & Jack................................ 700 10,412
Spiegel, Inc., Class A (a)................................ 950 9,619
Systemax, Inc. (a) ....................................... 400 3,350
----------
59,162
----------
CONSUMER DURABLES 3.6%
Aaron Rents, Inc., Class B................................ 250 4,313
Arvin Industries, Inc. ................................... 350 10,828
Dupont Photomasks, Inc. (a) .............................. 100 4,606
Kimball International, Inc., Class B...................... 200 3,850
Smith A.O. Corp. ......................................... 400 12,100
Stoneridge, Inc. (a)...................................... 100 1,738
Toro Co. ................................................. 250 9,344
Tower Automotive, Inc. (a) ............................... 600 11,887
Woodward Governor Co. .................................... 300 7,481
----------
66,147
----------
CONSUMER NON-DURABLES 6.8%
Agribrands International, Inc. (a) ....................... 200 9,925
Corn Products International, Inc. ........................ 350 10,653
Fleming Cos., Inc. ....................................... 900 8,831
International Multifoods Corp. ........................... 400 9,108
Ivex Packaging Corp. (a) ................................. 800 8,000
Michael Foods, Inc. ...................................... 200 5,256
Mikasa, Inc. ............................................. 500 5,875
Movado Group, Inc. ....................................... 400 9,200
Performance Food Group Co. (a) ........................... 150 3,844
Pilgrims Pride Corp., Class A............................. 425 2,178
Quiksilver Resources, Inc. (a) ........................... 250 4,563
Riviana Foods, Inc. ...................................... 250 4,813
</TABLE>
See Notes to Financial Statements
10
<PAGE> 162
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER NON-DURABLES (CONTINUED)
Schweitzer Mauduit International, Inc. ................... 400 $ 5,175
Shorewood Packaging Corp. (a)............................. 550 7,459
Smithfield Foods, Inc. (a)................................ 350 9,362
Springs Industries, Inc. ................................. 200 6,788
Universal Corp. .......................................... 400 10,450
Zapata Corp. (a).......................................... 650 3,250
----------
124,730
----------
CONSUMER SERVICES 4.9%
Avis Rent A Car, Inc. (a)................................. 450 9,394
Aztar Corp. (a)........................................... 1,000 10,250
Dollar Thrifty Automotive Group. (a)...................... 550 11,378
Extended Stay America, Inc. (a)........................... 650 5,850
Gray Communications Systems, Inc. ........................ 200 3,450
Landry's Seafood Restaurants, Inc. (a).................... 1,100 8,800
Lone Star Steakhouse & Saloon............................. 1,050 8,072
Pulitzer, Inc. ........................................... 200 9,087
Ruby Tuesday, Inc. ....................................... 500 9,750
Station Casinos, Inc. (a)................................. 400 9,300
Westwood One, Inc. (a).................................... 100 4,513
----------
89,844
----------
ENERGY 5.3%
EEX Corp. ................................................ 150 441
Helmerich & Payne, Inc. .................................. 500 12,656
HS Resources, Inc. (a).................................... 500 8,197
Louis Dreyfus Natural Gas Corp. (a) ...................... 400 8,608
Parker Drilling Co. (a)................................... 2,000 8,875
Pioneer Natural Resources Co. ............................ 1,000 10,625
Plains Resources, Inc. (a)................................ 350 6,256
RPC, Inc. ................................................ 600 4,163
Seitel, Inc. ............................................. 800 7,800
Tesoro Petroleum Corp. (a)................................ 700 11,550
Tom Brown, Inc. (a)....................................... 400 5,900
</TABLE>
See Notes to Financial Statements
11
<PAGE> 163
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
TransMontaigne, Inc. (a).................................. 900 $ 13,500
----------
98,571
----------
FINANCE 21.3%
Advanta Corp., Class A.................................... 450 6,581
Affiliated Managers Group, Inc. (a)....................... 300 8,175
Alfa Corp. ............................................... 350 5,688
Amerus Life Holdings, Inc. ............................... 350 7,416
BancFirst Corp. .......................................... 150 4,725
BancWest Corp. ........................................... 150 6,094
Bank United Corp., Class A................................ 350 11,331
Blanch E W Holdings, Inc. ................................ 50 3,256
Capital Re Corp. ......................................... 350 3,500
Capstead Mortgage Corp. .................................. 2,000 8,000
Cathay Bancorp, Inc. ..................................... 300 10,706
CB Richard Ellis Services, Inc. (a)....................... 200 3,025
Chicago Title Corp. ...................................... 250 9,984
Commonwealth Bancorp, Inc. ............................... 450 7,678
Community Trust Bancorp, Inc. ............................ 400 8,675
Crown American Reality.................................... 750 4,828
Dain Rauscher Corp. ...................................... 200 9,800
Delphi Financial Group, Inc. ............................. 350 10,566
Dime Community Bancorp, Inc. (a).......................... 250 5,188
EastGroup Properties, Inc. ............................... 300 5,438
First American Financial Corp. ........................... 300 4,013
First Citizens Bancshares, Inc. .......................... 100 7,675
First Washington Realty Trust, Inc. ...................... 450 9,450
Foremost Corp. of America................................. 400 9,600
GBC Bancorp of California................................. 500 9,687
Glimcher Realty Trust..................................... 550 8,078
Great Lakes REIT, Inc. ................................... 350 5,272
Guarantee Life Companies, Inc. ........................... 300 9,169
Health Care REIT, Inc. ................................... 400 8,000
Irwin Financial Corp. .................................... 250 5,016
</TABLE>
See Notes to Financial Statements
12
<PAGE> 164
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
JP Realty, Inc. .......................................... 450 $ 7,706
Kansas City Life Insurance Co. ........................... 250 9,125
Lasalle Hotel Properties.................................. 550 7,116
Leucadia National Corp. .................................. 350 7,350
LNR Property Corp. ....................................... 500 10,187
Mail-Well, Inc. (a)....................................... 300 4,163
Medical Assurance, Inc. .................................. 400 10,025
Meristar Hospitality Corp. ............................... 600 9,150
National Health Investors, Inc. .......................... 250 4,109
Oceanfirst Financial Corp. ............................... 300 4,913
Omega Healthcare Investors, Inc. ......................... 400 8,400
Prentiss Properties Trust................................. 400 8,875
PS Business Parks, Inc. .................................. 400 10,400
Redwood Trust, Inc. ...................................... 300 3,881
Republic Bancorp, Inc., Class A........................... 300 2,981
RLI Corp. ................................................ 250 8,250
Silicon Valley Bancshares (a)............................. 400 9,650
Southwest Securities Group, Inc. ......................... 110 2,970
Summit Properties, Inc. .................................. 300 5,981
Taubman Centers, Inc. .................................... 450 5,175
Triad Guaranty, Inc. (a).................................. 500 8,437
UICI (a).................................................. 450 11,503
US Bancorp, Inc. ......................................... 350 4,725
Webster Financial Corp. .................................. 400 10,200
----------
391,886
----------
HEALTHCARE 4.0%
Alpharma, Inc. ........................................... 100 3,531
Ameripath, Inc. (a)....................................... 900 7,537
Apria Healthcare Group, Inc. (a).......................... 800 13,400
Bindley Western Industries, Inc. ......................... 716 10,248
Chattem, Inc. (a)......................................... 300 6,619
Herbalife International, Inc., Class A.................... 450 6,863
Laboratory Corp. of America Holdings (a).................. 3,500 9,625
</TABLE>
See Notes to Financial Statements
13
<PAGE> 165
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
Province Healthcare Co. (a)............................... 550 $ 6,325
Quest Diagnostics, Inc. (a)............................... 400 10,400
----------
74,548
----------
RAW MATERIALS/PROCESSING INDUSTRIES 10.3%
Arch Coal, Inc. .......................................... 600 7,387
Battle Mountain Gold Co. (a).............................. 1,550 5,038
Buckeye Technologies, Inc. (a)............................ 550 8,628
Caraustar Industries, Inc. ............................... 200 5,100
Commercial Metals Co. .................................... 300 8,625
Dexter Corp. ............................................. 250 9,328
Ethyl Corp. .............................................. 1,000 3,875
Ferro Corp. .............................................. 450 9,591
Gaylord Container Corp., Class A (a)...................... 100 713
Geon Co. ................................................. 350 9,012
Georgia Gulf Corp. ....................................... 600 10,575
Gibraltor Steel Corp. .................................... 400 8,400
Glatfelter P.H. Co. ...................................... 600 9,862
H.B. Fuller Co. .......................................... 200 12,175
Mueller Industries, Inc. (a).............................. 400 11,875
Oregon Steel Mills, Inc. ................................. 50 559
Polymer Group, Inc. (a)................................... 600 8,850
Quanex Corp. ............................................. 350 8,969
Reliance Steel & Aluminum Co. ............................ 525 11,025
Rock Tennessee Co., Class A............................... 600 8,974
Ryerson Tull, Inc. ....................................... 400 9,250
Scotts Co., Class A (a)................................... 200 6,925
Spartech Corp. ........................................... 200 5,863
Steel Dynamics, Inc. (a).................................. 400 6,275
Universal Forest Products, Inc. .......................... 200 2,613
----------
189,487
----------
TECHNOLOGY 12.6%
Aavid Thermal Technologies, Inc. (a) ..................... 350 7,897
Actel Corp. (a)........................................... 500 9,306
</TABLE>
See Notes to Financial Statements
14
<PAGE> 166
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Alliance Semiconductor Corp. (a)..........................
800 $ 8,600
American Mobile Satellite Corp. (a).......................
300 5,250
Amkor Technology, Inc. (a)................................
550 8,869
AVT Corp. (a).............................................
150 4,594
Clarify, Inc. (a).........................................
100 5,031
Cypress Semiconductor Corp. (a)...........................
500 10,750
DII Group, Inc. (a).......................................
150 5,278
EG&G, Inc. (a)............................................
350 13,934
General Communication, Inc. (a)...........................
900 4,697
Genrad, Inc. (a)..........................................
450 8,606
Inacom Corp. (a)..........................................
900 8,269
Informix Corp. (a)........................................
500 3,969
International Rectifier Corp. (a).........................
650 9,912
Kaman Corp., Class A......................................
700 8,925
Lam Research Corp. (a)....................................
200 12,200
MEMC Electronic Materials, Inc. (a).......................
500 6,875
Micro Warehouse, Inc. (a).................................
400 4,825
MTS Systems Corp. ........................................
850 8,819
Park Electrochemical Corp. ...............................
300 9,862
Pinnacle Systems, Inc. (a)................................
100 4,237
Primex Technologies, Inc. ................................
400 7,900
S3, Inc. (a)..............................................
950 9,916
Stewart Information Services Corp. (a)....................
450 8,241
Tektronix, Inc. ..........................................
400 13,400
Thermoquest Corp. (a).....................................
800 8,100
Triumph Group, Inc. (a)...................................
350 9,297
Xircom, Inc. (a)..........................................
100 4,269
----------
231,828
----------
TRANSPORTATION 3.4%
America West Holdings Corp., Class B (a)..................
550 9,522
American Freightways Corp. (a)............................
400 7,275
Covenant Transport, Inc., Class A (a).....................
500 7,625
Landstar Systems, Inc. (a)................................
250 8,688
</TABLE>
See Notes to Financial Statements
15
<PAGE> 167
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION (CONTINUED)
MS Carriers, Inc. (a).....................................
400 $ 9,600
Pittston Co. .............................................
550 4,434
Rollins Truck Leasing Corp. ..............................
200 2,025
US Freightways Corp. .....................................
300 14,212
----------
63,381
----------
UTILITIES 9.5%
Black Hills Corp. ........................................
250 5,828
California Water Service Group............................
250 6,844
Cilcorp, Inc. ............................................
100 6,481
CMP Group, Inc. ..........................................
400 10,550
Empire District Electric Co. .............................
200 5,113
Energen Corp. ............................................
400 8,100
Equitable Resources, Inc. ................................
300 11,344
Idacorp, Inc. ............................................
400 12,050
Jersey Resources Corp. ...................................
150 6,000
Laclede Gas Co. ..........................................
250 5,688
Madison Gas & Electric Co. ...............................
300 5,962
Northwest Natural Gas Co. ................................
300 7,744
Northwestern Corp. .......................................
250 5,688
NUI Corp. ................................................
250 6,187
Oneok, Inc. ..............................................
400 12,125
Otter Tail Power Co. .....................................
150 6,375
Public Service Co. of Mexico..............................
300 5,475
RGS Energy Group, Inc. ...................................
400 9,800
South Jersey Industries, Inc. ............................
200 5,275
Southwestern Energy Co. ..................................
550 4,984
TNP Enterprises, Inc. ....................................
200 7,787
Western Gas Resources, Inc. ..............................
600 11,212
WPS Resources Corp. ......................................
300 8,419
----------
175,031
----------
</TABLE>
See Notes to Financial Statements
16
<PAGE> 168
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- ----------------------------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS 95.3%
(Cost $1,845,985)............................................... $1,756,765
OTHER ASSETS IN EXCESS OF LIABILITIES 4.7%....................... 85,792
----------
NET ASSETS 100.0%................................................. $1,842,557
==========
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
17
<PAGE> 169
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments
(Cost $1,845,985)......................................... $1,756,765
Cash........................................................ 78,882
Receivables:
Fund Shares Sold.......................................... 109,921
Expense Reimbursement from Advisor........................ 30,188
Dividends................................................. 2,116
Investments Sold.......................................... 1,825
----------
Total Assets.......................................... 1,979,697
----------
LIABILITIES:
Payables:
Investments Purchased..................................... 100,519
Distributor and Affiliates................................ 3,210
Investment Advisory Fee................................... 2,945
Accrued Expenses............................................ 27,739
Trustees' Deferred Compensation and Retirement Plans........ 2,727
----------
Total Liabilities..................................... 137,140
----------
NET ASSETS.................................................. $1,842,557
==========
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,914,589
Accumulated Net Realized Gain............................... 17,035
Accumulated Undistributed Net Investment Income............. 153
Net Unrealized Depreciation................................. (89,220)
----------
NET ASSETS.................................................. $1,842,557
==========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $850,940 and 88,088 shares of beneficial
interest issued and outstanding)...................... $ 9.66
Maximum sales charge (5.75%* of offering price)......... .59
----------
Maximum offering price to public........................ $ 10.25
==========
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $647,616 and 67,228 shares of beneficial
interest issued and outstanding)...................... $ 9.63
==========
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $344,001 and 35,715 shares of beneficial
interest issued and outstanding)...................... $ 9.63
==========
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
18
<PAGE> 170
STATEMENT OF OPERATIONS
For the Period June 21, 1999
(Commencement of Investment Operations)
through September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................... $ 7,140
Interest.................................................... 509
--------
Total Income............................................ 7,649
--------
EXPENSES:
Registration Fee............................................ 11,069
Custody..................................................... 10,574
Trustees' Fees and Related Expenses......................... 3,308
Investment Advisory Fee..................................... 2,945
Audit....................................................... 2,767
Reports to Shareholders..................................... 2,767
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $447, $1,273 and $867, respectively)........ 2,587
Shareholder Services........................................ 1,372
Legal....................................................... 152
Other....................................................... 598
--------
Total Expenses.......................................... 38,139
Less: Expense Reduction ($2,945 Advisory fees and
$27,243 other).................................... 30,188
Credits Earned on Cash Balances.................... 455
--------
Net Expenses............................................ 7,496
--------
NET INVESTMENT INCOME....................................... $ 153
========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 17,035
--------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... -0-
End of the Period......................................... (89,220)
--------
Net Unrealized Depreciation During the Period............... (89,220)
--------
NET REALIZED AND UNREALIZED LOSS............................ $(72,185)
========
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $(72,032)
========
</TABLE>
See Notes to Financial Statements
19
<PAGE> 171
STATEMENT OF CHANGES IN NET ASSETS
For the Period June 21, 1999
(Commencement of Investment Operations)
through September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 153
Net Realized Gain........................................... 17,035
Net Unrealized Depreciation During the Period............... (89,220)
----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... (72,032)
----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 927,164
Cost of Shares Repurchased.................................. (12,575)
----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 914,589
----------
TOTAL INCREASE IN NET ASSETS................................ 842,557
NET ASSETS:
Beginning of the Period..................................... 1,000,000
----------
End of the Period (Including accumulated undistributed net
investment income of $153)................................ $1,842,557
==========
</TABLE>
See Notes to Financial Statements
20
<PAGE> 172
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the period indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 21, 1999
(Commencement of
Investment Operations)
Class A Shares to September 30, 1999
- -----------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of the Period.................... $10.000
-------
Net Investment Income....................................... .010
Net Realized and Unrealized Loss............................ (.350)
-------
Total from Investment Operations............................ (.340)
-------
Net Asset Value, End of the Period.......................... $ 9.660
=======
Total Return (a)............................................ (3.40%)**
Net Assets at End of the Period (In millions)............... $0.9
Ratio of Expenses to Average Net Assets* (b)................ 1.65%
Ratio of Net Investment Income to Average Net Assets*....... .50%
Portfolio Turnover.......................................... 9%**
* 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..................... 9.60%
Ratio of Net Investment Loss to Average Net Assets.......... (7.45%)
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) The 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 .12% for the period June 21, 1999
to September 30, 1999.
See Notes to Financial Statements
21
<PAGE> 173
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the period indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 21, 1999
(Commencement of
Investment Operations)
Class B Shares to September 30, 1999
- ---------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period...................... $10.000
-------
Net Investment Loss....................................... (.006)
Net Realized and Unrealized Loss.......................... (.361)
-------
Total from Investment Operations.......................... (.367)
-------
Net Asset Value, End of the Period........................ $ 9.633
=======
Total Return (a).......................................... (3.70%)**
Net Assets at End of the Period (In millions)............. $0.6
Ratio of Expenses to Average Net Assets* (b).............. 2.52%
Ratio of Net Investment Loss to Average Net Assets*....... (.34%)
Portfolio Turnover........................................ 9%**
* 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................... 10.47%
Ratio of Net Investment Loss to Average Net Assets........ (8.29%)
** Non-Annualized
</TABLE>
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) 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 .12% for the period June 21, 1999
to September 30, 1999.
See Notes to Financial Statements
22
<PAGE> 174
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the period indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 21, 1999
(Commencement of
Investment Operations)
Class C Shares to September 30, 1999
- -----------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of the Period.................... $10.000
-------
Net Investment Loss......................................... (.008)
Net Realized and Unrealized Loss............................ (.360)
-------
Total from Investment Operations............................ (.368)
-------
Net Asset Value, End of the Period.......................... $ 9.632
=======
Total Return (a)............................................ (3.70%)**
Net Assets at End of the Period (In millions)............... $ 0.3
Ratio of Expenses to Average Net Assets* (b)................ 2.38%
Ratio of Net Investment Loss to Average Net Assets*......... (.32%)
Portfolio Turnover.......................................... 9%**
* 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..................... 10.33%
Ratio of Net Investment Loss to Average Net Assets.......... (8.27%)
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) The 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 .12% for the period June 21, 1999
to September 30, 1999.
See Notes to Financial Statements
23
<PAGE> 175
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Small Cap 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 investment management company under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to seek
capital appreciation by investing primarily in a diversified portfolio of equity
securities of small capitalization companies that the Fund's investment adviser
believes are undervalued. The Fund commenced investment operations on June 21,
1999 with three classes of common shares, Class A, Class B, and Class C shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Unlisted securities and listed securities for which the last sales price is not
available are valued at the mean of the bid and asked prices, or, if not
available, their fair 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 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, 1999,
there were no when issued or delayed delivery purchase commitments.
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
24
<PAGE> 176
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 EXPENSE--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Discounts are amortized over
the life of each applicable security. Premiums on debt securities are not
amortized. Income and expenses of the Fund are allocated on a pro rata basis to
each class of shares, except for distribution and service fees and transfer
agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial and tax reporting
purposes.
At September 30, 1999, for federal income tax purposes, cost of long-term
investments is $1,845,985, the aggregate gross unrealized appreciation is
$59,827 and the aggregate gross unrealized depreciation is $149,047, resulting
in net unrealized depreciation on long-term investments of $89,220.
E. 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 option and futures transactions.
F. EXPENSE REDUCTIONS--During the period ended September 30, 1999, the Fund's
custody fee was reduced by $455 as a result of credits earned on overnight cash
balances.
25
<PAGE> 177
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide facilities and investment advice 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 period ended September 30, 1999, the Adviser voluntarily waived
$2,945 of its investment advisory fees and assumed $27,243 of the Fund's other
expenses. This waiver is voluntary in nature and can be discontinued at the
Adviser's discretion.
For the period ended September 30, 1999, the Fund recognized expenses of
approximately $100 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 expense has been assumed by Van Kampen.
For the period ended September 30, 1999, the Fund recognized expenses of
approximately $100 representing Van Kampen Funds Inc. or its affiliates'
(collectively "Van Kampen") cost of providing accounting and legal services to
the Fund. All of this expense 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 period ended September 30,
1999, the Fund recognized expenses of approximately $1,300. All of this expense
has been assumed by Van Kampen. 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, 1999, Van Kampen owned 40,000 shares of Class A, 30,000
shares of Class B, and 30,000 shares of Class C.
26
<PAGE> 178
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
At September 30, 1999, capital aggregated $884,491, $673,865 and $356,233
for Classes A, B and C, respectively. For the period ended September 30, 1999,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ----------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A........................................ 48,093 $484,546
Class B........................................ 37,306 374,609
Class C........................................ 6,885 68,009
------- --------
Total Sales...................................... 92,284 $927,164
======= ========
Repurchases:
Class A........................................ (5) $ (55)
Class B........................................ (78) (744)
Class C........................................ (1,170) (11,776)
------- --------
Total Repurchases................................ (1,253) $(12,575)
======= ========
</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>
For the period ended September 30, 1999, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A shares of
approximately $1,200 and CDSC on redeemed shares of approximately $100. Sales
charges do not represent expenses of the Fund.
27
<PAGE> 179
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $1,974,844 and $145,894, 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. No fees were paid for
the period ended September 30, 1999.
28
<PAGE> 180
VAN KAMPEN FUNDS
GROWTH
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Pace
Small Cap Value
Technology
GROWTH AND INCOME
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Fixed Income
Global Franchise
Global Government Securities
Global Managed Assets
International Magnum
Latin American
Short-Term Global Income*
Strategic Income
Worldwide High Income
INCOME
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN
Prime Rate Income Trust
Senior Floating Rate
TAX FREE
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
To find out more about any of these funds, ask your financial advisor for
a prospectus, which contains more complete information, including sales charges,
risks, and ongoing 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
* Closed to new investors
29
<PAGE> 181
VAN KAMPEN SMALL CAP VALUE FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY, PH.D.
PAUL G. YOVOVICH
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief
Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
STEPHEN L. BOYD*
PETER W. HEGEL*
MICHAEL H. SANTO*
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 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
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., 1999 All rights reserved.
(SM) denotes a service mark of
Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After February 29, 2000, the report, if used with
prospective investors, must be accompanied by a quarterly performance update, if
applicable.
30
<PAGE> 182
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
31
<PAGE> 183
VAN KAMPEN FUNDS
YOUR NOTES:
32
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> UTILITY A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 117,574,922<F1>
<INVESTMENTS-AT-VALUE> 158,199,438<F1>
<RECEIVABLES> 2,620,727<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 9,909<F1>
<TOTAL-ASSETS> 160,830,074<F1>
<PAYABLE-FOR-SECURITIES> 1,228,125<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 896,308<F1>
<TOTAL-LIABILITIES> 2,124,433<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47,288,717
<SHARES-COMMON-STOCK> 3,505,256
<SHARES-COMMON-PRIOR> 3,554,036
<ACCUMULATED-NII-CURRENT> 149,941<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 8,702,425<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 40,624,516<F1>
<NET-ASSETS> 66,090,607
<DIVIDEND-INCOME> 2,168,462<F1>
<INTEREST-INCOME> 550,919<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,398,629)<F1>
<NET-INVESTMENT-INCOME> 1,320,752<F1>
<REALIZED-GAINS-CURRENT> 6,641,826<F1>
<APPREC-INCREASE-CURRENT> 5,382,742<F1>
<NET-CHANGE-FROM-OPS> 13,345,320<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (636,167)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 271,462
<NUMBER-OF-SHARES-REDEEMED> (348,265)
<SHARES-REINVESTED> 28,023
<NET-CHANGE-IN-ASSETS> 4,018,877
<ACCUMULATED-NII-PRIOR> 18,180<F1>
<ACCUMULATED-GAINS-PRIOR> 2,060,599<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 536,874<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 536,874<F1>
<AVERAGE-NET-ASSETS> 67,862,446
<PER-SHARE-NAV-BEGIN> 17.465
<PER-SHARE-NII> 0.197
<PER-SHARE-GAIN-APPREC> 1.372
<PER-SHARE-DIVIDEND> (0.180)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.854
<EXPENSE-RATIO> 1.25
<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> UTILITY B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 117,574,922<F1>
<INVESTMENTS-AT-VALUE> 158,199,438<F1>
<RECEIVABLES> 2,620,727<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 9,909<F1>
<TOTAL-ASSETS> 160,830,074<F1>
<PAYABLE-FOR-SECURITIES> 1,228,125<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 896,308<F1>
<TOTAL-LIABILITIES> 2,124,433<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57,023,068
<SHARES-COMMON-STOCK> 4,562,224
<SHARES-COMMON-PRIOR> 4,821,994
<ACCUMULATED-NII-CURRENT> 149,941<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 8,702,425<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 40,624,516<F1>
<NET-ASSETS> 85,867,151
<DIVIDEND-INCOME> 2,168,462<F1>
<INTEREST-INCOME> 550,919<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,398,629)<F1>
<NET-INVESTMENT-INCOME> 1,320,752<F1>
<REALIZED-GAINS-CURRENT> 6,641,826<F1>
<APPREC-INCREASE-CURRENT> 5,382,742<F1>
<NET-CHANGE-FROM-OPS> 13,345,320<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (513,994)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 284,727
<NUMBER-OF-SHARES-REDEEMED> (566,362)
<SHARES-REINVESTED> 21,865
<NET-CHANGE-IN-ASSETS> 1,784,414
<ACCUMULATED-NII-PRIOR> 18,180<F1>
<ACCUMULATED-GAINS-PRIOR> 2,060,599<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 536,874<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 536,874<F1>
<AVERAGE-NET-ASSETS> 90,190,020
<PER-SHARE-NAV-BEGIN> 17.437
<PER-SHARE-NII> 0.125
<PER-SHARE-GAIN-APPREC> 1.369
<PER-SHARE-DIVIDEND> (0.110)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.821
<EXPENSE-RATIO> 2.00
<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> UTILITY C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 117,574,922<F1>
<INVESTMENTS-AT-VALUE> 158,199,438<F1>
<RECEIVABLES> 2,620,727<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 9,909<F1>
<TOTAL-ASSETS> 160,830,074<F1>
<PAYABLE-FOR-SECURITIES> 1,228,125<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 896,308<F1>
<TOTAL-LIABILITIES> 2,124,433<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,916,974
<SHARES-COMMON-STOCK> 358,773
<SHARES-COMMON-PRIOR> 399,217
<ACCUMULATED-NII-CURRENT> 149,941<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 8,702,425<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 40,624,516<F1>
<NET-ASSETS> 6,747,883
<DIVIDEND-INCOME> 2,168,462<F1>
<INTEREST-INCOME> 550,919<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,398,629)<F1>
<NET-INVESTMENT-INCOME> 1,320,752<F1>
<REALIZED-GAINS-CURRENT> 6,641,826<F1>
<APPREC-INCREASE-CURRENT> 5,382,742<F1>
<NET-CHANGE-FROM-OPS> 13,345,320<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (38,830)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,786
<NUMBER-OF-SHARES-REDEEMED> (92,503)
<SHARES-REINVESTED> 1,273
<NET-CHANGE-IN-ASSETS> (208,779)
<ACCUMULATED-NII-PRIOR> 18,180<F1>
<ACCUMULATED-GAINS-PRIOR> 2,060,599<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 536,874<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 536,874<F1>
<AVERAGE-NET-ASSETS> 6,845,628
<PER-SHARE-NAV-BEGIN> 17.426
<PER-SHARE-NII> 0.127
<PER-SHARE-GAIN-APPREC> 1.365
<PER-SHARE-DIVIDEND> (0.110)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.808
<EXPENSE-RATIO> 2.00
<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> 61
<NAME> AGGRESSIVE GROWTH CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 630,889,802<F1>
<INVESTMENTS-AT-VALUE> 873,686,094<F1>
<RECEIVABLES> 16,200,905<F1>
<ASSETS-OTHER> 34,984<F1>
<OTHER-ITEMS-ASSETS> 22,644<F1>
<TOTAL-ASSETS> 889,944,627<F1>
<PAYABLE-FOR-SECURITIES> 31,000,879<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 6,937,164<F1>
<TOTAL-LIABILITIES> 37,938,043<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 262,931,265
<SHARES-COMMON-STOCK> 19,878,924
<SHARES-COMMON-PRIOR> 14,154,257
<ACCUMULATED-NII-CURRENT> (4,487,233)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 92,428,058<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 242,796,292<F1>
<NET-ASSETS> 422,538,995
<DIVIDEND-INCOME> 94,207<F1>
<INTEREST-INCOME> 1,173,001<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,688,184)<F1>
<NET-INVESTMENT-INCOME> (4,420,976)<F1>
<REALIZED-GAINS-CURRENT> 74,921,195<F1>
<APPREC-INCREASE-CURRENT> 74,614,829<F1>
<NET-CHANGE-FROM-OPS> 145,115,048<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,124,100
<NUMBER-OF-SHARES-REDEEMED> (4,399,433)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 179,982,544
<ACCUMULATED-NII-PRIOR> (66,257)<F1>
<ACCUMULATED-GAINS-PRIOR> 17,506,863<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,462,085<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 5,691,361<F1>
<AVERAGE-NET-ASSETS> 341,633,489
<PER-SHARE-NAV-BEGIN> 17.137
<PER-SHARE-NII> (0.090)
<PER-SHARE-GAIN-APPREC> 4.209
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 21.256
<EXPENSE-RATIO> 1.32
<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> 62
<NAME> AGGRESSIVE GROWTH CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 630,889,802<F1>
<INVESTMENTS-AT-VALUE> 873,686,094<F1>
<RECEIVABLES> 16,200,905<F1>
<ASSETS-OTHER> 34,984<F1>
<OTHER-ITEMS-ASSETS> 22,644<F1>
<TOTAL-ASSETS> 889,944,627<F1>
<PAYABLE-FOR-SECURITIES> 31,000,879<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 6,937,164<F1>
<TOTAL-LIABILITIES> 37,938,043<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 219,334,000
<SHARES-COMMON-STOCK> 17,980,715
<SHARES-COMMON-PRIOR> 13,840,712
<ACCUMULATED-NII-CURRENT> (4,487,233)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 92,428,058<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 242,796,292<F1>
<NET-ASSETS> 372,131,217
<DIVIDEND-INCOME> 94,207<F1>
<INTEREST-INCOME> 1,173,001<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,688,184)<F1>
<NET-INVESTMENT-INCOME> (4,420,976)<F1>
<REALIZED-GAINS-CURRENT> 74,921,195<F1>
<APPREC-INCREASE-CURRENT> 74,614,829<F1>
<NET-CHANGE-FROM-OPS> 145,115,048<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,625,316
<NUMBER-OF-SHARES-REDEEMED> (1,485,313)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 140,345,103
<ACCUMULATED-NII-PRIOR> (66,257)<F1>
<ACCUMULATED-GAINS-PRIOR> 17,506,863<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,462,085<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 5,691,361<F1>
<AVERAGE-NET-ASSETS> 290,095,868
<PER-SHARE-NAV-BEGIN> 16.747
<PER-SHARE-NII> (0.158)
<PER-SHARE-GAIN-APPREC> 4.107
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 20.696
<EXPENSE-RATIO> 2.08
<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> 63
<NAME> AGGRRESSIVE GROWTH CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 630,889,802<F1>
<INVESTMENTS-AT-VALUE> 873,686,094<F1>
<RECEIVABLES> 16,200,905<F1>
<ASSETS-OTHER> 34,984<F1>
<OTHER-ITEMS-ASSETS> 22,644<F1>
<TOTAL-ASSETS> 889,944,627<F1>
<PAYABLE-FOR-SECURITIES> 31,000,879<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 6,937,164<F1>
<TOTAL-LIABILITIES> 37,938,043<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39,004,202
<SHARES-COMMON-STOCK> 2,764,815
<SHARES-COMMON-PRIOR> 1,632,921
<ACCUMULATED-NII-CURRENT> (4,487,233)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 92,428,058<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 242,796,292<F1>
<NET-ASSETS> 57,336,372
<DIVIDEND-INCOME> 94,207<F1>
<INTEREST-INCOME> 1,173,001<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,688,184)<F1>
<NET-INVESTMENT-INCOME> (4,420,976)<F1>
<REALIZED-GAINS-CURRENT> 74,921,195<F1>
<APPREC-INCREASE-CURRENT> 74,614,829<F1>
<NET-CHANGE-FROM-OPS> 145,115,048<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,318,476
<NUMBER-OF-SHARES-REDEEMED> (186,582)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 29,964,983
<ACCUMULATED-NII-PRIOR> (66,257)<F1>
<ACCUMULATED-GAINS-PRIOR> 17,506,863<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,462,085<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 5,691,361<F1>
<AVERAGE-NET-ASSETS> 38,157,466
<PER-SHARE-NAV-BEGIN> 16.762
<PER-SHARE-NII> (0.160)
<PER-SHARE-GAIN-APPREC> 4.136
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 20.738
<EXPENSE-RATIO> 2.08
<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> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 1,622,746<F1>
<INVESTMENTS-AT-VALUE> 1,714,765<F1>
<RECEIVABLES> 89,242<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 120,597<F1>
<TOTAL-ASSETS> 1,924,604<F1>
<PAYABLE-FOR-SECURITIES> 86,786<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 82,802<F1>
<TOTAL-LIABILITIES> 169,588<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,328,601
<SHARES-COMMON-STOCK> 110,323
<SHARES-COMMON-PRIOR> 110,306
<ACCUMULATED-NII-CURRENT> (27,735)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 191,191<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 92,019<F1>
<NET-ASSETS> 1,529,960
<DIVIDEND-INCOME> 11,249<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (11,954)<F1>
<NET-INVESTMENT-INCOME> (705)<F1>
<REALIZED-GAINS-CURRENT> 158,354<F1>
<APPREC-INCREASE-CURRENT> (41,046)<F1>
<NET-CHANGE-FROM-OPS> 116,603<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 101,897
<ACCUMULATED-NII-PRIOR> (27,030)<F1>
<ACCUMULATED-GAINS-PRIOR> 32,837<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 6,886<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 101,490<F1>
<AVERAGE-NET-ASSETS> 1,598,927
<PER-SHARE-NAV-BEGIN> 12.946
<PER-SHARE-NII> (0.006)
<PER-SHARE-GAIN-APPREC> 0.928
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.868
<EXPENSE-RATIO> 1.49
<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> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 1,622,746<F1>
<INVESTMENTS-AT-VALUE> 1,714,765<F1>
<RECEIVABLES> 89,242<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 120,597<F1>
<TOTAL-ASSETS> 1,924,604<F1>
<PAYABLE-FOR-SECURITIES> 86,786<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 82,802<F1>
<TOTAL-LIABILITIES> 169,588<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 86,018
<SHARES-COMMON-STOCK> 8,111
<SHARES-COMMON-PRIOR> 8,111
<ACCUMULATED-NII-CURRENT> (27,735)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 191,191<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 92,019<F1>
<NET-ASSETS> 112,519
<DIVIDEND-INCOME> 11,249<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (11,954)<F1>
<NET-INVESTMENT-INCOME> (705)<F1>
<REALIZED-GAINS-CURRENT> 158,354<F1>
<APPREC-INCREASE-CURRENT> (41,046)<F1>
<NET-CHANGE-FROM-OPS> 116,603<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> 7,478
<ACCUMULATED-NII-PRIOR> (27,030)<F1>
<ACCUMULATED-GAINS-PRIOR> 32,837<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 6,886<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 101,490<F1>
<AVERAGE-NET-ASSETS> 117,600
<PER-SHARE-NAV-BEGIN> 12.950
<PER-SHARE-NII> (0.006)
<PER-SHARE-GAIN-APPREC> 0.928
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.872
<EXPENSE-RATIO> 1.49
<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> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 1,622,746<F1>
<INVESTMENTS-AT-VALUE> 1,714,765<F1>
<RECEIVABLES> 89,242<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 120,597<F1>
<TOTAL-ASSETS> 1,924,604<F1>
<PAYABLE-FOR-SECURITIES> 86,786<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 82,802<F1>
<TOTAL-LIABILITIES> 169,588<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 84,922
<SHARES-COMMON-STOCK> 8,111
<SHARES-COMMON-PRIOR> 8,111
<ACCUMULATED-NII-CURRENT> (27,735)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 191,191<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 92,019<F1>
<NET-ASSETS> 112,537
<DIVIDEND-INCOME> 11,249<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (11,954)<F1>
<NET-INVESTMENT-INCOME> (705)<F1>
<REALIZED-GAINS-CURRENT> 158,354<F1>
<APPREC-INCREASE-CURRENT> (41,046)<F1>
<NET-CHANGE-FROM-OPS> 116,603<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> 7,478
<ACCUMULATED-NII-PRIOR> (27,030)<F1>
<ACCUMULATED-GAINS-PRIOR> 32,837<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 6,886<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 101,490<F1>
<AVERAGE-NET-ASSETS> 117,619
<PER-SHARE-NAV-BEGIN> 12.953
<PER-SHARE-NII> (0.006)
<PER-SHARE-GAIN-APPREC> 0.927
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.874
<EXPENSE-RATIO> 1.49
<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> 21
<NAME> GREAT AMERICAN COS. A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 1,684,651<F1>
<INVESTMENTS-AT-VALUE> 2,049,120<F1>
<RECEIVABLES> 37,396<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 185,540<F1>
<TOTAL-ASSETS> 2,272,056<F1>
<PAYABLE-FOR-SECURITIES> 61,873<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 89,139<F1>
<TOTAL-LIABILITIES> 151,012<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,410,601
<SHARES-COMMON-STOCK> 113,163
<SHARES-COMMON-PRIOR> 113,163
<ACCUMULATED-NII-CURRENT> (38,195)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 204,217<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 364,469<F1>
<NET-ASSETS> 1,849,532
<DIVIDEND-INCOME> 7,657<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (13,761)<F1>
<NET-INVESTMENT-INCOME> (6,104)<F1>
<REALIZED-GAINS-CURRENT> 239,784<F1>
<APPREC-INCREASE-CURRENT> (324,236)<F1>
<NET-CHANGE-FROM-OPS> (90,566)<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> (78,962)
<ACCUMULATED-NII-PRIOR> (32,091)<F1>
<ACCUMULATED-GAINS-PRIOR> (35,567)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 7,697<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 103,417<F1>
<AVERAGE-NET-ASSETS> 1,914,660
<PER-SHARE-NAV-BEGIN> 17.042
<PER-SHARE-NII> (0.047)
<PER-SHARE-GAIN-APPREC> (0.651)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.344
<EXPENSE-RATIO> 1.40
<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> GREAT AMERICAN COS. B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 1,684,651<F1>
<INVESTMENTS-AT-VALUE> 2,049,120<F1>
<RECEIVABLES> 37,396<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 185,540<F1>
<TOTAL-ASSETS> 2,272,056<F1>
<PAYABLE-FOR-SECURITIES> 61,873<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 89,139<F1>
<TOTAL-LIABILITIES> 151,012<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,976
<SHARES-COMMON-STOCK> 8,305
<SHARES-COMMON-PRIOR> 8,305
<ACCUMULATED-NII-CURRENT> (38,195)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 204,217<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 364,469<F1>
<NET-ASSETS> 135,749
<DIVIDEND-INCOME> 7,657<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (13,761)<F1>
<NET-INVESTMENT-INCOME> (6,104)<F1>
<REALIZED-GAINS-CURRENT> 239,784<F1>
<APPREC-INCREASE-CURRENT> (324,236)<F1>
<NET-CHANGE-FROM-OPS> (90,566)<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> (5,797)
<ACCUMULATED-NII-PRIOR> (32,091)<F1>
<ACCUMULATED-GAINS-PRIOR> (35,567)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 7,697<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 103,417<F1>
<AVERAGE-NET-ASSETS> 140,530
<PER-SHARE-NAV-BEGIN> 17.043
<PER-SHARE-NII> (0.047)
<PER-SHARE-GAIN-APPREC> (0.651)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.345
<EXPENSE-RATIO> 1.40
<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> GREAT AMERICAN COS. C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 1,684,651<F1>
<INVESTMENTS-AT-VALUE> 2,049,120<F1>
<RECEIVABLES> 37,396<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 185,540<F1>
<TOTAL-ASSETS> 2,272,056<F1>
<PAYABLE-FOR-SECURITIES> 61,873<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 89,139<F1>
<TOTAL-LIABILITIES> 151,012<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,976
<SHARES-COMMON-STOCK> 8,305
<SHARES-COMMON-PRIOR> 8,305
<ACCUMULATED-NII-CURRENT> (38,195)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 204,217<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 364,469<F1>
<NET-ASSETS> 135,763
<DIVIDEND-INCOME> 7,657<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (13,761)<F1>
<NET-INVESTMENT-INCOME> (6,104)<F1>
<REALIZED-GAINS-CURRENT> 239,784<F1>
<APPREC-INCREASE-CURRENT> (324,236)<F1>
<NET-CHANGE-FROM-OPS> (90,566)<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> (5,797)
<ACCUMULATED-NII-PRIOR> (32,091)<F1>
<ACCUMULATED-GAINS-PRIOR> (35,567)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 7,697<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 103,417<F1>
<AVERAGE-NET-ASSETS> 140,545
<PER-SHARE-NAV-BEGIN> 17.045
<PER-SHARE-NII> (0.047)
<PER-SHARE-GAIN-APPREC> (0.651)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.347
<EXPENSE-RATIO> 1.40
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 31
<NAME> GROWTH CLASS A
<MULTIPLIER>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 103,352,894<F1>
<INVESTMENTS-AT-VALUE> 135,859,447<F1>
<RECEIVABLES> 3,033,955<F1>
<ASSETS-OTHER> 6,456<F1>
<OTHER-ITEMS-ASSETS> 1,691<F1>
<TOTAL-ASSETS> 138,901,549<F1>
<PAYABLE-FOR-SECURITIES> 4,471,304<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 906,086<F1>
<TOTAL-LIABILITIES> 5,377,390<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36,723,000
<SHARES-COMMON-STOCK> 2,378,121
<SHARES-COMMON-PRIOR> 2,580,837
<ACCUMULATED-NII-CURRENT> (1,122,335)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 16,538,141<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 32,506,553<F1>
<NET-ASSETS> 58,353,104
<DIVIDEND-INCOME> 160,442<F1>
<INTEREST-INCOME> 109,137<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,337,298)<F1>
<NET-INVESTMENT-INCOME> (1,067,719)<F1>
<REALIZED-GAINS-CURRENT> 20,783,298<F1>
<APPREC-INCREASE-CURRENT> (12,823,193)<F1>
<NET-CHANGE-FROM-OPS> 6,892,386<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 111,971
<NUMBER-OF-SHARES-REDEEMED> (314,687)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,775,764)
<ACCUMULATED-NII-PRIOR> (54,616)<F1>
<ACCUMULATED-GAINS-PRIOR> (4,245,157)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 516,946<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,337,955<F1>
<AVERAGE-NET-ASSETS> 59,372,483
<PER-SHARE-NAV-BEGIN> 23.298
<PER-SHARE-NII> (0.134)
<PER-SHARE-GAIN-APPREC> 1.373
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 24.537
<EXPENSE-RATIO> 1.51
<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> 32
<NAME> GROWTH CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 103,352,894<F1>
<INVESTMENTS-AT-VALUE> 135,859,447<F1>
<RECEIVABLES> 3,033,955<F1>
<ASSETS-OTHER> 6,456<F1>
<OTHER-ITEMS-ASSETS> 1,691<F1>
<TOTAL-ASSETS> 138,901,549<F1>
<PAYABLE-FOR-SECURITIES> 4,471,304<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 906,086<F1>
<TOTAL-LIABILITIES> 5,377,390<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44,680,623
<SHARES-COMMON-STOCK> 2,834,075
<SHARES-COMMON-PRIOR> 3,183,691
<ACCUMULATED-NII-CURRENT> (1,122,335)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 16,538,141<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 32,506,553<F1>
<NET-ASSETS> 68,021,391
<DIVIDEND-INCOME> 160,442<F1>
<INTEREST-INCOME> 109,137<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,337,298)<F1>
<NET-INVESTMENT-INCOME> (1,067,719)<F1>
<REALIZED-GAINS-CURRENT> 20,783,298<F1>
<APPREC-INCREASE-CURRENT> (12,823,193)<F1>
<NET-CHANGE-FROM-OPS> 6,892,386<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 78,526
<NUMBER-OF-SHARES-REDEEMED> (428,142)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (4,787,256)
<ACCUMULATED-NII-PRIOR> (54,616)<F1>
<ACCUMULATED-GAINS-PRIOR> (4,245,157)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 516,946<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,337,955<F1>
<AVERAGE-NET-ASSETS> 70,997,288
<PER-SHARE-NAV-BEGIN> 22.869
<PER-SHARE-NII> (0.221)
<PER-SHARE-GAIN-APPREC> 1.353
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 24.001
<EXPENSE-RATIO> 2.27
<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> 33
<NAME> GROWTH CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 103,352,894<F1>
<INVESTMENTS-AT-VALUE> 135,859,447<F1>
<RECEIVABLES> 3,033,955<F1>
<ASSETS-OTHER> 6,456<F1>
<OTHER-ITEMS-ASSETS> 1,691<F1>
<TOTAL-ASSETS> 138,901,549<F1>
<PAYABLE-FOR-SECURITIES> 4,471,304<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 906,086<F1>
<TOTAL-LIABILITIES> 5,377,390<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,198,177
<SHARES-COMMON-STOCK> 298,286
<SHARES-COMMON-PRIOR> 323,632
<ACCUMULATED-NII-CURRENT> (1,122,335)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 16,538,141<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 32,506,553<F1>
<NET-ASSETS> 7,149,664
<DIVIDEND-INCOME> 160,442<F1>
<INTEREST-INCOME> 109,137<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,337,298)<F1>
<NET-INVESTMENT-INCOME> (1,067,719)<F1>
<REALIZED-GAINS-CURRENT> 20,783,298<F1>
<APPREC-INCREASE-CURRENT> (12,823,193)<F1>
<NET-CHANGE-FROM-OPS> 6,892,386<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,053
<NUMBER-OF-SHARES-REDEEMED> (31,399)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (250,743)
<ACCUMULATED-NII-PRIOR> (54,616)<F1>
<ACCUMULATED-GAINS-PRIOR> (4,245,157)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 516,946<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,337,955<F1>
<AVERAGE-NET-ASSETS> 7,269,581
<PER-SHARE-NAV-BEGIN> 22.867
<PER-SHARE-NII> (0.222)
<PER-SHARE-GAIN-APPREC> 1.324
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 23.969
<EXPENSE-RATIO> 2.28
<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> PROSPECTOR FUND CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 2,014,164<F1>
<INVESTMENTS-AT-VALUE> 2,138,918<F1>
<RECEIVABLES> 24,119<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 81,486<F1>
<TOTAL-ASSETS> 2,244,523<F1>
<PAYABLE-FOR-SECURITIES> 13,655<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 88,358<F1>
<TOTAL-LIABILITIES> 102,013<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,572,545
<SHARES-COMMON-STOCK> 127,413
<SHARES-COMMON-PRIOR> 127,413
<ACCUMULATED-NII-CURRENT> (21,791)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 264,576<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 124,754<F1>
<NET-ASSETS> 1,874,004
<DIVIDEND-INCOME> 22,926<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (14,283)<F1>
<NET-INVESTMENT-INCOME> 8,643<F1>
<REALIZED-GAINS-CURRENT> 186,632<F1>
<APPREC-INCREASE-CURRENT> (78,524)<F1>
<NET-CHANGE-FROM-OPS> 116,751<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> 102,121
<ACCUMULATED-NII-PRIOR> (30,434)<F1>
<ACCUMULATED-GAINS-PRIOR> 77,944<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 7,986<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 104,323<F1>
<AVERAGE-NET-ASSETS> 1,993,449
<PER-SHARE-NAV-BEGIN> 13.907
<PER-SHARE-NII> 0.059
<PER-SHARE-GAIN-APPREC> 0.742
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.708
<EXPENSE-RATIO> 1.43
<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> PROSPECTOR FUND CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 2,014,164<F1>
<INVESTMENTS-AT-VALUE> 2,138,918<F1>
<RECEIVABLES> 24,119<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 81,486<F1>
<TOTAL-ASSETS> 2,244,523<F1>
<PAYABLE-FOR-SECURITIES> 13,655<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 88,358<F1>
<TOTAL-LIABILITIES> 102,013<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101,213
<SHARES-COMMON-STOCK> 9,128
<SHARES-COMMON-PRIOR> 9,128
<ACCUMULATED-NII-CURRENT> (21,791)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 264,576<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 124,754<F1>
<NET-ASSETS> 134,253
<DIVIDEND-INCOME> 22,926<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (14,283)<F1>
<NET-INVESTMENT-INCOME> 8,643<F1>
<REALIZED-GAINS-CURRENT> 186,632<F1>
<APPREC-INCREASE-CURRENT> (78,524)<F1>
<NET-CHANGE-FROM-OPS> 116,751<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> 7,315
<ACCUMULATED-NII-PRIOR> (30,434)<F1>
<ACCUMULATED-GAINS-PRIOR> 77,944<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 7,986<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 104,323<F1>
<AVERAGE-NET-ASSETS> 142,811
<PER-SHARE-NAV-BEGIN> 13.906
<PER-SHARE-NII> 0.059
<PER-SHARE-GAIN-APPREC> 0.743
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.708
<EXPENSE-RATIO> 1.43
<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> PROSPECTOR FUND CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 2,014,164<F1>
<INVESTMENTS-AT-VALUE> 2,138,918<F1>
<RECEIVABLES> 24,119<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 81,486<F1>
<TOTAL-ASSETS> 2,244,523<F1>
<PAYABLE-FOR-SECURITIES> 13,655<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 88,358<F1>
<TOTAL-LIABILITIES> 102,013<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101,213
<SHARES-COMMON-STOCK> 9,128
<SHARES-COMMON-PRIOR> 9,128
<ACCUMULATED-NII-CURRENT> (21,791)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 264,576<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 124,754<F1>
<NET-ASSETS> 134,253
<DIVIDEND-INCOME> 22,926<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (14,283)<F1>
<NET-INVESTMENT-INCOME> 8,643<F1>
<REALIZED-GAINS-CURRENT> 186,632<F1>
<APPREC-INCREASE-CURRENT> (78,524)<F1>
<NET-CHANGE-FROM-OPS> 116,751<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> 7,315
<ACCUMULATED-NII-PRIOR> (30,434)<F1>
<ACCUMULATED-GAINS-PRIOR> 77,944<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 7,986<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 104,323<F1>
<AVERAGE-NET-ASSETS> 142,811
<PER-SHARE-NAV-BEGIN> 13.906
<PER-SHARE-NII> 0.059
<PER-SHARE-GAIN-APPREC> 0.743
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.708
<EXPENSE-RATIO> 1.43
<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> SMALL CAP VALUE CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> JUN-21-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 1,845,985<F1>
<INVESTMENTS-AT-VALUE> 1,756,765<F1>
<RECEIVABLES> 144,050<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 78,882<F1>
<TOTAL-ASSETS> 1,979,697<F1>
<PAYABLE-FOR-SECURITIES> 100,519<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 36,321<F1>
<TOTAL-LIABILITIES> 137,140<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 884,491
<SHARES-COMMON-STOCK> 88,088
<SHARES-COMMON-PRIOR> 40,000
<ACCUMULATED-NII-CURRENT> 153<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 17,035<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (89,220)<F1>
<NET-ASSETS> 850,940
<DIVIDEND-INCOME> 7,140<F1>
<INTEREST-INCOME> 509<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (7,496)<F1>
<NET-INVESTMENT-INCOME> 153<F1>
<REALIZED-GAINS-CURRENT> 17,035<F1>
<APPREC-INCREASE-CURRENT> (89,220)<F1>
<NET-CHANGE-FROM-OPS> (72,032)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 48,093
<NUMBER-OF-SHARES-REDEEMED> (5)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 450,940
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,945<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 38,139<F1>
<AVERAGE-NET-ASSETS> 608,265
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.010
<PER-SHARE-GAIN-APPREC> (0.350)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.660
<EXPENSE-RATIO> 1.65
<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> SMALL CAP VALUE CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> JUN-21-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 1,845,985<F1>
<INVESTMENTS-AT-VALUE> 1,756,765<F1>
<RECEIVABLES> 144,050<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 78,882<F1>
<TOTAL-ASSETS> 1,979,697<F1>
<PAYABLE-FOR-SECURITIES> 100,519<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 36,321<F1>
<TOTAL-LIABILITIES> 137,140<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 673,865
<SHARES-COMMON-STOCK> 67,228
<SHARES-COMMON-PRIOR> 30,000
<ACCUMULATED-NII-CURRENT> 153<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 17,035<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (89,220)<F1>
<NET-ASSETS> 647,616
<DIVIDEND-INCOME> 7,140<F1>
<INTEREST-INCOME> 509<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (7,496)<F1>
<NET-INVESTMENT-INCOME> 153<F1>
<REALIZED-GAINS-CURRENT> 17,035<F1>
<APPREC-INCREASE-CURRENT> (89,220)<F1>
<NET-CHANGE-FROM-OPS> (72,032)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 37,306
<NUMBER-OF-SHARES-REDEEMED> (78)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 347,616
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,945<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 38,139<F1>
<AVERAGE-NET-ASSETS> 435,972
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> (0.006)
<PER-SHARE-GAIN-APPREC> (0.361)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.633
<EXPENSE-RATIO> 2.52
<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> SMALL CAP VALUE CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> JUN-21-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 1,845,985<F1>
<INVESTMENTS-AT-VALUE> 1,756,765<F1>
<RECEIVABLES> 144,050<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 78,882<F1>
<TOTAL-ASSETS> 1,979,697<F1>
<PAYABLE-FOR-SECURITIES> 100,519<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 36,321<F1>
<TOTAL-LIABILITIES> 137,140<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 356,233
<SHARES-COMMON-STOCK> 35,715
<SHARES-COMMON-PRIOR> 30,000
<ACCUMULATED-NII-CURRENT> 153<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 17,035<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (89,220)<F1>
<NET-ASSETS> 344,001
<DIVIDEND-INCOME> 7,140<F1>
<INTEREST-INCOME> 509<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (7,496)<F1>
<NET-INVESTMENT-INCOME> 153<F1>
<REALIZED-GAINS-CURRENT> 17,035<F1>
<APPREC-INCREASE-CURRENT> (89,220)<F1>
<NET-CHANGE-FROM-OPS> (72,032)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,885
<NUMBER-OF-SHARES-REDEEMED> (1,170)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 44,001
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,945<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 38,139<F1>
<AVERAGE-NET-ASSETS> 314,228
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> (0.008)
<PER-SHARE-GAIN-APPREC> (0.360)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.632
<EXPENSE-RATIO> 2.38
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
