<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio Management Review................. 4
Portfolio of Investments.................... 7
Statement of Assets and Liabilities......... 16
Statement of Operations..................... 17
Statement of Changes in Net Assets.......... 18
Financial Highlights........................ 19
Notes to Financial Statements............... 22
</TABLE>
EMG SAR 4/96
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO APPEARS HERE]
DENNIS J. MCDONNELL AND DON G. POWELL
April 15, 1996
Dear Shareholder,
We are pleased to report continued excellent results for the Van Kampen
American Capital Emerging Growth Fund. For the six months ended February 29,
1996, Class A shares
provided a total return at net asset value of
10.82 percent/1/, including reinvestment of all distributions; over the past
twelve months, this figure rises to 43.83 percent/1/. These returns are espe-
cially noteworthy in light of the market volatility experienced in the first
quarter of 1996.
Furthermore, the Fund's long-term results, which are the true measure of a
fund that seeks capital appreciation, are even more impressive. They reveal
that over the Fund's lifetime, a $10,000 investment made on October 2, 1970
(the time at which the Fund began investment operations) would have grown to
$555,883, assuming payment of the maximum sales charge of 5.75 percent and re-
investment of all distributions*. This translates to an average annual return
of 17.13 percent/2/ for Class A shareholders.
You can read more about your Fund's performance on the following pages, in-
cluding a recent interview with the portfolio management team.
ECONOMIC OVERVIEW
The slowdown in the economy continued through the end of 1995, reflected in
weak consumer demand and disappointing retail sales during the holiday season.
Severe winter weather in many parts of the country further dampened retail ac-
tivity and hindered distribution and manufacturing. These conditions helped to
keep inflation in check, prompting the Federal Reserve Board to continue eas-
ing short-term interest rates. In turn, long-term interest rates declined,
causing the price of bonds to increase.
The market's volatility in early 1996 was triggered in part by three fac-
tors: fiscal uncertainty caused by two unprecedented shutdowns of the federal
government, presidential primary debates about impending tax reform, and an
unexpected reversal in several key economic indicators, which consequently
sent the market mixed signals on the direction of the economy.
Still, due to the government shutdowns and the unusually harsh weather, the
market remained skeptical of the predictive value of economic statistics is-
sued for January and February. Interest rates have fluctuated as the market
attempts to determine whether the economy will remain slow throughout 1996.
*Past performance does not insure future results. Performance is historical
and yields, investment returns, and net asset value of the Fund will vary with
market conditions; Fund shares, when redeemed, may be worth more or less than
their original purchase price.
Continued on page two
1
<PAGE>
ECONOMIC OUTLOOK
In general, we anticipate a pickup in economic activity during the first half
of the year, with possibilities of an increase in inflation and an economic
slowdown toward the end of the year. We believe the Federal Reserve Board will
be cautious in its monetary policy toward short-term interest rates, as mixed
economic news continues to be reported.
The Fed is expected to maintain its focus on growing the economy at an annual
rate of 2 to 3 percent, while striving to keep inflation at bay. Interest rates
are expected to remain within the range experienced over the past several
years, with a continuation of historically low rates.
The present near-record price levels of stocks lead us to expect greater vol-
atility in the equity market. However, the Fund's management team anticipates
continuing its investment approach of staying fully invested in the market in
order to maximize the potential for long-terms returns.
Throughout the life of the Fund, the support of our shareholders and our com-
mitment to a disciplined investment approach have been important to our long-
term performance record. Thank you for your continued confidence in Van Kampen
American Capital and in your Fund's management team.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED FEBRUARY 29, 1996
VAN KAMPEN 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/.............. 10.82% 10.38% 10.39%
Six-month total return/2/........................... 4.44% 5.38% 9.39%
One-year total return/2/............................ 35.59% 37.65% 41.64%
Five-year average annual total return/2/............ 19.26% N/A N/A
Ten-year average annual total return/2/............. 14.83% N/A N/A
Life-of-Fund average annual total return/2/......... 17.13% 19.19% 16.49%
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 and does not include
payment of the maximum sales charge (5.75% for A shares) or contingent de-
ferred sales charge for early withdrawal (5% for B 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 contin-
gent deferred sales charge for the early withdrawal (B and C shares).
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth
more or less than their original cost.
3
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
We recently spoke with the management team of the Van Kampen American Capital
Emerging Growth Fund about the key events and economic forces which shaped the
markets during the first half of the Fund's fiscal year. The team includes
Gary M. Lewis, portfolio manager, and Alan T. Sachtleben, executive vice
president for equity investments. The following excerpts reflect their views
on the Fund's performance during the six-month period ended February 29, 1996.
Q WHAT FACTORS CONTRIBUTED TO THE FUND'S TREMENDOUS SUCCESS--ESPECIALLY
OVER THE PAST SIX MONTHS?
A Many funds in our peer group, other mid-cap emerging growth funds, bene-
fited from large, risky technology sector bets. Fortunately for them,
that group of stocks performed exceptionally well. On the other hand, we're
pleased to say that we believe the Emerging Growth Fund's strong performance
was a direct result of our disciplined stock selection approach. Rather than
trying to time the market or making risky sector bets, the Fund focused on se-
lecting companies whose earnings expectations were rising and whose valuations
were improving. Over the past six months, this strategy worked extremely well.
Technology stocks which led a rally in the broader market over the past six
months fell victim to dramatic price fluctuations in the process. Because the
Fund remained broadly diversified (across a number of varied industries) and
fully invested, the technology sector's roller-coaster ride did not signifi-
cantly affect the Fund. By selecting what we felt were the strongest stocks
from a number of different sectors, the Fund (Class A shares at NAV) was able
to outperform the Russell 2000 index over the past six months.
Q OVERALL, HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD? WHICH
HOLDINGS POSTED THE LARGEST GAINS?
A The Fund (Class A shares) achieved a total return, at net asset value,
of 10.82 percent/1/. By comparison, the Standard & Poor's 500-Stock In-
dex returned 15.32 percent while the Russell 2000 Index returned 7.12 percent.
These indices are unmanaged statistical composites and do not reflect any com-
missions or fees which would be incurred by an investor purchasing the securi-
ties they represent. (Please refer to the chart on page three for additional
Fund performance results.)
The Fund's best individual performers over the past six months represented a
wide range of industries. The companies listed below are ranked in terms of
stock price appreciation (shown to the right) over the past six months. In pa-
rentheses is the sector or industry to which that company belongs:
1) Ascend Communications (Technology) +184%
2) Chesapeake Energy (Energy) +160%
4
<PAGE>
3) Corrections Corp. of America (Consumer Services) +114%
4) Boise Cascade Office Products (Consumer Distribution) +106%
5) HFS Inc. formerly Hospitality Franchise Systems (Consumer Services) +100%
6) Cadence Design Systems (Technology) +93%
7) HBO & Co. (Health Care) +86%
8) Medaphis (Health Care) +85%
9) Gartner Group (Consumer Services) +84%
10) Guidant (Health Care) +82%
Of course not all of the portfolio's holdings performed this well during the
period and there is no guarantee that these returns will be achieved in the fu-
ture or that the Fund will continue to own these holdings.
[PIE CHART PORTFOLIO HOLDINGS BY SECTOR AS OF FEBRUARY 29, 1996 APPEARS HERE]
Energy 5%
Health Care 18%
Producer Manufacturing 5%
Consumer Services 9%
Technology 26%
Raw Materials/Processing Industries 4%
Finance 12%
Consumer Distribution 6%
Consumer Non-Durables 4%
Other 11%
Q TECHNOLOGY STOCKS OBVIOUSLY PERFORMED VERY WELL OVER THE PAST SIX MONTHS.
Q DO ANY OPPORTUNITIES STILL EXIST IN THIS SECTOR?
A Although we will remain broadly diversified as 1996 continues, we believe
companies that provide the Internet's infrastructure have strong growth
potential. We will be keeping an especially close eye on those companies behind
Internet search engines (the websites that let you locate information on the
Internet), security (the hardware and software that protects the information
which travels through the Internet) and digital commerce (those companies whose
hardware and software can facilitate secure monetary transactions across the
Internet).
There should be a flood of initial public offerings within this sector. As
1996 progresses, we intend to stay on top of these new issues and use our dis-
ciplined stock-picking approach to selectively add those with the greatest op-
portunities to the Fund's portfolio.
Q IN GENERAL, WHAT IS YOUR OUTLOOK FOR EMERGING GROWTH STOCKS IN 1996? HOW
WILL YOU POSITION THE FUND TO TAKE ADVANTAGE OF THESE OPPORTUNITIES?
A Our outlook is positive for four reasons. First, we don't think the
strongest performers will be concentrated in one industry. Since good op-
portunities will come from a number of different sectors, we expect it to be a
"stock picker's market." That will support our
5
<PAGE>
equity investment style and our well-defined stock-selection techniques. Sec-
ond, with overall earnings expectations on the decline, all signs point to a
slowing economy. In such slowdowns, emerging growth stocks have historically
performed very well. Third, we think interest rates are relatively high. And
although rates have continued to creep upward as of late, we see interest rates
declining throughout the remainder of 1996. Such a drop would be positive for
emerging growth stocks. Finally, the possibility of a capital gains tax cut is
good news for stocks in general.
Currently, we believe the Fund is very well-positioned to take advantage of
these economic trends. We expect our health care, consumer services, technology
and financial holdings to remain strong. Since certain emerging growth stocks
have a great deal to offer, the Fund will stay broadly diversified and fully
invested in those companies with improving valuations and above-average earn-
ings expectations. We still hold all ten of the stocks that were the past six
month's best performers in the Fund as of February 29, 1996, and believe the
Emerging Growth Fund will continue its strong performance over the next six
months.
/s/ Alan T. Sachtleben /s/ Gary M. Lewis
Alan T. Sachtleben Gary M. Lewis
Executive Vice President Portfolio Manager
Equity Investments
Please see footnotes on page three.
6
<PAGE>
PORTFOLIO OF INVESTMENTS
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK AND EQUIVALENTS 94.3%
CONSUMER DISTRIBUTION 6.0%
150 Alco Standard Corp.................................. $ 7,106,250
*175 Bed, Bath & Beyond Inc.............................. 7,809,375
*75 Boise Cascade Office Products Corp.................. 4,162,500
200 Casey's General Stores Inc.......................... 4,500,000
*200 Consolidated Stores Corp............................ 5,200,000
*300 Corporate Express Inc............................... 8,925,000
*125 Eckerd Corp......................................... 5,609,375
*80 Gadzooks Inc........................................ 2,180,000
60 Gap Inc............................................. 3,217,500
*50 Garden Ridge Corp................................... 1,900,000
*100 Just For Feet Inc................................... 3,575,000
*250 Kroger Co........................................... 9,281,250
*75 Petco Animal Supplies............................... 2,475,000
125 Richfood Holdings Inc............................... 3,437,500
*300 Safeway Inc......................................... 8,962,500
*325 Staples Inc......................................... 8,409,375
*150 Sunglass Hut International Inc...................... 4,162,500
105 Tiffany & Co........................................ 5,643,750
*125 U.S. Office Products Co............................. 3,781,250
*85 Viking Office Products.............................. 4,834,375
*100 Vons Companies Inc.................................. 2,875,000
*225 Zale Corp........................................... 3,403,125
--------------
111,450,625
--------------
CONSUMER DURABLES 1.0%
*125 Beazer Homes USA Inc................................ 2,375,000
150 Harman International Industries Inc................. 5,325,000
60 Industrie Natuzzi Spa, ADR.......................... 3,000,000
85 Lennar Corp......................................... 2,040,000
60 Oakwood Homes Corp.................................. 2,677,500
85 Snap On Inc......................................... 3,803,750
--------------
19,221,250
--------------
CONSUMER NON-DURABLES 3.8%
125 Coca-Cola Enterprises Inc........................... 3,546,875
*125 Fila Holdings, ADR.................................. 6,843,750
300 First Brands Corp................................... 8,025,000
160 Liz Claiborne Inc................................... 5,020,000
*50 Mossimo Inc......................................... 1,227,450
*175 Nautica Enterprises Inc............................. 7,175,000
150 Nike Inc., Class B.................................. 9,731,250
</TABLE>
See Notes to Financial Statements
7
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
*200 Nu-Kote Holdings Inc., Class A...................... $ 3,300,000
*100 Quiksilver Inc...................................... 2,900,000
*65 Revlon Inc., Class A................................ 1,795,625
65 St. John Knits Inc.................................. 3,778,125
*250 Tommy Hilfiger Corp................................. 9,906,250
*85 USA Detergents Inc.................................. 1,891,250
200 Wolverine World Wide Inc............................ 5,750,000
--------------
70,890,575
--------------
CONSUMER SERVICES 9.5%
*175 Accustaff Inc....................................... 9,275,000
*85 Appollo Group Inc., Class A......................... 3,400,000
*200 Boston Chicken Inc.................................. 7,175,000
99 Career Horizons Inc................................. 2,334,625
*50 CKS Group Inc....................................... 1,662,500
*250 Clear Channel Communications........................ 12,656,250
*50 Corestaff Inc....................................... 2,112,500
*350 Corrections Corp. of America........................ 16,625,000
200 Evergreen Media Corp., Class A...................... 6,625,000
*200 Gartner Group Inc................................... 10,825,000
*100 HA LO Industries Inc................................ 2,250,000
*300 HFS Inc............................................. 13,950,000
*250 Infinity Broadcasting Corp.......................... 10,312,500
125 Interpublic Group Companies Inc..................... 5,265,625
*100 Lone Star Steakhouse & Saloon Inc................... 3,187,500
250 Meredith Corp....................................... 10,968,750
*300 Mirage Resorts Inc.................................. 13,912,500
*100 National Media Corp................................. 1,775,000
150 Omnicom Group....................................... 6,131,250
*150 Outback Steakhouse Inc.............................. 5,325,000
*40 Primark Corp........................................ 1,564,200
*125 Promus Hotel Corp................................... 3,250,000
*225 Regal Cinemas Inc................................... 7,593,750
175 Reynolds & Reynolds Co.............................. 6,628,125
*150 Scientific Games Holdings Corp...................... 4,500,000
*65 Sitel Corp.......................................... 2,486,250
*35 Sun International Hotels Ltd........................ 1,255,625
*100 U.S. Satellite Broadcasting Co...................... 3,250,000
--------------
176,296,950
--------------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
ENERGY 4.7%
125 Baker Hughes Inc.................................... $ 3,296,875
*200 BJ Services Co...................................... 5,525,221
*40 BJ Services Co., Warrants expiring 04/13/00......... 280,000
*70 Cairn Energy USA Inc................................ 761,250
125 Camco International Inc............................. 3,546,875
*225 Chesapeake Energy Corp.............................. 9,309,375
*100 Diamond Offshore Drilling........................... 3,662,500
*85 Ensco International Inc............................. 2,050,625
*400 Global Marine Inc................................... 3,550,000
150 Kerr McGee Corp..................................... 8,943,750
*200 Noble Drilling Corp................................. 1,950,000
100 Phoenix Resource Co................................. 1,887,500
275 Pogo Producing Co................................... 9,315,625
*375 Pride Petroleum Services Inc........................ 4,195,313
*450 Rowan Companies Inc................................. 4,893,750
*200 Smith International Inc............................. 4,075,000
275 Sonat Offshore Drilling Inc......................... 11,962,500
200 Tidewater Inc....................................... 6,825,000
50 Williams Companies.................................. 2,375,000
--------------
88,406,159
--------------
FINANCE 11.7%
125 AAMES Financial Corp................................ 4,109,375
200 American Bankers Insurance Group.................... 7,200,000
*125 American Travellers Corp............................ 3,765,625
145 AT&T Capital Corp. ................................. 5,999,375
375 Bank of Boston Corp................................. 18,234,375
175 Bank of New York Inc................................ 9,078,125
125 Berkley (W. R.) Corp................................ 5,656,250
200 City National Corp.................................. 2,750,000
75 CMAC Investment Corp................................ 4,115,625
*200 Coast Savings Financial Inc......................... 5,850,000
50 Conseco Inc......................................... 3,387,500
*96 Contifinancial Corp................................. 2,466,850
125 Cullen Frost Bankers Inc............................ 6,125,000
200 Exel Ltd............................................ 13,950,000
125 Finova Group Inc.................................... 6,671,875
125 First American Corp................................. 5,578,125
100 First Bank System Inc............................... 5,762,500
*18 First Commonwealth Inc.............................. 477,000
85 Firstar Corp........................................ 3,835,625
</TABLE>
See Notes to Financial Statements
9
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
188 Fremont General Corp................................ $ 4,406,250
400 Green Tree Financial Corp........................... 12,650,000
125 Mercury General Corp................................ 5,468,750
200 Money Store Inc..................................... 4,450,000
125 North Fork Bancorporation........................... 3,015,625
175 Old Republic International Corp..................... 5,993,750
*100 Oxford Resources Corp., Class A..................... 2,737,500
256 Penncorp Financial Group Inc........................ 8,384,000
150 Peoples Heritage Financial Group Inc................ 3,206,250
*45 RAC Financial Group Inc............................. 900,000
75 Star Banc Corp...................................... 4,725,000
125 Student Loan Marketing Assn......................... 10,328,125
250 SunAmerica Inc...................................... 13,625,000
250 TCF Financial Corp.................................. 9,406,250
100 TIG Holdings Inc.................................... 3,162,500
100 United Companies Financial Corp..................... 2,700,000
113 Vesta Insurance Group Inc........................... 3,712,500
150 Washington Mutual Inc............................... 4,500,000
--------------
218,384,725
--------------
HEALTH CARE 17.5%
*100 Access Health Inc................................... 5,475,000
*125 Advanced Technology Labs Inc........................ 3,718,750
*85 Biochem Pharma Inc.................................. 3,931,250
*100 Biogen Inc.......................................... 6,537,500
*300 Boston Scientific Corp.............................. 14,400,000
*100 Chronimed Inc....................................... 2,087,500
*24 Clintrials Research Inc............................. 707,937
*63 Coherent Inc........................................ 2,866,500
*125 Compdent Corp....................................... 4,781,250
*85 Curative Technologies Inc........................... 1,646,875
*100 Cycare Systems Inc.................................. 3,025,000
*250 Dura Pharmaceuticals Inc............................ 10,562,500
*85 Elan PLC, ADR....................................... 4,930,000
*14 Enterprise Systems Inc.............................. 357,000
*60 ESC Medical Systems Ltd............................. 1,980,000
*42 Genesis Health Ventures Inc......................... 1,819,163
*50 Genetics Institute Inc.............................. 3,412,500
350 Guidant Corp........................................ 16,581,250
*100 Gulf South Medical Supply Inc....................... 3,375,000
350 HBO & Co............................................ 34,650,000
*300 Health Management Associates Inc., Class A.......... 9,412,500
*288 Health Management Systems Inc....................... 8,409,375
</TABLE>
See Notes to Financial Statements
10
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
*125 Healthcare Compare Corp............................. $ 6,093,750
*85 Healthsource Inc.................................... 3,219,375
*350 Healthsouth Rehabilitation.......................... 12,250,000
*81 Hologic Inc......................................... 3,954,300
*20 HPR Inc............................................. 740,000
125 Invacare Corp....................................... 3,125,000
*40 Iridex Corp......................................... 412,500
*150 Liposome Inc........................................ 2,634,375
*35 Lunar Corp.......................................... 1,386,450
*300 Maxicare Health Plans............................... 8,662,500
*150 Medaphis Corp....................................... 5,831,250
*100 Medisense Inc....................................... 3,112,500
*200 Medpartners/Mullikin Inc............................ 6,000,000
150 Medtronic Inc....................................... 8,606,250
250 Mentor Corp......................................... 6,406,250
*125 Minimed Inc......................................... 2,062,500
*26 NCS Healthcare Inc., Class A........................ 636,300
*150 Nellcor Inc......................................... 10,050,000
300 Omnicare Inc........................................ 14,475,000
*8 Parexel International Corp.......................... 284,000
*100 Phycor Inc.......................................... 4,550,000
*125 Physician Reliance Network.......................... 5,507,812
*300 Physician Sales & Service Inc....................... 8,025,000
*75 Quintiles Transnational Corp........................ 4,950,000
*154 Renal Treatment Centers Inc......................... 6,726,038
*175 Respironics Inc..................................... 3,893,750
*35 Schein (Henry) Inc.................................. 994,700
*85 Spine Tech Inc...................................... 2,135,625
*150 Target Therapeutics Inc............................. 7,856,250
*150 Tenet Healthcare Corp............................... 3,356,250
*175 Thermedics Inc...................................... 4,550,000
*26 Total Renal Care Holdings........................... 767,000
*100 United Dental Care Inc.............................. 3,550,000
100 United Healthcare Corp.............................. 6,525,000
*75 Universal Health Services Inc., Class B............. 3,834,375
*200 Veterinary Centers Of America....................... 3,950,000
*25 Vitalcom Inc........................................ 331,250
*250 Watson's Pharmaceuticals Inc........................ 10,750,000
--------------
326,862,200
--------------
</TABLE>
See Notes to Financial Statements
11
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
PRODUCER MANUFACTURING 5.2%
100 BMC Industries Inc.................................. $ 2,300,000
170 Cable Design Technologies........................... 6,672,500
*250 Cognex Corp......................................... 5,625,000
200 Danaher Corp........................................ 6,800,000
150 Foster Wheeler Corp................................. 6,600,000
*188 Glenayre Technologies............................... 8,273,437
175 Granite Construction Inc............................ 4,856,250
175 Greenfield Industries Inc........................... 5,818,750
*125 Kent Electronics Corp............................... 8,578,125
85 LSI Industries Inc.................................. 1,434,375
150 Measurex Corp....................................... 4,293,750
*100 Mueller Industries Inc.............................. 3,087,500
125 Precision Castparts Co.............................. 4,906,250
*175 Sanifill Inc........................................ 6,846,875
*60 Thermo Instrument Systems Inc....................... 1,642,500
*150 USA Waste Services Inc.............................. 3,206,250
*200 U. S. Filter Corp................................... 5,650,000
*175 United Waste Systems Inc............................ 8,137,500
60 Zygo Corp........................................... 2,010,000
--------------
96,739,062
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 4.4%
375 Agrium Inc.......................................... 5,800,781
60 Cabot Corp.......................................... 3,630,000
*85 Fort Howard Corp.................................... 1,955,000
125 Goodrich (B.F.) Co.................................. 9,515,625
100 Hercules Inc........................................ 6,000,000
400 IMC Global Inc...................................... 16,500,000
200 Millipore Corp...................................... 8,875,000
162 Potash Corp. Saskatchewan Inc....................... 12,028,500
100 Praxair Inc......................................... 3,450,000
100 Raychem Corp........................................ 6,487,500
*80 Sealed Air Corp..................................... 2,360,000
100 Sonoco Products Co.................................. 2,737,500
*85 UCAR International Inc.............................. 3,017,500
--------------
82,357,406
--------------
TECHNOLOGY 26.4%
150 America Online Inc.................................. 7,368,750
*150 Applix Inc.......................................... 5,962,500
*800 Ascend Communications Inc........................... 36,200,000
*200 Aspect Telecommunications Corp...................... 9,425,000
</TABLE>
See Notes to Financial Statements
12
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
*125 Aspen Technology Inc................................. $ 4,875,000
*125 Astea International Inc.............................. 3,078,125
*150 Auspex Systems Inc................................... 3,056,250
*250 Bay Networks Inc..................................... 10,156,250
*125 BMC Software Inc..................................... 6,968,750
*400 Cadence Design Systems Inc........................... 17,850,000
*8 California Amplifier Inc............................. 382,837
*100 Cambridge Technology Partners Inc.................... 5,125,000
*188 Cascade Communications............................... 12,726,562
*325 C-Cube Microsystems Inc.............................. 22,750,000
*350 Cisco Systems Inc.................................... 16,625,000
*20 Clarify Inc.......................................... 585,000
60 Computer Associates International Inc................ 4,125,000
*100 Concord EFS Inc...................................... 2,700,000
*125 Cyberoptics Corp..................................... 4,281,250
*40 Cylink Corp.......................................... 940,000
*200 Data General Corp.................................... 3,375,000
*175 DSP Communications Inc............................... 8,400,000
250 ECI Telecom Ltd...................................... 6,375,000
*42 Engineering Animation Inc............................ 1,081,500
*60 Filenet Corp......................................... 3,810,000
*100 IDX Systems Corp..................................... 3,175,000
*300 Informix Corp........................................ 10,575,000
*400 Input/Output Inc..................................... 11,900,000
*100 Inso Corp............................................ 4,925,000
*150 International Rectifier Corp......................... 3,075,000
*116 Kronos Inc........................................... 3,585,914
175 Linear Technology Corp............................... 8,137,500
*175 Macromedia Inc....................................... 7,010,938
*300 McAfee Associates Inc................................ 16,050,000
*200 Medic Computer Systems Inc........................... 13,500,000
*10 Meta Software Inc.................................... 186,250
*30 Metatools Inc........................................ 795,000
*125 Microcom Inc......................................... 3,781,250
*75 Micros Systems Inc................................... 3,900,000
*225 Mylex Corp........................................... 5,400,000
*100 Netscape Communications Corp......................... 5,100,000
*125 Network General Corp................................. 5,031,250
*125 Newbridge Networks Corp.............................. 6,109,375
*150 Oak Technology Inc................................... 7,537,500
</TABLE>
See Notes to Financial Statements
13
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- ----------------------------------------------------------------
<C> <S> <C>
*200 Oracle System Corp................... $ 10,400,000
*200 Pairgain Technologies Inc............ 11,850,000
*150 Parametric Technology Corp........... 11,156,250
150 Paychex Inc.......................... 8,268,750
*200 Peoplesoft Inc....................... 10,800,000
*300 Physician Computer Network........... 4,162,500
*275 Picturetel Corp...................... 9,728,125
*130 Pri Automation....................... 3,103,750
*125 Project Software & Development Inc... 4,593,750
*125 Proxim Inc........................... 2,328,125
*30 Raptor Systems Inc................... 955,675
*13 Red Brick Systems Inc................ 663,000
*100 Robotic Vision Systems Inc........... 1,550,000
*85 SCI Systems Inc...................... 3,150,313
*62 Secure Computing Corp................ 1,722,000
*150 Security Dynamics Technologies Inc... 8,718,750
*100 Solectron Corp....................... 4,850,000
*350 Structural Dynamics Research Corp.... 10,675,000
*350 Sun Microsystems Inc................. 18,375,000
100 Sundstrand Corp...................... 7,537,500
*250 Sunguard Data Systems Inc............ 8,562,500
*200 3Com Corp............................ 9,775,000
*125 U.S. Robotics Corp................... 15,500,000
*26 Visio Corp........................... 719,600
*85 Xilinx Inc........................... 3,283,125
*22 Zoran Corp........................... 773,800
--------------
491,200,264
--------------
TRANSPORTATION 2.2%
150 Airborne Freight Corp................ 4,181,250
100 Comair Holdings Inc.................. 3,112,500
100 Conrail Inc.......................... 7,212,500
*85 Consolidated Delivery & Logistics.... 818,125
*200 Continental Airlines Inc., Class B... 9,600,000
*100 Fritz Companies Inc.................. 3,900,000
*100 Northwest Airlines Inc., Class A..... 4,587,500
*200 USAir Group Inc...................... 3,375,000
*50 Wisconsin Central Transportation..... 3,712,500
--------------
40,499,375
--------------
</TABLE>
See Notes to Financial Statements
14
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------
<C> <S> <C> <C> <C>
UTILITIES 1.9%
105 ACC Corp................................. $ 3,045,000
*43 Cellular Communications Inc., Preferred
Stock.................................... 2,200,235
225 Cincinnati Bell Inc...................... 7,368,750
300 Frontier Corp............................ 9,000,000
*400 LCI International Inc.................... 9,100,000
*85 Midcom Communications Inc................ 1,168,750
*150 Paging Network Inc....................... 3,975,000
--------------
35,857,735
--------------
TOTAL COMMON STOCK AND EQUIVALENTS
(Cost $1,314,859,325).................... 1,758,166,326
--------------
Par
Amount
(000)
- ------------
SHORT-TERM INVESTMENTS 6.4%
REPURCHASE AGREEMENT 1.1%
$20,765 SBC Capital Markets, Inc. dated 2/29/96,
5.40%, due 03/01/96 (collateralized by
U.S. Government obligations in a pooled
cash account)
repurchase proceeds $20,768,115.......... 20,765,000
--------------
UNITED STATES AGENCY AND GOVERNMENT OBLIGATIONS 5.3%
50,000 Federal National Mortgage Association,
5.09%, 07/22/96.......................... 49,012,000
50,000 United States Treasury Bills, 4.98%,
07/25/96................................. 49,011,025
--------------
98,023,025
--------------
TOTAL SHORT-TERM INVESTMENTS (Cost
$118,779,729)............................ 118,788,025
--------------
TOTAL INVESTMENTS (Cost $1,433,639,054) 100.7%..... 1,876,954,351
OTHER ASSETS AND LIABILITIES, NET (0.7%)........... (12,514,799)
--------------
NET ASSETS 100%.................................... $1,864,439,552
--------------
</TABLE>
*Non-income producing security.
See Notes to Financial Statements
15
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C>
Investments at market value (Cost $1,433,639,054).............. $1,876,954,351
Cash........................................................... 1,753
Receivable for investments sold................................ 13,148,869
Receivable for Fund shares sold................................ 6,860,871
Dividends receivable........................................... 519,750
Other assets and receivables................................... 71,515
--------------
Total Assets.................................................. 1,897,557,109
--------------
LIABILITIES
Payable for investments purchased.............................. 23,384,560
Payable for Fund shares redeemed............................... 7,305,657
Due to Adviser................................................. 738,892
Due to Distributor............................................. 698,518
Due to shareholder service agent............................... 520,000
Deferred Trustees' compensation................................ 88,303
Accrued expenses............................................... 381,627
--------------
Total Liabilities............................................. 33,117,557
--------------
NET ASSETS, equivalent to $31.58 per share for Class A, $30.40
per share for Class B, and $30.81 per share for Class C
shares........................................................ $1,864,439,552
--------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, at par; 38,398,207 Class A,
19,542,866 Class B and 1,868,721 Class C shares outstanding... $ 598,098
Capital surplus................................................ 1,338,053,868
Undistributed net realized gain on securities.................. 85,918,569
Net unrealized appreciation of securities...................... 443,315,297
Accumulated net investment loss................................ (3,446,280)
--------------
NET ASSETS..................................................... $1,864,439,552
--------------
</TABLE>
See Notes to Financial Statements
16
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest......................................................... $ 4,056,907
Dividends........................................................ 3,735,603
------------
Investment income............................................... 7,792,510
------------
EXPENSES
Management fees.................................................. 4,039,385
Shareholder service agent's fees and expenses.................... 2,639,209
Accounting services.............................................. 70,034
Service fees--Class A............................................ 1,101,255
Distribution and service fees--Class B........................... 2,533,559
Distribution and service fees--Class C........................... 240,574
Trustees' fees and expenses...................................... 33,580
Audit fees....................................................... 16,200
Custodian fees................................................... 15,008
Legal fees....................................................... 3,662
Reports to shareholders.......................................... 150,000
Registration and filing fees..................................... 277,822
Miscellaneous.................................................... 42,374
------------
Total expenses.................................................. 11,162,662
------------
NET INVESTMENT LOSS.............................................. (3,370,152)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized gain on securities
Investments..................................................... 150,509,783
Futures contracts............................................... 11,954,944
Net unrealized appreciation (depreciation) of securities during
the period
Investments..................................................... 18,446,689
Futures contracts............................................... (1,734,775)
------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES................... 179,176,641
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $175,806,489
------------
</TABLE>
See Notes to Financial Statements
17
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
February 29, 1996 August 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period............ $1,521,557,668 $ 954,412,776
-------------- --------------
OPERATIONS
Net investment loss....................... (3,370,152) (788,843)
Net realized gain on securities........... 162,464,727 101,065,575
Net unrealized appreciation of securities
during the period......................... 16,711,914 262,801,169
-------------- --------------
Increase in net assets resulting from
operations................................ 175,806,489 363,077,901
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
REALIZED GAIN ON SECURITIES
Class A................................... (105,606,205) (17,526,137)
Class B................................... (51,568,016) (7,315,354)
Class C................................... (4,735,178) (662,660)
-------------- --------------
(161,909,399) (25,504,151)
-------------- --------------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A................................... 959,134,848 1,085,793,746
Class B................................... 128,982,528 150,468,438
Class C................................... 32,520,346 25,757,240
-------------- --------------
1,120,637,722 1,262,019,424
-------------- --------------
Proceeds from shares issued for
distributions reinvested
Class A................................... 98,887,480 16,392,292
Class B................................... 47,788,460 6,692,531
Class C................................... 4,002,009 556,128
-------------- --------------
150,677,949 23,640,951
-------------- --------------
Cost of shares redeemed
Class A................................... (887,333,454) (980,641,481)
Class B................................... (33,926,052) (57,495,439)
Class C................................... (21,071,371) (17,952,313)
-------------- --------------
(942,330,877) (1,056,089,233)
-------------- --------------
Increase in net assets from capital
transactions.............................. 328,984,794 229,571,142
-------------- --------------
INCREASE IN NET ASSETS..................... 342,881,884 567,144,892
-------------- --------------
NET ASSETS, end of period (including
accumulated net investment loss of
$3,446,280 and $76,128)................... $1,864,439,552 $1,521,557,668
-------------- --------------
</TABLE>
See Notes to Financial Statements
18
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated (Unaudited).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------
Six Months
Ended Year Ended August 31
February 29, ----------------------------------------------
1996(/1/) 1995(/1/) 1994 1993 1992(/1/) 1991
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period..... $31.59 $24.37 $26.46 $19.03 $20.06 $14.44
-------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Investment income...... .15 .34 .33 .15 .195 .23
Expenses............... (.17) (.29) (.44) (.20) (.21) (.195)
-------- -------- ------- ------- ------- -------
Net investment income
(loss).................. (.02) .05 (.11) (.05) (.015) .035
Net realized and
unrealized gain (loss)
on securities.......... 3.20 7.79 (.32) 8.6375 .9275 6.035
-------- -------- ------- ------- ------- -------
Total from investment
operations.............. 3.18 7.84 (.43) 8.5875 .9125 6.07
-------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS FROM
Net investment income.. -- -- -- -- (.0325) (.0775)
Net realized gain on
securities............. (3.19) (.62) (1.66) (1.1575) (1.91) (.3725)
-------- -------- ------- ------- ------- -------
Total distributions..... (3.19) (.62) (1.66) (1.1575) (1.9425) (.45)
-------- -------- ------- ------- ------- -------
Net asset value, end of
period.................. $31.58 $31.59 $24.37 $26.46 $19.03 $20.06
-------- -------- ------- ------- ------- -------
TOTAL RETURN (/2/)...... 10.82% 33.11% (1.67%) 46.73% 4.28% 43.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the
period (millions)....... $1,212.7 $1,029.2 $677.1 $517.8 $312.3 $283.6
Average net assets
(millions).............. $1,099.0 $ 768.2 $599.4 $405.2 $320.6 $235.8
Ratios to average net
assets (annualized)
Expenses............... 1.08% 1.14% 1.18% 1.10% 1.04% 1.14%
Net investment income
(loss)................. (.14%) .19% (.30%) (.27%) (.08%) .21%
Portfolio turnover rate. 62% 101% 64% 47% 61% 69%
</TABLE>
(1) Based on average shares outstanding
(2) Total return for a period of less than one year is not annualized. Total
return does not consider the effect of sales charges.
See Notes to Financial Statements
19
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated (Unaudited).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
----------------------------------------------------
April 20,
Six Months 1992(/1/)
Ended Year Ended August 31 through
February 29, --------------------------- August 31,
1996(/2/) 1995(/2/) 1994 1993(/2/) 1992(/2/)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period...... $30.65 $23.86 $26.14 $18.98 $19.66
------ ------ ------ ------- ------
INCOME FROM INVESTMENT
OPERATIONS
Investment income....... .14 .34 .24 .19 .08
Expenses................ (.28) (.50) (.51) (.435) (.145)
------ ------ ------ ------- ------
Net investment loss...... (.14) (.16) (.27) (.245) (.065)
Net realized and
unrealized gain (loss)
on securities........... 3.08 7.57 (.35) 8.5625 (.615)
------ ------ ------ ------- ------
Total from investment
operations............... 2.94 7.41 (.62) 8.3175 (.68)
------ ------ ------ ------- ------
LESS DISTRIBUTIONS FROM
NET REALIZED GAIN ON
SECURITIES.............. (3.19) (.62) (1.66) (1.1575) --
------ ------ ------ ------- ------
Net asset value, end of
period................... $30.40 $30.65 $23.86 $26.14 $18.98
------ ------ ------ ------- ------
TOTAL RETURN (/3/)....... 10.38% 32.01% (2.46%) 45.41% (3.51%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the
period (millions)........ $594.2 $450.5 $252.9 $74.5 $5.2
Average net assets
(millions)............... $506.7 $325.9 $163.1 $28.4 $2.8
Ratios to average net
assets (annualized)
Expenses................ 1.89% 1.97% 2.01% 1.89% 1.86%
Net investment loss..... (.95%) (.64%) (1.07%) (1.07%) (.80%)
Portfolio turnover rate.. 62% 101% 64% 47% 61%
</TABLE>
(1) Commencement of offering of sales.
(2) Based on average shares outstanding.
(3) Total return for a period of less than one year is not annualized. Total
return does not consider the effect of sales charges.
See Notes to Financial Statements
20
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated (Unaudited).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C(/2/)
----------------------------------------
July 6,
Six Months Year Ended 1993(/1/)
Ended August 31 through
February 29, -------------- August 31,
1996 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period. $31.02 $24.14 $26.42 $25.07
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income................... .14 .34 .24 .03
Expenses............................ (.28) (.50) (.49) (.075)
------ ------ ------ ------
Net investment loss.................. (.14) (.16) (.25) (.045)
Net realized and unrealized gain
(loss) on securities................. 3.12 7.66 (.37) 1.395
------ ------ ------ ------
Total from investment operations..... 2.98 7.50 (.62) 1.35
------ ------ ------ ------
LESS DISTRIBUTIONS FROM NET REALIZED
GAIN ON SECURITIES................... (3.19) (.62) (1.66) --
------ ------ ------ ------
Net asset value, end of period....... $30.81 $31.02 $24.14 $26.42
------ ------ ------ ------
TOTAL RETURN (/3/)................... 10.39% 32.01% (2.46%) 5.42%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the period
(millions)........................... $57.5 $41.8 $24.5 $1.4
Average net assets (millions)........ $48.1 $30.2 $12.8 $0.5
Ratios to average net assets
(annualized)
Expenses............................ 1.89% 1.96% 2.02% 2.31%
Net investment loss................. (.94%) (.63%) (1.04%) (1.37%)
Portfolio turnover rate.............. 62% 101% 64% 47%
</TABLE>
(1) Commencement of offering of sales.
(2) Based on average shares outstanding.
(3) Total return for a period of less than one year is not annualized. Total
return does not consider the effect of sales charges.
See Notes to Financial Statements
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Emerging Growth Fund (the "Fund") is registered
under the Investment Company Act of 1940, as amended, as a diversified open-
end management investment company. The Fund seeks capital appreciation by
principally investing in common stock of small and medium sized companies that
are considered to be emerging growth companies.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The prep-
aration of financial statements in conformity with generally accepted account-
ing principles requires management to make estimates and assumptions that
effect the amounts reported. Actual amounts may differ from the estimates.
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
cost.
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
by Van Kampen American Capital Asset Management, Inc. (the "Adviser"), the
daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are collateralized by the underlying debt security. The Fund 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 required 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
market price of investments. There is also a risk that the market movement of
such instruments may not be in the direction forecasted.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. A portion of these funds is held as collateral in
an account in the name of the broker, the Fund's agent in acquiring the
futures position. During the period the futures contract is open, changes in
the value of the contract ("variation margin") are recognized by marking the
contract to market on a daily basis. As unrealized gains or losses are in-
curred, variation margin payments are received from or made to the broker.
Upon the closing or cash settlement of a contract, gains or losses are real-
ized. The cost of securities acquired through delivery under a contract is ad-
justed by the unrealized gain or loss on the contract.
D. WHEN ISSUED SECURITIES-Delivery and payment for securities purchased on a
when-
issued basis may take place up to 45 days after the date of the transaction.
The securities purchased are subject to market fluctuation during this period.
To meet the payment obligation, sufficient cash or liquid securities equal to
the amount that will be due are set aside with the custodian.
E. 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.
F. 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.
G. 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 differ from generally accepted accounting principles. Such dividends
or distributions may exceed financial statement 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.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- --------------------------------------------------------------------------------
Accounting services include the salaries and overhead expenses of the Fund's
Chief Accounting Officer and the personnel operating under his direction.
Charges are allocated among investment companies advised by the Adviser. For
the period, these charges included $10,305 as the Fund's share of the employee
costs attributable to the Fund's accounting officers. A portion of the account-
ing services expense was paid to the Adviser in reimbursement of personnel, fa-
cilities and equipment costs attributable to the provision of accounting
services to the Fund. The services provided by the Adviser are at cost.
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, the fees for such services were $2,292,848.
The Fund has been advised that Van Kampen American Capital Distributors, Inc.
(the "Distributor") and Advantage Capital Corp. (the "Retail Dealer"), both af-
filiates of the Adviser, received $459,958 and $105,743, respectively, as their
portion of the commissions on sales of Fund shares during the period. As of
January 2, 1996, Advantage Capital Corp. was no longer an affiliate of the Ad-
viser.
Under the Distribution Plans, each class pays up to .25% per annum of its av-
erage daily net assets to reimburse the Distributor for expenses and service
fees incurred. Class B and C shares pay an additional fee of up to .75% per an-
num of their average daily net assets to reimburse the Distributor for its dis-
tribution expenses. Actual distribution expenses incurred by the Distributor
for Class B and C shares may exceed the amounts reimbursed to the Distributor
by the Fund. At the end of the period, the unreimbursed expenses incurred by
the Distributor under the Class B and C plans aggregated approximately $16.7
million and $291,000, respectively, and may be carried forward and reimbursed
through either the collection of the contingent deferred sales charges from
share redemptions or, subject to the annual renewal of the plans, future Fund
reimbursements of distribution fees.
Legal fees during the period were for services rendered by former counsel of
the Fund. O'Melveny & Myers. A former trustee was of counsel to that firm.
Certain officers and trustees of the Fund are officers and trustees 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 $1,137,586,993 and $948,796,681,
respectively.
The identified cost of investments owned at the end of the period was the
same for federal income tax and financial reporting purposes. Net unrealized
appreciation of investments aggregated $443,315,297, gross unrealized apprecia-
tion of investments aggregated $463,870,347, and gross unrealized depreciation
aggregated $20,555,050.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 4--TRUSTEE COMPENSATION
Fund trustees who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $2,377 plus a fee of $68 per day for Board and Com-
mittee meetings attended. During the period, such fees aggregated $32,866.
The Fund has in effect a deferred compensation plan and a defined benefits
retirement plan for its trustees not affiliated with the Adviser. These plans
are not funded, and obligations under the plans will be paid solely out of the
Fund's general account. The Fund will not reserve or set aside funds for the
payment of its obligations under the plans by any form of trust or escrow.
Under the deferred compensation plan, trustees may elect to defer all or a
portion of their compensation to a later date. Each trustee covered under the
plan elects to earn on the deferred balances an amount equal to the total re-
turn of the Fund or equal to the income earned by the Fund on its short-term
investments.
Under the retirement plan which became effective in January, 1996, benefits
which are based on years of service will be received by the trustee for a ten
year period. The maximum annual benefit for each trustee is $2,500. Retirement
plan expenses for the period aggregated $1,500. During the calendar year 1996,
the Adviser has agreed to reimburse the Fund for these plan expenses.
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 and C shares). All classes of shares have the same rights,
except that Class B and C shares bear the cost of distribution fees and cer-
tain other class specific expenses. Realized and unrealized gains or losses,
investment income and expenses (other than class specific expenses) are allo-
cated daily to each class of shares based upon the relative proportion of net
assets of each class. Class B and C shares automatically convert to Class A
shares six years and ten years after purchase, respectively, subject to cer-
tain conditions.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
The Fund has an unlimited number of shares of $.01 par value beneficial in-
terest authorized. Transactions in shares of beneficial interest were as fol-
lows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
February 29, August 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A............................................. 30,779,872 41,742,312
Class B............................................. 4,274,458 6,061,426
Class C............................................. 1,073,242 1,006,637
----------- -----------
36,127,572 48,810,375
----------- -----------
Shares issued for distributions reinvested
Class A............................................. 3,364,624 721,895
Class B............................................. 1,686,231 302,136
Class C............................................. 139,345 24,801
----------- -----------
5,190,200 1,048,832
----------- -----------
Shares redeemed
Class A............................................. (28,327,177) (37,660,418)
Class B............................................. (1,116,924) (2,263,921)
Class C............................................. (692,358) (697,504)
----------- -----------
(30,136,459) (40,621,843)
----------- -----------
Increase in Fund shares outstanding................. 11,181,313 9,237,364
----------- -----------
</TABLE>
26
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Limited Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
27
<PAGE>
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
LINDA HUTTON HEAGY
ROGER HILSMAN
R. CRAIG KENNEDY
DENNIS J. MCDONNELL
DONALD C. MILLER
JACK E. NELSON
DON G. POWELL
JEROME L. ROBINSON
FERNANDO SISTO*
WAYNE W. WHALEN
WILLIAM S. WOODSIDE
*Chairman of the Board
OFFICERS
DON G. POWELL
President and Chief Executive Officer
DENNIS J. MCDONNELL
Executive Vice President
RONALD A. NYBERG
Vice President and Secretary
EDWARD C. WOOD, III
Vice President and Chief Financial Officer
CURTIS W. MORELL
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN
Treasurer
TANYA M. LODEN
Controller
WILLIAM N. BROWN
PETER W. HAGEL
ROBERT C. PECK, JR.
ALAN T. SACHTLEBEN
PAUL R. WOLKENBERG
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER 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
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606
(C) Van Kampen American Capital Distributors, Inc., 1996
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 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.
28
