<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Performance in Perspective....................... 4
Glossary of Terms................................ 5
Portfolio Management Review...................... 6
Portfolio Highlights............................. 9
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 19
Report of Independent Accountants................ 27
</TABLE>
UTLF ANR 5/99
<PAGE> 2
LETTER TO SHAREHOLDERS
April 20, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together we've
witnessed one of the greatest bull markets in investment history, unprecedented
growth in mutual fund investing, and a surge in personal retirement planning.
The coming millennium promises to hold even more opportunities.
To lead us into this new era of investing, Richard F. Powers III has joined
Van Kampen as Chairman and Chief Executive Officer. He comes to us from our
parent company, Morgan Stanley Dean Witter & Co., where he served as Executive
Vice President and Director of Marketing. He brings 27 years of experience in
the financial services industry, including an extensive background in product
management, strategic planning, and brand development.
Although former Chairman Don G. Powell retired on January 1, he will remain
active in the industry and the community. Mr. Powell plans to continue his
service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
ECONOMIC OVERVIEW
The U.S. economy continued to grow at a robust pace, despite financial
problems abroad. In the fourth quarter, the nation's gross domestic product
(GDP) rose at an astounding 6.0 percent annual rate, surprising most economists,
whose estimates had been much more conservative. GDP remained strong through the
first quarter of 1999, posting a 4.5 percent annual growth rate. However, the
economy began to show signs of slowing down early in 1999, as corporate profits
and wage growth declined.
A series of interest rate cuts by the Federal Reserve helped the U.S.
economy avoid the economic slump that plagued many global markets. The Fed's
0.25 percent interest rate cut in September was followed by additional cuts in
October and November. These rate cuts, coupled with a wave of corporate mergers
and cost-cutting measures, lent the support needed to foster continued growth.
In addition, the outlook for troubled areas such as Asia and Latin America
improved significantly, and most experts agree that these economies are on the
slow road to recovery.
Despite the improvements abroad and record economic growth in the United
States, inflation remained at bay as commodity prices tumbled. This low
inflationary environment--only a 1.7 percent increase in the consumer price
index over the past 12 months--contributed to the strong domestic economy and
kept inflation-adjusted interest rates attractive. A low level of unemployment,
vibrant consumer spending, and an active housing market also supported the
positive economic conditions.
MARKET REVIEW
The stock market bounced back resoundingly from the lows we experienced in
August and September, when concerns about the global economic slowdown had
reached a peak.
Continued on page 2
1
<PAGE> 3
Growth-oriented large-company stocks displayed the most resilience, propelling
the Dow Jones Industrial Average past the 10,000 mark for the first time at the
end of the reporting period. Investors continued to favor the earnings strength
and perceived stability of these high-quality stocks, while many other areas of
the market remained sluggish. With the emphasis on growth-style blue-chip
companies, many investors overlooked the strong values to be found in other
areas of the market, especially among smaller companies. The Russell 2000 Index,
which represents small-cap stocks, lost more than 12 percent during the nine
months since our last report, compared with a gain of almost 15 percent for the
larger companies composing the S&P 500 Index.
OUTLOOK
Our outlook for the domestic economy remains positive, although the pattern
of reduced growth may continue into the second half of the year. We look for a
slow but steady rise in inflation throughout 1999 to more normal, but certainly
not alarming levels. Internationally, low interest rates and improving financial
conditions should continue to support the economic improvements we've witnessed
in Asia and Latin America.
We believe the markets may still favor higher-quality securities such as
large-company stocks and investment-grade bonds in the near term. In addition,
we anticipate continued day-to-day volatility in the markets, although we
probably won't see sustained high or low periods during the next six months.
Additional details about your fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.
Sincerely,
[SIG.]
Richard F. Powers III
Chairman
Van Kampen Investment Advisory Corp.
[SIG.]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED MARCH 31, 1999
VAN KAMPEN UTILITY FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Nine-month total return based on
NAV(1)................................... 1.72% 1.21% 1.22%
Nine-month total return(2)............... (4.14%) (2.74%) 0.23%
One-year total return based on NAV(1).... 0.14% (0.58%) (0.58%)
One-year total return(2)................. (5.61%) (4.45%) (1.54%)
Five-year average annual total
return(2)................................ 11.98% 12.25% 12.46%
Life-of-Fund average annual total
return(2)................................ 9.57% 9.77% 9.74%
Commencement date........................ 07/28/93 07/28/93 08/13/93
</TABLE>
(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for A shares) or contingent
deferred sales charge for early withdrawal (4% for B shares and 1% for C
shares).
(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).
See the Fund Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth more
or less than their original cost.
Because the Fund concentrates investments in the utility industry, it may be
more susceptible to any economic, political or regulatory occurrence effecting
this industry. Foreign securities involve the risk of fluctuations in foreign
exchange rates, future political and economic developments. Lower-rated
securities are referred to as "junk bonds"' and are considered speculative with
regards to payment of interest and principal.
Market forecasts provided in this report may not necessarily come to pass.
On July 31, 1998, the Fund's Board of Trustees voted to change the Fund's
fiscal year end from June 30 to March 31. As a result, this annual report
reflects the nine-month period commencing on July 1, 1998, and ending on March
31, 1999.
3
<PAGE> 5
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment performance at regular intervals. A
comparison of your Fund's performance to an applicable benchmark can:
- Illustrate the market environment in which your Fund is being managed.
- Reflect the impact of favorable market trends or difficult market
conditions.
- Help you evaluate how your Fund's management team has responded to
opportunities and challenges.
The following graph compares your Fund's performance to that of the Standard
& Poor's 40 Utilities Index over time. This index is a broad-based statistical
composite that does not include any commissions that would be paid by an
investor purchasing the securities it represents.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Utility Fund vs. Standard & Poor's 40 Utilities Index
(July 28, 1993 through March 31, 1999)
[INVESTMENT PERFORMANCE GRAPH]
- ------------------------------
Fund's Total Return
1 Year Total Return = -5.61%
3 Year Avg. Annual = 12.84%
5 Year Avg. Annual = 11.98%
Inception Avg. Annual = 9.57%
- ------------------------------
<TABLE>
<CAPTION>
VAN KAMPEN UTILITY FUND S & P'S 40 UTILITIES INDEX
----------------------- --------------------------
<S> <C> <C>
7/28/93 9427 10000
9/30/93 9848 10504
3/31/94 8994 9094
9/30/94 8867 9138
3/31/95 9043 9759
9/30/95 10228 11650
3/31/96 11020 12335
4/30/96 10939 12421
5/31/96 10939 12340
6/30/96 11382 12952
7/31/96 10876 12082
8/31/96 11121 12284
9/30/96 11203 12552
10/31/96 11684 13093
11/30/96 12112 13313
12/31/96 12191 13348
1/31/97 12376 13381
2/28/97 12353 13197
3/31/97 11911 12902
4/30/97 11856 12652
5/31/97 12354 13130
6/30/97 12884 13654
7/31/97 13229 13910
8/31/97 12876 13596
9/30/97 13606 14306
10/31/97 13700 14385
11/30/97 14553 15343
12/31/97 15324 16619
1/31/98 15260 15901
2/28/98 15610 16381
3/31/98 16773 17544
4/30/98 16383 17143
5/31/98 16188 16996
6/30/98 16514 17752
7/31/98 16205 16815
8/31/98 15513 17023
9/30/98 16591 18563
10/31/98 16846 18194
11/30/98 17298 18378
12/31/98 18083 19044
1/31/99 17901 18124
2/28/99 17202 17402
3/31/99 16798 17265
</TABLE>
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions and includes payment of the maximum
sales charge (5.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
4
<PAGE> 6
GLOSSARY OF TERMS
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.
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, such as utilities.
FLIGHT TO QUALITY: The flow of funds toward safer investments in times of
marketplace uncertainty or fear.
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.
NET ASSET VALUE (NAV): The value of a trust share, calculated by deducting a
trust's liabilities from the total assets applicable to common shareholders
in its portfolio and dividing this amount by the number of common shares
outstanding.
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.
5
<PAGE> 7
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN UTILITY FUND
We recently spoke to the management team of the Van Kampen Utility Fund about
the key events and economic forces that shaped the markets during the reporting
period. The team includes Christine Drusch, portfolio manager; Matthew Hart and
David McLaughlin, portfolio comanagers; and Stephen L. Boyd, chief investment
officer for equity investments.
The Fund's fiscal year end was recently changed from June 30 to March 31.
Going forward, your annual reports will be dated March 31, and your semiannual
reports will be dated September 30. The following interview discusses the Fund's
performance during the nine-month period since your last annual report, from
July 1, 1998, to March 31, 1999.
Q COULD YOU TALK BRIEFLY ABOUT THE MARKET ENVIRONMENT DURING THE REPORTING
PERIOD AND HOW IT AFFECTED THE FUND?
A The stock market was extremely volatile during the reporting period,
plummeting in the third quarter of 1998 but staging an impressive recovery
that left the Dow Jones Industrial Average hovering just below 10,000--a
milestone it surpassed in the period's final week. The stock market's rise could
be attributed primarily to continued U.S. economic growth and low inflation.
In the third quarter of 1998, defensive investments such as utilities
performed very well, as extreme stock market volatility left investors in search
of these more stable opportunities. Beginning in October, however, the stock
market began to recover, leading investors to opt instead for higher-growth
stocks. Although this shift had a generally negative effect on the utility
sector, telecommunications and cable companies were able to benefit.
Q GIVEN THIS ENVIRONMENT, HOW DID YOU MANAGE THE FUND?
A Early in the period, we maintained a higher-than-usual weighting in
electric utilities because they benefited from a "flight to quality," or
investor preference for less risky, more defensive investments. Also,
because of continuing economic troubles in Asia, Latin America, and Russia, we
limited our holdings in telecommunications stocks with significant exposure to
international markets. We did, however, maintain ample weighting in
predominantly domestic telecommunications companies. These decisions benefited
the Fund's shareholders, especially in the latter half of 1998.
As the reporting period drew to a close, our weighting in electric utilities
remained high, despite the sector's relative underperformance in late 1998 and
into 1999. We have held onto these stocks because valuations among electric
utilities currently are very attractive by historical measures.
Q WHICH STOCKS BENEFITED THE FUND DURING THE REPORTING PERIOD?
A The best-performing stocks during the reporting period were in the
domestic telecommunications area. These companies actively participated in the
stock
6
<PAGE> 8
market's gains in late 1998 and the first quarter of 1999. Many
telecommunications firms have partially transformed themselves into high-growth
businesses by taking advantage of growing markets for Internet and cellular
service. Among the Fund's best performers in this sector were Ameritech, AT&T,
Airtouch, BellSouth, SBC Communications, ALLTEL, Sprint, and U S West.
One company outside the telecommunications area that performed extremely
well for the Fund was PECO Energy, which provides retail electric and natural
gas service in southeastern Pennsylvania and engages in wholesale marketing of
electricity on a national basis. In addition to its core businesses, the company
has benefited from its purchase and subsequent turnaround of several nuclear
facilities.
Q WHICH OF THE FUND'S STOCKS PERFORMED POORLY?
A As mentioned earlier, because of deteriorating economic conditions abroad,
companies with significant exposure to international markets did not fare
well during the reporting period. The Fund's primary exposure to foreign
markets was in a handful of telecommunications companies. Some of these
companies that most hurt the Fund's performance were Portugal Telecom, China
Telecom, and Telecom Italia. Other international telecommunications firms, such
as France Telecom and Tele Denmark, did not perform as badly, and we continue to
own those companies' stock.
Two additional stocks that did not do well were energy distributor El Paso
Energy and electric utility New Centuries Energy. Both the energy and electric
utility sectors were hit hard during the reporting period, and the performance
of these two companies reflected those difficulties. Also contributing to these
firms' underperformance were concerns relating to acquisitions and investors'
preference for stocks with more immediate potential for appreciation. For
additional Fund portfolio highlights, please refer to page 9.
Q HOW DID THE FUND PERFORM OVERALL?
A For the nine-month period ended March 31, 1999, the Fund generated a total
return of 1.72 percent(1) (Class A shares at net asset value). By
comparison, the Standard & Poor's 40 Utilities Index returned -2.74
percent, while the Lipper Utility Fund Index returned 5.33 percent for the
period. The S&P Utilities Index is a broad-based index that reflects the general
performance of utility stocks and does not reflect any commissions that would be
paid by an investor purchasing the securities it represents. The Lipper Utility
Fund Index reflects the average performance of utility funds and does not
reflect any sales charges that would be paid by an investor purchasing the
securities it represents. Past performance does not guarantee future results.
For additional Fund performance results, please refer to the chart and footnotes
on page 3.
Q WHAT DO YOU SEE AHEAD FOR THE FUND?
A As we mentioned, electric utilities appear to be an excellent value right
now, so we believe that at some point our overweighting in this sector
will benefit the
7
<PAGE> 9
Fund. We are hopeful that, if growth stocks remain expensive, investors will
recognize the value to be found in electric utilities.
Continued international economic weakness may indirectly benefit the
domestic utilities market. The U.S. economy has proved resilient to this point,
but we see the potential for a slowdown in economic growth, leading investors
once again to pursue defensive investments in the wake of economic uncertainty.
If these scenarios occur, the Utility Fund is likely to be well positioned.
[SIG]
Christine Drusch
Portfolio Manager
[SIG]
David McLaughlin
Portfolio Comanager
[SIG]
Matthew Hart
Portfolio Comanager
[SIG]
Stephen L. Boyd
Chief Investment Officer
Equity Investments
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS
VAN KAMPEN UTILITY FUND
PORTFOLIO HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
TOP TEN HOLDINGS PERCENTAGE OF
AS OF THESE INVESTMENTS
MARCH 31, 1999 NINE MONTHS AGO
<S> <C> <C> <C>
Ameritech Corp. .................... 3.7% ................. 2.9%
AT&T Corp. ......................... 3.6% ................. 1.5%
SBC Communications, Inc. ........... 3.4% ................. 2.8%
Airtouch Communications, Inc. ...... 3.3% ................. 2.0%
DQE, Inc. .......................... 3.1% ................. N/A
U S West, Inc. ..................... 3.0% ................. 2.6%
BEC Energy ......................... 3.0% ................. 3.3%
Pinnacle West Capital Corp. ........ 2.7% ................. 3.4%
CMS Energy Group ................... 2.7% ................. 2.9%
Firstenergy Corp. .................. 2.6% ................. 2.8%
</TABLE>
N/A = Not Applicable
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
<S> <C>
Electric Utilities......... 44.6%
Telecommunications......... 38.3%
Oil, Gas, Pipeline and
Distribution............. 9.2%
Natural Gas Pipeline and
Distribution............. 4.9%
Cable Television........... 1.4%
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
<S> <C>
Electric Utilities......... 43.4%
Telecommunications......... 36.9%
Oil, Gas, Pipeline and
Distribution............. 14.9%
Natural Gas Pipeline and
Distribution............. 3.3%
Cable Television........... 1.5%
</TABLE>
ASSET ALLOCATION AS A PERCENTAGE OF TOTAL ASSETS
PIE CHART
<TABLE>
<CAPTION>
CASH AND SHORT-
AS OF MARCH 31, 1999 STOCKS BONDS CONVERTIBLES TERM INVESTMENTS OTHER
------ ----- ------------ ---------------- -----
<S> <C> <C> <C> <C> <C>
84.70 8.00 3.30 3.30 0.7
</TABLE>
PIE CHART
<TABLE>
<CAPTION>
CASH AND SHORT-
AS OF JUNE 30, 1998 STOCKS BONDS CONVERTIBLES TERM INVESTMENTS OTHER
------ ----- ------------ ---------------- -----
<S> <C> <C> <C> <C> <C>
86.4 8.10 2.30 2.60 0.60
</TABLE>
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Description Shares Market Value
- -----------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 88.8%
CONSUMER SERVICES 1.0%
Quanta Services, Inc. (a)............................ 60,000 $ 1,526,250
------------
ELECTRIC UTILITIES 41.8%
Allegheny Energy, Inc................................ 47,000 1,386,500
BEC Energy........................................... 120,000 4,410,000
Calpine Corp. (a).................................... 50,750 1,849,203
Cinergy Corp......................................... 73,000 2,007,500
CMS Energy Group..................................... 99,800 3,998,237
Consolidated Edison, Inc............................. 40,000 1,812,500
DQE, Inc............................................. 120,800 4,635,700
DTE Energy Co........................................ 50,000 1,921,875
Edison International................................. 36,200 805,450
FirstEnergy Corp..................................... 138,000 3,855,375
Florida Progress Corp................................ 96,000 3,624,000
GPU, Inc............................................. 85,675 3,196,748
Illinova Corp........................................ 80,500 1,705,594
New Century Energies, Inc............................ 79,000 2,690,938
Niagara Mohawk Holdings, Inc. (a).................... 127,700 1,715,969
OGE Energy Corp...................................... 144,000 3,249,000
PECO Energy Co....................................... 60,300 2,788,875
Pinnacle West Capital Corp........................... 111,600 4,059,450
Public Service Co. of New Mexico..................... 110,000 1,870,000
Reliant Energy, Inc.................................. 114,800 2,991,975
Sierra Pacific Resources............................. 100,000 3,518,750
Southern Co.......................................... 87,100 2,030,519
Texas Utilities Co................................... 73,800 3,076,537
Texas Utilities Co. -- Convertible Preferred,
PRIDES............................................. 14,800 789,025
------------
63,989,720
------------
NATURAL GAS PIPELINE AND DISTRIBUTION 4.7%
National Fuel Gas Co. NJ............................. 31,000 1,216,750
Nicor, Inc........................................... 50,000 1,796,875
Southwest Gas Corp................................... 100,000 2,750,000
Wicor, Inc........................................... 72,000 1,458,000
------------
7,221,625
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Description Shares Market Value
- -----------------------------------------------------------------------------
<S> <C> <C>
OIL & GAS PIPELINE AND DISTRIBUTION 7.1%
Coastal Corp......................................... 108,000 $ 3,564,000
Columbia Energy Group................................ 55,500 2,899,875
El Paso Energy Capital Trust I -- Convertible
Preferred.......................................... 41,750 2,009,219
Enron Corp........................................... 36,400 2,338,700
------------
10,811,794
------------
TELECOMMUNICATIONS 33.7%
Airtouch Communications, Inc. (a).................... 50,000 4,831,250
ALLTEL Corp.......................................... 49,300 3,075,088
Ameritech Corp....................................... 96,000 5,556,000
AT&T Corp............................................ 67,650 5,399,316
Bell Atlantic Corp................................... 39,900 2,062,331
BellSouth Corp....................................... 69,400 2,780,338
Cable & Wireless, PLC -- ADR (United Kingdom)........ 100,700 3,719,606
China Telecom -- ADR (China) (a)..................... 82,000 2,736,750
Cincinnati Bell, Inc................................. 41,000 919,938
Convergys Corp. (a).................................. 41,000 702,125
France Telecom -- ADR (France)....................... 20,000 1,613,750
Intermedia Communications, Inc. -- Convertible
Preferred Ser E.................................... 27,700 740,975
Nextlink Communications, Inc. -- Convertible
Preferred, 144A -- Private Placement (b)........... 21,500 1,510,375
SBC Communications, Inc.............................. 106,000 4,995,250
Sprint Corp.......................................... 23,400 2,296,125
Sprint Corp. PCS, Ser I (a).......................... 11,700 518,456
Tele Denmark A/S ADS (Denmark)....................... 50,000 2,450,000
Telstra, Ltd. -- ADR (Australia)..................... 11,700 1,234,350
U S West, Inc........................................ 81,000 4,460,062
------------
51,602,085
------------
TECHNOLOGY 0.5%
NorthEast Optic Network, Inc. (a).................... 60,000 847,500
------------
TOTAL COMMON AND PREFERRED STOCKS 88.8%....................... $135,998,974
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED INCOME SECURITIES 8.1%
CABLE TELEVISION 1.4%
$1,000 Continental Cablevision, Inc............. 8.300% 05/15/06 $ 1,097,440
1,000 Cox Communications, Inc.................. 6.875 06/15/05 1,036,601
------------
2,134,041
------------
ELECTRIC UTILITIES 1.4%
1,000 Texas Utilities Electric Co.............. 8.250 04/01/04 1,100,401
1,000 Union Electric Co........................ 7.375 12/15/04 1,070,196
------------
2,170,597
------------
OIL & GAS PIPELINE AND DISTRIBUTION 1.9%
1,000 Enron Corp............................... 7.125 05/15/07 1,045,575
500 Panhandle Eastern Pipeline Co............ 7.875 08/15/04 537,993
100 Texas Eastern Transmission Corp.......... 8.000 07/15/02 106,105
1,090 Texas Gas Transmission Corp.............. 8.625 04/01/04 1,205,170
------------
2,894,843
------------
TELECOMMUNICATIONS 3.4%
1,000 360 Communications....................... 7.125 03/01/03 1,041,115
1,000 Century Telephone Enterprises, Inc., Ser
F........................................ 6.300 01/15/08 1,001,528
900 GTE Corp................................. 9.375 12/01/00 952,968
1,000 Sprint Corp.............................. 8.125 07/15/02 1,060,938
1,000 Worldcom, Inc............................ 7.750 04/01/07 1,099,927
------------
5,156,476
------------
TOTAL FIXED INCOME SECURITIES........................................ 12,355,957
------------
TOTAL LONG-TERM INVESTMENTS 96.9%
(Cost $113,113,157)................................................ 148,354,931
SHORT-TERM INVESTMENTS 3.4%
(Cost $5,169,311).................................................. 5,169,311
------------
TOTAL INVESTMENTS 100.3%
(Cost $118,282,468)................................................ 153,524,242
LIABILITIES IN EXCESS OF OTHER ASSETS (0.3%)........................ (413,113)
------------
NET ASSETS 100.0%................................................... $153,111,129
============
</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
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $118,282,468)....................... $153,524,242
Cash........................................................ 1,092
Receivables:
Fund Shares Sold.......................................... 473,794
Interest.................................................. 298,180
Dividends................................................. 242,295
Other....................................................... 24
------------
Total Assets.......................................... 154,539,627
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 746,755
Fund Shares Repurchased................................... 221,746
Distributor and Affiliates................................ 175,920
Investment Advisory Fee................................... 87,419
Trustees' Deferred Compensation and Retirement Plans........ 128,788
Accrued Expenses............................................ 67,870
------------
Total Liabilities..................................... 1,428,498
------------
NET ASSETS.................................................. $153,111,129
============
NET ASSETS CONSIST OF:
Capital..................................................... $115,790,576
Net Unrealized Appreciation................................. 35,241,774
Accumulated Net Realized Gain............................... 2,060,599
Accumulated Undistributed Net Investment Income............. 18,180
------------
NET ASSETS.................................................. $153,111,129
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $62,071,730 and 3,554,036 shares of
beneficial interest issued and outstanding)............. $ 17.47
Maximum sales charge (5.75%* of offering price)......... 1.07
------------
Maximum offering price to public........................ $ 18.54
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $84,082,737 and 4,821,994 shares of
beneficial interest issued and outstanding)............. $ 17.44
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $6,956,662 and 399,217 shares of
beneficial interest issued and outstanding)............. $ 17.43
============
</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 Nine Months Ended March 31, 1999,
and the Year Ended June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
March 31, 1999 June 30, 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 3,340,479 $ 4,260,507
Interest.................................................. 789,039 1,219,948
----------- -----------
Total Income.......................................... 4,129,518 5,480,455
----------- -----------
EXPENSES:
Distribution (12b-1) and Services Fees (Attributed to
Classes A, B and C of $116,693, $657,434 and $46,844,
respectively, for the nine months ended 3/31/99 and
$139,079, $835,949 and $52,350, respectively, for the
year ended 6/30/98)..................................... 820,971 1,027,378
Investment Advisory Fee................................... 761,143 939,137
Shareholder Services...................................... 189,617 298,606
Trustees' Fees and Expenses............................... 27,467 34,021
Legal..................................................... 13,073 16,828
Custody................................................... 6,556 27,417
Amortization of Organizational Costs...................... 1,663 22,995
Other..................................................... 162,797 194,077
----------- -----------
Total Expenses........................................ 1,983,287 2,560,459
----------- -----------
NET INVESTMENT INCOME..................................... $ 2,146,231 $ 2,919,996
=========== ===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain......................................... $ 3,971,978 $ 5,691,843
----------- -----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................. 39,245,899 12,907,034
End of the Period:
Investments........................................... 35,241,774 39,245,899
----------- -----------
Net Unrealized Appreciation/Depreciation During the
Period.................................................. (4,004,125) 26,338,865
----------- -----------
NET REALIZED AND UNREALIZED GAIN/LOSS..................... $ (32,147) $32,030,708
=========== ===========
NET INCREASE IN NET ASSETS FROM OPERATIONS................ $ 2,114,084 $34,950,704
=========== ===========
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the Nine Months Ended March 31, 1999,
and the Years Ended June 30, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Year Ended Year Ended
March 31, 1999 June 30, 1998 June 30, 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.......................... $ 2,146,231 $ 2,919,996 $ 5,126,338
Net Realized Gain.............................. 3,971,978 5,691,843 10,817,404
Net Unrealized Appreciation/Depreciation
During the Period............................. (4,004,125) 26,338,865 1,002,087
------------ ------------ ------------
Change in Net Assets from Operations........... 2,114,084 34,950,704 16,945,829
------------ ------------ ------------
Distributions from Net Investment Income....... (2,070,469) (3,302,950) (4,918,449)
Distributions in Excess of Net Investment
Income........................................ -0- (58,293) -0-
------------ ------------ ------------
Distributions from and in Excess of Net
Investment Income*............................ (2,070,469) (3,361,243) (4,918,449)
------------ ------------ ------------
Distributions from Net Realized Gain........... (1,862,563) (13,156,292) (1,861,394)
Distributions in Excess of Net Realized Gain... -0- (125,726) -0-
------------ ------------ ------------
Distributions from and in Excess of Net
Realized Gain*................................ (1,862,563) (13,282,018) (1,861,394)
------------ ------------ ------------
Return of Capital Distribution*................ -0- (7,471,305) -0-
------------ ------------ ------------
Total Distributions............................ (3,933,032) (24,114,566) (6,779,843)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.................................... (1,818,948) 10,836,138 10,165,986
------------ ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold...................... 25,006,965 33,570,538 50,324,196
Net Asset Value of Shares Issued Through
Dividend Reinvestment......................... 3,332,371 21,003,724 5,538,900
Cost of Shares Repurchased..................... (26,459,204) (53,035,786) (80,912,740)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.................................. 1,880,132 1,538,476 (25,049,644)
------------ ------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS.......... 61,184 12,374,614 (14,883,658)
NET ASSETS:
Beginning of the Period........................ 153,049,945 140,675,331 155,558,989
------------ ------------ ------------
End of the Period (Including accumulated
undistributed net investment income of
$18,180, $(57,582) and $382,954,
respectively)................................. $153,111,129 $153,049,945 $140,675,331
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Year Ended Year Ended
*Distributions by Class March 31, 1999 June 30, 1998 June 30, 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Distributions from and in Excess
of Net Investment Income:
Class A Shares................... $ (1,031,678) $ (1,538,296) $ (2,064,034)
Class B Shares................... (970,381) (1,714,845) (2,700,742)
Class C Shares................... (68,410) (108,102) (153,673)
------------ ------------ ------------
$ (2,070,469) $ (3,361,243) $ (4,918,449)
============ ============ ============
Distributions from and in Excess
of Net Realized Gain:
Class A Shares................... $ (740,901) $ (5,310,506) $ (683,737)
Class B Shares................... (1,048,593) (7,494,154) (1,114,278)
Class C Shares................... (73,069) (477,358) (63,379)
------------ ------------ ------------
$ (1,862,563) $(13,282,018) $ (1,861,394)
============ ============ ============
Return of Capital Distribution:
Class A Shares................... $ -0- $ (2,987,603) $ -0-
Class B Shares................... -0- (4,215,072) -0-
Class C Shares................... -0- (268,630) -0-
------------ ------------ ------------
$ -0- $ (7,471,305) $ -0-
============ ============ ============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From July 28, 1993,
Nine Months (Commencement
Ended Year Ended June 30, of Investment
March 31, ------------------------------------- Operations) to
Class A Shares 1999 1998 1997 1996 1995 June 30, 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period............... $17.657 $16.441 $15.298 $13.386 $12.906 $ 14.300
------- ------- ------- ------- ------- ---------
Net Investment
Income............... .310 .429 .637 .538 .595 .479
Net Realized and
Unrealized
Gain/Loss............ .013 3.909 1.317 2.077 .485 (1.513)
------- ------- ------- ------- ------- ---------
Total from Investment
Operations........... .323 4.338 1.954 2.615 1.080 (1.034)
------- ------- ------- ------- ------- ---------
Less:
Distributions from
and in Excess of
Net Investment
Income............. .300 .480 .610 .703 .600 .323
Distributions from
and in Excess of
Net Realized
Gain............... .215 1.691 .201 -0- -0- .037
Return of Capital
Distribution....... -0- .951 -0- -0- -0- -0-
------- ------- ------- ------- ------- ---------
Total Distributions.... .515 3.122 .811 .703 .600 .360
------- ------- ------- ------- ------- ---------
Net Asset Value, End of
the Period........... $17.465 $17.657 $16.441 $15.298 $13.386 $ 12.906
======= ======= ======= ======= ======= =========
Total Return (a)....... 1.72%* 28.17% 13.20% 19.93% 8.70% (7.38%)*
Net Assets at End of
the Period (In
millions)............ $ 62.1 $ 60.4 $ 52.5 $ 57.7 $ 50.4 $ 51.5
Ratio of Expenses to
Average Net
Assets (b)........... 1.24% 1.30% 1.41% 1.38% 1.34% 1.34%
Ratio of Net Investment
Income to Average Net
Assets (b)........... 2.29% 2.47% 4.03% 3.61% 4.55% 4.10%
Portfolio Turnover..... 13%* 23% 102% 121% 109% 102%*
</TABLE>
*Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended June 30, 1997, and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
16
<PAGE> 18
FINANCIAL HIGHLIGHTS -- CONTINUED
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From July 28, 1993,
Nine Months (Commencement
Ended Year Ended June 30, of Investment
March 31, ------------------------------------- Operations) to
Class B Shares 1999 1998 1997 1996 1995 June 30, 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period.............. $17.632 $16.434 $15.296 $13.356 $12.880 $ 14.300
------- ------- ------- ------- ------- ---------
Net Investment
Income.............. .208 .309 .519 .426 .507 .394
Net Realized and
Unrealized
Gain/Loss........... .012 3.891 1.314 2.080 .461 (1.519)
------- ------- ------- ------- ------- ---------
Total from Investment
Operations.......... .220 4.200 1.833 2.506 .968 (1.125)
------- ------- ------- ------- ------- ---------
Less:
Distributions from
and in Excess of
Net Investment
Income............ .200 .360 .494 .566 .492 .258
Distributions from
and in Excess of
Net Realized
Gain.............. .215 1.691 .201 -0- -0- .037
Return of Capital
Distribution...... -0- .951 -0- -0- -0- -0-
------- ------- ------- ------- ------- ---------
Total Distributions... .415 3.002 .695 .566 .492 .295
------- ------- ------- ------- ------- ---------
Net Asset Value, End
of the Period....... $17.437 $17.632 $16.434 $15.296 $13.356 $ 12.880
======= ======= ======= ======= ======= =========
Total Return (a)...... 1.21%* 27.20% 12.30% 19.08% 7.80% (8.02%)*
Net Assets at End of
the Period (In
millions)........... $ 84.1 $ 86.8 $ 83.3 $ 92.9 $ 81.0 $ 83.7
Ratio of Expenses to
Average Net
Assets (b).......... 1.99% 2.07% 2.17% 2.13% 2.05% 2.06%
Ratio of Net
Investment Income to
Average Net
Assets (b).......... 1.53% 1.74% 3.27% 2.86% 3.84% 3.36%
Portfolio Turnover.... 13%* 23% 102% 121% 109% 102%*
</TABLE>
*Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended June 30, 1997, and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
17
<PAGE> 19
FINANCIAL HIGHLIGHTS -- CONTINUED
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months From August 13, 1993,
Ended Year Ended June 30, (Commencement of
March 31, ------------------------------------- Distribution) to
Class C Shares 1999 1998 1997 1996 1995 June 30, 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period............. $17.619 $16.426 $15.290 $13.356 $12.868 $14.460
------- ------- ------- ------- ------- -------
Net Investment
Income............. .209 .308 .503 .470 .482 .330
Net Realized and
Unrealized
Gain/Loss.......... .013 3.887 1.328 2.030 .498 (1.627)
------- ------- ------- ------- ------- -------
Total from Investment
Operations......... .222 4.195 1.831 2.500 .980 (1.297)
------- ------- ------- ------- ------- -------
Less:
Distributions from
and in Excess of
Net Investment
Income........... .200 .360 .494 .566 .492 .258
Distributions from
and in Excess of
Net Realized
Gain............. .215 1.691 .201 -0- -0- .037
Return of Capital
Distribution..... -0- .951 -0- -0- -0- -0-
------- ------- ------- ------- ------- -------
Total
Distributions...... .415 3.002 .695 .566 .492 .295
------- ------- ------- ------- ------- -------
Net Asset Value, End
of the Period...... $17.426 $17.619 $16.426 $15.290 $13.356 $12.868
======= ======= ======= ======= ======= =======
Total Return (a)..... 1.22%* 27.14% 12.37% 19.00% 7.88% (9.11%)*
Net Assets at End of
the Period (In
millions).......... $7.0 $5.9 $4.9 $5.0 $1.3 $1.1
Ratio of Expenses to
Average
Net Assets (b)..... 1.99% 2.06% 2.17% 2.13% 2.09% 2.05%
Ratio of Net
Investment Income
to Average Net
Assets (b)......... 1.53% 1.73% 3.23% 2.78% 3.80% 3.38%
Portfolio Turnover... 13%* 23% 102% 121% 109% 102%*
</TABLE>
*Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended June 30, 1997, and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Utility Fund (the "Fund") is organized as a series of the Van Kampen
Equity Trust, a Delaware business trust and is registered as a diversified
open-end management investment company under the Investment Company Act of 1940,
as amended. The Fund's investment objective is to provide its shareholders with
capital appreciation and current income, through investment in common stocks and
income securities of companies engaged in the utilities industry. The Fund
commenced investment operations on July 28, 1993, with two classes of common
shares, Class A and Class B shares. The distribution of the Fund's Class C
shares commenced on August 13, 1993. In July 1998, the Fund's Board of Trustees
approved a change in the Fund's fiscal year end from June 30 to March 31. As a
result, this financial report reflects the nine month period commencing on July
1, 1998, and ending on March 31, 1999.
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 March 31, 1999, there were no
when issued or delayed delivery purchase commitments.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date;
interest income is recorded on an accrual basis. Bond discount is amortized over
the expected life of each applicable security. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class of
shares.
D. ORGANIZATIONAL COSTS--The Fund has reimbursed Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $115,000. These costs were amortized on a
straight line basis over the 60-month period ending July 28, 1998.
E. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At March 31, 1999, for federal income tax purposes the cost of long- and
short-term investments is $118,282,468, the aggregate gross unrealized
appreciation is $37,999,562 and the aggregate gross unrealized depreciation is
$2,757,788, resulting in net unrealized appreciation on long- and short-term
investments of $35,241,774.
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
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
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.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and for
federal income tax purposes, permanent book and tax differences have been
reclassified. For the year ended June 30, 1998, $77,621 has been reclassified
from capital with $711 posted to accumulated undistributed net investment income
and $76,910 posted to accumulated net realized gain/loss. These differences
relate to the character of gain/loss recognized on the sale of and distributions
received from REIT's and the impact of the amortization of organizational costs
on tax basis earnings and profits.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ----------------------------------------------------------------------
<S> <C>
First $500 million.................................... .65 of 1%
Next $500 million..................................... .60 of 1%
Over $1 billion....................................... .55 of 1%
</TABLE>
For the nine months ended March 31, 1999, and the year ended June 30, 1998,
the Fund recognized expenses of approximately $7,000 and $5,400, respectively,
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated
person.
For the nine months ended March 31, 1999, and the year ended June 30, 1998,
the Fund recognized expenses of approximately $64,600 and $64,700, respectively,
representing Van Kampen's cost of providing accounting and legal services to the
Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent of the Fund. For the nine months ended March 31,
1999, and the year ended June 30, 1998, the Fund recognized expenses of
approximately $148,300 and $212,500, respectively. 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
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
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.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At 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>
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
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>
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
At June 30, 1997, capital aggregated $44,783,868, $71,029,312 and $4,107,714
for Classes A, B and C, respectively. For the year ended June 30, 1997,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A...................................... 2,620,830 $ 41,844,771
Class B...................................... 496,213 7,650,734
Class C...................................... 55,249 828,691
---------- ------------
Total Sales.................................... 3,172,292 $ 50,324,196
========== ============
Dividend Reinvestment:
Class A...................................... 146,956 $ 2,266,380
Class B...................................... 203,976 3,135,954
Class C...................................... 8,882 136,566
---------- ------------
Total Dividend Reinvestment.................... 359,814 $ 5,538,900
========== ============
Repurchases:
Class A...................................... (3,344,356) $(53,090,333)
Class B...................................... (1,709,336) (26,459,861)
Class C...................................... (89,228) (1,362,546)
---------- ------------
Total Repurchases.............................. (5,142,920) $(80,912,740)
========== ============
</TABLE>
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC will be imposed on most redemptions made within six years of
the purchase for Class B and one year of the purchase for Class C as detailed in
the following schedule.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ---------------------------------------------------------------------------
<S> <C> <C>
First........................................ 4.00% 1.00%
Second....................................... 3.75% None
Third........................................ 3.50% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Sixth........................................ 1.00% None
Seventh and Thereafter....................... None None
</TABLE>
For the nine months ended March 31, 1999, and the year ended June 30, 1998,
Van Kampen, as Distributor for the Fund, received net commissions on sales of
the Fund's Class A shares of approximately $15,900 and $16,000, respectively,
and CDSC on redeemed shares of approximately $88,000 and $181,300, respectively.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
For the nine months ended March 31, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $20,270,111
and $21,078,042, respectively. For the year ended June 30, 1998, the cost of
purchases and proceeds from sales of investments, excluding short-term
investments, were $32,564,835 and $51,249,647, respectively.
25
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
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 nine months ended March 31, 1999, and the year ended June 30, 1998,
are payments retained by Van Kampen of approximately $511,188 and $643,300,
respectively.
26
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Utility Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Utility Fund (the "Fund"), including the portfolio of investments, as of
March 31, 1999, and the related statement of operations for the nine-month
period ended March 31, 1999 and the year ended June 30, 1998, the statement of
changes in net assets for the nine-month period ended March 31, 1999 and for
each of the years in the two-year period ended June 30, 1998, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Utility Fund as of March 31, 1999, the results of its operations for the
nine-month period ended March 31, 1999 and the year ended June 30, 1998, the
changes in its net assets for the nine-month period ended March 31, 1999 and for
each of the years in the two-year period then ended June 30, 1998, and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
May 6, 1999
27
<PAGE> 29
VAN KAMPEN UTILITY FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN*--Chairman
PAUL G. YOVOVICH
OFFICERS
DENNIS J. MCDONNELL*
President
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR
SERVICES INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
For federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
March 31, 1999. The Fund designated and paid $1,862,563 as a 20% rate gain
distribution. Shareholders were sent a 1998 Form 1099-DIV in January 1999,
representing their proportionate share of this capital gain distribution. For
corporate shareholders 100% of the distributions qualify for the dividend
received deductions.
- --------------------------------------------------------------------------------
* "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 September 30, 1999, the report, if used with
prospective investors, must be accompanied by a quarterly performance update.
28
<PAGE> 30
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> 31
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Performance in Perspective....................... 4
Glossary of Terms................................ 5
Portfolio Management Review...................... 6
Portfolio Highlights............................. 9
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 15
Statement of Operations.......................... 16
Statement of Changes in Net Assets............... 17
Financial Highlights............................. 18
Notes to Financial Statements.................... 21
Report of Independent Accountants................ 28
</TABLE>
AGG ANR 5/99
<PAGE> 32
LETTER TO SHAREHOLDERS
April 20, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together we've
witnessed one of the greatest bull markets in investment history, unprecedented
growth in mutual fund investing, and a surge in personal retirement planning.
The coming millennium promises to hold even more opportunities.
To lead us into this new era of investing, Richard F. Powers III has joined
Van Kampen as Chairman and Chief Executive Officer. He comes to us from our
parent company, Morgan Stanley Dean Witter & Co., where he served as Executive
Vice President and Director of Marketing. He brings 27 years of experience in
the financial services industry, including an extensive background in product
management, strategic planning, and brand development.
Although former Chairman Don G. Powell retired on January 1, he will remain
active in the industry and the community. Mr. Powell plans to continue his
service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
ECONOMIC OVERVIEW
The U.S. economy continued to grow at a robust pace, despite financial
problems abroad. In the fourth quarter, the nation's gross domestic product
(GDP) rose at an astounding 6.0 percent annual rate, surprising most economists,
whose estimates had been much more conservative. GDP remained strong through the
first quarter of 1999, posting a 4.5 percent annual growth rate. However, the
economy began to show signs of slowing down early in 1999, as corporate profits
and wage growth declined.
A series of interest rate cuts by the Federal Reserve helped the U.S.
economy avoid the economic slump that plagued many global markets. The Fed's
0.25 percent interest rate cut in September was followed by additional cuts in
October and November. These rate cuts, coupled with a wave of corporate mergers
and cost-cutting measures, lent the support needed to foster continued growth.
In addition, the outlook for troubled areas such as Asia and Latin America
improved significantly, and most experts agree that these economies are on the
slow road to recovery.
Despite the improvements abroad and record economic growth in the United
States, inflation remained at bay as commodity prices tumbled. This low
inflationary environment--only a 1.7 percent increase in the consumer price
index over the past 12 months--contributed to the strong domestic economy and
kept inflation-adjusted
Continued on page 2
1
<PAGE> 33
interest rates attractive. A low level of unemployment, vibrant consumer
spending, and an active housing market also supported the positive economic
conditions.
MARKET REVIEW
The stock market bounced back resoundingly from the lows we experienced in
August and September, when concerns about the global economic slowdown had
reached a peak. Growth-oriented large-company stocks displayed the most
resilience, propelling the Dow Jones Industrial Average past the 10,000 mark for
the first time at the end of the reporting period. Investors continued to favor
the earnings strength and perceived stability of these high-quality stocks,
while many other areas of the market remained sluggish. With the emphasis on
growth-style blue-chip companies, many investors overlooked the strong values to
be found in other areas of the market, especially among smaller companies. The
Russell 2000 Index, which represents small-cap stocks, lost more than 12 percent
during the nine months since our last report, compared with a gain of almost 15
percent for the larger companies composing the S&P 500 Index.
OUTLOOK
Our outlook for the domestic economy remains positive, although the pattern
of reduced growth may continue into the second half of the year. We look for a
slow but steady rise in inflation throughout 1999 to more normal, but certainly
not alarming levels. Internationally, low interest rates and improving financial
conditions should continue to support the economic improvements we've witnessed
in Asia and Latin America.
We believe the markets may still favor higher-quality securities such as
large-company stocks and investment-grade bonds in the near term. In addition,
we anticipate continued day-to-day volatility in the markets, although we
probably won't see sustained high or low periods during the next six months.
Additional details about your fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.
Sincerely,
[SIG.]
Richard F. Powers III
Chairman
Van Kampen Investment Advisory
Corp.
[SIG.]
Dennis J. McDonnell
President
Van Kampen Investment Advisory
Corp.
2
<PAGE> 34
PERFORMANCE RESULTS FOR THE PERIOD ENDED MARCH 31, 1999
VAN KAMPEN AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Nine-month total return based on
NAV(1)................................... 33.72% 32.99% 32.96%
Nine-month total return(2)............... 26.07% 27.99% 31.96%
One-year total return(2)................. 31.80% 33.76% 37.84%
Life-of-Fund average annual total
return(2)................................ 23.67% 24.63% 25.36%
Commencement date........................ 05/29/96 05/29/96 05/29/96
</TABLE>
(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for A shares) or contingent
deferred sales charge for early withdrawal (5.00% for B and 1.00% for C shares).
(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Market volatility may have adversely affected
fund performance since March 31, 1999. 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> 35
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment performance at regular intervals. A
comparison of your Fund's performance to an applicable benchmark can:
- Illustrate the market environment in which your Fund is being managed.
- Reflect the impact of favorable market trends or difficult market
conditions.
- Help you evaluate the how your Fund's management team has responded to
opportunities and challenges.
The following graph compares your Fund's performance to that of the Standard
& Poor's 500 Index,* the Russell 2000 Index, and the Russell 2500 Growth Index
over time. These indexes are statistical composites that do not include any
commissions that would be paid by an investor purchasing the securities they
represent.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Aggressive Growth Fund vs. the Standard & Poor's 500 Index,* the
Russell 2000 Index, and the Russell 2500 Growth Index (May 29, 1996 through
March 31, 1999)
[INVESTMENT PERFORMANCE GRAPH]
------------------------------
Fund's Total Return
1 Year Total Return = 31.80%
Inception Avg. Annual = 23.67%
------------------------------
<TABLE>
<CAPTION>
VAN KAMPEN
AGGRESSIVE GROWTH STANDARD & POOR'S 500 RUSSELL 2500 GROWTH
FUND INDEX* RUSSELL 2000 INDEX INDEX
----------------- --------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
May1996 9421.00 10000.00 10000.00 10000.00
9101.00 10097.00 9589.00 9501.10
8262.00 9635.00 8752.00 8635.45
9051.00 9816.00 9260.00 9230.01
Sep1996 9990.00 10407.00 9622.00 9697.87
9950.00 10678.00 9474.00 9444.66
9900.00 11462.00 9864.00 9812.91
10010.00 11273.00 10122.00 9886.21
10120.00 11964.00 10325.00 10154.00
8821.00 12035.00 10074.00 9795.29
Mar1997 8092.00 11577.00 9599.00 9220.80
8372.00 12253.00 9626.00 9264.78
9341.00 12971.00 10697.00 10323.50
9920.00 13594.00 11155.00 10705.00
11089.00 14656.00 11674.00 11320.00
11419.00 13814.00 11941.00 11600.90
Sep1997 12687.00 14611.00 12815.00 12420.10
11788.00 14107.00 12252.00 11643.40
11219.00 14736.00 12173.00 11465.00
11379.00 15029.00 12386.00 11423.60
11129.00 15181.00 12191.00 11275.30
12288.00 16251.00 13092.00 12244.30
Mar1998 13067.00 17120.00 13632.00 12701.30
13307.00 17276.00 13707.00 12817.00
12507.00 16951.00 12969.00 11994.30
13666.00 17684.00 12996.00 12082.80
13167.00 17479.00 11944.00 11177.80
10340.00 14930.00 9625.00 8637.97
Sep1998 11608.00 15928.00 10378.00 9394.31
11499.00 17207.00 10801.00 10028.10
13037.00 18225.00 11367.00 10740.90
15407.00 19315.00 12071.00 11774.70
17081.00 20107.00 12231.00 12115.30
16015.00 19458.00 11241.00 11132.60
Mar1999 18275.00 20276.00 11416.00 11651.40
</TABLE>
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions and includes payment of the maximum
sales charge (5.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
* The S&P 500 Index is a broad-based index that reflects the general performance
of the stock market and was initially selected as a benchmark comparison for the
Fund's performance. Based upon the Fund's asset composition, we believe the
Russell 2500 Growth Index provides a more accurate narrow-based benchmark for
the Fund. Therefore, the S&P 500 Index will not be shown in future reports.
4
<PAGE> 36
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).
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 company's forecast for their net income during a given
period.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its
policy-making committee, called the Federal Open Market Committee, meets
eight times a year to establish monetary policy and monitor the economic
pulse of the United States.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
GROSS DOMESTIC PRODUCT (GDP): The total market value of all final goods and
services produced in a country in a given year.
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.
PRICE-TO-BOOK RATIO: A stock's market capitalization divided by its book value,
which is a company's total assets minus liabilities, preferred stock, and
intangible assets such as goodwill.
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.
5
<PAGE> 37
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AGGRESSIVE GROWTH FUND
We recently spoke to the management team of the Van Kampen Aggressive Growth
Fund about the key events and economic forces that shaped the markets during the
reporting period. The team includes Gary M. Lewis, portfolio manager; Dudley
Brickhouse, David Walker, and Janet Luby, portfolio comanagers; and Stephen L.
Boyd, chief investment officer for equity investments.
The Fund's fiscal year end was recently changed from June 30 to March 31.
Going forward, your annual reports will be dated March 31, and your semiannual
reports will be dated September 30. The following interview discusses the Fund's
performance during the nine-month period since your last annual report, from
July 1, 1998, to March 31, 1999.
Q COULD YOU TALK BRIEFLY ABOUT THE MARKET ENVIRONMENT DURING THE REPORTING
PERIOD AND HOW IT AFFECTED THE FUND?
A The stock market was extremely volatile during the reporting period,
plummeting early in the period but staging an impressive recovery that
left the Dow Jones Industrial Average hovering just below 10,000--a
milestone the Dow surpassed in the period's final week. The stock market's rise
could be attributed primarily to sustained U.S. economic growth and low
inflation. Large-cap growth stocks continued to be the beneficiaries of the
market rise; small- and mid-cap stocks did not do as well. Consequently, this
was not the most favorable environment for the Fund, which invests the majority
of its assets in small- and mid-cap stocks. But we did own some large-cap
holdings that helped the Fund significantly.
Q GIVEN THIS ENVIRONMENT, HOW DID YOU MANAGE THE FUND?
A We maintain a consistent management strategy regardless of market
conditions: seeking to invest in companies with rising earnings
expectations and rising valuations. Early in the reporting period, as the
market was declining, it was more difficult to find small- and mid-cap stocks
that met our criteria because there were relatively few such companies with
increasing valuations. Beginning in November, however, market conditions began
to improve dramatically, and it became easier--though by no means easy--to
satisfy our investment discipline. The Fund included a higher-than-average
weighting in large-cap stocks because they tended to outperform the market
during the period.
Q DID YOU MAKE ANY NEW PURCHASES DURING THE REPORTING PERIOD THAT BENEFITED
THE FUND?
A Some of our most successful new purchases were in the technology area.
Go2Net, an Internet search company backed by Microsoft cofounder Paul
Allen, was an excellent performer for the Fund, as was VISX, a company
that supplies lasers for corrective eye surgery. Metromedia Fiber Network, which
works to alleviate the
6
<PAGE> 38
bottlenecks that occur as more and more people go on-line, also helped boost the
Fund's return. The Fund's biggest holding, RF Micro Devices, was a new purchase
during the reporting period. This company, which makes components for cellular
phones, has helped the Fund considerably since we bought it in September 1998.
Q WHAT OTHER STOCKS HELPED THE FUND?
A Internet-related stocks were among our most successful holdings. During
the reporting period, some of our best performers included Internet
provider America Online (up 459 percent), data storage company EMC (up 185
percent), and Internet search engine Yahoo! (up 328 percent). Other successes
included credit card company Providian Financial and retailers Best Buy and
Abercrombie & Fitch.
Q WHAT STOCKS DID YOU SELL BECAUSE OF POOR PERFORMANCE?
A Toward the end of the period, concerns mounted about a slowdown in the
computer software and services industry. Investors believed this area was
vulnerable to a decline in routine technology spending as companies dedicate
more of their budgets to year 2000 concerns. Stock prices for computer software
and service companies fell correspondingly. When their prices started to
decline, we decided to get out of stocks such as Engineering Animation, BMC
Software, Compuware, Software AG, Visio, JDA Software, Saville Systems, Ciber,
and SPR. These turned out to be good sales because these companies' stock prices
later fell even further.
Also, in response to a slowdown in the personal computer industry, we
opted to eliminate our position in Dell Computer, formerly the Fund's largest
holding. We decided to sell the position after the company announced its
revenues weren't accelerating as quickly as expected.
Outside the computer industry, we also sold our holdings in Steiner
Leisure (cruise ship spa operator), Finish Line (athletic apparel retailer), and
Party City (party supplies retailer), all of which were falling in value when we
made our sales. For additional Fund portfolio highlights, please refer to page
9.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A Despite operating in a tough environment for stock selection, the Fund
performed extremely well, recovering from a significant market decline
early in the reporting period to post impressive gains. During the
reporting period, the Fund returned 33.72 percent(1) (Class A shares at net
asset value). By comparison, the Russell 2000 Index returned -12.16 percent, and
the Russell 2500 Growth Index, which more closely resembles the Fund, returned
- -3.57 percent.
The Russell 2000 Index 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 indices are statistical composites that do not
include any commissions that would
7
<PAGE> 39
be paid by an investor purchasing the securities or investments represented by
these indices. 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?
A Our biggest concern is continued market volatility, to which growth stocks
are especially vulnerable. Even if we invest only in those stocks that
have what we believe are solid fundamentals, these companies' stock prices
are not going to go up if the market enters a correction. It is very difficult
to prepare for such corrections because they can happen at any time, without
warning.
Related to this concern is the impact that Internet trading is having on
growth stocks. Recently, growth stocks have become even more susceptible to
rapid price increases and decreases, suggesting the increasing influence of
on-line "day traders"--investors with very short time horizons. This is a new
phenomenon in our industry, and we are seeking to better understand how this
form of day trading affects our investment discipline. In the meantime, we
believe our best response is to continue to conduct thorough research about the
companies in which we invest and seek to avoid fundamental surprises.
Finally, small-cap stocks currently remain undervalued relative to
large-cap stocks. This situation has been in place for some time now, so we do
not know when a reversal will occur. If the market does broaden and small caps
begin to recognize their potential, we believe the Fund will be well positioned
to take advantage of the situation.
[SIG]
GARY M. LEWIS
Gary M. Lewis
Portfolio Manager
[SIG]
DAVID WALKER
David Walker
Portfolio Comanager
[SIG]
STEPHEN L. BOYD
Stephen L. Boyd
Chief Investment Officer
Equity Investments
[SIG]
DUDLEY BRICKHOUSE
Dudley Brickhouse
Portfolio Comanager
[SIG]
JANET LUBY
Janet Luby
Portfolio Comanager
8
<PAGE> 40
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AGGRESSIVE GROWTH FUND
PORTFOLIO HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOP TEN HOLDINGS THESE INVESTMENTS
AS OF MARCH 31, 1999 NINE MONTHS AGO
<S> <C> <C> <C>
RF Micro Devices, Inc. .............. 3.1% ................. N/A
America Online, Inc. ................ 2.6% ................. 1.2%
EMC Corp. ........................... 2.3% ................. 1.1%
VISX, Inc. .......................... 2.0% ................. N/A
SDL, Inc. ........................... 2.0% ................. N/A
Carrier Access Corp. ................ 2.0% ................. N/A
Abercrombie & Fitch Co. ............. 1.9% ................. 1.3%
Geotel Communications Corp. ......... 1.8% ................. 1.1%
Providian Financial Corp. ........... 1.8% ................. 1.1%
Macromedia, Inc. .................... 1.8% ................. N/A
</TABLE>
N/A = Not Applicable
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<S> <C>
AS OF MARCH 31, 1999
Technology .................................... 44%
Consumer Services ............................. 13%
Health Care ................................... 13%
Consumer Distribution ......................... 12%
Utilities ..................................... 5%
AS OF JUNE 30, 1998
Technology .................................... 36%
Consumer Distribution ......................... 17%
Consumer Services ............................. 14%
Finance ....................................... 11%
Health Care ................................... 5%
</TABLE>
9
<PAGE> 41
PORTFOLIO OF INVESTMENTS
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 89.9%
CONSUMER DISTRIBUTION 10.7%
99 Cents Only Stores (a).............................. 50,000 $ 2,121,875
Abacus Direct Corp. (a)............................... 30,000 2,460,000
Abercrombie & Fitch Co. (a)........................... 95,000 8,740,000
American Eagle Outfitters, Inc. (a)................... 30,000 2,150,625
Ames Department Stores, Inc. (a)...................... 70,000 2,598,750
AnnTaylor Stores Corp. (a)............................ 145,000 6,407,188
Best Buy Co., Inc. (a)................................ 140,000 7,280,000
Chico's Fas, Inc. (a)................................. 85,000 1,827,500
Circuit City Stores-Circuit City Group................ 50,000 3,831,250
Claire's Stores, Inc.................................. 75,000 2,259,375
Hollywood Entertainment Corp. (a)..................... 100,000 1,862,500
Jacor Communications, Inc., Class A (a)............... 30,000 2,280,000
K-Swiss, Inc., Class A................................ 30,000 757,500
O'Reilly Automotive, Inc. (a)......................... 55,000 2,461,250
Pacific Sunwear of California (a)..................... 40,000 1,390,000
Staples, Inc. (a)..................................... 120,000 3,945,000
Tricon Global Restaurants, Inc. (a)................... 15,652 1,099,553
------------
53,472,366
------------
CONSUMER DURABLES 1.5%
Copart, Inc. (a)...................................... 100,000 2,075,000
CSK Auto Corp. (a).................................... 50,000 1,496,875
MIPS Technologies, Inc. (a)........................... 35,000 2,135,000
Sonic Automotive, Inc. (a)............................ 100,000 1,550,000
------------
7,256,875
------------
CONSUMER NON-DURABLES 3.6%
bebe stores, inc. (a)................................. 75,000 3,075,000
Ben & Jerry's Homemade, Inc., Class A (a)............. 75,000 2,100,000
Cutter & Buck, Inc. (a)............................... 50,000 1,600,000
Fossil, Inc. (a)...................................... 120,000 3,577,500
Linens 'N Things, Inc. (a)............................ 65,000 2,949,375
Quiksilver Resources, Inc. (a)........................ 110,000 4,647,500
------------
17,949,375
------------
CONSUMER SERVICES 12.0%
Adelphia Communications Corp., Class A (a)............ 35,000 2,205,000
autobytel.com, inc. (a)............................... 26,900 1,126,437
</TABLE>
See Notes to Financial Statements
10
<PAGE> 42
PORTFOLIO OF INVESTMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
CMP Media, Inc. (a)................................... 55,000 $ 1,691,250
Covad Communications Group, Inc. (a).................. 40,000 2,630,000
Earthlink Network, Inc. (a)........................... 30,000 1,800,000
Entercom Communications Corp. (a)..................... 15,700 555,388
Express Scripts, Inc., Class A (a).................... 57,000 4,898,437
Foodmaker, Inc. (a)................................... 125,000 3,187,500
FPIC Insurance Group, Inc. (a)........................ 40,000 1,660,000
Go2Net, Inc. (a)...................................... 35,000 4,641,875
International Network Services (a).................... 60,000 4,196,250
International Speedway Corp., Class A................. 25,000 1,318,750
iVillage, Inc. (a).................................... 10,100 1,015,050
Metromedia Fiber Network, Inc. (a).................... 140,000 7,253,750
Metzler Group, Inc. (a)............................... 75,000 2,353,125
NCO Group, Inc. (a)................................... 35,000 1,295,000
Outdoor Systems, Inc. (a)............................. 78,750 2,362,500
Pegasus Systems, Inc. (a)............................. 85,000 3,389,375
Quanta Services, Inc. (a)............................. 100,000 2,543,750
RoweCom, Inc. (a)..................................... 30,000 1,308,750
Speedway Motorsports, Inc. (a)........................ 75,000 3,093,750
TMP Worldwide, Inc. (a)............................... 50,000 3,240,625
Vignette Corp. (a).................................... 15,500 1,166,375
Ziff-Davis, Inc. (a).................................. 36,800 1,324,800
------------
60,257,737
------------
FINANCE 3.1%
Capital One Financial Corp............................ 15,000 2,265,000
Knight/Trimark Group, Inc., Class A (a)............... 25,000 1,675,000
Providian Financial Corp.............................. 73,700 8,107,000
TeleBanc Financial Corp. (a).......................... 25,000 1,993,750
US Trust Corp......................................... 20,000 1,483,750
------------
15,524,500
------------
HEALTHCARE 11.4%
Advance Paradigm, Inc. (a)............................ 45,000 2,843,438
Alpharma, Inc......................................... 165,100 6,480,175
Andrx Corp. (a)....................................... 40,000 3,645,000
Biogen, Inc. (a)...................................... 45,000 5,144,062
Biomatrix, Inc. (a)................................... 30,000 2,340,000
</TABLE>
See Notes to Financial Statements
11
<PAGE> 43
PORTFOLIO OF INVESTMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
Hooper Holmes, Inc.................................... 70,000 $ 1,093,750
IDEC Pharmaceuticals Corp. (a)........................ 25,000 1,284,375
Laser Vision Centers, Inc. (a)........................ 125,000 4,765,625
Medicis Pharmaceutical Corp., Class A (a)............. 25,000 750,000
MedImmune, Inc. (a)................................... 50,000 2,959,375
Molecular Devices Corp. (a)........................... 65,000 1,755,000
Osteotech, Inc. (a)................................... 52,500 1,804,688
Priority Healthcare Corp. (a)......................... 125,000 5,656,250
TLC The Laser Center, Inc. (a)........................ 50,000 1,609,375
VISX, Inc. (a)........................................ 85,000 9,142,812
Xomed Surgical Products, Inc. (a)..................... 150,000 5,887,500
------------
57,161,425
------------
PRODUCER MANUFACTURING 1.9%
Cree Research, Inc. (a)............................... 50,000 2,346,875
Dycom Industries, Inc. (a)............................ 135,000 5,872,500
Insituform Technologies, Inc. (a)..................... 84,000 1,470,000
------------
9,689,375
------------
RAW MATERIALS/PROCESSING INDUSTRIES 1.7%
Elcor Corp............................................ 135,000 4,750,313
Optical Coating Laboratory, Inc....................... 50,000 2,400,000
Stillwater Mining Co. (a)............................. 50,000 1,318,750
------------
8,469,063
------------
TECHNOLOGY 39.2%
Advantage Learning Systems, Inc. (a).................. 80,000 2,485,000
America Online, Inc. (a).............................. 80,000 11,680,000
Applied Micro Circuits Corp. (a)...................... 50,000 2,137,500
AVT Corp. (a)......................................... 153,200 3,657,650
Aware, Inc. (a)....................................... 55,000 2,585,000
BroadVision, Inc. (a)................................. 50,000 2,987,500
Business Objects SA (a)............................... 60,000 1,781,250
Carrier Access Corp. (a).............................. 115,000 8,890,937
Concord Communications, Inc. (a)...................... 85,000 4,845,000
CSG Systems International, Inc. (a)................... 140,000 5,521,250
EMC Corp. (a)......................................... 80,000 10,220,000
Exodus Communications, Inc. (a)....................... 15,000 2,017,500
FactSet Research Systems, Inc......................... 42,500 1,838,125
</TABLE>
See Notes to Financial Statements
12
<PAGE> 44
PORTFOLIO OF INVESTMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Gemstar International Group Ltd. (a).................. 52,300 $ 3,935,575
Geotel Communications Corp. (a)....................... 180,000 8,257,500
Gilat Satellite Networks Ltd. (a)..................... 95,000 5,700,000
Harmonic, Inc. (a).................................... 45,000 1,243,125
ISS Group, Inc. (a)................................... 50,000 3,975,000
Macromedia, Inc. (a).................................. 175,000 7,929,687
Mercury Interactive Corp. (a)......................... 130,000 4,631,250
Micromuse, Inc. (a)................................... 85,000 3,910,000
Mindspring Enterprises, Inc. (a)...................... 75,000 6,454,688
NEON Systems, Inc. (a)................................ 22,700 1,248,500
Network Appliance, Inc. (a)........................... 100,000 5,062,500
Network Solutions, Inc., Class A (a).................. 40,000 4,230,000
New Era of Networks, Inc. (a)......................... 100,000 6,775,000
pcOrder.com, Inc. (a)................................. 10,000 566,250
Peregrine Systems, Inc. (a)........................... 180,000 6,052,500
Power Integrations, Inc. (a).......................... 100,000 3,175,000
Qlogic Corp. (a)...................................... 45,000 3,020,625
Rational Software Corp. (a)........................... 90,000 2,413,125
SanDisk Corp. (a)..................................... 70,000 1,855,000
Sapient Corp. (a)..................................... 25,000 1,784,375
SDL, Inc. (a)......................................... 100,000 9,075,000
SEI Investments Co.................................... 29,700 2,747,250
TSI International Software Ltd. (a)................... 35,000 1,708,438
Tweeter Home Entertainment Group, Inc. (a)............ 75,000 2,418,750
Uniphase Corp. (a).................................... 35,000 4,029,375
USWeb Corp. (a)....................................... 100,000 4,125,000
VeriSign, Inc. (a).................................... 20,000 3,080,000
VERITAS Software Corp. (a)............................ 75,000 6,056,250
Verity, Inc. (a)...................................... 125,000 4,187,500
Visual Networks, Inc. (a)............................. 30,000 1,121,250
Vitesse Semiconductor Corp. (a)....................... 40,000 2,025,000
Waters Corp. (a)...................................... 65,000 6,829,062
WebTrends Corp. (a)................................... 26,000 1,264,250
</TABLE>
See Notes to Financial Statements
13
<PAGE> 45
PORTFOLIO OF INVESTMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Xircom, Inc. (a)...................................... 75,000 $ 1,884,375
Yahoo!, Inc. (a)...................................... 20,000 3,367,500
------------
196,785,412
------------
TRANSPORTATION 0.6%
Comair Holdings, Inc.................................. 60,000 1,417,500
Skywest, Inc.......................................... 50,000 1,443,750
------------
2,861,250
------------
UTILITIES 4.2%
RF Micro Devices, Inc. (a)............................ 144,400 13,817,275
Transwitch Corp. (a).................................. 165,000 7,466,250
------------
21,283,525
------------
TOTAL LONG-TERM INVESTMENTS 89.9%
(Cost $282,529,440)........................................ 450,710,903
REPURCHASE AGREEMENT 6.3%
Warburg Dillon Read ($31,740,000 par collaterized by U.S.
Government obligations in a pooled cash account, dated
03/31/99, to be sold on 04/01/99 at $31,744,320)
(Cost $31,740,000)........................................... 31,740,000
------------
TOTAL INVESTMENTS 96.2%
(Cost $314,269,440)........................................ 482,450,903
OTHER ASSETS IN EXCESS OF LIABILITIES 3.8%.................... 19,263,051
------------
NET ASSETS 100.0%............................................. $501,713,954
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
14
<PAGE> 46
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $314,269,440)....................... $482,450,903
Cash........................................................ 2,396
Receivables:
Fund Shares Sold.......................................... 26,532,970
Investments Sold.......................................... 5,659,170
Dividends................................................. 2,200
Unamortized Organizational Costs............................ 45,512
Other....................................................... 69,913
------------
Total Assets............................................ 514,763,064
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 10,846,412
Fund Shares Repurchased................................... 1,172,130
Distributor and Affiliates................................ 518,522
Investment Advisory Fee................................... 281,407
Accrued Expenses............................................ 164,175
Trustees' Deferred Compensation and Retirement Plans........ 66,464
------------
Total Liabilities....................................... 13,049,110
------------
NET ASSETS.................................................. $501,713,954
============
NET ASSETS CONSIST OF:
Capital..................................................... $316,091,885
Net Unrealized Appreciation................................. 168,181,463
Accumulated Net Realized Gain............................... 17,506,863
Accumulated Net Investment Loss............................. (66,257)
------------
NET ASSETS.................................................. $501,713,954
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $242,556,451 and 14,154,257 shares of
beneficial interest issued and outstanding)............. $ 17.14
Maximum sales charge (5.75%* of offering price)......... 1.05
------------
Maximum offering price to public........................ $ 18.19
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $231,786,114 and 13,840,712 shares of
beneficial interest issued and outstanding)............. $ 16.75
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $27,371,389 and 1,632,921 shares of
beneficial interest issued and outstanding)............. $ 16.76
============
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
15
<PAGE> 47
STATEMENT OF OPERATIONS
For the Nine Months Ended March 31, 1999 and the
Year Ended June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
March 31, 1999 June 30, 1998
- -----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest......................................... $ 680,329 $ 595,465
Dividends........................................ 137,307 248,561
------------ -----------
Total Income................................. 817,636 844,026
------------ -----------
EXPENSES:
Investment Advisory Fee.......................... 1,777,939 1,820,687
Distribution (12b-1) and Service Fees (Attributed
to Classes A, B and C of $261,587, $1,191,530
and $135,838, respectively, for the nine months
ended 3/31/99 and $264,715, $1,233,496 and
$135,103, respectively, for the year ended
6/30/98)....................................... 1,588,955 1,633,314
Shareholder Services............................. 1,088,758 1,106,755
Custody.......................................... 18,931 1,659
Amortization of Organizational Costs............. 15,763 20,998
Legal............................................ 15,362 15,344
Trustees' Fees and Expenses...................... 13,540 23,085
Other............................................ 213,216 326,581
------------ -----------
Total Expenses............................... 4,732,464 4,948,423
Less Fees Waived............................. -0- 406,180
------------ -----------
Net Expenses................................. 4,732,464 4,542,243
------------ -----------
NET INVESTMENT LOSS.............................. $ (3,914,828) $(3,698,217)
============ ===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments.................................... $ 17,483,578 $46,196,606
Futures........................................ 123,947 -0-
------------ -----------
Net Realized Gain................................ 17,607,525 46,196,606
------------ -----------
Unrealized Appreciation/Depreciation:
Beginning of the Period........................ 70,053,002 39,121,376
End of the Period.............................. 168,181,463 70,053,002
------------ -----------
Net Unrealized Appreciation During the Period.... 98,128,461 30,931,626
------------ -----------
NET REALIZED AND UNREALIZED GAIN................. $115,735,986 $77,128,232
============ ===========
NET INCREASE IN NET ASSETS FROM OPERATIONS....... $111,821,158 $73,430,015
============ ===========
</TABLE>
See Notes to Financial Statements
16
<PAGE> 48
STATEMENT OF CHANGES IN NET ASSETS
For the Nine Months Ended March 31, 1999 and the
Years Ended June 30, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Year Ended Year Ended
March 31, 1999 June 30, 1998 June 30, 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss................... $ (3,914,828) $ (3,698,217) $ (1,683,612)
Net Realized Gain/Loss................ 17,607,525 46,196,606 (25,868,909)
Net Unrealized Appreciation During the
Period.............................. 98,128,461 30,931,626 39,073,042
------------ ------------ ------------
Change in Net Assets from
Operations.......................... 111,821,158 73,430,015 11,520,521
------------ ------------ ------------
Distributions from Net Realized Gain:
Class A Shares...................... (8,188,984) -0- -0-
Class B Shares...................... (10,090,918) -0- -0-
Class C Shares...................... (1,152,760) -0- -0-
------------ ------------ ------------
Total Distributions............... (19,432,662) -0- -0-
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES............... 92,388,496 73,430,015 11,520,521
------------ ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............. 293,035,698 165,163,266 183,003,605
Net Asset Value of Shares Issued
Through Dividend Reinvestment....... 18,218,328 -0- -0-
Cost of Shares Repurchased............ (184,145,939) (145,403,812) (65,305,867)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS........................ 127,108,087 19,759,454 117,697,738
------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS.......... 219,496,583 93,189,469 129,218,259
NET ASSETS:
Beginning of the Period............... 282,217,371 189,027,902 59,809,643
------------ ------------ ------------
End of the Period (Including
accumulated net investment loss of
$66,257, $51,572 and $34,878,
respectively)....................... $501,713,954 $282,217,371 $189,027,902
============ ============ ============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 49
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 29, 1996
(Commencement
of Investment
Nine Months Ended Year Ended Year Ended Operations) to
Class A Shares March 31, 1999(b) June 30, 1998 June 30, 1997 June 30, 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.......................... $13.676 $9.948 $9.118 $9.430
------- ------ ------ ------
Net Investment Loss............... (.125) (.135) (.065) (.002)
Net Realized and Unrealized
Gain/Loss....................... 4.445 3.863 .895 (.310)
------- ------ ------ ------
Total from Investment Operations.... 4.320 3.728 .830 (.312)
Less Distributions from Net Realized
Gain.............................. .859 -0- -0- -0-
------- ------ ------ ------
Net Asset Value, End of the
Period............................ $17.137 $13.676 $9.948 $9.118
======= ====== ====== ======
Total Return (a).................... 33.72%** 37.49% 9.10% (3.29%)**
Net Assets at End of the Period (In
millions)......................... $ 242.6 $117.5 $ 84.0 $ 30.3
Ratio of Expenses to Average Net
Assets*........................... 1.56% 1.44% 1.30% 1.29%
Ratio of Net Investment Loss to
Average Net Assets*............... (1.22%) (1.09%) (.81%) (.50%)
Portfolio Turnover.................. 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 1.61% 1.61% 2.05%
Ratio of Net Investment Loss to
Average Net Assets................ N/A (1.26%) (1.12%) (1.25%)
</TABLE>
**Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Based on average shares outstanding.
N/A=Not Applicable
See Notes to Financial Statements
18
<PAGE> 50
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 29, 1996
(Commencement
of Investment
Nine Months Ended Year Ended Year Ended Operations) to
Class B Shares March 31, 1999(b) June 30, 1998 June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................. $13.461 $9.867 $9.112 $9.430
------- ------ ------ ------
Net Investment Loss................ (.197) (.204) (.105) (.006)
Net Realized and Unrealized
Gain/Loss........................ 4.342 3.798 .860 (.312)
------- ------ ------ ------
Total from Investment Operations..... 4.145 3.594 .755 (.318)
Less Distributions from Net Realized
Gain............................... .859 -0- -0- -0-
------- ------ ------ ------
Net Asset Value, End of the Period... $16.747 $13.461 $9.867 $9.112
======= ====== ====== ======
Total Return (a)..................... 32.99%** 36.37% 8.34% (3.39%)**
Net Assets at End of the Period (In
millions).......................... $ 231.8 $148.4 $ 94.2 $ 25.5
Ratio of Expenses to Average Net
Assets*............................ 2.33% 2.20% 2.05% 2.06%
Ratio of Net Investment Loss to
Average Net Assets*................ (1.99%) (1.85%) (1.55%) (1.28%)
Portfolio Turnover................... 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 2.37% 2.35% 2.81%
Ratio of Net Investment Loss to
Average Net Assets................. N/A (2.02%) (1.86%) (2.04%)
</TABLE>
**Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Based on average shares outstanding.
N/A=Not Applicable
See Notes to Financial Statements
19
<PAGE> 51
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 29, 1996
(Commencement
of Investment
Nine Months Ended Year Ended Year Ended Operations) to
Class C Shares March 31, 1999(b) June 30, 1998 June 30, 1997 June 30, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period........................... $13.470 $9.869 $9.113 $9.430
------- ------ ------ ------
Net Investment Loss.............. (.197) (.203) (.103) (.006)
Net Realized and Unrealized
Gain/Loss...................... 4.348 3.804 .859 (.311)
------- ------ ------ ------
Total from Investment Operations... 4.151 3.601 .756 (.317)
Less Distributions from Net
Realized Gain.................... .859 -0- -0- -0-
------- ------ ------ ------
Net Asset Value, End of the
Period........................... $16.762 $13.470 $9.869 $9.113
======= ====== ====== ======
Total Return (a)................... 32.96%** 36.47% 8.34% (3.39%)**
Net Assets at End of the Period (In
millions)........................ $ 27.4 $ 16.4 $ 10.8 $ 3.9
Ratio of Expenses to Average Net
Assets*.......................... 2.33% 2.20% 2.05% 2.05%
Ratio of Net Investment Loss to
Average Net Assets*.............. (1.98%) (1.85%) (1.54%) (1.28%)
Portfolio Turnover................. 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 2.36% 2.35% 2.81%
Ratio of Net Investment Loss to
Average Net Assets............... N/A (2.02%) (1.85%) (2.04%)
</TABLE>
**Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Based on average shares outstanding.
N/A=Not Applicable
See Notes to Financial Statements
20
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
- --------------------------------------------------------------------------------
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
21
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
entry transfer to the account of the custodian bank. The seller is required to
maintain the value of the underlying security at not less than the repurchase
proceeds due the Fund.
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class of
shares.
D. ORGANIZATIONAL COSTS--The Fund will reimburse Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $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 March 31, 1999, for federal income tax purposes, cost of long- and
short-term investments is $314,540,786; the aggregate gross unrealized
appreciation is $173,177,065 and the aggregate gross unrealized depreciation is
$5,266,948 resulting in net unrealized appreciation on long- and short-term
investments of $167,910,117.
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
22
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
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.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- --------------------------------------------------------------------
<S> <C>
First $500 million..................................... .75 of 1%
Next $500 million...................................... .70 of 1%
Over $1 billion........................................ .65 of 1%
</TABLE>
For the year ended June 30, 1998, the Adviser voluntarily waived
approximately $406,200 of its investment advisory fees. Van Kampen agreed to
waive fees or reimburse certain expenses to the extent necessary so that the net
expense based upon average net assets would not exceed 1.30%, 2.05% and 2.05%
for Classes A, B and C shares, respectively. This agreement was voluntarily
continued through December 31, 1997 and was discontinued on January 1, 1998.
For the nine months ended March 31, 1999 and the year ended June 30, 1998,
the Fund recognized expenses of approximately $9,900 and $4,600, respectively,
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated
person.
For the nine months ended March 31, 1999 and the year ended June 30, 1998,
the Fund recognized expenses of approximately $92,100 and $86,100, respectively,
representing Van Kampen's cost of providing accounting and legal services to the
Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the nine months ended March
31, 1999 and the year ended June 30, 1998, the Fund recognized expenses of
approximately $827,300 and $865,100, respectively. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees and are based
on competitive market benchmarks.
23
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
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 March 31, 1999, Van Kampen owned 100 shares each of Classes A, B and C.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
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>
24
<PAGE> 56
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
At June 30, 1998, capital aggregated $77,375,241, $103,908,446 and
$11,600,254 for Classes A, B, and C, respectively. For the year ended June 30,
1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 9,586,041 $ 113,481,993
Class B.................................. 3,875,397 46,006,833
Class C.................................. 476,868 5,674,440
----------- ---------------
Total Sales................................ 13,938,306 $ 165,163,266
=========== ===============
Repurchases:
Class A.................................. (9,437,958) $ (112,683,409)
Class B.................................. (2,400,562) (28,531,040)
Class C.................................. (359,118) (4,189,363)
----------- ---------------
Total Repurchases.......................... (12,197,638) $ (145,403,812)
=========== ===============
</TABLE>
At June 30, 1997, capital aggregated $78,128,681, $88,239,951 and
$10,313,111 for Classes A, B, and C, respectively. For the year ended June 30,
1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................... 9,770,450 $ 92,970,307
Class B................................... 8,682,864 81,053,761
Class C................................... 950,840 8,979,537
----------- -------------
Total Sales................................. 19,404,154 $ 183,003,605
=========== =============
Repurchases:
Class A................................... (4,658,667) $ (44,877,839)
Class B................................... (1,934,698) (17,864,738)
Class C................................... (284,968) (2,563,290)
----------- -------------
Total Repurchases........................... (6,878,333) $ (65,305,867)
=========== =============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC for Class B and C
25
<PAGE> 57
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
shares will be imposed on most redemptions made within five years of the
purchase for Class B and one year of the purchase for Class C as detailed in the
following schedule.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALE CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- -------------------------------------------------------------------------
<S> <C> <C>
First................................................. 5.00% 1.00%
Second................................................ 4.00% None
Third................................................. 3.00% None
Fourth................................................ 2.50% None
Fifth................................................. 1.50% None
Sixth and Thereafter.................................. None None
</TABLE>
For the nine months ended March 31, 1999 and the year ended June 30, 1998,
Van Kampen, as Distributor for the Fund, received commissions on sales of the
Fund's Class A shares of approximately $137,300 and $140,600, respectively, and
CDSC on redeemed shares of approximately $327,300 and $412,300, respectively.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
For the nine months ended March 31, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $445,834,772
and $386,873,307, respectively. For the year ended June 30, 1998, the cost of
purchases and proceeds from sales of investments, excluding short-term
investments, were $447,463,505 and $431,097,637, respectively.
5. 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
26
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
instance, the recognition of gain or loss is postponed until the disposal of the
security underlying the futures contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in stock index futures. These contracts are generally used 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, 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).
Transactions in futures contracts for the nine months ended March 31, 1999,
were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- -----------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1998.............................. -0-
Futures Opened............................................ 33
Futures Closed............................................ (33)
---
Outstanding at March 31, 1999............................. -0-
===
</TABLE>
There were no transactions in futures contracts for the year ended June 30,
1998.
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 nine months ended March 31, 1999 and the year ended June 30, 1998, are
payments retained by Van Kampen of approximately $341,300 and $983,700,
respectively.
27
<PAGE> 59
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Aggressive Growth Fund:
We have audited the accompanying statement of assets and liabilities Van Kampen
Aggressive Growth Fund (the "Fund"), including the portfolio of investments, as
of March 31, 1999, and the related statement of operations for the nine-month
period ended March 31, 1999 and the year ended June 30, 1998, the statement of
changes in net assets for the nine-month period ended March 31, 1999 and for
each of the years in the two-year period ended June 30, 1998, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen Aggressive Growth Fund as of March 31, 1999, the results of its
operations for the nine-month period ended March 31, 1999 and the year ended
June 30, 1998, the changes in its net assets for the nine-month period ended
March 31, 1999 and for each of the years in the two-year period ended June 30,
1998, and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
May 3, 1999
28
<PAGE> 60
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
SENIOR LOAN
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these
funds, ask your financial advisor for
a prospectus, which contains more
complete information, including sales
charges, risks, and expenses. Please
read it carefully before you invest
or send money.
To view a current Van Kampen fund
prospectus or to receive additional
fund information, choose from one of
the following:
- - visit our Web site at
WWW.VANKAMPEN.COM--to view a prospectus, select Download Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Deaf users, call 1-800-421-2833.
- - e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
29
<PAGE> 61
VAN KAMPEN AGGRESSIVE GROWTH FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
PAUL G. YOVOVICH
OFFICERS
DENNIS J. MCDONNELL*
President
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief
Financial Officer
CURTIS W. MORRELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR
SERVICES INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
For federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
March 31, 1999. The Fund designated and paid $19,432,662 as a 20% rate gain
distribution. Shareholders were sent a 1998 Form 1099-DIV in January 1999,
representing their proportionate share of this capital gain distribution.
* "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 September 30, 1999, the report, if used with
prospective investors, must be accompanied by a quarterly performance update.
30
<PAGE> 62
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> 63
VAN KAMPEN FUNDS
YOUR NOTES:
32
<PAGE> 64
VAN KAMPEN
MID CAP VALUE FUND
Annual Report
March 31, 1999
VAN KAMPEN
FUNDS
CHANGE IN FISCAL YEAR END
On July 31, 1998, the Fund's Board of Trustees voted to change the Fund's fiscal
year end from June 30 to March 31. As a result, this annual report reflects the
9-month period commencing on July 1, 1998, and ending on March 31, 1999.
TABLE OF CONTENTS
Letter to Shareholders .................................................... 1
Putting Your Fund's Performance in Perspective ............................ 3
Portfolio Management Review ............................................... 4
Portfolio of Investments .................................................. 7
Statement of Assets and Liabilities ....................................... 9
Statement of Operations ................................................... 10
Statement of Changes in Net Assets ........................................ 11
Financial Highlights ...................................................... 12
Notes to Financial Statements ............................................. 15
Report of Independent Accountants ......................................... 18
VALF ANR 5/99
<PAGE> 65
LETTER TO SHAREHOLDERS
April 20, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together
we've witnessed one of the greatest bull markets in investment history,
unprecedented growth in mutual fund investing, and a surge in personal
retirement planning. The coming millennium promises to hold even more
opportunities.
To lead us into this new era of investing, Richard F. Powers III has
joined Van Kampen as Chairman and Chief Executive Officer. He comes to us from
our parent company, Morgan Stanley Dean Witter & Co., where he served as
Executive Vice President and Director of Marketing. He brings 27 years of
experience in the financial services industry, including an extensive background
in product management, strategic planning, and brand development.
Although former Chairman Don G. Powell retired on January 1, he will
remain active in the industry and the community. Mr. Powell plans to continue
his service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
ECONOMIC OVERVIEW
The U.S. economy continued to grow at a robust pace, despite financial
problems abroad. In the fourth quarter, the nation's gross domestic product
(GDP) rose at an astounding 6.0 percent annual rate, surprising most economists,
whose estimates had been much more conservative. GDP remained strong through the
first quarter of 1999, posting a 4.5 percent annual growth rate. However, the
economy began to show signs of slowing down early in 1999, as corporate profits
and wage growth declined.
A series of interest rate cuts by the Federal Reserve helped the U.S.
economy avoid the economic slump that plagued many global markets. The Fed's
0.25 percent interest rate cut in September was followed by additional cuts in
October and November. These rate cuts, coupled with a wave of corporate mergers
and cost-cutting measures, lent the support needed to foster continued growth.
In addition, the outlook for troubled areas such as Asia and Latin America
improved significantly, and most experts agree that these economies are on the
slow road to recovery.
Despite the improvements abroad and record economic growth in the
United States, inflation remained at bay as commodity prices tumbled. This low
inflationary environment only a 1.7 percent increase in the consumer price index
over the past 12 months contributed to the strong domestic economy and kept
inflation-adjusted interest rates attractive. A low level of unemployment,
vibrant consumer spending, and an active housing market also supported the
positive economic conditions.
MARKET REVIEW
The stock market bounced back resoundingly from the lows we experienced in
August and September, when concerns about the global economic slowdown had
reached a peak. Growth-oriented large-company stocks displayed the most
resilience, propelling the Dow Jones Industrial Average past the 10,000 mark for
the first time at the end of the reporting period.
Continued on page 2
1
<PAGE> 66
Investors continued to favor the earnings strength and perceived
stability of these high-quality stocks, while many other areas of the market
remained sluggish. With the emphasis on growth-style blue-chip companies, many
investors overlooked the strong values to be found in other areas of the market,
especially among smaller companies. The Russell 2000 Index, which represents
small-cap stocks, lost more than 12 percent during the nine months since our
last report, compared with a gain of almost 15 percent for the larger companies
composing the S&P 500 Index.
OUTLOOK
Our outlook for the domestic economy remains positive, although the
pattern of reduced growth may continue into the second half of the year. We look
for a slow but steady rise in inflation throughout 1999 to more normal, but
certainly not alarming levels. Internationally, low interest rates and improving
financial conditions should continue to support the economic improvements we've
witnessed in Asia and Latin America.
We believe the markets may still favor higher-quality securities such
as large-company stocks and investment-grade bonds in the near term. In
addition, we anticipate continued day-to-day volatility in the markets, although
we probably won't see sustained high or low periods during the next six months.
Additional details about your fund, including a question-and-answer
section with your portfolio management team, are provided in this report. As
always, we are pleased to have the opportunity to share with you the progress of
your investment.
Sincerely,
/s/ 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.
2
<PAGE> 67
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:
o Illustrate the general market environment in which your investments
are being managed
o Reflect the impact of favorable market trends or difficult market
conditions
o Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over
the period measured
For these reasons, you may find it helpful to review the chart below,
which compares your Fund's performance to that of the Standard & Poor's 500
Index and the Standard & Poor's 400 MidCap Index* over time. These indices are
statistical composites and do not reflect any commissions or fees which would be
incurred by an investor purchasing the securities they represent. Similarly,
their performance does not reflect any other costs which would be applicable to
an actively managed portfolio, such as that of the Fund.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Mid Cap Value Fund vs. the Standard & Poor's 500 Index and the
Standard & Poor's 400 MidCap Index* (December 27, 1995 through March 31, 1999)
Fund's Total Return
1 Year Total Return = -9.43%
Inception Avg. Annual = 15.62%
Van Kampen Mid Cap Value Fund
Standard & Poor's 500 Index
Standard & Poor's 400 MidCap Index* Index
Month S&P 500 Index Mid Cap Value S&P 400 Midcap
Dec-95 $10,000 $9,425 $10,000
Jan-96 $10,409 $9,614 $10,177
Feb-96 $10,482 $9,887 $10,504
Mar-96 $10,621 $10,141 $10,659
Apr-96 $10,764 $10,386 $10,972
May-96 $11,010 $11,027 $11,103
Jun-96 $11,096 $10,745 $10,966
Jul-96 $10,589 $10,179 $10,213
Aug-96 $10,788 $10,669 $10,786
Sep-96 $11,437 $11,103 $11,283
Oct-96 $11,736 $10,867 $11,302
Nov-96 $12,597 $11,800 $11,921
Dec-96 $12,389 $12,099 $11,965
Jan-97 $13,149 $12,387 $12,401
Feb-97 $13,227 $12,864 $12,282
Mar-97 $12,723 $12,208 $11,790
Apr-97 $13,466 $12,457 $12,082
May-97 $14,255 $13,897 $13,121
Jun-97 $14,940 $14,225 $13,520
Jul-97 $16,107 $15,755 $14,841
Aug-97 $15,182 $15,248 $14,808
Sep-97 $16,057 $15,983 $15,691
Oct-97 $15,503 $14,841 $14,992
Nov-97 $16,195 $14,483 $15,198
Dec-97 $16,516 $14,582 $15,820
Jan-98 $16,684 $14,676 $15,504
Feb-98 $17,859 $16,071 $16,770
Mar-98 $18,815 $16,704 $17,559
Apr-98 $18,986 $16,528 $17,863
May-98 $18,629 $16,013 $17,043
Jun-98 $19,435 $16,083 $17,183
Jul-98 $19,209 $15,614 $16,500
Aug-98 $16,409 $13,316 $13,414
Sep-98 $17,505 $13,879 $14,701
Oct-98 $18,911 $14,747 $15,995
Nov-98 $20,029 $15,708 $16,775
Dec-98 $21,227 $16,400 $18,837
Jan-99 $22,098 $16,512 $18,087
Feb-99 $21,384 $15,507 $17,117
Mar-99 $22,283 $16,053 $17,635
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions and includes payment of the maximum
sales charge (5.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
The Fund commenced operation in 1995 with limited capital invested primarily by
the adviser's affiliates. While the Fund has been available for sale in a
limited number of states, as of March 31, 1999, the Fund had not engaged in a
broad continuous public offering and was not subject to redemption requests. The
Fund's adviser believes that the portfolio has been managed substantially the
same as if the Fund had been open for investment to all public investors. No
assurances can be given, however, that the Fund's investment performance would
have been the same during the period if the Fund had been broadly distributed.
During this period, certain fees were waived and expenses were reimbursed by the
Fund's adviser which had a material effect on the Fund's total return.
*The Standard & Poor's 500 Index represents general stock market performance and
was initially selected as a benchmark for the Fund's performance; additionally
the Standard & Poor's 400 MidCap Index was selected to represent a more narrow-
based comparison.
3
<PAGE> 68
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN MID CAP VALUE FUND
We recently spoke to the management team of the Van Kampen Mid Cap Value Fund
about the key events and economic forces that shaped the markets during the
reporting period. The team is led by James A. Gilligan, portfolio manager; Scott
Carroll, portfolio comanager; and Stephen L. Boyd, chief investment officer for
equity investments.
The Fund's fiscal year end was recently changed from June 30 to March
31. Going forward, your semiannual reports will be dated September 30, and your
annual reports will be dated March 31. The following interview discusses the
Fund's performance during the nine-month period commencing on July 1, 1998, to
March 31, 1999.
Q HOW WOULD YOU DESCRIBE THE ECONOMIC ENVIRONMENT DURING THE PAST NINE MONTHS?
A During the latter half of 1998, global instability continued to cast a pall
over the stock market, chasing investors from risk-sensitive securities to the
relative safety of large growth stocks and U.S. Treasuries. Although the Dow
Jones Industrial Average topped a record-high 9000 late in the summer, it
plummeted in the third quarter of 1998 as investor confidence in the global
economy was shaken. Calm was restored by three sequential rate cuts by the
Federal Reserve Board, which settled the markets and prompted investors to
recognize the fundamental strength of the U.S. economy. On this note, the Dow
steadily rebounded to its earlier highs. As the reporting period drew to a
close, the Dow broke through the 10,000-point ceiling.
Not surprisingly, large-capitalization stocks outperformed
smaller-capitalization stocks in this environment, as investors continued to
support established companies with more stable earnings prospects. Mid-cap
stocks also lagged large-cap stocks during this time, with the Standard & Poor's
400 MidCap Index returning only 2.63 percent for the nine-month period compared
to the Russell 1000 Index's 12.64 percent return. These indices reflect
performance for mid- and large-cap stocks, respectively.
The return for the primarily large-cap Dow during this time was 10.78 percent.
Q IN LIGHT OF THESE CIRCUMSTANCES, HOW DID YOU MANAGE THE FUND?
A The high valuations of the general stock market did pose challenges for
value-oriented portfolios such as this one, but we were able to identify stocks
that met our criteria in sectors that did not fare as well as the overall
market. For example, we looked to the energy sector, which was largely depressed
by low oil prices for much of the period, and added companies like Apache and
Dynegy to the portfolio. When oil prices began to rebound in the wake of an OPEC
intervention, these stocks benefited. Apache, a recent addition to the
portfolio, was purchased just prior to this resurgence in prices. We were
attracted to Dynegy's successful existing energy trading and market business
component as well as the potential for growth in its natural gas liquids
business.
Another sector that demonstrated strong rebound capacity was
technology. In the second half of 1998, technology stocks emerged from previous
problems to capture investors' attention. As some of our holdings in this sector
began to realize their value, we monitored their valuations carefully and
4
<PAGE> 69
sold them if we noticed the fundamentals begin to weaken or the valuations move
to extreme levels. Micron, formerly one of the portfolio's largest holdings in
the technology sector, showed strong improvement during its tenure in the
portfolio, but after the stock quadrupled from its lowest price, we decided to
liquidate our holding. QualComm, a wireless technology company, posed a similar
situation: after positive corporate news prompted this stock to increase in
price from our original purchase by approximately 50 percent, we elected to
reduce our position in the company.
Q IN WHAT OTHER AREAS DID YOU SEARCH FOR VALUE DURING THE REPORTING PERIOD?
A We maintained our focus on health care, the Fund's largest sector position,
which was one of the better-performing sectors in the portfolio. In a market
battered by volatility, health-care stocks boasted relatively predictable
earnings and were largely isolated from events overseas. We increased the Fund's
exposure to HMOs by adding Aetna and United HealthCare to the portfolio. We
believe that, after a long period of underperformance, HMO stocks should improve
as customer rate increases outweigh projected cost increases. At the same time,
we eliminated PacifiCare Health Systems from the portfolio. Although it is also
an HMO, this company is primarily a Medicare service provider, and it was not
able to implement the same level of rate increases because of
government-mandated pricing.
We held our positions in large pharmaceutical stocks, which continued
to perform very well during the period. In particular, Pharmacia & Upjohn
benefited after receiving approval for and distributing a new urinary
incontinence product.
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 in the
future.
Q WERE THERE ANY DISAPPOINTMENTS IN THE FUND'S PORTFOLIO?
A The financial sector, the portfolio's third-largest sector, was the source of
some volatility during the period. We reduced the Fund's exposure modestly after
we became concerned about the ability of a number of emerging markets to satisfy
their debt obligations. As a result, we eliminated our holding in Dresdner Bank
and reduced our position in Chase Manhattan. However, we renewed our interest in
Chase near year-end as the bank reported a record-high fourth quarter return and
named a new CEO. We also purchased shares of Bank of Tokyo, which rose in price
from $10 to $14 per share.
Q HOW DID THE FUND PERFORM DURING THE PAST YEAR?
A The Fund achieved a nine-month total return of -0.19 percent (Class A shares
at net asset value) as of March 31, 1999. In addition, the Fund generated total
returns of -9.43 percent, 14.25 percent, and 15.62 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 14.65 percent
for the nine-month reporting period, and the Standard & Poor's 400 MidCap Index,
which more closely resembles the Fund, returned 2.63 percent. The S&P 500 Index
is a broad-based index that reflects the general
5
<PAGE> 70
performance of the stock market, and the S&P 400 MidCap Index reflects the
general performance of mid-cap stocks. Keep in mind that these indices are
statistical composites that do not include any commissions or sales charges that
would be paid by an investor purchasing the securities or investments they
represent.
Q WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A The U.S. economy continues to show strength, with better-than-expected
earnings growth and relatively low inflation. In spite of these conditions and
the calmer seas of global finance, we believe that we're dealing with a nervous
stock market that doesn't respond well to bad news of any kind. This jittery
stock market and a weakened bond market have led us to take a somewhat defensive
outlook, and we have positioned the portfolio correspondingly. Of course, we
will continue to monitor the markets for changes in the cycle, but our long-term
view remains the same. We believe that investors will continue to seek companies
with strong fundamentals, promising growth prospects, and attractive valuations.
We feel that the Mid Cap Value Fund, with its emphasis on such companies, is
well positioned to meet that objective.
/S/ Stephen L. Boyd /S/ James A. Gilligan /S/ Scott Carroll
Stephen L. Boyd James A. Gilligan Scott Carroll
Chief Investment Officer Portfolio Manager Portfolio Comanager
Equity Investments
6
<PAGE> 71
VAN KAMPEN MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
Description Shares Market Value
Common Stocks 90.7%
Consumer Distribution 4.3%
Federated Department Stores, Inc. (a) 790 $ 31,699
Saks, Inc. (a) 1,500 39,000
------------
70,699
------------
Consumer Non-Durables 3.4%
Philip Morris Cos., Inc. 670 23,575
Whitman Corp. 1,850 31,797
------------
55,372
------------
Consumer Services 1.9%
Bell & Howell Co. (a) 1,090 31,951
------------
Energy 7.2%
Apache Corp. 1,000 26,063
Dynegy Inc. 3,000 42,187
Nabors Industries, Inc. (a) 500 9,094
Seagull Energy Corp. (a) 5,900 40,194
------------
117,538
------------
Finance 14.7%
Arden Realty, Inc. 1,200 26,700
Bank of Tokyo - Mitsubishi, Ltd. - ADR (Japan) 4,100 57,656
Chase Manhattan Corp. 480 39,030
Merrill Lynch & Co., Inc. 100 8,844
MONY Group Inc. 1,500 37,312
Washington Mutual, Inc. 1,000 40,875
XL Capital Ltd. - Class A 500 30,375
------------
240,792
------------
Healthcare 19.4%
Aetna, Inc. 450 37,350
Beckman Coulter, Inc. 800 35,200
Dura Pharmaceuticals, Inc. (a) 2,700 38,138
Oxford Health Plans, Inc. (a) 2,800 43,750
Pharmacia & Upjohn, Inc. 500 31,188
Schein Pharmaceutical, Inc. (a) 2,000 26,000
Teva Pharmaceutical Industries Ltd.
- ADR (Israel) 1,000 47,437
United HealthCare Corp. 1,100 57,887
------------
316,950
------------
See Notes to Financial Statements
7
<PAGE> 72
VAN KAMPEN MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 1999
Description Shares Market Value
Producer Manufacturing 7.9%
International Game Technology 1,800 $ 26,212
Koninklijke Philips Electronics N.V. -
N.Y. Registered Shares (Netherlands) 200 16,488
Minnesota Mining & Manufacturing Co. 600 42,450
Waste Management, Inc. 990 43,931
------------
129,081
------------
Raw Materials/Processing Industries 4.9%
Boise Cascade Corp. 1,300 41,925
Raychem Corp. 1,700 38,356
------------
80,281
------------
Technology 12.2%
Adaptec, Inc. (a) 800 18,250
Adobe Systems, Inc. 900 51,075
Alcatel SA - ADR (France) 200 4,563
First Data Corp. 1,000 42,750
QUALCOMM, Inc. (a) 200 24,875
Quantum Corp. (a) 800 14,400
SunGard Data Systems, Inc. (a) 1,100 44,000
------------
199,913
------------
Utilities 14.8%
GPU, Inc. 800 29,850
Illinova Corp. 1,000 21,188
NCR Corp. (a) 1,200 60,000
Niagara Mohawk Holdings Inc. (a) 5,200 69,875
Northeast Utilities (a) 2,400 33,300
Texas Utilities Co. 700 29,181
------------
243,394
------------
Total Investments 90.7% 1,485,971
(Cost $1,352,906)
Other Assets in Excess of Liabilities 9.3% 152,192
------------
Net Assets 100.0% $ 1,638,163
------------
(a) Non-income producing security as this stock currently does not
declare dividends.
ADR - American Depository Receipt.
See Notes to Financial Statements
8
<PAGE> 73
<TABLE>
<CAPTION>
VAN KAMPEN MID CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
<S> <C>
ASSETS:
Total Investments (Cost $1,352,906) $ 1,485,971
Cash 151,260
Receivables:
Investments Sold 30,791
Expense Reimbursement From Adviser 15,964
Dividends 2,435
Fund Shares Sold 50
Unamortized Organizational Costs 14,102
Other 1,441
------------
Total Assets 1,702,014
------------
LIABILITIES:
Trustees' Deferred Compensation and Retirement Plans 37,208
Payable to Distributor and Affiliates 11,334
Audit Fees 8,310
Custody 2,815
Other Accrued Expenses 4,184
------------
Total Liabilities 63,851
------------
NET ASSETS $ 1,638,163
============
NET ASSETS CONSIST OF:
Capital $ 1,499,291
Net Unrealized Appreciation 133,065
Accumulated Net Realized Gain 32,837
Accumulated Net Investment Loss (27,030)
------------
NET ASSETS $ 1,638,163
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$1,428,063 and 110,306 shares of beneficial interest issued and outstanding) $ 12.95
Maximum sales charge (5.75%* of offering price) 0.79
------------
Maximum offering price to public $ 13.74
============
Class B Shares:
Net asset value and offering price per share (Based on net assets of $105,041
and 8,111 shares of beneficial interest issued and outstanding) $ 12.95
============
Class C Shares:
Net asset value and offering price per share (Based on net assets of $105,059
and 8,111 shares of beneficial interest issued and outstanding) $ 12.95
============
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
9
</TABLE>
<PAGE> 74
VAN KAMPEN MID CAP VALUE FUND
STATEMENT OF OPERATIONS
For the Nine Months Ended March 31, 1999
and the Year Ended June 30, 1998
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
March 31, 1999 June 30, 1998
INVESTMENT INCOME:
<S> <C> <C>
Dividends $ 12,288 $ 15,205
--------- ---------
EXPENSES:
Accounting 33,927 29,582
Shareholder Reports 20,476 20,885
Trustees' Fees and Expenses 13,034 7,383
Custody 11,282 4,623
Shareholder Services 11,265 16,558
Audit 9,506 11,991
Investment Advisory Fee 8,855 12,163
Amortization of Organizational Costs 6,003 7,997
Legal 3,891 5,184
Other 6,019 9,548
--------- ---------
Total Expenses 124,258 125,914
Less: Fees Waived and Expenses Reimbursed ($8,855 and $97,204 respectively,
for the nine months ended March 31,
1999 and $12,163 and $90,382,
respectively, for the year ended
June 30, 1998)
106,059 102,545
Credits Earned on Cash Balances 2,850 2,286
--------- ---------
Net Expenses 15,349 21,083
--------- ---------
NET INVESTMENT LOSS $ (3,061) $ (5,878)
========= =========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 34,570 $ 240,590
--------- ---------
Unrealized Appreciation/Depreciation:
Beginning of the Period 168,091 206,246
End of the Period 133,065 168,091
--------- ---------
Net Unrealized Depreciation During the Period (35,026) (38,155)
--------- ---------
NET REALIZED AND UNREALIZED GAIN/LOSS $ (456) $ 202,435
========= =========
NET INCREASE/DECREASE IN NET ASSETS FROM OPERATIONS $ (3,517) $ 196,557
========= =========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 75
VAN KAMPEN MID CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Nine Months Ended March 31, 1999
and the Years Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended Year Ended
March 31, 1999 June 30, 1998 June 30, 1997
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss $ (3,061) $ (5,878) $ (1,438)
Net Realized Gain 34,570 240,590 64,043
Net Unrealized Appreciation/Depreciation During the Period (35,026) (38,155) 185,690
----------- ----------- -----------
Change in Net Assets from Operations (3,517) 196,557 248,295
----------- ----------- -----------
Distributions in Excess of Net Investment Income:
Class A Shares (2,858) (9,412) (174)
Class B Shares (210) (666) (111)
Class C Shares (210) (666) (111)
----------- ----------- -----------
(3,278) (10,744) (396)
----------- ----------- -----------
Distributions from and in Excess of Net Realized Gain:
Class A Shares (73,579) (192,785) (6,330)
Class B Shares (5,411) (13,647) (4,004)
Class C Shares (5,411) (13,647) (4,004)
----------- ----------- -----------
(84,401) (220,079) (14,338)
----------- ----------- -----------
Total Distributions (87,679) (230,823) (14,734)
----------- ----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES (91,196) (34,266) 233,561
----------- ----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold 350 1,196 1,000,000
Net Asset Value of Shares Issued Through Dividend Reinvestment 87,679 230,823 2,074
Cost of Capital Stock Repurchased -0- (57,633) -0-
----------- ----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 88,029 174,386 1,002,074
----------- ----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS (3,167) 140,120 1,235,635
NET ASSETS:
Beginning of the Period 1,641,330 1,501,210 265,575
----------- ----------- -----------
End of the Period (Including accumulated net investment
loss of $27,030, $20,691 and $4,069 respectively) $ 1,638,163 $ 1,641,330 $ 1,501,210
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 76
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.
<TABLE>
<CAPTION>
December 27,
1995
(Commencement
Nine Months of Investment
Ended Year Ended Year Ended Operations)
March 31, 1999 June 30, 1998 June 30, 1997 to June 30,
CLASS A SHARES 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.719 $ 14.321 $ 11.409 $ 10.000
-------------- -------------- -------------- ------------
Net Investment Income/Loss (0.013) (0.032) (0.014) 0.018
Net Realized and Unrealized Gain/Loss (0.027) 1.633 3.559 1.391
-------------- -------------- -------------- ------------
Total from Investment Operations (0.040) 1.601 3.545 1.409
-------------- -------------- -------------- ------------
Less:
Distributions in Excess of Net Investment Income 0.027 0.103 0.017 -0-
Distributions from Net Realized Gain 0.706 2.100 0.616 -0-
-------------- -------------- -------------- ------------
Total Distributions 0.733 2.203 0.633 -0-
-------------- -------------- -------------- ------------
Net Asset Value, End of the Period $ 12.946 $ 13.719 $ 14.321 $ 11.409
============== ============== ============== ============
Total Return * (a) (0.19)%** 13.06% 32.39% 14.00%**
Net Assets at End of the Period (In thousands) $ 1,428.1 $ 1,430.7 $ 1,315.0 $ 117.2
Ratio of Expenses to Average Net Assets* (b) 1.54% 1.44% 1.48% 1.38%
Ratio of Net Investment Income/Loss to Average Net Assets* (0.26)% (0.36)% (0.31)% 0.38%
Portfolio Turnover 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) 10.52% 7.76% 17.19% 17.57%
Ratio of Net Investment Income/Loss to Average Net Assets (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 .24%, .14%, .18% and .08% for the
periods ended on March 31, 1999, June 30, 1998, June 30, 1997 and June 30,
1996 respectively.
See Notes to Financial Statements
12
<PAGE> 77
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.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement of
Nine Months Investment
Ended Year Ended Year Ended Operations)
March 31, June 30, June 30, to June 30,
CLASS B SHARES 1999 1998 1997 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.724 $ 14.327 $ 11.410 $ 10.000
------------ ------------ ----------- -----------
Net Investment Income/Loss (0.014) (0.027) (0.017) 0.024
Net Realized and Unrealized Gain/Loss (0.027) 1.626 3.567 1.386
------------ ------------ ----------- -----------
Total from Investment Operations (0.041) 1.599 3.550 1.410
------------ ------------ ----------- -----------
Less:
Distributions in Excess of Net Investment Income 0.027 0.102 0.017 -0-
Distributions from Net Realized Gain 0.706 2.100 0.616 -0-
------------ ------------ ----------- -----------
Total Distributions 0.733 2.202 0.633 -0-
------------ ------------ ----------- -----------
Net Asset Value, End of the Period $ 12.950 $ 13.724 $ 14.327 $ 11.410
============ ============ =========== ===========
Total Return * (a) (0.19)%** 12.98% 32.48% 14.00%**
Net Assets at End of the Period (In thousands) $ 105.0 $ 105.3 $ 93.1 $ 74.2
Ratio of Expenses to Average Net Assets* (b) 1.54% 1.44% 1.48% 1.38%
Ratio of Net Investment Income/Loss to Average Net Assets* (0.26)% (0.36)% (0.14)% 0.44%
Portfolio Turnover 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) 10.52% 7.76% 17.19% 17.57%
Ratio of Net Investment Income/Loss to Average Net Assets (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 .24%, .14%, .18% and .08% for the
periods ended on March 31, 1999, June 30, 1998, June 30, 1997 and June 30,
1996 respectively.
See Notes to Financial Statements
13
<PAGE> 78
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.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
Nine Months of Investment
Ended Year Ended Year Ended Operations)
March 31, June 30, June 30, to June 30,
CLASS C SHARES 1999 1998 1997 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.726 $ 14.327 $ 11.410 $ 10.000
------------ ------------ ----------- -----------
Net Investment Income/Loss (0.014) (0.026) (0.017) 0.024
Net Realized and Unrealized Gain/Loss (0.026) 1.627 3.567 1.386
------------ ------------ ----------- -----------
Total from Investment Operations (0.040) 1.601 3.550 1.410
------------ ------------ ----------- -----------
Less:
Distributions in Excess of Net Investment Income 0.027 0.102 0.017 -0-
Distributions from Net Realized Gain 0.706 2.100 0.616 -0-
------------ ------------ ----------- -----------
Total Distributions 0.733 2.202 0.633 -0-
------------ ------------ ----------- -----------
Net Asset Value, End of the Period $ 12.953 $ 13.726 $ 14.327 $ 11.410
============ ============ =========== ===========
Total Return * (a) (0.26)%** 13.06% 32.48% 14.00%**
Net Assets at End of the Period (In thousands) $ 105.1 $ 105.3 $ 93.1 $ 74.2
Ratio of Expenses to Average Net Assets* (b) 1.54% 1.44% 1.48% 1.38%
Ratio of Net Investment Income/Loss to Average Net Assets* (0.26)% (0.36)% (0.14)% 0.44%
Portfolio Turnover 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) 10.52% 7.76% 17.19% 17.57%
Ratio of Net Investment Income/Loss to Average Net Assets (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 .24%, .14%, .18% and .08% for the
periods ended on March 31, 1999, June 30, 1998, June 30, 1997 and June 30,
1996 respectively.
See Notes to Financial Statements
14
<PAGE> 79
VAN KAMPEN MID CAP VALUE FUND
Notes to Financial Statements
March 31, 1999
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. In July 1998, the
Fund's Board of Trustees approved a change in the Fund's fiscal year end from
June 30 to March 31. As a result, this financial report reflects the nine-month
period commencing on July 1, 1998, and ending on March 31, 1999.
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. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class of
shares.
D. ORGANIZATIONAL COSTS - The Fund will reimburse Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $40,000. These costs are being amortized on
a straight-line basis over the 60-month period ending December 27, 2000. The
Adviser has agreed that in the event any of the initial shares of the Fund
originally purchased by Van Kampen are redeemed during the amortization period,
the Fund will be reimbursed for any unamortized organizational costs in the same
proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.
E. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and gains to
its shareholders. Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial purposes primarily as a
result of wash sales at March 31, 1999.
At March 31, 1999, for federal income tax purposes, the cost of
long-term investments is $1,353,300; the aggregate gross unrealized appreciation
is $214,819 and the aggregate gross unrealized depreciation is $82,148,
resulting in net unrealized appreciation of $132,671.
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 nine months ended March 31, 1999 and the year
ended June 30, 1998, respectively, the Fund's custody fee was reduced by $2,850
and $2,286, respectively, as a result of credits earned on overnight cash
balances.
15
<PAGE> 80
VAN KAMPEN MID CAP VALUE FUND
Notes to Financial Statements (Continued)
March 31, 1999
2. INVESTMENT ADVISORY AGREEMENT AND OTHER
TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
Average Net Assets % Per Annum
- --------------------------- ----------------
First $500 million .75%
Next $500 million .70%
Over $1 billion .65%
For the nine months ended March 31, 1999 and the year ended June 30,
1998 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 $8,855 and $12,163, respectively, of its investment advisory fees
and assumed $97,204 and $90,382, respectively, of the Fund's other expenses.
This waiver is voluntary in nature and can be discontinued at the Adviser's
discretion.
For the nine months ended March 31, 1999 and the year ended June 30,
1998, respectively, the Fund incurred expenses of approximately $3,900 and
$5,200, respectively, representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person. All of this cost has been assumed by Van Kampen.
For the nine months ended March 31, 1999 and the year ended June 30,
1998, respectively, the Fund incurred expenses of approximately $33,900 and
$29,600, respectively, representing Van Kampen's cost of providing accounting
services to the Fund. All of this cost has been assumed by Van Kampen.
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the
Adviser, serves as the shareholder servicing agent of the Fund. For the nine
months ended March 31, 1999 and the year ended June 30, 1998, respectively, the
Fund recognized expenses of approximately $10,800 and $15,000, respectively. 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 March 31, 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
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At 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)
========= ===========
16
<PAGE> 81
VAN KAMPEN MID CAP VALUE FUND
Notes to Financial Statements (Continued)
March 31, 1999
At June 30, 1997, capital aggregated $1,106,900, $64,988 and $64,988
for Classes A, B, and C respectively. For the year ended June 30, 1997,
transactions were as follows:
Shares Value
--------- -----------
Sales:
Class A 81,367 $1,000,000
========= ===========
Dividend Reinvestment:
Class A 177 $2,074
========= ===========
Class B and Class C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC will be imposed on most redemptions made within five years of
the purchase for Class B and one year of the purchase for Class C as detailed in
the following schedule.
Contingent Deferred
Sales Charge
Value Year of Redemption Class B Shares Class 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
4. INVESTMENT TRANSACTIONS
For the nine months ended March 31, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments were $1,048,821
and $1,141,341 respectively. For the year ended June 30, 1998, the cost of
purchases and proceeds of sales of investments, excluding short-term investments
were $1,697,057 and $1,565,249 respectively.
5. DISTRIBUTION AND SERVICE PLANS
The Fund and its Shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
The Fund's net assets are subject to annual fees under the Plans of up
to .25% for Class A shares and 1.00% each for Class B and Class C shares. No
fees related to the Plans have been accrued by the Fund, as the Fund is
currently owned solely by affiliated persons.
17
<PAGE> 82
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Mid Cap Value Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Mid Cap Value Fund (the iFundi), including the portfolio of investments,
as of March 31, 1999, and the related statement of operations for the nine-month
period ended March 31, 1999 and the year ended June 30, 1998, the statement of
changes in net assets for the nine-month period ended March 31, 1999, and for
each of the years in the two-year period ended June 30, 1998, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen Mid Cap Value Fund as of March 31, 1999, the results of its operations
for the nine-month period ended March 31, 1999 and the year ended June 30, 1998,
the changes in its net assets for the nine-month period ended March 31, 1999 and
for each of the years in the two-year period ended June 30, 1998, and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
May 10, 1999
18
<PAGE> 83
Van Kampen Mid Cap Value Fund
Board of Trustees
J. Miles Branagan
Richard M. DeMartini*
Linda Hutton Heagy
R. Craig Kennedy
Jack E. Nelson
Don G. Powell*
Phillip B. Rooney
Fernando Sisto
Wayne W. Whalen* - Chairman
Paul G. Yovovich
Officers
Dennis J. McDonnell*
President
John L. Sullivan*
Vice President, Treasurer and
Chief Financial Officer
Curtis W. Morell*
Vice President and Chief Accounting Officer
Tanya M. Loden*
Controller
Peter W. Hegel*
Paul R. Wolkenberg*
Edward C. Wood, III*
Vice Presidents
Investment Adviser
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Distributor
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Shareholder Servicing Agent
Van Kampen Investor Services Inc.
P.O. Box 418256
Kansas City, Missouri 64141-9256
Custodian
State Street Bank and Trust Company
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Independent Accountants
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
<PAGE> 84
Tax Notice to Corporate Shareholders
For federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
March 31, 1999. The Fund designated and paid $39,204 as a 20% rate gain
distribution. Shareholders were sent a 1998 Form 1099-DIV in January 1999,
representing their proportionate share of this capital gain distribution. For
corporate shareholders, 6.69% of distributions qualify for the dividend received
deductions.
* "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> 85
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> 86
VAN KAMPEN
GREAT AMERICAN
COMPANIES FUND
Annual Report
March 31, 1999
VAN KAMPEN
FUNDS
TABLE OF CONTENTS
Letter to Shareholders .................................................... 1
Putting Your Fund's Performance in Perspective ............................ 3
Portfolio Management Review ............................................... 4
Portfolio of Investments .................................................. 7
Statement of Assets and Liabilities ....................................... 10
Statement of Operations ................................................... 11
Statement of Changes in Net Assets ........................................ 12
Financial Highlights ...................................................... 13
Notes to Financial Statements ............................................. 16
Report of Independent Accountants ......................................... 19
GAC ANR 5/99
CHANGE IN FISCAL YEAR END
On July 31, 1998, the Fund's Board of Trustees voted to change the Fund's
fiscal year end from June 30 to March 31. As a result, this annual report
reflects the 9-month period commencing on July 1, 1998, and ending on March 31,
1999.
<PAGE> 87
Letter to Shareholders
April 20, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together
we've witnessed one of the greatest bull markets in investment history,
unprecedented growth in mutual fund investing, and a surge in personal
retirement planning. The coming millennium promises to hold even more
opportunities.
To lead us into this new era of investing, Richard F. Powers III has
joined Van Kampen as Chairman and Chief Executive Officer. He comes to us from
our parent company, Morgan Stanley Dean Witter & Co., where he served as
Executive Vice President and Director of Marketing. He brings 27 years of
experience in the financial services industry, including an extensive background
in product management, strategic planning, and brand development.
Although former Chairman Don G. Powell retired on January 1, he will
remain active in the industry and the community. Mr. Powell plans to continue
his service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
ECONOMIC OVERVIEW
The U.S. economy continued to grow at a robust pace, despite financial
problems abroad. In the fourth quarter, the nation's gross domestic product
(GDP) rose at an astounding 6.0 percent annual rate, surprising most economists,
whose estimates had been much more conservative. GDP remained strong through the
first quarter of 1999, posting a 4.5 percent annual growth rate. However, the
economy began to show signs of slowing down early in 1999, as corporate profits
and wage growth declined.
A series of interest rate cuts by the Federal Reserve helped the U.S.
economy avoid the economic slump that plagued many global markets. The Fed's
0.25 percent interest rate cut in September was followed by additional cuts in
October and November. These rate cuts, coupled with a wave of corporate mergers
and cost-cutting measures, lent the support needed to foster continued growth.
In addition, the outlook for troubled areas such as Asia and Latin America
improved significantly, and most experts agree that these economies are on the
slow road to recovery.
Despite the improvements abroad and record economic growth in the
United States, inflation remained at bay as commodity prices tumbled. This low
inflationary environment--only a 1.7 percent increase in the consumer price
index over the past 12 months--contributed to the strong domestic economy and
kept inflation-adjusted interest rates attractive. A low level of unemployment,
vibrant consumer spending, and an active housing market also supported the
positive economic conditions.
MARKET REVIEW
The stock market bounced back resoundingly from the lows we experienced
in August and September, when concerns about the global economic slowdown had
reached a peak. Growth-oriented large-company stocks displayed the most
resilience, propelling the Dow Jones Industrial Average past the 10,000 mark for
the first time at the end of the reporting period.
Continued on page 2
1
<PAGE> 88
Investors continued to favor the earnings strength and perceived stability of
these high-quality stocks, while many other areas of the market remained
sluggish. With the emphasis on growth-style blue-chip companies, many investors
overlooked the strong values to be found in other areas of the market,
especially among smaller companies. The Russell 2000 Index, which represents
small-cap stocks, lost more than 12 percent during the nine months since our
last report, compared with a gain of almost 15 percent for the larger companies
composing the S&P 500 Index.
OUTLOOK
Our outlook for the domestic economy remains positive, although the
pattern of reduced growth may continue into the second half of the year. We look
for a slow but steady rise in inflation throughout 1999 to more normal, but
certainly not alarming levels. Internationally, low interest rates and improving
financial conditions should continue to support the economic improvements we've
witnessed in Asia and Latin America.
We believe the markets may still favor higher-quality securities such
as large-company stocks and investment-grade bonds in the near term. In
addition, we anticipate continued day-to-day volatility in the markets, although
we probably won't see sustained high or low periods during the next six months.
Additional details about your fund, including a question-and-answer
section with your portfolio management team, are provided in this report. As
always, we are pleased to have the opportunity to share with you the progress of
your investment.
Sincerely,
/s/ 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.
2
<PAGE> 89
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:
- Illustrate the general market environment in which your investments
are being managed
- Reflect the impact of favorable market trends or difficult market
conditions
- Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over
the period measured
For these reasons, you may find it helpful to review the chart below,
which compares your Fund's performance to that of the Standard & Poor's 500
Index and the Lipper Growth Fund Index over time. These indices are statistical
composites and do not reflect any commissions or fees which would be incurred by
an investor purchasing the securities they represent. Similarly, their
performance does not reflect any sales charges or other costs which would be
applicable to an actively managed portfolio, such as that of the Fund.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Great American Companies Fund vs. the Standard & Poor's 500
Index and the Lipper Growth Fund Index (December 27, 1995 through
March 31, 1999)
Fund's Total Return
1 Year Total Return = 16.79%
Inception Avg. Annual = 27.59%
Van Kampen Great American Companies Fund
Standard & Poor's 500 Stock Index
Lipper Growth Fund Index
Month S&P 500 Index GAC Lipper Growth
Dec-95 $10,000 $9,425 $10,000
Jan-96 $10,409 $9,925 $10,242
Feb-96 $10,482 $10,217 $10,402
Mar-96 $10,621 $10,603 $10,451
Apr-96 $10,764 $10,773 $10,713
May-96 $11,010 $10,933 $10,903
Jun-96 $11,096 $10,943 $10,796
Jul-96 $10,589 $10,377 $10,212
Aug-96 $10,788 $10,754 $10,516
Sep-96 $11,437 $11,310 $11,103
Oct-96 $11,736 $11,433 $11,263
Nov-96 $12,597 $12,290 $11,975
Dec-96 $12,389 $12,311 $11,748
Jan-97 $13,149 $12,809 $12,364
Feb-97 $13,227 $12,829 $12,269
Mar-97 $12,723 $12,463 $11,708
Apr-97 $13,466 $12,971 $12,223
May-97 $14,255 $13,754 $13,069
Jun-97 $14,940 $14,476 $13,557
Jul-97 $16,107 $15,553 $14,681
Aug-97 $15,182 $14,760 $14,138
Sep-97 $16,057 $15,564 $14,946
Oct-97 $15,503 $15,208 $14,464
Nov-97 $16,195 $15,503 $14,796
Dec-97 $16,516 $15,998 $15,046
Jan-98 $16,684 $15,847 $15,147
Feb-98 $17,859 $17,075 $16,215
Mar-98 $18,815 $17,863 $16,908
Apr-98 $18,986 $18,025 $17,090
May-98 $18,629 $17,770 $16,671
Jun-98 $19,435 $18,685 $17,391
Jul-98 $19,209 $18,164 $17,207
Aug-98 $16,409 $14,851 $14,444
Sep-98 $17,505 $15,998 $15,407
Oct-98 $18,911 $16,936 $16,473
Nov-98 $20,029 $17,979 $17,455
Dec-98 $21,227 $20,470 $18,914
Jan-99 $22,098 $21,678 $19,721
Feb-99 $21,384 $20,847 $19,047
Mar-99 $22,283 $22,133 $19,874
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions and includes payment of the maximum
sales charge (5.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
The Fund commenced operation in 1995 with limited capital invested primarily by
the adviser's affiliates. While the Fund has been available for sale in a
limited number of states, as of March 31, 1999, the Fund had not engaged in a
broad continuous public offering and was not subject to redemption requests. The
Fund's adviser believes that the portfolio has been managed substantially the
same as if the Fund had been open for investment to all public investors. No
assurances can be given, however, that the Fund's investment performance would
have been the same during the period if the Fund had been broadly distributed.
During this period, certain fees were waived and expenses were reimbursed by the
Fund's adviser which had a material effect on the Fund's total return.
3
<PAGE> 90
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
We recently spoke to the management team of the Van Kampen Great American
Companies Fund about the key events and economic forces that shaped the markets
during the reporting period. The team includes Jeff D. New, portfolio manager;
Michael Davis and Mary Jayne Maly, portfolio comanagers; and Stephen L. Boyd,
chief investment officer for equity investments.
The Fund's fiscal year end was recently changed from June 30 to March
31. Going forward, your annual reports will be dated March 31, and your
semiannual reports will be dated September 30. The following interview discusses
the Fund's performance during the nine-month period since your last annual
report, from July 1, 1998, to March 31, 1999.
Q COULD YOU TALK BRIEFLY ABOUT THE MARKET ENVIRONMENT DURING THE REPORTING
PERIOD AND HOW IT AFFECTED THE FUND?
A The stock market was extremely volatile during the reporting period,
plummeting in the third quarter of 1998 but staging an impressive recovery that
left the Dow Jones Industrial Average hovering just below 10,000-a milestone it
surpassed in the period's final week. The stock market's rise could be
attributed primarily to sustained U.S. economic growth and low inflation.
Large-cap growth stocks continued to be the primary beneficiaries of the market
rise; small- and mid-cap stocks did not do as well. This was a favorable
environment for the Fund, which invests the majority of its assets in
established, large-cap companies.
Q GIVEN THIS ENVIRONMENT, HOW DID YOU MANAGE THE FUND?
A The Fund invests primarily in U.S. companies that have been market leaders in
their respective industries. We believe these companies will be able to sustain
their position and produce superior performance over time. Although quality is a
primary consideration, we also evaluate potential holdings for attractive
valuations relative to their growth rates. In this volatile market environment,
we are maintaining our investment strategy because we believe it is especially
important to uphold a consistent discipline during changing market conditions.
Q WHAT STOCKS HELPED THE FUND'S PERFORMANCE?
A Some of our most successful stocks were technology companies we believed would
benefit from the Internet and computing boom. Internet service provider America
Online, which we purchased during the reporting period, saw its stock price
skyrocket and become the Fund's largest holding. EMC, which provides data
storage solutions to major corporations, was another extremely successful
investment for the Fund, up 193 percent during the reporting period. Computer
networking leader Cisco Systems also thrived; its stock price rose by 83
percent.
Cable and media company Time Warner also benefited from the Internet's
increasing significance, as companies that own residential cable connections
have enormous opportunities to provide access to high-speed computer networks.
4
<PAGE> 91
Time Warner's stock price rose significantly during the period, helping the
Fund.
Retail holdings also benefited the Fund, particularly once we moved
beyond the difficult third quarter of 1998. Companies such as Wal-Mart, Home
Depot, and Lowe's all enjoyed good performance during the reporting period.
Other companies whose performance boosted the Fund's return were financial
services company Providian Financial and leading biotechnology firm Amgen.
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 in the
future.
Q DID ANY STOCKS HURT THE FUND?
A Stocks in the area of health care services had the most significant negative
impact on the Fund's performance. Two primary factors fueled these companies'
stock price declines. First, many companies in this sector have seen their
profits squeezed because of their inability to keep pace with increasing health
care costs. Second, changes in Medicare regulations and some instances of
Medicare fraud have plagued the industry. Investors have generally been wary of
this sector, even though most of the companies--including the ones we owned--
have not been shown to have committed any wrongdoing. Some of the health care
companies that hurt the Fund were United HealthCare, Total Renal Care,
HealthSouth, and Tenet Healthcare. Because of the industry's declining
fundamentals, we sold these four companies during the reporting period.
Despite the mostly positive performance of technology companies, some
software companies faced the possibility of declining demand for their products
as businesses ease software spending to focus their resources on the year 2000
problem. BMC Software and Compuware had a negative impact on the Fund during the
reporting period. BMC stock lost 27 percent of its value, while Compuware stock
declined 2 percent.
Other stocks that we sold during the period due to disappointing
performance and weak fundamentals were financial services firm Conseco and food
and tobacco conglomerate Philip Morris.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A Overall, during the reporting period, the Fund had a total return of 18.45
percent (Class A shares at net asset value). In addition, the Fund generated
total returns of 16.79 percent, 25.29 percent, and 27.59 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 had a return of 14.65 percent,
while the Lipper Growth Fund Index, which more closely resembles the Fund, had a
return of 14.27 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.
5
<PAGE> 92
Q WHAT DO YOU SEE AHEAD FOR THE FUND DURING THE NEXT SIX MONTHS?
A We basically expect more of the same--continued economic growth and low
inflation. Even with robust domestic economic growth, however, growth in
corporate profits is slowing and weak overall because of strong competition in
many industries. Our goal is to own those companies that we believe will produce
significantly above-average earnings growth in an increasingly competitive
environment.
Large-cap stocks have performed very well over the past few years--due partly
to large companies increasing their dominance in many industries. We expect this
condition to continue for the foreseeable future, although we are somewhat
concerned about the extreme gap between valuations of large-cap stocks versus
small- and mid-cap stocks; large-company valuations are generally high by
historical standards, while small- to mid-sized company valuations are generally
low. The Fund has most of its assets invested in larger-cap stocks, so if
valuations return to more traditional levels, the Fund's future performance may
be affected.
/s/ Jeff D. New /s/ Michael Davis
Jeff D. New Michael Davis
Portfolio Manager Portfolio Comanager
/s/ Mary Jayne Maly /s/ Stephen L. Boyd
Mary Jayne Maly Stephen L. Boyd
Portfolio Comanager Chief Investment Officer
Equity Investments
6
<PAGE> 93
Van Kampen Great American Companies Fund
Portfolio of Investments
March 31, 1999
Description Shares Market Value
Common Stocks 96.9%
Consumer Distribution 12.6%
Dayton Hudson Corp. 400 $ 26,650
Home Depot, Inc. 500 31,125
Kroger Co. (a) 400 23,950
Lowe's Cos., Inc. 800 48,400
Safeway, Inc. (a) 500 25,655
TJX Cos., Inc. 1,000 34,000
Tricon Global Restaurants, Inc. (a) 600 42,150
Wal-Mart Stores, Inc. 500 46,094
--------
278,024
--------
Consumer Durables 1.5%
Ford Motor Co. 600 34,050
--------
Consumer Non-Durables 2.8%
Anheuser Busch Cos., Inc. 500 38,094
Clorox Co. 200 23,438
--------
61,532
--------
Consumer Services 13.4%
Brinker International, Inc. (a) 600 15,488
CBS Corp. 900 36,844
Chancellor Media Corp., Class A (a) 200 9,425
Comcast Corp., Class A 300 18,881
Cox Communications, Inc., Class A (a) 600 45,375
Fox Entertainment Group, Inc., Class A (a) 1,000 27,125
Omnicom Group, Inc. 700 55,956
Time Warner, Inc. 800 56,850
Univision Communications, Inc. (a) 600 30,000
--------
295,944
--------
Energy 1.9%
Enron Corp. 600 38,550
Halliburton Co. 100 3,850
--------
42,400
--------
See Notes to Financial Statements
7
<PAGE> 94
Van Kampen Great American Companies Fund
Portfolio of Investments (Continued)
March 31, 1999
Description Shares Market Value
Finance 12.5%
American General Corp. 300 $ 21,150
American International Group, Inc. 200 24,125
Chase Manhattan Corp. 300 24,394
Citigroup, Inc. 350 22,356
Equitable Cos., Inc. 400 28,000
Fifth Third Bancorp 100 6,594
Firstar Corp. 300 26,850
J.P. Morgan & Co., Inc. 200 24,675
Marsh & McLennan Cos., Inc. 300 22,256
Mellon Bank Corp. 100 7,038
Merrill Lynch & Co., Inc. 200 17,688
PNC Bank Corp. 400 22,225
Providian Financial Corp. 200 22,000
State Street Corp. 100 8,219
--------
277,570
--------
Healthcare 16.3%
Abbott Laboratories, Inc. 600 28,088
American Home Products Corp. 500 32,625
Amgen, Inc. (a) 800 59,900
Baxter International, Inc. 250 16,500
Bristol-Myers Squibb Co. 600 38,588
Cardinal Health, Inc. 300 19,800
Eli Lilly & Co. 400 33,950
Guidant Corp. 400 24,200
Johnson & Johnson 200 18,738
Pfizer, Inc. 200 27,750
Schering Plough Corp. 600 33,188
Warner Lambert Co. 400 26,475
--------
359,802
--------
Producer Manufacturing 3.9%
Republic Services, Inc., Class A (a) 700 11,331
Tyco International, Ltd. 350 25,113
United Technologies Corp. 200 27,088
Waste Management, Inc. 500 22,188
--------
85,720
--------
See Notes to Financial Statements
8
<PAGE> 95
Van Kampen Great American Companies Fund
Portfolio of Investments (Continued)
March 31, 1999
Description Shares Market Value
Raw Materials/Processing Industries 1.6%
Georgia Pacific Group 300 $ 22,275
Temple Inland, Inc. 200 12,550
----------
34,825
----------
Technology 24.9%
America Online, Inc. (a) 1,220 178,120
Applied Materials, Inc. (a) 300 18,506
Ascend Communications, Inc. (a) 300 25,106
BMC Software, Inc. (a) 400 14,825
Cisco Systems, Inc. (a) 450 49,303
Citrix Systems, Inc. (a) 600 22,875
Compuware Corp. (a) 800 19,100
EMC Corp. (a) 500 63,875
Intel Corp. 350 41,606
International Business Machines Corp. 150 26,588
Microsoft Corp. (a) 600 53,775
Oracle Corp. (a) 650 17,144
Texas Instruments, Inc. 200 19,850
----------
550,673
----------
Transportation 1.0%
Kansas City Southern Industries, Inc. 400 22,800
----------
Utilities 4.5%
ALLTEL Corp. 500 31,188
AT & T Corp. 200 15,963
MCI Worldcom, Inc. (a) 300 26,569
SBC Communications, Inc. 550 25,919
----------
99,639
----------
Total Investments 96.9%
(Cost $1,454,274) 2,142,979
Other Assets in Excess of Liabilities 3.1% 68,621
----------
Net Assets 100.0% $2,211,600
==========
(a) Non-income producing security as this stock does not currently declare
dividends.
See Notes to Financial Statements
9
<PAGE> 96
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
ASSETS:
Total Investments (Cost $1,454,274) $2,142,979
Cash 96,366
Receivables:
Investments Sold 56,864
Expense Reimbursement from Adviser 16,194
Dividends 1,132
Unamortized Organizational Costs 14,102
Other 1,129
-----------
Total Assets 2,328,766
-----------
LIABILITIES:
Payable for Investments Purchased 49,113
Trustees' Deferred Compensation and Retirement Plans 37,585
Accrued Expenses 17,469
Distributor and Affiliates 12,999
-----------
Total Liabilities 117,166
-----------
NET ASSETS $2,211,600
===========
NET ASSETS CONSIST OF:
Capital $1,590,553
Net Unrealized Appreciation 688,705
Accumulated Net Investment Loss (32,091)
Accumulated Net Realized Loss (35,567)
-----------
NET ASSETS $2,211,600
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $1,928,494 and 113,163 shares of beneficial interest
issued and outstanding)
$17.04
Maximum sales charge (5.75%* of offering price) 1.04
===========
Maximum offering price to public $18.08
===========
Class B Shares:
Net asset value and offering price per share (Based on net
assets of $141,546 and 8,305 shares of beneficial interest
issued and outstanding)
$17.04
===========
Class C Shares:
Net asset value and offering price per share (Based on net
assets of $141,560 and 8,305 shares of beneficial interest
issued and outstanding)
$17.05
===========
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
10
<PAGE> 97
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
STATEMENT OF OPERATIONS
For the Nine Months Ended March 31, 1999, and
the Year Ended June 30, 1998
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
March 31, 1999 June 30, 1998
--------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 9,409 $ 16,979
--------------- ------------
EXPENSES:
Accounting 33,776 28,709
Shareholder Reports 20,176 25,938
Trustees' Fees and Expenses 13,289 9,477
Shareholder Services 11,702 15,259
Custody 10,443 7,307
Investment Advisory Fee 9,771 11,450
Audit 9,506 11,992
Amortization of Organizational Costs 6,003 7,997
Legal 3,963 9,020
Other 5,477 10,194
--------------- ------------
Total Expenses 124,106 137,343
Less: Fees Waived and Expenses
Reimbursed ($9,771 and $95,161, 104,932 112,756
respectively, for the nine months
ended 3/31/99 and $11,450 and
$101,306, respectively, for the
year ended 6/30/98)
Credits Earned on Cash Balances 1,721 4,169
--------------- ------------
Net Expenses 17,453 20,418
--------------- ------------
NET INVESTMENT LOSS $ (8,044) $ (3,439)
=============== ============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain/Loss $ (34,592) $ 320,602
--------------- ------------
Unrealized Appreciation:
Beginning of the Period 301,129 198,127
End of the Period 688,705 301,129
--------------- ------------
Net Unrealized Appreciation During the Period 387,576 103,002
--------------- ------------
NET REALIZED AND UNREALIZED GAIN $ 352,984 $ 423,604
=============== ============
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 344,940 $ 420,165
=============== ============
</TABLE>
See Notes to Financial Statements
11
<PAGE> 98
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Nine Months Ended March 31, 1999, and
the Years Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
Nine Months Ended Year Ended Year Ended
March 31, 1999 June 30, 1998 June 30, 1997
--------------------- ------------------ ---------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss $ (8,044) $ (3,439) $ (369)
Net Realized Gain/Loss (34,592) 320,602 56,138
Net Unrealized Appreciation During the Period 387,576 103,002 176,652
-------------- --------------- --------------
Change in Net Assets from Operations 344,940 420,165 232,421
-------------- --------------- --------------
Distributions from and in Excess of Net Investment Income:
Class A Shares (2,823) (12,532) (133)
Class B Shares (207) (920) (123)
Class C Shares (207) (920) (123)
-------------- --------------- --------------
(3,237) (14,372) (379)
-------------- --------------- --------------
Distributions from Net Realized Gain:
Class A Shares (171,322) (154,061) (6,296)
Class B Shares (12,574) (11,306) (5,847)
Class C Shares (12,574) (11,306) (5,847)
-------------- --------------- --------------
(196,470) (176,673) (17,990)
-------------- --------------- --------------
Total Distributions (199,707) (191,045) (18,369)
-------------- --------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES 145,233 229,120 214,052
-------------- --------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold 0 0 1,005,024
Net Asset Value of Shares Issued Through
Dividend Reinvestment 199,707 191,045 0
Cost of Shares Repurchased 0 (5,023) 0
-------------- --------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 199,707 186,022 1,005,024
-------------- --------------- --------------
TOTAL INCREASE IN NET ASSETS 344,940 415,142 1,219,076
NET ASSETS:
Beginning of the Period 1,866,660 1,451,518 232,442
-------------- --------------- --------------
End of the Period (Including accumulated Net Investment
Loss of $32,091, $20,810 and $2,999, respectively) $ 2,211,600 $ 1,866,660 $ 1,451,518
============== =============== ==============
</TABLE>
See Notes to Financial Statements
12
<PAGE> 99
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
Year Ended June 30, of Investment
Nine Months Ended ---------------------- Operations) to
Class A Shares March 31, 1999 1998 1997 June 30, 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 16.128 $ 14.235 $ 11.622 $ 10.000
------------ ---------- ----------- ------------
Net Investment Income/Loss (0.040) (0.009) (0.003) 0.019
Net Realized and Unrealized Gain 2.680 3.784 3.535 1.603
------------ ---------- ----------- ------------
Total from Investment Operations 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 $ 17.042 $ 16.128 $ 14.235 $ 11.622
============ ========== =========== ============
Total Return * (a) 18.45%** 29.08% 32.29% 16.10%**
Net Assets at End of the Period (In thousands) $ 1,928.5 $ 1,627.7 $ 1,260.8 $ 81.4
Ratio of Expenses to Average Net Assets* (b) 1.37% 1.51% 1.59% 1.37%
Ratio of Net Investment Income/
Loss to Average Net Assets* (0.58%) (0.21%) (0.08%) 0.33%
Portfolio Turnover 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) 8.89% 8.41% 17.82% 18.46%
Ratio of Net Investment Income/
Loss to Average Net Assets (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 .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> 100
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
Year Ended June 30, of Investment
Nine Months Ended ---------------------- Operations) to
Class B Shares March 31, 1999 1998 1997 June 30, 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 16.129 $ 14.237 $ 11.622 $ 10.000
-------- -------- -------- --------
Net Investment Income/Loss (0.036) (0.004) (0.007) 0.019
Net Realized and Unrealized Gain 2.676 3.778 3.541 1.603
-------- -------- -------- --------
Total from Investment Operations 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 $ 17.043 $ 16.129 $ 14.237 $ 11.622
======== ======== ======== ========
Total Return * (a) 18.52%** 29.08% 32.29% 16.10%**
Net Assets at End of the Period (In thousands) $ 141.5 $ 119.5 $ 92.5 $ 75.5
Ratio of Expenses to Average Net Assets* (b) 1.37% 1.51% 1.59% 1.37%
Ratio of Net Investment Income/
Loss to Average Net Assets* (0.58%) (0.21%) (0.05%) 0.33%
Portfolio Turnover 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) 8.89% 8.41% 17.82% 18.46%
Ratio of Net Investment Income/
Loss to Average Net Assets (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 .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> 101
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
Year Ended June 30, of Investment
Nine Months Ended ---------------------- Operations) to
Class C Shares March 31, 1999 1998 1997 June 30, 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 16.131 $ 14.237 $ 11.622 $ 10.000
--------- --------- --------- ---------
Net Investment Income/Loss (0.036) (0.008) (0.007) 0.019
Net Realized and Unrealized Gain 2.676 3.784 3.541 1.603
--------- --------- --------- ---------
Total from Investment Operations 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 $ 17.045 $ 16.131 $ 14.237 $ 11.622
========= ========= ========= =========
Total Return * (a) 18.52%** 29.08% 32.29% 16.10%**
Net Assets at End of the Period (In thousands) $ 141.6 $ 119.5 $ 98.2 $ 75.5
Ratio of Expenses to Average Net Assets* (b) 1.37% 1.51% 1.59% 1.37%
Ratio of Net Investment Income/
Loss to Average Net Assets* (0.58%) (0.21%) (0.05%) 0.33%
Portfolio Turnover 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) 8.89% 8.41% 17.82% 18.46%
Ratio of Net Investment Income
Loss to Average Net Assets (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 .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
15
<PAGE> 102
VAN KAMPEN
GREAT AMERICAN COMPANIES FUND
Notes to Financial Statements
March 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Great American Companies Fund (the "Fund") is organized as a series
of the Van Kampen Equity Trust (the "Trust"), a Delaware business trust, and is
registered as a diversified open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to seek long-term growth of capital by investing principally in common stocks
and other equity securities. The Fund commenced investment operations on
December 27, 1995, with three classes of common shares, Class A, Class B and
Class C shares. In July 1998, the Fund's Board of Trustees approved a change in
the Fund's fiscal year end from June 30 to March 31. As a result, this financial
report reflects the nine month period commencing on July 1, 1998, and ending on
March 31, 1999.
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. 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 will be expensed on the first business day of
the 1999 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 wash sales.
At March 31, 1999, for federal income tax purposes the cost of long-
and short-term investments is $1,455,250, the aggregate gross unrealized
appreciation is $711,808 and the aggregate gross unrealized depreciation is
$24,079, resulting in net unrealized appreciation on long- and short-term
investments of $687,729.
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.
16
<PAGE> 103
VAN KAMPEN
GREAT AMERICAN COMPANIES FUND
Notes to Financial Statements (Continued)
March 31, 1999
G. EXPENSE REDUCTIONS - During the nine months ended
March 31, 1999 and the year ended June 30, 1998, the Fund's custody fee was
reduced by $1,721 and $4,169, respectively as a result of credits earned on
overnight cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under
the terms of the Fund's Investment Advisory Agreement, the Adviser will provide
investment advice and facilities to the Fund for an annual fee payable monthly
as follows:
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 nine months ended March 31, 1999, and the year ended June 30,
1998, 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 $9,771 and $11,450, respectively, of its investment
advisory fees and assumed $95,161 and $101,306, respectively, of the Fund's
other expenses. This waiver is voluntary in nature and can be discontinued at
the Adviser's discretion.
For the nine months ended March 31, 1999, and the year ended June 30,
1998, the Fund recognized expenses of approximately $200 and $500, respectively,
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund of which a trustee of the Fund is an affiliated
person. All of this cost has been assumed by Van Kampen.
For the nine months ended March 31, 1999, and the year ended June 30,
1998, the Fund incurred expenses of approximately $37,500 and $37,300,
respectively, representing Van Kampen's cost of providing accounting and legal
services to the Fund. All of this cost has been assumed by Van Kampen.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves
as the shareholder servicing agent for the Fund. For the nine months ended March
31, 1999, and the year ended June 30, 1998, the Fund recognized expenses of
approximately $10,800 and $15,000, respectively. 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 March 31, 1999, Van Kampen owned all shares of Classes A, B and C,
respectively.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At 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)
------------ ----------------
At June 30, 1997, capital aggregated $1,069,863, $64,969 and $69,992
for Classes A, B and C, respectively. For the year ended June 30, 1997,
transactions were as follows:
Shares Value
- -------------------------------------- ------------ ----------------
Dividend Reinvestment:
Class A 81,566 $1,000,000
Class B 0 0
Class C 398 5,024
------------ ----------------
Total Dividend Reinvestment 81,964 $1,005,024
------------ ----------------
17
<PAGE> 104
VAN KAMPEN
GREAT AMERICAN COMPANIES FUND
Notes to Financial Statements (Continued)
March 31, 1999
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 nine months ended March 31, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $1,374,373 and
$1,371,514, respectively. For the year ended June 30, 1998, the cost of
purchases and proceeds from sales of investments, excluding short-term
investments were $2,298,298 and $2,282,313, respectively.
5. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
The Fund's net assets are subject to annual fees under the Plans of up
to .25% for Class A net assets and 1.00% each for Class B and Class C net
assets. No fees related to the Plans have been accrued by the Fund as the Fund
is currently owned solely by affiliated persons.
18
<PAGE> 105
Report of Independent Accountants
The Board of Trustees and Shareholders of
Van Kampen Great American Companies Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Great American Companies Fund (the "Fund"), including the portfolio
of investments, as of March 31, 1999, and the related statement of
operations for the nine-month period ended March 31, 1999 and the year
ended June 30, 1998, the statement of changes in net assets for the
nine-month period ended March 31, 1999 and for each of the years in the
two-year period ended June 30, 1998, and the financial highlights for each
of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 1999, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Van Kampen Great American Companies Fund as of March 31, 1999, the
results of its operations for the nine-month period ended March 31, 1999
and the year ended June 30, 1998, the changes in its net assets for the
nine-month period ended March 31, 1999 and for each of the years in the
two-year period ended June 30, 1998, and the financial highlights for each
of the periods presented, in conformity with generally accepted accounting
principles.
KPMG LLP
Chicago, Illinois
May 10, 1999
19
<PAGE> 106
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
Board of Trustees Investment Adviser
J. Miles Branagan Van Kampen
Richard M. DeMartini* Investment Advisory Corp.
Linda Hutton Heagy 1 Parkview Plaza
R. Craig Kennedy P.O. Box 5555
Jack E. Nelson Oakbrook Terrace, Illinois 60181-5555
Don G. Powell*
Phillip B. Rooney Distributor
Fernando Sisto
Wayne W. Whalen* - Chairman Van Kampen Funds Inc.
Paul G. Yovovich 1 Parkview Plaza
P.O. Box 5555
Officers Oakbrook Terrace, Illinois 60181-5555
Dennis J. McDonnell* Shareholder Servicing Agent
President
John L. Sullivan* Van Kampen Investor Services Inc.
Vice President, Treasurer and Chief P.O. Box 418256
Financial Officer Kansas City, Missouri 64141-9256
Curtis W. Morell* Custodian
Vice President and
Chief Accounting Officer State Street Bank and Trust Company
225 Franklin Street
Tanya M. Loden* P.O. Box 1713
Controller Boston, Massachusetts 02105
Peter W. Hegel* Legal Counsel
Paul R. Wolkenberg* Skadden, Arps, Slate, Meagher &
Edward C. Wood, III* Flom (Illinois)
Vice Presidents 333 West Wacker Drive
Chicago, Illinois 60601
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.
Van Kampen Funds Inc., 1999
All Rights Reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
For federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
March 31, 1999. The Fund designated and paid $76,112 as a 20% rate gain
distribution. Shareholders were sent a 1998 Form 1099-DIV in January 1999,
representing their proportionate share of this capital gain distribution. For
corporate shareholders 6.98% of this distributions quality for the dividend
received deductions.
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.
20
<PAGE> 107
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> 108
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Performance in Perspective....................... 4
Glossary of Terms................................ 5
Portfolio Management Review...................... 6
Portfolio Highlights............................. 9
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 19
Report of Independent Accounts................... 28
</TABLE>
GF ANR 5/99
<PAGE> 109
LETTER TO SHAREHOLDERS
April 20, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together we've
witnessed one of the greatest bull markets in investment history, unprecedented
growth in mutual fund investing, and a surge in personal retirement planning.
The coming millennium promises to hold even more opportunities.
To lead us into this new era of investing, Richard F. Powers III has joined
Van Kampen as Chairman and Chief Executive Officer. He comes to us from our
parent company, Morgan Stanley Dean Witter & Co., where he served as Executive
Vice President and Director of Marketing. He brings 27 years of experience in
the financial services industry, including an extensive background in product
management, strategic planning, and brand development.
Although former Chairman Don G. Powell retired on January 1, he will remain
active in the industry and the community. Mr. Powell plans to continue his
service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
ECONOMIC OVERVIEW
The U.S. economy continued to grow at a robust pace, despite financial
problems abroad. In the fourth quarter, the nation's gross domestic product
(GDP) rose at an astounding 6.0 percent annual rate, surprising most economists,
whose estimates had been much more conservative. GDP remained strong through the
first quarter of 1999, posting a 4.5 percent annual growth rate. However, the
economy began to show signs of slowing down early in 1999, as corporate profits
and wage growth declined.
A series of interest rate cuts by the Federal Reserve helped the U.S.
economy avoid the economic slump that plagued many global markets. The Fed's
0.25 percent interest rate cut in September was followed by additional cuts in
October and November. These rate cuts, coupled with a wave of corporate mergers
and cost-cutting measures, lent the support needed to foster continued growth.
In addition, the outlook for troubled areas such as Asia and Latin America
improved significantly, and most experts agree that these economies are on the
slow road to recovery.
Despite the improvements abroad and record economic growth in the United
States, inflation remained at bay as commodity prices tumbled. This low
inflationary environment--only a 1.7 percent increase in the consumer price
index over the past 12 months--contributed to the strong domestic economy and
kept inflation-adjusted interest rates attractive. A low level of unemployment,
vibrant consumer spending, and an active housing market also supported the
positive economic conditions.
MARKET REVIEW
The stock market bounced back resoundingly from the lows we experienced in
August and September, when concerns about the global economic slowdown had
reached a peak.
Continued on page 2
1
<PAGE> 110
Growth-oriented large-company stocks displayed the most resilience, propelling
the Dow Jones Industrial Average past the 10,000 mark for the first time at the
end of the reporting period. Investors continued to favor the earnings strength
and perceived stability of these high-quality stocks, while many other areas of
the market remained sluggish. With the emphasis on growth-style blue-chip
companies, many investors overlooked the strong values to be found in other
areas of the market, especially among smaller companies. The Russell 2000 Index,
which represents small-cap stocks, lost more than 12 percent during the nine
months since our last report, compared with a gain of almost 15 percent for the
larger companies composing the S&P 500 Index.
OUTLOOK
Our outlook for the domestic economy remains positive, although the pattern
of reduced growth may continue into the second half of the year. We look for a
slow but steady rise in inflation throughout 1999 to more normal, but certainly
not alarming levels. Internationally, low interest rates and improving financial
conditions should continue to support the economic improvements we've witnessed
in Asia and Latin America.
We believe the markets may still favor higher-quality securities such as
large-company stocks and investment-grade bonds in the near term. In addition,
we anticipate continued day-to-day volatility in the markets, although we
probably won't see sustained high or low periods during the next six months.
Additional details about your fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.
Sincerely,
[SIG.]
Richard F. Powers III
Chairman
Van Kampen Investment Advisory Corp.
[SIG.]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
2
<PAGE> 111
PERFORMANCE RESULTS FOR THE PERIOD ENDED MARCH 31, 1999
VAN KAMPEN GROWTH FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Nine-month total return based on
NAV(1)................................... 2.18% 1.60% 1.60%
Nine-month total return(2)............... (3.69%) (3.34%) 0.61%
One-year total return(2)................. 1.28% 1.66% 5.62%
Life-of-Fund average annual total
return(2).............................. 32.22% 33.52% 33.91%
Commencement Date........................ 12/27/95 12/27/95 12/27/95
</TABLE>
(1)Assumes reinvestment of all distributions for the period and does not include
payment of the maximum sales charge (5.75% for A shares) or contingent deferred
sales charge for early withdrawal (5% for B shares and 1% for C shares).
(2)Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).
See the Prior Performance section of the current prospectus. 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 greater affect 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.
On July 31, 1998, the Fund's Board of Trustees voted to change the Fund's
fiscal year end from June 30 to March 31. As a result, this annual report
reflects the 9-month period commencing on July 1, 1998 and ending on March 31,
1999.
3
<PAGE> 112
PUTTING YOUR PORTFOLIO'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment performance at regular intervals. A
comparison of your Fund's performance to an applicable benchmark can:
- Illustrate the market environment in which your Fund is being managed.
- Reflect the impact of favorable market trends or difficult market
conditions.
- Help you evaluate how your Fund's management team has responded to
opportunities and challenges.
The following graph compares your Fund's performance to that of the Standard
& Poor's 500 Index and the Lipper Growth Fund Index over time. These indexes are
broad-based statistical composites that do not include any commissions that
would be paid by an investor purchasing the securities they represent.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Growth Fund vs. the Standard & Poor's 500 Index and the Lipper
Growth Fund Index (December 27, 1995, through March 31, 1999)
[INVESTMENT PERFORMANCE GRAPH]
- -------------------------------
Fund's Total Return
1 Year Total Return = 1.28%
3 Year Avg. Annual = 27.48%
Inception Avg. Annual = 32.22%
- -------------------------------
<TABLE>
<CAPTION>
VAN KAMPEN GROWTH FUND STANDARD & POOR'S 500 INDEX LIPPER GROWTH FUND INDEX
---------------------- --------------------------- ------------------------
<S> <C> <C> <C>
Dec 1995 9425 10000 10000
9849 10409 10242
10688 10482 10402
Mar 1996 11310 10621 10450
12884 10764 10712
13525 11010 10902
12912 11096 10796
11659 10589 10212
12516 10788 10521
Sep 1996 14213 11437 11108
15108 11736 11268
15721 12597 11980
15390 12389 11753
16883 13149 12386
16598 13227 12271
Mar 1997 15213 12723 11709
15635 13466 12224
16873 14255 13070
17561 14940 13559
19360 16107 14683
19301 15182 14140
Sep 1997 21168 16057 14948
19664 15503 14466
19664 16195 14798
19546 16516 15048
19639 16684 15147
21713 17859 16215
Mar 1998 23134 18815 16908
23528 18986 17090
22429 18629 16671
24326 19435 17391
22387 19209 17207
17742 16408 14444
Sep 1998 18768 17505 15407
19245 18911 16473
20873 20029 17455
24100 21227 18914
24953 22096 19721
23161 21384 19047
Mar 1999 24857 22283 19874
</TABLE>
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions, and includes payment of the maximum
sales charge (5.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
The Fund commenced operation in 1995 with limited capital invested primarily by
the adviser's affiliate. While the Fund had been available for sale in a limited
number of states, prior to February 3, 1997, the Fund had not engaged in a broad
continuous public offering, had limited public investors, and was not subject to
redemption requests. The Fund's adviser believes that the portfolio had been
managed substantially the same as if the Fund had been open for investment to
all public investors. No assurances can be given, however, that the Fund's
investment performance would have been the same during the period if the Fund
had been broadly distributed.
4
<PAGE> 113
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).
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.
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.
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.
STANDARD & POOR'S 500 INDEX: A broad-based measurement of changes in stock-
market conditions based on the average performance of 500 widely held common
stocks. The index, which tracks industrial, transportation, financial, and
utility stocks, provides a guide to the overall health of the U.S. stock
market. The S&P 500 is a much broader index than the Dow Jones Industrial
Average and reflects the stock market more fully.
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.
5
<PAGE> 114
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN GROWTH FUND
We recently spoke to the management team of the Van Kampen Growth Fund about the
key events and economic forces that shaped the markets during the reporting
period. The team includes Jeff D. New, portfolio manager; Michael Davis and Mary
Jayne Maly, portfolio comanagers; and Stephen L. Boyd, chief investment officer
for equity investments.
The Fund's fiscal year end was recently changed from June 30 to March 31.
Going forward, your annual reports will be dated March 31, and your semiannual
reports will be dated September 30. The following interview discusses the Fund's
performance during the nine-month period since your last annual report, from
July 1, 1998, to March 31, 1999.
Q COULD YOU TALK BRIEFLY ABOUT THE MARKET ENVIRONMENT DURING THE REPORTING
PERIOD AND HOW IT AFFECTED THE FUND?
A The stock market was extremely volatile during the reporting period,
plummeting in the third quarter of 1998 but staging an impressive recovery
that left the Dow Jones Industrial Average hovering just below 10,000--a
milestone it surpassed in the period's final week. The stock market's rise may
be attributed primarily to sustained U.S. economic growth and low inflation.
Large growth stocks continued to be the beneficiaries of the market rise; small
and medium-sized stocks did not do as well. Consequently, this was not the most
favorable environment for the Fund, which invested a significant percentage of
its assets in small- and medium-sized stocks.
Q GIVEN THIS ENVIRONMENT, HOW DID YOU MANAGE THE FUND?
A Our strategy for managing the Fund remained consistent: We sought to find
growth companies with a combination 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.
Despite the general underperformance of small and mid caps during the
reporting period, we maintained a sizeable weighting in those types of stocks as
long as they continued to meet our criteria. We did, however, own some large-cap
holdings that helped the Fund significantly.
Q WHAT STOCKS HELPED THE FUND'S PERFORMANCE?
A Two of our most successful stocks were technology companies that we
believed would be beneficiaries of the Internet and computing boom.
Internet service provider America Online, which we bought in August in the
$20s, finished the reporting
6
<PAGE> 115
period at $146 per share. EMC, which provides data storage solutions to major
corporations, was another extremely successful investment for the Fund.
Retail companies rebounded from a poor third quarter of 1998 to post
impressive gains during the period, as consumer spending remained robust--due in
part to a strong stock market and buoyant economy. Specialty and discount
retailers fared the best. Our holdings in these areas included specialty
clothing retailers Abercrombie & Fitch and Ann Taylor, and discounter TJX
Companies.
Other companies we selected whose performance benefited the Fund were Tricon
Global (restaurants) and Biogen (biotechnology). Of course, not all of the
Fund's holdings performed as favorably, and there is no guarantee that these
stocks will continue to do so.
Q DID ANY STOCKS HURT THE FUND?
A Stocks in the area of health care services had the most significant
negative impact on the Fund's performance. First, many companies in this
area have seen their profits squeezed because of their inability to keep
pace with increasing health care costs. Second, changes in Medicare regulations
and some instances of Medicare fraud have plagued the industry. Investors have
generally been wary of this sector, even though most of the companies--including
the ones we owned--have not been shown to have committed any wrongdoing. Some of
the health care companies we owned that performed poorly were Safeskin, Total
Renal Care, HealthSouth, Tenet Health Care, and Lincare. These stocks fell by
between 33 and 82 percent during the reporting period--although in most cases we
sold them before they hit their bottoms. Only Lincare remained in the Fund's
portfolio as of March 31.
Other companies whose performance hurt the Fund during the reporting period
were consumer lender FirstPlus Financial, vehicle transporter United Road
Services, and software companies BMC Software and Compuware. Despite the
predominantly positive performance of technology firms, some software companies
faced the possibility of declining demand for their products as businesses ease
software spending to focus their resources on the year 2000 problem. During the
reporting period, BMC stock lost 29 percent of its value, while Compuware stock
declined 7 percent. For additional Fund portfolio highlights, please refer to
page 9.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A Overall, during the reporting period, the Fund had a total return of 2.18
percent(1) (Class A shares at net asset value). By comparison, the
Standard & Poor's 500 Index had a return of 14.65 percent, while the
Lipper Growth Fund Index, which more closely resembles the Fund, had a return of
14.27 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. Keep in mind
that these indices are statistical composites that do not include any
commissions or sales charges that would be paid by an investor purchasing the
securities or investments represented by these indices. Past performance does
not guarantee
7
<PAGE> 116
future results. Please refer to the chart and footnotes on page 3 for additional
Fund performance results.
Q WHAT DO YOU SEE AHEAD FOR THE FUND DURING THE NEXT SIX MONTHS?
A We basically expect moderate inflation and continued economic growth. Even
with robust domestic economic growth, however, corporate-profit growth is
slowing and weak overall because of strong competition in many industries.
Our goal is to own those companies that we believe have the potential to produce
significantly above-average earnings growth in an increasingly competitive
environment.
When comparing large and small- to mid-sized companies, there continues to
be a large gap in valuations. Large-company valuations are generally high by
historical standards, while small- to mid-sized company valuations are generally
low. Given that a significant portion of the Fund is invested in these smaller
stocks, we are hopeful that they will begin to outperform and that this
discrepancy will return to more traditional levels.
[SIG]
Jeff D. New
Portfolio Manager
[SIG]
Mary Jayne Maly
Portfolio Comanager
[SIG]
Michael Davis
Portfolio Comanager
[SIG]
Stephen L. Boyd
Chief Investment Officer
Equity Investments
8
<PAGE> 117
PORTFOLIO HIGHLIGHTS
VAN KAMPEN GROWTH FUND
PORTFOLIO HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
TOP TEN HOLDINGS PERCENTAGE OF
AS OF THESE INVESTMENTS
MARCH 31, 1999 NINE MONTHS AGO
<S> <C> <C> <C>
America Online, Inc. ............... 7.7% ................. N/A
EMC Corp. .......................... 5.7% ................. 2.3%
TJX Cos., Inc. ..................... 3.1% ................. 2.4%
Wal-Mart Stores, Inc. .............. 2.6% ................. N/A
Transwitch Corp. ................... 2.4% ................. N/A
Amgen, Inc. ........................ 2.2% ................. N/A
Safeway, Inc. ...................... 2.2% ................. 1.9%
Tricon Global Restaurants, Inc. .... 2.1% ................. N/A
Ann Taylor Stores Corp. ............ 1.9% ................. N/A
Lowe's Cos., Inc. .................. 1.9% ................. 1.1%
</TABLE>
N/A = Not Applicable
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
<S> <C>
Technology............................ 34.3%
Consumer Distribution................. 29.0%
Health Care........................... 12.9%
Consumer Services..................... 6.1%
Finance............................... 5.8%
AS OF JUNE 30, 1998
Technology............................ 26.3%
Health Care........................... 24.6%
Consumer Distribution................. 17.3%
Consumer Services..................... 13.4%
Finance............................... 8.1%
</TABLE>
9
<PAGE> 118
PORTFOLIO OF INVESTMENTS
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
--------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 97.6%
CONSUMER DISTRIBUTION 28.3%
Abercrombie & Fitch Co., Class A (a)............... 22,000 $ 2,024,000
AmeriSource Health Corp., Class A (a).............. 36,200 1,237,587
Ames Department Stores, Inc. (a)................... 40,000 1,485,000
AnnTaylor Stores Corp. (a)......................... 60,000 2,651,250
Bindley Western Industries, Inc. .................. 77,000 2,199,313
BJ's Wholesale Club, Inc. (a)...................... 58,000 1,533,375
Chico's Fas, Inc. (a).............................. 99,000 2,128,500
Hollywood Entertainment Corp. (a).................. 50,000 931,250
Intimate Brands, Inc. ............................. 34,000 1,636,250
Lexmark International Group, Inc., Class A (a)..... 12,700 1,419,225
Lowe's Cos., Inc. ................................. 42,800 2,589,400
Office Depot, Inc. (a)............................. 40,000 1,472,500
Pacific Sunwear of California, Inc. (a)............ 66,000 2,293,500
Polycom, Inc. (a).................................. 45,000 843,750
Safeway, Inc. (a).................................. 58,000 2,976,125
TJX Cos., Inc. .................................... 125,000 4,250,000
Tommy Hilfiger Corp. (a)........................... 26,000 1,790,750
Tricon Global Restaurants, Inc. (a)................ 40,000 2,810,000
Wal-Mart Stores, Inc. ............................. 38,000 3,503,125
------------
39,774,900
------------
CONSUMER DURABLES 2.9%
Harley Davidson, Inc. ............................. 24,000 1,380,000
Hasbro, Inc. ...................................... 51,000 1,475,813
Shaw Industries, Inc. ............................. 62,000 1,147,000
------------
4,002,813
------------
CONSUMER NON-DURABLES 1.0%
Adolph Coors Co.................................... 27,000 1,458,000
------------
CONSUMER SERVICES 6.0%
Autobytel.com, Inc. (a)............................ 8,100 339,188
Brinker International, Inc. (a).................... 39,300 1,014,431
Chancellor Media Corp., Class A (a)................ 15,000 706,875
iVillage, Inc. (a)................................. 3,100 311,550
MGM Grand, Inc. (a)................................ 39,000 1,311,375
United Road Services, Inc. (a)..................... 74,000 383,875
Univision Communications, Inc., Class A (a)........ 40,000 2,000,000
Young & Rubicam, Inc. (a).......................... 47,000 1,915,250
Ziff Davis, Inc. (a)............................... 10,900 392,400
------------
8,374,944
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 119
PORTFOLIO OF INVESTMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
--------------------------------------------------------------------------------
<S> <C> <C>
FINANCE 5.7%
Affiliated Managers Group, Inc. (a)................ 8,800 $ 228,800
Ambac Financial Group, Inc. ....................... 17,900 966,600
Charles Schwab Corp. .............................. 16,000 1,538,000
Fifth Third Bancorp................................ 6,700 441,781
Firstar Corp. ..................................... 18,000 1,611,000
Nationwide Financial Services, Inc., Class A....... 3,800 159,600
Providian Financial Corp. ......................... 15,000 1,650,000
Zions Bancorp. (a)................................. 21,000 1,396,500
------------
7,992,281
------------
HEALTHCARE 12.6%
Allergan, Inc. .................................... 8,800 773,300
Alpharma, Inc., Class A............................ 35,000 1,373,750
Amgen, Inc. (a).................................... 40,000 2,995,000
Biogen, Inc. (a)................................... 13,000 1,486,062
Bristol-Myers Squibb Co. .......................... 22,000 1,414,875
Guidant Corp. ..................................... 40,000 2,420,000
Lincare Holdings, Inc. (a)......................... 74,000 2,081,250
Mylan Laboratories, Inc. .......................... 38,000 1,042,625
Schering-Plough Corp. ............................. 33,000 1,825,313
Watson Pharmaceuticals, Inc. (a)................... 26,000 1,147,250
Wellpoint Health Networks, Inc., Class A (a)....... 14,000 1,061,375
------------
17,620,800
------------
PRODUCER MANUFACTURING 2.9%
Corning, Inc. ..................................... 24,000 1,440,000
Republic Services, Inc., Class A (a)............... 73,900 1,196,256
Waste Management, Inc. ............................ 32,900 1,459,938
------------
4,096,194
------------
TECHNOLOGY 33.5%
Acclaim Entertainment, Inc. (a).................... 60,000 536,250
Altera Corp. (a)................................... 25,000 1,487,500
America Online, Inc. (a)........................... 72,000 10,512,000
Avt Corp. (a)...................................... 72,000 1,719,000
BMC Software, Inc. (a)............................. 27,000 1,000,687
Citrix Systems, Inc. (a)........................... 48,000 1,830,000
Compuware Corp. (a)................................ 66,000 1,575,750
CSG Systems International, Inc. (a)................ 30,000 1,183,125
Electronics for Imaging, Inc. (a).................. 55,000 2,145,000
EMC Corp. (a)...................................... 61,000 7,792,750
Jabil Circuit, Inc. (a)............................ 62,000 2,511,000
Microsoft Corp. (a)................................ 27,200 2,437,800
</TABLE>
See Notes to Financial Statements
11
<PAGE> 120
PORTFOLIO OF INVESTMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
--------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Neon Systems, Inc. (a)............................. 7,300 $ 401,500
Network Solutions, Inc., Class A................... 7,000 740,250
Nokia Corp.--ADR (Finland)......................... 13,000 2,024,750
pcOrder.com, Inc., Class A (a)..................... 3,200 181,200
Rational Software Corp. (a)........................ 50,000 1,340,625
Sanmina Corp. (a).................................. 28,000 1,785,000
Solectron Corp. (a)................................ 32,000 1,554,000
Teradyne, Inc. (a)................................. 13,000 709,312
Waters Corp. (a)................................... 23,000 2,416,437
Xilinx, Inc. (a)................................... 26,000 1,054,625
------------
46,938,561
------------
UTILITIES 4.7%
Century Telephone Enterprises, Inc. ............... 21,000 1,475,250
Cincinnati Bell, Inc. ............................. 71,000 1,593,063
Level 3 Communications, Inc. (a)................... 2,700 196,594
Transwitch Corp. (a)............................... 74,000 3,348,500
------------
6,613,407
------------
TOTAL LONG-TERM INVESTMENTS 97.6%
(Cost $91,542,154).......................................... 136,871,900
REPURCHASE AGREEMENT 2.4%
SBC Warburg, Corp. ($3,400,000 par collateralized by U.S.
Government obligations in a pooled cash account dated
03/31/99, to be sold on 04/01/99 at $3,400,463) (Cost
$3,400,000)................................................... 3,400,000
------------
TOTAL INVESTMENTS 100.0%
(Cost $94,942,154).......................................... 140,271,900
OTHER ASSETS IN EXCESS OF LIABILITIES 0.0%..................... 66,022
------------
NET ASSETS 100.0%.............................................. $140,337,922
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR - American Depositary Receipt
See Notes to Financial Statements
12
<PAGE> 121
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $94,942,154)........................ $140,271,900
Cash........................................................ 3,844
Receivables:
Investments Sold.......................................... 5,008,980
Dividends................................................. 40,156
Fund Shares Sold.......................................... 15,292
Unamortized Organizational Costs............................ 14,102
Other....................................................... 344,825
------------
Total Assets.......................................... 145,699,099
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 4,472,798
Fund Shares Repurchased................................... 495,754
Distributor and Affiliates................................ 180,799
Investment Advisory Fee................................... 87,211
Accrued Expenses............................................ 68,870
Trustees' Deferred Compensation and Retirement Plans........ 55,745
------------
Total Liabilities..................................... 5,361,177
------------
NET ASSETS.................................................. $140,337,922
============
NET ASSETS CONSIST OF:
Capital..................................................... $ 99,307,949
Net Unrealized Appreciation................................. 45,329,746
Accumulated Net Realized Loss............................... (4,245,157)
Accumulated Net Investment Loss............................. (54,616)
------------
NET ASSETS.................................................. $140,337,922
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $60,128,868 and 2,580,837 shares of
beneficial interest issued and outstanding)............. $ 23.30
Maximum sales charge (5.75%* of offering price)........... 1.42
------------
Maximum offering price to public.......................... $ 24.72
============
Class B Shares:
Net asset value and offering price per share (Based on net
assets of $72,808,647 and 3,183,691 shares of beneficial
interest issued and outstanding)........................ $ 22.87
============
Class C Shares:
Net asset value and offering price per share (Based on net
assets of $7,400,407 and 323,632 shares of beneficial
interest issued and outstanding)........................ $ 22.87
============
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
13
<PAGE> 122
STATEMENT OF OPERATIONS
For the Nine Months Ended March 31, 1999
and the Year Ended June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
March 31, 1999 June 30, 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................... $ 241,203 $ 466,773
Interest.................................... 203,423 421,677
----------- -----------
Total Income............................ 444,626 888,450
----------- -----------
EXPENSES:
Investment Advisory Fee..................... 741,338 1,014,540
Distribution (12b-1) and Service Fees
(Attributed to Class A, B, and C of
$105,309, $511,218 and $55,646,
respectively, for the nine months ended
3/31/99 and $148,958, $669,433 and
$87,301, respectively, for the year ended
6/30/98).................................. 672,173 905,692
Shareholder Services........................ 407,920 574,734
Legal....................................... 45,597 14,323
Trustees' Fees and Expenses................. 12,294 24,916
Custody..................................... 11,803 2,177
Amortization of Organizational Costs........ 6,003 7,997
Other....................................... 193,861 168,777
----------- -----------
Total Expenses.......................... 2,090,989 2,713,156
Less Fees Waived........................ 42,465 386,039
----------- -----------
Net Expenses............................ 2,048,524 2,327,117
----------- -----------
NET INVESTMENT LOSS......................... $(1,603,898) $(1,438,667)
=========== ===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................... $(3,953,208) $12,625,540
Futures................................... -0- 278,325
----------- -----------
Net Realized Gain/Loss...................... (3,953,208) 12,903,865
----------- -----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................... 38,993,144 7,542,991
End of the Period......................... 45,329,746 38,993,144
----------- -----------
Net Unrealized Appreciation During the
Period.................................... 6,336,602 31,450,153
----------- -----------
NET REALIZED AND UNREALIZED GAIN............ $ 2,383,394 $44,354,018
=========== ===========
NET INCREASE IN NET ASSETS FROM
OPERATIONS................................ $ 779,496 $42,915,351
=========== ===========
</TABLE>
See Notes to Financial Statements
14
<PAGE> 123
STATEMENT OF CHANGES IN NET ASSETS
For the Nine Months Ended March 31, 1999
and the Years Ended June 30, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Year Ended Year Ended
March 31, 1999 June 30, 1998 June 30, 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss.................. $(1,603,898) $ (1,438,667) $ (86,224)
Net Realized Gain/Loss............... (3,953,208) 12,903,865 (1,757,194)
Net Unrealized Appreciation During
the Period......................... 6,336,602 31,450,153 7,484,772
----------- ------------ ------------
Change in Net Assets from
Operations......................... 779,496 42,915,351 5,641,354
----------- ------------ ------------
Distributions from Net Realized
Gain/Loss.......................... (3,378,184) (6,327,980) (23,514)
Distributions in Excess of Net
Realized Gain/Loss................. (291,949) -0- (1,799)
----------- ------------ ------------
Distributions from and in Excess of
Net Realized Gain*............... (3,670,133) (6,327,980) (25,313)
Return of Capital Distribution*...... -0- -0- (21,887)
----------- ------------ ------------
Total Distributions................ (3,670,133) (6,327,980) (47,200)
----------- ------------ ------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES.............. (2,890,637) 36,587,371 5,594,154
----------- ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............ 12,933,199 28,476,433 122,206,757
Net Asset Value of Shares Issued
Through Dividend Reinvestment...... 3,395,527 5,825,754 2,031
Cost of Shares Repurchased........... (26,950,184) (33,462,669) (11,696,360)
----------- ------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS....................... (10,621,458) 839,518 110,512,428
----------- ------------ ------------
TOTAL INCREASE/DECREASE IN NET
ASSETS............................. (13,512,095) 37,426,889 116,106,582
NET ASSETS:
Beginning of the Period.............. 153,850,017 116,423,128 316,546
----------- ------------ ------------
End of the Period (Including
accumulated net investment loss of
$54,616, $47,131, and $23,118
respectively)...................... $140,337,922 $153,850,017 $116,423,128
=========== ============ ============
*Distributions by Class
Distributions from and in Excess of
Net Realized Gain:
Class A Shares..................... $(1,555,668) $ (2,743,327) $ (24,246)
Class B Shares..................... (1,907,640) (3,159,670) (537)
Class C Shares..................... (206,825) (424,983) (530)
----------- ------------ ------------
$(3,670,133) $ (6,327,980) $ (25,313)
=========== ============ ============
Return of Capital Distribution:
Class A Shares..................... $ -0- $ -0- $ (20,964)
Class B Shares..................... -0- -0- (465)
Class C Shares..................... -0- -0- (458)
----------- ------------ ------------
$ -0- $ -0- $ (21,887)
=========== ============ ============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 124
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
Nine Months (Commencement of
Ended Year Ended Year Ended Investment Operations)
Class A Shares March 31, 1999(a) June 30, 1998 June 30, 1997(a) to June 30, 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $ 23.463 $ 17.878 $ 13.696 $ 10.000
----------- ----------- ----------- -----------
Net Investment Income/Loss... (.185) (.136) .031 (.044)
Net Realized and Unrealized
Gain....................... .604 6.711 4.810 3.740
----------- ----------- ----------- -----------
Total from Investment
Operations................... .419 6.575 4.841 3.696
----------- ----------- ----------- -----------
Less:
Distributions from and in
Excess of Net Realized
Gain....................... .584 .990 .353 -0-
Return of Capital
Distribution............... -0- -0- .306 -0-
----------- ----------- ----------- -----------
Total Distributions........... .584 .990 .659 -0-
----------- ----------- ----------- -----------
Net Asset Value, End of the
Period....................... $ 23.298 $ 23.463 $ 17.878 $ 13.696
=========== =========== =========== ===========
Total Return* (b)............. 2.18%** 38.52% 36.00% 37.00%**
Net Assets at End of the
Period (In millions)......... $60.1 $64.9 $53.1 $.1
Ratio of Expenses to Average
Net Assets*.................. 1.64% 1.30% 1.32% 1.46%
Ratio of Net Investment Income
to Average Net Assets*....... (1.19%) (.64%) .19% (.79%)
Portfolio Turnover............ 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................... 1.68% 1.58% 2.31% 15.69%
Ratio of Net Investment Income
to Average Net Assets........ (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.
See Notes to Financial Statements
16
<PAGE> 125
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
Nine Months (Commencement of
Ended Year Ended Year Ended Investment Operations)
Class B Shares March 31, 1999(a) June 30, 1998 June 30, 1997(a) to June 30, 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $ 23.173 $ 17.796 $ 13.695 $ 10.000
----------- ----------- ----------- -----------
Net Investment Loss.......... (.299) (.270) (.093) (.045)
Net Realized and Unrealized
Gain....................... .579 6.637 4.853 3.740
----------- ----------- ----------- -----------
Total from Investment
Operations................... .280 6.367 4.760 3.695
----------- ----------- ----------- -----------
Less:
Distributions from and in
Excess of Net Realized
Gain....................... .584 .990 .353 -0-
Return of Capital
Distribution............... -0- -0- .306 -0-
----------- ----------- ----------- -----------
Total Distributions........... .584 .990 .659 -0-
----------- ----------- ----------- -----------
Net Asset Value, End of the
Period....................... $ 22.869 $ 23.173 $ 17.796 $ 13.695
=========== =========== =========== ===========
Total Return* (b)............. 1.60%** 37.56% 35.32% 37.00%**
Net Assets at End of the
Period (In millions)......... $72.8 $79.7 $55.0 $.1
Ratio of Expenses to Average
Net Assets*.................. 2.40% 2.05% 2.07% 1.46%
Ratio of Net Investment Income
to Average Net Assets*....... (1.95%) (1.40%) (.56%) (.74%)
Portfolio Turnover............ 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................... 2.44% 2.34% 3.04% 15.70%
Ratio of Net Investment Income
to Average Net Assets........ (1.99%) (1.68%) (1.53%) (14.97%)
</TABLE>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
See Notes to Financial Statements
17
<PAGE> 126
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
Nine Months (Commencement of
Ended Year Ended Year Ended Investment Operations)
Class C Shares March 31, 1999(a) June 30, 1998 June 30, 1997(a) to June 30, 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period.............. $23.173 $17.793 $13.695 $10.000
------- ------- ------- -------
Net Investment Loss........ (.300) (.311) (.096) (.045)
Net Realized and Unrealized
Gain..................... .578 6.681 4.853 3.740
------- ------- ------- -------
Total from Investment
Operations................. .278 6.370 4.757 3.695
------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Realized
Gain..................... .584 .990 .353 -0-
Return of Capital
Distribution............. -0- -0- .306 -0-
------- ------- ------- -------
Total Distributions......... .584 .990 .659 -0-
------- ------- ------- -------
Net Asset Value, End of
the Period................. $22.867 $23.173 $17.793 $13.695
======= ======= ======= =======
Total Return* (b)........... 1.60%** 37.56% 35.32% 37.00%**
Net Assets at End of the
Period (In millions)....... $7.4 $9.2 $8.3 $.1
Ratio of Expenses to Average
Net Assets*................ 2.41% 2.05% 2.07% 1.46%
Ratio of Net Investment
Income to Average Net
Assets*.................... (1.96%) (1.39%) (.57%) (.74%)
Portfolio Turnover.......... 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................. 2.45% 2.34% 3.04% 15.70%
Ratio of Net Investment
Income to Average Net
Assets..................... (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.
See Notes to Financial Statements
18
<PAGE> 127
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Growth Fund (the "Fund") is organized as a Delaware business trust,
and is registered as a diversified open-end management investment company under
the Investment Company Act of 1940, as amended. The Fund's investment objective
is to seek capital growth by investing primarily in a diversified portfolio of
common stocks and other equity securities of growth companies. The Fund
commenced investment operations on December 27, 1995, with three classes of
common shares, Class A, Class B and Class C. In July, 1998, the Fund's Board of
Trustees approved a change in the Fund's fiscal year end from June 30 to March
31. As a result, this financial report reflects the nine-month period commencing
on July 1, 1998, and ending on March 31, 1999.
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
19
<PAGE> 128
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
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. Discount on debt securities
purchased are amortized over the expected life of each applicable security.
Premiums on debt securities are not amortized. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class of
shares.
D. ORGANIZATIONAL COSTS--The Fund has agreed to reimburse Van Kampen Funds Inc.
or its affiliates ("collectively Van Kampen") for costs incurred in connection
with the Fund's organization in the amount of $40,000. These costs are being
amortized on a straight line basis over the 60 month period ending December 27,
2000. The Adviser has agreed that in the event any of the initial shares of the
Fund originally purchased by Van Kampen are redeemed during the amortization
period, the Fund will be reimbursed for any unamortized organizational costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.
E. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the Federal income tax laws which
allows it to carry a realized capital loss forward for eight years following the
year of the 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 $3,970,049 which will expire an March 31, 2007.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of losses from wash sales and post October 31
losses which are not recognized for tax purposes until the first day of the
following fiscal year.
At March 31, 1999, for federal income tax purposes the cost of long- and
short-term investments is $95,216,360, the aggregate gross unrealized
appreciation is $47,556,355 and the aggregate gross unrealized depreciation is
$2,500,815, resulting in net unrealized appreciation on long- and short-term
investments of $45,055,540.
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
20
<PAGE> 129
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
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 totalling $1,414,654 has been reclassified from accumulated net
investment loss to accumulated net realized gain.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- --------------------------------------------------------------------
<S> <C>
First $500 million..................................... .75 of 1%
Next $500 million...................................... .70 of 1%
Over $1 billion........................................ .65 of 1%
</TABLE>
For the nine months ended March 31, 1999 and the year ended June 30, 1998,
the Adviser voluntarily waived approximately $42,000 and $386,000, respectively,
of its investment advisory fees. Van Kampen agreed to waive fees or reimburse
certain expenses through June 30, 1998 to the extent necessary so that the net
expense based upon Average Net Assets would not exceed 1.30%, 2.05% and 2.05%
for Classes A, B and C shares, respectively. This agreement was voluntarily
continued through July 31, 1998 and was discontinued on August 1, 1998.
For the nine months ended March 31, 1999 and the year ended June 30, 1998,
the Fund recognized expenses of approximately $4,900 and $3,000, respectively,
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated
person.
For the nine months ended March 31, 1999 and the year ended June 30, 1998,
the Fund recognized expenses of approximately $62,100 and $50,100, respectively,
representing Van Kampen's cost of providing accounting and legal services to the
Fund.
21
<PAGE> 130
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the nine months ended
March 31, 1999 and the year ended June 30, 1998, the Fund recognized expenses of
approximately $305,800 and $412,300, respectively. Beginning in 1998, the
transfer agency fees are determined through negotiations with the Fund's Board
of Trustees and are based on competitive market benchmarks.
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 March 31, 1999, Van Kampen owned 7,000 shares of Class A and 6,500 shares
each of Classes B and C, respectively.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
22
<PAGE> 131
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
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>
23
<PAGE> 132
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
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>
24
<PAGE> 133
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
At June 30, 1997, capital aggregated $50,593,110, $52,263,425, and
$7,829,767 for Classes A, B, and C, respectively. For the year ended June 30,
1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................. 3,381,843 $ 57,414,786
Class B................................. 3,282,280 55,512,272
Class C................................. 548,147 9,279,699
---------- ------------
Total Sales............................... 7,212,270 $122,206,757
========== ============
Dividend Reinvestment:
Class A................................. 132 $ 2,031
Class B................................. -0- -0-
Class C................................. -0- -0-
---------- ------------
Total Dividend Reinvestment............... 132 $ 2,031
========== ============
Repurchases:
Class A................................. (419,798) $ (6,901,267)
Class B................................. (197,416) (3,284,564)
Class C................................. (89,792) (1,510,529)
---------- ------------
Total Repurchases......................... (707,006) $(11,696,360)
========== ============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC for Class B and C
25
<PAGE> 134
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
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 nine months ended March 31, 1999 and the year ended June 30, 1998,
Van Kampen, as Distributor for the Fund, received net commissions on sales of
the Fund's Class A shares of approximately $15,400 and $38,700, respectively and
CDSC on the redeemed shares of Classes B and C of approximately $178,400 and
$191,300, respectively. Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
For the nine months ended March 31, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $104,662,006
and $123,377,532, respectively. For the year ended June 30, 1998, the cost of
purchases and proceeds from sales of investment excluding short-term
investments, were $167,989,019 and $160,998,244, respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In these instances,
the recognition of gain or loss is postponed until the disposal of the security
underlying futures contract.
26
<PAGE> 135
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
- --------------------------------------------------------------------------------
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 nine months
ended March 31, 1999.
Transactions in futures contracts for the year ended June 30, 1998, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS
- -----------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1997.............................. 15
Futures Opened............................................ -0-
Futures Closed............................................ (15)
---
Outstanding at June 30, 1998.............................. -0-
===
</TABLE>
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the nine months ended March 31, 1999 and the year ended June 30, 1998, are
payments retained by Van Kampen of approximately $409,700 and $568,400,
respectively.
27
<PAGE> 136
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Growth Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Growth Fund (the "Fund"), including the portfolio of investments, as of
March 31, 1999, and the related statement of operations for the nine-month
period ended March 31, 1999 and the year then ended June 30, 1998, the statement
of changes in net assets for the nine-month period ended March 31, 1999 and for
each of the years in the two year period ended June 30, 1998, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1999, by correspondence with the custodian and brokers and by the
application of alternative auditing procedures where broker replies were not
received. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Growth Fund as of March 31, 1999, the results of its operations for the
nine-month period ended March 31, 1999 and the year ended June 30, 1998, the
changes in its net assets for the nine-month period ended March 31, 1999 and for
each of the years in the two year period then ended June 30, 1998, and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
May 5, 1999
28
<PAGE> 137
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
SENIOR LOAN
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM--to view a prospectus, select Download
Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Deaf users, call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM and selecting Contact Us
29
<PAGE> 138
VAN KAMPEN GROWTH FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN*
Chairman
PAUL G. YOVOVICH
OFFICERS
DENNIS J. MCDONNELL*
President
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN
INVESTOR SERVICES INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
For federal income tax purposes, the following information is furnished with
respect to the distribution paid by the Fund during its taxable year ended
March 31, 1999. The Fund designated and paid $368,016 as a 20% rate gain
distribution. Shareholders were sent a 1998 Form 1099-DIV in January 1999,
representing their proportionate share of this capital gain distribution.
* "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 September 30, 1999, the report, if used with
prospective investors, must be accompanied by a quarterly performance update.
30
<PAGE> 139
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> 140
VAN KAMPEN FUNDS
YOUR NOTES:
32
<PAGE> 141
VAN KAMPEN
PROSPECTOR FUND
Annual Report
March 31, 1999
VAN KAMPEN
FUNDS
CHANGE IN FISCAL YEAR END
On July 31, 1998, the Fund's Board of Trustees voted to change the Fund's fiscal
year end from June 30 to March 31. As a result, this annual report reflects the
9-month period commencing on July 1, 1998, and ending on March 31, 1999.
TABLE OF CONTENTS
Letter to Shareholders .................................................... 1
Putting Your Fund's Performance in Perspective ............................ 3
Portfolio Management Review ............................................... 4
Portfolio of Investments .................................................. 7
Statement of Assets and Liabilities ....................................... 10
Statement of Operations ................................................... 11
Statement of Changes in Net Assets ........................................ 12
Financial Highlights ...................................................... 13
Notes to Financial Statements ............................................. 16
Report of Independent Accountants ......................................... 18
PRS ANR 5/99
<PAGE> 142
Letter to Shareholders
April 20, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together
we've witnessed one of the greatest bull markets in investment history,
unprecedented growth in mutual fund investing, and a surge in personal
retirement planning. The coming millennium promises to hold even more
opportunities.
To lead us into this new era of investing, Richard F. Powers III has
joined Van Kampen as Chairman and Chief Executive Officer. He comes to us from
our parent company, Morgan Stanley Dean Witter & Co., where he served as
Executive Vice President and Director of Marketing. He brings 27 years of
experience in the financial services industry, including an extensive background
in product management, strategic planning, and brand development.
Although former Chairman Don G. Powell retired on January 1, he will
remain active in the industry and the community. Mr. Powell plans to continue
his service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
Economic Overview
The U.S. economy continued to grow at a robust pace, despite financial
problems abroad. In the fourth quarter, the nation's gross domestic product
(GDP) rose at an astounding 6.0 percent annual rate, surprising most economists,
whose estimates had been much more conservative. GDP remained strong through the
first quarter of 1999, posting a 4.5 percent annual growth rate. However, the
economy began to show signs of slowing down early in 1999, as corporate profits
and wage growth declined.
A series of interest rate cuts by the Federal Reserve helped the U.S.
economy avoid the economic slump that plagued many global markets. The Fed's
0.25 percent interest rate cut in September was followed by additional cuts in
October and November. These rate cuts, coupled with a wave of corporate mergers
and cost-cutting measures, lent the support needed to foster continued growth.
In addition, the outlook for troubled areas such as Asia and Latin America
improved significantly, and most experts agree that these economies are on the
slow road to recovery.
Despite the improvements abroad and record economic growth in the
United States, inflation remained at bay as commodity prices tumbled. This low
inflationary environment--only a 1.7 percent increase in the consumer price
index over the past 12 months--contributed to the strong domestic economy and
kept inflation-adjusted interest rates attractive. A low level of unemployment,
vibrant consumer spending, and an active housing market also supported the
positive economic conditions.
Market Review
The stock market bounced back resoundingly from the lows we experienced
in August and September, when concerns about the global economic slowdown had
reached a peak. Growth-oriented large-company stocks displayed the most
resilience, propelling the Dow Jones Industrial Average past the 10,000 mark for
the first time at the end of the reporting period.
1 Continued on page 2
<PAGE> 143
Investors continued to favor the earnings strength and perceived stability of
these high-quality stocks, while many other areas of the market remained
sluggish. With the emphasis on growth-style blue-chip companies, many investors
overlooked the strong values to be found in other areas of the market,
especially among smaller companies. The Russell 2000 Index, which represents
small-cap stocks, lost more than 12 percent during the nine months since our
last report, compared with a gain of almost 15 percent for the larger companies
composing the S&P 500 Index.
Outlook
Our outlook for the domestic economy remains positive, although the
pattern of reduced growth may continue into the second half of the year. We look
for a slow but steady rise in inflation throughout 1999 to more normal, but
certainly not alarming levels. Internationally, low interest rates and improving
financial conditions should continue to support the economic improvements we've
witnessed in Asia and Latin America.
We believe the markets may still favor higher-quality securities such
as large-company stocks and investment-grade bonds in the near term. In
addition, we anticipate continued day-to-day volatility in the markets, although
we probably won't see sustained high or low periods during the next six months.
Additional details about your fund, including a question-and-answer
section with your portfolio management team, are provided in this report. As
always, we are pleased to have the opportunity to share with you the progress of
your investment.
Sincerely,
/s/ 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.
2
<PAGE> 144
Putting Your Fund's Performance in Perspective
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:
o Illustrate the general market environment in which your investments
are being managed
o Reflect the impact of favorable market trends or difficult market
conditions
o Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over
the period measured
For these reasons, you may find it helpful to review the chart below,
which compares your Fund's performance to that of the Standard & Poor's 500
Index and the Lipper Growth and Income Fund Index over time. These indices are
statistical composites and do not reflect any commissions or fees which would be
incurred by an investor purchasing the securities they represent. Similarly,
their performance does not reflect any sales charges or other costs which would
be applicable to an actively managed portfolio, such as that of the Fund.
Growth of a Hypothetical $10,000 Investment
Van Kampen Prospector Fund vs. the Standard & Poor's 500 Index and the
Lipper Growth and Income Fund Index (December 27, 1995 through March 31, 1999)
Month Prospector Lipper G & I Index S&P 500 Index
Dec-95 $9,425 $10,000 $10,000
Jan-96 $9,887 $10,297 $10,409
Feb-96 $9,953 $10,441 $10,482
Mar-96 $10,160 $10,574 $10,621
Apr-96 $10,518 $10,736 $10,764
May-96 $10,603 $10,892 $11,010
Jun-96 $10,666 $10,846 $11,096
Jul-96 $10,297 $10,404 $10,589
Aug-96 $10,732 $10,717 $10,788
Sep-96 $11,093 $11,196 $11,437
Oct-96 $11,140 $11,450 $11,736
Nov-96 $11,917 $12,187 $12,597
Dec-96 $12,173 $12,069 $12,389
Jan-97 $12,701 $12,606 $13,149
Feb-97 $12,813 $12,715 $13,227
Mar-97 $12,135 $12,272 $12,723
Apr-97 $12,492 $12,724 $13,466
May-97 $13,470 $13,464 $14,255
Jun-97 $13,771 $13,992 $14,940
Jul-97 $14,853 $14,996 $16,107
Aug-97 $14,966 $14,433 $15,182
Sep-97 $15,818 $15,163 $16,057
Oct-97 $15,184 $14,659 $15,503
Nov-97 $15,624 $15,068 $16,195
Dec-97 $16,208 $15,323 $16,516
Jan-98 $16,367 $15,351 $16,684
Feb-98 $17,533 $16,314 $17,859
Mar-98 $18,355 $17,069 $18,815
Apr-98 $18,718 $17,161 $18,986
May-98 $18,015 $16,886 $18,629
Jun-98 $18,128 $17,089 $19,435
Jul-98 $17,583 $16,671 $19,209
Aug-98 $15,608 $14,316 $16,409
Sep-98 $17,265 $14,958 $17,505
Oct-98 $18,639 $16,045 $18,911
Nov-98 $19,502 $16,818 $20,029
Dec-98 $19,991 $17,390 $21,227
Jan-99 $20,148 $17,554 $22,098
Feb-99 $19,577 $17,166 $21,384
Mar-99 $19,848 $17,758 $22,283
------------------------------
Fund's Total Return
1 Year Total Return = 1.90%
Inception Avg. Annual = 23.40%
------------------------------
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions and includes payment of the maximum
sales charge (5.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
The Fund commenced operation in 1995 with limited capital invested primarily by
the adviser's affiliates. While the Fund has been available for sale in a
limited number of states, as of March 31, 1999, the Fund had not engaged in a
broad continuous public offering and was not subject to redemption requests. The
Fund's adviser believes that the portfolio has been managed substantially the
same as if the Fund had been open for investment to all public investors. No
assurances can be given, however, that the Fund's investment performance would
have been the same during the period if the Fund had been broadly distributed.
During this period, certain fees were waived and expenses were reimbursed by the
Fund's adviser which had a material effect on the Fund's total return.
3
<PAGE> 145
Portfolio Management Review
Van Kampen Prospector Fund
We recently spoke to the management team of the Van Kampen Prospector Fund about
the key events and economic forces that shaped the markets during the reporting
period. The team includes B. Robert Baker, Jr., portfolio manager; Jason Leder
and Edie Terreson, portfolio comanagers; and Stephen L. Boyd, chief investment
officer for equity investments. The Fund's fiscal year end was recently changed
from June 30 to March 31. Going forward, your semiannual reports will be dated
September 30, and your annual reports will be dated March 31. The following
interview discusses the Fund's performance during the nine-month period since
your last annual report, from July 1, 1998, to March 31, 1999.
Q Can you describe the stock market environment for the Fund during the
reporting period?
A The stock market was extremely volatile during the reporting period,
plummeting early but staging an impressive recovery by the end of March. After
peaking at 9337 in July 1998, the market succumbed to overseas turmoil, as
analysts slashed their earnings estimates for U.S. companies. This turbulence
culminated in a 512-point drop in the Dow Jones Industrial Average on August 31,
1998, paving the way toward the Dow's worst quarterly performance in eight
years.
The fourth quarter saw a turnaround, as a series of interest rate cuts
by the Fed helped restore investors' confidence in the stock market. By October,
companies began to report better-than-expected third-quarter earnings, reminding
investors that the U.S. economy was still fundamentally solid. The stock market
began to rise again, and the Dow surpassed the 10,000 milestone during the final
week of the reporting period.
Q Given these events, what was your strategy in managing the Fund to meet its
objective?
A We consistently seek to identify undervalued stocks that we believe have the
potential for future price appreciation. To do this, we look for companies that
are temporarily out of favor in the marketplace, because their stock prices are
usually lower than we believe they should be. Then, we apply basic fundamental
analysis to determine whether the company is sound and has the potential to
reach fair value. When we find a company that is undervalued and that we believe
is fundamentally sound, we consider adding it to the portfolio.
Q Which sectors had the most significant effect on Fund performance?
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 electric
utilities, because they represented one of the few undervalued areas of the
market. These stocks have limited foreign exposure and relatively stable (albeit
modest) earnings growth, which contributed to their outperformance during the
market
4
<PAGE> 146
downturn in the third quarter. Lately, performance among electric utilities has
suffered as investors have largely ignored slower-growth stocks. Consequently,
our overweight position has hindered the Fund's performance. The fundamentals of
this sector remain sound and valuations are attractive, however, so we have
maintained our exposure.
Another important sector was energy. At the beginning of this year,
many energy stocks were coming off depressed levels, due to oil prices hitting
12-year lows in December. We took advantage of low valuations to add to our
positions in many of these stocks, so we were well situated to participate in
the recent sector rally. Increased merger-and-acquisition activity in the energy
industry has also propelled valuations in this sector. Year to date, stocks such
as BP Amoco, ENSCO, Rowan, Diamond Offshore Drilling, and Unocal have performed
very well, although not all energy stocks posted favorable returns for the
entire reporting period.
Q Which stocks supported Fund performance?
A Some of our paper stocks, such as Union Camp and Smurfit Stone Container, have
performed very well. Union Camp has risen favorably since we purchased its stock
in late January, due in part to International Paper's bid to purchase the
company. Similarly, Smurfit Stone Container was created in November through a
merger between Jefferson Smurfit and Stone Container, and the new company's
stock has risen almost 50 percent since then.
Packaged-goods giant Dial has been a consistent performer for the Fund,
appreciating nearly 35 percent during the reporting period. The company
continued to report strong earnings and higher-than-expected revenue growth.
American Home Products, a leading pharmaceutical firm, also displayed an upward
climb throughout the past nine months. It remains in the portfolio due to its
positive fundamentals, although we believe the stock is nearing fair value.
One of the portfolio's largest holdings is Cognex. This company
manufactures machine vision systems for the semiconductor industry--when
semiconductor firms seek to expand their operations and upgrade their product
line, they rely on equipment produced by firms like Cognex. As a result, Cognex
is vulnerable to the cyclical nature of the semiconductor industry. Accordingly,
its stock bottomed out in September but has rallied since, closing the reporting
period with a 28 percent gain. We believe the company is well managed and well
positioned, so we've maintained a substantial position in its stock. Not all
stocks in the portfolio performed as favorably, and there is no guarantee that
any of these stocks will perform as well in the future.
Q What factors worked against the Fund?
A A big hurdle for the Fund was the dominance of a handful of growth stocks
during the reporting period. A variety of factors, including investors'
preference for time-tested companies with upward momentum, steered assets toward
these growth stocks, to the detriment of the broader market. Consequently, this
was an unfavorable environment for the Fund, which has typically concentrated
the majority of its assets in value stocks.
Additionally, some of the Fund's largest holdings performed poorly
during the period. Waste Management, a long-time holding for the Fund, showed
solid fundamentals and efficient execution; however, issues surrounding its
recent merger with USA Waste and skepticism over its
5
<PAGE> 147
ability to achieve analysts' earnings estimates precipitated a moderate decline
in its stock price for the period. Philip Morris was on the rise during the
third quarter but has since given back those gains because of continuing
litigation in the tobacco industry. We've been adding to our position because
the stock is very cheap and its price appears to be overly discounting
investors' concerns regarding settlement payouts. Finally, Tenet Healthcare
experienced an earnings shortfall due to changes in Medicare reimbursement and a
temporary decline in admissions. Its stock price has fallen more than 40 percent
since June.
Q How did the Fund perform during the reporting period?
A The Fund had a nine-month total return of 9.49 percent (Class A shares at net
asset value) as of March 31, 1999. In addition, the Fund generated total returns
of 1.90 percent, 22.56 percent, and 23.40 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 14.65 percent,
and the Lipper Growth and Income Fund Index, which more closely resembles the
Fund, returned 3.92 percent for the nine-month period. The S&P 500 Index is a
broad-based index that reflects the general performance of the stock market, and
the Lipper Growth and Income Fund Index reflects the average performance of the
30 largest growth and income funds. Keep in mind that these indices are
statistical composites that do not include any commissions or sales charges that
would be paid by an investor purchasing the securities or investments they
represent.
Q What is your outlook for the Fund for the remainder of the year?
A Currently, the U.S. economy is still growing steadily and inflation remains
low; stocks reflect this good news and appear to be fully valued. While enormous
liquidity and consequent demand for stocks could drive prices even higher,
valuation levels are already high enough that investors who participate in the
stock market must generally assume a heightened degree of risk. We believe
value-oriented funds may be well suited for this environment. Until the market
begins to recognize the value to be found outside of the large-cap growth arena,
however, the Prospector Fund may struggle.
/s/ Stephen L. Boyd /s/ B. Robert Baker, Jr. /s/ Jason Leder
Stephen L. Boyd B. Robert Baker, Jr. Jason Leder
Chief Investment Officer Portfolio Manager Portfolio Comanager
Equity Investments
/s/ Edie Terreson
Edie Terreson
Portfolio Comanager
6
<PAGE> 148
Van Kampen Prospector Fund
Portfolio of Investments
March 31, 1999
Description Shares Market Value
Common Stocks 98.2%
Consumer Distribution 5.6%
Consolidated Stores Corp. (a) 800 $ 24,250
Federated Department Stores, Inc. (a) 900 36,112
Payless ShoeSource, Inc. (a) 500 23,250
Saks, Inc. (a) 1,130 29,380
--------
112,992
--------
Consumer Non-Durables 3.7%
Dial Corp. 860 29,563
Philip Morris Cos., Inc. 1,290 45,392
--------
74,955
--------
Consumer Services 0.7%
Mirage Resorts, Inc. (a) 700 14,875
--------
Energy 12.4%
Apache Corp. 1,300 33,881
BP Amoco PLC - ADR (United Kingdom) 285 28,767
Chevron Corp. 390 34,491
Diamond Offshore Drilling, Inc. 900 28,463
Enron Oil & Gas Co. 600 9,975
ENSCO International, Inc. 2,200 29,288
Rowan Cos., Inc. (a) 2,600 32,987
Ultramar Diamond Shamrock Corp. 900 19,463
Unocal Corp. 900 33,131
--------
250,446
--------
Finance 12.9%
AMBAC Financial Group, Inc. 930 50,220
Aon Corp. 400 25,300
Bear Stearns Cos., Inc. 430 19,216
CMAC Investment Corp. 460 17,940
LandAmerica Financial Group, Inc. 570 16,530
Providian Financial Corp. 600 66,000
Torchmark Corp. 600 18,975
United Asset Management Corp. 400 9,050
Washington Mutual, Inc. 520 21,255
Wells Fargo Co. 500 17,531
--------
262,017
--------
7
See Notes to Financial Statements
<PAGE> 149
Van Kampen Prospector Fund
Portfolio of Investments (Continued)
March 31, 1999
Description Shares Market
Value
Healthcare 11.1%
American Home Products Corp. 630 $ 41,108
HEALTHSOUTH Corp. (a) 1,200 12,450
Rhone-Poulenc, SA, Class A - ADR (France) 1,240 54,560
Tenet Healthcare Corp. (a) 3,700 70,069
United HealthCare Corp. 900 47,362
--------
225,549
--------
Producer Manufacturing 10.3%
American Power Conversion Corp. (a) 750 20,250
Cognex Corp. (a) 4,115 97,474
U. S. Filter Corp. (a) 360 11,025
Waste Management, Inc. 1,807 80,186
--------
208,935
--------
Raw Materials/Processing Industries 15.2%
Barrick Gold Corp. 700 11,944
Bethlehem Steel Corp. (a) 6,000 49,500
Boise Cascade Corp. 755 24,349
Champion International Corp. 600 24,637
Freeport-McMoRan Copper & Gold, Inc., Class B 1,740 18,923
Homestake Mining Co. 1,240 10,695
Imperial Chemical Industries PLC - ADR (United Kingdom) 500 17,906
Louisiana - Pacific Corp. 1,060 19,742
Placer Dome, Inc. 1,700 19,019
Smurfit-Stone Container Corp. (a) 1,881 36,327
Temple - Inland, Inc. 300 18,825
Union Camp Corp. 300 20,137
USX - U.S. Steel, Inc. 1,500 35,250
--------
307,254
--------
8
See Notes to Financial Statements
<PAGE> 150
Van Kampen Prospector Fund
Portfolio of Investments (Continued)
March 31, 1999
Description Shares Market Value
Technology 6.8%
BMC Software, Inc. (a) 600 $ 22,237
Comverse Technology, Inc. (a) 300 25,500
ECI Telecom Ltd. 600 21,000
Quantum Corp. (a) 670 12,060
SunGard Data Systems, Inc. (a) 1,430 57,200
--------
137,997
--------
Utilities 19.5%
Baltimore Gas & Electric Co. 800 20,300
BEC Energy 1,500 55,124
Central & South West Corp. 800 18,750
DTE Energy Co. 1,000 38,437
FirstEnergy Corp. 500 13,969
IDACORP, Inc. 700 20,563
Illinova Corp. 700 14,831
New Century Energies, Inc. 600 20,438
Northern States Power Co. 700 16,231
OGE Energy Corp. 1,400 31,587
P G & E Corp. 600 18,638
Pinnacle West Capital Corp. 500 18,188
Public Service Co. of New Mexico 1,030 17,510
Reliant Energy, Inc. 1,200 31,275
Texas Utilities Co. 870 36,268
Unicom Corp. 600 21,937
--------
394,046
--------
Total Investments 98.2%
(Cost $1,785,788) 1,989,066
Other Assets in Excess of Liabilities 1.8% 36,693
--------
Net Assets 100.0% $2,025,759
==========
(a) Non-income producing security as this stock currently does not declare
dividends.
9
See Notes to Financial Statements.
<PAGE> 151
VAN KAMPEN PROSPECTOR FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Total Investments (Cost $1,785,788) $ 1,989,066
Cash 77,850
Receivables:
Investments Sold 19,405
Expense Reimbursement from Adviser 14,199
Dividends 3,521
Unamortized Organizational Costs 14,059
Other 1,136
-----------
Total Assets 2,119,236
-----------
LIABILITIES:
Deferred Compensation and Retirement Plans 37,598
Investments Purchased 27,436
Payable to Distributor and Affliates 10,278
Audit 8,310
Reports to Shareholders 2,565
Accrued Expenses 7,290
-----------
Total Liabilities 93,477
-----------
NET ASSETS $ 2,025,759
===========
NET ASSETS CONSIST OF:
Capital $ 1,774,971
Net Unrealized Appreciation 203,278
Accumulated Net Realized Gain 77,944
Accumulated Distributions in Excess of Net Investment Income (30,434)
-----------
NET ASSETS $ 2,025,759
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$1,771,883 and 127,413 shares $ 13.91
of beneficial interest issued and outstanding)
Maximum sales charge (5.75%* of offering price) 0.85
-----------
Maximum offering price to public $ 14.76
===========
Class B Shares:
Net asset value and offering price per share (Based on net assets of $126,938
and 9,128 shares of beneficial interest issued and outstanding) $ 13.91
===========
Class C Shares:
Net asset value and offering price per share (Based on net assets of $126,938
and 9,128 shares of beneficial interest issued and outstanding) $ 13.91
===========
* On sales of $50,000 or more, the sales charge will be reduced.
</TABLE>
See Notes to Financial Statements
10
<PAGE> 152
VAN KAMPEN PROSPECTOR FUND
STATEMENT OF OPERATIONS
For the Nine Months Ended March 31, 1999 and the
Year Ended June 30, 1998
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
March 31, 1999 June 30, 1998
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 27,886 $ 33,513
--------- ---------
EXPENSES:
Accounting 32,581 28,861
Shareholder Reports 17,976 22,389
Trustees' Fees and Expenses 13,630 8,483
Custody 13,240 2,145
Shareholder Services 11,204 15,036
Investment Advisory Fee 10,020 11,782
Audit 9,506 11,992
Amortization of Organizational Costs 6,003 7,997
Legal 3,141 5,934
Other 5,584 10,084
--------- ---------
Total Expenses 122,885 124,703
Less: Fees Waived and Expenses Reimbursed
($10,020 and $92,631, respectively, for the nine months ended 03/31/99 and
$11,782 and $91,388, respectively, for the year ended 6/30/98) 102,651 103,170
Credits earned on Overnight Cash Balances 2,317 474
--------- ---------
Net Expenses 17,917 21,059
--------- ---------
NET INVESTMENT INCOME $ 9,969 $ 12,454
========= =========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 180,405 $ 373,394
--------- ---------
Unrealized Appreciation/Depreciation:
Beginning of the Period 218,931 158,790
End of the Period 203,278 218,931
--------- ---------
Net Unrealized Appreciation/Depreciation During the Period (15,653) 60,141
--------- ---------
NET REALIZED AND UNREALIZED GAIN $ 164,752 $ 433,535
========= =========
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 174,721 $ 445,989
========= =========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 153
VAN KAMPEN PROSPECTOR FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Nine Months Ended March 31, 1999 and the
Years Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
Nine Months Ended Year Ended Year Ended
March 31, 1999 June 30, 1998 June 30, 1997
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income $ 9,969 $ 12,454 $ 5,574
Net Realized Gain 180,405 373,394 50,199
Net Unrealized Appreciation/Depreciation During the Period (15,653) 60,141 140,918
----------- ----------- -----------
Change in Net Assets from Operations 174,721 445,989 196,691
----------- ----------- -----------
Distributions from Net Investment Income (9,969) (13,056) (6,087)
Distributions in Excess of Net Investment Income (14,367) (16,067) -0-
----------- ----------- -----------
Distributions from and in Excess of Net Investment Income * (24,336) (29,123) (6,087)
Distributions from Net Realized Gain * (383,744) (133,630) (15,600)
----------- ----------- -----------
Total Distributions (408,080) (162,753) (21,687)
----------- ----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES (233,359) 283,236 175,004
----------- ----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold -0- -0- 1,000,000
Net Asset Value of Shares Issued Through Dividend Reinvestment 408,080 162,753 4,341
----------- ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 408,080 162,753 1,004,341
----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS 174,721 445,989 1,179,345
NET ASSETS:
Beginning of the Period 1,851,038 1,405,049 225,704
----------- ----------- -----------
End of the Period (Including accumulated undistributed net investment
income of $(30,434), $(16,067) and $602, respectively) $ 2,025,759 $ 1,851,038 $ 1,405,049
=========== =========== ===========
<CAPTION>
Nine Months Ended Year Ended Year Ended
*Distributions by Class March 31, 1999 June 30, 1998 June 30, 1997
<S> <C> <C> <C>
Distributions from and in excess of Net Investment Income:
Class A Shares $ (21,286) $ (25,473) $ (4,041)
Class B Shares (1,525) (1,825) (1,023)
Class C Shares (1,525) (1,825) (1,023)
----------- ----------- -----------
$ (24,336) $ (29,123) $ (6,087)
=========== =========== ===========
Distributions from Net Realized Gain:
Class A Shares $ (335,652) $ (116,882) $ (5,460)
Class B Shares (24,046) (8,374) (5,070)
Class C Shares (24,046) (8,374) (5,070)
----------- ----------- -----------
$ (383,744) $ (133,630) $ (15,600)
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
12
<PAGE> 154
VAN KAMPEN PROSPECTOR FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Nine Months Ended Year Ended June 30, Operations) to
Class A Shares March 31, 1999 1998 1997 (a) June 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 15.974 $ 13.473 $ 11.285 $ 10.000
-------------- ------------- ------------ ----------
Net Investment Income 0.140 0.131 0.115 0.072
Net Realized and Unrealized Gain/Loss 1.315 3.924 2.996 1.239
-------------- ------------- ------------ ----------
Total from Investment Operations 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 $ 13.907 $ 15.974 $ 13.473 $ 11.285
============== ============= ============ ==========
Total Return * (b) 9.49%** 31.65% 29.11% 13.10%**
Net Assets at End of the Period (In thousands) $ 1,771.9 $ 1,619.1 $ 1,229.0 $ 78.9
Ratio of Expenses to Average Net Assets* (c) 1.41% 1.28% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets* 0.70% 0.74% 1.19% 1.34%
Portfolio Turnover 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) 8.57% 7.40% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets (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 .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> 155
VAN KAMPEN PROSPECTOR FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Nine Months Ended Year Ended June 30, Operations) to
Class B Shares March 31, 1999 1998 1997 (a) June 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 15.973 $ 13.473 $ 11.285 $ 10.000
------------ ----------- ---------- -----------
Net Investment Income 0.140 0.131 0.113 0.072
Net Realized and Unrealized Gain/Loss 1.315 3.923 3.020 1.239
------------ ----------- ---------- -----------
Total from Investment Operations 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 $ 13.906 $ 15.973 $ 13.473 $ 11.285
============ =========== ========== ===========
Total Return * (b) 9.49%** 31.65% 29.11% 13.19%**
Net Assets at End of the Period (In thousands) $ 126.9 $ 116.0 $ 88.0 $ 73.4
Ratio of Expenses to Average Net Assets* (c) 1.41% 1.28% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets* 0.69% 0.74% 0.86% 1.34%
Portfolio Turnover 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) 8.57% 7.40% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets (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 .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
14
<PAGE> 156
VAN KAMPEN PROSPECTOR FUND
FINANCIAL HIGHLIGHTS (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Nine Months Ended Year Ended June 30, Operations) to
Class C Shares March 31, 1999 1998 1997 (a) June 30, 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 15.973 $ 13.473 $ 11.285 $ 10.000
------------ ----------- ----------- ----------
Net Investment Income 0.140 0.131 0.113 0.072
Net Realized and Unrealized Gain/Loss 1.315 3.923 3.020 1.239
------------ ----------- ----------- ----------
Total from Investment Operations 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 $ 13.906 $ 15.973 $ 13.473 $ 11.285
============ =========== =========== ==========
Total Return * (b) 9.49%** 31.65% 29.11% 13.19%**
Net Assets at End of the Period (In thousands) $ 126.9 $ 116.0 $ 88.0 $ 73.4
Ratio of Expenses to Average Net Assets* (c) 1.41% 1.28% 1.55% 1.33%
Ratio of Net Investment Income to Average Net Assets* 0.69% 0.74% 0.86% 1.34%
Portfolio Turnover 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) 8.57% 7.40% 18.41% 20.75%
Ratio of Net Investment Income to Average Net Assets (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 .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
15
<PAGE> 157
VAN KAMPEN PROSPECTOR FUND
Notes to Financial Statements
March 31, 1999
1. Significant Accounting Policies
Van Kampen Prospector Fund (the "Fund") is organized as a series of the Van
Kampen Equity Trust, a Delaware business trust (the "Trust") and is registered
as a diversified open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to seek
capital growth and income through investing principally in income producing
equity securities and other equity securities. The Fund commenced investment
operations on December 27, 1995, with three classes of common shares, Class A,
Class B and Class C shares. In July, 1998, the Fund's Board of Trustees approved
a change in the Fund's fiscal year end from June 30 to March 31.
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.
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 will be expensed on the first business day of
the 1999 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,
if any, to its shareholders. Therefore, no provision for federal income taxes is
required. Net realized gains or losses may differ for financial reporting and
tax purposes primarily as a result of wash sales.
At March 31, 1999, for federal income tax purposes, cost of long-term
investments is $1,804,199; the aggregate gross unrealized appreciation is
$307,991, and the aggregate gross unrealized depreciation is $123,124, resulting
in net unrealized appreciation on long-term investments of $184,867.
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 nine months ended
March 31, 1999 and the year ended June 30, 1998, the Fund's custody fee was
reduced by $2,317 and $474, respectively as a result of credits earned on
overnight cash balances.
2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
Average Net Assets % Per Annum
First $500 million .70%
Next $500 million .65%
Over $1 billion .60%
For the nine months ended March 31, 1999 and the year ended June 30, 1998
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 $10,020 and $11,782, respectively, of its investment advisory
fees and assumed $92,631 and $91,388, respectively, of the Fund's other
expenses. This waiver is voluntary in nature and can be discontinued at the
Adviser's discretion.
For the nine months ended March 31, 1999 and the year ended June 30, 1998,
the Fund recognized expenses of approximately $100 and $300, respectively,
representing legal services provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated
person. All of this cost has been assumed by Van
16
<PAGE> 158
VAN KAMPEN PROSPECTOR FUND
Notes to Financial Statements
March 31, 1999
Kampen.
For the nine months ended March 31, 1999 and the year ended June 30, 1998,
the Fund incurred expenses of approximately $35,600 and $35,400, respectively,
representing Van Kampen's cost of providing accounting and legal services to the
Fund. All of this cost has been assumed by Van Kampen.
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the nine months
ended March 31, 1999 and the year ended June 30, 1998, the Fund recognized
expenses of approximately $10,800 and $15,000, respectively. The transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive market benchmarks. All of this cost has been assumed by
Van Kampen.
Certain officers and trustees of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
At March 31, 1999, Van Kampen owned all shares of Classes A, B and C,
respectively.
3. Capital Transactions
The Fund has outstanding three classes of shares of beneficial interest,
Classes A, B and C, each with a par value of $.01 per share. There are an
unlimited number of shares of each class authorized.
At 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
======== ========
At June 30, 1997 capital aggregated $1,073,252, $65,443 and $65,443 for
classes A, B, and C, respectively. For the year ended June 30, 1997,
transactions were as follows:
Shares Value
---------- ----------
Sales:
Class A 83,963 $1,000,000
Class B -0- -0-
Class C -0- -0-
---------- ----------
Total Sales 83,963 $1,000,000
========== ==========
Shares Value
---------- ----------
Dividend Reinvestment:
Class A 254 $ 3,429
Class B 35 456
Class C 35 456
---------- ----------
Total Dividend Reinvestments 324 $ 4,341
========== ==========
Class B and Class C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B and Class C shares
will automatically convert to Class A shares after the seventh and tenth years,
respectively, following purchase. The CDSC will be imposed on most redemptions
made within five years of the purchase for Class B and one year of the purchase
for Class C as detailed in the following schedule.
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 nine months ended March 31, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $1,905,291 and
$1,896,997, respectively. For the year ended June 30, 1998, the cost of
purchases and proceeds from sales of investments, excluding short-term
investments, were $2,180,788 and $2,223,842, respectively.
5. Distribution and Service Plans
The Fund and its Shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
The Fund's net assets are subject to annual fees under the Plans of up to
.25% for Class A net assets and 1.00% each for Class B and Class C net assets.
No fees related to the Plans have been accrued by the Fund as the Fund is
currently owned solely by affiliated persons.
17
<PAGE> 159
Report of Independent Accountants
The Board of Trustees and Shareholders of
Van Kampen Prospector Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Prospector Fund (the "Fund"), including the portfolio of
investments, as of March 31, 1999, and the related statement of operations
for the nine-month period ended March 31, 1999 and the year ended June 30,
1998, the statement of changes in net assets for the nine-month period
ended March 31, 1999 and for each of the years in the two-year period ended
June 30, 1998, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 1999, by correspondence with the custodian
and brokers and by the application of alternative auditing procedures where
broker replies were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Van Kampen Prospector Fund as of March 31, 1999, the results of its
operations for the nine-month period ended March 31, 1999 and the year
ended June 30, 1998, the changes in its net assets for the nine-month
period ended March 31, 1999 and for each of the years in the two-year
period ended June 30, 1998, and the financial highlights for each of the
periods presented, in conformity with generally accepted accounting
principles.
KPMG LLP
Chicago, Illinois
May 10, 1999
<PAGE> 160
Van Kampen Prospector Fund
<TABLE>
<CAPTION>
<S> <C>
Board of Trustees Investment Adviser
J. Miles Branagan Van Kampen Investment Advisory Corp.
Richard M. DeMartini 1 Parkview Plaza
Linda Hutton Heagy P.O. Box 5555
R. Craig Kennedy Oakbrook Terrace, Illinois 60181
Jack E. Nelson
Don G. Powell* Distributor
Phillip B. Rooney
Fernando Sisto Van Kampen Funds Inc.
Wayne W. Whalen* - Chairman 1 Parkview Plaza
Paul G. Yovovich P.O. Box 5555
Oakbrook Terrace, Illinois 60181
Officers Shareholder Servicing Agent
Dennis J. McDonnell* Van Kampen Investor Services Inc.
President P.O. Box 418256
Kansas City, Missouri 64141-9256
John L. Sullivan*
Vice President, Treasurer and Chief Financial Officer Custodian
Curtis W. Morell* State Street Bank and Trust Company
Vice President and Chief Accounting Officer 225 Franklin Street
P.O. Box 1713
Tanya M. Loden* Boston, Massachusetts 02105
Controller
Legal Counsel
Peter W. Hegel*
Paul R. Wolkenberg* Skadden, Arps, Slate, Meagher & Flom (Illinois)
Edward C. Wood, III* 333 West Wacker Drive
Vice Presidents Chicago, Illinois 60606
Independent Accountants
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
</TABLE>
* "Interested" persons of the Fund, as defined in the Investment Company
Act of 1940.
(C) Van Kampen Funds Inc., 1999 All Rights Reserved.
SM denotes a service mark of Van Kampen Funds Inc.
<PAGE> 161
- --------------------------------------------------------------------------------
Tax Notice to Corporate Shareholders
For federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
March 31, 1999. The Fund designated and paid $122,731 as a 20% rate gain
distribution. Shareholders were sent a 1998 Form 1099-Div in January 1999,
representing their proportionate share of this capital gain distribution. For
the nine months ended March 31, 1999, 10.65% of the dividends taxable as
ordinary income qualified for the 70% dividends received deduction for
corporations.
- -------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors unless
it has been preceded or is accompanied by an effective prospectus of the Fund
which contains additional information on how to purchase shares, the sales
charge, and other pertinent data.
<PAGE> 162
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.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> UTILITY A
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 118,282,468<F1>
<INVESTMENTS-AT-VALUE> 153,524,242<F1>
<RECEIVABLES> 1,014,269<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 1,116<F1>
<TOTAL-ASSETS> 154,539,627<F1>
<PAYABLE-FOR-SECURITIES> 746,755<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 681,743<F1>
<TOTAL-LIABILITIES> 1,428,498<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 48,192,293
<SHARES-COMMON-STOCK> 3,554,036
<SHARES-COMMON-PRIOR> 3,421,515
<ACCUMULATED-NII-CURRENT> 18,180<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 2,060,599<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 35,241,774<F1>
<NET-ASSETS> 62,071,730
<DIVIDEND-INCOME> 3,340,479<F1>
<INTEREST-INCOME> 789,039<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,983,287)<F1>
<NET-INVESTMENT-INCOME> 2,146,231<F1>
<REALIZED-GAINS-CURRENT> 3,971,978<F1>
<APPREC-INCREASE-CURRENT> (4,004,125)<F1>
<NET-CHANGE-FROM-OPS> 2,114,084<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,031,678)
<DISTRIBUTIONS-OF-GAINS> (740,901)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 544,379
<NUMBER-OF-SHARES-REDEEMED> (496,899)
<SHARES-REINVESTED> 85,041
<NET-CHANGE-IN-ASSETS> 1,657,638
<ACCUMULATED-NII-PRIOR> (57,582)<F1>
<ACCUMULATED-GAINS-PRIOR> (48,816)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 761,143<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,983,287<F1>
<AVERAGE-NET-ASSETS> 62,195,365
<PER-SHARE-NAV-BEGIN> 17.657
<PER-SHARE-NII> 0.310
<PER-SHARE-GAIN-APPREC> 0.013
<PER-SHARE-DIVIDEND> (0.300)
<PER-SHARE-DISTRIBUTIONS> (0.215)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.465
<EXPENSE-RATIO> 1.24
<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
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 118,282,468<F1>
<INVESTMENTS-AT-VALUE> 153,524,242<F1>
<RECEIVABLES> 1,014,269<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 1,116<F1>
<TOTAL-ASSETS> 154,539,627<F1>
<PAYABLE-FOR-SECURITIES> 746,755<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 681,743<F1>
<TOTAL-LIABILITIES> 1,428,498<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61,954,096
<SHARES-COMMON-STOCK> 4,821,994
<SHARES-COMMON-PRIOR> 4,921,099
<ACCUMULATED-NII-CURRENT> 18,180<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 2,060,599<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 35,241,774<F1>
<NET-ASSETS> 84,082,737
<DIVIDEND-INCOME> 3,340,479<F1>
<INTEREST-INCOME> 789,039<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,983,287)<F1>
<NET-INVESTMENT-INCOME> 2,146,231<F1>
<REALIZED-GAINS-CURRENT> 3,971,978<F1>
<APPREC-INCREASE-CURRENT> (4,004,125)<F1>
<NET-CHANGE-FROM-OPS> 2,114,084<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (970,381)
<DISTRIBUTIONS-OF-GAINS> (1,048,593)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 673,415
<NUMBER-OF-SHARES-REDEEMED> (867,572)
<SHARES-REINVESTED> 95,052
<NET-CHANGE-IN-ASSETS> (2,687,502)
<ACCUMULATED-NII-PRIOR> (57,582)<F1>
<ACCUMULATED-GAINS-PRIOR> (48,816)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 761,143<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,983,287<F1>
<AVERAGE-NET-ASSETS> 87,601,359
<PER-SHARE-NAV-BEGIN> 17.632
<PER-SHARE-NII> 0.208
<PER-SHARE-GAIN-APPREC> 0.012
<PER-SHARE-DIVIDEND> (0.200)
<PER-SHARE-DISTRIBUTIONS> (0.215)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.437
<EXPENSE-RATIO> 1.99
<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
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 118,282,468<F1>
<INVESTMENTS-AT-VALUE> 153,524,242<F1>
<RECEIVABLES> 1,014,269<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 1,116<F1>
<TOTAL-ASSETS> 154,539,627<F1>
<PAYABLE-FOR-SECURITIES> 746,755<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 681,743<F1>
<TOTAL-LIABILITIES> 1,428,498<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,644,187
<SHARES-COMMON-STOCK> 399,217
<SHARES-COMMON-PRIOR> 332,912
<ACCUMULATED-NII-CURRENT> 18,180<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 2,060,599<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 35,241,774<F1>
<NET-ASSETS> 6,956,662
<DIVIDEND-INCOME> 3,340,479<F1>
<INTEREST-INCOME> 789,039<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,983,287)<F1>
<NET-INVESTMENT-INCOME> 2,146,231<F1>
<REALIZED-GAINS-CURRENT> 3,971,978<F1>
<APPREC-INCREASE-CURRENT> (4,004,125)<F1>
<NET-CHANGE-FROM-OPS> 2,114,084<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (68,410)
<DISTRIBUTIONS-OF-GAINS> (73,069)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 174,359
<NUMBER-OF-SHARES-REDEEMED> (113,012)
<SHARES-REINVESTED> 4,958
<NET-CHANGE-IN-ASSETS> (1,091,048)
<ACCUMULATED-NII-PRIOR> (57,582)<F1>
<ACCUMULATED-GAINS-PRIOR> (48,816)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 761,143<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,983,287<F1>
<AVERAGE-NET-ASSETS> 6,241,842
<PER-SHARE-NAV-BEGIN> 17.619
<PER-SHARE-NII> 0.209
<PER-SHARE-GAIN-APPREC> 0.013
<PER-SHARE-DIVIDEND> (0.200)
<PER-SHARE-DISTRIBUTIONS> (0.215)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.426
<EXPENSE-RATIO> 1.99
<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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> MAR-31-1999<F1>
<INVESTMENTS-AT-COST> 314,269,440<F1>
<INVESTMENTS-AT-VALUE> 482,450,903<F1>
<RECEIVABLES> 32,194,340<F1>
<ASSETS-OTHER> 45,512<F1>
<OTHER-ITEMS-ASSETS> 72,309<F1>
<TOTAL-ASSETS> 514,763,064<F1>
<PAYABLE-FOR-SECURITIES> 10,846,412<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,202,698<F1>
<TOTAL-LIABILITIES> 13,049,110<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 157,542,638
<SHARES-COMMON-STOCK> 14,154,257
<SHARES-COMMON-PRIOR> 8,588,377
<ACCUMULATED-NII-CURRENT> (66,257)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 17,506,863<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 168,181,463<F1>
<NET-ASSETS> 242,556,451
<DIVIDEND-INCOME> 137,307<F1>
<INTEREST-INCOME> 680,329<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (4,732,464)<F1>
<NET-INVESTMENT-INCOME> (3,914,828)<F1>
<REALIZED-GAINS-CURRENT> 17,607,525<F1>
<APPREC-INCREASE-CURRENT> 98,128,461<F1>
<NET-CHANGE-FROM-OPS> 111,821,158<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (8,188,984)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,304,723
<NUMBER-OF-SHARES-REDEEMED> (11,356,554)
<SHARES-REINVESTED> 617,711
<NET-CHANGE-IN-ASSETS> 125,105,203
<ACCUMULATED-NII-PRIOR> (51,572)<F1>
<ACCUMULATED-GAINS-PRIOR> 19,332,000<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,777,939<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4,732,464<F1>
<AVERAGE-NET-ASSETS> 139,550,837
<PER-SHARE-NAV-BEGIN> 13.676
<PER-SHARE-NII> (0.125)
<PER-SHARE-GAIN-APPREC> 4.445
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.859)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.137
<EXPENSE-RATIO> 1.56
<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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> MAR-31-1999<F1>
<INVESTMENTS-AT-COST> 314,269,440<F1>
<INVESTMENTS-AT-VALUE> 482,450,903<F1>
<RECEIVABLES> 32,194,340<F1>
<ASSETS-OTHER> 45,512<F1>
<OTHER-ITEMS-ASSETS> 72,309<F1>
<TOTAL-ASSETS> 514,763,064<F1>
<PAYABLE-FOR-SECURITIES> 10,846,412<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,202,698<F1>
<TOTAL-LIABILITIES> 13,049,110<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 141,372,990
<SHARES-COMMON-STOCK> 13,840,712
<SHARES-COMMON-PRIOR> 11,023,802
<ACCUMULATED-NII-CURRENT> (66,257)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 17,506,863<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 168,181,463<F1>
<NET-ASSETS> 231,786,114
<DIVIDEND-INCOME> 137,307<F1>
<INTEREST-INCOME> 680,329<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (4,732,464)<F1>
<NET-INVESTMENT-INCOME> (3,914,828)<F1>
<REALIZED-GAINS-CURRENT> 17,607,525<F1>
<APPREC-INCREASE-CURRENT> 98,128,461<F1>
<NET-CHANGE-FROM-OPS> 111,821,158<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (10,090,918)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,260,040
<NUMBER-OF-SHARES-REDEEMED> (2,191,661)
<SHARES-REINVESTED> 748,531
<NET-CHANGE-IN-ASSETS> 83,399,166
<ACCUMULATED-NII-PRIOR> (51,572)<F1>
<ACCUMULATED-GAINS-PRIOR> 19,332,000<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,777,939<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4,732,464<F1>
<AVERAGE-NET-ASSETS> 158,885,983
<PER-SHARE-NAV-BEGIN> 13.461
<PER-SHARE-NII> (0.197)
<PER-SHARE-GAIN-APPREC> 4.342
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.859)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.747
<EXPENSE-RATIO> 2.33
<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> AGGRESSIVE GROWTH CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> MAR-31-1999<F1>
<INVESTMENTS-AT-COST> 314,269,440<F1>
<INVESTMENTS-AT-VALUE> 482,450,903<F1>
<RECEIVABLES> 32,194,340<F1>
<ASSETS-OTHER> 45,512<F1>
<OTHER-ITEMS-ASSETS> 72,309<F1>
<TOTAL-ASSETS> 514,763,064<F1>
<PAYABLE-FOR-SECURITIES> 10,846,412<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,202,698<F1>
<TOTAL-LIABILITIES> 13,049,110<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,176,257
<SHARES-COMMON-STOCK> 1,632,921
<SHARES-COMMON-PRIOR> 1,216,007
<ACCUMULATED-NII-CURRENT> (66,257)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 17,506,863<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 168,181,463<F1>
<NET-ASSETS> 27,371,389
<DIVIDEND-INCOME> 137,307<F1>
<INTEREST-INCOME> 680,329<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (4,732,464)<F1>
<NET-INVESTMENT-INCOME> (3,914,828)<F1>
<REALIZED-GAINS-CURRENT> 17,607,525<F1>
<APPREC-INCREASE-CURRENT> 98,128,461<F1>
<NET-CHANGE-FROM-OPS> 111,821,158<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,152,760)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 654,046
<NUMBER-OF-SHARES-REDEEMED> (315,445)
<SHARES-REINVESTED> 78,313
<NET-CHANGE-IN-ASSETS> 10,992,214
<ACCUMULATED-NII-PRIOR> (51,572)<F1>
<ACCUMULATED-GAINS-PRIOR> 19,332,000<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,777,939<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4,732,464<F1>
<AVERAGE-NET-ASSETS> 18,114,297
<PER-SHARE-NAV-BEGIN> 13.470
<PER-SHARE-NII> (0.197)
<PER-SHARE-GAIN-APPREC> 4.348
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.859)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.762
<EXPENSE-RATIO> 2.33
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 51
<NAME> MID CAP VALUE CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> MAR-31-1999<F1>
<INVESTMENTS-AT-COST> 1,352,906<F1>
<INVESTMENTS-AT-VALUE> 1,485,971<F1>
<RECEIVABLES> 49,240<F1>
<ASSETS-OTHER> 14,102<F1>
<OTHER-ITEMS-ASSETS> 152,701<F1>
<TOTAL-ASSETS> 1,702,014<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 63,851<F1>
<TOTAL-LIABILITIES> 63,851<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,328,351
<SHARES-COMMON-STOCK> 110,306
<SHARES-COMMON-PRIOR> 104,285
<ACCUMULATED-NII-CURRENT> (27,030)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 32,837<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 133,065<F1>
<NET-ASSETS> 1,428,063
<DIVIDEND-INCOME> 12,288<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (15,349)<F1>
<NET-INVESTMENT-INCOME> (3,061)<F1>
<REALIZED-GAINS-CURRENT> 34,570<F1>
<APPREC-INCREASE-CURRENT> (35,026)<F1>
<NET-CHANGE-FROM-OPS> (3,517)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (2,858)
<DISTRIBUTIONS-OF-GAINS> (73,579)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 5,995
<NET-CHANGE-IN-ASSETS> (2,714)
<ACCUMULATED-NII-PRIOR> (20,691)<F1>
<ACCUMULATED-GAINS-PRIOR> 82,668<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 8,855<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 124,258<F1>
<AVERAGE-NET-ASSETS> 1,371,042
<PER-SHARE-NAV-BEGIN> 13.719
<PER-SHARE-NII> (0.013)
<PER-SHARE-GAIN-APPREC> (0.027)
<PER-SHARE-DIVIDEND> (0.027)
<PER-SHARE-DISTRIBUTIONS> (0.706)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.946
<EXPENSE-RATIO> 1.54
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 52
<NAME> MID CAP VALUE CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> MAR-31-1999<F1>
<INVESTMENTS-AT-COST> 1,352,906<F1>
<INVESTMENTS-AT-VALUE> 1,485,971<F1>
<RECEIVABLES> 49,240<F1>
<ASSETS-OTHER> 14,102<F1>
<OTHER-ITEMS-ASSETS> 152,701<F1>
<TOTAL-ASSETS> 1,702,014<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 63,851<F1>
<TOTAL-LIABILITIES> 63,851<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 86,018
<SHARES-COMMON-STOCK> 8,111
<SHARES-COMMON-PRIOR> 7,670
<ACCUMULATED-NII-CURRENT> (27,030)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 32,837<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 133,065<F1>
<NET-ASSETS> 105,041
<DIVIDEND-INCOME> 12,288<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (15,349)<F1>
<NET-INVESTMENT-INCOME> (3,061)<F1>
<REALIZED-GAINS-CURRENT> 34,570<F1>
<APPREC-INCREASE-CURRENT> (35,026)<F1>
<NET-CHANGE-FROM-OPS> (3,517)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (210)
<DISTRIBUTIONS-OF-GAINS> (5,411)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 441
<NET-CHANGE-IN-ASSETS> (227)
<ACCUMULATED-NII-PRIOR> (20,691)<F1>
<ACCUMULATED-GAINS-PRIOR> 82,668<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 8,855<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 124,258<F1>
<AVERAGE-NET-ASSETS> 100,866
<PER-SHARE-NAV-BEGIN> 13.724
<PER-SHARE-NII> (0.014)
<PER-SHARE-GAIN-APPREC> (0.027)
<PER-SHARE-DIVIDEND> (0.027)
<PER-SHARE-DISTRIBUTIONS> (0.706)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.950
<EXPENSE-RATIO> 1.54
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 53
<NAME> MID CAP VALUE CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> MAR-31-1999<F1>
<INVESTMENTS-AT-COST> 1,352,906<F1>
<INVESTMENTS-AT-VALUE> 1,485,971<F1>
<RECEIVABLES> 49,240<F1>
<ASSETS-OTHER> 14,102<F1>
<OTHER-ITEMS-ASSETS> 152,701<F1>
<TOTAL-ASSETS> 1,702,014<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 63,851<F1>
<TOTAL-LIABILITIES> 63,851<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 84,922
<SHARES-COMMON-STOCK> 8,111
<SHARES-COMMON-PRIOR> 7,670
<ACCUMULATED-NII-CURRENT> (27,030)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 32,837<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 133,065<F1>
<NET-ASSETS> 105,059
<DIVIDEND-INCOME> 12,288<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (15,349)<F1>
<NET-INVESTMENT-INCOME> (3,061)<F1>
<REALIZED-GAINS-CURRENT> 34,570<F1>
<APPREC-INCREASE-CURRENT> (35,026)<F1>
<NET-CHANGE-FROM-OPS> (3,517)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (210)
<DISTRIBUTIONS-OF-GAINS> (5,411)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 441
<NET-CHANGE-IN-ASSETS> (226)
<ACCUMULATED-NII-PRIOR> (20,691)<F1>
<ACCUMULATED-GAINS-PRIOR> 82,668<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 8,855<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 124,258<F1>
<AVERAGE-NET-ASSETS> 100,882
<PER-SHARE-NAV-BEGIN> 13.726
<PER-SHARE-NII> (0.014)
<PER-SHARE-GAIN-APPREC> (0.026)
<PER-SHARE-DIVIDEND> (0.027)
<PER-SHARE-DISTRIBUTIONS> (0.706)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.953
<EXPENSE-RATIO> 1.54
<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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 1,454,274<F1>
<INVESTMENTS-AT-VALUE> 2,142,979<F1>
<RECEIVABLES> 74,190<F1>
<ASSETS-OTHER> 15,231<F1>
<OTHER-ITEMS-ASSETS> 96,366<F1>
<TOTAL-ASSETS> 2,328,766<F1>
<PAYABLE-FOR-SECURITIES> 49,113<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 68,053<F1>
<TOTAL-LIABILITIES> 117,166<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,410,601
<SHARES-COMMON-STOCK> 113,163
<SHARES-COMMON-PRIOR> 100,925
<ACCUMULATED-NII-CURRENT> (32,091)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (35,567)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 688,705<F1>
<NET-ASSETS> 1,928,494
<DIVIDEND-INCOME> 9,409<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (17,453)<F1>
<NET-INVESTMENT-INCOME> (8,044)<F1>
<REALIZED-GAINS-CURRENT> (34,592)<F1>
<APPREC-INCREASE-CURRENT> 387,576<F1>
<NET-CHANGE-FROM-OPS> 344,940<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (2,823)
<DISTRIBUTIONS-OF-GAINS> (171,322)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 12,238
<NET-CHANGE-IN-ASSETS> 300,785
<ACCUMULATED-NII-PRIOR> (20,810)<F1>
<ACCUMULATED-GAINS-PRIOR> 195,495<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 9,771<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 124,106<F1>
<AVERAGE-NET-ASSETS> 1,621,841
<PER-SHARE-NAV-BEGIN> 16.128
<PER-SHARE-NII> (0.040)
<PER-SHARE-GAIN-APPREC> 2.680
<PER-SHARE-DIVIDEND> (0.028)
<PER-SHARE-DISTRIBUTIONS> (1.698)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.042
<EXPENSE-RATIO> 1.37
<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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 1,454,274<F1>
<INVESTMENTS-AT-VALUE> 2,142,979<F1>
<RECEIVABLES> 74,190<F1>
<ASSETS-OTHER> 15,231<F1>
<OTHER-ITEMS-ASSETS> 96,366<F1>
<TOTAL-ASSETS> 2,328,766<F1>
<PAYABLE-FOR-SECURITIES> 49,113<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 68,053<F1>
<TOTAL-LIABILITIES> 117,166<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,976
<SHARES-COMMON-STOCK> 8,305
<SHARES-COMMON-PRIOR> 7,407
<ACCUMULATED-NII-CURRENT> (32,091)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (35,567)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 688,705<F1>
<NET-ASSETS> 141,546
<DIVIDEND-INCOME> 9,409<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (17,453)<F1>
<NET-INVESTMENT-INCOME> (8,044)<F1>
<REALIZED-GAINS-CURRENT> (34,592)<F1>
<APPREC-INCREASE-CURRENT> 387,576<F1>
<NET-CHANGE-FROM-OPS> 344,940<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (207)
<DISTRIBUTIONS-OF-GAINS> (12,574)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 898
<NET-CHANGE-IN-ASSETS> 22,077
<ACCUMULATED-NII-PRIOR> (20,810)<F1>
<ACCUMULATED-GAINS-PRIOR> 195,495<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 9,771<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 124,106<F1>
<AVERAGE-NET-ASSETS> 119,039
<PER-SHARE-NAV-BEGIN> 16.129
<PER-SHARE-NII> (0.036)
<PER-SHARE-GAIN-APPREC> 2.676
<PER-SHARE-DIVIDEND> (0.028)
<PER-SHARE-DISTRIBUTIONS> (1.698)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.043
<EXPENSE-RATIO> 1.37
<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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 1,454,274<F1>
<INVESTMENTS-AT-VALUE> 2,142,979<F1>
<RECEIVABLES> 74,190<F1>
<ASSETS-OTHER> 15,231<F1>
<OTHER-ITEMS-ASSETS> 96,366<F1>
<TOTAL-ASSETS> 2,328,766<F1>
<PAYABLE-FOR-SECURITIES> 49,113<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 68,053<F1>
<TOTAL-LIABILITIES> 117,166<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,976
<SHARES-COMMON-STOCK> 8,305
<SHARES-COMMON-PRIOR> 7,407
<ACCUMULATED-NII-CURRENT> (32,091)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (35,567)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 688,705<F1>
<NET-ASSETS> 141,560
<DIVIDEND-INCOME> 9,409<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (17,453)<F1>
<NET-INVESTMENT-INCOME> (8,044)<F1>
<REALIZED-GAINS-CURRENT> (34,592)<F1>
<APPREC-INCREASE-CURRENT> 387,576<F1>
<NET-CHANGE-FROM-OPS> 344,940<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (207)
<DISTRIBUTIONS-OF-GAINS> (12,574)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 898
<NET-CHANGE-IN-ASSETS> 22,078
<ACCUMULATED-NII-PRIOR> (20,810)<F1>
<ACCUMULATED-GAINS-PRIOR> 195,495<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 9,771<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 124,106<F1>
<AVERAGE-NET-ASSETS> 119,051
<PER-SHARE-NAV-BEGIN> 16.131
<PER-SHARE-NII> (0.036)
<PER-SHARE-GAIN-APPREC> 2.676
<PER-SHARE-DIVIDEND> (0.028)
<PER-SHARE-DISTRIBUTIONS> (1.698)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.045
<EXPENSE-RATIO> 1.37
<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> 31
<NAME> GROWTH CLASS A
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 94,942,154<F1>
<INVESTMENTS-AT-VALUE> 140,271,900<F1>
<RECEIVABLES> 5,064,428<F1>
<ASSETS-OTHER> 358,927<F1>
<OTHER-ITEMS-ASSETS> 3,844<F1>
<TOTAL-ASSETS> 145,699,099<F1>
<PAYABLE-FOR-SECURITIES> 4,472,798<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 888,379<F1>
<TOTAL-LIABILITIES> 5,361,177<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41,591,140
<SHARES-COMMON-STOCK> 2,580,637
<SHARES-COMMON-PRIOR> 2,765,431
<ACCUMULATED-NII-CURRENT> (54,616)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (4,245,157)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 45,329,746<F1>
<NET-ASSETS> 60,128,868
<DIVIDEND-INCOME> 241,203<F1>
<INTEREST-INCOME> 203,423<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,048,524)<F1>
<NET-INVESTMENT-INCOME> (1,603,898)<F1>
<REALIZED-GAINS-CURRENT> (3,953,208)<F1>
<APPREC-INCREASE-CURRENT> 6,336,602<F1>
<NET-CHANGE-FROM-OPS> 779,496<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,555,668)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 337,597
<NUMBER-OF-SHARES-REDEEMED> (593,731)
<SHARES-REINVESTED> 71,540
<NET-CHANGE-IN-ASSETS> (4,756,184)
<ACCUMULATED-NII-PRIOR> (47,131)<F1>
<ACCUMULATED-GAINS-PRIOR> 3,378,184<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 741,338<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,090,989<F1>
<AVERAGE-NET-ASSETS> 56,091,134
<PER-SHARE-NAV-BEGIN> 23.463
<PER-SHARE-NII> (0.185)
<PER-SHARE-GAIN-APPREC> 0.604
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.584)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 23.298
<EXPENSE-RATIO> 1.64
<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
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 94,942,154<F1>
<INVESTMENTS-AT-VALUE> 140,271,900<F1>
<RECEIVABLES> 5,064,428<F1>
<ASSETS-OTHER> 358,927<F1>
<OTHER-ITEMS-ASSETS> 3,844<F1>
<TOTAL-ASSETS> 145,699,099<F1>
<PAYABLE-FOR-SECURITIES> 4,472,798<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 888,379<F1>
<TOTAL-LIABILITIES> 5,361,177<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52,906,982
<SHARES-COMMON-STOCK> 3,183,691
<SHARES-COMMON-PRIOR> 3,440,655
<ACCUMULATED-NII-CURRENT> (54,616)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (4,245,157)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 45,329,746<F1>
<NET-ASSETS> 72,808,647
<DIVIDEND-INCOME> 241,203<F1>
<INTEREST-INCOME> 203,423<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,048,524)<F1>
<NET-INVESTMENT-INCOME> (1,603,898)<F1>
<REALIZED-GAINS-CURRENT> (3,953,208)<F1>
<APPREC-INCREASE-CURRENT> 6,336,602<F1>
<NET-CHANGE-FROM-OPS> 779,496<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,907,640)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 269,887
<NUMBER-OF-SHARES-REDEEMED> (616,839)
<SHARES-REINVESTED> 89,988
<NET-CHANGE-IN-ASSETS> (6,922,669)
<ACCUMULATED-NII-PRIOR> (47,131)<F1>
<ACCUMULATED-GAINS-PRIOR> 3,378,184<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 741,338<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,090,989<F1>
<AVERAGE-NET-ASSETS> 68,067,392
<PER-SHARE-NAV-BEGIN> 23.173
<PER-SHARE-NII> (0.299)
<PER-SHARE-GAIN-APPREC> 0.579
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.584)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 22.869
<EXPENSE-RATIO> 2.40
<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> 33
<NAME> GROWTH CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 94,942,154<F1>
<INVESTMENTS-AT-VALUE> 140,271,900<F1>
<RECEIVABLES> 5,064,428<F1>
<ASSETS-OTHER> 358,927<F1>
<OTHER-ITEMS-ASSETS> 3,844<F1>
<TOTAL-ASSETS> 145,699,099<F1>
<PAYABLE-FOR-SECURITIES> 4,472,798<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 888,379<F1>
<TOTAL-LIABILITIES> 5,361,177<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,809,827
<SHARES-COMMON-STOCK> 323,632
<SHARES-COMMON-PRIOR> 398,471
<ACCUMULATED-NII-CURRENT> (54,616)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (4,245,157)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 45,329,746<F1>
<NET-ASSETS> 7,400,407
<DIVIDEND-INCOME> 241,203<F1>
<INTEREST-INCOME> 203,423<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,048,524)<F1>
<NET-INVESTMENT-INCOME> (1,603,898)<F1>
<REALIZED-GAINS-CURRENT> (3,953,208)<F1>
<APPREC-INCREASE-CURRENT> 6,336,602<F1>
<NET-CHANGE-FROM-OPS> 779,496<F1>
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (206,825)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,753
<NUMBER-OF-SHARES-REDEEMED> (102,252)
<SHARES-REINVESTED> 7,660
<NET-CHANGE-IN-ASSETS> (1,833,242)
<ACCUMULATED-NII-PRIOR> (47,131)<F1>
<ACCUMULATED-GAINS-PRIOR> 3,378,184<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 741,338<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,090,989<F1>
<AVERAGE-NET-ASSETS> 7,408,644
<PER-SHARE-NAV-BEGIN> 23.173
<PER-SHARE-NII> (0.300)
<PER-SHARE-GAIN-APPREC> 0.578
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.584)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 22.867
<EXPENSE-RATIO> 2.41
<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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> MAR-31-1999<F1>
<INVESTMENTS-AT-COST> 1,785,788<F1>
<INVESTMENTS-AT-VALUE> 1,989,066<F1>
<RECEIVABLES> 37,125<F1>
<ASSETS-OTHER> 14,059<F1>
<OTHER-ITEMS-ASSETS> 78,986<F1>
<TOTAL-ASSETS> 2,119,236<F1>
<PAYABLE-FOR-SECURITIES> 27,436<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 66,041<F1>
<TOTAL-LIABILITIES> 93,477<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,572,545<F1>
<SHARES-COMMON-STOCK> 127,413
<SHARES-COMMON-PRIOR> 101,359
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> (30,434)<F1>
<ACCUMULATED-NET-GAINS> 77,944<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 203,278<F1>
<NET-ASSETS> 1,771,883
<DIVIDEND-INCOME> 27,886<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (17,917)<F1>
<NET-INVESTMENT-INCOME> 9,969<F1>
<REALIZED-GAINS-CURRENT> 180,405<F1>
<APPREC-INCREASE-CURRENT> (15,653)<F1>
<NET-CHANGE-FROM-OPS> 174,721<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (21,286)
<DISTRIBUTIONS-OF-GAINS> (335,652)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 26,054
<NET-CHANGE-IN-ASSETS> 152,825
<ACCUMULATED-NII-PRIOR> (16,067)<F1>
<ACCUMULATED-GAINS-PRIOR> 281,283<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 10,020<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 122,885<F1>
<AVERAGE-NET-ASSETS> 1,670,174
<PER-SHARE-NAV-BEGIN> 15.974
<PER-SHARE-NII> 0.140
<PER-SHARE-GAIN-APPREC> 1.315
<PER-SHARE-DIVIDEND> (0.210)
<PER-SHARE-DISTRIBUTIONS> (3.312)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.907
<EXPENSE-RATIO> 1.41
<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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> MAR-31-1999<F1>
<INVESTMENTS-AT-COST> 1,785,788<F1>
<INVESTMENTS-AT-VALUE> 1,989,066<F1>
<RECEIVABLES> 37,125<F1>
<ASSETS-OTHER> 14,059<F1>
<OTHER-ITEMS-ASSETS> 78,986<F1>
<TOTAL-ASSETS> 2,119,236<F1>
<PAYABLE-FOR-SECURITIES> 27,436<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 66,041<F1>
<TOTAL-LIABILITIES> 93,477<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101,213
<SHARES-COMMON-STOCK> 9,128
<SHARES-COMMON-PRIOR> 7,262
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> (30,434)<F1>
<ACCUMULATED-NET-GAINS> 77,944<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 203,278<F1>
<NET-ASSETS> 126,938
<DIVIDEND-INCOME> 27,886<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (17,917)<F1>
<NET-INVESTMENT-INCOME> 9,969<F1>
<REALIZED-GAINS-CURRENT> 180,405<F1>
<APPREC-INCREASE-CURRENT> (15,653)<F1>
<NET-CHANGE-FROM-OPS> 174,721<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,525)
<DISTRIBUTIONS-OF-GAINS> (24,046)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1,866
<NET-CHANGE-IN-ASSETS> 10,948
<ACCUMULATED-NII-PRIOR> (16,067)<F1>
<ACCUMULATED-GAINS-PRIOR> 281,283<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 10,020<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 122,885<F1>
<AVERAGE-NET-ASSETS> 119,652
<PER-SHARE-NAV-BEGIN> 15.973
<PER-SHARE-NII> 0.140
<PER-SHARE-GAIN-APPREC> 1.315
<PER-SHARE-DIVIDEND> (0.210)
<PER-SHARE-DISTRIBUTIONS> (3.312)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.906
<EXPENSE-RATIO> 1.41
<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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999<F1>
<PERIOD-START> JUL-01-1998<F1>
<PERIOD-END> MAR-31-1999<F1>
<INVESTMENTS-AT-COST> 1,785,788<F1>
<INVESTMENTS-AT-VALUE> 1,989,066<F1>
<RECEIVABLES> 37,125<F1>
<ASSETS-OTHER> 14,059<F1>
<OTHER-ITEMS-ASSETS> 78,986<F1>
<TOTAL-ASSETS> 2,119,236<F1>
<PAYABLE-FOR-SECURITIES> 27,436<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 66,041<F1>
<TOTAL-LIABILITIES> 93,477<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101,213
<SHARES-COMMON-STOCK> 9,128
<SHARES-COMMON-PRIOR> 7,262
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> (30,434)<F1>
<ACCUMULATED-NET-GAINS> 77,944<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 203,278<F1>
<NET-ASSETS> 126,938
<DIVIDEND-INCOME> 27,886<F1>
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (17,917)<F1>
<NET-INVESTMENT-INCOME> 9,969<F1>
<REALIZED-GAINS-CURRENT> 180,405<F1>
<APPREC-INCREASE-CURRENT> (15,653)<F1>
<NET-CHANGE-FROM-OPS> 174,721<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,525)
<DISTRIBUTIONS-OF-GAINS> (24,046)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1,866
<NET-CHANGE-IN-ASSETS> 10,948
<ACCUMULATED-NII-PRIOR> (16,067)<F1>
<ACCUMULATED-GAINS-PRIOR> 281,283<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 10,020<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 122,885<F1>
<AVERAGE-NET-ASSETS> 119,652
<PER-SHARE-NAV-BEGIN> 15.973
<PER-SHARE-NII> 0.140
<PER-SHARE-GAIN-APPREC> 1.315
<PER-SHARE-DIVIDEND> (0.210)
<PER-SHARE-DISTRIBUTIONS> (3.312)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.906
<EXPENSE-RATIO> 1.41
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
