<PAGE>
Van Kampen American Capital
GROWTH AND
INCOME FUND
============================================================================
Semi-Annual Report
May 31, 1998
[ARTWORK APPEARS HERE]
_____ A Wealth of Knowledge . A Knowledge of Wealth(SM) _____
VAN KAMPEN AMERICAN CAPITAL
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders............................... 1
Performance Results.................................. 3
Glossary of Terms................................... 4
Portfolio Management Review.......................... 5
Portfolio Highlights................................. 8
Portfolio of Investments............................. 9
Statement of Assets and Liabilities.................. 14
Statement of Operations.............................. 15
Statement of Changes in Net Assets................... 16
Financial Highlights................................. 17
Notes to Financial Statements........................ 20
</TABLE>
GI SAR 7/98
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO]
DENNIS J. MCDONNELL AND DON G. POWELL
June 19, 1998
Dear Shareholder,
The recent announcement that the federal government will generate a budget
surplus this year for the first time since 1969 gives us pause to reflect on how
far the nation's finances have come during the past 15 years. Many Americans can
remember the 1970s, when a painful outbreak of inflation undermined investment
returns and lowered living standards. Just a few years ago, the federal budget
was still nearly $300 billion in the red and the U.S. dollar was weak.
Today, economic growth is robust, inflation is virtually nonexistent, the
job market is healthy, and the dollar is rising around the world. Against this
backdrop, stock and bond prices have appreciated considerably since the nation's
inflationary fever began to subside more than a decade ago. From a long-term
perspective, however, history tells us that the good times will not last
forever.
At Van Kampen American Capital, we are pleased to provide investors with
products and tools for all economic climates. As always, we remain vigilant in
identifying changes in the investment environment that might affect our fund
shareholders. In the meantime, we encourage you to talk to your adviser about
how diversification can help your portfolio's long-term performance.
ECONOMIC OVERVIEW
The United States economy continued to grow briskly during the reporting
period with no evidence of inflation. The nation's output of goods and services
(gross domestic product) increased at an annualized rate of about 4.2 percent in
the first quarter of 1998, while unemployment fell to the lowest level since
1970. Meanwhile, consumer confidence soared to a 28-year high in February.
At the consumer level, inflation fell to approximately 1.37 percent during
the six months ended in May, while producer prices actually declined during the
same period. Several factors contributed to keeping inflation in check despite
strong overall growth. The extreme economic weakness in Asia reduced demand for
U.S. goods in the region. Also, the strong dollar helped to contain price
increases for many imported goods. Finally, the Asian recession contributed to a
sharp decline in world energy and commodity prices.
There are indications, however, that mild price pressures are building. The
low unemployment rate has caused a modest acceleration in wages. Also, the
nation's money supply has been growing at an above-average rate for most of the
last year.
Despite these warning signs of potential inflation, Federal Reserve policy
makers kept short-term interest rates unchanged during the reporting period.
Inflation-adjusted interest rates remain relatively high by historical
standards, and with no sign of rising inflation, the Fed has been reluctant to
risk damaging the frail Asian economies further by tightening monetary policy.
1 Continued on page two
<PAGE>
MARKET OVERVIEW
The high-growth, low-inflation environment provided the perfect backdrop
for a continuation of the seven-year bull market. The broad-based Wilshire 5000
Index soared to a series of record highs while gaining 13.61 percent during the
six-month reporting period. Once again, strength was concentrated among large-
capitalization companies, with the Standard & Poor's 500-Stock Index returning
15.03 percent compared to 6.54 percent for the small-cap Russell 2000 Index.
Large technology shares were especially strong, as evidenced by the 10.45
percent gain for the Nasdaq 100 Index.
After climbing virtually nonstop between mid-January and late April, U.S.
stocks pulled back during the last month of the reporting period amid
indications that ongoing economic weakness in Asia might hurt corporate profits.
The Dow Jones Industrial Average slipped about 1.5 percent during the
correction, while the Russell 2000 Index fell about 5.39 percent. With the S&P
500 Index trading near its all-time high, investors are highly sensitive to
signs that profit growth might be receding.
OUTLOOK
Economic growth in the United States is likely to slow in the coming months
as the impact of the Asian crisis becomes more evident. The deflationary effects
of Asia will also limit the ability of domestic companies to raise prices.
Coupled with increasing wages, this loss of pricing power could squeeze
corporate profit margins in coming months. While the domestic economy should
continue to provide a generally solid foundation for U.S. stocks, high
valuations and decelerating profit growth could limit returns in the equity
market over the near term.
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to serve you and your family through our
diverse selection of quality investments.
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, 1998
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/.................. 13.40% 13.02% 13.01%
Six-month total return/2/............................... 6.87% 8.07% 12.02%
One-year total return/2/................................ 18.74% 20.07% 24.05%
Five-year average annual total return/2/................ 18.33% N/A N/A
Ten-year average annual total return/2/................. 15.08% N/A N/A
Life-of-Fund average annual total return/2/............. 10.19% 18.65% 18.82%
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 (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. This performance was achieved during generally
rising stock prices. Fund shares, when redeemed, may be worth more or less than
their original cost.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE>
GLOSSARY OF TERMS
BLUE-CHIP STOCKS:
Stocks of large, well-known companies that have a long record of growth and
a reputation for quality management. Examples of blue-chip stocks include
General Motors, International Business Machines (IBM), Coca-Cola, and
General Electric.
CAPITALIZATION:
The size of a company, as measured by the value of its stock. Morningstar,
Inc., an independent mutual fund rating service, defines "small-cap" as
less than $1 billion, "mid-cap" as between $1 billion and $5 billion, and
"large-cap" as more than $5 billion.
DOW JONES INDUSTRIAL AVERAGE:
The oldest and most widely recognized stock market average, which reflects
the performance of 30 actively traded stocks of well-established, blue-
chip companies.
FEDERAL RESERVE BOARD (FED):
A seven-member group that oversees the operations of the Federal Reserve
System, the central bank system of the United States. Currently led by
Chairman Alan Greenspan, the Fed meets eight times a year to establish
monetary policy and monitor the country's economic pulse.
GROWTH INVESTING:
An investment strategy that seeks to identify stocks that tend to offer
greater-than-average earnings growth. Growth stocks typically trade at
higher prices than value stocks, due to their higher expected earnings
growth.
NET ASSET VALUE (NAV):
The value of a mutual fund share, calculated by deducting a fund's
liabilities from its total assets and dividing this amount by the number of
shares outstanding. The NAV does not include any initial or contingent
deferred sales charge.
P/E RATIO:
The price-to-earnings ratio shows the "multiple" of earnings at which a
stock is selling. It is calculated by dividing a stock's current price by
its current earnings per share. A high multiple means that investors are
optimistic about future growth and have bid up the stock's price.
STANDARD AND POOR'S 500-STOCK INDEX:
An index of the 500 largest, most actively traded stocks on the New York
Stock Exchange. It provides a guide to the overall health of the U.S. stock
market. The S&P 500 is a much broader index than the Dow Jones Industrial
Average and reflects the stock market more accurately.
VALUATION:
The estimated or determined worth of a stock, based on its current price
relative to its earnings.
VALUE INVESTING:
A strategy that seeks to identify stocks that are sound investments but are
temporarily out of favor in the marketplace, due to concerns about short-
term performance. As a result, they trade at prices below what value
investors believe they are actually worth.
4
<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 six months ended May 31, 1998. The team is led by James A.
Gilligan, portfolio manager, Scott Carroll and Bret Stanley, assistant
portfolio managers, and Dennis J. McDonnell, chief investment officer for equity
investments. The following excerpts reflect their views on the Fund's
performance during this time.
Q HOW WOULD YOU DESCRIBE THE MARKET ENVIRONMENT IN WHICH THE FUND OPERATED
DURING THIS SIX-MONTH PERIOD?
A Generally, we've witnessed a continuation of the conditions that
dominated the market in late 1997. The currency crisis in Asia continued to
capture investors' attention: fears about its impact on the U.S. market eased
in the final months of last year, but were reactivated by cautionary comments
from Federal Reserve Board Chairman Alan Greenspan in the second quarter of
1998. Despite distractions from across the ocean, the Dow Jones industrial
average maintained its climb, reaching new highs and wowing investors. By mid-
April, the Dow crept over the coveted 9,000-point mark but fluctuated within a
200-point range above and below this record high in the final weeks of the
reporting period.
Overall, the market has been healthy and inflation continues to be
nominal, but earnings growth has slowed somewhat and reports of earnings
disappointments have increased, particularly in those companies with exposure to
Asia. The majority of companies reporting disappointing earnings were small-
capitalization companies in the technology industry.
Q HOW WAS THE FUND'S PORTFOLIO AFFECTED BY THESE MARKET CONDITIONS?
A An increase in the level of large-scale, high-visibility merger and
acquisition activity -- encompassing banking, telephone, automotive, and airline
industries -- has further fueled the rise in market prices that we discussed in
the last report. Speaking broadly, it's a much more expensive market than a year
ago, which makes for a challenging landscape for a value-oriented portfolio like
this one. Our concern that valuations are overextended is certainly reflected in
how we manage the portfolio. When searching for new portfolio holdings, we want
to find stocks with a limited potential for downward movement that exhibit the
potential for significant appreciation. On the flip side of the coin, we
continually review the portfolio's existing holdings, replacing overvalued
stocks with stocks that have better value characteristics. We consult any number
of sources before we decide that a position should be reduced or eliminated,
including discussions with the company's management, key vendors and
competitors, and research based on anecdotal evidence.
Q TELL US ABOUT SOME OF THE MAJOR SECTORS AND SPECIFIC HOLDINGS
REPRESENTED IN THE PORTFOLIO.
A During the reporting period, the Fund's largest sector weighting is in
finance, an industry that was dominated by merger and acquisition activity
during the period. Among our most significant positions were Chase Manhattan,
American General, First Union, and Equitable Companies; we increased our holding
in the latter position due to vastly improved results in the
5
<PAGE>
company's earnings. Both First Union and NationsBank announced major
acquisitions during the period and turned in slightly disappointing returns as a
result. We believe that, in the long run, investors will again reward these
companies with higher share prices as their successes with consolidation are
borne out in their earnings.
The second-largest sector in the Fund's portfolio is health care, which
continues to be an exciting industry. Our largest holding, PacifiCare Health
Systems, boasted a terrific return after a disappointing 1997, thanks to rate
increases instituted in 1998 and the alleviation of cost pressures. American
Home Products, another dominant holding, was also a good performer following the
recall of its weight loss drug Redux. This sector has produced very few
disappointments in the Fund's portfolio because of the underlying growth of the
health-care industry, but we did reduce some positions due to high valuations.
Unlike the previous two sectors, the technology industry was the source of
more disappointments than successes, largely because of the upheaval in Asia.
We've been particularly displeased with stocks in the semiconductor sector,
which included VLSI, a mid-size position in the portfolio, and networking stocks
such as 3Com and Cabletron Systems. However, the news wasn't all bad in
technology: our largest stock, IBM continued to hold its ground. As a large,
established company focusing on growth in its services business, it was somewhat
shielded from the big disappointments that plagued smaller hardware-oriented
companies. This was also the case for Xerox, which continued to meet growth
objectives during the period. Another large technology holding, Alcatel,
performed very well as investors took notice of the positive changes ushered in
by a new management.
We continue to be pleased with developments in the utility industry, which
is the fourth-largest sector represented in the portfolio. Telephone stocks in
general turned in strong performances, partially buoyed by increased merger and
acquisition activity. Electric stocks presented something of a mixed bag; one
success was Northeast Utilities, which appreciated in anticipation of restarting
one of the company's nuclear plants.
Finally, we maintained a small but successful percentage of the portfolio
in retail stocks. Our best-performing stock in this sector, and perhaps in the
portfolio, was Tommy Hilfiger, which was added to the portfolio in late 1997.
Overall, retail stocks performed very well during the period, buoyed by
increases in consumer spending. For additional Fund portfolio highlights, please
refer to page eight.
Q SO, HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A The Fund achieved a total return of 13.40 percent/1/ (Class A shares at
net asset value) for the six-month period ended May 31, 1998. By comparison, the
Standard & Poor's 500-Stock Index returned 15.03 percent, and the Lipper Growth
and Income Fund Index produced a total return of 12.06 percent for the same
period. The S&P 500-Stock Index is a broad-based index that reflects the general
performance of the stock market, and the Lipper Growth and Income Fund Index
reflects the average performance of all growth and income funds. Keep in mind
that these indices are statistical composites that do not reflect any
commissions or sales charges that would be paid by an investor purchasing the
securities or investments they represent. Please refer to the chart on page
three for additional Fund performance results.
6
<PAGE>
Q WHAT DO YOU SEE HAPPENING IN THE MARKET OVER THE COMING MONTHS?
A We expect the market to be more challenging through the end of 1998.
Although the Dow has continued to set new record highs, estimates for 1998
corporate profits have been reduced. However, even though the turmoil in Asia is
causing a slowdown in global economic growth, the economy at home is still
relatively healthy. The job market is exceptionally tight, and while this has
not had a significant impact in the reported wage inflation data, it is a reason
for concern if continuing low unemployment gives rise to wage inflation.
Meanwhile, the Fed has also expressed some concern about the level of
appreciation in financial assets, particularly in the stock market. In spite of
the fact that the forces that determine interest rates seem to be coming from
all directions, our expectation is that the Fed may act to increase rates later
this year. This action could cause the market to give back some of its recent
gains, but, in the big picture, may forestall a return to an inflationary
environment.
Although we monitor economic and market conditions carefully to gauge how
they may affect the Fund, our focus remains unaltered: to continue to meet the
Fund's objective of providing quarterly income and long-term growth of capital
to Fund shareholders. We will continue to stay as fully invested as possible and
manage the Fund's portfolio with an eye toward value and growth.
/s/ Dennis J. McDonnell /s/ James A. Gilligan
Dennis J. McDonnell James A. Gilligan
Chief Investment Officer Portfolio Manager
Equity Investments
7 Please see footnotes on page three
<PAGE>
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
As of May 31, 1998 As of November 30, 1997
<S> <C> <C>
International Business Machines Corp.......... 2.81% .................. 2.99%
Chase Manhattan Corp.......................... 2.66% .................. 1.78%
PacifiCare Health Systems, Class B............ 2.33% .................. 1.49%
Alcatel Alsthom CGE -- ADR (France)........... 2.26% .................. 1.15%
Philip Morris Cos., Inc....................... 2.16% .................. 2.25%
American Home Products Corp................... 2.02% .................. 1.14%
Philips Electronics NV -- ADR (Netherlands)... 1.79% .................. 1.17%
NationsBank Corp.............................. 1.77% .................. 0.45%
Cognizant Corp................................ 1.76% .................. 1.26%
Rhone-Poulenc, SA, Class A -- ADR (France).... 1.75% .................. 1.12%
</TABLE>
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
As of May 31, 1998 As of November 30, 1997
<S> <C>
Finance........................... 17.1% Finance.................... 16.4%
Health Care....................... 14.1% Technology................. 12.4%
Technology........................ 13.0% Utilities.................. 11.2%
Utilities......................... 12.2% Health Care................ 10.8%
Producer Manufacturing............ 8.5% Energy..................... 9.7%
</TABLE>
ASSET ALLOCATION AS A PERCENTAGE OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
As of May 31, 1998 As of November 30, 1997
<S> <C> <C>
Common Stocks.................................. 85.6% ................... 86.6%
Convertibles................................... 3.1% ................... 3.7%
Commercial Paper............................... 3.9% ................... 2.1%
U.S. Government Agency Obligations............. 7.0% ................... 6.9%
Preferred Stock................................ 0.4% ................... 0.7%
</TABLE>
8
<PAGE>
PORTFOLIO OF INVESTMENTS
May 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
===========================================================================================
- -------------------------------------------------------------------------------------------
Description Shares Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 87.2%
CONSUMER DURABLES 0.8%
Black & Decker Corp....................................... 199,900 $ 11,669,163
---------------
CONSUMER NON-DURABLES 6.9%
Benckiser NV, Class B-ADR (Netherlands) (a)............... 194,400 10,995,750
Colgate-Palmolive Co...................................... 247,000 21,489,000
Dole Food, Inc............................................ 205,600 9,496,150
Philip Morris Cos., Inc................................... 729,000 27,246,375
Ralston Purina Group...................................... 168,400 18,745,025
Unilever NV-ADR (Netherlands)............................. 100,200 7,909,537
---------------
95,881,837
---------------
CONSUMER SERVICES 3.3%
Avis Rent A Car, Inc. (a)................................. 297,200 7,207,100
Capstar Broadcasting Corp., Class A (a)................... 257,800 4,898,200
Cognizant Corp............................................ 416,000 22,152,000
H & R Block, Inc.......................................... 252,300 11,101,200
---------------
45,358,500
---------------
ENERGY 7.0%
Coastal Corp.............................................. 298,000 21,009,000
El Paso Natural Gas Co.................................... 383,000 14,793,375
Exxon Corp................................................ 175,400 12,365,700
Mobil Corp................................................ 153,600 11,980,800
Texaco, Inc............................................... 358,700 20,714,925
Valero Energy Corp........................................ 145,700 4,753,463
YPF Sociedad Anonima, Class D-ADR (Argentina)............. 379,700 11,794,431
---------------
97,411,694
---------------
FINANCE 15.6%
Allstate Corp............................................. 93,700 8,819,513
American General Corp..................................... 272,000 18,258,000
Arden Realty Group, Inc. (REIT)........................... 291,300 7,992,544
BankBoston Corp........................................... 133,900 14,109,712
Chase Manhattan Corp...................................... 247,100 33,590,156
Conseco, Inc.............................................. 123,800 5,772,175
Dresdner Bank AG-ADR (Germany)............................ 158,600 8,723,000
Equitable Cos., Inc....................................... 271,000 18,665,125
</TABLE>
9 See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
=========================================================================================================
- ---------------------------------------------------------------------------------------------------------
Description Shares Market Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
Everest Reinsurance Holdings, Inc........................................... 152,300 $ 5,920,662
Exel Ltd.................................................................... 122,200 9,195,550
First Union Corp............................................................ 325,600 18,009,750
Fleet Financial Group, Inc.................................................. 122,800 10,069,600
NationsBank Corp............................................................ 294,700 22,323,525
Provident Cos., Inc......................................................... 127,000 4,683,125
Travelers Group, Inc........................................................ 212,500 12,962,500
Washington Mutual, Inc...................................................... 232,300 16,406,187
------------
215,501,124
------------
HEALTHCARE 12.8%
Alza Corp. (a).............................................................. 279,000 13,496,625
American Home Products Corp................................................. 526,400 25,431,700
Beckman Coulter, Inc........................................................ 186,200 10,380,650
Columbia / HCA Healthcare Corp.............................................. 236,100 7,717,519
Merck & Co., Inc............................................................ 109,900 12,865,169
Mylan Labs., Inc............................................................ 486,400 14,592,000
PacifiCare Health Systems, Class B (a)...................................... 355,300 29,356,662
Pharmacia & Upjohn, Inc..................................................... 366,000 16,172,625
Rhone-Poulenc, SA-ADR (France), Warrants (expiring 11/05/01) (a)............ 239,000 1,419,062
Rhone-Poulenc, SA, Class A-ADR (France)..................................... 401,300 22,071,500
SmithKline Beecham PLC-ADR (United Kingdom)................................. 246,000 13,237,875
Watson Pharmaceuticals, Inc. (a)............................................ 258,300 11,300,625
------------
178,042,012
------------
PRODUCER MANUFACTURING 7.7%
AGCO Corp................................................................... 468,600 11,773,575
AlliedSignal, Inc........................................................... 350,400 14,979,600
Flowserve Corp.............................................................. 282,200 8,183,800
Fluor Corp.................................................................. 156,000 7,439,250
Ingersoll-Rand Co........................................................... 385,600 17,376,100
Philips Electronics NV-ADR (Netherlands).................................... 237,000 22,544,625
USA Waste Services, Inc. (a)................................................ 311,000 14,675,312
Waste Management, Inc....................................................... 299,800 9,743,500
------------
106,715,762
------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1998 (Unaudited)
==========================================================================
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Description Shares Market Value
- --------------------------------------------------------------------------
<S> <C> <C>
RAW MATERIALS/PROCESSING INDUSTRIES 4.4%
Airgas, Inc. (a).......................... 121,200 $ 1,840,725
BetzDearborn, Inc......................... 111,100 5,471,675
Boise Cascade Corp........................ 221,000 7,375,875
Crown Cork & Seal Co., Inc................ 262,900 13,637,938
Fort James Corp........................... 181,600 8,682,750
Imperial Chemical Industries PLC-ADR
(United Kingdom).......................... 160,400 11,969,850
Raychem Corp.............................. 234,800 8,834,350
Stone Container Corp...................... 208,300 3,697,325
------------
61,510,488
------------
RETAIL 4.6%
Adidas-144A, ADR (Germany) (c)............ 34,300 2,971,237
Federated Department Stores, Inc. (a)..... 389,900 20,201,694
Gap, Inc.................................. 324,000 17,496,000
Gymboree Corp. (a)........................ 390,600 6,176,363
Tommy Hilfiger Corp. (a).................. 261,800 17,606,050
------------
64,451,344
------------
TECHNOLOGY 11.8%
Alcatel Alsthom CGE-ADR (France).......... 657,700 28,445,525
BMC Software, Inc. (a).................... 369,000 16,997,062
Computer Associates International, Inc.... 277,000 14,542,500
First Data Corp........................... 261,200 8,684,900
Hewlett Packard Co........................ 80,300 4,988,638
International Business Machines Corp...... 301,700 35,412,037
International Rectifier Corp. (a)......... 256,700 2,711,394
Micron Technology, Inc.................... 139,800 3,294,038
Motorola, Inc............................. 73,700 3,901,494
Nokia Corp.-ADR (Finland)................. 28,200 1,831,238
Quantum Corp. (a)......................... 287,400 6,286,875
Texas Instruments, Inc.................... 186,700 9,591,712
VLSI Technology, Inc. (a)................. 547,300 8,483,150
Xerox Corp................................ 136,600 14,035,650
Xilinx, Inc. (a).......................... 114,500 4,354,578
------------
163,560,791
------------
</TABLE>
11 See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1998 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION 1.2%
Canadian National Railway Co........................ 281,700 $ 16,655,513
--------------
UTILITIES 11.1%
AirTouch Communications, Inc. (a)................... 79,600 3,790,950
AT&T Corp........................................... 198,500 12,083,687
BEC Energy.......................................... 246,500 9,998,656
BellSouth Corp...................................... 121,000 7,804,500
Cincinnati Bell, Inc................................ 422,000 13,424,875
Consolidated Edison, Inc............................ 323,200 13,837,000
Edison International................................ 267,400 7,888,300
Entergy Corp........................................ 19,600 515,725
FPL Group, Inc...................................... 185,200 11,378,225
GPU, Inc............................................ 289,500 11,145,750
GTE Corp............................................ 172,200 10,041,413
Niagara Mohawk Power Corp........................... 493,600 6,108,300
Northeast Utilities................................. 895,100 14,265,656
PG&E Corp........................................... 197,100 6,208,650
SBC Communications, Inc............................. 125,400 4,874,925
Sprint Corp......................................... 75,700 5,431,475
US WEST Media Group................................. 299,900 15,219,925
--------------
154,018,012
--------------
TOTAL COMMON STOCKS............................................. 1,210,776,240
--------------
PREFERRED STOCK 0.4%
Fresenius National Med Care, Inc.
(convertible into common stock)..................... 10,000 650
Microsoft Corp., $2.196 dividend per share
(convertible into common stock)..................... 58,000 5,415,750
--------------
5,416,400
--------------
CONVERTIBLE CORPORATE OBLIGATIONS 3.2%
ADT Operations, Inc., LYON ($10,500,000 par,
0% coupon, 07/06/10 maturity)................................... 15,750,000
Deutshce Finance - 144A (Netherlands) ($18,000,000
par, 0% coupon, 02/12/17 maturity) (c).......................... 10,080,000
Hewlett-Packard Co. LYON - 144A ($8,375,000
par, 0% coupon, 10/14/17 maturity) (c).......................... 4,454,495
Merrill Lynch STRYPES ($66,100 par, 6.00% coupon,
06/01/99 maturity).............................................. 2,441,528
</TABLE>
12 See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1998 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Description Market Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
CONVERTIBLE CORPORATE OBLIGATIONS (CONTINUED)
Roche Holdings, Inc. LYON (Switzerland) ($17,000,000 par,
0% coupon, 04/20/10 maturity)..................................................................... $ 9,605,000
Sandoz Ltd. (Switzerland) ($1,310,000 par, 2.00% coupon, 10/06/02 maturity)....................... 2,115,650
----------------
44,446,673
----------------
TOTAL LONG-TERM INVESTMENTS 90.8%
(Cost $985,476,638)......................................................................... 1,260,639,313
----------------
SHORT TERM INVESTMENTS 11.2%
COMMERCIAL PAPER 4.0%
Prudential Funding Corp. ($20,845,000 par, yielding 5.66%, 06/01/98 maturity)..................... 20,835,167
General Electric Capital Corp. ($34,000,000 par, yielding 5.62%, 06/01/98 maturity)............... 33,984,074
----------------
54,819,241
----------------
U.S. GOVERNMENT AGENCY OBLIGATIONS 7.2%
Federal Home Loan Mortgage Discount Notes
($20,000,000 par, yielding 5.43%, 06/05/98 maturity).............................................. 19,985,056
Federal Home Loan Mortgage Discount Notes
($20,000,000 par, yielding 5.43%, 06/09/98 maturity) (b).......................................... 19,972,950
Federal Home Loan Mortgage Discount Notes
($20,000,000 par, yielding 5.47%, 07/06/98 maturity).............................................. 19,891,400
Federal National Mortgage Association Discount Notes
($20,000,000 par, yielding 5.42%, 06/08/98 maturity) (b).......................................... 19,976,045
Federal National Mortgage Association Discount Notes
($20,000,000 par, yielding 5.41%, 06/15/98 maturity) (b).......................................... 19,955,083
----------------
99,780,534
----------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $154,599,775)........................................................................... 154,599,775
TOTAL INVESTMENTS 102.0%
----------------
(Cost $1,140,076,413)......................................................................... 1,415,239,088
LIABILITIES IN EXCESS OF OTHER ASSETS (2.0%) (27,193,616)
----------------
NET ASSETS 100.0%................................................................................ $ 1,388,045,472
================
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) Assets segregated for open futures transactions.
(c) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may be resold only in
transactions exempt from registration which are normally those transactions
with qualified institutional buyers.
LYON--Liquid yield option note.
STRYPES--Structured yield product exchangable for common stock
ADR--American Depository Receipt
13 See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1998 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Total Investments (Cost $1,140,076,413)........................................... $ 1,415,239,088
Cash.............................................................................. 28,756
Receivables:
Investments Sold................................................................ 2,010,683
Fund Shares Sold................................................................ 1,987,886
Dividends....................................................................... 1,683,218
Interest........................................................................ 26,648
Other............................................................................. 62,856
---------------
Total Assets.................................................................. 1,421,039,135
===============
LIABILITIES:
Payables:
Investments Purchased........................................................... 17,125,748
Fund Shares Repurchased......................................................... 13,400,297
Distributor and Affiliates...................................................... 887,130
Investment Advisory Fee......................................................... 448,567
Variation Margin on Futures..................................................... 495,000
Income Distributions............................................................ 45,814
Accrued Expenses.................................................................. 421,448
Trustees Deferred Compensation and Retirement Plans............................... 169,659
---------------
Total Liabilities............................................................. 32,993,663
---------------
NET ASSETS........................................................................ $ 1,388,045,472
===============
NET ASSETS CONSIST OF:
Capital........................................................................... $ 1,047,575,927
Net Unrealized Appreciation....................................................... 275,063,300
Accumulated Net Realized Gain..................................................... 63,742,650
Accumulated Undistributed Net Investment Income................................... 1,663,595
---------------
NET ASSETS........................................................................ $ 1,388,045,472
===============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $914,825,804 and 48,632,139 shares of beneficial
interest issued and outstanding)................................................ $ 18.81
Maximum sales charge (5.75%* of offering price)................................. 1.15
---------------
Maximum offering price to public................................................ $ 19.96
Class B Shares: ===============
Net asset value and offering price per share (Based on net
assets of $428,929,989 and 22,922,831 shares of beneficial
interest issued and outstanding)................................................ $ 18.71
===============
Class C Shares:
Net asset value and offering price per share (Based on net
assets of $44,289,679 and 2,365,948 shares of beneficial
interest issued and outstanding)................................................ $ 18.72
===============
</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 May 31, 1998 (Unaudited)
=========================================================================
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................. $ 8,743,037
Interest.................................................. 4,003,357
-------------
Total Income......................................... 12,746,394
-------------
EXPENSES:
Distribution (12b-1) and Service Fees
(Attributed to Classes A, B and C of $1,005,402, $1,931,056
and $199,967, respectively).............................. 3,136,425
Investment Advisory Fee................................... 2,414,902
Shareholder Services...................................... 1,318,784
Custody................................................... 29,120
Legal..................................................... 25,844
Trustees' Fees and Expenses............................... 6,034
Other..................................................... 411,271
-------------
Total Expenses....................................... 7,342,380
-------------
NET INVESTMENT INCOME..................................... $ 5,404,014
=============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments.......................................... $ 58,973,846
Futures.............................................. 5,957,729
-------------
Net Realized Gain......................................... 64,931,575
-------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................. 170,134,229
-------------
End of the Period:
Investments.......................................... 275,162,675
Futures.............................................. (99,375)
-------------
275,063,300
-------------
Net Unrealized Appreciation During the Period............. 104,929,071
-------------
NET REALIZED AND UNREALIZED GAIN.......................... $ 169,860,646
=============
NET INCREASE IN NET ASSETS FROM OPERATIONS................ $ 175,264,660
=============
</TABLE>
15 See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended May 31, 1998 and
the Year Ended November 30, 1997 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
May 31, 1998 November 30, 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income...................................... $ 5,404,014 $ 10,747,126
Net Realized Gain.......................................... 64,931,575 142,774,617
Net Unrealized Appreciation During the Period.............. 104,929,071 31,725,750
------------------ ------------------
Change in Net Assets from Operations....................... 175,264,660 185,247,493
------------------ ------------------
Distributions from Net Investment Income:
Class A Shares..................................... (5,133,383) (8,812,655)
Class B Shares..................................... (1,113,221) (1,691,267)
Class C Shares..................................... (112,947) (185,706)
------------------ ------------------
(6,359,551) (10,689,628)
------------------ ------------------
Distributions from Net Realized Gain:
Class A Shares..................................... (92,501,532) (38,290,040)
Class B Shares..................................... (41,387,326) (13,977,897)
Class C Shares..................................... (4,313,232) (1,489,104)
------------------ ------------------
(138,202,090) (53,757,041)
------------------ ------------------
Total Distributions........................ (144,561,641) (64,446,669)
------------------ ------------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES............................................... 30,703,019 120,800,824
------------------ ------------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.................................. 227,944,935 357,663,305
Net Asset Value of Shares Issued Through Dividend
Reinvestment............................................. 132,655,588 58,449,265
Cost of Shares Repurchased................................. (152,889,513) (204,209,399)
------------------ ------------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS............................................. 207,711,010 211,903,171
------------------ ------------------
TOTAL INCREASE IN NET ASSETS............................... 238,414,029 332,703,995
NET ASSETS:
Beginning of the Period.................................... 1,149,631,443 816,927,448
------------------ ------------------
End of the Period (Including accumulated undistributed net
investment income of $1,663,595 and $2,619,132,
respectively)............................................ $ 1,388,045,472 $ 1,149,631,443
================== ==================
</TABLE>
16 See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended November 30,
Class A Shares May 31, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........ $18.716 $16.786 $ 14.81 $ 12.26 $ 14.08
------- ------- ------- ------- -------
Net Investment Income........................ .096 .226 .243 .28 .29
Net Realized and Unrealized Gain/Loss........ 2.359 3.032 2.851 3.455 (.1025)
------- ------- ------- ------- -------
Total from Investment Operations................ 2.455 3.258 3.094 3.735 .1875
------- ------- ------- ------- -------
Less:
Distributions from Net Investment Income..... .115 .230 .250 .2925 .27
Distributions from Net Realized Gain......... 2.245 1.098 .868 .8925 1.7375
------- ------- ------- ------- -------
Total Distributions............................. 2.360 1.328 1.118 1.185 2.0075
------- ------- ------- ------- -------
Net Asset Value, End of the Period.............. $18.811 $18.716 $16.786 $ 14.81 $ 12.26
======= ======= ======= ======= =======
Total Return (a)................................ 13.40%* 21.27% 22.35% 33.34% 1.21%
Net Assets at End of the Period
(In millions)................................ $ 914.8 $ 773.3 $ 584.6 $ 381.6 $ 205.4
Ratio of Expenses to
Average Net Assets (b)....................... .89% .94% 1.04% 1.15% 1.16%
Ratio of Net Investment Income to
Average Net Assets (b)....................... 1.10% 1.33% 1.68% 2.24% 2.25%
Portfolio Turnover.............................. 42%* 94% 110% 108% 102%
Average Commission Paid Per
Equity Share Traded (c)...................... $ .0515 $ .0284 $ .0565 -- --
</TABLE>
* Non-Annualized
(a) Total Return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) For the years ended November 30, 1995 and 1997, 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>
- -------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended November 30,
Class B Shares May 31, 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period ........................................................ $ 18.630 $ 16.721 $ 14.77 $ 12.25 $ 14.07
--------- -------- ------- ------ -------
Net Investment Income............................................ .035 .097 .142 .17 .17
Net Realized and Unrealized Gain/Loss............................ 2.347 3.020 2.827 3.455 (.1025)
--------- -------- ------- ------ -------
Total from Investment Operations...................................... 2.382 3.117 2.969 3.625 .0675
--------- -------- ------- ------ -------
Less:
Distributions from
Net Investment Income.......................................... .055 .110 .150 .2125 .15
Distributions from Net Realized Gain............................. 2.245 1.098 .868 .8925 1.7375
--------- -------- ------- ------ -------
Total Distributions................................................... 2.300 1.208 1.018 1.105 1.8875
--------- -------- ------- ------ -------
Net Asset Value, End of the Period.................................... $ 18.712 $ 18.630 $16.721 $ 14.77 $ 12.25
========= ======== ======= ====== =======
Total Return (a)...................................................... 13.02%* 20.37% 21.38% 32.15% .36%
Net Assets at End of the Period
(In millions).................................................... $ 428.9 $ 340.8 $210.3 $ 98.4 $ 18.5
Ratio of Expenses to
Average Net Assets (b)........................................... 1.66% 1.72% 1.83% 1.99% 2.02%
Ratio of Net Investment Income to
Average Net Assets (b)........................................... .34% .55% .89% 1.25% 1.51%
Portfolio Turnover.................................................... 42%* 94% 110% 108% 102%
Average Commission Paid Per
Equity Share Traded (c)............................................... $ .0515 $ .0284 $.0565 -- --
</TABLE>
*Non-Annualized
(a) Total Return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) For the years ended November 30, 1995 and 1997, 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>
- ------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended November 30,
Class C Shares May 31, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.............. $ 18.643 $ 16.734 $ 14.78 $ 12.26 $ 14.07
-------- -------- -------- ------- -------
Net Investment Income............................... .036 .096 .139 .18 .17
Net Realized and Unrealized Gain/Loss............... 2.341 3.021 2.833 3.445 (.0925)
-------- -------- -------- ------- -------
Total from Investment Operations...................... 2.377 3.117 2.972 3.625 .0775
-------- -------- -------- ------- -------
Less:
Distributions from
Net Investment Income............................. .055 .110 .150 .2125 .15
Distributions from Net Realized Gain................ 2.245 1.098 .868 .8925 1.7375
-------- -------- -------- ------- -------
Total Distributions................................... 2.300 1.208 1.018 1.105 1.8875
-------- -------- -------- ------- -------
Net Asset Value, End of the Period.................... $ 18.720 $ 18.643 $ 16.734 $ 14.78 $ 12.26
======== ======== ======== ======= =======
Total Return (a)...................................... 13.01%* 20.28% 21.43% 32.23% .36%
Net Assets at End of the
Period (In millions)................................ $ 44.3 $ 35.5 $ 22.1 $ 10.4 $ 3.5
Ratio of Expenses to
Average Net Assets (b).............................. 1.66% 1.72% 1.83% 1.97% 2.01%
Ratio of Net Investment Income
to Average Net Assets (b)........................... .34% .55% .89% 1.35% 1.50%
Portfolio Turnover.................................... 42%* 94% 110% 108% 102%
Average Commission Paid Per
Equity Share Traded (c)............................. $ .0515 $ .0284 $ .0565 -- --
</TABLE>
*Non-Annualized
(a) Total Return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) For the years ended November 30, 1995 and 1997, 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
<PAGE>
NOTES TO FINANCIAL STATEMENTS
May 31, 1998 (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
management investment company under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to provide income and long-term
growth of capital by investing principally in income-producing equity securities
including 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
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.
Fixed income investments are stated at value using market quotations. Unlisted
securities and listed securities for which the last sales price is not available
are valued at the last bid price. For those securities where quotations or
prices are not available, valuations are determined in accordance with
procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At May 31, 1998, there were no when
issued or delayed delivery purchase commitments.
The Fund may invest in repurchase agreements, which are short-term
investments whereby 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
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1998 (Unaudited)
================================================================================
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. INCOME AND EXPENSES--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 amortized over the expected life of each
applicable security. Premiums on debt securities are not amortized. Expenses of
the Fund are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of gains or losses recognized for tax purposes on
open futures at November 30, 1997, and the deferral of losses for tax purposes
resulting from wash sales.
At May 31, 1998, for federal income tax purposes the cost of long-and
short-term investments is $1,140,241,963; the aggregate gross unrealized
appreciation is $299,995,886 and the aggregate gross unrealized depreciation is
$24,998,761, resulting in net unrealized appreciation including open futures
positions of $274,997,125.
E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains and gains on option and futures
transactions. All short-term capital gains and a portion of option and futures
gains are included in ordinary income for tax purposes.
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:
<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>
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1998 (Unaudited)
================================================================================
For the six months ended May 31, 1998, the Fund recognized expenses of
approximately $25,800 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 May 31, 1998, the Fund recognized expenses of
approximately $74,500 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
May 31, 1998, the Fund recognized expenses of approximately $939,700. Beginning
in 1998, the transfer agency fees are determined through negotiations with the
Fund's Board of Trustees and are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors
of 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 $2,500.
For the six months ended May 31, 1998, the Fund paid brokerage commissions
to Morgan Stanley Dean Witter & Co., which is an affiliate of VKAC, totaling
$375.
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 May 31, 1998, capital aggregated $660,132,227, $351,549,815 and
$35,893,885 for Classes A, B, and C, respectively. For the six months ended May
31, 1998, transactions were as follows:
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1998 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A........................................ 7,800,283 $ 139,734,383
Class B........................................ 4,345,901 78,071,922
Class C........................................ 565,745 10,138,630
----------- -------------
Total Sales...................................... 12,711,929 $ 227,944,935
=========== =============
Dividend Reinvestment:
Class A........................................ 5,521,546 $ 90,302,327
Class B........................................ 2,380,371 38,722,791
Class C........................................ 223,037 3,630,470
----------- -------------
Total Dividend Reinvestment...................... 8,124,954 $ 132,655,588
=========== =============
Repurchases:
Class A........................................ (6,008,465) $(109,049,864)
Class B........................................ (2,095,136) (37,932,467)
Class C........................................ (328,658) (5,907,182)
----------- -------------
Total Repurchases................................ (8,432,259) $(152,889,513)
=========== =============
</TABLE>
At November 30, 1997, capital aggregated $539,145,381, $272,687,569 and
$28,031,967 for Classes A, B, and C, respectively. For the year ended November
30, 1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
================================================================================
<S> <C> <C>
Sales:
Class A........................................ 12,661,054 $ 214,097,873
Class B........................................ 7,448,409 127,830,907
Class C........................................ 936,448 15,734,525
----------- -------------
Total Sales...................................... 21,045,911 $ 357,663,305
=========== =============
Dividend Reinvestment:
Class A........................................ 2,817,850 $ 43,169,689
Class B........................................ 925,904 14,037,324
Class C........................................ 81,806 1,242,252
----------- -------------
Total Dividend Reinvestment...................... 3,825,560 $ 58,449,265
=========== =============
Repurchases:
Class A........................................ (8,984,896) $(150,897,486)
Class B........................................ (2,659,743) (45,883,568)
Class C........................................ (431,229) (7,428,345)
----------- -------------
Total Repurchases................................ (12,075,868) $(204,209,399)
=========== =============
</TABLE>
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1998 (Unaudited)
================================================================================
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC 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 Class C as detailed in the following schedule.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
----------------------
YEAR OF REDEMPTION CLASS B CLASS C
================================================================================
<S> <C> <C>
First.................................................. 5.00% 1.00%
Second................................................. 4.00% None
Third.................................................. 3.00% None
Fourth................................................. 2.50% None
Fifth.................................................. 1.50% None
Sixth and Thereafter................................... None None
</TABLE>
For the six months ended May 31, 1998, VKAC, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A shares of approximately
$280,700 and CDSC on the redeemed shares of Classes B and C of approximately
$288,300. 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 $561,069,359 and $487,383,848,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
exercising a call option contract or taking delivery of a security underlying a
futures contract. In these instances the recognition of gain or loss is
postponed until the disposal of the security underlying the option or futures
contract.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1998 (Unaudited)
================================================================================
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 as
a substitute for purchasing and selling specific securities. Upon entering into
futures contracts, the Fund maintains, in a segregated account with its
custodian, securities with a value equal to its obligation under the futures
contracts. During the period the futures contract is open, payments are received
from or made to the broker based upon changes in the value of the contract (the
variation margin). The potential risk of loss associated with a futures contract
could be in excess of the variation margin reflected on the Statement of Assets
and Liabilities.
Transactions in futures contracts for the six months ended May 31, 1998,
were as follows:
CONTRACTS
================================================================================
Outstanding at November 30, 1997.................................. 170
Futures Opened.................................................... 500
Futures Closed.................................................... (470)
-----
Outstanding at May 31, 1998....................................... 200
=====
The futures contracts outstanding as of May 31, 1998, and the description
and unrealized depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS DEPRECIATION
=====================================================================================
<S> <C> <C>
Long Contracts:
S&P 500 Index Futures
June 1998 (Current Notional Value of $272,700 per contract) 200 $99,375
==== =======
</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 May 31, 1998, are payments retained by VKAC of
approximately $1,609,300.
25
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VK Equity Growth
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International /Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS Latin American
FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Limited Maturity Government
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term
Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC Tax Free Money
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen American Capital or Morgan Stanley fund prospectus
or to receive additional fund information, choose from one of the following:
. visit our web site at WWW.VKAC.COM -- to view prospectuses, select
Investors' Place, then Download a Prospectus
. call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)
. e-mail us by visiting WWW.VKAC.COM and selecting Investors' Place
26
<PAGE>
Van Kampen American Capital Growth and Income Fund
Board of Trustees
J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
Officers
DENNIS J. MCDONNELL*
PRESIDENT
RONALD A. NYBERG*
VICE PRESIDENT AND SECRETARY
EDWARD C. WOOD, III*
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
CURTIS W. MORELL*
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
JOHN L. SULLIVAN*
TREASURER
TANYA M. LODEN*
CONTROLLER
PETER W. HEGEL*
PAUL R. WOLKENBERG*
VICE PRESIDENTS
Investment Adviser
VAN KAMPEN 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
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act
of 1940.
(c) Van Kampen American Capital Distributors, Inc., 1998 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 September 30, 1998, the report, if used with
prospective investors, must be accompanied by a quarterly performance update, if
applicable.
27
<PAGE>
Bulk Rate
U.S. Postage
PAID
VAN KAMPEN
AMERICAN CAPITAL
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> GROWTH AND INCOME - C1A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 1,140,076,413<F1>
<INVESTMENTS-AT-VALUE> 1,415,239,088<F1>
<RECEIVABLES> 5,708,435<F1>
<ASSETS-OTHER> 62,856<F1>
<OTHER-ITEMS-ASSETS> 28,756<F1>
<TOTAL-ASSETS> 1,421,039,135<F1>
<PAYABLE-FOR-SECURITIES> 17,125,748<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 15,867,915<F1>
<TOTAL-LIABILITIES> 32,993,663<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 660,132,227
<SHARES-COMMON-STOCK> 48,632,139
<SHARES-COMMON-PRIOR> 41,318,775
<ACCUMULATED-NII-CURRENT> 1,663,595<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 63,742,650<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 275,063,300<F1>
<NET-ASSETS> 914,825,804
<DIVIDEND-INCOME> 8,743,037<F1>
<INTEREST-INCOME> 4,003,357<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (7,342,380)<F1>
<NET-INVESTMENT-INCOME> 5,404,014<F1>
<REALIZED-GAINS-CURRENT> 64,931,575<F1>
<APPREC-INCREASE-CURRENT> 104,929,071<F1>
<NET-CHANGE-FROM-OPS> 175,264,660<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (5,133,383)
<DISTRIBUTIONS-OF-GAINS> (92,501,532)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,800,283
<NUMBER-OF-SHARES-REDEEMED> (6,008,465)
<SHARES-REINVESTED> 5,521,546
<NET-CHANGE-IN-ASSETS> 141,492,692
<ACCUMULATED-NII-PRIOR> 2,619,132<F1>
<ACCUMULATED-GAINS-PRIOR> 137,013,165<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,414,902<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 7,342,380<F1>
<AVERAGE-NET-ASSETS> 851,241,719
<PER-SHARE-NAV-BEGIN> 18.716
<PER-SHARE-NII> 0.096
<PER-SHARE-GAIN-APPREC> 2.359
<PER-SHARE-DIVIDEND> (0.115)
<PER-SHARE-DISTRIBUTIONS> (2.245)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.811
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> GROWTH AND INCOME - C1B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 1,140,076,413<F1>
<INVESTMENTS-AT-VALUE> 1,415,239,088<F1>
<RECEIVABLES> 5,708,435<F1>
<ASSETS-OTHER> 62,856<F1>
<OTHER-ITEMS-ASSETS> 28,756<F1>
<TOTAL-ASSETS> 1,421,039,135<F1>
<PAYABLE-FOR-SECURITIES> 17,125,748<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 15,867,915<F1>
<TOTAL-LIABILITIES> 32,993,663<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 351,549,815
<SHARES-COMMON-STOCK> 22,922,831
<SHARES-COMMON-PRIOR> 18,291,695
<ACCUMULATED-NII-CURRENT> 1,663,595<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 63,742,650<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 275,063,300<F1>
<NET-ASSETS> 428,929,989
<DIVIDEND-INCOME> 8,743,037<F1>
<INTEREST-INCOME> 4,003,357<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (7,342,380)<F1>
<NET-INVESTMENT-INCOME> 5,404,014<F1>
<REALIZED-GAINS-CURRENT> 64,931,575<F1>
<APPREC-INCREASE-CURRENT> 104,929,071<F1>
<NET-CHANGE-FROM-OPS> 175,264,660<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,113,221)
<DISTRIBUTIONS-OF-GAINS> (41,387,326)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,345,901
<NUMBER-OF-SHARES-REDEEMED> (2,095,136)
<SHARES-REINVESTED> 2,380,371
<NET-CHANGE-IN-ASSETS> 88,161,228
<ACCUMULATED-NII-PRIOR> 2,619,132<F1>
<ACCUMULATED-GAINS-PRIOR> 137,013,165<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,414,902<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 7,342,380<F1>
<AVERAGE-NET-ASSETS> 387,521,078
<PER-SHARE-NAV-BEGIN> 18.630
<PER-SHARE-NII> 0.035
<PER-SHARE-GAIN-APPREC> 2.347
<PER-SHARE-DIVIDEND> (0.055)
<PER-SHARE-DISTRIBUTIONS> (2.245)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.712
<EXPENSE-RATIO> 1.66
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> GROWTH AND INCOME - C1C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 1,140,076,413<F1>
<INVESTMENTS-AT-VALUE> 1,415,239,088<F1>
<RECEIVABLES> 5,708,435<F1>
<ASSETS-OTHER> 62,856<F1>
<OTHER-ITEMS-ASSETS> 28,756<F1>
<TOTAL-ASSETS> 1,421,039,135<F1>
<PAYABLE-FOR-SECURITIES> 17,125,748<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 15,867,915<F1>
<TOTAL-LIABILITIES> 32,993,663<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35,893,885
<SHARES-COMMON-STOCK> 2,365,948
<SHARES-COMMON-PRIOR> 1,905,824
<ACCUMULATED-NII-CURRENT> 1,663,595<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 63,742,650<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 275,063,300<F1>
<NET-ASSETS> 44,289,679
<DIVIDEND-INCOME> 8,743,037<F1>
<INTEREST-INCOME> 4,003,357<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (7,342,380)<F1>
<NET-INVESTMENT-INCOME> 5,404,014<F1>
<REALIZED-GAINS-CURRENT> 64,931,575<F1>
<APPREC-INCREASE-CURRENT> 104,929,071<F1>
<NET-CHANGE-FROM-OPS> 175,264,660<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (112,947)
<DISTRIBUTIONS-OF-GAINS> (4,313,232)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 565,745
<NUMBER-OF-SHARES-REDEEMED> (328,658)
<SHARES-REINVESTED> 223,037
<NET-CHANGE-IN-ASSETS> 8,760,109
<ACCUMULATED-NII-PRIOR> 2,619,132<F1>
<ACCUMULATED-GAINS-PRIOR> 137,013,165<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,414,902<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 7,342,380<F1>
<AVERAGE-NET-ASSETS> 40,130,682
<PER-SHARE-NAV-BEGIN> 18.643
<PER-SHARE-NII> 0.036
<PER-SHARE-GAIN-APPREC> 2.341
<PER-SHARE-DIVIDEND> (0.055)
<PER-SHARE-DISTRIBUTIONS> (2.245)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.720
<EXPENSE-RATIO> 1.66
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite
basis and not on a class basis
</FN>
</TABLE>
