<PAGE>
Van Kampen American Capital
ENTERPRISE FUND
Semi-Annual Report
June 30, 1997
[ART APPEARS HERE]
[VAN KAMPEN AMERICAN CAPITAL LOGO APPEARS HERE]
<PAGE>
Table of Contents
Letter to Shareholders ................................... 1
Performance Results ...................................... 3
Portfolio Highlights ..................................... 4
Portfolio Management Review .............................. 5
Portfolio of Investments ................................. 8
Statement of Assets and Liabilities ...................... 14
Statement of Operations .................................. 15
Statement of Changes in Net Assets ....................... 16
Financial Highlights ..................................... 17
Notes to Financial Statements ............................ 20
<PAGE>
Letter to Shareholders
[PHOTO APPEARS HERE]
Dennis J. McDonnell and Don G. Powell
July 24, 1997
Dear Shareholder,
As you know, Van Kampen American Capital was acquired by Morgan Stanley Group
Inc., a world leader in asset management. Earlier this year, Morgan Stanley
Group Inc. and Dean Witter, Discover & Co. agreed to merge. The merger was
completed on May 31, creating the combined company of Morgan Stanley, Dean
Witter, Discover & Co. Additionally, we are very pleased to announce that Philip
N. Duff, formerly the chief financial officer of Morgan Stanley Group Inc., has
joined Van Kampen American Capital as president and chief executive officer. I
will continue as chairman of the firm. We are confident that the partnership of
Van Kampen American Capital and Morgan Stanley will continue to work to the
benefit of our fund shareholders.
One of the immediate privileges that we can offer fund shareholders is the
ability to make exchanges between Van Kampen American Capital and Morgan Stanley
retail funds at no charge. In our view, the rapid appreciation of U.S. stock
prices in recent years has created a need for investors to examine their
portfolios carefully to ensure proper diversification among domestic and foreign
investments. The Morgan Stanley retail funds, with their emphasis on global
markets, can be valuable tools for accomplishing this diversification.
We also urge investors to consider how their fund holdings are currently
allocated among the three major asset classes of stocks, bonds, and cash
reserves. Uneven movements in the various markets can distort a carefully
planned investment program. And, with stock prices near record highs, it is
likely that some rebalancing of your portfolio allocations may be necessary.
Once again, the exchangeability feature with the Morgan Stanley retail funds
provides additional choices and opportunities to make the necessary adjustments
to your portfolio's asset allocation.
Economic Overview
Growth, stability, and confidence continued to characterize the U.S. economic
environment during the past six months. In the first quarter, the economy grew
at its fastest pace since 1987. Meanwhile, consumer confidence soared to its
highest reading in 27 years, while unemployment fell as low as 4.8 percent, the
lowest level since 1973.
Despite the robust pace of economic activity, there was little evidence of
troublesome inflation. Wholesale prices actually fell during each of the first
five months of 1997, the longest stretch of consecutive monthly declines in 45
years. At the consumer level, prices rose by a mere 2.2 percent during the 12
months through May. A strong rally in the U.S. dollar helped dampen inflationary
pressures resulting from the vigorous domestic economy by making imported goods
less expensive. At the same time, continued moderation in the cost of employee
benefit packages offset mild upward pressure on wages.
In March, the inflationary implications of a tight labor market caused the
Federal Reserve Board to raise its target for a key lending rate by one-quarter
of a percentage point, the first hike in
1 Continued on page two
<PAGE>
short-term interest rates in two years. Signs that economic growth slowed
markedly in the second quarter, however, led Fed policymakers to leave rates
unchanged at subsequent meetings.
Market Overview
With a solid underpinning of record profits, strong economic growth, and low
inflation, the U.S. equity market continued its torrid performance during the
first half of 1997. For a brief time this spring, however, investors worried
that growth was too robust and that higher interest rates were on the way. Those
fears pushed stock prices lower by about 10 percent over a one-month period
beginning in mid-March.
By mid-April, signs that the economy was cooling began to emerge, and stocks
skyrocketed to a series of record highs. The Wilshire 5000 Index of all publicly
traded domestic companies gained 16.65 percent during the first six months of
the year and increased by 25.95 percent over the 12 months through June 30. Low
inflation allowed the stock market's price/earnings multiple to remain high,
while strong growth in corporate profits provided solid support for stock
prices.
Within the equity market, most of the gains were generated by large-
capitalization stocks. The Russell 1000 Index of large companies gained 17.57
percent over the six months through June 30, almost double the return of the
Russell 2000 Index of small-capitalization companies. Consumer non-cyclicals
such as beverages and pharmaceuticals were among the top-performing industry
groups, although the rally broadened by the end of June to include sectors that
had previously been laggards, including cyclicals and small-company stocks.
Outlook
We expect the pace of economic activity during the remainder of 1997 to
accelerate modestly from the relatively sluggish rate that prevailed during the
second quarter. While we do not believe that economic growth will be rapid
enough to reignite inflation, some warning signs are present, including a tight
labor market and high consumer confidence. In this environment, at least one
additional Federal Reserve interest rate hike remains a possibility.
We believe that equities should continue to do well given the likely
continuation of the moderate-growth, low-inflation environment. We are
concerned, however, that the lengthy series of record highs in the U.S. stock
market is creating unreasonable expectations among some investors. Valuations
are extended and investment sentiment is exceptionally optimistic. Under such
circumstances, a mild correction would not be unusual.
We are fortunate to be experiencing a rare combination of sustained economic
growth, low inflation, and highly favorable performance in the financial market.
Along with our fund shareholders, we celebrate the seemingly best of economic
times. Once again, we encourage you to review your portfolio with an eye toward
correcting allocation imbalances.
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. We appreciate
your continued confidence in your investment with Van Kampen American Capital.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
Performance Results for the Period Ended June 30, 1997
Van Kampen American Capital Enterprise Fund
<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Total Returns
Six-month total return based on NAV/1/........ 16.46% 15.96% 15.98%
Six-month total return/2/..................... 9.78% 10.96% 14.98%
One-year total return/2/...................... 21.45% 22.76% 26.80%
Five-year average annual total return/2/...... 17.93% 18.16% N/A
Ten-year average annual total return/2/....... 13.14% N/A N/A
Life-of-Fund average annual total return/2/... 13.31% 17.45% 18.94%
Commencement Date............................. 01/07/54 12/20/91 07/20/93
</TABLE>
N/A = Not Applicable
/1/Assumes reinvestment of all distributions for the period and does not include
payment of the maximum sales charge (5.75% for A shares) or contingent
deferred sales charge for early withdrawal (5% for B shares and 1% for C
shares).
/2/Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or
contingent deferred sales charge for early withdrawal (B and C shares).
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth more
or less than their original cost.
Because the prices of common stocks and other securities fluctuate, the value of
an investment in the Fund will vary upon the Fund's investment performance.
Foreign securities may magnify volatility due to changes in foreign exchange
rates, the political and economic uncertainties in foreign countries, and the
potential lack of liquidity, government supervision, and regulation.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE>
Portfolio Highlights
Van Kampen American Capital Enterprise Fund
Top Ten Portfolio Holdings as a Percentage of Long-Term Investments
<TABLE>
<CAPTION>
As of June 30, 1997 As of December 31, 1996
<S> <C> <C>
Philip Morris Cos., Inc. ................ 5.3% .............. 5.8%
BMC Software, Inc. ...................... 2.4% .............. 1.2%
Conseco, Inc. ........................... 2.2% .............. 1.9%
Bristol-Myers Squibb Co. ................ 2.2% .............. 1.5%
Compaq Computer Corp. ................... 2.1% .............. 0.8%
Merck & Co., Inc. ....................... 1.8% .............. 1.6%
Pfizer, Inc. ............................ 1.7% .............. 1.4%
Federal National Mortgage Assn. ......... 1.7% .............. 3.0%
Praxair, Inc. ........................... 1.6% .............. 1.3%
BankAmerica Corp. ....................... 1.5% .............. 1.1%
</TABLE>
Top Five Portfolio Sectors as a Percentage of Long-Term Investments
<TABLE>
<CAPTION>
As of June 30, 1997
<S> <C>
Technology ............................. 23%
Health Care ............................ 16%
Finance ................................ 16%
Consumer Distribution .................. 11%
Consumer Services ...................... 9%
<CAPTION>
As of December 31, 1996
<S> <C>
Technology ............................. 23%
Finance ................................ 17%
Health Care ............................ 13%
Consumer Non-Durables .................. 10%
Consumer Services ...................... 9%
</TABLE>
4
<PAGE>
Portfolio Management Review
Van Kampen American Capital Enterprise Fund
We recently spoke to the management team of the Van Kampen American Capital
Enterprise Fund about the key events and economic forces that shaped the markets
during the past six months. The team includes Jeff D. New, portfolio manager,
and Alan T. Sachtleben, chief investment officer for equity investments. The
following excerpts reflect their views on the Fund's performance during the six-
month period ended June 30, 1997.
Q What factors influenced the market during the past six months?
A The rare combination of moderate economic growth and historically low
inflation provided a nearly ideal environment for equity investments and
drove the stock market to new highs. The economy grew at a remarkably strong
pace in the first quarter of the year, which caused investors to worry that
inflation might become a problem. This concern increased volatility in stock
prices and precipitated a month-long market correction that began in early
March, wiping out all year-to-date gains.
Stocks rebounded quickly after economic data was released in April showing
negligible inflation and hints of a slowdown in growth. In May, the Dow Jones
Industrial Average rallied to record-breaking heights and recouped its losses.
Overall, large, well-established companies weathered the past six months better
than their smaller competitors. The reporting period ended on a positive note,
as stocks continued to surge ahead through the end of June.
Q Given this environment, what was your strategy in seeking to meet the
Fund's objective?
A We maintain a consistent strategy of stock selection, seeking to identify
companies with positive future fundamentals at attractive prices. We look
for stocks that have one or more of the following traits: consistently above-
average earnings growth, accelerating earnings growth, better-than-expected
fundamentals, or an underlying change in a company, industry, or regulatory
environment. Our selection process is referred to as "bottom up," which means we
evaluate stocks one by one and make purchases wherever we find a good
opportunity, rather than maintaining defined sector allocations. This strategy
of purchasing attractively valued companies with strong fundamentals, regardless
of sector, was successful for the Fund during the reporting period.
Q How did the Fund weather the market's volatility in March and April?
A Quite well. We have a strict policy of normally keeping the Fund fully
invested, so we didn't move a large portion of the Fund's assets into cash
when the stock market dropped. As a result, the Fund more than recovered its
lost ground when the market rebounded in May, while funds that increased their
cash allocation might have been left behind. Situations like this one illustrate
why we stick to a fully invested strategy.
5
<PAGE>
Q What changes did you make to the portfolio?
A Because we use a bottom-up selection process, our sector weightings are a
reflection of where we found good opportunities on a stock-by-stock basis.
The portfolio was slightly overweighted in the health-care sector, because we
increased our holdings in several pharmaceutical firms, including Merck,
Bristol-Myers Squibb, and Pfizer. Generally, we believe the outlook for HMOs is
growing more positive, as they continue to gain market share and show greater
profitability. In particular, Wellpoint Health Network has been acquiring
smaller firms, which has allowed them to add new members while cutting redundant
costs. Their stock price has appreciated almost 34 percent so far this year.
In the financial sector, we reduced our overall weighting but added
substantially to our holdings in Conseco, a financial services holding company
that operates life insurance firms. Recently, we visited with representatives
from Conseco, and they gave us a first-hand account of their business. Meetings
like this one are key to a bottom-up selection strategy--we think it is the
single most valuable way for us to spend our time. We try to meet or have
discussions with 300 to 400 management teams each year in an effort to gain
insight into the companies whose securities we are evaluating.
Q What is the largest sector in the Fund's portfolio?
A Once again, it's technology--about 23 percent of the Fund's long-term
assets are allocated here. Our holdings in BMC Software, International
Business Machines, and Compaq Computer Corp. served the portfolio well
during the reporting period. Compaq is especially attractive to us now,
since we visited the company this spring. In the past year, they appointed
a new chief financial officer who has focused on increasing profitability
and reducing inventory, which should lower the company's risks and
operating costs. Compaq's stock price has returned almost 34 percent this
year. This is a good example of our stock selection strategy at work--we
believe Compaq is reasonably priced and has positive future fundamentals.
In general, we believe that U.S. businesses and consumers will continue to
spend money on new technology because of the productivity benefits it can offer.
In addition, companies are tending to consolidate the number of technology
suppliers they use, so they want these suppliers to provide a broader range of
products and services. We expect this trend to continue, which may result in
leading technology companies increasing their market share. As a result, the
technology sector could start to produce fewer winners. This scenario should
provide careful stock selectors with good investment opportunities. For
additional Fund portfolio highlights, please refer to page four.
Q How did the Fund perform over the past six months?
A The Fund achieved a six-month total return of 16.46 percent/1/ (Class A
shares at net asset value) as of June 30, 1997. By comparison, the Standard
& Poor's 500-Stock Index returned 20.59 percent, and the Lipper Growth Fund
Index, which more closely resembles the Fund, returned 15.40 percent. The S&P
500-Stock Index is a broad-based, unmanaged index that reflects the general
performance of the stock market, and the Lipper Growth Fund Index reflects the
average performance of the largest growth funds.
6
<PAGE>
Keep in mind that these indices are unmanaged statistical composites that
do not include any commissions, fees, or sales charges that would be paid by an
investor purchasing the securities they represent. Please refer to the chart on
page three for additional Fund performance results.
Q What is your outlook for the remainder of the year?
A Currently, the stock market is experiencing a nearly perfect environment:
low inflation, moderate economic growth, and solid corporate earnings.
While we don't believe inflation is a serious concern, some warning signs are
present, including strong job growth, high consumer confidence, and a mild
upturn in wages. The recent rally in stock prices suggests that investors
believe the Federal Reserve Board will successfully engineer a slowdown in
growth without tipping the economy into a recession. However, volatility could
remain high until then.
Because the stock market has flourished lately, we are finding it
difficult--but not impossible--to identify promising securities that we believe
are attractively priced. High-valuation stocks often carry high risk: the more
expensive a security, the farther its price can fall in a downturn. Our strategy
for the Enterprise Fund emphasizes securities with strong fundamentals at
reasonable prices, so we believe the Fund will be in good standing in the months
ahead.
/S/ Alan T. Sachtleben /S/ Jeff D. New
Alan T. Sachtleben Jeff D. New
Chief Investment Officer Portfolio Manager
Equity Investments
7 Please see footnotes on page three
<PAGE>
Portfolio of Investments
June 30, 1997 (Unaudited)
=========================================================================
<TABLE>
<CAPTION>
Number Market Value
Description of Shares (000)
- -------------------------------------------------------------------------
<S> <C> <C>
Common and Preferred Stocks 89.5%
Consumer Distribution 9.4%
American Stores Co.............................. 309,000 $ 15,257
Bed Bath & Beyond, Inc. (b)..................... 170,000 5,164
Consolidated Stores Corp. (b)................... 256,000 8,896
CVS Corp........................................ 259,000 13,274
Dayton Hudson Corp.............................. 299,000 15,903
General Nutrition Cos., Inc. (b)................ 266,000 7,448
Home Depot, Inc................................. 155,000 10,685
Kroger Co. (b).................................. 552,000 16,008
Lear Corp. (b).................................. 128,000 5,680
Lowe's Cos., Inc................................ 212,000 7,870
Ross Stores, Inc................................ 438,000 14,317
Safeway, Inc. (b)............................... 541,000 24,954
Tiffany & Co.................................... 212,000 9,792
TJX Cos., Inc................................... 592,000 15,614
U.S. Office Products Co. (b).................... 353,000 10,788
----------
181,650
----------
Consumer Non-Durables 7.2%
Borders Group, Inc. (b)......................... 273,000 6,586
Liz Claiborne, Inc.............................. 274,000 12,775
Nautica Enterprises, Inc. (b)................... 170,000 4,494
Philip Morris Cos., Inc......................... 2,073,000 91,990
Procter & Gamble Co............................. 79,000 11,159
Ralston-Ralston Purina Group.................... 82,000 6,739
Tommy Hilfiger Corp. (b)........................ 133,000 5,345
----------
139,088
----------
Consumer Services 8.4%
AccuStaff, Inc. (b)............................. 494,000 11,702
Evergreen Media Corp., Class A (b).............. 366,000 16,333
Firstplus Financial Group, Inc. (b)............. 420,000 14,280
Gannett, Inc.................................... 125,000 12,344
HFS, Inc. (b)................................... 201,000 11,658
Hilton Hotels Corp.............................. 266,000 7,066
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
=========================================================================
Number Market Value
Description of Shares (000)
- -------------------------------------------------------------------------
<S> <C> <C>
Consumer Services (Continued)
La Quinta Inns, Inc.............................. 443,000 $ 9,691
Marriot International, Inc....................... 129,000 7,917
New York Times Co................................ 234,000 11,583
Omnicom Group, Inc............................... 340,000 20,952
Scripps Co. (EW), Class A........................ 106,000 4,412
Service Corp. International...................... 587,000 19,297
Tribune Co....................................... 283,000 13,602
----------
160,837
----------
Energy 4.2%
Baker Hughes, Inc................................ 185,000 7,157
British Petroleum PLC--ADR (United Kingdom)...... 205,000 15,349
Exxon Corp....................................... 158,000 9,717
Schlumberger, Ltd................................ 82,000 10,250
Smith International, Inc. (b).................... 190,000 11,543
Texaco, Inc...................................... 160,000 17,400
YPF Sociedad Anonima--ADR (Argentina), Class D... 319,000 9,809
----------
81,225
Finance 14.4%................................... ----------
Allstate Corp.................................... 180,000 13,140
AMBAC, Inc....................................... 113,000 8,630
BankAmerica Corp................................. 412,000 26,600
BankBoston Corp.................................. 217,000 15,638
Chase Manhattan Corp............................. 213,000 20,674
Citicorp......................................... 74,000 8,922
CMAC Investment Corp............................. 318,000 15,184
Conseco, Inc..................................... 1,043,000 38,591
Federal National Mortgage Assn................... 654,000 28,531
First Bank System, Inc........................... 116,000 9,904
Green Tree Financial Corp........................ 414,000 14,749
Merrill Lynch & Co., Inc......................... 175,000 10,434
MGIC Investment Corp............................. 233,000 11,169
Money Store, Inc................................. 149,000 4,274
Student Loan Marketing Assn...................... 80,000 10,160
</TABLE>
9 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited
=========================================================================
Number Market Value
Description of Shares (000)
- -------------------------------------------------------------------------
<S> <C> <C>
Finance (Continued)
SunAmerica, Inc................................ 282,000 $ 13,748
Travelers Group, Inc........................... 412,000 25,982
----------
276,330
----------
Healthcare 14.7%
Aetna, Inc..................................... 103,000 10,545
American Home Products Corp.................... 129,000 9,869
Amgen, Inc. (b)................................ 202,000 11,741
Bristol-Myers Squibb Co........................ 460,000 37,260
ESC Medical Systems, Ltd. (b).................. 252,000 6,426
Health Management Assn., Inc., Class A (b)..... 308,000 8,778
Healthsouth Corp. (b).......................... 657,000 16,384
Johnson & Johnson, Inc......................... 240,000 15,450
Lincare Holdings, Inc. (b)..................... 288,000 12,384
Merck & Co., Inc............................... 303,000 31,360
PacifiCare Health Systems, Class B (b)......... 100,000 6,388
Pfizer, Inc.................................... 249,000 29,755
Renal Treatment Centers, Inc. (b).............. 271,000 7,283
Schering-Plough Corp........................... 424,000 20,299
Tenet Healthcare Corp. (b)..................... 309,000 9,135
Universal Health Services, Inc., Class B (b)... 266,000 10,241
Vencor, Inc. (b)............................... 196,000 8,281
Watson Pharmaceuticals, Inc. (b)............... 247,000 10,436
Wellpoint Health Networks, Inc., Class A (b)... 453,000 20,781
----------
282,796
----------
Producer Manufacturing 6.2%
AlliedSignal, Inc.............................. 152,000 12,768
Cummins Engine, Inc............................ 139,000 9,808
Illinois Tool Workers, Inc..................... 119,000 5,943
Philips Electronics N.V.-ADR (Netherlands)..... 77,000 5,534
Textron, Inc................................... 297,000 19,713
Tyco International Ltd......................... 244,000 16,973
United Technologies Corp....................... 191,000 15,853
United Waste Systems, Inc. (b)................. 483,000 19,803
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
- ----------------------------------------------------------------------------
June 30, 1997 (Unaudited)
============================================================================
<TABLE>
<CAPTION>
Number Market Value
Description of Shares (000)
- ----------------------------------------------------------------------------
<S> <C> <C>
Producer Manufacturing (Continued)
USA Waste Services, Inc. (b)........................ 313,000 $ 12,090
----------
118,485
----------
Raw Materials/Processing Industries 2.7%
Bowater, Inc........................................ 221,000 10,221
Cytec Industries, Inc. (b).......................... 337,000 12,596
Praxair, Inc........................................ 505,000 28,280
----------
51,097
----------
Technology 20.7%
Adaptec, Inc (b).................................... 296,000 10,286
Altera Corp. (b).................................... 170,000 8,585
Analog Devices, Inc. (b)............................ 220,000 5,844
Aspect Telecommunications Corp. (b)................. 319,000 7,098
BMC Industries, Inc................................. 143,000 4,898
BMC Software, Inc. (b).............................. 757,000 41,919
Boeing Co........................................... 170,000 9,021
Cadence Design Systems, Inc. (b).................... 200,000 6,700
CHS Electronics, Inc. (b)........................... 144,000 3,816
Cisco Systems, Inc. (b)............................. 108,000 7,250
Compaq Computer Corp. (b)........................... 372,000 36,921
Compuware Corp. (b)................................. 336,000 16,044
Data General Corp. (b).............................. 258,000 6,708
Dell Computer Corp. (b)............................. 93,000 10,922
Intel Corp.......................................... 33,000 4,680
International Business Machines Corp................ 285,000 25,703
KLA - Tencor Corp. (b).............................. 103,000 5,021
Linear Technology Corp.............................. 143,000 7,400
LSI Logic Corp. (b)................................. 286,000 9,152
Lucent Technologies, Inc............................ 133,000 9,584
Microsoft Corp. (b)................................. 89,000 11,247
Motorola, Inc....................................... 113,000 8,588
National Semiconductor Corp. (b).................... 336,000 10,290
Nokia Corp. - ADR (Finland)......................... 106,000 7,818
Oracle Systems Corp. (b)............................ 206,000 10,377
</TABLE>
11 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
- ----------------------------------------------------------------------------
June 30, 1997 (Unaudited)
============================================================================
<TABLE>
<CAPTION>
Number Market Value
Description of Shares (000)
- ----------------------------------------------------------------------------
<S> <C> <C>
Technology (Continued)
Pacific Gateway Exchange, Inc. (b).................. 185,000 $ 5,226
Sanmina Corp. (b)................................... 160,000 10,160
SCI Systems, Inc. (b)............................... 191,000 12,176
Scientific Atlanta, Inc............................. 541,000 11,834
Stratus Computer, Inc. (b).......................... 129,000 6,450
Sun Microsystems, Inc. (b).......................... 473,000 17,604
Telecomunicacoes Brasileiras - ADR (Brazil)......... 93,000 14,113
Tellabs, Inc. (b)................................... 228,000 12,740
Texas Instruments, Inc.............................. 64,000 5,380
Xerox Corp.......................................... 201,000 15,854
----------
397,409
----------
Transportation 0.3%
Continental Airlines, Inc., Class B (b)............. 185,000 6,463
----------
Utilities 1.3%
Bell Atlantic Corp.................................. 206,000 15,630
Cincinnati Bell, Inc................................ 325,000 10,238
----------
25,868
----------
Total Long-Term Investments
(Cost $1,213,384,142)....................................... 1,721,248
----------
Short-Term Investments 10.9%
Commercial Paper 3.8%
General Electric Capital Corp.
($50,000,000 par, yielding 6.051%, 07/01/97 maturity)(a)..... 49,992
Prudential Funding Corp.
($22,665,000 par, yielding 6.031%, 07/01/97 maturity)(a)..... 22,661
----------
72,653
----------
United States Government Agency Obligations 7.1%
Federal Home Loan Bank Consolidated Discount Notes
($8,000,000 par, yielding 5.577%, 07/03/97 maturity)(a)...... 7,996
Federal Home Loan Bank Consolidated Discount Notes
($20,000,000 par, yielding 5.325%, 07/10/97 maturity)(a)..... 19,971
Federal Home Loan Mortgage Discount Notes
($20,000,000 par, yielding 5.399%, 07/07/97 maturity)........ 19,979
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market Value
Description (000)
- --------------------------------------------------------------------------------
<S> <C>
United States Agency Obligations (Continued)
Federal Home Loan Mortgage Discount Notes
($50,000,000 par, yielding 5.562%, 07/17/97 maturity)(a)............ $ 49,870
----------
Federal Home Loan Mortgage Discount Notes
($25,000,000 par, yielding 5.512%, 09/12/97 maturity)............... 24,726
Federal National Mortgage Assn. Discount Notes
($15,000,000 par, yielding 5.610%, 07/18/97 maturity)(a)............ 14,959
----------
137,501
----------
Total Short-Term Investments (Cost $210,148,262).................... 210,154
----------
Total Investments 100.4% (Cost $1,423,532,404)...................... 1,931,402
Liabilities in Excess of Other Assets (0.4%)........................ (7,995)
----------
Net Assets 100.0% .................................................. $1,923,407
==========
</TABLE>
(a) Assets segregated for open option and futures transactions.
(b) Non-income producing security as this stock currently does not declare
dividends.
13 See Notes to Financial Statements
<PAGE>
Statements of Assets and Liabilities
June 30, 1997 (Unaudited).
All amounts, except for Maximum Offering Price information, reported in
thousands
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Total Investments, at Market Value (Cost $1,423,532)................ $1,931,402
Cash................................................................ 18
Receivables:
Investments Sold.................................................. 8,347
Fund Shares Sold.................................................. 5,732
Dividends......................................................... 1,638
Other............................................................... 13
----------
Total Assets................................................... 1,947,150
----------
Liabilities:
Payables:
Fund Shares Repurchased........................................... 11,946
Investments Purchased............................................. 8,272
Distributor and Affiliates........................................ 1,232
Variation Margin on Futures....................................... 1,197
Investment Advisory Fee........................................... 748
Income Distributions.............................................. 92
Deferred Compensation and Retirement Plans (Note 2)................. 137
Accrued Expenses.................................................... 119
----------
Total Liabilities.............................................. 23,743
----------
Net Assets.......................................................... $1,923,407
==========
Net Assets Consist of:
Capital............................................................. $1,301,605
Net Unrealized Appreciation......................................... 508,999
Accumulated Net Realized Gain....................................... 107,514
Accumulated Undistributed Net Investment Income..................... 5,289
----------
Net Assets.......................................................... $1,923,407
==========
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share
(Based on net assets of $1,480,701,339 and 85,538,347
shares of beneficial interest issued and outstanding).......... $ 17.31
Maximum sales charge (5.75%* of offering price)................. 1.06
----------
Maximum offering price to public................................ $ 18.37
==========
Class B Shares:
Net asset value and offering price per share
(Based on net assets of $399,642,543 and 23,505,481
shares of beneficial interest issued and outstanding).......... $ 17.00
==========
Class C Shares:
Net asset value and offering price per share
(Based on net assets of $43,062,736 and 2,515,278
shares of beneficial interest issued and outstanding).......... $ 17.12
==========
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
14 See Notes to Financial Statements
<PAGE>
Statement of Operations
For the Six Months Ended June 30, 1997 (Unaudited)
All amounts reported in thousands
===============================================================================
<TABLE>
<S> <C>
Investment Income:
Dividends .......................................................... $ 7,751
Interest ........................................................... 7,419
--------
Total Income ............................................... 15,170
--------
Expenses:
Investment Advisory Fee ............................................ 4,193
Distribution (12b-1) and Service Fees (Attributed to Classes A,
B and C of $1,292, $1,755 and $183, respectively) ................ 3,230
Shareholder Services ............................................... 1,796
Custody ............................................................ 49
Legal .............................................................. 33
Trustees Fees and Expenses ......................................... 16
Other .............................................................. 449
--------
Total Expenses ............................................. 9,766
--------
Net Investment Income .............................................. $ 5,404
========
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments .................................................... $ 75,100
Futures ........................................................ 36,167
--------
Net Realized Gain .................................................. 111,267
--------
Unrealized Appreciation/Depreciation:
Beginning of the Period ........................................ 359,779
--------
End of the Period:
Investments ................................................ 507,870
Futures .................................................... 1,129
--------
508,999
--------
Net Unrealized Appreciation During the Period ...................... 149,220
--------
Net Realized and Unrealized Gain ................................... $260,487
========
Net Increase in Net Assets From Operations ......................... $265,891
========
15 See Notes to Financial Statements
</TABLE>
<PAGE>
Statement of Changes in Net Assets
For the Six Months Ended June 30, 1997
and the Year Ended December 31, 1996 (Unaudited)
All amounts reported in thousands
<TABLE>
<CAPTION>
===============================================================================================
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income............................... $ 5,404 $ 6,405
Net Realized Gain................................... 111,267 104,556
Net Unrealized Appreciation During the Period....... 149,220 183,936
---------------- -----------------
Change in Net Assets from Operations................ 265,891 294,897
---------------- -----------------
Distributions from Net Investment Income:
Class A Shares..................................... (645) (6,114)
---------------- -----------------
Distributions from Net Realized Gain:
Class A Shares..................................... (22,624) (71,743)
Class B Shares..................................... (5,894) (16,735)
Class C Shares..................................... (585) (1,643)
---------------- -----------------
(29,103) (90,121)
---------------- -----------------
Total Distributions............................... (29,748) (96,235)
---------------- -----------------
Net Change in Net Assets from
Investment Activities.............................. 236,143 198,662
---------------- -----------------
From Capital Transactions:
Proceeds from Shares Sold........................... 1,470,560 2,030,347
Net Asset Value of Shares Issued Through
Dividend Reinvestment.............................. 26,863 86,564
Cost of Shares Repurchased.......................... (1,423,124) (1,938,131)
---------------- -----------------
Net Change in Net Assets from
Capital Transactions............................... 74,299 178,780
---------------- -----------------
Total Increase in Net Assets........................ 310,442 377,442
Net Assets:
Beginning of the Period............................. 1,612,965 1,235,523
---------------- -----------------
End of the Period (Including accumulated
undistributed net investment income
of $5,289 and $530, respectively).................. $ 1,923,407 $ 1,612,965
================ =================
16 See Notes to Financial Statements
</TABLE>
<PAGE>
Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended --------------------------------------
Class A Shares June 30, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.......... $ 15.120 $ 13.07 $ 11.43 $ 12.23 $ 12.64
-------- -------- -------- ------- -------
Net Investment Income........................... .064 .086 .08 .08 .06
Net Realized and Unrealized Gain/Loss........... 2.400 2.942 3.7325 (.1225) 1.2525
-------- -------- -------- ------- -------
Total from Investment Operations.................. 2.464 3.028 3.8125 (.0425) 1.3125
-------- -------- -------- ------- -------
Less:
Distributions from Net Investment Income........ .008 .077 .0725 .085 .0575
Distributions from Net Realized Gain............ .266 .901 2.10 .6725 1.665
-------- -------- -------- ------- -------
Total Distributions............................... .274 .978 2.1725 .7575 1.7225
-------- -------- -------- ------- -------
Net Asset Value, End of the Period................ $ 17.310 $ 15.120 $ 13.07 $ 11.43 $ 12.23
======== ======== ======== ======= =======
Total Return (a).................................. 16.46%* 23.48% 33.92% (.18%) 10.96%
Net Assets at End of the Period (In millions)..... $1,480.7 $1,276.9 $1,035.7 $ 749.7 $ 778.9
Ratio of Expenses to Average Net Assets (b)....... .93% 1.01% .98% 1.05% .99%
Ratio of Net Investment Income to
Average Net Assets (b).......................... .80% .60% .59% .71% .48%
Portfolio Turnover................................ 42%* 110% 152% 176% 196%
Average Commission Paid
Per Equity Share Traded (c)..................... $ .0578 $ .0583 -- -- --
</TABLE>
* Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC's reimbursement of certain expenses was less than
0.01%.
(c) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
17 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
========================================================================================================
Year Ended December 31,
Six Months Ended ------------------------------------
Class B Shares June 30, 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period............ $14.909 $ 12.94 $11.37 $ 12.19 $12.66
------- ------- ------ ------- ------
Net Investment Income/Loss........................ .005 (.012) (.03) (.01) (.04)
Net Realized and Unrealized Gain/Loss............. 2.354 2.882 3.70 (.1375) 1.24
------- ------- ------ ------- ------
Total from Investment Operations.................... 2.359 2.870 3.67 (.1475) 1.20
------- ------- ------ ------- ------
Less:
Distributions from Net Investment Income.......... -- -- -- -- .005
Distributions from Net Realized Gain.............. .266 .901 2.10 .6725 1.665
------- ------- ------ ------- ------
Total Distributions................................. .266 .901 2.10 .6725 1.675
------- ------- ------ ------- ------
Net Asset Value, End of the Period.................. $17.002 $14.909 $12.94 $ 11.37 $12.19
======= ======= ====== ======= ======
Total Return (a) 15.96%* 22.48% 32.82% (1.07%) 10.00%
Net Assets at End of the Period (In millions)....... $ 399.6 $ 305.6 $184.1 $ 93.7 $ 66.2
Ratio of Expenses to Average Net Assets (b)......... 1.75% 1.82% 1.81% 1.89% 1.81%
Ratio of Net Investment Income to
Average Net Assets (b)............................ (.02%) (.21%) (.24%) (.11%) (.37%)
Portfolio Turnover.................................. 42%* 110% 152% 176% 196%
Average Commission Paid
Per Equity Share Traded (c)....................... $ .0578 $ .0583 -- -- --
</TABLE>
* Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC's reimbursement of certain expenses was less than
0.01%.
(c) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
18 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
==============================================================================================================
July 20, 1993
(Commencement
Year Ended December 31, of Distribution) to
Six Months Ended --------------------------- December 31,
Class C Shares June 30, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period..... $ 15.008 $ 13.01 $11.42 $ 12.23 $ 12.66
-------- ------- ------ ------- -------
Net Investment Income/Loss................. .006 (.013) (.03) (.01) (.03)
Net Realized and Unrealized Gain/Loss...... 2.372 2.912 3.72 (.1275) .765
-------- ------- ------ ------- -------
Total from Investment Operations............. 2.378 2.899 3.69 (.1375) .735
Less:
Distributions from Net Realized Gain....... .266 .901 2.10 .6725 1.165
-------- ------- ------ ------- -------
Net Asset Value, End of the Period........... $ 17.120 $15.008 $13.01 $ 11.42 $ 12.23
======== ======= ====== ======= =======
Total Return (a)............................. 15.98%* 22.60% 32.85% (.99%) 6.08%*
Net Assets at End of the Period
(In millions)............................... $ 43.1 $ 30.4 $ 15.7 $ 7.4 $ 2.1
Ratio of Expenses to
Average Net Assets (b)..................... 1.75% 1.82% 1.80% 1.90% 1.83%
Ratio of Net Investment Income to
Average Net Assets (b)..................... (.02%) (.22%) (.23%) (.12%) (.48%)
Portfolio Turnover........................... 42%* 110% 152% 176% 196%
Average Commission Paid Per
Equity Share Traded (c).................... $ .0578 $ .0583 - - -
*Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC's reimbursement of certain expenses was less than
0.01%.
(c) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
19 See Notes to Financial Statements
</TABLE>
<PAGE>
Notes to Financial Statements
June 30, 1997 (Unaudited)
================================================================================
1. Significant Accounting Policies
Van Kampen American Capital Enterprise Fund (the "Fund") is organized as a
Delaware business trust, and is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to seek capital appreciation by investing in a
portfolio of securities consisting principally of common stocks. The Fund
commenced investment operations on January 7, 1954. The distribution of the
Fund's Class B and Class C shares commenced on December 20, 1991 and July 20,
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 or, if not
available, their fair value as determined in accordance with procedures
established in good faith by the Board of Trustees. Short-term securities with
remaining maturities of 60 days or less are valued at amortized cost.
B. Security Transactions--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may 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 American Capital 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 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. Original issue discounts on
debt securities purchased are
20
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
===============================================================================
amortized over the expected life of each applicable security. Premiums on debt
securities are not amortized. Market discounts are recognized at the time of
sale as realized gains for book purposes and ordinary income for tax purposes.
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, 1997, for federal income tax purposes, cost of long- and short-
term investments is $1,423,842,932; the aggregate gross unrealized appreciation
is $518,525,325 and the aggregate gross unrealized depreciation is $9,837,830,
resulting in net unrealized appreciation including open futures transactions of
$508,687,495.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses for tax purposes
resulting from wash sales.
E. Distribution of Income and Gains--The Fund declares and pays dividends
annually from net investment income. Net realized gains, if any, are distributed
annually. Distributions from net realized gains for book purposes may include
short-term capital gains and gains on option and futures transactions. All
short-term capital gains and a portion of option and futures gains are included
in ordinary income for tax purposes.
2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
Average Net Assets % Per Annum
===============================================================================
First $1 billion.................................................... .50 of 1%
Next $1 billion..................................................... .45 of 1%
Next $1 billion..................................................... .40 of 1%
Over $3 billion..................................................... .35 of 1%
21
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
For the six months ended June 30, 1997, the Fund recognized expenses of
approximately $33,000 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, 1997, the Fund recognized expenses of
approximately $122,200 representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting
services to the Fund. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
June 30, 1997, the Fund recognized expenses of approximately $1,324,200,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. 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 equal to $2,500.
At June 30, 1997, VKAC owned 233,167 Class A shares of the Fund.
3. Capital Transactions
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At June 30, 1997, capital aggregated $944,710,486, $321,639,606 and
$35,255,099 for Classes A, B, and C, respectively. For the six months ended June
30, 1997, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
==============================================================================
Sales:
<S> <C> <C>
Class A..................................... 71,168,829 $1,146,369,891
Class B..................................... 17,502,001 276,609,039
Class C..................................... 3,000,400 47,580,637
---------- --------------
Total Sales................................... 91,671,230 $1,470,559,567
========== ==============
</TABLE>
22
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
================================================================================
Shares Value
================================================================================
<S> <C> <C>
Dividend Reinvestment:
Class A..................................... 1,307,198 $ 20,784,439
Class B..................................... 354,514 5,548,153
Class C..................................... 33,664 530,542
------------ ---------------
Total Dividend Reinvestment................... 1,695,376 $ 26,863,134
============ ===============
Repurchases:
Class A..................................... (71,390,836) $(1,149,579,138)
Class B..................................... (14,848,978) (233,203,757)
Class C..................................... (2,545,433) (40,340,881)
------------ ---------------
Total Repurchases............................. (88,785,247) $(1,423,123,776)
============ ===============
</TABLE>
At December 31, 1996, capital aggregated.$927,135,294, $272,686,171 and
$27,484,801 for Classes A, B, and C, respectively. For the year ended December
31, 1996, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
================================================================================
<S> <C> <C>
Sales:
Class A..................................... 126,043,194 $ 1,809,251,040
Class B..................................... 13,737,705 198,374,191
Class C..................................... 1,580,836 22,721,465
------------ ---------------
Total Sales................................... 141,361,735 $ 2,030,346,696
============ ===============
Dividend Reinvestment:
Class A..................................... 4,744,715 $ 69,348,511
Class B..................................... 1,091,094 15,745,899
Class C..................................... 101,205 1,470,099
------------ ---------------
Total Dividend Reinvestment................... 5,937,014 $ 86,564,509
============ ===============
Repurchases:
Class A..................................... (125,592,139) $(1,803,597,041)
Class B..................................... (8,554,547) (122,127,031)
Class C..................................... (861,999) (12,406,893)
------------ ---------------
Total Repurchases............................. (135,008,685) $(1,938,130,965)
============ ===============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and C
shares will be imposed on most redemptions made within five years of the
purchase for Class B and one year of the purchase for
23
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
================================================================================
Class C as detailed in the following schedule. The Class B and C shares bear the
expense of their respective deferred sales arrangements, including higher
distribution and service fees and incremental transfer agency costs.
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
Year of Redemption Class B Class C
================================================================================
<S> <C> <C>
First ........................................................ 5.00% 1.00%
Second ....................................................... 4.00% None
Third ........................................................ 3.00% None
Fourth ....................................................... 2.50% None
Fifth ........................................................ 1.50% None
Sixth and Thereafter ......................................... None None
</TABLE>
For the six months ended June 30, 1997, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$281,400 and CDSC on redeemed shares of approximately $295,200. 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 $728,111,567 and $623,290,036,
respectively.
5. Derivative Financial Instruments
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the futures contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in stock index futures. These contracts are generally used to
provide the return of an index without purchasing all of the securities
underlying the index or to manage the Fund's overall exposure to the equity
markets.
24
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
================================================================================
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin).
Transactions in futures contracts for the six months ended June 30, 1997,
were as follows:
<TABLE>
<CAPTION>
Contracts
================================================================================
<S> <C>
Outstanding at December 31, 1996....................................... 450
Futures Opened......................................................... 1,190
Futures Closed......................................................... (1,280)
------
Outstanding at June 30, 1997........................................... 360
======
The futures contracts outstanding at June 30, 1997, and the description and
unrealized appreciation are as follows:
Unrealized
Contracts Appreciation
================================================================================
Long Contracts--Sept 1997 S&P 500 Index Future
(Current Notional Value of $445,125 per contract).. 360 $ 1,128,703
========= ============
</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, 1997, are payments to VKAC of approximately
$1,583,900.
25
<PAGE>
Funds Distributed by Van Kampen American Capital
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income fund
Tax Free Money Fund
MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Value Fund
Worldwide High Income Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us weekdays from 7:00 a.m. to 7:00 p.m.
Central time at 1-800-341-2911 for Van Kampen American Capital funds or Morgan
Stanley retail funds.
26
<PAGE>
Results of Shareholder Votes
A Special Meeting of Shareholders of the Fund was held on May 28, 1997
where shareholders voted on a new investment advisory agreement, the election of
Trustees and the ratification of Price Waterhouse LLP as independent public
accountants. With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Asset Management, Inc. and the Fund,
63,615,433 shares voted for the proposal, 1,296,470 shares voted against and
2,921,015 shares abstained. With regard to the election of J. Miles Branagan as
elected trustee of the Fund, 66,287,677 shares voted in his favor and 1,545,240
shares withheld. With regard to the election of Richard M. DeMartini as elected
trustee of the Fund, 66,275,204 shares voted in his favor and 1,557,713 shares
withheld. With regard to the election of Linda Hutton Heagy as elected trustee
of the Fund, 66,270,884 shares voted in her favor and 1,562,033 shares withheld.
With regard to the election of R. Craig Kennedy as elected trustee of the Fund,
66,268,005 shares voted in his favor and 1,564,912 shares withheld. With regard
to the election of Jack E. Nelson as elected trustee of the Fund, 66,290,624
shares voted in his favor and 1,542,293 shares withheld. With regard to the
election of Jerome L. Robinson as elected trustee of the Fund, 66,228,070 shares
voted in his favor and 1,604,847 shares withheld. With regard to the election of
Phillip B. Rooney as elected trustee of the Fund, 66,285,613 shares voted in his
favor and 1,547,304 shares withheld. With regard to the election of Fernando
Sisto as elected trustee of the Fund, 66,229,377 shares voted in his favor and
1,603,540 shares withheld. With regard to the election of Wayne W. Whalen as
elected trustee of the Fund, 66,294,005 shares voted in his favor and 1,538,913
shares withheld. With regard to the ratification of Price Waterhouse LLP as
independent public accountants for the Fund, 64,728,914 shares voted for the
proposal, 566,263 shares voted against and 2,537,740 shares abstained.
27
<PAGE>
Van Kampen American Capital Enterprise Fund
Board of Trustees
J. Miles Branagan
Richard M. DeMartini*
Linda Hutton Heagy
R. Craig Kennedy
Jack E. Nelson
Jerome L. Robinson
Phillip B. Rooney
Fernando Sisto
Wayne W. Whalen* - Chairman
Officers
Dennis J. McDonnell*
President
Ronald A. Nyberg*
Vice President and Secretary
Edward C. Wood, III*
Vice President and Chief Financial Officer
Curtis W. Morell*
Vice President and Chief Accounting Officer
John L. Sullivan*
Treasurer
Tanya M. Loden*
Controller
Peter W. Hegel*
Alan T. Sachtleben*
Paul R. Wolkenberg*
Vice Presidents
Investment Adviser
Van Kampen American Capital
Asset Management, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Distributor
Van Kampen American Capital
Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Shareholder Servicing Agent
ACCESS 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
Price Waterhouse LLP
1201 Louisiana
Houston, Texas 77002
* "Interested" persons of the Fund, as defined in the Investment Company Act
of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1997
All rights reserved.
/SM/ denotes a service mark of Van Kampen American Capital Distributors, 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, 1997, the report must be accompanied by
a quarterly performance update, if applicable.
28
<PAGE>
---------------
Van Kampen American Capital Distributors, Inc. Bulk Rate
One Parkview Plaza U.S. Postage
Oakbrook Terrace, Illinois 60181 PAID
VAN KAMPEN
AMERICAN CAPITAL
----------------
