<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio Management Review................. 4
Portfolio of Investments.................... 6
Statement of Assets and Liabilities......... 11
Statement of Operations..................... 12
Statement of Changes in Net Assets.......... 13
Financial Highlights........................ 14
Notes to Financial Statements............... 17
</TABLE>
GI SAR 7/96
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
DENNIS J. MCDONNELL AND DON G. POWELL
July 8, 1996
Dear Shareholder,
During the six-month period covered by this report, December 1, 1995 through
May 31, 1996, we saw the end of a solid year for the financial markets--and
the beginning of a new year that promises to offer investment challenges and
opportunities.
Events on the horizon--from the presidential election to the likelihood of
significant tax reform --reiterate the need to maintain a long-term investment
perspective. While short-term political and economic events may affect
investment performance, a long-term strategy that includes growth and income
securities may help you achieve your financial objectives.
MARKET OVERVIEW
The economy continued to demonstrate steady and moderate growth which was
reflected in the stock market's strong performance during the reporting peri-
od. From December 1, 1995 through May 31, 1996, the total return of the Stan-
dard & Poor's 500 Index was 11.76 percent.
Other factors also contributed to good news for the U.S. equity market.
There was little evidence of higher inflation during the reporting period. In
fact, recent Consumer Price Index reports indicated the closely watched "core"
rate (which excludes volatile food and energy components) increased at a 2.7
percent rate in the twelve-month period ending May 1996. The continuation of a
heavy influx of money into equity mutual funds helped drive the market forward
as well.
A performance summary of the Growth and Income Fund and an interview with
the Fund's portfolio management team follow this letter.
ECONOMIC OUTLOOK
The economy rebounded in the first quarter of 1996, despite poor weather in
the East and the remnants of a slow fourth quarter in 1995, which was hurt by
weak construction activity, two government shutdowns, and a strike at Boeing.
Upward momentum continued into the second quarter, due in part to renewed auto
production in the aftermath of the strike at several General Motors plants and
an end to the budget stalemate between the White House and Congress. This mo-
mentum was particularly evident in robust reports for retail sales. We expect
a modest slowdown in the summer months, as higher interest rates could slow
activity in interest-sensitive sectors of the economy, such as housing.
Continued on page two
1
<PAGE>
The Fed's protracted period of easing, and relatively neutral stance on
interest rates, favors the growth we are currently experiencing. Given the
strong employment situation, we believe the Fed will await further economic
evidence before acting--probably mid- to late-summer at the earliest. So far,
guides such as the Consumer Price Index continue to reveal modest levels of
inflation. More importantly, we still see little sign of emerging inflation in
either unit labor costs, hourly earnings or the employment cost index, all of
which have been important drivers of inflation.
The stock market outlook continues to be promising. Several factors contrib-
ute to this positive environment, including steady growth, moderate inflation
and acceptable interest rate levels.
Throughout this report, you can read more about your Fund's performance dur-
ing the past six months. We hope this information is helpful as you review your
investment in the Growth and Income Fund. We look forward to communicating with
you on a regular basis about your Fund's performance and appreciate your con-
tinued confidence in your portfolio management team.
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 MAY 31, 1996
VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
Six-month total return based on NAV/1/............... 9.93% 9.51% 9.50%
Six-month total return/2/............................ 3.64% 4.51% 8.50%
One-year total return based on NAV/1/................ 25.03% 24.04% 24.02%
One-year total return/2/............................. 17.86% 19.04% 23.02%
Five-year average annual total return/2/............. 13.74% N/A N/A
Ten-year average annual total return/2/.............. 11.29% N/A N/A
Life-of-Fund average annual total return/2/.......... 9.65% 14.67% 15.52%
Commencement Date.................................... 08/01/46 08/02/93 08/02/93
</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 (5.75% for A
shares) or contingent deferred sales charge for early withdrawal (5% for B
shares and 1% for 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.
3
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
We recently spoke with the management team of the Van Kampen American Capital
Growth and Income Fund about the key events and economic forces that shaped
the markets during the first half of the Fund's fiscal year. The team is led
by James A. Gilligan, portfolio manager, and Alan T. Sachtleben, executive
vice president for equity investments. The following excerpts
reflect their views on the Fund's performance during the six-month period
ended May 31, 1996.
Q WHAT MARKET FACTORS HAD THE GREATEST IMPACT ON THE FUND'S PERFORMANCE
DURING THE SIX MONTHS ENDED MAY 31, 1996?
A Many equity markets set new highs in the first part of 1996, driven by a
stronger-than-expected economy. This strength led to better-than-expected
corporate profits, which fueled the appreciation of stock prices. The strong
economy had the most pronounced impact on profits in the industrial and con-
sumer cyclical sectors. These included retail (Sears and Federated Department
Stores), autos (GM and Chrysler) and airlines (United Airlines and American
Airlines).
Q WHAT ADJUSTMENTS DID YOU MAKE TO THE PORTFOLIO IN RESPONSE TO THESE MAR-
KET CONDITIONS?
A Early in the first quarter, it was evident that the slow-down in the
economy seen in late 1995 would not continue, and by the end of February,
companies were reporting strengthening business. In response to this trend, we
reduced the Fund's exposure to interest-rate sensitive issues and increased
holdings of economically sensitive (or cyclical) stocks. For example, we in-
creased the Fund's exposure to stocks of raw materials producers, where stock
prices have rallied to become some of the best performers this year. Converse-
ly, we reduced the Fund's position in utility stocks, which did well in the
fourth quarter of 1995, but because of a rising interest rate environment,
have become the worst performing sector for the first half of 1996. Some fa-
miliar cyclical stocks were added to the portfolio during this period, includ-
ing Union Carbide (chemical) and ConRail (railroad). Both companies
historically have benefited from a robust economy.
Q CAN YOU GIVE A FEW EXAMPLES OF STOCKS THAT SHOWED SIGNIFICANT IMPACT ON
THE PORTFOLIO DURING THE PAST SIX MONTHS?
A One of the Fund's long-time holdings, Monsanto (chemicals) appreciated
over 30 percent for the six month period. This reflected strong demand
for agricultural chemicals and the increased profitability of their pharmaceu-
ticals division, which led to strong profit growth and to stock price appreci-
ation. Chrysler (autos) also appreciated over 30 percent for the six-month
period because of high demand for its products, particularly the newly rede-
signed minivan series. Cincinnati Bell's (utility) 70-plus percent apprecia-
tion over the last six months, can be attributed to its telecom services
division. This particular company is involved in "outsourcing"--the offering
of a specialized service to companies that may not have that same capability.
Cincinnati Bell's services include wireless communications billing and
telemarketing.
Q HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED MAY 31, 1996?
A Class A shares of the Fund achieved a total return at net asset value of
9.93 percent/1/. By comparison, the Standard & Poor's 500-Stock Index
generated a total return of 11.76 percent and the Lipper Growth and Income
Fund Index returned 10.94 percent for the same period. Keep in mind that the
Standard and Poor's 500-Stock Index is a broad-based, unmanaged index that re-
flects general stock market performance and does not reflect any
4
<PAGE>
commissions or fees that would be paid by an investor purchasing the securi-
ties it represents. The Lipper Growth and Income Fund Index reflects the aver-
age performance of the largest growth and income funds and does not reflect
any sales charges that would be paid by an investor purchasing the securities
it represents. Please refer to the chart on page three for additional Fund
performance results.
[PIE CHART APPEARS HERE]
HOLDINGS BY SECTOR AS A PERCENTAGE OF LONG-TERM INVESTMENTS AS OF MAY 31, 1996
Retail.................................. 7.6%
Consumer Non-Durables................... 8.1%
Energy.................................. 9.4%
Finance................................. 12.0%
Healthcare.............................. 6.1%
Producer Manufacturing.................. 8.2%
Raw Materials/Processing Industries..... 8.2%
Technology.............................. 14.0%
Utilities............................... 8.7%
Other................................... 17.7%
Q HOW DOES THE CURRENT INTEREST RATE ENVIRONMENT SHAPE THE PORTFOLIO STRUC-
TURE LOOKING FORWARD?
A During periods when interest rates are rising, the Fund has typically re-
duced its exposure to interest-rate sensitive issues, such as utilities.
This has been offset by an increased exposure to consumer and industrial cy-
clical stocks. Accordingly, this has been the portfolio's position for the
first six months of 1996.
Interest rates now appear to be stabilizing and inflation continues to be
low. Looking ahead, we will continue to monitor any changes in these economic
indicators. If there is little change in the economy, the portfolio will re-
main largely unchanged. On the other hand, should the economy begin to show
signs of weakening, we expect to reduce the Fund's current exposure to cycli-
cal stocks, while adding consumer companies with records of steady growth.
Q WHAT IS THE OUTLOOK FOR THE STOCK MARKET AND, MORE SPECIFICALLY, FOR THE
FUND THROUGH THE NEXT SIX MONTHS?
A The two key forces that determine the value of the stock market are in-
terest rates and corporate profits. Interest rates are affected by a num-
ber of variables, but the most important is anticipated inflation. In the
first part of this year, expectations were for a stronger economy and possibly
higher inflation. This caused a steep increase in interest rates. The second
key force in determining the value of the market, corporate profits, more than
overcame the dampening effect of higher rates.
While we are only halfway through the year, the current outlook is for cor-
porate profits to show considerably better growth than was expected at the be-
ginning of the year. Looking ahead, with inflation seemingly in check, despite
good economic growth and steady corporate profits, we are not overly concerned
about the valuation of the market. We expect that investments in large, qual-
ity companies that benefit from moderate economic growth and low inflation
will continue to do well.
/s/ Alan T. Sachtleben /s/ James A. Gilligan
Alan T. Sachtleben James A. Gilligan
Executive Vice President Portfolio Manager
Equity Investments
Please see footnotes on page three
5
<PAGE>
PORTFOLIO OF INVESTMENTS
May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 83.7%
CONSUMER DURABLES 3.5%
Chrysler Corp............................................. 139,000 $ 9,260,875
Eastman Kodak Co.......................................... 20,000 1,487,500
General Motors Corp....................................... 58,000 3,197,250
Magna International, Inc. Class A......................... 71,000 3,425,750
Masco Corp................................................ 84,000 2,625,000
Sunbeam-Oster, Inc........................................ 202,000 2,878,500
------------
22,874,875
------------
CONSUMER NON-DURABLES 7.4%
Adidas--ADS (Germany) (c)................................. 112,000 4,144,000
Avon Products, Inc........................................ 19,000 1,757,500
Campbell Soup Co.......................................... 39,000 2,515,500
Coca Cola Co.............................................. 96,000 4,416,000
Coca Cola Femsa SA--ADS (Mexico).......................... 100,000 2,887,500
Colgate Palmolive Co...................................... 37,000 2,913,750
Donnkenny, Inc. (c)....................................... 80,000 1,520,000
Nabisco Holdings Corp., Class A........................... 278,000 9,417,250
Philip Morris Companies, Inc. ............................ 127,000 12,620,625
Ralston Purina Group...................................... 54,000 3,307,500
Rubbermaid, Inc........................................... 110,000 3,080,000
------------
48,579,625
------------
CONSUMER SERVICES 3.1%
Block H & R, Inc.......................................... 40,000 1,395,000
Deluxe Corp............................................... 79,000 2,863,750
Disney (Walt) Co.......................................... 41,000 2,490,750
Dun & Bradstreet Corp..................................... 49,000 3,129,875
McDonald's Corp........................................... 44,000 2,117,500
Omnicom Group............................................. 84,000 3,664,500
Time Warner, Inc.......................................... 58,000 2,341,750
Wendy's International, Inc. .............................. 118,000 2,124,000
------------
20,127,125
------------
ENERGY 8.6%
Amerada Hess Corp......................................... 75,000 4,275,000
Apache Corp............................................... 164,000 4,694,500
Chevron Corp.............................................. 90,000 5,377,500
Exxon Corp................................................ 84,000 7,119,000
Mobil Corp................................................ 70,000 7,901,250
Pacific Enterprises....................................... 140,000 3,692,500
Panhandle Eastern Corp.................................... 114,000 3,662,250
Royal Dutch Petroleum Co.--ADR (Netherlands).............. 45,000 6,750,000
Texaco, Inc............................................... 157,000 13,148,750
------------
56,620,750
------------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
FINANCE 11.0%
Aetna Life & Casualty Co.................................. 35,000 $ 2,581,250
AllState Corp............................................. 85,000 3,591,250
American International Group, Inc. ....................... 40,000 3,770,000
Argenteria, (Bancaria Espana)--ADR (Spain)................ 121,100 2,543,100
BankAmerica Corp.......................................... 100,000 7,525,000
Beneficial Corp........................................... 45,000 2,621,250
Chase Manhattan Corp...................................... 66,000 4,620,000
Citicorp.................................................. 45,000 3,780,000
Comerica, Inc............................................. 95,000 4,156,250
Debartolo Realty Corp..................................... 82,700 1,343,875
Duke Realty Investment, Inc............................... 39,000 1,174,875
Everest Reinsurance Holdings.............................. 108,000 2,524,500
Federal National Mortgage Association..................... 140,000 4,322,500
First Bank System, Inc.................................... 62,000 3,743,250
Fleet Financial Group, Inc................................ 93,000 4,103,625
Health Care Property Investments.......................... 16,000 524,000
Horace Mann Educators Corp................................ 105,100 3,350,063
MBIA, Inc................................................. 30,000 2,283,750
Nationsbank Corp.......................................... 45,000 3,650,625
Norwest Corp.............................................. 100,000 3,487,500
Student Loan Marketing Association........................ 32,000 2,380,000
Travelers Group, Inc...................................... 99,000 4,108,500
------------
72,185,163
------------
HEALTHCARE 5.6%
Abbott Laboratories....................................... 82,000 3,536,250
Amgen, Inc. (c)........................................... 87,700 5,218,150
Astra, AB, Series A--ADR (Sweden)......................... 83,000 3,776,500
Baxter International, Inc. ............................... 50,000 2,212,500
Merck & Co., Inc.......................................... 49,300 3,186,013
Pfizer, Inc............................................... 80,900 5,723,675
Pharmacia & Upjohn, Inc................................... 128,000 5,232,000
Schering Plough Corp...................................... 62,000 3,634,750
Teva Pharmaceutical Ltd.--ADR (Israel).................... 57,000 2,550,750
United Healthcare Corp.................................... 27,000 1,481,625
------------
36,552,213
------------
PRODUCER MANUFACTURING 7.5%
Allied-Signal, Inc........................................ 99,000 5,420,250
Canadian Pacific Ltd...................................... 131,000 2,685,500
Fluor Corp................................................ 95,000 6,198,750
Foster Wheeler Corp....................................... 86,000 3,827,000
General Electric Co....................................... 99,000 8,192,250
Honeywell, Inc............................................ 111,000 5,633,250
Illinois Tool Works, Inc.................................. 55,000 3,685,000
</TABLE>
See Notes to Financial Statements
7
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING (CONTINUED)
Stewart & Stevenson Services, Inc......................... 56,800 $ 1,420,000
TRW, Inc.................................................. 32,000 3,016,000
WMX Technologies, Inc..................................... 135,000 4,758,750
York International Corp................................... 79,000 4,177,125
------------
49,013,875
------------
RAW MATERIALS/PROCESSING INDUSTRIES 7.5%
Aluminum Co. of America................................... 52,000 3,204,500
Barrick Gold Corp......................................... 90,000 2,835,000
Battle Mountain Gold Co. ................................. 175,000 1,531,250
Crown Cork & Seal, Inc.................................... 55,000 2,571,250
Georgia Pacific Corp...................................... 42,000 3,034,500
Grace (W. R.) & Co........................................ 75,000 5,587,500
Imperial Chemical Inds., PLC--ADR (United Kingdom)........ 39,000 2,071,875
Mead Corp................................................. 69,000 3,708,750
Monsanto Co............................................... 68,000 10,327,500
Olin Corp................................................. 26,000 2,405,000
Phelps Dodge Corp......................................... 40,000 2,740,000
Praxair, Inc.............................................. 102,000 4,143,750
Sigma-Aldrich Corp........................................ 55,000 3,080,000
Union Carbide Corp........................................ 47,000 2,026,875
------------
49,267,750
------------
RETAIL 7.0%
Dillard Department Stores, Inc............................ 83,000 3,320,000
Federated Department Stores, Inc. (c)..................... 233,100 8,071,088
Gap, Inc.................................................. 60,000 2,017,500
Gymboree Corp. (c)........................................ 90,000 3,060,000
Home Depot, Inc........................................... 67,000 3,425,375
May Department Stores Co. ................................ 114,600 5,429,175
Nordstrom, Inc............................................ 88,300 4,503,300
Sears, Roebuck & Co....................................... 82,400 4,192,100
Talbots, Inc.............................................. 84,000 2,740,500
Tandy Corp................................................ 50,000 2,700,000
Toys R Us, Inc. (c)....................................... 128,000 3,712,000
Vons Companies, Inc. (c).................................. 68,000 2,482,000
------------
45,653,038
------------
TECHNOLOGY 12.8%
BMC Software, Inc. (c).................................... 67,000 4,221,000
Boeing Co................................................. 91,000 7,757,750
Cisco Systems, Inc. (c)................................... 79,000 4,325,250
Computer Associates International, Inc. .................. 95,000 6,911,250
Dynatech Corp. (c)........................................ 77,000 2,685,375
General Instrument Corp. (c).............................. 159,000 4,909,125
General Signal Corp....................................... 107,000 4,092,750
</TABLE>
See Notes to Financial Statements
8
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Security Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Harris Corp............................................... 43,000 $ 2,778,875
Hewlett-Packard Co........................................ 25,000 2,668,750
Intel Corp................................................ 57,000 4,303,500
Linear Technology Corp.................................... 32,000 1,104,000
Loral Corp................................................ 133,400 2,134,400
Lucent Technologies, Inc.................................. 136,000 5,168,000
Microsoft Corp. (c)....................................... 36,000 4,275,000
Newbridge Networks Corp. (c).............................. 91,000 6,472,375
Nokia Corp--ADS (Finland)................................. 75,000 3,262,500
Perkin-Elmer Corp......................................... 87,000 4,611,000
Softkey International, Inc. (c)........................... 135,000 3,358,125
Tellabs, Inc. (c)......................................... 55,000 3,547,500
Xerox Corp................................................ 34,000 5,350,750
------------
83,937,275
------------
TRANSPORTATION 1.7%
Canadian National Railway (c)............................. 153,000 2,830,500
Conrail Inc............................................... 74,000 5,198,500
Union Pacific Corp........................................ 44,000 3,085,500
------------
11,114,500
------------
UTILITIES 8.0%
Allegheny Power Systems, Inc.............................. 89,000 2,614,375
Ameritech Corp............................................ 85,100 4,808,150
A T & T Corp.............................................. 149,800 9,343,775
Cable & Wireless--ADR (United Kingdom).................... 100,800 2,079,000
Cincinnati Bell, Inc...................................... 86,000 4,568,750
Duke Power Co............................................. 90,800 4,381,100
Frontier Corp............................................. 146,700 4,694,400
GTE Corp.................................................. 50,000 2,137,500
MCI Communications Corp................................... 91,000 2,650,375
MFS Communications Co., Inc. (c).......................... 455 15,811
National Power, LPC--ADR (United Kingdom)................. 119,800 2,815,300
Nipsco Industries, Inc. .................................. 19,000 707,750
Peco Energy Co............................................ 92,000 2,265,500
PowerGen, PLC--ADR (United Kingdom)....................... 125,600 2,967,300
Southern N E Telecommunictions............................ 40,000 1,725,000
Telefonos de Mexico, SA--ADR (Mexico)..................... 141,000 4,653,000
------------
52,427,086
------------
TOTAL COMMON STOCKS...................................... 548,353,275
------------
CONVERTIBLE PREFERRED STOCKS 1.6%
MFS Communications, DECS, 8%.............................. 50,000 2,987,500
SCI Finance, LLC, NV, 6.25%............................... 23,000 2,179,250
Williams Cos., $3.50 Dividend per share................... 64,000 5,168,000
------------
10,334,750
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Security Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE CORPORATE OBLIGATIONS 6.4%
$10,500 ADT Operations, Inc., LYON............ * 07/06/10 $ 5,827,500
50 American Express Co. , DECKS.......... 6.250% 10/15/96 3,260,486
3,000 Continental Airlines, Inc............. 6.750 04/15/06 3,300,000
2,200 Equitable Companies................... 6.125 12/15/24 2,458,500
3,800 Grand Metropolitan, PLC (United
Kingdom)............................ 6.500 01/31/00 4,180,000
6,000 MBL International..................... 3.000 11/30/02 7,012,500
66 Merrill Lynch, STRYPES................ 6.000 06/01/99 1,528,548
6,300 News America Holdings, Inc., LYON..... * 03/11/13 2,968,875
10,400 Roche Holdings, Inc. (Switzerland),
LYON................................ * 04/20/10 4,498,000
1,310 Sandoz, Ltd. (Switzerland)............ 2.000 10/06/02 1,339,475
70 Sprint Corp., DECKS................... 8.250 03/31/00 2,911,285
7,600 U S Cellular Corp., LYON.............. * 06/15/15 2,584,000
------------
41,869,169
------------
TOTAL LONG-TERM INVESTMENTS 91.7%
(Cost $516,959,020) (a)....................... 600,557,194
------------
SHORT-TERM INVESTMENTS 7.0%
COMMERCIAL PAPER 1.4%
9,220 General Electric Capital Corp. (yielding 5.58%,
06/03/96 maturity)................................... 9,215,774
------------
UNITED STATES AGENCY AND GOVERNMENT
OBLIGATIONS 5.6%
7,000 Federal Home Loan Bank (yielding 5.29%, 06/17/96
maturity)(b)......................................... 6,982,745
15,000 Federal Home Loan Mortgage Corp. (yielding 5.27%,
06/25/96 maturity)(b)................................ 14,945,834
5,000 Federal Home Loan Mortgage Corp. (yielding 5.29%,
07/24/96 maturity)(b)................................ 4,960,850
5,000 Federal National Mortgage Association (yielding 5.31%,
08/12/96 maturity)(b)................................ 4,947,400
5,000 United States Treasury Bills (yielding 5.05%, 07/25/96
maturity)(b)......................................... 4,961,958
------------
36,798,787
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $46,014,033) (a)........................ 46,014,561
OTHER ASSETS IN EXCESS OF LIABILITIES 1.3%..... 8,654,657
------------
NET ASSETS 100%................................ $655,226,412
------------
</TABLE>
*Zero coupon bond.
(a) At May 31, 1996, for federal income tax purposes, cost for long-term and
short-term investments is $563,137,410, the aggregate gross unrealized appreci-
ation is $89,474,943 and the aggregate gross unrealized depreciation is
$5,120,642, resulting in net unrealized appreciation including open futures
transactions of $84,354,301.
(b) Assets segregated as collateral for open futures transactions.
(c) Non-income producing security as this stock currently does not declare div-
idends.
DECKS--Debt exchangeable for common stock.
DECS--Dividend enhanced convertible stock.
LYON--Liquid yield option note.
STRYPES--Structured yield product exchangeable for common stock.
See Notes to Financial Statements
10
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $516,959,020) (Note 1)........ $600,557,194
Short-Term Investments (Cost $46,014,033) (Note 1)............... 46,014,561
Cash............................................................. 6,617
Receivables:
Investments Sold................................................ 12,059,174
Fund Shares Sold................................................ 2,361,492
Dividends....................................................... 1,407,270
Interest........................................................ 182,612
Other............................................................ 53,200
------------
Total Assets.................................................... 662,642,120
------------
LIABILITIES:
Payables:
Investments Purchased........................................... 5,258,940
Fund Shares Repurchased......................................... 844,574
Margin on Futures............................................... 257,602
Investment Advisory Fee (Note 2)................................ 218,375
Distributor and Affiliates (Note 2)............................. 170,450
Income Distributions............................................ 14,367
Accrued Expenses................................................. 594,759
Deferred Compensation and Retirement Plans (Note 2).............. 56,641
------------
Total Liabilities............................................... 7,415,708
------------
NET ASSETS....................................................... $655,226,412
------------
NET ASSETS CONSIST OF:
Paid in Capital (Note 3)......................................... $542,900,269
Net Unrealized Appreciation on Investments....................... 84,518,658
Accumulated Net Realized Gain on Investments..................... 26,122,697
Accumulated Undistributed Net Investment Income.................. 1,684,788
------------
NET ASSETS....................................................... $655,226,412
------------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $488,113,929 and 32,121,245 shares of capital stock
issued and outstanding) (Note 3)................................ $ 15.20
Maximum sales charge (5.75%* of offering price)................. .93
------------
Maximum offering price to public................................ $ 16.13
------------
Class B Shares:
Net asset value and offering price per share (Based on net
assets of $151,581,180 and 10,013,165 shares of capital stock
issued and outstanding) (Note 3)................................ $ 15.14
------------
Class C Shares:
Net asset value and offering price per share (Based on net
assets of $15,531,303 and 1,025,141 shares of capital stock
issued and outstanding) (Note 3)................................ $ 15.15
------------
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
11
<PAGE>
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends......................................................... $ 5,312,653
Interest.......................................................... 2,503,640
------------
Investment Income................................................ 7,816,293
------------
EXPENSES:
Investment Advisory Fee (Note 2).................................. 1,197,234
Distribution (12b-1) and Service Fees (Allocated to Classes A, B
and C of $483,553, $623,127 and $63,860, respectively) (Note 6).. 1,170,540
Shareholder Services (Note 2)..................................... 881,203
Custody (Note 1).................................................. 37,550
Trustees Fees and Expenses (Note 2)............................... 24,270
Other ............................................................ 279,925
------------
Total Expenses................................................... 3,590,722
Less: Earnings Credits on Cash Balances (Note 1)................. 10,713
Expenses Reimbursed............................................ 6,000
------------
Net Expenses..................................................... 3,574,009
------------
NET INVESTMENT INCOME............................................. $ 4,242,284
------------
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Realized Gain/Loss on Investments:
Proceeds from Sales.............................................. $286,695,351
Cost of Securities Sold.......................................... (259,080,862)
------------
Net Realized Gain on Investments (Including realized gain on
futures transactions of $2,379,300)............................... 27,614,489
------------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period.......................................... 63,353,409
End of the Period (Including unrealized appreciation on open
futures transactions of $919,956)................................ 84,518,658
------------
Net Unrealized Appreciation on Investments During the Period...... 21,165,249
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... $ 48,779,738
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................ $ 53,022,022
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended May 31, 1996 and the Year Ended November 30, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 1996 November 30, 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income...................... $ 4,242,284 $ 6,396,148
Net Realized Gain on Investments........... 27,614,489 27,719,915
Net Unrealized Appreciation/Depreciation
on Investments During the Period.......... 21,165,249 58,686,451
------------ ------------
Change in Net Assets from Operations....... 53,022,022 92,802,514
------------ ------------
Distributions from Net Investment Income:
Class A Shares............................ (3,795,963) (5,369,631)
Class B Shares............................ (738,235) (466,935)
Class C Shares............................ (77,244) (80,770)
------------ ------------
(4,611,442) (5,917,336)
------------ ------------
Distributions from Net Realized Gain on
Investments:
Class A Shares............................ (22,535,629) (15,005,570)
Class B Shares............................ (5,929,491) (1,393,982)
Class C Shares............................ (615,197) (257,765)
------------ ------------
(29,080,317) (16,657,317)
------------ ------------
Total Distributions....................... (33,691,759) (22,574,653)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................. 19,330,263 70,227,861
------------ ------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold.................. 191,197,670 129,516,794
Value Received for Shares Issued in Merger
(Note 7)................................... -0- 92,249,367
Net Asset Value of Shares Issued Through
Dividend Reinvestment...................... 30,255,130 20,091,299
Cost of Shares Repurchased................. (75,967,005) (49,053,715)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS............................... 145,485,795 192,803,745
------------ ------------
TOTAL INCREASE IN NET ASSETS............... 164,816,058 263,031,606
NET ASSETS:
Beginning of the Period.................... 490,410,354 227,378,748
------------ ------------
End of the Period (Including undistributed
net investment income of $1,684,788 and
$2,053,946, respectively)................. $655,226,412 $490,410,354
------------ ------------
</TABLE>
See Notes to Financial Statements
13
<PAGE>
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended November 30,
Ended ----------------------------
Class A Shares May 31, 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. $14.81 $12.26 $14.08 $13.42 $11.69
------- ------ ------ ------ ------
Net Investment Income............... .115 .28 .29 .27 .315
Net Realized and Unrealized
Gain/Loss on Investments........... 1.274 3.455 (.1025) 1.52 1.785
------- ------ ------ ------ ------
Total from Investment Operations..... 1.389 3.735 .1875 1.79 2.10
------- ------ ------ ------ ------
Less:
Distributions from Net Investment
Income.............................. .135 .2925 .27 .2825 .37
Distributions from Net Realized
Gain on Investments................ .868 .8925 1.7375 .8475 -0-
------- ------ ------ ------ ------
Total Distributions.................. 1.003 1.185 2.0075 1.13 .37
------- ------ ------ ------ ------
Net Asset Value, End of Period....... $15.196 $14.81 $12.26 $14.08 $13.42
------- ------ ------ ------ ------
Total Return......................... 9.93%* 33.34% 1.21% 14.34% 18.25%
Net Assets at End of Period (In
millions)............................ $488.1 $381.6 $205.4 $204.3 $177.8
Ratio of Expenses to Average Net
Assets** (a)......................... 1.05% 1.15% 1.16% 1.16% 1.15%
Ratio of Net Investment Income to
Average Net Assets**................. 1.66% 2.24% 2.25% 2.15% 2.46%
Portfolio Turnover................... 49%* 108% 102% 134% 78%
</TABLE>
*Non-Annualized
**The Ratios of Expenses and Net Investment Income to Average Net Assets were
not affected by the assumption of expenses by VKAC.
(a) Beginning with the year ended November 30, 1995, the Ratios of Expenses are
based upon Total Expenses which does not reflect credits earned on
overnight cash balances. (Note 1)
See Notes to Financial Statements
14
<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 From August 2, 1993
Six Months November 30, (Commencement
Ended -------------- of Distribution) to
Class B Shares May 31, 1996 1995 1994 November 30, 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................... $14.77 $12.25 $14.07 $13.64
------- ------ ------- ------
Net Investment Income...... .070 .17 .17 .06
Net Realized and Unrealized
Gain/Loss on Investments.. 1.261 3.455 (.1025) .4175
------- ------ ------- ------
Total from Investment
Operations.................. 1.331 3.625 .0675 .4775
------- ------ ------- ------
Less:
Distributions from Net
Investment Income.......... .095 .2125 .15 .0475
Distributions from Net
Realized
Gain on Investments....... .868 .8925 1.7375 -0-
------- ------ ------- ------
Total Distributions......... .963 1.105 1.8875 .0475
------- ------ ------- ------
Net Asset Value, End of
Period...................... $15.138 $14.77 $12.25 $14.07
------- ------ ------- ------
Total Return................ 9.51%* 32.15% .36% 3.50%*
Net Assets at End of Period
(In millions)............... $151.6 $98.4 $18.5 $1.7
Ratio of Expenses to Average
Net Assets** (a)............ 1.84% 1.99% 2.02% 2.02%
Ratio of Net Investment
Income to Average Net
Assets**................... .87% 1.25% 1.51% 1.51%
Portfolio Turnover.......... 49%* 108% 102% 134%*
</TABLE>
*Non-Annualized
**The Ratios of Expenses and Net Investment Income to Average Net Assets were
not affected by the assumption of expenses by VKAC.
(a) Beginning with the year ended November 30, 1995, the Ratios of Expenses are
based upon Total Expenses which does not reflect credits earned on
overnight cash balances. (Note 1)
See Notes to Financial Statements
15
<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 From August 2, 1993
Six Months November 30, (Commencement
Ended ------------- of Distribution) to
Class C Shares May 31, 1996 1995 1994 November 30, 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $14.78 $12.26 $14.07 $13.64
------- ------ ------ ------
Net Investment Income....... .067 .18 .17 .06
Net Realized and Unrealized
Gain/Loss on Investments... 1.266 3.445 (.0925) .4175
------- ------ ------ ------
Total from Investment
Operations................... 1.333 3.625 .0775 .4775
------- ------ ------ ------
Less:
Distributions from Net
Investment Income........... .095 .2125 .15 .0475
Distributions from Net
Realized
Gain on Investments........ .868 .8925 1.7375 -0-
------- ------ ------ ------
Total Distributions.......... .963 1.105 1.8875 .0475
------- ------ ------ ------
Net Asset Value, End of
Period....................... $15.150 $14.78 $12.26 $14.07
------- ------ ------ ------
Total Return................. 9.50%* 32.23% .36% 3.50%*
Net Assets at End of Period
(In millions)................ $15.5 $10.4 $3.5 $0.6
Ratio of Expenses to Average
Net Assets** (a)............. 1.84% 1.97% 2.01% 2.00%
Ratio of Net Investment
Income to Average Net
Assets**.................... .87% 1.35% 1.50% 1.56%
Portfolio Turnover........... 49%* 108% 102% 134%*
*Non-Annualized
**If certain expenses had not been assumed by the Adviser total return would
have been lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net Assets................... 1.85% N/A N/A N/A
Ratio of Net Investment
Income to Average Net
Assets...................... .87% N/A N/A N/A
</TABLE>
(a) Beginning with the year ended November 30, 1995, the Ratios of Expenses are
based upon Total Expenses which does not reflect credits earned on
overnight cash balances. (Note 1)
N/A = Not Applicable
See Notes to Financial Statements
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
May 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Growth and Income Fund (the "Fund") is organized
as a Delaware business trust, and is registered as a diversified open-end man-
agement investment company under the Investment Company Act of 1940, as amend-
ed. The Fund's investment objective is to provide income and long-term growth
of capital by investing principally in income-producing equity securities in-
cluding common stock and convertible securities. The Fund commenced investment
operations on August 1, 1946. The distribution of the Fund's Class B and Class
C shares commenced on August 2, 1993.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The prep-
aration of financial statements in conformity with generally accepted account-
ing principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of con-
tingent 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 ex-
change are valued at their sale price as of the close of such securities ex-
change. Investments in securities not listed on a securities exchange are
valued based on their last quoted bid price or, if not available, their fair
value as determined by the Board of Trustees. Fixed income investments are
stated at values using market quotations or, if such valuations are not avail-
able, estimates obtained from yield data relating to instruments or securities
with similar characteristics in accordance with procedures established in good
faith by the Board of Trustees. Short-term securities with remaining maturi-
ties of less than 60 days are valued at amortized cost.
B. SECURITY TRANSACTIONS-Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may purchase and sell securities on a "when issued" or "delayed de-
livery" basis, with settlement to occur at a later date. The value of the se-
curity so purchased is subject to market fluctuations during this period. The
Fund will maintain, in a segregated account with its custodian, assets having
an aggregate value at least equal to the amount of the when issued or delayed
delivery purchase commitments until payment is made.
A repurchase agreement is a short-term investment 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 re-
purchase agreements, or transfer uninvested cash balances into a pooled cash
account along with other investment companies
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------
advised by Van Kampen American Capital Asset Management, Inc. (the "Adviser"),
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 re-
quired 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.
The Fund accounts for discounts and premiums on the same basis as is used
for federal income tax reporting. Accordingly, original issue discounts on
debt securities purchased are amortized over the life of the security. Premi-
ums 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 require-
ments of the Internal Revenue Code applicable to regulated investment compa-
nies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial and tax reporting pur-
poses primarily as a result of gains or losses recognized for tax purposes on
the mark-to-market of open futures at November 30, 1995, the Fund's year-end,
and the deferral of losses for tax purposes resulting from wash sales.
E. DISTRIBUTION OF INCOME AND GAINS-The Fund declares and pays dividends quar-
terly 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 in-
cluded in ordinary income for tax purposes.
F. EXPENSE REDUCTIONS-During the six months ended May 31, 1996, the Fund's
custody fee was reduced by $10,713 as a result of credits earned on overnight
cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide facilities and investment advice to the Fund for an annual fee payable
monthly as follows:
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- --------------------------------------------------------------------------------
<S> <C>
First $150 million.................................................. .50 of 1%
Next $100 million................................................... .45 of 1%
Next $100 million................................................... .40 of 1%
Over $350 million................................................... .35 of 1%
</TABLE>
For the six months ended May 31, 1996, the Fund recognized expenses of ap-
proximately $86,100 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., an affiliate of the Adviser, serves as the
shareholder servicing agent for the Fund. For the six months ended May 31,
1996, the Fund recognized expenses of approximately $741,100, representing AC-
CESS' cost of providing transfer agency and shareholder services plus a prof-
it.
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 has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer
all or a portion of their compensation to a later date. The retirement plan
covers those trustees who are not officers of VKAC.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of common shares, 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 May 31, 1996, capital aggregated $391,277,167, $137,633,401 and
$13,989,701 for Classes A, B, and C, respectively. For the six months ended
May 31, 1996, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A............................................. 8,910,169 $130,445,984
Class B............................................. 3,766,953 55,098,687
Class C............................................. 385,234 5,652,999
---------- ------------
Total Sales.......................................... 13,062,356 $191,197,670
---------- ------------
Dividend Reinvestment:
Class A............................................. 1,691,718 $ 23,959,778
Class B............................................. 411,724 5,819,607
Class C............................................. 33,632 475,745
---------- ------------
Total Dividend Reinvestment.......................... 2,137,074 $ 30,255,130
---------- ------------
Repurchases:
Class A............................................. (4,251,629) $(62,403,863)
Class B............................................. (828,231) (12,133,989)
Class C............................................. (97,426) (1,429,153)
---------- ------------
Total Repurchases.................................... (5,177,286) $(75,967,005)
---------- ------------
</TABLE>
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------
At November 30, 1995, capital aggregated $299,275,268, $88,849,096 and
$9,290,110 for Classes A, B, and C, respectively. For the year ended November
30, 1995, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A............................................. 6,635,728 $ 85,250,942
Class B............................................. 3,047,961 39,419,588
Class C............................................. 371,894 4,846,264
---------- ------------
Total Sales.......................................... 10,055,583 $129,516,794
---------- ------------
Shares Issued in Merger (Note 7):
Class A............................................. 3,860,925 $ 55,056,789
Class B............................................. 2,506,742 35,696,009
Class C............................................. 105,023 1,496,569
---------- ------------
Total Shares Issued in Merger........................ 6,472,690 $ 92,249,367
---------- ------------
Dividend Reinvestment:
Class A............................................. 1,564,473 $ 18,202,014
Class B............................................. 141,860 1,653,948
Class C............................................. 20,185 235,337
---------- ------------
Total Dividend Reinvestment.......................... 1,726,518 $ 20,091,299
---------- ------------
Repurchases:
Class A............................................. (3,047,098) $(40,737,496)
Class B............................................. (541,395) (7,282,377)
Class C............................................. (79,872) (1,033,842)
---------- ------------
Total Repurchases.................................... (3,668,365) $(49,053,715)
---------- ------------
</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 six years of the pur-
chase for Class B and one year of the purchase for Class C as detailed in the
following schedule. The Class B and C shares bear the expense of their respec-
tive deferred sales arrangements, including higher distribution and service
fees and incremental transfer agency costs.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------
<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 May 31, 1996, VKAC, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A shares of approxi-
mately $144,000 and CDSC on the redeemed shares of Classes B and C of approxi-
mately $192,000. Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
Aggregate purchases and cost of sales of investment securities, excluding
short-term notes, for the six months ended May 31, 1996, were $401,086,303 and
$259,080,862, 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 hold-
ings, including derivative instruments, are marked to market each day with the
change in value reflected in the unrealized appreciation/depreciation on in-
vestments. Upon disposition, a realized gain or loss is recognized according-
ly.
During the period, the Fund invested in futures contracts, a type of deriva-
tive. A futures contract is an agreement involving the delivery of a particu-
lar 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 un-
derlying the index or as a substitute for purchasing specific securities.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1996 (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. A portion of these funds is held as collateral in
an account in the name of the broker, the Fund's agent in acquiring the
futures position. During the period the futures contract is open, changes in
the value of the contract ("variation margin") are recognized by marking the
contract to market on a daily basis. As unrealized gains or losses are in-
curred, variation margin payments are received from or made to the broker.
Upon the closing settlement of a contract, gains or losses are realized. The
cost of securities acquired through delivery under a contract is adjusted by
the unrealized gain or loss on the contract.
Transactions in futures contracts for the six months ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- --------------------------------------------------------------------------------
<S> <C>
Outstanding at November 30, 1995..................................... 99
Futures Opened....................................................... 193
Futures Closed....................................................... (183)
----
Outstanding at May 31, 1996.......................................... 109
----
</TABLE>
The futures contracts outstanding at May 31, 1996, and the descriptions and
unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
- --------------------------------------------------------------------------------
<S> <C> <C>
S&P 500 Index Futures
June 1996--Buys to Open.............................. 84 $954,063
Nikkei 225 Index Futures
June 1996--Buys to Open.............................. 25 (34,107)
--- --------
109 $919,956
--- --------
</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 (col-
lectively the "Plans"). The Plans govern payments for the distribution of the
Fund's shares, ongoing shareholder services and maintenance of shareholder ac-
counts.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------
Annual fees under the Plans of up to .25% of Class A shares and 1.00% each
of Class B and Class C shares are accrued daily. Included in these fees for
the six months ended May 31, 1996, are payments to VKAC of approximately
$553,300.
7. BUSINESS COMBINATION
On September 27, 1995, the Fund acquired the net assets of Van Kampen Merritt
Growth and Income Fund ("VKGI") pursuant to a plan of reorganization approved
by VKGI shareholders on September 21, 1995. The acquisition resulted in a tax-
free exchange of 6,472,690 shares of the Fund for the 4,667,067 shares of VKGI
outstanding on September 27, 1995. VKGI's net assets at that date were
$92,249,367 which included $7,125,042 of net unrealized appreciation of in-
vestments; the Fund's net assets were $348,826,025. After the acquisition, the
combined net assets of the Fund were $441,075,392.
24
<PAGE>
VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
LINDA HUTTON HEAGY
ROGER HILSMAN
R. CRAIG KENNEDY
DENNIS J. MCDONNELL*
DONALD C. MILLER - Co-Chairman
JACK E. NELSON
DON G. POWELL*
JEROME L. ROBINSON
FERNANDO SISTO - Co-Chairman
WAYNE W. WHALEN*
WILLIAM STEWART WOODSIDE
OFFICERS
DON G. POWELL*
President and Chief Executive Officer
DENNIS J. MCDONNELL*
Executive Vice 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
WILLIAM N. BROWN*
PETER W. HEGEL*
ROBERT C. PECK, JR.*
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
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1201 Louisiana
Houston, Texas 77002
*"Interested" persons of the Fund, as de-
fined in the
Investment Company Act of 1940.
(C)Van Kampen American Capital Distribu-
tors, Inc., 1996
All rights reserved.
SMdenotes 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 un-
less 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.
25
