<PAGE>
VAN KAMPEN
EQUITY INCOME FUND
Semi-Annual Report
June 30, 1998
[ARTWORK APPEARS HERE]
Van Kampen
Funds
<PAGE>
<TABLE>
- -----------------------------------------
Table of Contents
- -----------------------------------------
<S> <C>
Letter to Shareholders................. 1
Performance Results.................... 3
Glossary of Terms...................... 4
Portfolio Management Review............ 5
Portfolio Highlights................... 8
Portfolio of Investments............... 9
Statement of Assets and Liabilities....17
Statement of Operations................18
Statement of Changes in Net Assets.....19
Financial Highlights...................20
Notes to Financial Statements..........23
EQI SAR 8/98
</TABLE>
<PAGE>
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Letter to Shareholders
- --------------------------------------------------------------------------------
[Photo Appears Here]
Dennis J. McDonnell and Don G. Powell
July 16, 1998
Dear Shareholder,
As you may know, Van Kampen American Capital is consolidating all of the
retail mutual funds that we distribute under the single name of Van Kampen
Funds. This move accompanies the change in our legal name to Van Kampen Funds
Inc.
You can be assured that the change in your fund's name will not affect its
management or daily operations. You will begin seeing the application of this
change with this report. In addition, as of August 31, your fund will be listed
in the daily newspapers by share class under the heading "Van Kampen Funds." For
your convenience, we have enclosed a separate brochure that covers additional
details related to these changes.
Economic Review
The U.S. economy continued to expand at a robust pace despite a deepening
recession in a number of Asian nations. The nation's inflation-adjusted output
of goods and services ran at 5.4 percent during the first quarter, an annualized
rate considered by many economists to be virtually unsustainable without leading
to inflation. As the reporting period ended, however, there were indications
that the Asian financial crisis was finally having a moderating impact on the
economy. Also, the Conference Board's index of leading indicators points toward
a slowdown in economic growth later this year.
Despite the generally solid pace of economic activity, inflation remained
benign. Consumer prices rose by 1.7 percent during the 12 months through June,
while producer prices actually declined during the same period. Falling
commodity prices and the impact of the strong dollar helped to offset the
inflationary implications of a tight labor market and strong consumer spending.
While the Federal Reserve kept short-term interest rates steady at 5.5
percent during the reporting period, minutes from the central bank's May policy
meeting indicated growing sentiment for tightening monetary policy if the drag
from Asia does not slow the American economy on its own.
Market Review
U.S. stocks continued to post gains during the period, but the sharp
variation in returns across industry groups reflected the growing impact of the
Asian financial crisis on corporate profits. The Wilshire 5000 Index, consisting
of all publicly traded U.S. companies, gained 14.68 percent during the first six
months of 1998. Once again, most of the strength was concentrated in large-
capitalization companies, as the S&P 500 Index of large stocks returned 17.67
percent during the period compared to 4.93 percent for the Russell 2000 Index of
small-cap issues. Even large stocks, however, fell back significantly beginning
in April as the Asian crisis intensified.
Continued on page two
1
<PAGE>
Companies with heavy exposure to domestic consumers benefited from a strong
American economy, especially during the latter stages of the reporting period.
Consumer cyclical stocks returned 28.94 percent during the first six months of
1998, compared to 6.35 percent for basic materials and 3.01 percent for energy
issues. Eight of the ten top-performing industry groups during the second
quarter were from consumer-related sectors. Meanwhile, the steep decline in
energy and agricultural prices--a consequence of reduced demand from
Asia--undermined the performance of commodity-related stocks. During the three
months through June, five of the ten worst-performing industry sectors were from
either energy, metals, or commodity-based industries.
Outlook
We believe economic growth in the United States is likely to slow in coming
months as the impact of the Asian crisis becomes more apparent. As growth
decelerates, corporate profits will come under pressure, especially among larger
companies. Given the difficult year-over-year earnings comparisons that will
begin to appear in coming quarters, we caution investors not to expect a
continuation of the large gains that have become almost routine for U.S. stocks
in recent years. The high valuations and decelerating profit growth could limit
returns in the equity market over the near term.
Still, the overall environment for equities remains positive. Inflation is
low, the economy continues to grow, the bond market is healthy, and monetary
policy is stable. These characteristics usually support relatively high
valuations in the stock market. We remain confident that the domestic equity
asset class will continue to provide solid growth for investors with a long-term
time horizon.
Additional details about your fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to serve you and your family through our
diverse menu of quality investments.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen Asset Management Inc. Van Kampen Asset Management Inc.
2
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Performance Results for the Period Ended June 30, 1998
- --------------------------------------------------------------------------------
Van Kampen Equity Income Fund
<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Total Returns
Six-month total return based on NAV/1/.......... 12.99% 12.55% 12.69%
Six-month total return/2/....................... 6.52% 7.55% 11.69%
One-year average annual total return/2/......... 15.29% 16.33% 20.48%
Five-year average annual total return/2/........ 16.40% 16.72% N/A
Ten-year average annual total return/2/......... 14.27% N/A N/A
Life-of-Fund average annual total return/2/..... 11.52% 16.39% 17.16%
Commencement Date............................... 08/03/60 05/01/92 07/06/93
</TABLE>
N/A = Not Applicable
1 Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for A shares) or
contingent deferred sales charge for early withdrawal (5% for B shares and
1% for C shares).
2 Standardized total return. Assumes reinvestment of all distributions for
the period and includes payment of the maximum sales charge (A shares) or
contingent deferred sales charge for early withdrawal (B and C shares).
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. This performance was achieved during generally
rising stock prices. Fund shares, when redeemed, may be worth more or less than
their original cost.
The medium-grade debt securities in which the Fund may invest are subject to
greater market risks and less assurance as to the ability of the issuer to meet
principal and interest obligations than higher-rated securities. Debt securities
rated in lower categories are considered high-risk securities; the rating
agencies consider them speculative, and payment of interest and principal is not
considered well-assured.
Market forecasts provided in this report may not necessarily come to pass.
3
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Glossary of Terms
- --------------------------------------------------------------------------------
Blue-chip stocks: Stocks of large, well-known companies that have a long record
of growth. Examples of blue-chip stocks include General Motors, International
Business Machines (IBM), Coca-Cola, and General Electric.
Dow Jones Industrial Average (DJIA): The oldest and most widely recognized stock
market average, which reflects the performance of 30 actively traded stocks of
well-established, blue-chip companies.
Federal Reserve Board (the Fed): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its policy-
making committee, called the Federal Open Market Committee, meets eight times
a year to establish monetary policy and monitor the economic pulse of the U.S.
Growth investing: An investment strategy that seeks to identify stocks that tend
to offer greater-than-average earnings growth. Growth stocks typically trade
at higher prices than value stocks, due to their higher expected earnings
growth.
Market capitalization: The size of a company, as measured by the value of its
stock. Morningstar, an independent mutual fund rating service, defines "small-
cap" as less than $1 billion, "mid-cap" as between $1 billion and $5 billion,
and "large-cap" as more than $5 billion.
Net asset value (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from its total assets and dividing this amount by the
number of shares outstanding. The NAV does not include any initial or
contingent deferred sales charge.
P/E ratio: The price-to-earnings ratio shows the "multiple" of earnings at which
a stock is selling. The P/E ratio is calculated by dividing a stock's current
price by its current earnings per share. A high multiple means that investors
are optimistic about future growth and have bid up the stock's price.
Standard & Poor's 500-Stock Index: A broad-based measurement of changes in
stock-market conditions based on the average performance of 500 widely held
common stocks. The index, which tracks industrial, transportation, financial,
and utility stocks, provides a guide to the overall health of the U.S. stock
market. The S&P 500 is a much broader index than the Dow Jones Industrial
Average and reflects the stock market more accurately.
Valuation: The estimated or determined worth of a stock, based on financial
measures such as the stock's current price relative to earnings, revenue, book
value, and cash flow.
Value investing: A strategy that seeks to identify stocks that are sound
investments but are temporarily out of favor in the marketplace. As a result,
the stocks trade at prices below the value that value investors believe they
are actually worth.
4
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Portfolio Management Review
- --------------------------------------------------------------------------------
Van Kampen Equity Income Fund
We recently spoke with the management team of the Van Kampen Equity Income Fund
about the key events and economic forces that shaped the markets during the six
months ended June 30, 1998. The team is led by James A. Gilligan, portfolio
manager, Scott Carroll, portfolio comanager, and Dennis J. McDonnell, president
of the adviser. The following excerpts reflect their views on the Fund's
performance during this time.
Q How would you describe the market environment in which the Fund operated
during this six-month period?
A We've witnessed a continuation of the conditions that dominated the market
in late 1997. The currency crisis in Asia continued to capture investors'
attention: fears about its impact on the U.S. market eased in the final months
of last year, but were reactivated by cautionary comments from Federal Reserve
Board Chairman Alan Greenspan in the second quarter of 1998. Despite
distractions from across the ocean, the Dow Jones Industrial Average maintained
its climb, reaching new highs and wowing investors. By mid-April, the Dow crept
over the coveted 9000-point mark but fluctuated within a 200-point range above
and below this record high in the final weeks of the reporting period.
Although the market has been healthy and inflation continues to be nominal,
earnings growth has slowed somewhat and reports of earnings disappointments have
increased, particularly in those companies with exposure to Asia. The majority
of companies reporting disappointing earnings were small-capitalization
companies in the technology industry.
Q How was the Fund's portfolio affected by these market conditions?
A An increase in the level of large-scale, high-visibility merger and
acquisition activity--encompassing banking, telephone, automotive, and airline
industries--has further fueled the rise in market prices that we discussed in
your last report. Speaking broadly, it's a much more expensive market than a
year ago, which makes for a challenging environment for a value-oriented
portfolio like this one. Our concern that valuations are overextended is
certainly reflected in how we manage the portfolio. When searching for new
portfolio holdings, we want to find stocks that we feel have a limited potential
for downward movement that exhibit the potential for significant appreciation.
On the flip side of the coin, we continually review the portfolio's existing
holdings, replacing overvalued stocks with stocks that we believe have better
value characteristics. We consult any number of sources before we decide that a
position should be reduced or eliminated, including discussions with the
company's management, key vendors and competitors, and research based on
anecdotal evidence.
Q Tell us about some of the major sectors and specific holdings represented
in the portfolio.
A The Fund's largest sector weighting is in finance, an industry that was
dominated by merger and acquisition activity during the period. Our most
significant positions were Chase Manhattan, NationsBank, First Union, and
Equitable Companies; we increased our holding in the latter position due to
vastly improved results in the company's earnings. Both First Union and
NationsBank announced major acquisitions during the period and turned in
slightly disappointing
5
<PAGE>
returns as a result. We believe that, in the long run, investors will again
reward these companies with higher share prices as their successes with
consolidation are borne out in their earnings.
Among the largest sectors in the Fund's portfolio is health care, which
continues to be an exciting industry. Our largest holding, PacifiCare Health
Systems, boasted a terrific return after a disappointing 1997, thanks to rate
increases instituted in 1998 and the alleviation of cost pressures. American
Home Products, another dominant holding, was also a good performer following the
recall of its weight loss drug Redux. This sector has produced very few
disappointments in the Fund's portfolio because of the underlying growth of the
health-care industry, but we did reduce some positions due to high valuations.
Unlike the previous two sectors, the technology industry was the source of
more disappointments than successes, largely because of the upheaval in Asia.
We've been particularly displeased with stocks in the semiconductor sector,
which included VLSI, a mid-size position in the portfolio, and networking stocks
such as 3Com and Cabletron Systems. However, the news wasn't all bad in
technology: our largest stock, IBM, continued to hold its ground. As a large,
established company focusing on growth in its services business, it was somewhat
shielded from the big disappointments that plagued smaller hardware-oriented
companies. This was also the case for Xerox, which continued to meet growth
objectives during the period. Another large technology holding, Alcatel,
performed very well as investors took notice of the positive changes ushered in
by a new management.
We continue to be pleased with developments in the utility industry, which
is the second-largest sector represented in the portfolio. Telephone stocks in
general turned in strong performances, partially buoyed by increased merger and
acquisition activity. Electric stocks presented something of a mixed bag; one
success was Northeast Utilities, which appreciated in anticipation of restarting
one of the company's nuclear plants.
Finally, we maintained a small but successful percentage of the portfolio
in retail stocks. Our best-performing stock in this sector, and perhaps in the
portfolio, was Tommy Hilfiger, which was added to the portfolio in late 1997.
Overall, retail stocks performed very well during the period, buoyed by
increases in consumer spending.
In addition to the Fund's equity holdings, we also maintained approximately
17 percent of the Fund's net assets in fixed-income investments. This position,
which is relatively unchanged from the portfolio's allocation at the beginning
of the period, serves to defend the portfolio against volatility in the stock
market. For additional Fund portfolio highlights, please refer to page eight.
Q So, how did the Fund perform during the reporting period?
A The Fund achieved a total return of 12.99 percent(1) (Class A shares at net
asset value) for the six-month period ended June 30, 1998. By comparison, the
Standard & Poor's 500-Stock Index returned 17.67 percent, and the Lipper Equity
Income Fund Average produced a total return of 9.36 percent for the same period.
The S&P 500-Stock Index is a broad-based index that reflects the general
performance of the stock market, and the Lipper Equity Income Fund Average
reflects the average performance of the largest equity income funds. These
indices are statistical composites that do not reflect any commissions or sales
charges that would be paid by an investor purchasing the securities or
investments they represent. Please refer to the chart on page three for
additional Fund performance results.
6
<PAGE>
Q What do you see happening in the market over the coming months?
A We expect the market to be challenging through the end of 1998. Although
the Dow has continued to set new record highs, estimates for 1998 corporate
profits have been reduced. However, even though the turmoil in Asia is causing a
slowdown in global economic growth, the economy at home is still relatively
healthy. The job market is exceptionally tight, and while this has not had a
significant impact in the reported wage inflation data, it is a reason for
concern if continuing low unemployment gives rise to wage inflation. Meanwhile,
the Fed has also expressed some concern about the level of appreciation in
financial assets, particularly in the stock market.
Although we monitor economic and market conditions carefully to gauge how
they may affect the Fund, our focus remains unaltered: to continue to meet the
Fund's objective of providing income and long-term growth of capital to Fund
shareholders. We will continue to stay as fully invested as possible and manage
the Fund's portfolio with an eye toward value and growth.
/s/ James A. Gilligan /s/ Dennis J. McDonnell
James A. Gilligan Dennis J. McDonnell
Portfolio Manager President
Van Kampen Asset Management Inc.
Please see footnotes on page three
7
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Portfolio Highlights
- --------------------------------------------------------------------------------
Van Kampen Equity Income Fund
- --------------------------------------------------------------------------------
Portfolio Holdings as a Percentage of Long-Term Investments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage of
Top Ten Holdings These Investments
As of June 30, 1998 Six Months Ago
<S> <C> <C>
United States Treasury Notes................. 10.7%.............. 7.2%
Chase Manhattan Corp. ....................... 2.3%.............. 1.7%
Aegon NV..................................... 1.8%.............. 1.1%
PacifiCare Health Systems.................... 1.7%.............. 1.1%
ADT Operations, Inc. ........................ 1.6%.............. 1.3%
Philip Morris Cos., Inc. .................... 1.6%.............. 1.8%
Equitable Cos., Inc. ........................ 1.6%.............. 1.1%
American Home Products Corp. ................ 1.5%.............. 0.8%
International Business Machines Corp. ....... 1.5%.............. 1.7%
Alcatel Alsthom CGE.......................... 1.4%.............. 0.9%
</TABLE>
- --------------------------------------------------------------------------------
Top Five Portfolio Holdings by Sector as a Percentage of Long-Term Investments
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
As of June 30, 1998 As of December 31, 1997
Finance....................... 18% Finance............................. 18%
Utilities..................... 14% Utilities........................... 12%
Health Care................... 12% Technology.......................... 10%
Technology.................... 9% Health Care......................... 10%
Energy........................ 7% Energy.............................. 10%
</TABLE>
- --------------------------------------------------------------------------------
Asset Allocation as a Percentage of Total Investments
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
As of June 30, 1998 [PIE CHARTS APPEARS HERE]
[ ] Stocks......................... 64%
[ ] Bonds.......................... 7%
[ ] Convertibles................... 9%
[ ] United States Obligations...... 10%
[ ] Cash Equivalents............... 10%
As of December 31, 1997
[ ] Stocks......................... 68%
[ ] Bonds.......................... 9%
[ ] Convertibles................... 8%
[ ] United States Obligations...... 7%
[ ] Cash Equivalents............... 8%
</TABLE>
8
<PAGE>
Portfolio of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
===============================================================================
Security Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Common and Preferred Stocks 64.2%
Consumer Distribution 2.1%
Federated Department Stores, Inc. (a)................ 366,800 $ 19,738,425
Gap, Inc............................................. 318,050 19,599,831
Gymboree Corp. (a)................................... 86,500 1,311,016
--------------
40,649,272
--------------
Consumer Durables 1.2%
Black & Decker Corp.................................. 199,300 12,157,300
Newell Financial Trust, 144A - Convertible
Preferred (b)...................................... 185,000 10,776,250
--------------
22,933,550
--------------
Consumer Non-Durables 5.6%
Adidas - ADR (Germany), 144A (b)..................... 33,500 2,872,625
Benckiser NV, Class B - ADR (Netherlands) (a)........ 232,500 14,342,344
Colgate - Palmolive Co............................... 170,200 14,977,600
Dole Food, Inc....................................... 200,000 9,937,500
Philip Morris Cos., Inc.............................. 715,000 28,153,125
Ralston Purina Group................................. 144,600 16,891,088
Tommy Hilfiger Corp. (a)............................. 237,700 14,856,250
Unilever NV - ADR (Netherlands)...................... 94,800 7,483,275
--------------
109,513,807
--------------
Consumer Services 2.5%
Capstar Broadcasting Corp., Class A (a).............. 351,800 8,838,975
Cognizant Corp....................................... 172,900 10,892,700
H & R Block, Inc..................................... 222,500 9,372,813
Hilton Hotels Corp................................... 260,000 7,410,000
News Corp.- Exchange Trust, 144A - Convertible
Preferred (b)...................................... 83,000 7,304,000
Sinclair Broadcast Group - Convertible Preferred..... 82,000 5,781,000
--------------
49,599,488
--------------
Energy 5.2%
Coastal Corp......................................... 284,100 19,833,731
El Paso Natural Gas Co............................... 339,000 12,966,750
Exxon Corp........................................... 301,300 21,486,456
Mobil Corp........................................... 149,600 11,463,100
Texaco, Inc.......................................... 357,700 21,350,219
Valero Energy Corp................................... 141,500 4,704,875
</TABLE>
9 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
===============================================================================
Security Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Energy (Continued)
YPF Sociedad Anonima, Class D - ADR (Argentina)...... 359,400 $ 10,804,463
--------------
102,609,594
--------------
Finance 13.3%
Allstate Corp........................................ 92,300 8,451,219
American General Corp................................ 240,000 17,085,000
Arden Realty Group, Inc.............................. 280,100 7,247,588
Avis Rent A Car, Inc. (a)............................ 544,700 13,481,325
BankBoston Corp...................................... 254,600 14,162,125
Chase Manhattan Corp................................. 527,800 39,848,900
Conseco, Inc......................................... 120,600 5,638,050
Conseco, Inc., PRIDES - Convertible Preferred........ 160,000 8,480,000
Dresdner Bank AG - ADR (Germany)..................... 156,600 8,358,525
Equitable Cos., Inc.................................. 369,000 27,651,937
Everest Reinsurance Holdings, Inc.................... 113,400 4,358,813
Exel Ltd............................................. 119,000 9,259,688
First Union Corp..................................... 320,000 18,640,000
Fleet Financial Group, Inc........................... 124,400 10,387,400
NationsBank Corp..................................... 291,000 22,261,500
PLC Capital Trust II, PRIDES - Convertible
Preferred........................................... 130,000 8,125,000
Provident Cos., Inc.................................. 123,700 4,267,650
Travelers Group, Inc................................. 166,500 10,094,063
Washington Mutual, Inc............................... 328,560 14,271,825
WBK Trust, STRYPES - Convertible Preferred........... 201,000 6,067,688
Weingarten Realty Investors.......................... 48,000 2,007,000
--------------
260,145,296
--------------
Healthcare 9.0%
Alza Corp. (a)....................................... 127,000 5,492,750
American Home Products Corp.......................... 507,400 26,257,950
Beckman Coulter, Inc................................. 186,100 10,840,325
Columbia / HCA Healthcare Corp....................... 219,900 6,404,588
Merck & Co., Inc..................................... 79,600 10,646,500
Mylan Laboratories, Inc.............................. 392,800 11,808,550
PacifiCare Health Systems, Class B (a)............... 337,500 29,826,563
Pharmacia & Upjohn, Inc.............................. 364,300 16,803,338
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
===============================================================================
Security Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Healthcare (Continued)
Rhodia, SA - ADR (France) (a)........................ 110,100 $ 3,000,225
Rhone-Poulenc, SA, Warrants - ADR (France) (a)....... 248,000 1,581,000
Rhone-Poulenc, SA, Class A - ADR (France)............ 359,300 20,188,169
SmithKline Beecham Plc. - ADR (United Kingdom)....... 195,300 11,815,650
St. Jude Medical, Inc................................ 248,700 9,155,269
Watson Pharmaceuticals, Inc. (a)..................... 250,200 11,681,213
--------------
175,502,090
--------------
Producer Manufacturing 4.6%
AGCO Corp............................................ 152,900 3,144,006
Allied Signal, Inc................................... 334,600 14,847,865
Flowserve Corp....................................... 170,900 4,208,413
Fluor Corp........................................... 144,000 7,344,000
Ingersoll Rand Co.................................... 375,400 16,541,062
Philips Electronics NV - ADR (Netherlands)........... 217,400 18,479,000
USA Waste Services, Inc. (a)......................... 296,800 14,654,500
Waste Management, Inc................................ 283,100 9,908,500
--------------
89,127,346
--------------
Raw Materials/Processing Industries 2.4%
Airgas, Inc. (a)..................................... 118,100 1,697,688
BetzDearborn, Inc.................................... 107,900 4,464,363
Boise Cascade Corp................................... 137,500 4,503,125
Crown Cork & Seal Co., Inc........................... 217,200 10,317,000
Fort James Corp...................................... 154,900 6,893,050
Fresenius National Med Care, Inc., Class D -
Preferred (a)...................................... 12,000 780
Imperial Chemical Industries Plc. - ADR
(United Kingdom)................................... 153,100 9,874,950
Raychem Corp......................................... 227,300 6,719,556
Stone Container Corp................................. 198,700 3,104,688
--------------
47,575,200
--------------
Technology 6.8%
Alcatel Alsthom CGE - ADR (France)................... 620,900 25,262,869
BMC Software, Inc. (a)............................... 192,800 10,013,550
Computer Associates International, Inc............... 142,500 7,917,656
</TABLE>
11 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
===============================================================================
Security Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Technology (Continued)
First Data Corp................................... 261,100 $ 8,697,894
International Business Machines Corp.............. 222,000 25,488,375
International Rectifier Corp. (a)................. 145,500 1,236,750
Micron Technology, Inc............................ 135,900 3,372,019
Microsoft Corp. - Convertible Preferred........... 85,000 8,075,000
Quantum Corp. (a)................................. 278,000 5,768,500
Texas Instruments, Inc............................ 180,100 10,502,081
VLSI Technology, Inc. (a)......................... 511,300 8,580,253
Xerox Corp........................................ 131,800 13,394,175
Xilinx, Inc. (a).................................. 164,900 5,606,600
--------------
133,915,722
--------------
Transportation 0.8%
Canadian National Railway Co...................... 277,100 14,720,938
--------------
Utilities 10.7%
AirTouch Communications, Inc. (a)................. 60,400 3,529,625
BEC Energy........................................ 421,100 17,475,650
BellSouth Corp.................................... 249,500 16,747,688
Cincinnati Bell, Inc.............................. 271,000 7,757,375
Consolidated Edison, Inc.......................... 471,600 21,723,075
Edison International.............................. 448,400 13,255,825
Entergy Corp...................................... 19,300 554,875
FPL Group, Inc.................................... 209,400 13,192,200
GPU, Inc.......................................... 403,700 15,264,906
GTE Corp.......................................... 200,200 11,136,125
Niagara Mohawk Power Corp......................... 1,009,600 15,080,900
Northeast Utilities............................... 1,458,900 24,710,119
P G & E Corp...................................... 405,700 12,804,906
SBC Communications, Inc........................... 116,300 4,652,000
Sprint Corp....................................... 145,700 10,271,850
U.S. WEST Communications Group.................... 453,300 21,305,100
--------------
209,462,219
--------------
Total Common and Preferred Stocks 64.2%...... 1,255,754,522
--------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corporate Obligations 7.4%
Consumer Distribution 0.3%
$ 6,000 Gruma SA De Cv (Mexico), 144A (b)...... 7.625% 10/15/07 $ 5,751,600
-----------
Consumer Durables 0.5%
3,000 Ford Motor Co. ........................ 7.250 10/01/08 3,232,500
3,000 Ford Motor Co. Delaware Note........... 9.000 09/15/01 3,265,800
3,000 General Motors Corp. .................. 7.000 06/15/03 3,119,700
-----------
9,618,000
-----------
Consumer Services 1.1%
10,000 Clear Channel Communications........... 6.625 06/15/08 10,005,000
10,000 Cox Communications, Inc. .............. 7.250 11/15/15 10,736,000
-----------
20,741,000
-----------
Energy 1.1%
5,000 Enron Corp. ........................... 9.125 04/01/03 5,568,000
4,000 Occidental Petroleum Corp. ............ 10.125 11/15/01 4,478,960
2,500 Texaco Capital, Inc. .................. 8.250 10/01/06 2,868,750
5,500 Texas Eastern Transmission Corp. ...... 8.250 10/15/04 6,059,350
2,000 Western Atlas, Inc. ................... 7.875 06/15/04 2,170,400
-----------
21,145,460
-----------
Finance 0.1%
2,000 General Electric Capital Corp. ........ 8.900 09/15/04 2,287,200
-----------
Producer Manufacturing 0.1%
1,500 Reliance Electric Co. ................. 6.800 04/15/03 1,546,943
-----------
Raw Materials/Processing Industries 1.4%
5,000 Crown Cork & Seal Finance Plc. ........ 7.000 12/15/06 5,187,500
5,000 Crown Cork & Seal, Inc. ............... 8.375 01/15/05 5,537,900
5,000 Georgia Pacific Corp. ................. 9.500 05/15/22 5,740,500
10,000 ICI North America, Inc. ............... 8.875 11/15/06 11,571,000
-----------
28,036,900
-----------
Retail 0.2%
4,000 May Department Stores Co. ............. 8.375 08/01/24 4,553,600
-----------
</TABLE>
13 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
================================================================================================
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Technology 0.7%
$ 4,000 Philips Electronics NV (Netherlands) 7.750% 04/15/04 $ 4,296,400
10,000 Raytheon Co..................................... 6.750 08/15/07 10,301,000
------------
14,597,400
------------
Transportation 0.3%
5,000 Norfolk Southern Corp........................... 7.350 05/15/07 5,382,500
------------
Utilities 1.6%
5,000 360 Communications Co........................... 7.125 03/01/03 5,189,500
10,000 Century Telephone Enterprises, Inc.............. 6.300 01/15/08 9,898,000
4,000 Compania De Telocomunicaciones (Chile).......... 7.625 07/15/06 4,004,000
1,000 Tennessee Valley Authority, Series G............ 8.625 11/15/29 1,139,900
10,000 Worldcom, Inc................................... 7.750 04/01/07 10,846,800
------------
31,078,200
------------
Total Corporate Obligations 7.4%................................ 144,738,803
------------
Convertible Corporate Obligations 8.6%
Consumer Durables 0.7%
- ---------------------------------------------------------------------------------------------------------------------
26,000 Deutsche Bank Finance Netherlands, 144A
(Convertible into 134,550 Daimler Benz
common shares) (b).............................. * 02/12/17 14,495,000
------------
Consumer Services 1.5%
17,000 ADT Operations, Inc., LYON
(Convertible into 461,992
Tyco International Ltd. common shares).......... * 07/06/10 28,602,500
------------
Finance 2.5%
5,000 Aegon NV, 144A (Convertible into 360,000
common shares) (b).............................. 4.750 11/01/04 31,000,000
8,160 Berkshire Hathaway, Inc. (Convertible into 244,121
Travelers Group, Inc. common shares)............ 1.000 12/03/01 14,769,600
STRYPES Merrill Lynch & Co., Inc., 94,500 shares
(Convertible into 77,452 Cox Communications,
Inc. common shares)............................. 6.000 06/01/99 3,791,812
-------------
49,561,412
-------------
</TABLE>
14 See Notes to Financial Statement
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
==========================================================================================
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Healthcare 1.6%
$ 12,000 Alza Corp., LYON (Convertible
into 155,844 common shares)............ * 07/14/14 $ 7,050,000
43,500 Roche Holdings, Inc., LYON
(Convertible into 206,347
common shares)......................... * 04/20/10 24,903,750
--------------
31,953,750
--------------
Pharmaceuticals 0.2%
2,090 Sandoz, Ltd. 144A (Convertible
into 1,958 common shares) (b).......... 2.000% 10/06/02 3,310,038
--------------
Producer Manufacturing 0.4%
8,000 WMX Technologies, Inc. (Convertible
into 151,252 Waste Management, Inc.
common shares)......................... 2.000 01/24/05 7,690,000
--------------
Raw Materials/Processing
Industries 1.0%
18,401 APP Finance VII, 144A (Convertible
into 1,066,724 common shares) (b)...... 3.500 04/30/03 14,858,808
7,500 RPM Convertibles, Inc., LYON
(Convertible into 228,902 Asia
Pulp & Paper Co. Ltd. common
shares)................................ * 09/30/12 3,918,750
--------------
18,777,558
--------------
Technology 0.7%
24,000 Hewlett Packard Co., LYON, 144A
(Convertible into 130,320 common
shares) (b)............................ * 10/14/17 12,840,000
--------------
Total Convertible Corporate
Obligations 8.6%........................................ 167,230,258
--------------
United States Obligations 9.6%
10,000 United States Treasury Notes........... 6.125 08/15/07 10,409,900
90,000 United States Treasury Notes........... 6.250 10/31/01 91,834,200
12,000 United States Treasury Notes........... 6.375 07/15/99 12,107,760
68,000 United States Treasury Notes........... 6.875 05/15/06 73,668,480
--------------
Total United States Obligations......................... 188,020,340
--------------
Total Long-Term Investments 89.8%
(Cost $1,396,463,761)................................................. 1,755,743,923
--------------
</TABLE>
15 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
==============================================================================================================================
Description Market Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Short-Term Investments 9.5%
Commercial Paper 1.0%
General Electric Capital Corp. ($20,000,000 par, yielding 6.254%, 07/01/98 maturity).......................... $ 19,996,527
--------------
Repurchase Agreements 2.9%
BA Securities ($31,810,000 par, collateralized by U.S. Government obligations
in a pooled cash account, dated 06/30/98, to be sold on 07/01/98 at $31,815,346).............................. 31,810,000
DLJ Mortgage Acceptance Corp. ($7,173,000 par, collateralized by U.S. Government
obligations in a pooled cash account, dated 06/30/98, to be sold on 07/01/98
at $7,174,096)................................................................................................ 7,173,000
Swiss Bk Corp ($17,105,000 par, collateralized by U.S. Government obligations in
a pooled cash account, dated 06/30/98, to be sold on 07/01/98 at $17,107,756)................................. 17,105,000
--------------
Total Repurchase Agreements................................................................................... 56,088,000
--------------
United States Agencies 5.6%
Federal Home Loan Mortgage Discount Notes
($15,000,000 par, yielding 5.413%, 07/02/98 maturity)......................................................... 14,995,583
Federal Home Loan Mortgage Discount Notes
($20,000,000 par, yielding 5.444%, 07/17/98 maturity)......................................................... 19,949,094
Federal Home Loan Mortgage Discount Notes
($25,000,000 par, yielding 5.482%, 07/31/98 maturity)......................................................... 24,882,888
Federal Home Loan Mortgage Discount Notes
($20,000,000 par, yielding 5.486%, 08/04/98 maturity)......................................................... 19,894,221
Federal National Mortgage Association Discount Notes
($30,675,000 par, yielding 5.482%, 07/15/98 maturity)......................................................... 30,605,214
--------------
Total United States Agencies.................................................................................. 110,327,000
--------------
Total Short-Term Investments
(Cost $186,411,527)......................................................................................... 186,411,527
--------------
Total Investments 99.3%
(Cost $1,582,875,288)....................................................................................... 1,942,155,450
--------------
Other Assets in Excess of Other Liabilities 0.7%.............................................................. 13,893,006
--------------
Net Assets 100.0%............................................................................................. $1,956,048,456
==============
</TABLE>
* Zero coupon bond
(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 only in
transactions exempt from registration which are normally those transactions
with qualified institutional buyers.
LYON - Liquid yield option note.
PRIDES - Preferred redeemable interest dividend equity security, traded in
shares.
STRYPES - Structured yield product exchangeable for stock, traded in shares.
16 See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Assets:
<S> <C>
Total Investments (Cost $1,582,875,288).......................... $1,942,155,450
Cash............................................................. 3,855
Receivables:
Investments Sold............................................... 10,348,944
Fund Shares Sold............................................... 5,619,349
Interest....................................................... 4,882,184
Dividends...................................................... 1,710,895
Other............................................................ 164,368
--------------
Total Assets................................................ 1,964,885,045
--------------
Liabilities:
Payables:
Fund Shares Repurchased........................................ 4,054,262
Distributor and Affiliates..................................... 1,934,694
Investments Purchased.......................................... 908,544
Investment Advisory Fee........................................ 580,349
Variation Margin on Futures.................................... 488,750
Income Distributions........................................... 291,343
Accrued Expenses................................................. 411,889
Trustees' Deferred Compensation and Retirement Plans............. 166,758
--------------
Total Liabilities........................................... 8,836,589
--------------
Net Assets....................................................... $1,956,048,456
==============
Net Assets Consist of:
Capital.......................................................... $1,510,938,369
Net Unrealized Appreciation...................................... 360,244,794
Accumulated Net Realized Gain.................................... 79,155,504
Accumulated Undistributed Net Investment Income.................. 5,709,789
--------------
Net Assets....................................................... $1,956,048,456
==============
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $774,473,973 and 96,424,358 shares of
beneficial interest issued and outstanding)................. $ 8.03
Maximum sales charge (5.75%* of offering price)............. .49
--------------
Maximum offering price to public............................ $ 8.52
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $1,092,958,631 and 136,892,279 shares of
beneficial interest issued and outstanding)................. $ 7.98
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $88,615,852 and 11,098,364 shares of
beneficial interest issued and outstanding)................. $ 7.98
==============
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
17 See Notes to Financial Statements
<PAGE>
Statement of Operations
For the Six Months Ended June 30, 1998 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest......................................................... $ 16,942,823
Dividends........................................................ 11,076,508
------------
Total Income................................................ 28,019,331
------------
Expenses:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $856,543, $5,010,684 and $410,137, respectively). 6,277,364
Investment Advisory Fee.......................................... 3,315,179
Shareholder Services............................................. 1,418,338
Custody.......................................................... 46,624
Trustees' Fees and Expenses...................................... 27,141
Legal............................................................ 22,444
Other............................................................ 436,829
------------
Total Expenses.............................................. 11,543,919
------------
Net Investment Income............................................ $ 16,475,412
============
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments................................................. $ 72,357,840
Futures..................................................... 8,400,150
------------
Net Realized Gain................................................ 80,757,990
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period..................................... 245,432,645
------------
End of the Period:
Investments................................................. 359,280,162
Futures..................................................... 964,632
------------
360,244,794
------------
Net Unrealized Appreciation During the Period.................... 114,812,149
------------
Net Realized and Unrealized Gain................................. $195,570,139
============
Net Increase in Net Assets From Operations....................... $212,045,551
============
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
For the Six Months Ended June 30, 1998 and
the Year Ended December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
===================================================================================================
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income....................................... $ 16,475,412 $ 23,048,492
Net Realized Gain........................................... 80,757,990 184,609,912
Net Unrealized Appreciation During the Period............... 114,812,149 85,825,819
-------------- --------------
Change in Net Assets from Operations.................... 212,045,551 293,484,223
-------------- --------------
Distributions from Net Investment Income.................... (12,831,547) (24,018,109)
Distributions in Excess of Net Investment Income............ -0- (2,400,068)
-------------- --------------
Distributions from and in Excess of Net Investment Income*.. (12,831,547) (26,418,177)
Distributions from Net Realized Gain*....................... (17,794,426) (181,941,214)
-------------- --------------
Total Distributions..................................... (30,625,973) (208,359,391)
-------------- --------------
Net Change in Net Assets
from Investment Activities................................ 181,419,578 85,124,832
-------------- --------------
From Capital Transactions
Proceeds from Shares Sold................................... 459,283,232 436,926,312
Value Received from Shares Issued in Merger................. -0- 21,732,117
Net Asset Value of Shares Issued Through
Dividend Reinvestment..................................... 27,728,944 188,548,998
Cost of Shares Repurchased.................................. (335,038,624) (269,846,748)
-------------- --------------
Net Change in Net Assets
from Capital Transactions................................. 151,973,552 377,360,679
-------------- --------------
Total Increase in Net Assets................................ 333,393,130 462,485,511
Net Assets:
Beginning of the Period..................................... 1,622,655,326 1,160,169,815
-------------- --------------
End of the Period (Including accumulated undistributed net
investment income of $5,709,789 and $2,065,924
respectively)............................................. $1,956,048,456 $1,622,655,326
============== ==============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended
*Distributions by Class June 30, 1998 December 31, 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of Net Investment Income:
Class A Shares.......................................... $ (6,499,567) $ (12,849,167)
Class B Shares.......................................... (5,854,247) (12,509,687)
Class C Shares.......................................... (477,733) (1,059,323)
-------------- --------------
$ (12,831,547) $ (26,418,177)
============== ==============
Distributions from Net Realized Gain:
Class A Shares.......................................... $ (7,022,502) $ (71,711,304)
Class B Shares.......................................... (9,950,358) (101,660,017)
Class C Shares.......................................... (821,566) (8,569,893)
-------------- --------------
$ (17,794,426) $ (181,941,214)
============== ==============
</TABLE>
19 See Notes to Financial Statements
<PAGE>
Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended ----------------------------------------
Class A Shares June 30, 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.............. $ 7.242 $ 6.740 $ 6.31 $ 5.16 $ 5.55
------- ------- ------- ------- -------
Net Investment Income............................... .085 .152 .158 .20 .21
Net Realized and Unrealized Gain/Loss............... .852 1.435 .796 1.458 (.317)
------- ------- ------- ------- -------
Total from Investment Operations...................... .937 1.587 .954 1.658 (.107)
------- ------- ------- ------- -------
Less:
Distributions from and in Excess
of Net Investment Income.......................... .070 .168 .156 .188 .1855
Distributions from Net Realized Gain................ .077 .917 .368 .32 .0975
------- ------- ------- ------- -------
Total Distributions................................... .147 1.085 .524 .508 .283
------- ------- ------- ------- -------
Net Asset Value, End of the Period.................... $ 8.032 $ 7.242 $ 6.740 $ 6.31 $ 5.16
======= ======= ======= ======= =======
Total Return (a)...................................... 12.99%* 24.13% 15.55% 32.57% (1.98%)
Net Assets at End of the Period (In millions)......... $ 774.5 $ 638.1 $ 471.8 $ 349.9 $ 240.5
Ratio of Expenses to Average Net Assets (b)........... .83% .86% .97% .95% 1.02%
Ratio of Net Investment Income to
Average Net Assets (b).............................. 2.30% 2.09% 2.50% 3.43% 3.60%
Portfolio Turnover.................................... 32%* 86% 99% 92% 92%
</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 December 31, 1993 through 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%.
20 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended ----------------------------------------
Class B Shares June 30, 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.............. $ 7.203 $ 6.713 $ 6.30 $ 5.16 $ 5.55
-------- ------- ------- ------- -------
Net Investment Income............................... .058 .100 .113 .15 .13
Net Realized and Unrealized Gain/Loss............... .844 1.423 .784 1.458 (.277)
-------- ------- ------- ------- -------
Total from Investment Operations...................... .902 1.523 .897 1.608 (.147)
-------- ------- ------- ------- -------
Less:
Distributions from and in Excess
of Net Investment Income............................ .044 .116 .116 .148 .1455
Distributions from Net Realized Gain................ .077 .917 .368 .32 .0975
-------- ------- ------- ------- -------
Total Distributions................................... .121 1.033 .484 .468 .243
-------- ------- ------- ------- -------
Net Asset Value, End of the Period.................... $ 7.984 $ 7.203 $ 6.713 $ 6.30 $ 5.16
======== ======= ======= ======= =======
Total Return (a)...................................... 12.55%* 23.23% 14.56% 31.51 (2.70%)
Net Assets at End of the Period (In millions)......... $1,092.9 $ 908.7 $ 633.3 $ 408.9 $ 242.0
Ratio of Expenses to Average Net Assets (b)........... 1.59% 1.64% 1.74% 1.75% 1.82%
Ratio of Net Investment Income to
Average Net Assets (b).............................. 1.54% 1.32% 1.74% 2.62% 2.82%
Portfolio Turnover.................................... 32%* 86% 99% 92% 92%
</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 December 31, 1993 through 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%.
21 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended ----------------------------------------
Class C Shares June 30, 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.............. $ 7.204 $ 6.713 $ 6.30 $ 5.16 $ 5.55
------- ------- ------- ------- -------
Net Investment Income............................... .058 .100 .113 .15 .14
Net Realized and Unrealized Gain/Loss............... .843 1.424 .784 1.458 (.287)
------- ------- ------- ------- -------
Total from Investment Operations...................... .901 1.524 .897 1.608 (.147)
------- ------- ------- ------- -------
Less:
Distributions from and in Excess
of Net Investment Income............................ .044 .116 .116 .148 .1455
Distributions from Net Realized Gain................ .077 .917 .368 .32 .0975
------- ------- ------- ------- -------
Total Distributions................................... .121 1.033 .484 .468 .243
------- ------- ------- ------- -------
Net Asset Value, End of the Period.................... $ 7.984 $ 7.204 $ 6.713 $ 6.30 $ 5.16
======= ======= ======= ======= =======
Total Return (a)...................................... 12.69%* 23.23% 14.56% 31.51% (2.70%)
Net Assets at End of the Period (In millions)......... $ 88.6 $ 75.8 $ 55.2 $ 38.3 $ 26.9
Ratio of Expenses to Average Net Assets (b)........... 1.59% 1.64% 1.74% 1.76% 1.82%
Ratio of Net Investment Income to
Average Net Assets (b).............................. 1.54% 1.32% 1.73% 2.63% 2.83%
Portfolio Turnover.................................... 32%* 86% 99% 92% 92%
</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 period ended December 31, 1993 and the years ended December 31,
1994 through 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%.
22 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
June 30, 1998 (Unaudited)
================================================================================
1. Significant Accounting Policies
Van Kampen Equity Income Fund, formerly known as Van Kampen American Capital
Equity Income 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 the highest possible income consistent with safety of principal by
investing primarily in income-producing equity instruments and other debt
securities issued by a wide group of companies in many different industries. The
Fund commenced investment operations on August 3, 1960. The distribution of the
Fund's Class B and Class C shares commenced on May 1, 1992 and July 6, 1993,
respectively.
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 sale price is not
available are valued at the mean of the bid and asked prices. Fixed income
investments are stated at value using market quotations. 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 purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At June 30, 1998, there were no when
issued or delayed delivery purchase commitments.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its
affiliates, the daily
23
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1998 (Unaudited)
================================================================================
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 security 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. Original issue discounts 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. Federal Income Taxes-It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At June 30, 1998, for federal income tax purposes, cost of long- and short-
term investments is $1,583,374,425, the aggregate gross unrealized appreciation
is $386,425,364 and the aggregate gross unrealized depreciation is $27,644,339,
resulting in net unrealized appreciation on investments of $358,781,025.
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of the deferral of losses for tax purposes
resulting from wash sales.
E. Distribution of Income and Gains-The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains and gains on option and futures
transactions. All short-term capital gains and a portion of option and futures
gains are included in ordinary income for tax purposes.
24
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1998 (Unaudited)
================================================================================
2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets % Per Annum
================================================================================
<S> <C>
First $150 million................................................... .50 of 1%
Next $100 million.................................................... .45 of 1%
Next $100 million.................................................... .40 of 1%
Over $350 million.................................................... .35 of 1%
</TABLE>
For the six months ended June 30, 1998, the Fund recognized expenses of
approximately $22,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended June 30, 1998, the Fund recognized expenses of
approximately $171,400 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the six months ended June 30,
1998, the Fund recognized expenses of approximately $1,084,700. Beginning in
1998, the transfer agency fees are determined through negotiations with the
Fund's Board of Trustees and are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
At June 30, 1998, Van Kampen owned 223 shares of Class A and 224 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.
25
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1998 (Unaudited)
===============================================================================
At June 30, 1998, capital aggregated $574,055,362, $867,693,107 and
$69,189,900 for Classes A, B, and C, respectively. For the six months ended June
30, 1998, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
==========================================================
<S> <C> <C>
Sales:
Class A....................... 38,475,778 $ 301,005,988
Class B....................... 18,783,750 144,602,230
Class C....................... 1,785,699 13,675,014
---------- -------------
Total Sales................... 59,045,227 $ 459,283,232
========== =============
Dividend Reinvestment:
Class A....................... 1,565,446 $ 12,280,519
Class B....................... 1,842,650 14,364,576
Class C....................... 138,889 1,083,849
---------- -------------
Total Dividend Reinvestment... 3,546,985 $ 27,728,944
========== =============
Repurchases:
Class A....................... (31,721,093) $(248,677,088)
Class B....................... (9,888,509) (76,060,411)
Class C....................... (1,354,901) (10,301,125)
---------- -------------
Total Repurchases............. (42,964,503) $(335,038,624)
========== =============
</TABLE>
At December 31, 1997, capital aggregated $509,445,943, $784,786,712 and
$64,732,162 for Classes A, B, and C, respectively. For the year ended December
31, 1997, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
==========================================================
<S> <C> <C>
Sales:
Class A..................... 25,583,186 $191,217,108
Class B..................... 29,915,227 221,594,137
Class C..................... 3,239,213 24,115,067
---------- ------------
Total Sales................... 58,737,626 $436,926,312
========== ============
</TABLE>
26
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1998 (Unaudited)
=============================================================
<TABLE>
<CAPTION>
Shares Value
=============================================================
<S> <C> <C>
Shares Issued in Merger:
Class A........................ 1,531,079 $ 10,227,602
Class B........................ 1,542,761 10,259,360
Class C........................ 187,242 1,245,155
---------- -------------
Total Shares Issued in Merger.... 3,261,082 $ 21,732,117
========== =============
Dividend Reinvestment:
Class A........................ 10,787,829 $ 77,160,579
Class B........................ 14,561,001 103,558,871
Class C........................ 1,100,953 7,829,548
---------- -------------
Total Dividend Reinvestment...... 26,449,783 $ 188,548,998
========== =============
Repurchases:
Class A........................(19,786,873) $(147,745,099)
Class B........................(14,197,582) (105,642,498)
Class C........................ (2,216,230) (16,459,151)
---------- -----------
Total Repurchases................(36,200,685) $(269,846,748)
========== ===========
</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 will be imposed on most redemptions made within five years of
the purchase for Class B and one year of the purchase for Class C as detailed in
the following schedule.
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
-------------------
Year of Redemption Class B Class C
======================================================
<S> <C> <C>
First.............................. 5.00% 1.00%
Second............................. 4.00% None
Third.............................. 3.00% None
Fourth............................. 2.50% None
Fifth.............................. 1.50% None
Sixth and Thereafter............... None None
- ------------------------------------------------------
</TABLE>
For the six months ended June 30, 1998, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $345,200 and CDSC on redeemed shares of approximately $706,000.
Sales charges do not represent expenses of the Fund.
27
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1998 (Unaudited)
================================================================================
4. Investment Transactions
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $609,918,647 and $530,197,137,
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
exercising a call option contract or 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 the option or futures
contract.
Summarized below are the specific types of derivative financial instruments
used by the Fund.
A. Option Contracts--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Fund
to provide the return of an index without purchasing all of the securities
underlying the index or as a substitute for purchasing or selling specific
securities.
B. Futures Contracts--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). The potential risk of loss
associated with a futures contract could be in excess of the variation margin
reflected on the Statement of Assets and Liabilities.
28
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1998 (Unaudited)
================================================================================
Transactions in futures contracts for the six months ended June 30, 1998,
were as follows:
<TABLE>
<CAPTION>
Contracts
================================================================================
<S> <C>
Outstanding at December 31, 1997........................................ 134
Futures Opened.......................................................... 695
Futures Closed.......................................................... (599)
----
Outstanding at June 30, 1998............................................ 230
====
</TABLE>
The futures contracts outstanding at June 30, 1998, and the description and
unrealized appreciation are as follows:
<TABLE>
<CAPTION>
Unrealized
Contracts Appreciation
================================================================================
<S> <C> <C>
Long Contracts -- September 1998 S&P 500 Index Futures
(Current Notional Value of $285,750 per contract)..... 230 $964,632
========= ============
</TABLE>
6. Distribution and Service Plans
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the six months ended June 30, 1998, are payments retained by Van Kampen of
approximately $3,217,400.
29
<PAGE>
Van Kampen Funds
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
U.S. Real Estate
Utility
Value
International/Global
Asian Growth
Emerging Markets
Global Equity
Global Equity Allocation
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation and
Senior Loan Funds
Prime Rate Income Trust
Reserve
Senior Floating Rate
Tax Free Money
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
. visit our web site at www.van-kampen.com--to view prospectuses, select
Investors' Place, then Download a Prospectus
. call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central
time (Telecommunications Device for the Deaf users, call 1-800-421-2833)
. e-mail us by visiting www.van-kampen.com and selecting Investors' Place
30
<PAGE>
Van Kampen Equity Income Fund
Board of Trustees
J. Miles Branagan
Richard M. DeMartini*
Linda Hutton Heagy
R. Craig Kennedy
Jack E. Nelson
Don G. Powell*
Phillip B. Rooney
Fernando Sisto
Wayne W. Whalen*-Chairman
Officers
Dennis J. McDonnell*
President
Ronald A. Nyberg*
Vice President and Secretary
Edward C. Wood, III*
Vice President and Chief Financial Officer
Curtis W. Morell*
Vice President and Chief Accounting Officer
John L. Sullivan*
Treasurer
Tanya M. Loden*
Controller
Peter W. Hegel*
Paul R. Wolkenberg*
Vice Presidents
Investment Adviser
Van Kampen
Asset Management Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Distributor
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Shareholder Servicing Agent
Van Kampen Investor
Services Inc.
P.O. Box 418256
Kansas City, Missouri 64141-9256
Custodian
State Street Bank
and Trust Company
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Independent Accountants
PricewaterhouseCoopers LLP
200 E. Randolph Drive
Chicago, IL 60601
* "Interested" persons of the Fund, as defined in the
Investment Company Act of 1940.
(C) Van Kampen Funds Inc., 1998
All rights reserved.
SM denotes a service mark of
Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After December 31, 1998, the report if used with
prospective investors, must be accompanied by a quarterly performance update.
31
<PAGE>
Van Kampen Equity Income Fund
This Page Intentionally Left Blank
32
<PAGE>
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> EQUITY INCOME CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,582,875,288 <F1>
<INVESTMENTS-AT-VALUE> 1,942,155,450 <F1>
<RECEIVABLES> 22,561,372 <F1>
<ASSETS-OTHER> 164,368 <F1>
<OTHER-ITEMS-ASSETS> 3,855 <F1>
<TOTAL-ASSETS> 1,964,885,045 <F1>
<PAYABLE-FOR-SECURITIES> 908,544 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 7,928,045 <F1>
<TOTAL-LIABILITIES> 8,836,589 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 574,055,362
<SHARES-COMMON-STOCK> 96,424,358
<SHARES-COMMON-PRIOR> 88,104,227
<ACCUMULATED-NII-CURRENT> 5,709,789 <F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> 79,155,504 <F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 360,244,794 <F1>
<NET-ASSETS> 774,473,973
<DIVIDEND-INCOME> 11,076,508 <F1>
<INTEREST-INCOME> 16,942,823 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (11,543,919)<F1>
<NET-INVESTMENT-INCOME> 16,475,412 <F1>
<REALIZED-GAINS-CURRENT> 80,757,990 <F1>
<APPREC-INCREASE-CURRENT> 114,812,149 <F1>
<NET-CHANGE-FROM-OPS> 212,045,551 <F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> (6,499,567)
<DISTRIBUTIONS-OF-GAINS> (7,022,502)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 38,475,778
<NUMBER-OF-SHARES-REDEEMED> (31,721,093)
<SHARES-REINVESTED> 1,565,446
<NET-CHANGE-IN-ASSETS> 136,381,860
<ACCUMULATED-NII-PRIOR> 2,065,924 <F1>
<ACCUMULATED-GAINS-PRIOR> 16,191,940 <F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 3,315,179 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 11,543,919 <F1>
<AVERAGE-NET-ASSETS> 711,510,351
<PER-SHARE-NAV-BEGIN> 7.242
<PER-SHARE-NII> 0.085
<PER-SHARE-GAIN-APPREC> 0.852
<PER-SHARE-DIVIDEND> (0.070)
<PER-SHARE-DISTRIBUTIONS> (0.077)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 8.032
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
<FN>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> EQUITY INCOME CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,582,875,288 <F1>
<INVESTMENTS-AT-VALUE> 1,942,155,450 <F1>
<RECEIVABLES> 22,561,372 <F1>
<ASSETS-OTHER> 164,368 <F1>
<OTHER-ITEMS-ASSETS> 3,855 <F1>
<TOTAL-ASSETS> 1,964,885,045 <F1>
<PAYABLE-FOR-SECURITIES> 908,544 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 7,928,045 <F1>
<TOTAL-LIABILITIES> 8,836,589 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 867,693,107
<SHARES-COMMON-STOCK> 136,892,279
<SHARES-COMMON-PRIOR> 126,154,388
<ACCUMULATED-NII-CURRENT> 5,709,789 <F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> 79,155,504 <F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 360,244,794 <F1>
<NET-ASSETS> 1,092,958,631
<DIVIDEND-INCOME> 11,076,508 <F1>
<INTEREST-INCOME> 16,942,823 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (11,543,919)<F1>
<NET-INVESTMENT-INCOME> 16,475,412 <F1>
<REALIZED-GAINS-CURRENT> 80,757,990 <F1>
<APPREC-INCREASE-CURRENT> 114,812,149 <F1>
<NET-CHANGE-FROM-OPS> 212,045,551 <F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> (5,854,247)
<DISTRIBUTIONS-OF-GAINS> (9,950,358)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,783,750
<NUMBER-OF-SHARES-REDEEMED> (9,888,509)
<SHARES-REINVESTED> 1,842,650
<NET-CHANGE-IN-ASSETS> 184,243,577
<ACCUMULATED-NII-PRIOR> 2,065,924 <F1>
<ACCUMULATED-GAINS-PRIOR> 16,191,940 <F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 3,315,179 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 11,543,919 <F1>
<AVERAGE-NET-ASSETS> 1,011,641,757
<PER-SHARE-NAV-BEGIN> 7.203
<PER-SHARE-NII> 0.058
<PER-SHARE-GAIN-APPREC> 0.844
<PER-SHARE-DIVIDEND> (0.044)
<PER-SHARE-DISTRIBUTIONS> (0.077)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 7.984
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
<FN>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> EQUITY INCOME CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,582,875,288 <F1>
<INVESTMENTS-AT-VALUE> 1,942,155,450 <F1>
<RECEIVABLES> 22,561,372 <F1>
<ASSETS-OTHER> 164,368 <F1>
<OTHER-ITEMS-ASSETS> 3,855 <F1>
<TOTAL-ASSETS> 1,964,885,045 <F1>
<PAYABLE-FOR-SECURITIES> 908,544 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 7,928,045 <F1>
<TOTAL-LIABILITIES> 8,836,589 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 69,189,900
<SHARES-COMMON-STOCK> 11,098,364
<SHARES-COMMON-PRIOR> 10,528,677
<ACCUMULATED-NII-CURRENT> 5,709,789 <F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> 79,155,504 <F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 360,244,794 <F1>
<NET-ASSETS> 88,615,852
<DIVIDEND-INCOME> 11,076,508 <F1>
<INTEREST-INCOME> 16,942,823 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (11,543,919)<F1>
<NET-INVESTMENT-INCOME> 16,475,412 <F1>
<REALIZED-GAINS-CURRENT> 80,757,990 <F1>
<APPREC-INCREASE-CURRENT> 114,812,149 <F1>
<NET-CHANGE-FROM-OPS> 212,045,551 <F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> (477,733)
<DISTRIBUTIONS-OF-GAINS> (821,566)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,785,699
<NUMBER-OF-SHARES-REDEEMED> (1,354,901)
<SHARES-REINVESTED> 138,889
<NET-CHANGE-IN-ASSETS> 12,767,693
<ACCUMULATED-NII-PRIOR> 2,065,924 <F1>
<ACCUMULATED-GAINS-PRIOR> 16,191,940 <F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 3,315,179 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 11,543,919 <F1>
<AVERAGE-NET-ASSETS> 82,806,206
<PER-SHARE-NAV-BEGIN> 7.204
<PER-SHARE-NII> 0.058
<PER-SHARE-GAIN-APPREC> 0.843
<PER-SHARE-DIVIDEND> (0.044)
<PER-SHARE-DISTRIBUTIONS> (0.077)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 7.984
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
<FN>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</FN>
</TABLE>