<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio Manager Comments.................. 4
Portfolio of Investments.................... 6
Statement of Assets and Liabilities......... 14
Statement of Operations..................... 15
Statement of Changes in Net Assets.......... 16
Financial Highlights........................ 17
Notes to Financial Statements............... 19
</TABLE>
11-EMG-SAR-4/95
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DON G. POWELL]
DON G. POWELL
March 27, 1995
Dear Shareholder:
During the six-month period covered by this report, September 1, 1994 through
February 28, 1995, we saw the close of a challenging and difficult year in the
financial markets--and the beginning of a new year, with renewed optimism and
strength on many fronts.
MARKET OVERVIEW
In an effort to moderate economic growth and keep inflation under control,
the Federal
Reserve Board (the "Fed") raised the federal funds rate (the rate banks charge
each other for overnight loans) seven times over a 12-month period. As a re-
sult, the fed funds rate doubled from 3 percent to 6 percent, its highest level
in three years. Intermediate and long-term interest rates quickly followed the
Fed's lead and moved significantly higher as well. The yield on 30-year Trea-
sury securities, for example, began 1994 at 6.35 percent and increased to a
high of 8.16 percent, before retreating to 7.89 percent at the end of the year.
However, since yields and prices move in opposite directions, this had a nega-
tive impact on prices of fixed-income securities.
Stock market investors did not fare much better during this rising interest
rate environment, despite the robust economy and stronger corporate earnings.
Concerned that higher interest rates and the prospect for continued rate hikes
might altogether extinguish the
economic expansion, the equity market sputtered for most of 1994. The S&P 500
Index, for example, produced a 1.36 percent total return for 1994, while the
average price change for the year for all stocks listed on the New York Stock
Exchange was down 20 percent.
In contrast, 1995 began more positively, as the bond market got a boost from
growing sentiment that the Fed appeared to have stabilized economic growth
while keeping inflation under control, and that it may be near the end of its
tightening cycle. Subsequently, the yield on 30-year Treasury securities fell
to 7.44 percent by the end of February--down nearly three quarters of a per-
centage point--from its high of 8.16 percent in November.
The stock market responded in late February with the Dow Jones Industrial Av-
erage breaking through the 4000 mark, setting a new record high and raising ex-
pectations for a stronger market in 1995. At the same time, almost all other
major stock indexes rose, including the S&P 500 Index, the New York Stock Ex-
change Composite Index, and the Nasdaq Composite Index.
Additionally, the Van Kampen American Capital Index of Investor Intentions
for February reached 233--an increase of 17 percent over January's level of
200--its largest monthly increase since February 1994. The index, computed from
an independently conducted survey and published by Van Kampen American Capital,
measures the investment climate (investors' confidence) by asking 1,000 invest-
ors about what they intend to do with their money over the next 60-90 days. A
total of 45.6 percent of investors said the next 60-90 days would be a "good"
time to invest.
(Continued on page two)
1
<PAGE>
On the following pages, you can read about your Fund's performance during
the past six months, as well as portfolio management's outlook for 1995. We
hope that you will find the information contained in the question-and-answer
section helpful.
CORPORATE NEWS
As you may have already noticed, we have adopted a new design for our share-
holder reports that begins to reflect our new identity as Van Kampen American
Capital. Going forward, we will continue to look for new ways to improve upon
the presentation of information in your Fund's report.
In addition, we have developed a new corporate ad campaign introducing Van
Kampen American Capital to investors and the investment community. Full page
ads appeared in The Wall Street Journal in February--watch for more advertis-
ing throughout the year.
We look forward to communicating with you on a regular basis, providing in-
formation about your Fund's performance, new investment opportunities, and our
newly created company. We appreciate your continued confidence in your Fund
and Van Kampen American Capital.
Sincerely,
LOGO
Don G. Powell
President
Van Kampen American Capital
Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED FEBRUARY 28, 1995
AMERICAN CAPITAL EMERGING GROWTH FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV/1/.............. 2.56% 2.15% 2.17%
Six-month total return/2/........................... (3.34%) (2.82%) 1.17%
One-year total return/2/............................ (10.38%) (10.30%) (6.64%)
Five-year average annual total return/2/............ 16.40% N/A N/A
Life of Fund average annual total return/2/......... 16.20% 11.58% 3.03%
Commencement Date................................... 10/02/70 04/20/92 07/06/93
</TABLE>
N/A = Not Applicable
/1/Assumes reinvestment of all distributions for the period ended February 28,
1995, and does not include payment of the maximum sales charge (5.75% for A
shares) or contingent deferred sales charge (5% for B shares; 1% for C
shares).
/2/Standardized total return for the period ended February 28, 1995.
See the Fund Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Investor's shares, when redeemed, may be
worth more or less than their original cost.
3
<PAGE>
LOGO
PORTFOLIO MANAGER COMMENTS
AMERICAN CAPITAL EMERGING GROWTH FUND
The following is an interview with the management team of American Capital
Emerging Growth Fund. The team is led by Gary Lewis, portfolio manager, and
Alan Sachtleben, executive vice president for equity investments.
Q STOCKS OF SMALLER AND MEDIUM-SIZED COMPANIES BEGAN TO RECOVER DURING THE
SIX MONTHS ENDED FEBRUARY 28, 1995. WHAT FACTORS DO YOU FEEL CONTRIBUTED
TO THIS RECOVERY?
A The correction in emerging growth stocks ended just as the reporting pe-
riod began. As we moved into the fourth quarter of 1994, these stocks
started to rebound strongly on a selective basis. Until recently, the rebound
largely was confined to technology stocks and, to a lesser degree, health care
stocks. Technology stocks performed well because many of the companies in this
sector were benefitting from the strong demand for personal computers. As a
result, analysts predicted rapidly rising earnings for technology companies,
pushing up their stock prices.
Toward the end of the reporting period the rebound spread to other sectors,
including finance, health care and transportation. This was a positive move,
since the recovery could not be sustained on the strength of just one sector.
Q HOW DID YOU RESPOND TO THE CHANGING MARKET CONDITIONS?
A We gradually increased the Fund's technology holdings, from about 18 per-
cent at the beginning of the period to around 25 percent at the end of
February. We also increased the Fund's holdings of health care stocks, from 12
percent at the beginning of September to 15 percent at the end of February. As
a result, our holdings in most other sectors declined during the period. The
top five industries in which the Fund was invested at the end of the reporting
period were semiconductors, medical services, computer software, financial
services and telecommunications equipment. The Fund's diversification at the
end of the period is illustrated by the pie chart below.
[PERFORMANCE CHART APPEARS HERE]
PORTFOLIO HOLDINGS BY INDUSTRY AS OF FEBRUARY 28, 1995
Health Care=15.0%
Finance=9.0%
Energy=4.0%
Consumer Services=6.0%
Consumer Non-Durables=3.0%
Consumer Durables=2.0%
Consumer Distribution=5.0%
Producer Manufacturing=4.0%
Raw Materials/Processing Industries=4.0%
Technology=25.0%
Transportation=2.0%
Utilities=2.0%
Other=19.0%
4
<PAGE>
Several of the technology stocks that we owned throughout the period did
very well. These included Broderbund, LSI Logic and Integrated Device Technol-
ogy. Among the technology stocks we bought during the past six months, Alli-
ance Semiconductor did especially well, with its stock price rising 279
percent during the reporting period. Other new additions to the Fund's portfo-
lio that did well were Sierra Semiconductor and Network Equipment Technolo-
gies, both of which saw their stock price increase by at least 70 percent
during the period. Of course, not all of the stocks in the Fund's portfolio
performed that well. For a complete list of portfolio holdings, see the Port-
folio of Investments section of this report, beginning on page six.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A The Fund (Class A Shares) achieved a total return, at net asset value,
of 2.56 percent/1/, including a capital gains distribution of $0.62 per
share. By comparison, the Standard & Poor's 500-Stock Index achieved a total
return of 3.98 percent. However, the S&P 500 reflects the general performance
of larger-capitalization stocks. The S&P Midcap Index, which reflects the gen-
eral performance of mid-cap stocks, achieved a total return of 0.63 percent.
Both indexes are broad-based, unmanaged indexes, and neither reflects any com-
missions or fees that would be paid by an investor purchasing the securities
they represent.
Q WHAT DO YOU BELIEVE IS AHEAD FOR EMERGING GROWTH STOCKS?
A The economy has continued to slow, in response to increases in short-
term interest rates. The Federal Reserve Board has been raising rates in
an effort to keep inflation under control.
As the pace of economic growth decelerates, emerging growth companies should
become more attractive because of the potential for capital appreciation that
they offer investors. The earnings projections for the companies in the Fund
are strong, as are the outlooks for many of the industries in which these com-
panies operate. Therefore, we remain optimistic about the outlook for emerging
growth stocks.
LOGO LOGO
Alan T. Sachtleben Gary M. Lewis
Executive Vice President Portfolio Manager
Equity Investments
Please see footnotes on page three.
5
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS
February 28, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
................................................................................
<C> <S> <C>
COMMON STOCK 80.3%
CONSUMER DISTRIBUTION 5.2%
100,000 Alco Standard Corp............................. $ 6,800,000
* 7,200 Baby Superstore, Inc........................... 302,400
* 50,000 Barnes & Noble, Inc............................ 1,475,000
129,250 Bergen Brunswig Corp........................... 3,522,062
100,000 Casey's General Stores, Inc.................... 1,575,000
* 100,000 CompUSA, Inc................................... 1,887,500
* 75,000 Corporate Express, Inc......................... 1,790,625
375,000 Dollar General Corp............................ 13,031,250
* 100,000 Emulex Corp.................................... 1,450,000
16,500 Fastenal Co.................................... 771,375
* 100,000 Gymboree Corp.................................. 2,400,000
100,000 Pier 1 Imports, Inc............................ 987,500
* 100,000 Revco Drugs, Inc............................... 1,837,500
* 200,000 Safeway, Inc................................... 7,175,000
100,000 Talbots, Inc................................... 3,162,500
100,000 Tiffany & Co................................... 3,150,000
* 125,000 Viking Office Products......................... 3,750,000
* 85,000 Waban, Inc..................................... 1,678,750
----------------
TOTAL CONSUMER DISTRIBUTION.................... 56,746,462
----------------
CONSUMER DURABLES 2.2%
125,000 Callaway Golf Co............................... 4,218,750
100,000 Clayton Homes, Inc............................. 1,787,500
* 75,000 Cobra Golf, Inc................................ 2,442,188
125,000 Echlin, Inc.................................... 4,328,125
140,400 Harman International Industries, Inc........... 5,896,800
125,000 Sunbeam--Oster Co., Inc........................ 3,046,875
110,000 Ultralife Batteries, Inc....................... 1,567,500
60,000 X-Rite, Inc.................................... 1,170,000
----------------
TOTAL CONSUMER DURABLES........................ 24,457,738
----------------
</TABLE>
6
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
................................................................................
<C> <S> <C>
CONSUMER NON-DURABLES 3.1%
25,000 Bush Boake Allen, Inc.......................... $ 612,500
175,000 Canandaigua Wine, Inc.......................... 6,485,937
* 75,000 Fieldcrest Cannon, Inc......................... 1,584,375
* 100,000 Fossil, Inc.................................... 1,812,500
150,000 Nautica Enterprises, Inc....................... 4,668,750
* 125,000 Ralcorp Holdings, Inc.......................... 3,156,250
* 75,000 Smithfield Foods, Inc.......................... 1,982,813
65,000 St. John Knits, Inc............................ 2,185,625
250,000 Tommy Hilfiger Corp............................ 5,000,000
* 85,000 Unifi, Inc..................................... 2,401,250
125,000 Wolverine World Wide, Inc...................... 3,390,625
----------------
TOTAL CONSUMER NON-DURABLES.................... 33,280,625
----------------
CONSUMER SERVICES 6.2%
35,000 Belo (A.H.) Corp............................... 1,973,125
93,750 Clear Channel Communications, Inc.............. 5,332,031
125,000 Corrections Corp. of America................... 2,953,125
40,000 Devon Group, Inc............................... 1,030,000
* 150,000 Gartner Group, Inc............................. 6,225,000
* 150,000 Heritage Media Corp. Class A................... 3,843,750
* 200,000 Hospitality Franchise System, Inc.............. 5,675,000
* 100,000 Infinity Broadcasting Corp..................... 3,525,000
285,000 La Quinta Inns, Inc.,.......................... 7,089,375
* 100,000 Landry's Seafood Restaurants................... 2,662,500
175,000 Manpower, Inc.................................. 5,118,750
100,000 Meredith Corp.................................. 4,862,500
175,000 Mirage Resorts, Inc............................ 4,178,125
100,000 Reynolds & Reynolds Co......................... 2,762,500
* 200,000 Robert Half International, Inc................. 4,925,000
* 75,000 Rock Bottom Restaurants, Inc................... 1,462,500
* 35,000 Scientific Games Holdings Corp................. 1,575,000
150,000 Wendy's International, Inc..................... 2,325,000
----------------
TOTAL CONSUMER SERVICES........................ 67,518,281
----------------
</TABLE>
7
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
................................................................................
<C> <S> <C>
ENERGY 4.0%
150,000 Apache Corp.................................... $ 3,750,000
* 150,000 Barret Resources Corp.......................... 2,943,750
200,000 Benton Oil & Gas Co............................ 1,850,000
150,000 Chesapeake Energy Corp......................... 2,362,500
100,000 Enron Oil & Gas Co............................. 2,087,500
125,000 J Ray McDermott, SA............................ 2,781,250
100,000 Kerr McGee Corp................................ 5,037,500
50,000 Murphy Oil Corp................................ 2,187,500
125,000 Norsk Hydro, A.S., ADS......................... 4,718,750
* 100,000 Petroleum Geo-Services, (A.S., ADS)............ 2,243,750
50,000 Phoenix Resource Co............................ 987,500
200,000 Pogo Producing Co.............................. 3,700,000
* 200,000 Smith International, Inc....................... 2,675,000
100,000 Union Texas Petroleum Holdings, Inc............ 1,925,000
* 200,000 Western Co. of North America................... 3,775,000
----------------
TOTAL ENERGY................................... 43,025,000
----------------
FINANCE 8.9%
75,000 American Bankers, Inc.......................... 2,034,375
150,000 Bank of Boston Corp............................ 4,518,750
200,000 Baybanks, Inc.................................. 12,550,000
75,000 CMAC Investment Corp........................... 2,559,375
50,000 Cole Taylor Financial Group, Inc............... 887,500
50,000 Comdisco, Inc.................................. 1,275,000
75,000 Crestar Financial Corp......................... 3,234,375
110,000 Cullen Frost Bankers, Inc...................... 3,960,000
55,000 Equitable of Iowa Companies.................... 1,828,750
125,000 Finova Group, Inc.............................. 4,187,500
125,000 First American Corp............................ 4,289,063
75,000 First Bank System, Inc......................... 2,915,625
25,000 Foothill Group, Inc............................ 456,250
150,000 Green Tree Financial Corp...................... 5,737,500
50,000 Life Partners Group, Inc....................... 1,075,000
75,000 MBNA Corp...................................... 1,978,125
125,000 Merchantile Bancorporation, Inc................ 4,609,375
75,000 MGIC Investment Corp........................... 2,859,375
72,162 Michigan National Corp......................... 7,351,504
175,000 Midlantic Corp................................. 5,381,250
50,000 Progressive Corp............................... 1,943,750
100,000 Providian Corp................................. 3,537,500
50,000 Republic Corp.................................. 2,493,750
</TABLE>
8
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
................................................................................
<C> <S> <C>
75,000 St. Paul Companies Inc......................... $ 3,646,875
50,000 Star Banc Corp................................. 2,131,250
50,000 TCF Financial Corp............................. 2,050,000
35,000 Vesta Investments Group, Inc................... 1,045,625
150,000 Webb (Del) Corp................................ 2,962,500
100,000 West One Bancorp............................... 2,731,250
----------------
TOTAL FINANCE.................................. 96,231,192
----------------
HEALTH CARE 14.5%
* 150,000 AMSCO International, Inc....................... 2,062,500
50,000 CDP Technologies, Inc.......................... 487,500
* 100,000 Community Health Systems, Inc.................. 2,787,500
* 75,000 Coram Healthcare Corp.......................... 1,762,500
* 150,000 Cordis Corp.................................... 9,750,000
* 150,000 Coventry Corp.................................. 4,050,000
* 86,500 Genentech, Inc................................. 4,346,625
* 50,000 Genesis Health Ventures, Inc................... 1,512,500
* 125,000 Gulf South Medical Supply...................... 4,937,500
200,000 HBO & Co....................................... 7,700,000
* 300,000 Health Management Associates, Inc.............. 7,987,500
* 300,000 Healthcare Compare Corp........................ 9,525,000
* 100,000 Healthcare & Retirement Corp................... 3,100,000
* 125,000 Healthsound Rehabilitation..................... 5,031,250
75,000 Hillhaven Corp................................. 1,809,375
75,000 Homedco Group, Inc............................. 3,375,000
* 150,000 Horizon Healthcare Corp........................ 3,656,250
75,000 Integrated Health Services, Inc................ 2,868,750
* 75,000 Lincare Holdings, Inc.......................... 2,100,000
* 125,000 Living Centers of America, Inc................. 4,546,875
* 75,000 Marquette Electronics, Inc..................... 1,668,750
* 200,000 Medaphis Corp.................................. 11,300,000
100,000 Medtronic, Inc................................. 6,000,000
9,000 Mentor Corp.................................... 218,250
200,000 Mylan Labs, Inc................................ 6,250,000
84,000 National Medical Enterprise.................... 1,302,000
125,000 Omnicare, Inc.................................. 6,078,125
* 85,000 Ostex International, Inc....................... 860,625
* 75,000 Oxford Health Plans, Inc....................... 6,825,000
* 75,000 Pharmacy Management Systems, Inc............... 1,183,594
* 250,000 Phycor, Inc.................................... 7,687,500
* 50,000 Quorum Health Group, Inc....................... 950,000
* 110,000 REN Corp--USA.................................. 1,650,000
</TABLE>
9
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
................................................................................
<C> <S> <C>
* 100,000 Rotech Medical Corp............................ $ 2,700,000
* 50,000 Steris Corp.................................... 1,656,250
* 175,000 Sun Healthcare Group........................... 4,484,375
8,700 Sunrise Medical, Inc........................... 300,150
* 100,000 Theratx, Inc................................... 1,987,500
* 50,000 United American Healthcare Corp................ 1,300,000
* 125,000 Vencor, Inc.................................... 3,968,750
* 109,400 Vivra, Inc..................................... 3,555,500
* 100,000 Watson Pharmaceuticals, Inc.................... 2,581,250
----------------
TOTAL HEALTHCARE............................... 157,904,244
----------------
PRODUCER MANUFACTURING 3.8%
175,000 Ametek, Inc.................................... 3,128,125
* 75,000 Clark Equipment Co............................. 4,012,500
200,000 Danaher Corp................................... 5,900,000
75,000 Exide Corp..................................... 3,862,500
* 75,000 FMC Corp....................................... 4,387,500
150,000 Harnischfeger Industries, Inc.................. 4,181,250
* 50,000 Image Industries, Inc.......................... 793,750
75,000 Kennametal, Inc................................ 2,025,000
* 125,000 Newpark Resources, Inc......................... 1,968,750
100,000 Parker Hannifin Corp........................... 4,675,000
* 150,000 Sanifill, Inc.................................. 3,543,750
35,000 Thermo Remediation, Inc........................ 625,625
75,000 Wellman, Inc................................... 2,025,000
----------------
TOTAL PRODUCER MANUFACTURING................... 41,128,750
----------------
RAW MATERIALS/PROCESSING INDUSTRIES 3.8%
* 200,000 A K Steel...................................... 5,200,000
125,000 Cabot Corp..................................... 4,250,000
75,000 Caraustar Industries, Inc...................... 1,425,000
100,000 Chesapeake Corp................................ 3,300,000
125,000 First Mississippi Corp......................... 3,031,250
75,000 Furon Co....................................... 1,481,250
* 125,000 Georgia Gulf Corp.............................. 3,750,000
100,000 J&L Specialty Steel, Inc....................... 1,925,000
85,000 Millipore Corp................................. 4,515,625
75,000 OM Group, Inc.................................. 1,800,000
175,000 Potash Corp Sask, Inc.......................... 6,256,250
* 40,000 Sealed Air Corp................................ 1,675,000
230,000 Terra Industries, Inc.......................... 2,530,000
----------------
TOTAL RAW MATERIALS/PROCESSING INDUSTRIES...... 41,139,375
----------------
</TABLE>
10
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
<C> <S> <C>
TECHNOLOGY 24.6%
* 175,000 3 COM, Corp..................................... $ 9,121,875
100,000 Adaptec, Inc.................................... 3,300,000
* 125,000 Alliance Semiconducter Corp..................... 4,781,250
125,000 Altera Corp..................................... 7,109,375
* 112,500 American Management Systems, Inc................ 2,299,218
* 110,000 Amphenol Corp................................... 2,708,750
* 300,000 Analog Devices, Inc............................. 7,537,500
* 75,000 Andrew Corp..................................... 4,350,000
* 35,000 Aspen Technology, Inc........................... 682,500
* 250,000 Atmel Corp...................................... 8,531,250
150,000 Auspex Systems, Inc............................. 1,425,000
100,000 Autodesk, Inc................................... 3,925,000
85,000 BMC Software, Inc............................... 5,461,250
* 200,000 Broderbund Software, Inc........................ 10,375,000
* 100,000 C-COR Electrics, Inc............................ 2,675,000
* 250,000 Cadence Design Systems, Inc..................... 6,406,250
* 125,000 Ceridian Corp................................... 3,937,500
* 23,300 CIDCO, Inc...................................... 722,300
* 80,000 Cycare Systems, Inc............................. 1,650,000
* 200,000 Cypress Semiconductor Corp...................... 5,675,000
* 100,000 DSC Communications Corp......................... 3,600,000
* 200,000 Frame Technology................................ 3,250,000
25,000 General Magic, Inc.............................. 456,250
* 50,000 Hyperion Software, Corp......................... 2,187,500
* 200,000 Input/Output, Inc............................... 5,250,000
* 150,000 Integrated Device Technology, Inc............... 5,718,750
* 85,000 Kemet Corp...................................... 2,645,625
* 150,000 KLA Instruments Corp............................ 8,700,000
* 75,000 Kronos, Inc..................................... 2,043,750
200,000 Linear Technology Corp.......................... 10,900,000
* 300,000 LSI Logic Corp.................................. 16,350,000
100,000 Medic Computer Systems, Inc..................... 4,212,500
* 150,000 Microchip Technology, Inc....................... 3,787,500
200,000 Micron Technology, Inc.......................... 12,400,000
* 75,000 Micros System, Inc.............................. 2,231,250
125,000 Netmanage, Inc.................................. 4,531,250
* 200,000 Network Equipment Technologies.................. 5,075,000
* 150,000 Network General Corp............................ 3,993,750
* 17,000 Oak Technology, Inc............................. 350,625
* 55,000 Optical Data Systems, Inc....................... 1,485,000
................................................................................
</TABLE>
11
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
................................................................................
<C> <S> <C>
* 25,000 Shiva Corp.................................... $ 812,500
* 150,000 Sierra Semiconductor Corp..................... 3,412,500
* 250,000 Silicon Graphics, Inc......................... 8,656,250
* 200,000 Softkey International, Inc.................... 5,100,000
* 150,000 Sterling Software, Inc........................ 5,418,750
* 100,000 Stratacom, Inc................................ 3,700,000
* 350,000 Tellabs, Inc.................................. 18,200,000
* 150,000 Tencor Instruments............................ 7,143,750
* 100,000 Teradyne, Inc................................. 3,637,500
* 10,500 TGV Software, Inc............................. 168,000
* 125,000 Ultratech Stepper, Inc........................ 5,687,500
175,000 Vishav Intertechnology, Inc................... 9,450,000
100,000 Watkins-Johnson Co............................ 3,650,000
----------------
TOTAL TECHNOLOGY.............................. 266,879,518
----------------
TRANSPORTATION 1.7%
* 75,000 Landstar Systems, Inc......................... 2,700,000
125,000 Pittston Company Services Group............... 3,125,000
* 150,000 Swift Transportation, Inc..................... 3,487,500
200,000 TNT Freightways Corp.......................... 5,500,000
* 75,000 Wisconsin Central Transportation Corp......... 3,412,500
----------------
TOTAL TRANSPORTATION.......................... 18,225,000
----------------
UTILITIES 2.3%
* 125,000 ALC Communications Corp....................... 3,687,500
150,000 Century Telephone Enterprises, Inc............ 4,668,750
* 250,000 LCI International, Inc........................ 5,500,000
* 50,000 Nationwide Cellular Services, Inc............. 900,000
* 200,000 Paging Network, Inc........................... 6,650,000
75,000 Telephone & Data Systems, Inc................. 3,421,875
----------------
TOTAL UTILITIES............................... 24,828,125
----------------
TOTAL COMMON STOCK (Cost $731,847,078)........ 871,364,310
----------------
CONVERTIBLE PREFERRED STOCK 0.3%
Cellular Communications, Inc. (Cost
* 70,000 $2,570,000)................................... 3,552,500
----------------
</TABLE>
12
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
................................................................................
<C> <S> <C>
SHORT-TERM INVESTMENTS 19.2%
# 23,000,000 Federal Home Loan Mortgage Association, 5.85%
to 6.07%, 3/17/95 to 5/2/95.................. $ 22,860,910
Federal National Mortgage Association, 5.87%
# 66,185,000 to 6.04%, 3/15/95 to 5/24/95................. 65,515,349
General Electric Capital Corp., 6.00%,
50,000,000 3/1/95....................................... 49,991,667
64,490,000 Repurchase Agreement with Salomon Brothers,
Inc., dated 2/28/95, 6.10%, due 3/1/95
(collateralized by U.S. Government
obligations in a pooled cash account)
repurchase proceeds $64,500,927.............. 64,490,000
United States Treasury Bills, 5.72% to 5.83%,
# 5,000,000 4/13/95 to 5/4/95............................ 4,955,163
----------------
TOTAL SHORT-TERM INVESTMENTS (Cost $207,805,859)... 207,813,089
----------------
TOTAL INVESTMENTS 99.8% (Cost $942,222,937)................. 1,082,729,899
Other Assets and Liabilities, net 0.2%...................... 1,689,712
----------------
NET ASSETS 100%............................................. $ 1,084,419,611
----------------
</TABLE>
*Non-income producing security.
#A portion of this security, with a market value of approximately $59.9 mil-
lion, was maintained in a segregated account and placed as collateral for
futures contracts (See Note IC).
13
<PAGE>
See Notes to Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $942,222,937)............ $ 1,082,729,899
Cash........................................................ 4,449
Receivable for Fund shares sold............................. 23,282,932
Receivable for investments sold............................. 17,467,773
Dividends receivable........................................ 546,052
Receivable from broker-variation margin..................... 441,000
Other assets................................................ 42,009
----------------
Total Assets............................................... 1,124,514,114
----------------
LIABILITIES
Payable for investments purchased........................... 35,677,754
Payable for Fund shares redeemed............................ 2,806,126
Due to Distributor.......................................... 589,021
Due to Adviser.............................................. 458,584
Due to shareholder service agent............................ 387,405
Deferred directors' compensation............................ 70,228
Accrued expenses............................................ 105,385
----------------
Total Liabilities.......................................... 40,094,503
----------------
NET ASSETS, equivalent to $24.34 per share for Class A
shares, $23.71 per share for Class B shares and $24.00 per
share for Class C shares................................... $ 1,084,419,611
----------------
NET ASSETS WERE COMPRISED OF:
Capital stock, at par; 30,384,542 Class A, 13,325,091 Class
B and 1,211,711 Class C
shares outstanding......................................... $ 449,213
Capital surplus............................................. 913,243,616
Undistributed net realized gain on securities............... 28,035,921
Net unrealized appreciation of securities
Investments................................................ 140,506,962
Futures contracts.......................................... 2,438,938
Accumulated net investment loss............................. (255,039)
----------------
NET ASSETS at February 28, 1995............................. $ 1,084,419,611
----------------
</TABLE>
14
<PAGE>
See Notes to Financial Statements
STATEMENT OF OPERATIONS
Six Months Ended February 28, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.................................................... $ 3,755,983
Dividends................................................... 3,128,660
----------------
Investment income.......................................... 6,884,643
----------------
EXPENSES
Management Fees............................................. 2,588,587
Shareholder service agent's fees and expenses............... 1,961,170
Service fees--Class A....................................... 664,218
Distribution and service fees--Class B...................... 1,372,369
Distribution and service fees--Class C...................... 128,909
Reports to shareholders..................................... 165,069
Accounting services......................................... 74,751
Directors' fees and expenses................................ 28,508
Custodian fees.............................................. 19,069
Audit fees.................................................. 17,500
Registration and filing fees................................ 7,765
Legal fees.................................................. 7,702
Miscellaneous............................................... 34,721
----------------
Total expenses............................................. 7,070,338
----------------
NET INVESTMENT LOSS......................................... (185,695)
----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized gain on investments............................ 49,652,530
Net realized loss on futures contracts...................... (715,275)
Net unrealized depreciation of investments during the
period...................................................... (22,478,064)
Net unrealized appreciation of futures contracts during the
period...................................................... 1,621,750
----------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES.............. 28,080,941
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 27,895,246
----------------
</TABLE>
15
<PAGE>
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
February 28, 1995 August 31, 1994
................................................................................
<S> <C> <C>
NET ASSETS, beginning of period............ $ 954,412,776 $593,737,150
-------------- ------------
Operations
Net investment loss....................... (185,695) (3,699,373)
Net realized gain on securities........... 48,937,255 25,654,512
Net unrealized depreciation of securities
during the period........................ (20,856,314) (43,151,364)
-------------- ------------
Increase (decrease) in net assets result-
ing from operations...................... 27,895,246 (21,196,225)
-------------- ------------
Distributions to shareholders from net
realized gain on securities:
Class A................................... (17,525,839) (34,197,716)
Class B................................... (7,311,642) (7,449,021)
Class C................................... (662,369) (402,667)
-------------- ------------
(25,499,850) (42,049,404)
-------------- ------------
Fund share transactions
Proceeds from shares sold
Class A................................... 448,382,552 747,070,310
Class B................................... 78,411,897 218,458,300
Class C................................... 10,758,664 26,549,184
-------------- ------------
537,553,113 992,077,794
-------------- ------------
Proceeds from shares issued for distribu-
tions reinvested
Class A................................... 16,358,362 31,162,468
Class B................................... 6,692,349 6,869,825
Class C................................... 555,536 339,541
-------------- ------------
23,606,247 38,371,834
-------------- ------------
Cost of shares redeemed
Class A................................... (404,903,625) (571,657,960)
Class B................................... (21,968,659) (32,231,372)
Class C................................... (6,675,637) (2,639,041)
-------------- ------------
(433,547,921) (606,528,373)
-------------- ------------
INCREASE IN NET ASSETS RESULTING FROM FUND
SHARE TRANSACTIONS......................... 127,611,439 423,921,255
-------------- ------------
INCREASE IN NET ASSETS..................... 130,006,835 360,675,626
-------------- ------------
NET ASSETS, end of period.................. $1,084,419,611 $954,412,776
-------------- ------------
</TABLE>
16
<PAGE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each of the
periods indicated (Unaudited).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------
Six Months
Ended Year Ended August 31
February 28, ----------------------------------------
1995 1994 1993 1992(1) 1991 1990
................................................................................
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PER-
FORMANCE
Net asset value, begin-
ning of period......... $24.37 $26.46 $ 19.03 $ 20.06 $14.44 $15.19
------ ------ ------- ------- ------ ------
Income from investment
operations
Investment income...... .13 .33 .15 .195 .23 .29
Expenses............... (.11) (.44) (.20) (.21) (.195) (.185)
------ ------ ------- ------- ------ ------
Net investment income
(loss)................. .02 (.11) (.05) (.015) .035 .105
Net realized and
unrealized gain or loss
on securities.......... .57 (.32) 8.6375 .9275 6.035 (.60)
------ ------ ------- ------- ------ ------
Total from investment
operations............. .59 (.43) 8.5875 .9125 6.07 (.495)
------ ------ ------- ------- ------ ------
Less Distributions
Dividends from net in-
vestment income....... -- -- -- (.0325) (.0775) (.255)
Distributions from net
realized gains on
securities............ (.62) (1.66) (1.1575) (1.91) (.3725) --
------ ------ ------- ------- ------ ------
Total distributions..... (.62) (1.66) (1.1575) (1.9425) (.45) (.255)
------ ------ ------- ------- ------ ------
Net asset value, end of
period................. $24.34 $24.37 $ 26.46 $ 19.03 $20.06 $14.44
------ ------ ------- ------- ------ ------
TOTAL RETURN (2)........ 2.56% (1.67%) 46.73% 4.28% 43.30% (3.27%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the
period (millions)...... $739.4 $677.1 $ 517.8 $ 312.3 $283.6 $206.6
Average net assets (mil-
lions)................. $679.1 $599.4 $ 405.2 $ 320.6 $235.8 $209.9
Ratios to average net
assets:
Expenses............... 1.20%(3) 1.18% 1.10% 1.04% 1.14% 1.15%
Net investment income
(loss)................ .21%(3) (.30%) (.27%) (.08%) .21% .65%
Portfolio turnover rate. 53% 64% 47% 61% 69% 47%
</TABLE>
(1) Based on average month-end shares outstanding
(2) Total return for a period of less than one full year is not annualized.
Total return does not consider the effect of sales charges.
(3) Annualized.
17
<PAGE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of capital stock outstanding throughout each of the
periods indicated (Unaudited).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C
----------------------------------------------- -----------------------------------------
April 28, July 6,
Six Months Year Ended 1992(1) Six Months 1993(1)
Ended August 31 through Ended Year Ended through
February 28, ---------------- August 31, February 28, August 31, August 31,
1995 1994 1993(2) 1992(2) 1995 1994(2) 1993(2)
........................................................................................................................
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, begin-
ning of period.......... $23.86 $26.14 $18.98 $19.66 $24.14 $26.42 $25.07
------ ------ ------- ------ ------ ------ ------
Income from investment
operations
Investment income....... .08 .24 .19 .08 .11 .24 .03
Expenses................ (.12) (.51) (.435) (.145) (.16) (.49) (.075)
------ ------ ------- ------ ------ ------ ------
Net investment loss...... (.04) (.27) (.245) (.065) (.05) (.25) (.045)
Net realized and
unrealized gain or loss
on securities........... .51 (.35) 8.5625 (.615) .53 (.37) 1.395
------ ------ ------- ------ ------ ------ ------
Total from investment
operations.............. .47 (.62) 8.3175 (.68) .48 (.62) 1.35
------ ------ ------- ------ ------ ------ ------
Distributions from net
realized gains on
securities.............. (.62) (1.66) (1.1575) -- (.62) (1.66) --
------ ------ ------- ------ ------ ------ ------
Net asset value, end of
period.................. $23.71 $23.86 $26.14 $18.98 $24.00 $24.14 $26.42
------ ------ ------- ------ ------ ------ ------
TOTAL RETURN (3)......... 2.15% (2.46%) 45.41% (3.51%) 2.17% (2.46%) 5.42%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the
period (millions)....... $315.9 $252.9 $74.5 $5.2 $29.1 $24.5 $1.4
Average net assets
(millions).............. $274.5 $163.1 $28.4 $2.8 $25.8 $12.8 $0.5
Ratios to average net
assets
Expenses................ 2.02%(4) 2.01% 1.89% 1.86%(4) 2.02%(4) 2.02% 2.31%(4)
Net investment loss..... (.60%)(4) (1.07%) (1.07%) (.80%)(4) (.60%)(4) (1.04%) (1.37%)(4)
Portfolio turnover rate.. 53% 64% 47% 61% 53% 64% 47%
</TABLE>
(1) Commencement of offering of sales
(2) Based on average month-end shares outstanding
(3) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
(4) Annualized
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
February 28, 1995 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
American Capital Emerging Growth Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified open-end man-
agement investment company. The following is a summary of significant account-
ing policies consistently followed by the Fund in the preparation of its
financial statements.
A. INVESTMENT VALUATIONS-Securities listed or traded on a national securities
exchange are valued at the last sale price. Unlisted and listed securities for
which the last sale price is not available are valued at the mean between the
last reported bid and asked prices.
Short-term investments with a maturity of 60 days or less when purchased are
valued at amortized cost, which approximates market value. Short-term invest-
ments with a maturity of more than 60 days when purchased are valued based on
market quotations until the remaining days to maturity becomes less than 61
days. From such time, until maturity, the investments are valued at amortized
costs.
B. REPURCHASE AGREEMENTS-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 in-
vest independently in repurchase agreements, or transfer uninvested cash bal-
ances into a pooled cash account along with other investment companies advised
or sub-advised by Van Kampen American Capital Asset Management, Inc. (the "Ad-
viser"), the daily aggregate of which is invested in repurchase agreements. Re-
purchase agreements are collateralized by the underlying debt security. The
Fund makes 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. FUTURES CONTRACTS-Transactions in futures contracts are utilized in strate-
gies to manage the market risk of the Fund's investments. The purchase of a
futures contract increases the impact on net asset value of changes in the mar-
ket price of investments. There is also a risk that the market movement of such
instruments may not be in the direction forecasted. Note 3--Investment Activity
contains additional information.
Upon entering into futures contracts, the Fund maintains, in a segregated ac-
count 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 ac-
count in the name of the broker, the Fund's agent in acquiring the futures po-
sition. 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 incurred, variation
margin payments are received
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 1995 (Unaudited)
- -------------------------------------------------------------------------------
from or made to the broker. Upon the closing or cash 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.
D. FEDERAL INCOME TAXES-No provision for federal income taxes is required be-
cause the Fund has elected to be taxed as a "regulated investment company" un-
der the Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investment income and taxable net
realized gains on investments to its shareholders.
The Fund had a net realized capital loss carryforward for federal income tax
purposes of approximately $2.8 million at August 31, 1994, which may be uti-
lized to offset current or future capital gains until expiration in 1995.
E. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment trans-
actions are accounted for on the trade date. Realized gains and losses on in-
vestments are determined on the basis of identified cost. Dividend income is
recorded on the ex-dividend date. Interest income is accrued daily.
F. DIVIDENDS AND DISTRIBUTIONS-Dividends and distributions to shareholders are
recorded on the record date. The Fund distributes tax basis earnings in accor-
dance with the minimum distribution requirements of the Internal Revenue Code,
which may result in dividends or distributions in excess of financial state-
ment earnings.
NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as investment manager of the Fund. Management fees are paid
monthly, based on the average daily net assets of the Fund at an annual rate
of .575% of the first $350 million, .525% of the next $350 million, .475% of
the next $350 million and .425% of the excess of $1.05 billion.
Accounting services include the salaries and overhead expenses of the Fund's
Treasurer and the personnel operating under his direction. Charges are allo-
cated among investment companies advised or sub-advised by the Adviser. For
the period ended February 28, 1995, these charges included $10,105 as the
Fund's share of the employee costs attributable to the Fund's accounting offi-
cers. A portion of the accounting services expense was paid to the Adviser in
reimbursement of personnel, facilities and equipment costs attributable to the
provision of accounting services to the Fund. The services provided by the Ad-
viser are at cost.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 1995 (Unaudited)
- -------------------------------------------------------------------------------
ACCESS Investor Services, an affiliate of the Adviser, serves as the Fund's
shareholder service agent. These services are provided at cost plus a profit.
For the period ended February 28, 1995, the fees for such services were
$1,613,175.
The Fund has been advised that Van Kampen American Capital Distributors,
Inc. (the "Distributor") and Advantage Capital Corp. (the "Retail Dealer"),
both affiliates of the Adviser, received $38,774 and $10,839, respectively, as
their portion of the commissions on sales of Fund shares during the period.
Under the Distribution Plans, the Fund pays up to .25% per annum of its av-
erage daily net assets to the Distributor for expenses and service fees in-
curred. Class B shares and Class C shares pay an additional fee of up to .75%
per annum of their average net assets to reimburse the Distributor for its
distribution expenses. Actual distribution expenses incurred by the Distribu-
tor for Class B shares and Class C shares may exceed the amounts reimbursed to
the Distributor by the Fund. At February 28, 1995, the unreimbursed expenses
incurred by the Distributor under the Class B plan and Class C plan aggregated
approximately $11.9 million and $344,000, respectively, and may be carried
forward and reimbursed through either the collection of the contingent de-
ferred sales charges from share redemptions or, subject to the annual renewal
of the plans, future Fund reimbursements of distribution fees.
During the period, the Fund paid brokerage commissions of $31,593 to a com-
pany which was deemed an affiliate of the Adviser's parent because it owned
more than 5% of the Company's outstanding voting securities. As of December
20, 1994, the company was no longer considered an affiliate.
Legal fees were for services rendered by O'Melveny & Myers, counsel for the
Fund. Lawrence J. Sheehan, of counsel to that firm, is a director of the Fund.
Certain officers and directors of the Fund are officers and directors of the
Adviser, the Distributor, the Retail Dealer and the shareholder service agent.
NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments were $453,903,795 and $446,497,624,
respectively.
At February 28, 1995, the Fund held 245 long Standard & Poor's 500 Index
futures contracts expiring in March 1995. The market value of such contracts
was $59,847,375 and the unrealized appreciation was $2,438,938.
For federal income tax purposes, the identified cost of investments owned at
February 28, 1995 was the same as for financial reporting purposes. Gross
unrealized appreciation of investments aggregated $153,521,347 and gross
unrealized depreciation aggregated $13,014,385.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 1995 (Unaudited)
- -------------------------------------------------------------------------------
NOTE 4--DIRECTOR COMPENSATION
Fund directors who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $2,300 plus a fee of $60 per day for Board and Com-
mittee meetings attended. The Chairman receives additional fees from the Fund
at the annual rate of $860. During the period, such fees aggregated $15,342.
The directors may participate in a voluntary Deferred Compensation Plan (the
"Plan"). The Plan is not funded, and obligations under the Plan will be paid
solely out of the Fund's general accounts. The Fund will not reserve or set
aside funds for the payment of its obligations under the Plan by any form of
trust or escrow. Each director covered under the Plan elects to be credited
with an earnings component on amounts deferred equal to the income earned by
the Fund on its short-term investments or equal to the total return of the
Fund.
NOTE 5--CAPITAL
The Fund offers three classes of shares at their respective net asset values
per share, plus a sales charge which is imposed either at the time of purchase
(the Class A shares) or at the time of redemption on a contingent deferred ba-
sis (the Class B shares and Class C shares). All classes of shares have the
same rights, except that Class B shares and Class C shares bear the cost of
distribution fees and certain other class specific expenses. Realized and
unrealized gains or losses, investment income and expenses (other than class
specific expenses) are allocated daily to each class of shares based upon the
relative proportion of net assets of each class. Class B shares and Class C
shares automatically convert to Class A shares six years and ten years after
purchase, respectively, subject to certain conditions.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 1995 (Unaudited)
- -------------------------------------------------------------------------------
The Fund has 200 million shares of each class of $.01 par value capital
stock authorized. Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A............................................. 18,841,582 29,869,198
Class B............................................. 3,370,381 8,777,044
Class C............................................. 456,764 1,054,495
----------- -----------
22,668,727 39,700,737
----------- -----------
Shares issued for distribution reinvested
Class A............................................. 720,562 1,268,167
Class B............................................. 302,145 284,112
Class C............................................. 24,777 13,881
----------- -----------
1,047,484 1,566,160
----------- -----------
Shares redeemed
Class A............................................. (16,954,701) (22,927,742)
Class B............................................. (946,895) (1,311,636)
Class C............................................. (284,388) (107,283)
----------- -----------
(18,185,984) (24,346,661)
----------- -----------
Increase in Fund shares outstanding.................. 5,530,227 16,920,236
----------- -----------
</TABLE>
23
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND INTERNATIONAL
Govett Emerging Markets Fund
AC Global Equity Fund
Govett Global Government Income Fund
AC Global Government Securities
AC Global Managed Assets Fund
Govett International Equity Fund
Govett Latin America Fund
Govett Pacific Strategy Fund
EQUITY
GROWTH
AC Emerging Growth Fund
AC Enterprise Fund
AC Pace Fund
Govett Smaller Companies Fund
GROWTH & INCOME
VKM Balanced Fund
AC Comstock Fund
AC Equity Income Fund
AC Growth and Income Fund
VKM Growth and Income Fund
AC Harbor Fund
AC Real Estate Securities Fund
VKM Utility Fund
AC Utilities Income Fund
FIXED INCOME
VKM Adjustable Rate U.S. Government Fund
AC Corporate Bond Fund
AC Federal Mortgage Trust
AC Government Securities
VKM High Yield Fund
AC High Yield Investments
VKM Money Market Fund
VKM Prime Rate Income Trust
AC Reserve Fund
VKM Short-Term Global Income Fund
VKM Strategic Income Fund
VKM U.S. Government Fund
AC U.S. Government Trust for Income
TAX-FREE
VKM California Insured Tax Free Fund
VKM Florida Insured Tax Free Income Fund
VKM Insured Tax Free Income Fund
VKM Limited Term Municipal Income Fund
AC Municipal Bond Fund
VKM Municipal Income Fund
VKM New Jersey Tax Free Income Fund
VKM New York Tax Free Income Fund
VKM Pennsylvania Tax Free Income Fund
AC Tax-Exempt Trust
--High Yield Municipal Portfolio
--Insured Municipal Portfolio
VKM Tax Free High Income Fund
VKM Tax Free Money Fund
AC Texas Municipal Securities
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
24
<PAGE>
AMERICAN CAPITAL EMERGING GROWTH FUND INC.
BOARD OF DIRECTORS
J. MILES BRANAGAN
RICHARD E. CARUSO
ROGER HILSMAN
DON G. POWELL
DAVID REES
LAWRENCE J. SHEEHAN
FERNANDO SISTO*
WILLIAM S. WOODSIDE
*Chairman of the Board
OFFICERS
DON G. POWELL
President
CURTIS W. MORELL
Vice President and Treasurer
GARY M. LEWIS
DENNIS J. MCDONNELL
RONALD A. NYBERG
ALAN T. SACHTLEBEN
PAUL R. WOLKENBERG
Vice Presidents
TANYA M. LODEN
Vice President and Controller
NORI L. GABERT
Vice President and Secretary
J. DAVID WISE
Vice President and Assistant Secretary
PERRY F. FARRELL
M. ROBERT SULLIVAN
Assistant Treasurers
HUEY P. FALGOUT, JR.
Assistant Secretary
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
2800 Post Oak Blvd. Houston, Texas 77056
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
2800 Post Oak Blvd. Houston, Texas 77056
SHAREHOLDER SERVICE AGENT
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256 Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK AND TRUST CO.
225 Franklin Street Boston, Massachusetts 02110
COUNSEL
O'MELVENY & MYERS
400 South Hope Street Los Angeles, California 90071
(C) Van Kampen American Capital Distributors, Inc., 1995
All rights reserved.
SM denotes a service mark of
Van Kampen Armerican 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.
