<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 8
Portfolio Highlights............................. 9
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 18
Statement of Operations.......................... 19
Statement of Changes in Net Assets............... 20
Financial Highlights............................. 21
Notes to Financial Statements.................... 24
</TABLE>
EQI SAR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Asset Management Inc.
[SIG]
Dennis J. McDonnell
President
Van Kampen Asset Management Inc.
1
<PAGE> 3
ECONOMIC SNAPSHOT
The strength of the domestic economy continued to defy expectations in the
first half of 1999, although it finally began to show signs of slowing down.
Strong growth, healthy employment, and low inflation all contributed to the
favorable economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3
percent during the first quarter of 1999, but fell to 2.3 percent in the second
quarter. The first-quarter expansion was fueled by an increase in consumer
spending, which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in
more than 30 years. Throughout the reporting period, unemployment remained low,
the number of jobs grew, and wages rose. The labor market remained especially
tight in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report (CPI). Following this up-tick, the Federal Reserve raised interest
rates 0.25 percent on June 30. Although the Fed had expressed a bias toward a
series of rate increases, May's tame CPI report prompted it to drop this bias
when announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may
continue, bringing the economy back to historically normal growth levels.
Healthy job growth, which has been supporting the consumer confidence and
spending levels, showed signs of faltering toward the end of the reporting
period. However, a renewed optimism for corporate earnings, low unemployment,
and a vibrant housing market should provide some balance against a slower job
growth rate.
INTEREST RATES AND INFLATION
June 30, 1997, through June 30, 1999
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 1997 6.5000 2.3000
6.0000 2.2000
5.5000 2.2000
Sep 1997 6.2500 2.2000
5.7500 2.1000
5.6875 1.8000
Dec 1997 6.5000 1.7000
5.5625 1.6000
5.6250 1.4000
Mar 1998 6.1250 1.4000
5.6250 1.4000
5.6875 1.7000
Jun 1998 6.0000 1.7000
5.5625 1.7000
5.9375 1.6000
Sep 1998 5.7500 1.5000
5.2500 1.5000
4.8750 1.5000
Dec 1998 4.0000 1.6000
4.8125 1.7000
4.8750 1.6000
Mar 1999 5.1250 1.7000
4.9375 2.3000
4.5000 2.1000
Jun 1999 4.0000 2.0000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1999
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)... 6.53% 6.09% 6.09%
Six-month total return(2)................ 0.37% 1.09% 5.09%
One-year total return(2)................. 3.95% 4.50% 8.36%
Five-year average annual total
return(2)................................ 17.88% 18.21% 18.37%
Ten-year average annual total
return(2)................................ 13.99% N/A N/A
Life-of-Fund average annual total
return(2)................................ 11.49% 15.42% 15.84%
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 Comparative Performance section of the current prospectus. An investment
should be made with an understanding of the risks that an investment in equity
securities entails. These include the risk that the financial condition of the
issuers of the securities in the portfolio, or the condition of the stock market
in general, may worsen and therefore, the value of Fund shares may decline. Past
performance does not guarantee future results. Investment return and net asset
value will fluctuate with market conditions. Fund shares, when redeemed, may be
worth more or less than their original cost.
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
<PAGE> 5
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-month period ended June 30, 1999. The team is led by James A. Gilligan,
senior portfolio manager, who has managed the Fund since January 1990 and worked
in the investment industry since 1985. He is joined by Scott Carroll and James
Roeder, portfolio managers, and Stephen L. Boyd, chief investment officer for
equity investments. The following 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 It's been an explosive market. As global growth strengthened, investors
gained confidence in the domestic economy. Fueled by new money, the stock
market soared to record highs, breaking through the 10,000 point ceiling
and pushing past 11,000. However, investors found cause for concern when
interest rates began to creep higher in the second quarter of 1999. These fears
were only heightened when the Fed announced its bias toward tightening
short-term interest rates, which increased market volatility. Calm was restored
in the final hours of the reporting period, as the Fed raised rates by 0.25
percent but indicated that additional increases were unnecessary due to tame
inflation and healthy economic growth.
In the first quarter, the booming stock market created a very challenging
environment for a value-oriented portfolio such as this one, as growth-oriented
investments stole the spotlight. In April, however, investors took note of the
rising economy and turned their attention toward cyclical stocks. Cyclical
stocks tend to perform well in a strong economic environment, and this group
began to outperform large-capitalization growth stocks for the first time in
nearly three years. This change in investor sentiment provided a favorable
environment for the Fund.
Q BASED ON THIS ASSESSMENT, HOW AND WHERE DID YOU FIND INVESTMENTS?
A In our hunt for good value investments, we focused on companies that we
believe are underappreciated by the market but demonstrate a catalyst for
positive change. We might examine a troubled company that's recently come
under new management, or study a sector that has fallen out of favor but
exhibits solid fundamentals for recovery.
For example, in your last report, we described the troubles that had
befallen many financial companies because of economic turmoil overseas. As many
global economies began to recover during the past six months, we revisited the
financial sector and selected several large financial companies that we believed
were in good positions to take advantage of this recovery. We added a position
in BankAmerica, which we felt was less volatile than some of the bigger
money-center banks, and adjusted our positions in
4
<PAGE> 6
Equitable, Citigroup, and Chase Manhattan because of potential volatility. We
also added Lincoln National and Marsh & McLennan, both of which have reasonable
valuations and have recently appointed new chief executive officers.
Q IN WHAT OTHER AREAS WERE YOU SUCCESSFUL IN YOUR SEARCH FOR VALUE?
A We looked for turnaround stories in the technology sector, which
demonstrated the capacity for a strong rebound during the period. We were
especially interested in some of the technology areas that weren't part of
last year's market surge. For example, our position in Adobe Systems was one of
the best performers. We also invested successfully in Motorola and QualComm,
although we eliminated the latter when we believed the stock had reached its
price target. Computer hardware giant International Business Machines (IBM)
continues to be one of the portfolio's largest positions, although our holding
in this company fluctuated based on some variable quarterly earnings reports.
We also studied utilities companies, although this area had a slow start in
the reporting period. One of our largest holdings in this sector, Northeast
Utilities, continued to make strides in resolving its problems in providing
nuclear power. This company also benefited from rate regulation and deregulation
proposals from New Hampshire and Connecticut. We increased our position in
Illinova, taking advantage of the positive news of its merger with Dynergy, a
large energy trading company. We also maintained a position in Niagara Mohawk, a
company that has been plagued by high costs for an extended period of time, but
shows signs of improvement.
In the consumer nondurables sector, we focused our attention on a relatively
new area to the portfolio: beverage companies. These included Anheuser-Busch,
Pepsi Bottling Group, and Whitman, another bottling company. Although we
occasionally moderated our positions in these holdings during the period, we
were attracted to the high volume and attractive pricing of this industry.
Although we might say the same for Philip Morris, which used to be one of our
largest holdings, we reduced that position dramatically. With continuing clouds
of litigation hanging over the company, we were unable to identify a catalyst
for improvement in the stock's price.
Q WERE THERE ANY OTHER DISAPPOINTMENTS IN THE PORTFOLIO?
A One of our largest sector exposures, health care--in particular,
pharmaceutical companies--fell out of favor with investors during this
six-month period. As a result, we decreased our exposure to pharmaceutical
companies and focused on stocks that we believe are best positioned to take
advantage of a recovery in the health-care sector. Because HMOs (health
maintenance organizations) began to see improved performance, the Fund's return
benefited from a significant position in United HealthCare, as well as holdings
in Oxford Health Plans and Aetna.
We also continued to analyze health-care service companies--such as nursing
home provider HCR Manor Care, in which we established a small position. These
companies have come under significant financial pressure because of changes in
the way they are reimbursed for Medicare payments. However, we are optimistic
about their potential for
5
<PAGE> 7
recovery, as they serve a very important role in the industry. We expect to add
to this area if we find additional value opportunities.
In addition to mixed results in health care, the portfolio's allocation to
bonds was a drag on the Fund's return during the period. Due to concerns about
rising interest rates, we decreased the Fund's exposure to the depressed
fixed-income market.
Q TAKING EVERYTHING INTO CONSIDERATION, HOW DID THE FUND PERFORM?
A Although some of our holdings in the health-care sector hurt the Fund's
return, we also enjoyed some impressive gains in the financial and
technology sectors. As a result, the Fund achieved a total return of 6.53
percent(1) (Class A shares at net asset value) for the six-month period ended
June 30, 1999. By comparison, the Standard & Poor's 500 Index returned 12.36
percent, and the Lipper Equity Income Fund Index produced a total return of 9.03
percent for the same period.
The S&P 500 Index is a broad-based index that reflects the general
performance of the stock market, and the Lipper Equity Income Fund Index
reflects the average performance of the largest equity income funds. Keep in
mind that 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. Of course, past performance is no
guarantee of comparable future results. Please refer to the chart and footnotes
on page 3 for additional Fund performance results.
Q WHAT DO YOU SEE HAPPENING IN THE MARKET OVER THE COMING MONTHS?
A We take some reassurance in the fact that inflation is still low and the
economy remains strong. Although these factors support a healthy stock
market, the slow recovery of the bond market gives us reason to maintain a
cautious perspective. We've come to expect market volatility regardless of
strong economic fundamentals, if only because the Dow's current level is so
high. We hope that volatility will initiate investors' return to a broader range
of stocks within the market. In this environment, our bottom-up analysis and
disciplined value criteria may help us uncover fresh investment opportunities.
6
<PAGE> 8
We'll continue to emphasize securities that we feel exhibit potential for
improvement with limited downside risk.
[SIG]
James A. Gilligan
Portfolio Manager
[SIG]
Scott Carroll
Portfolio Comanager
[SIG]
James Roeder
Portfolio Comanager
[SIG]
Stephen L. Boyd
Chief Investment Officer
Equity Investments
7
<PAGE> 9
GLOSSARY OF TERMS
CYCLICAL STOCKS: Stocks within industries where earnings tend to rise quickly
when the economy strengthens and fall quickly when the economy weakens.
Examples of cyclical stocks include housing, automobile, and paper
companies. Noncyclical or defensive stocks are typically less sensitive to
changes in the economy. These include utilities, grocery stores, and
pharmaceutical companies.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a
year to establish monetary policy and monitor the economic pulse of the
United States.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
GROWTH INVESTING: An investment strategy that seeks to identify stocks that tend
to offer greater-than-average earnings growth. Growth stocks typically trade
at higher prices relative to their earnings than value stocks, due to their
higher expected earnings growth.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
MARKET CAPITALIZATION: The size of a company, as measured by the value of its
issued and outstanding stock.
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 general stock market more fully.
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.
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS
VAN KAMPEN EQUITY INCOME FUND
TOP TEN PORTFOLIO HOLDINGS AS OF JUNE 30, 1999*
<TABLE>
<S> <C>
U.S. TREASURY NOTES, 6.250%, 10/31/01....................... 6.3%
SPRINT CAPITAL CORP. is a global communications company
whose operations include long distance, local telephone,
product distribution, and directory publishing.............. 1.9%
INTERNATIONAL BUSINESS MACHINES (IBM) develops,
manufactures, and sells advanced technology processing
products, including computers and microelectronic
technology, software, networking systems, and related
services.................................................... 1.8%
NORTHEAST UTILITIES, an electric utility holding company,
provides electrical service to Connecticut, New Hampshire,
and western Massachusetts................................... 1.6%
EQUITABLE COMPANIES is a financial services company
operating in the insurance, investment management, and
investment banking industries............................... 1.6%
TELEFONOS DE MEXICO provides telecommunications services to
domestic and international telephone user in Mexico......... 1.6%
GTE provides local, long-distance, and wireless telephone
service, as well as internetworking capabilities to both
consumers and large companies............................... 1.5%
TEXAS INSTRUMENTS is a global semiconductor company as well
as a leading designer and supplier of digital signal
processing solutions and analog technologies................ 1.4%
BEC ENERGY, through its wholly owned subsidiary Boston
Edison Company, provides electricity to customers in Boston
and other cities and towns in Eastern Massachusetts......... 1.4%
CONSOLIDATED EDISON, an energy company, supplies electric
service, gas, and steam to customers in New York City and
the surrounding area........................................ 1.4%
</TABLE>
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Utilities 18.80 15.30
Technology 15.70 12.30
Health Care 13.20 14.20
Finance 13.10 13.80
Consumer Non-Durables 7.40 7.50
</TABLE>
* As a percentage of long-term investments
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 68.2%
CONSUMER DISTRIBUTION 1.4%
Federated Department Stores, Inc. (a)............. 370,800 $ 19,629,225
Gap, Inc.......................................... 249,263 12,556,573
--------------
32,185,798
--------------
CONSUMER DURABLES 0.4%
Black & Decker Corp............................... 162,200 10,238,875
--------------
CONSUMER NON-DURABLES 6.7%
Anheuser-Busch Cos., Inc.......................... 229,200 16,258,875
Benckiser NV, Class B -- ADR (Netherlands) (a).... 152,900 8,199,263
Colgate -- Palmolive Co........................... 135,130 13,344,088
Hershey Foods Corp................................ 229,900 13,650,312
Pepsi Bottling Group, Inc......................... 451,500 10,412,719
PepsiCo, Inc...................................... 300,600 11,629,463
Philip Morris Cos., Inc........................... 410,200 16,484,912
Ralston Purina Group.............................. 628,100 19,117,794
Seagram Co., Ltd.................................. 189,600 9,551,100
Seagram Co., Ltd. -- Convertible Preferred........ 325,000 16,229,687
Unilever NV -- ADR (Netherlands).................. 133,571 9,316,577
Whitman Corp...................................... 649,300 11,687,400
--------------
155,882,190
--------------
CONSUMER SERVICES 1.3%
H & R Block, Inc.................................. 270,000 13,500,000
International Game Technology..................... 277,700 5,137,450
News Corp. -- Exchange Trust, 144A -- Convertible
Preferred (b)................................... 83,000 8,289,625
Sinclair Broadcast Group -- Convertible
Preferred....................................... 82,000 3,546,500
--------------
30,473,575
--------------
ENERGY 5.6%
Coastal Corp...................................... 485,900 19,436,000
Consolidated Edison, Inc.......................... 630,800 28,543,700
El Paso Energy Corp............................... 549,900 19,349,606
Exxon Corp........................................ 199,100 15,355,588
Mobil Corp........................................ 272,750 27,002,250
Texaco, Inc....................................... 310,800 19,425,000
--------------
129,112,144
--------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
FINANCE 10.3%
American General Corp............................. 351,000 $ 26,456,625
Bank of Tokyo-Mitsubishi, Ltd. -- ADR (Japan)..... 1,312,800 19,117,650
BankAmerica Corp.................................. 224,300 16,443,994
Chase Manhattan Corp.............................. 213,000 18,451,125
Citigroup, Inc.................................... 287,050 13,634,875
Equitable Cos., Inc............................... 493,100 33,037,700
Fleet Financial Group, Inc........................ 533,500 23,674,062
Lincoln National Corp............................. 238,000 12,450,375
Marsh & McLennan Cos., Inc........................ 210,700 15,907,850
PLC Capital Trust II, PRIDES -- Convertible
Preferred....................................... 130,000 7,540,000
PNC Bank Corp..................................... 361,700 20,842,962
Radian Group, Inc................................. 25,000 1,220,313
Washington Mutual, Inc............................ 399,760 14,141,510
WBK Trust, STRYPES -- Convertible Preferred....... 201,000 6,507,375
XL Capital Ltd., Class A -- ADR (Bermuda)......... 175,600 9,921,400
--------------
239,347,816
--------------
HEALTHCARE 9.5%
Aetna, Inc........................................ 171,000 15,293,813
American Home Products Corp....................... 464,500 26,708,750
Beckman Coulter, Inc.............................. 270,400 13,148,200
Bristol-Myers Squibb Co........................... 115,600 8,142,575
Columbia/HCA Healthcare Corp...................... 505,700 11,536,281
HCR Manor Care, Inc. (a).......................... 282,100 6,823,294
IMS Health, Inc................................... 210,000 6,562,500
Laboratory Corp., Ser A -- Convertible
Preferred....................................... 313,000 18,349,625
MedPartners, Inc., TAPS -- Convertible
Preferred....................................... 1,000,000 10,750,000
Mylan Laboratories, Inc........................... 660,600 17,505,900
Oxford Health Plans, Inc. (a)..................... 693,000 10,784,813
Pharmacia & Upjohn, Inc........................... 356,000 20,225,250
Rhone-Poulenc, SA, Warrants -- ADR (France) (a)... 248,000 713,000
Teva Pharmaceutical Industries Ltd. -- ADR
(Israel)........................................ 284,900 13,960,100
Triad Hospitals, Inc. (a)......................... 23,242 313,767
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
United HealthCare Corp............................ 292,000 $ 18,286,500
Warner-Lambert Co................................. 306,700 21,277,312
--------------
220,381,680
--------------
PRODUCER MANUFACTURING 4.8%
Allied Signal, Inc................................ 180,800 11,390,400
Grainger, Inc..................................... 75,000 4,035,938
Ingersol Rand Co.................................. 416,000 26,884,000
Koninklijke Philips Electronics NV -- ADR
(Netherlands)................................... 267,384 26,972,361
Minnesota Mining & Manufacturing Co............... 296,800 25,803,050
Waste Management, Inc............................. 283,400 15,232,750
--------------
110,318,499
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 3.6%
Boise Cascade Corp................................ 391,400 16,781,275
Crown Cork & Seal Co., Inc........................ 51,100 1,456,350
Fresenius National Med Care, Inc., Class
D -- Preferred (a).............................. 12,000 180
Imperial Chemical Industries PLC -- ADR (United
Kingdom)........................................ 281,100 11,173,725
Monsanto Co....................................... 162,200 6,396,762
Monsanto Co., ACES -- Convertible Preferred....... 310,800 12,470,850
Newmont Mining Corp............................... 557,000 11,070,375
Pall Corp......................................... 25,000 554,688
Sherwin-Williams Co............................... 529,900 14,704,725
Union Carbide Corp................................ 177,400 8,648,250
--------------
83,257,180
--------------
TECHNOLOGY 11.7%
Adobe Systems, Inc................................ 324,000 26,618,625
Alcatel SA -- ADR (France)........................ 174,500 4,951,438
Boeing Co......................................... 404,900 17,891,519
Electronic Data Systems Corp...................... 362,500 20,503,906
First Data Corp................................... 164,400 8,045,325
International Business Machines Corp.............. 294,340 38,043,445
Microsoft Corp. -- Convertible Preferred.......... 85,000 8,494,687
Motorola, Inc..................................... 166,600 15,785,350
Nippon Telegraph & Telephone Corp -- ADR
(Japan)......................................... 301,000 18,850,125
Oracle Corp. (a).................................. 637,400 23,663,475
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
SunGard Data Systems, Inc. (a).................... 106,500 $ 3,674,250
Texas Instruments, Inc............................ 200,700 29,101,500
Unisys Corp. (a).................................. 111,054 7,224,230
Unisys Corp. -- Convertible Preferred............. 142,382 6,369,095
Xerox Corp........................................ 438,100 25,875,281
Xilinx, Inc. (a).................................. 301,740 17,274,615
--------------
272,366,866
--------------
UTILITIES 12.9%
Avista Corp., Ser L -- Convertible Preferred...... 537,000 9,129,000
BEC Energy........................................ 700,700 28,903,875
BellSouth Corp.................................... 399,000 18,703,125
DQE, Inc.......................................... 352,000 14,124,000
Edison International.............................. 691,100 18,486,925
GPU, Inc.......................................... 411,900 17,377,031
GTE Corp.......................................... 406,300 30,777,225
Illinova Corp..................................... 768,800 20,949,800
NCR Corp. (a)..................................... 553,000 26,993,311
Niagara Mohawk Holdings, Inc. (a)................. 1,552,400 24,935,425
Northeast Utilities (a)........................... 1,893,801 33,496,605
PECO Energy Co.................................... 169,000 7,076,875
SBC Communications, Inc........................... 155,300 9,007,400
Sprint Corp....................................... 410,700 21,690,094
U.S. WEST Communications Group.................... 310,900 18,265,375
--------------
299,916,066
--------------
TOTAL COMMON AND PREFERRED STOCKS 68.2%.................... 1,583,480,689
--------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS 7.6%
CONSUMER DISTRIBUTION 0.2%
$ 6,000 Gruma SA De Cv (Mexico), 144A (b).. 7.625% 10/15/07 $ 5,355,000
--------------
CONSUMER DURABLES 0.4%
3,000 Ford Motor Co...................... 7.250 10/01/08 3,042,510
3,000 Ford Motor Co. Delaware Note....... 9.000 09/15/01 3,153,342
3,000 General Motors Corp................ 7.000 06/15/03 3,030,678
--------------
9,226,530
--------------
CONSUMER SERVICES 0.8%
10,000 Clear Channel Communications....... 6.625 06/15/08 9,503,990
10,000 Cox Communications, Inc............ 7.250 11/15/15 9,698,550
--------------
19,202,540
--------------
ENERGY 0.9%
5,000 Enron Corp......................... 9.125 04/01/03 5,380,265
4,000 Occidental Petroleum Corp.......... 10.125 11/15/01 4,320,000
2,500 Texaco Capital, Inc................ 8.250 10/01/06 2,721,453
5,500 Texas Eastern Transmission Corp.... 8.250 10/15/04 5,847,682
2,000 Western Atlas, Inc................. 7.875 06/15/04 2,089,072
--------------
20,358,472
--------------
FINANCE 0.1%
2,000 General Electric Capital Corp...... 8.900 09/15/04 2,212,874
--------------
PRODUCER MANUFACTURING 0.3%
1,500 Reliance Electric Co............... 6.800 04/15/03 1,518,455
6,000 USA Waste Services, Inc............ 7.000 07/15/28 5,548,968
--------------
7,067,423
--------------
RAW MATERIALS/PROCESSING
INDUSTRIES 1.2%
5,000 Crown Cork & Seal Finance PLC...... 7.000 12/15/06 4,924,810
5,000 Crown Cork & Seal, Inc............. 8.375 01/15/05 5,249,120
5,000 Georgia Pacific Corp............... 9.500 05/15/22 5,306,110
10,000 ICI North America, Inc............. 8.875 11/15/06 10,845,950
--------------
26,325,990
--------------
RETAIL 0.2%
4,000 May Department Stores Co........... 8.375 08/01/24 4,194,456
--------------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TECHNOLOGY 0.6%
$ 4,000 Philips Electronics NV
(Netherlands)...................... 7.750% 04/15/04 $ 4,159,772
10,000 Raytheon Co........................ 6.750 08/15/07 9,930,750
--------------
14,090,522
--------------
TRANSPORTATION 0.2%
5,000 Norfolk Southern Corp.............. 7.350 05/15/07 5,104,810
--------------
UTILITIES 2.7%
5,000 360 Communications Co.............. 7.125 03/01/03 5,078,500
15,000 AT&T Corp.......................... 6.000 03/15/09 13,950,000
10,000 Century Telephone Enterprises,
Inc................................ 6.300 01/15/08 9,478,710
4,000 Compania De Telocomunicaciones
(Chile)............................ 7.625 07/15/06 3,757,920
20,000 Sprint Capital Corp................ 6.900 05/01/19 18,660,720
1,000 Tennessee Valley Authority, Ser
G.................................. 8.625 11/15/29 1,060,000
10,000 Worldcom, Inc...................... 7.750 04/01/07 10,465,720
--------------
62,451,570
--------------
TOTAL CORPORATE OBLIGATIONS 7.6%......................... 175,590,187
--------------
CONVERTIBLE CORPORATE OBLIGATIONS 8.6%
CONSUMER DURABLES 0.6%
26,000 Deutsche Bank Finance Netherlands,
144A (Convertible into 135,226
Daimler Benz common shares) (b).... * 02/12/17 13,292,500
--------------
CONSUMER SERVICES 0.4%
3,500 ADT Operations, Inc., LYON
(Convertible into 95,116 Tyco
International Ltd. common
shares)............................ * 07/06/10 9,012,500
--------------
FINANCE 1.4%
3,000 Aegon NV, 144A (Convertible into
216,000 common shares) (b)......... 4.750 11/01/04 15,678,750
4,599 APP Finance VII Euro, 144A
(Convertible into 267,724 common
shares) (b)........................ 3.500 04/30/03 3,466,496
18,401 App Finance VII Mauritius, 144A
(Convertible into 216,000 common
shares) (b)........................ 3.500 04/30/03 13,869,754
--------------
33,015,000
--------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTHCARE 2.4%
$ 25,000 Alza Corp., LYON (Convertible into
324,675 common shares)............. * 07/14/14 $ 16,562,500
20,000 Dura Pharmaceuticals, Inc.
(Convertible into 394,984 common
shares)............................ 3.500% 07/15/02 15,200,000
43,500 Roche Holdings, Inc., LYON
(Convertible into 206,347 common
shares)............................ * 04/20/10 24,577,500
--------------
56,340,000
--------------
PHARMACEUTICALS 0.1%
2,090 Sandoz, Ltd., 144A (Convertible
into 1,958 common shares) (b)...... 2.000 10/06/02 2,967,800
--------------
PRODUCER MANUFACTURING 0.4%
8,000 WMX Technologies, Inc. (Convertible
into 151,252 Waste Management, Inc.
common shares)..................... 2.000 01/24/05 8,660,000
--------------
TECHNOLOGY 1.9%
20,000 DSC Communications Corp.
(Convertible into 327,802 Alcatel
SA common shares).................. 7.000 08/01/04 20,775,000
12,000 Hewlett Packard Co., LYON
(Convertible into 65,160 common
shares)............................ * 10/14/17 7,620,000
24,000 Hewlett Packard Co., LYON, 144A
(Convertible into 130,320 common
shares) (b)........................ * 10/14/17 15,240,000
--------------
43,635,000
--------------
UTILITIES 1.4%
31,800 Telefonos de Mexico, SA
(Convertible into 335,013 common
shares)............................ 4.250 06/15/04 32,913,000
--------------
TOTAL CONVERTIBLE CORPORATE OBLIGATIONS 8.6%............. 199,835,800
--------------
UNITED STATES OBLIGATIONS 6.2%
12,000 United States Treasury Notes....... 6.375 07/15/99 12,012,840
130,000 United States Treasury Notes (c)... 6.250 10/31/01 131,868,100
--------------
TOTAL UNITED STATES OBLIGATIONS.......................... 143,880,940
--------------
TOTAL LONG-TERM INVESTMENTS 90.6%
(Cost $1,710,543,065)............................................. 2,102,787,616
--------------
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- -----------------------------------------------------------------------------------------
<S> <C>
SHORT-TERM INVESTMENTS 9.3%
COMMERCIAL PAPER 2.1%
General Electric Capital Corp. ($50,000,000 par, yielding 5.701%,
07/01/99 maturity)..................................................... $ 49,992,083
--------------
REPURCHASE AGREEMENT 2.9%
DLJ Mortgage Acceptance Corp. ($66,349,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 06/30/99, to be
sold on 07/01/99 at $66,357,847)....................................... 66,349,000
--------------
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 4.3%
Federal Home Loan Bank Consolidated Discount Notes ($25,000,000 par,
yielding 4.955%, 07/06/99 maturity).................................... 24,982,813
Federal Home Loan Mortgage Discount Notes ($25,000,000 par, yielding
4.819%, 07/07/99 maturity)............................................. 24,980,000
Federal Home Loan Mortgage Discount Notes ($25,000,000 par, yielding
4.902%, 08/05/99 maturity)............................................. 24,881,875
Federal National Mortgage Association Discount Notes ($25,000,000 par,
yielding 4.789%, 07/28/99 maturity).................................... 24,911,219
--------------
TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS...................... 99,755,907
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $216,096,990).................................................. 216,096,990
--------------
TOTAL INVESTMENTS 99.9%
(Cost $1,926,640,055)................................................ 2,318,884,606
OTHER ASSETS IN EXCESS OF LIABILITIES 0.1%............................ 1,180,565
--------------
NET ASSETS 100.0%..................................................... $2,320,065,171
==============
</TABLE>
* Zero coupon bond
(a) Non-income producing security as this security currently does not declare
dividends or pay interest.
(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.
(c) Assets segregated as collateral for open futures transactions.
ACES--Automatically Convertible Equity Securities.
ADR--American Depository Receipt.
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.
TAPS--Threshold Appreciation Price Securities.
See Notes to Financial Statements
17
<PAGE> 19
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $1,926,640,055)..................... $2,318,884,606
Cash........................................................ 10,044
Receivables:
Interest.................................................. 6,043,375
Investments Sold.......................................... 4,955,973
Fund Shares Sold.......................................... 4,664,534
Dividends................................................. 1,487,334
Variation Margin on Futures............................... 187,500
Other....................................................... 115,667
--------------
Total Assets.......................................... 2,336,349,033
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 6,674,670
Fund Shares Repurchased................................... 6,150,568
Distributor and Affiliates................................ 1,801,295
Investment Advisory Fee................................... 679,184
Income Distributions...................................... 256,135
Accrued Expenses............................................ 501,370
Trustees' Deferred Compensation and Retirement Plans........ 220,640
--------------
Total Liabilities..................................... 16,283,862
--------------
NET ASSETS.................................................. $2,320,065,171
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,823,363,633
Net Unrealized Appreciation................................. 392,771,801
Accumulated Net Realized Gain............................... 96,156,481
Accumulated Undistributed Net Investment Income............. 7,773,256
--------------
NET ASSETS.................................................. $2,320,065,171
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,011,540,670 and 123,843,209 shares of
beneficial interest issued and outstanding)........... $ 8.17
Maximum sales charge (5.75%* of offering price)......... .50
--------------
Maximum offering price to public........................ $ 8.67
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $1,196,454,478 and 147,594,923 shares of
beneficial interest issued and outstanding)........... $ 8.11
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $112,070,023 and 13,823,732 shares of
beneficial interest issued and outstanding)........... $ 8.11
==============
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
18
<PAGE> 20
STATEMENT OF OPERATIONS
For the Six Months Ended June 30,1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 19,610,065
Dividends................................................... 15,010,456
------------
Total Income............................................ 34,620,521
------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $1,058,523, $5,703,517 and $505,312,
respectively)............................................. 7,267,352
Investment Advisory Fee..................................... 3,887,039
Shareholder Services........................................ 1,547,559
Custody..................................................... 77,011
Trustees' Fees and Related Expenses......................... 43,208
Legal....................................................... 22,444
Other....................................................... 318,563
------------
Total Expenses.......................................... 13,163,176
Less Credits Earned on Overnight Cash Balances.......... 28,387
------------
Net Expenses............................................ 13,134,789
------------
NET INVESTMENT INCOME....................................... $ 21,485,732
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 96,637,577
Futures................................................... 3,705,276
------------
Net Realized Gain........................................... 100,342,853
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 378,269,769
------------
End of the Period:
Investments............................................... 392,244,551
Futures................................................... 527,250
------------
392,771,801
------------
Net Unrealized Appreciation During the Period............... 14,502,032
------------
NET REALIZED AND UNREALIZED GAIN............................ $114,844,885
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $136,330,617
============
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1999
and the Year Ended December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income......................... $ 21,485,732 $ 34,406,616
Net Realized Gain............................. 100,342,853 112,427,033
Net Unrealized Appreciation During the
Period...................................... 14,502,032 132,837,124
-------------- --------------
Change in Net Assets from Operations.......... 136,330,617 279,670,773
-------------- --------------
Distributions from Net Investment Income:
Class A Shares.............................. (8,124,760) (16,719,601)
Class B Shares.............................. (6,524,798) (16,833,408)
Class C Shares.............................. (588,236) (1,394,213)
-------------- --------------
(15,237,794) (34,947,222)
-------------- --------------
Distributions from Net Realized Gain:
Class A Shares.............................. (9,087,649) (43,282,677)
Class B Shares.............................. (12,100,358) (62,071,749)
Class C Shares.............................. (1,062,694) (5,200,218)
-------------- --------------
(22,250,701) (110,554,644)
-------------- --------------
Total Distributions........................... (37,488,495) (145,501,866)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.................................. 98,842,122 134,168,907
-------------- --------------
FROM CAPITAL TRANSACTIONS
Proceeds from Shares Sold..................... 962,405,668 1,143,314,008
Net Asset Value of Shares Issued Through
Dividend Reinvestment....................... 32,719,344 132,142,154
Cost of Shares Repurchased.................... (818,543,656) (987,638,702)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................ 176,581,356 287,817,460
-------------- --------------
TOTAL INCREASE IN NET ASSETS.................. 275,423,478 421,986,367
NET ASSETS:
Beginning of the Period....................... 2,044,641,693 1,622,655,326
-------------- --------------
End of the Period (Including accumulated
undistributed net investment income of
$7,773,256 and $1,525,318 respectively)..... $2,320,065,171 $2,044,641,693
============== ==============
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended ---------------------------------
Class A Shares June 30, 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $ 7.820 $7.242 $6.740 $ 6.31 $ 5.16
-------- ------ ------ ------ ------
Net Investment Income........... .088 .174 .152 .158 .20
Net Realized and Unrealized
Gain.......................... .412 1.030 1.435 .796 1.458
-------- ------ ------ ------ ------
Total from Investment
Operations.................... .500 1.204 1.587 .954 1.658
-------- ------ ------ ------ ------
Less:
Distributions from and in
Excess of Net Investment
Income...................... .070 .175 .168 .156 .188
Distributions from Net
Realized Gain............... .082 .451 .917 .368 .32
-------- ------ ------ ------ ------
Total Distributions............. .152 .626 1.085 .524 .508
-------- ------ ------ ------ ------
Net Asset Value, End of the
Period........................ $ 8.168 $7.820 $7.242 $6.740 $ 6.31
======== ====== ====== ====== ======
Total Return (a)................ 6.53%* 16.99% 24.13% 15.55% 32.57%
Net Assets at End of the Period
(In millions)................. $1,011.5 $808.5 $638.1 $471.8 $349.9
Ratio of Expenses to Average Net
Assets (b).................... .79% .85% .86% .97% .95%
Ratio of Net Investment Income
to Average Net Assets (b)..... 2.48% 2.31% 2.09% 2.50% 3.43%
Portfolio Turnover.............. 35%* 61% 86% 99% 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, 1995 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
21
<PAGE> 23
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended ----------------------------------
Class B Shares June 30, 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $ 7.766 $ 7.203 $6.713 $ 6.30 $ 5.16
-------- -------- ------ ------ ------
Net Investment Income.......... .066 .118 .100 .113 .15
Net Realized and Unrealized
Gain......................... .400 1.019 1.423 .784 1.458
-------- -------- ------ ------ ------
Total from Investment
Operations................... .466 1.137 1.523 .897 1.608
-------- -------- ------ ------ ------
Less:
Distributions from and in
Excess of Net Investment
Income..................... .044 .123 .116 .116 .148
Distributions from Net
Realized Gain.............. .082 .451 .917 .368 .32
-------- -------- ------ ------ ------
Total Distributions............ .126 .574 1.033 .484 .468
-------- -------- ------ ------ ------
Net Asset Value, End of the
Period....................... $ 8.106 $ 7.766 $7.203 $6.713 $ 6.30
======== ======== ====== ====== ======
Total Return (a)............... 6.09%* 16.17% 23.23% 14.56% 31.51%
Net Assets at End of the Period
(In millions)................ $1,196.5 $1,140.0 $908.7 $633.3 $408.9
Ratio of Expenses to Average
Net Assets (b)............... 1.56% 1.62% 1.64% 1.74% 1.75%
Ratio of Net Investment Income
to Average Net Assets (b).... 1.71% 1.55% 1.32% 1.74% 2.62%
Portfolio Turnover............. 35%* 61% 86% 99% 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, 1995 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
22
<PAGE> 24
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended ---------------------------------
Class C Shares June 30, 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $7.767 $7.204 $6.713 $ 6.30 $ 5.16
------ ------ ------ ------ ------
Net Investment Income........... .065 .117 .100 .113 .15
Net Realized and Unrealized
Gain.......................... .401 1.020 1.424 .784 1.458
------ ------ ------ ------ ------
Total from Investment
Operations.................... .466 1.137 1.524 .897 1.608
------ ------ ------ ------ ------
Less:
Distributions from and in
Excess of Net Investment
Income...................... .044 .123 .116 .116 .148
Distributions from Net
Realized Gain............... .082 .451 .917 .368 .32
------ ------ ------ ------ ------
Total Distributions............. .126 .574 1.033 .484 .468
------ ------ ------ ------ ------
Net Asset Value, End of the
Period........................ $8.107 $7.767 $7.204 $6.713 $ 6.30
====== ====== ====== ====== ======
Total Return (a)................ 6.09%* 16.17% 23.23% 14.56% 31.51%
Net Assets at End of the Period
(In millions)................. $112.1 $ 96.1 $ 75.8 $ 55.2 $ 38.3
Ratio of Expenses to Average Net
Assets (b).................... 1.56% 1.62% 1.64% 1.74% 1.76%
Ratio of Net Investment Income
to Average Net Assets (b)..... 1.71% 1.55% 1.32% 1.73% 2.63%
Portfolio Turnover.............. 35%* 61% 86% 99% 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, 1995 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
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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 or indications of value
obtained from an independent pricing service. 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, 1999, there were no when
issued or delayed delivery purchase commitments.
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such 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. Discounts are amortized over
the expected life of each applicable security. Premiums on debt securities are
not amortized. Income and expenses of the Fund are allocated on a pro rata basis
to each class of shares, except for distribution and service fees and transfer
agency costs which are unique to each class of shares.
D. 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, 1999, for federal income tax purposes, cost of long- and
short-term investments is $1,928,364,561, the aggregate gross unrealized
appreciation is $422,143,038 and the aggregate gross unrealized depreciation is
$31,622,993, resulting in net unrealized appreciation on long- and short-term
investments of $390,520,045.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses relating to wash sale
transactions.
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.
25
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
F. EXPENSE REDUCTIONS--During the six months ended June 30, 1999, the Fund's
custody fee was reduced by $28,387 as a result of credits earned on overnight
cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE 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, 1999, 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, 1999, the Fund recognized expenses of
approximately $190,300 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,
1999, the Fund recognized expenses of approximately $1,181,800. 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.
26
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
At June 30, 1999, capital aggregated $783,514,121, $949,628,418 and $90,221,094
for Classes A, B, and C, respectively. For the six months ended June 30, 1999,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................... 101,635,801 $ 792,313,049
Class B................................... 19,240,900 149,142,496
Class C................................... 2,703,461 20,950,123
------------ -------------
Total Sales................................. 123,580,162 $ 962,405,668
============ =============
Dividend Reinvestment:
Class A................................... 1,855,067 $ 14,386,242
Class B................................... 2,211,166 16,944,900
Class C................................... 180,871 1,388,202
------------ -------------
Total Dividend Reinvestment................. 4,247,104 $ 32,719,344
============ =============
Repurchases:
Class A................................... (83,036,889) $(647,257,823)
Class B................................... (20,650,634) (160,153,726)
Class C................................... (1,438,421) (11,132,107)
------------ -------------
Total Repurchases........................... (105,125,944) $(818,543,656)
============ =============
</TABLE>
27
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At December 31, 1998, capital aggregated $624,072,653, $943,694,748 and
$79,014,876 for Classes A, B, and C, respectively. For the year ended December
31, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 108,360,203 $ 836,859,216
Class B.................................. 36,029,610 276,860,624
Class C.................................. 3,865,558 29,594,168
------------ --------------
Total Sales................................ 148,255,371 $1,143,314,008
============ ==============
Dividend Reinvestment:
Class A.................................. 7,130,348 $ 54,671,876
Class B.................................. 9,437,571 71,897,500
Class C.................................. 731,441 5,572,778
------------ --------------
Total Dividend Reinvestment................ 17,299,360 $ 132,142,154
============ ==============
Repurchases:
Class A.................................. (100,205,548) $ (776,904,382)
Class B.................................. (24,828,078) (189,850,088)
Class C.................................. (2,747,855) (20,884,232)
------------ --------------
Total Repurchases.......................... (127,781,481) $ (987,638,702)
============ ==============
</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>
28
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended June 30, 1999, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $373,200 and CDSC on redeemed shares of approximately $1,043,200.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $740,653,155 and $698,178,252,
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
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, cash or liquid securities with a
29
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 risk of
loss associated with a futures contract is in excess of the variation margin
reflected on the Statement of Assets and Liabilities.
Transactions in futures contracts for the six months ended June 30, 1999,
were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ---------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1998.......................... 161
Futures Opened............................................ 200
Futures Closed............................................ (331)
-----
Outstanding at June 30, 1999.............................. 30
=====
</TABLE>
The futures contracts outstanding at June 30, 1999, and the description and
unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION/DEPRECIATION
- ----------------------------------------------------------------------------
<S> <C> <C>
Long Contracts--Sep 1999 S&P 500
Index Futures (Current Notional
Value of $345,425 per
contract)........................ 30 $527,250
== ========
</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, 1999, are payments retained by Van Kampen of
approximately $4,503,400.
30
<PAGE> 32
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
Small Cap Value
Technology
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 FUNDS
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
31
<PAGE> 33
VAN KAMPEN EQUITY INCOME FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY, PH.D.
PAUL G. YOVOVICH
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief
Financial Officer
CURTIS W. 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
ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR
SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1999
All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After December 31, 1999, the report, if used with
prospective investors, must be accompanied by a quarterly performance update, if
applicable.
32
<PAGE> 34
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> EQUITY INCOME CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 1,926,640,055<F1>
<INVESTMENTS-AT-VALUE> 2,318,884,606<F1>
<RECEIVABLES> 17,338,716<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 125,711<F1>
<TOTAL-ASSETS> 2,336,349,033<F1>
<PAYABLE-FOR-SECURITIES> 6,674,670<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 9,609,192<F1>
<TOTAL-LIABILITIES> 16,283,862<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 783,514,121
<SHARES-COMMON-STOCK> 123,843,209
<SHARES-COMMON-PRIOR> 103,389,230
<ACCUMULATED-NII-CURRENT> 7,773,256<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 96,156,481<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 392,771,801<F1>
<NET-ASSETS> 1,011,540,670
<DIVIDEND-INCOME> 15,010,456<F1>
<INTEREST-INCOME> 19,610,065<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (13,134,789)<F1>
<NET-INVESTMENT-INCOME> 21,485,732<F1>
<REALIZED-GAINS-CURRENT> 100,342,853<F1>
<APPREC-INCREASE-CURRENT> 14,502,032<F1>
<NET-CHANGE-FROM-OPS> 136,330,617<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (8,124,760)
<DISTRIBUTIONS-OF-GAINS> (9,087,649)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 101,635,801
<NUMBER-OF-SHARES-REDEEMED> (83,036,889)
<SHARES-REINVESTED> 1,855,067
<NET-CHANGE-IN-ASSETS> 203,086,142
<ACCUMULATED-NII-PRIOR> 1,525,318<F1>
<ACCUMULATED-GAINS-PRIOR> 18,064,329<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 3,887,039<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 13,163,176<F1>
<AVERAGE-NET-ASSETS> 882,973,850
<PER-SHARE-NAV-BEGIN> 7.820
<PER-SHARE-NII> 0.088
<PER-SHARE-GAIN-APPREC> 0.412
<PER-SHARE-DIVIDEND> (0.070)
<PER-SHARE-DISTRIBUTIONS> (0.082)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 8.168
<EXPENSE-RATIO> 0.79
<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> EQUITY INCOME CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 1,926,640,055<F1>
<INVESTMENTS-AT-VALUE> 2,318,884,606<F1>
<RECEIVABLES> 17,338,716<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 125,711<F1>
<TOTAL-ASSETS> 2,336,349,033<F1>
<PAYABLE-FOR-SECURITIES> 6,674,670<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 9,609,192<F1>
<TOTAL-LIABILITIES> 16,283,862<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 949,628,418
<SHARES-COMMON-STOCK> 147,594,923
<SHARES-COMMON-PRIOR> 146,793,491
<ACCUMULATED-NII-CURRENT> 7,773,256<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 96,156,481<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 392,771,801<F1>
<NET-ASSETS> 1,196,454,478
<DIVIDEND-INCOME> 15,010,456<F1>
<INTEREST-INCOME> 19,610,065<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (13,134,789)<F1>
<NET-INVESTMENT-INCOME> 21,485,732<F1>
<REALIZED-GAINS-CURRENT> 100,342,853<F1>
<APPREC-INCREASE-CURRENT> 14,502,032<F1>
<NET-CHANGE-FROM-OPS> 136,330,617<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (6,524,798)
<DISTRIBUTIONS-OF-GAINS> (12,100,358)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,240,900
<NUMBER-OF-SHARES-REDEEMED> (20,650,634)
<SHARES-REINVESTED> 2,211,166
<NET-CHANGE-IN-ASSETS> 56,411,597
<ACCUMULATED-NII-PRIOR> 1,525,318<F1>
<ACCUMULATED-GAINS-PRIOR> 18,064,329<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 3,887,039<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 13,163,176<F1>
<AVERAGE-NET-ASSETS> 1,150,945,356
<PER-SHARE-NAV-BEGIN> 7.766
<PER-SHARE-NII> 0.066
<PER-SHARE-GAIN-APPREC> 0.400
<PER-SHARE-DIVIDEND> (0.044)
<PER-SHARE-DISTRIBUTIONS> (0.082)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 8.106
<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> 13
<NAME> EQUITY INCOME CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 1,926,640,055<F1>
<INVESTMENTS-AT-VALUE> 2,318,884,606<F1>
<RECEIVABLES> 17,338,716<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 125,711<F1>
<TOTAL-ASSETS> 2,336,349,033<F1>
<PAYABLE-FOR-SECURITIES> 6,674,670<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 9,609,192<F1>
<TOTAL-LIABILITIES> 16,283,862<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 90,221,094
<SHARES-COMMON-STOCK> 13,823,732
<SHARES-COMMON-PRIOR> 12,377,821
<ACCUMULATED-NII-CURRENT> 7,773,256<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 96,156,481<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 392,771,801<F1>
<NET-ASSETS> 112,070,023
<DIVIDEND-INCOME> 15,010,456<F1>
<INTEREST-INCOME> 19,610,065<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (13,134,789)<F1>
<NET-INVESTMENT-INCOME> 21,485,732<F1>
<REALIZED-GAINS-CURRENT> 100,342,853<F1>
<APPREC-INCREASE-CURRENT> 14,502,032<F1>
<NET-CHANGE-FROM-OPS> 136,330,617<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (588,236)
<DISTRIBUTIONS-OF-GAINS> (1,062,694)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,703,461
<NUMBER-OF-SHARES-REDEEMED> (1,438,421)
<SHARES-REINVESTED> 180,871
<NET-CHANGE-IN-ASSETS> 15,925,739
<ACCUMULATED-NII-PRIOR> 1,525,318<F1>
<ACCUMULATED-GAINS-PRIOR> 18,064,329<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 3,887,039<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 13,163,176<F1>
<AVERAGE-NET-ASSETS> 101,972,076
<PER-SHARE-NAV-BEGIN> 7.767
<PER-SHARE-NII> 0.065
<PER-SHARE-GAIN-APPREC> 0.401
<PER-SHARE-DIVIDEND> (0.044)
<PER-SHARE-DISTRIBUTIONS> (0.082)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 8.107
<EXPENSE-RATIO> 1.56
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
