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Previous: MUNIYIELD FUND INC, N-30D, 1998-12-23 |
Next: PHARMACEUTICAL MARKETING SERVICES INC, SC 13D, 1998-12-23 |
VAN KAMPEN
SMALL CAPITALIZATION
FUND
Annual Report
October 31, 1998
LOGO:
VAN KAMPEN
FUNDS
<PAGE>
<TABLE>
Van Kampen Small Capitalization Fund
Portfolio of Investments
October 31, 1998
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Common Stock 94.9%
Consumer Distribution 6.2%
Americredit Corp. (a) 8,400 $ 114,450
BJ's Wholesale Club, Inc. (a) 1,400 50,050
Brightpoint, Inc. (a) 17,200 201,025
DIMON, Inc. 2,300 29,325
Food Lion, Inc. 9,200 100,625
Homebase, Inc. (a) 1,400 9,625
HON Industries, Inc. 8,200 175,275
Hughes Supply, Inc. 3,000 80,438
Lear Seating Corp. (a) 2,000 64,250
Lexmark International Group, Inc., Class A (a) 3,000 208,125
Meyer (Fred), Inc. Delaware (a) 2,800 149,275
Neiman-Marcus Group, Inc. (a) 1,800 39,375
Premark International, Inc. 4,600 144,900
Rite Aid Corp. 9,200 373,750
Safeway, Inc. (a) 13,700 654,175
Saks, Inc. (a) 4,566 95,886
School Specialty, Inc. (a) 294 4,667
Supervalue, Inc. 4,600 115,575
Tech Data Corp. (a) 2,300 92,575
TJX Cos., Inc. 31,200 588,900
U.S. Office Products Co. (a) 662 4,800
Zale Corp. (a) 2,900 69,238
-----------
3,366,304
-----------
Consumer Durables 3.2%
Arvin Industries, Inc. 9,900 393,525
Borg Warner Automotive, Inc. 3,700 174,363
Callaway Golf Co. 2,800 30,450
Furniture Brands International, Inc. (a) 13,800 296,700
Galoob Toys, Inc. (a) 200 2,388
Harman International Industries, Inc. 1,100 43,931
Mohawk Industries, Inc. (a) 11,700 353,194
Snap-On, Inc. 9,600 339,600
SPX Corp. (a) 784 43,022
Sturm Ruger & Co., Inc. 3,700 51,106
-----------
1,728,279
-----------
Consumer Non-Durables 8.2%
Alberto Culver Co., Class B 3,800 101,413
American Greetings Corp., Class A 6,900 281,175
Borders Group, Inc. (a) 4,600 114,138
Brown Group, Inc. 8,000 126,500
Burlington Industries, Inc. (a) 9,200 85,100
Dean Foods Co. 4,600 216,200
Donnkenny, Inc. (a) 11,500 15,813
Fossil, Inc. (a) 20,000 366,250
See Notes to Financial Statements
1
<PAGE>
<CAPTION>
Van Kampen Small Capitalization Fund
Portfolio of Investments (Continued)
October 31, 1998
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Consumer Non-Durables (Continued)
Fruit of the Loom, Inc. (a) 6,100 $ 94,931
Griffon Corp. (a) 10,700 107,000
Guilford Mills, Inc. 20,700 266,513
Herbalife International, Inc., Class A 3,700 42,087
Herbalife International, Inc., Class B 7,400 69,375
Jones Apparel Group, Inc. (a) 5,000 88,438
Lancaster Colony Corp. 4,800 144,450
Liz Claiborne, Inc. 5,500 166,375
McCormick & Co., Inc. 2,300 70,869
Michael Foods, Inc. 5,000 116,875
Nautica Enterprises, Inc. (a) 12,400 263,500
Oxford Industries, Inc. 6,000 169,875
Reebok International Ltd. (a) 4,600 78,200
Revlon, Inc., Class A (a) 2,800 53,025
Russ Berrie & Co., Inc. 9,200 180,550
Russell Corp. 14,400 351,000
Scotts Co., Class A (a) 3,000 99,375
Smithfield Foods, Inc. (a) 13,800 269,100
St John Knits, Inc. 3,400 69,063
Tultex Corp. (a) 39,100 51,319
Unifi, Inc. 8,600 141,363
Westpoint Stevens, Inc. (a) 10,800 303,075
-----------
4,502,947
-----------
Consumer Services 5.7%
Amresco, Inc. (a) 9,200 64,113
APAC Teleservices, Inc. (a) 1,400 8,488
Applebee's International, Inc. 1,800 35,775
Banta Corp. 6,900 169,050
CD Radio, Inc. (a) 10,000 307,500
Darden Restaurants, Inc. 10,000 166,875
Firstplus Financial Group, Inc. (a) 2,300 9,775
Imperial Credit Industries, Inc. (a) 8,000 51,000
International Game Technology 4,600 102,638
King World Productions, Inc. (a) 18,400 484,150
Labor Ready, Inc. (a) 10,000 178,750
Media General, Inc., Class A 2,400 106,500
MGM Grand, Inc. (a) 2,054 53,404
Navigant International, Inc. (a) 264 1,485
New York Times Co., Class A 12,800 361,600
Norrell Corp. 4,200 56,700
Ogden Corp. 5,000 134,688
Papa John's International, Inc. (a) 6,550 252,994
Promus Hotel Corp. (a) 3,052 91,941
Sonic Corp. (a) 4,200 80,850
Stewart Enterprises, Inc., Class A 4,600 107,238
Sunburst Hospitality Corp. (a) 1,233 4,932
See Notes to Financial Statements
2
<PAGE>
Van Kampen Small Capitalization Fund
Portfolio of Investments (Continued)
October 31, 1998
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Consumer Services (Continued)
Valassis Communications, Inc. (a) 3,200 $ 127,200
Vistana, Inc. (a) 15,000 165,000
Workflow Management, Inc. (a) 353 2,008
-----------
3,124,654
-----------
Energy 8.0%
Apache Corp. 5,100 145,988
Ashland, Inc. 3,200 153,600
BJ Services Co. (a) 1,200 23,775
Canadian Occidental Petroleum Ltd. 3,700 56,194
Cliffs Drilling Co. (a) 2,800 63,000
Devon Energy Corp. 2,300 78,488
Dynegy, Inc. 4,600 68,713
El Paso Energy Co. 9,400 330,763
KeySpan Energy Corp. 25,908 769,144
MCN Corp. 500 9,750
Murphy Oil Corp. 2,300 95,163
National Fuel Gas Co. 2,300 108,675
Newfield Exploration Co. (a) 1,800 44,100
NICOR, Inc. 500 21,313
Offshore Logistics, Inc. (a) 4,600 71,300
ONEOK, Inc. 11,200 382,900
Pennzoil Co. 3,200 116,400
Pool Energy Services Co. (a) 11,500 150,938
R&B Falcon Corp. (a) 1,652 22,199
Schlumberger Ltd. 3,776 196,824
Seagull Energy Corp. (a) 3,488 41,856
Smith International, Inc. (a) 2,300 81,650
Tesoro Petroleum Corp. (a) 14,200 210,338
Tidewater, Inc. 2,300 64,688
Valero Energy Corp. 5,800 146,450
Vintage Petroleum, Inc. 13,800 175,950
Washington Gas & Light Co. 7,400 194,713
WICOR, Inc. 17,800 440,550
Williams Cos 4,764 128,330
-----------
4,393,752
-----------
Finance 17.6%
20th Century Industries 3,500 85,094
AMBAC, Inc. 8,200 478,675
American Financial Group, Inc. 6,400 222,000
Amsouth Bancorp 9,225 371,883
Associated Banc-Corp 1,988 68,027
California Federal Bancorp, Inc. (a) 600 10,538
Charter One Financial, Inc. 8,708 237,837
Chicago Title Corp. 5,000 210,938
Choice Hotels International, Inc. (a) 3,700 45,788
City National Corp. 7,600 262,200
See Notes to Financial Statements
3
<PAGE>
Van Kampen Small Capitalization Fund
Portfolio of Investments (Continued)
October 31, 1998
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Finance (Continued)
Cityscape Financial Corp. (a) 4,600 $ 32
CMAC Investment Corp. 3,300 139,013
Concentra Managed Care, Inc. (a) 2,500 26,250
Conseco, Inc. 8,818 307,528
Countrywide Credit Industries, Inc. 6,900 298,856
Delta Financial Corp. (a) 20,000 113,750
Donaldson Lufkin & Jenrette, Inc. 5,600 188,300
Edwards (A.G.), Inc. 7,650 262,969
Enhance Financial Services Group, Inc. 4,000 98,750
Everest Reinsurance Holdings, Inc. 12,000 413,250
Finova Group, Inc. 1,800 86,850
First American Financial Corp. 14,400 450,900
First Union Corp. 4,037 236,165
Fremont General Corp. 7,050 352,500
Frontier Insurance Group, Inc. 5,060 81,909
Greenpoint Financial Corp. 5,400 174,825
HCC Insurance Holdings, Inc. 2,300 40,250
Home Properties of New York, Inc. 2,700 72,056
Horace Mann Educators Corp. 3,000 84,375
Lehman Brothers Holdings, Inc. 1,400 52,063
Mercantile Bankshares Corp. 3,400 109,013
Mercury General Corp. 4,600 188,888
MGIC Investment Corp. of Wisconsin 1,700 66,088
Nationwide Financial Services, Inc., Class A 10,000 412,500
North Fork Bancorp 10,947 213,467
Orion Capital Corp. 8,400 284,025
Pacific Century Financial Corp. 4,600 94,013
Paine Webber Group, Inc. 3,450 114,497
PBOC Holdings, Inc. (a) 10,000 95,625
Penncorp Financial Group, Inc. 2,300 3,881
PMI Group, Inc. 900 45,113
Protective Life Corp. 13,800 508,875
Reliance Group Holdings, Inc. 2,600 36,238
Republic New York Corp. 4,600 193,775
Resource Bancshares Management Group, Inc. 9,660 141,278
San Juan Basin Royalty Trust 10,000 60,000
Southtrust Corp. 7,200 266,400
Sovereign Bancorp, Inc. 26,056 350,128
T R Financial Corp. 4,600 147,200
Transatlantic Holdings, Inc. 6,000 461,625
U.S. Trust Corp. 2,300 147,200
Unitrin, Inc. 2,300 163,300
Vesta Insurance Group, Inc. 2,300 19,406
-----------
9,596,106
-----------
See Notes to Financial Statements
4
<PAGE>
Van Kampen Small Capitalization Fund
Portfolio of Investments (Continued)
October 31, 1998
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Healthcare 10.9%
Access Health, Inc. (a) 3,000 $ 110,063
ADAC Laboratories (a) 4,600 135,700
Agouron Pharmaceuticals, Inc. (a) 1,800 69,750
Beckman Industries, Inc. 6,000 279,750
Biomet, Inc. (a) 4,600 154,100
Coherent, Inc. (a) 6,400 76,800
Cooper Companies, Inc. (a) 3,000 70,688
Curative Health Services, Inc. (a) 4,600 125,925
Dekalb Genetics Corp., Class B 2,200 200,888
Dura Pharmaceuticals, Inc. (a) 2,800 33,600
ESC Medical Systems, Ltd. (a) 7,300 59,769
First Health Group Corp. (a) 1,800 41,175
FPA Medical Management, Inc. (a) 11,500 460
Haemonetics Corp. (a) 5,500 119,969
HBO & Co. 7,200 189,900
Health Management Associates, Inc., Class A (a) 35,775 637,242
HCR Manor Care (a) 6,800 221,850
Healthsouth Corp. (a) 12,300 150,675
Integrated Health Services, Inc. 2,903 46,448
Lincare Holdings, Inc. (a) 12,400 492,900
Medicis Pharmaceutical Corp., Class A (a) 3,700 184,075
Minimed, Inc. (a) 3,300 181,913
Mylan Labs, Inc. 5,000 172,500
NBTY, Inc. (a) 30,400 253,650
Pacificare Health Systems, Inc., Class A (a) 80 5,680
Phycor, Inc. (a) 2,300 16,316
PSS World Medical, Inc. (a) 10,000 222,500
Quorum Health Group, Inc. (a) 7,650 106,622
Rexall Sundown, Inc. (a) 18,400 328,900
Sun Healthcare Group (a) 5,000 29,063
Sybron International Corp. (a) 11,400 282,150
Tenet Healthcare Corp. (a) 4,750 133,594
Total Renal Care Holdings, Inc. (a) 13,311 325,288
Vivus, Inc. (a) 7,400 20,350
Watson Pharmaceuticals, Inc. (a) 8,640 476,820
-----------
5,957,073
-----------
Producer Manufacturing 6.3%
ACX Technologies, Inc. (a) 2,800 40,950
Aeroquip-Vickers, Inc. 2,000 62,500
American Standard Cos., Inc. (a) 3,400 108,163
Ametek, Inc. 2,300 48,588
Blount International, Inc., Class A 3,200 70,600
Cummins Engine Co., Inc. 4,100 136,581
Eastern Environmental Services, Inc. (a) 5,000 138,125
Flowserve Corp. 1,100 19,800
Global Industrial Technologies, Inc. (a) 9,900 84,150
See Notes to Financial Statements
5
<PAGE>
Van Kampen Small Capitalization Fund
Portfolio of Investments (Continued)
October 31, 1998
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Producer Manufacturing (Continued)
Harnischfeger Industries, Inc. 2,800 $ 26,075
Harsco Corp. 2,800 91,175
IDEX Corp. 9,350 242,516
Intermet Corp. 2,300 35,794
Johnson Controls, Inc. 3,700 204,656
Kaydon Corp. 4,600 161,288
Kennametal, Inc. 2,000 41,375
Manitowoc Co., Inc. 3,400 120,275
Mastec, Inc. (a) 2,100 49,613
Mueller Industries, Inc. (a) 4,600 106,950
National Service Industries, Inc. 2,800 101,325
PACCAR, Inc. 3,800 166,250
Republic Industries, Inc. (a) 2,300 37,950
Robbins & Myers, Inc. 5,000 117,813
Ruddick Corp. 4,600 89,125
Southdown, Inc. 5,408 296,764
Tecumseh Products Co., Class A 4,600 235,750
Timken Co. 10,100 179,906
Trinity Industries, Inc. 8,300 307,100
Tyco International, Ltd. 1,064 66,700
U.S. Filter Corp. (a) 2,721 57,141
-----------
3,444,998
-----------
Raw Materials/Processing Industries 3.2%
A K Steel Holding Corp. 1,800 30,600
Cytec Industries, Inc. (a) 2,500 59,688
Fuller (H. B.) Co. 2,300 94,875
Goodrich (B. F.) Co. 3,220 116,524
Lyondell Petrochemical Co. 7,400 123,950
Mississippi Chemical Corp. 1,674 24,482
Octel Corp. (a) 10,000 142,500
Potlatch Corp. 900 33,131
Rayonier, Inc. 5,100 200,813
Terra Industries, Inc. 17,000 128,563
Texas Industries, Inc. 2,000 60,875
USG Corp. (a) 5,100 244,481
USX-US Steel Group, Inc. 4,600 107,813
Valspar Corp. 4,100 115,056
Vulcan Materials Co. 2,300 272,694
-----------
1,756,045
-----------
Technology 16.5%
Adaptec, Inc. (a) 4,600 74,750
Altera Corp. (a) 2,500 102,500
Applied Magnetics Corp. (a) 11,500 47,438
Ascend Communications, Inc. (a) 1,950 93,234
Autodesk, Inc. 3,000 93,000
See Notes to Financial Statements
6
<PAGE>
Van Kampen Small Capitalization Fund
Portfolio of Investments (Continued)
October 31, 1998
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Technology (Continued)
Avnet, Inc. 2,300 $ 114,138
Avx Corp. 5,300 94,406
Aztec Technology Partners (a) 529 2,976
BancTec, Inc. (a) 9,200 115,000
BMC Software, Inc. (a) 4,200 201,731
Cadence Design Systems, Inc. (a) 2,800 56,875
Cambridge Technology Partners (a) 1,800 38,700
CIBER, Inc. (a) 4,000 80,750
Citrix Systems, Inc. (a) 10,800 762,750
Comverse Technology, Inc. (a) 2,990 137,166
Cymer, Inc. (a) 6,000 75,000
Data General Corp. (a) 13,800 232,013
Davox Corp. (a) 9,900 80,438
Digital Microwave Corp. (a) 14,600 63,875
DII Group, Inc. (a) 10,000 147,500
Discreet Logic, Inc. (a) 5,000 60,313
Elsag Bailey Process Automation N.V. (a) 6,900 252,713
Esterline Technologies Corp. (a) 12,000 237,750
Fiserv, Inc. (a) 5,550 252,525
GenRad, Inc. (a) 6,400 106,000
Harris Corp. 4,600 161,000
HMT Technology Corp. (a) 10,000 85,625
Hutchinson Technology, Inc. (a) 6,900 131,963
Hyperion Software Corp. (a) 3,135 93,658
Iomega Corp. (a) 9,200 50,025
Jabil Circuit, Inc. (a) 7,400 341,788
Legato Systems, Inc. (a) 8,000 308,500
Linear Technology Corp. 900 53,100
Loral Corp. (a) 2,300 42,694
Manugistics Group, Inc. (a) 3,000 43,688
Microchip Technology, Inc. (a) 2,300 62,244
Micron Electronics, Inc. (a) 4,600 93,438
Neomagic Corp. (a) 10,000 159,375
Networks Associates, Inc. (a) 3,150 133,875
Periphonics Corp. (a) 13,600 124,100
Pioneer-Standard Electronics, Inc. 14,000 122,500
Plexus Corp. (a) 5,000 125,313
Project Software & Development, Inc. (a) 4,600 82,225
Quantum Corp. (a) 8,000 138,000
Radisys Corp. (a) 4,600 85,675
Rational Software Corp. (a) 2,800 61,775
Recoton Corp. (a) 11,100 249,750
Remedy Corp. (a) 8,300 72,625
Sanmina Corp. (a) 7,400 314,038
Saville Systems PLC, Class A (a) 3,000 50,250
SCI Systems, Inc. (a) 9,200 363,400
Solectron Corp. (a) 3,700 213,213
See Notes to Financial Statements
7
<PAGE>
<PAGE>
Van Kampen Small Capitalization Fund
Portfolio of Investments (Continued)
October 31, 1998
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Technology (Continued)
Storage Technology Corp. (a) 19,200 $ 633,600
Sundstrand Corp. 3,200 150,800
Symbol Technologies, Inc. 1,575 69,891
Systems & Computer Technology Corp. (a) 16,000 231,000
Tekelec (a) 18,000 315,000
Unitrode Corp. (a) 10,800 136,350
Visio Corp. (a) 3,000 82,313
Western Digital Corp. (a) 9,600 97,800
Wyman-Gordan Co. (a) 2,300 33,350
-----------
9,037,482
-----------
Transportation 1.6%
Continental Airlines, Inc., Class B (a) 2,300 91,138
Expeditors International of Washington, Inc. 4,600 155,538
Halter Marine Group, Inc. (a) 9,296 80,178
Seacor Holdings, Inc. (a) 3,700 176,213
UAL Corp. (a) 1,400 90,825
U.S. Airways, Inc. (a) 2,600 145,438
USFreightways Corp. 4,600 115,000
-----------
854,330
-----------
Utilities 7.5%
Boston Edison Co. 9,700 386,788
CalEnergy, Inc. (a) 5,000 138,750
Central Hudson Gas & Electric Corp. 9,000 365,625
Century Telephone Enterprises, Inc. 750 41,344
Cincinnati Bell, Inc. 5,100 128,138
Commonwealth Energy System Cos 2,300 85,346
DQE, Inc. 5,500 216,219
Energy East Corp. 8,800 431,750
FirstEnergy Corp. 9,227 276,810
Kansas City Power & Light Co. 3,700 105,913
LG & E Energy Corp. 4,600 121,613
MDU Resources Group, Inc. 4,500 118,125
MidAmerican Energy Holdings Co. 6,900 178,969
New Century Energies, Inc. 3,700 178,756
NIPSCO Industries, Inc. 3,600 108,225
Pacific Gas & Electric Co. 1,524 46,768
Pinnacle West Capital Corp. 4,600 202,400
Public Service Co. of New Mexico 15,200 343,900
Sierra Pacific Resources 2,300 83,950
United Illuminating Co. 2,900 142,100
UtiliCorp United, Inc. 3,000 107,813
Western Resources, Inc. 9,200 320,850
-----------
4,130,152
-----------
See Notes to Financial Statements
8
<PAGE>
Van Kampen Small Capitalization Fund
Portfolio of Investments (Continued)
October 31, 1998
<CAPTION>
Description Market Value
<S> <C> <C>
Total Long-Term Investments 94.9%
(Cost $41,502,271) $ 51,892,122
Repurchase Agreement 5.1%
BancAmerica ($2,770,000 par, collateralized by U.S. Government
obligations in a pooled cash account, dated 10/30/98, to be sold on
11/02/98 at $2,771,293) (Cost $2,770,000) 2,770,000
-----------
Total Investments 100.0%
(Cost $44,272,271) 54,662,122
-----------
Liabilities in Excess of Other Assets 0.0% (13,515)
Net Assets 100.0% $54,648,607
===========
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
9
</TABLE>
<PAGE>
<TABLE>
Van Kampen Small Capitalization Fund
Statement of Assets and Liabilities
October 31, 1998
<CAPTION>
ASSETS:
<S> <C>
Total Investments (Cost $44,272,271) $54,662,122
Cash 1,897
Dividends Receivable 51,193
Other 1,859
-----------
Total Assets 54,717,071
-----------
LIABILITIES:
Payables
Shareholder Reports 10,594
Affiliates 5,110
Trustees' Deferred Compensation and Retirement Plans 39,675
Accrued Expenses 13,085
-----------
Total Liabilities 68,464
-----------
NET ASSETS $54,648,607
===========
NET ASSETS CONSIST OF:
Capital $39,712,475
Net Unrealized Appreciation 10,439,064
Accumulated Net Realized Gain 3,991,620
Accumulated Undistributed Net Investment Income 505,448
-----------
NET ASSETS $54,648,607
===========
Net Asset Value, Offering Price and Redemption Price Per Share
(Based on net assets of $54,648,607 and 5,487,382 shares of
beneficial interest issued and outstanding) $ 9.96
===========
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
Van Kampen Small Capitalization Fund
Statement of Operations
For the Year Ended October 31, 1998
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends $ 726,779
Interest 59,655
-----------
Total Income 786,434
-----------
EXPENSES:
Accounting Services 34,837
Trustees' Fees and Expenses 16,608
Shareholder Services 14,582
Amortization of Organizational Costs 14,427
Shareholder Reports 11,600
Custody 4,085
Legal 2,925
Other 20,270
-----------
Total Expenses 119,334
-----------
NET INVESTMENT INCOME $ 667,100
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 4,065,066
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period 18,532,862
End of the Period 10,439,064
-----------
Net Unrealized Depreciation During the Period (8,093,798)
-----------
NET REALIZED AND UNREALIZED LOSS $(4,028,732)
===========
NET DECREASE IN NET ASSETS FROM OPERATIONS $(3,361,632)
===========
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
Van Kampen Small Capitalization Fund
Statement of Changes in Net Assets
For the Years Ended October 31, 1998 and 1997
<CAPTION>
Year Ended Year Ended
October 31, 1998 October 31, 1997
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income $ 667,100 $ 2,120,328
Net Realized Gain 4,065,066 59,842,669
Net Unrealized Depreciation During the Period (8,093,798) (14,406,399)
------------- -------------
Change in Net Assets from Operations (3,361,632) 47,556,598
------------- -------------
Distributions from:
Net Investment Income (971,179) (2,779,489)
Net Realized Gain (20,161,961) (11,913,960)
------------- -------------
Total Distributions (21,133,140) (14,693,449)
------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES (24,494,772) 32,863,149
------------- -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold -0- 30,000,000
Net Asset Value of Shares Issued Through Dividend Reinvestment 21,133,140 14,693,449
Cost of Shares Repurchased -0- (213,753,951)
------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 21,133,140 (169,060,502)
------------- -------------
TOTAL DECREASE IN NET ASSETS (3,361,632) (136,197,353)
NET ASSETS:
Beginning of the Period 58,010,239 194,207,592
------------- -------------
End of the Period (Including accumulated undistributed net investment
income of $505,448 and $856,317, respectively) $ 54,648,607 $ 58,010,239
============= =============
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
Van Kampen Small Capitalization Fund
Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<CAPTION>
November 23, 1993
(Commencement
of Investment
Year Ended October 31, Operations) to
1998 1997 1996 1995 (a) October 31, 1994 (a)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 16.695 $ 13.807 $ 12.17 $ 9.82 $ 10.00
--------- ---------- ---------- --------- ---------
Net Investment Income 0.134 0.546 0.197 0.17 0.21
Net Realized and Unrealized Gain/Loss (0.788) 3.468 1.968 2.26 (0.37)
--------- ---------- ---------- --------- ---------
Total from Investment Operations (0.654) 4.014 2.165 2.43 (0.16)
--------- ---------- ---------- --------- ---------
Less:
Distributions from Net Investment Income 0.280 0.213 0.133 0.08 0.02
Distributions from Net Realized Gain 5.802 0.913 0.395 0.00 0.00
--------- ---------- ---------- --------- ---------
Total Distributions 6.082 1.126 0.528 0.08 0.02
--------- ---------- ---------- --------- ---------
Net Asset Value, End of the Period $ 9.959 $ 16.695 $ 13.807 $ 12.17 $ 9.82
========= ========== ========== ========== =========
Total Return (5.81%) 31.34% 18.50% 25.00% 1.80%*
Net Assets at End of the Period (In millions) $ 54.6 $ 58.0 $ 194.2 $ 200.3 $ 20.7
Ratio of Expenses to Average Net Assets (b) 0.20% 0.11% 0.10% 0.08% 0.30%
Ratio of Net Investment Income to Average Net Assets (b) 1.11% 1.34% 1.45% 1.59% 1.99%
Portfolio Turnover 14% 47% 75% 85% 34%*
(a) Based on average shares outstanding.
(b) For the period ended October 31, 1994 and the years ended October 31, 1995
through 1997, the impact on the Ratios of Expenses to Average Net Assets
and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
* Non-Annualized
</TABLE>
<PAGE>
Van Kampen Small Capitalization Fund
Notes to Financial Statements
October 31, 1998
1. Significant Accounting Policies
The Van Kampen Small Capitalization Fund, formerly known as the Van Kampen
American Capital Small Capitalization 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 approximate the performance of the small
capitalization sector of the equities market by investing primarily in common
stocks of small capitalization companies. The Fund commenced investment
operations on November 23, 1993.
The following is a summary of the 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 listed or traded on a national securities
exchange are stated at value using market quotations as of 2:00PM Eastern
Standard Time. Unlisted and listed securities for which the last sale price at
2:00PM Eastern Standard Time is not available are valued at the last reported
bid price. Short-term securities with remaining maturities of 60 days or less
are valued at amortized cost.
B. Security Transactions - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specific 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 collateralized by the underlying debt security. The
Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
C. Investment Income - Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis.
D. Organizational Costs - The Fund reimbursed Van Kampen Funds Inc. or its
affiliates ("collectively Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $62,000. These costs were amortized on a
straight line basis over the 60 month period ended October, 1998.
E. Federal Income Taxes - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and gains to
its shareholders. Therefore, no provision for federal income taxes is required.
At October 31, 1998, for federal income tax purposes cost of long- and
short-term investments is $44,272,271, the aggregate gross unrealized
appreciation is $16,971,614 and the aggregate gross unrealized depreciation is
$6,581,763, resulting in net unrealized appreciation on long- and short-term
investments of $10,389,851.
Net realized gains or losses may differ for financial and tax reporting
purposes as a result of the deferral of losses for tax purposes resulting from
wash sales.
F. Distribution of Income and Gains - The Fund declares and pays dividends
annually from net investment income and net realized gains on securities, if
any. Distributions from net realized gains for book purposes may include
short-term capital gains, which are included as ordinary income for
tax purposes.
During the period, the Fund declared and paid a 28% rate gain distribution
of $8,765,507 and a 20% rate gain distribution of $7,939,124. In January, 1999,
the Fund will provide tax information to shareholders for the 1998 calendar
year.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the 1998 fiscal year have been identified and appropriately reclassified.
Permanent book and tax basis differences relating to partnership interest of
($66,138) were reclassified between accumulated undistributed net investment
income and accumulated net realized gain. Additionally, permanent differences
relating to partnership interest of ($19,348) were reclassified from capital to
accumulated net investment income and ($63,963) was reclassified from
accumulated net realized gain to capital.
<PAGE>
Van Kampen Small Capitalization Fund
Notes to Financial Statements (Continued)
October 31, 1998
2. Investment Advisory Agreement and Other Transactions with Affiliates
The Adviser serves as the investment manager of the Fund, but receives no
compensation for its investment management services.
For the year ended October 31, 1998, the Fund recognized expenses of
approximately $2,900 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 year ended October 31, 1998, the Fund recognized expenses of
approximately $34,800, representing Van Kampen's cost of providing accounting
services to the Fund. These services are provided by Van Kampen at cost.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the year ended October 31,
1998, the Fund recognized expenses of approximately $14,600. Beginning in 1998,
the transfer agency fees are determined through negotiations with the Fund's
Board of Trustees and are based on competitive 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 October 31, 1998, the Fund was 100% owned by the Van Kampen Pace
Fund, which is an investment company advised by the Adviser.
3. Capital Transactions
The Fund is authorized to issue an unlimited number of shares of
beneficial interest with a par value of $.01 per share. Fund shares are only
available for purchase by Funds for which Van Kampen serves as investment
adviser.
At October 31, 1998 and October 31, 1997, capital aggregated $39,712,475
and $18,534,720, respectively. Transactions in common shares were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, October 31,
1998 1997
--------- -----------
<S> <C> <C>
Beginning Shares 3,474,702 14,065,878
--------- -----------
Shares Sold -0- 2,090,026
Shares Issued Through Dividend Reinvestment 2,012,680 1,123,352
Shares Redeemed -0- (13,804,554)
--------- -----------
Net Increase/Decrease in Shares Outstanding 2,012,680 (10,591,176)
--------- -----------
Ending Shares 5,487,382 3,474,702
========= ===========
</TABLE>
4. Investment Transactions
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $8,317,642 and $9,724,138, respectively.
5. Year 2000 Compliance (Unaudited)
Van Kampen utilizes a number of computer programs across its entire operation
relying on both internal software systems as well as external software systems
provided by third parties. In 1996 Van Kampen initiated a CountDown 2000 Project
to review both the internal systems and external vendor connections. The goal of
this project is to position its business to continue unaffected as a result of
the century change. At this time, there can be no assurance that the steps taken
will be sufficient to avoid any adverse impact to the Fund, but Van Kampen does
not anticipate that the move to Year 2000 will have a material impact on its
ability to continue to provide the Fund with service at current levels. In
addition, it is possible that the securities markets in which the Fund invests
may be detrimentally affected by computer failures throughout the financial
services industry beginning January 1, 2000. Improperly functioning trading
systems may result in settlement problems and liquidity issues.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Van Kampen Small Capitalization Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen Small Capitalization
Fund (the "Fund") at October 31, 1998 and the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1998 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Chicago, Illinois
December 4, 1998
<PAGE>
Van Kampen
Small Capitalization Fund
Board of Trustees
J. Miles Branagan
Richard M. DeMartini*
Linda Hutton Heagy
R. Craig Kennedy
Jack E. Nelson
Don G. Powell*
Philip B. Rooney
Fernando Sisto
Wayne W. Whalen* - Chairman
Paul G. Yovovich
Officers
Dennis J. McDonnell*
President
Ronald A. Nyberg*
Vice President and Secretary
John L. Sullivan*
Vice President, Treasurer and Chief Financial Officer
Curtis W. Morell*
Vice President and Chief Accounting Officer
Tanya M. Loden*
Controller
Peter W. Hegel*
Paul R. Wolkenberg*
Edward C. Wood, III*
Vice Presidents
Investment Adviser
Van Kampen
Asset Management Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181
Distributor
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
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
Chicago, Illinois 60601
*"Interested" persons of the Fund as defined in the Investment
Company Act of 1940
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> VAN KAMPEN SMALL CAP FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 44,272,271
<INVESTMENTS-AT-VALUE> 54,662,122
<RECEIVABLES> 51,193
<ASSETS-OTHER> 1,859
<OTHER-ITEMS-ASSETS> 1,897
<TOTAL-ASSETS> 54,717,071
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68,464
<TOTAL-LIABILITIES> 68,464
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39,712,475
<SHARES-COMMON-STOCK> 5,487,382
<SHARES-COMMON-PRIOR> 3,474,702
<ACCUMULATED-NII-CURRENT> 505,448
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,991,620
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,439,064
<NET-ASSETS> 54,648,607
<DIVIDEND-INCOME> 726,779
<INTEREST-INCOME> 59,655
<OTHER-INCOME> 0
<EXPENSES-NET> (119,334)
<NET-INVESTMENT-INCOME> 667,100
<REALIZED-GAINS-CURRENT> 4,065,066
<APPREC-INCREASE-CURRENT> (8,093,798)
<NET-CHANGE-FROM-OPS> (3,361,632)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (971,179)
<DISTRIBUTIONS-OF-GAINS> (20,161,961)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 2,012,680
<NET-CHANGE-IN-ASSETS> (3,361,632)
<ACCUMULATED-NII-PRIOR> 856,317
<ACCUMULATED-GAINS-PRIOR> 20,086,340
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 119,334
<AVERAGE-NET-ASSETS> 60,107,479
<PER-SHARE-NAV-BEGIN> 16.695
<PER-SHARE-NII> 0.134
<PER-SHARE-GAIN-APPREC> (0.788)
<PER-SHARE-DIVIDEND> (0.280)
<PER-SHARE-DISTRIBUTIONS> (5.802)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.959
<EXPENSE-RATIO> 0.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
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