<PAGE> 1
American Capital
Pace Fund, Inc.
Semiannual
Report
December 31, 1994
(Unaudited)
[Poto of Man, Woman and Child]
[AMERICAN CAPITAL LOGO]
<PAGE> 2
American Capital Pace Fund Highlights
[Photo of Man]
For investors seeking growth of capital
through a portfolio of common stocks.
American Capital's Quality Commitment
American Capital has been recognized for providing the highest quality service
in the mutual fund industry in 1994. For the second consecutive year, DALBAR
Surveys, Inc., an independent research firm in the mutual fund industry,
awarded American Capital its coveted crystal pyramid for ranking number one in
service. This ranking is based on evaluations by investment professionals
across the country.
[Photos of 2 DALBAR Awards]
American Capital also has received the DALBAR Quality Tested Service Seal for
outstanding customer service five years in a row.
<PAGE> 3
Shareholders' Message
January 30, 1995
[Photo of Don G. Powell]
Dear Shareholder,
For more than six decades, American Capital has helped investors achieve their
financial goals. As a shareholder, you know that American Capital's goal is to
provide you with consistent, competitive returns and outstanding customer
service. Those goals will remain unchanged as we embark on a new era as Van
Kampen American Capital.
In December, shareholders of American Capital funds approved new
agreements with the funds' manager that cleared the way for completion of the
merger between American Capital Management & Research, Inc., the company that
owns your Fund's manager, and The Van Kampen Merritt Companies, Inc. on
December 20, 1994. While this merger will have no direct impact on your Fund
shares, it will create a stronger company that will be able to provide
shareholders with a broader range of investment options and nearly 100 years of
combined investment experience.
The strength and experience of Van Kampen American Capital is enhanced
further by the international and emerging markets expertise of John Govett &
Co., Ltd. Last fall, Van Kampen American Capital Distributors, Inc. (formerly
American Capital Marketing, Inc.) became the exclusive U.S. distributor of The
Govett Funds, Inc. This relationship will provide six additional fund options
for Van Kampen American Capital shareholders who want to add an international
or global component to their portfolios.
Although 1994 was a year of significant change for American Capital,
one thing has not changed: our belief in investing for the long term. The past
year was extremely challenging for both the stock and bond market, as concerns
about rising inflation prompted repeated increases in short-term interest rates
that made many investors nervous. While the markets did not perform as well in
1994 as in previous years, investing in a stock mutual fund still is the one of
the best ways to achieve long-term capital appreciation.
We will continue to communicate with you on a regular basis as we go
forward, providing information about both market conditions and new investment
opportunities. We appreciate your continued confidence in your Fund and Van
Kampen American Capital.
Sincerely,
/s/ DON G. POWELL
- ----------------------
Don G. Powell
President
1
<PAGE> 4
Portfolio Perspective
- --------------------------------------------------------------------------------
The following is an interview with the management team of American Capital Pace
Fund. The team is led by portfolio manager Stephen Boyd and Alan T. Sachtleben,
executive vice president for equity investments.
- --------------------------------------------------------------------------------
Q. INTEREST RATES INCREASED STEADILY DURING THE SECOND HALF OF 1994. HOW DID
THIS IMPACT THE FUND'S PERFORMANCE?
A. The Federal Reserve Board raised short-term interest rates three times
during the past six months because it was concerned that the economy was
growing too rapidly and this would cause the inflation rate to increase. Many
investors believed higher interest rates would reduce corporate earnings. As a
result, the stock market reacted negatively, and this belief limited the
performance of stocks and stock mutual funds.
Q. HOW DID YOU REACT TO THE CHANGING EQUITY MARKET ENVIRONMENT?
A. We reduced our exposure to consumer durables, such as automobiles, housing
and furniture; raw materials, including paper, chemicals and metals; financial
services; and, utilities. Many consumer durables become less affordable as
interest rates rise, causing earnings to decline. The financial services sector
suffers because the cost of borrowing money increases and negatively affects
profits. We focused instead on the stocks in the health care, technology and
telephone equipment sectors. The prices of stocks in these industries had been
depressed, creating many good values. Health care companies suffered from
concerns about the potential impact of health care reform, which now appears
less likely to occur.
[Pie Chart showing Industry Holdings]
We also purchased the stocks of several European companies so that the
Fund might benefit from the European economic recovery, although foreign stocks
comprised only 5% of the portfolio's holdings at year-end.
Among the stocks we acquired or increased our position in
during the reporting period were: Schering Plough, a U.S.
pharmaceutical company; Astra, a Swedish drug manufacturer; and,
Cisco Systems, a technology firm. The Fund's diversification is
illustrated by the chart at left. For a complete list of the
portfolio holdings at the end of the reporting period, see the
Investment Portfolio beginning on page 4.
2
<PAGE> 5
Q. HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED DECEMBER 31, 1994?
A. Class A shares achieved a total return at net asset value (without a sales
charge) of 1.62%, including reinvestment of dividends totalling $.1225 per
share. Class B shares achieved a total return at net asset value of 1.25%,
including reinvestment of dividends totalling $.0325 per share. Class C shares
achieved a total return at net asset value of 1.26%, including reinvestment of
dividends totalling $.0325 per share. All three classes of shares received a
capital gains distribution of $1.2975 per share.
[Photo of Woman and 2 Men looking at Computer Screens]
Q. HOW DID STOCKS PERFORM DURING THE SIX MONTHS ENDED DECEMBER 31, 1994?
A. The Standard & Poor's 500-Stock Index, a broad-based, unmanaged index that
reflects general stock market performance achieved a total return of 4.87%
during the reporting period. The Index does not reflect any commissions or fees
that would be paid by an investor purchasing the securities it represents.
Q. WHAT IS THE OUTLOOK FOR THE FUND FOR THE NEXT SIX MONTHS?
A. The economy appears to be growing at a moderate rate. Factory orders climbed
2.6% in November and the Government's index of leading economic indicators
increased 0.3% in November, its largest gain since August. However, most
observers still expect the Fed to raise rates at least one more time in early
1995, after which rates should stabilize. As this happens, stock valuations
probably will begin to increase as investors respond to generally strong
corporate earnings instead of concerns about interest rates. In addition, new
leaders in Congress have indicated they will push for changes such as a cut in
the capital gains tax that could provide a further economic boost.
/s/ ALAN T. SACHTTLEBEN /s/ STEPHEN L. BOYD
- --------------------------- ------------------------------
Alan T. Sachtleben Stephen L. Boyd
Executive Vice President Portfolio Manager
Equity Investments
3
<PAGE> 6
Investment Portfolio
December 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK 89.4%
CONSUMER DISTRIBUTION 6.7%
175,000 Albertson's, Inc. ................................................. $ 5,075,000
200,000 American Stores Co. ............................................... 5,375,000
*300,000 AutoZone, Inc. .................................................... 7,275,000
100,000 Dayton Hudson Corp. ............................................... 7,075,000
200,000 Dollar General Corp. .............................................. 6,000,000
*375,000 Federated Department Stores, Inc. ................................. 7,218,750
150,000 Home Depot, Inc. .................................................. 6,900,000
*300,000 Kroger Co. ........................................................ 7,237,500
350,000 Limited, Inc. ..................................................... 6,343,750
*150,000 Michael's Stores, Inc. ............................................ 5,212,500
*500,000 OfficeMax, Inc. ................................................... 13,250,000
300,000 Premark International, Inc. ....................................... 13,425,000
*175,000 Safeway, Inc. ..................................................... 5,578,125
*31,800 Stop & Shop Companies, Inc. ....................................... 810,900
350,000 Sysco Corp. ....................................................... 9,012,500
*43,000 Tech Data Corp. ................................................... 731,000
400,000 Walgreen Co. ...................................................... 17,500,000
750,000 Wal-Mart Stores, Inc. ............................................. 15,937,500
------------
TOTAL CONSUMER DISTRIBUTION..................................... 139,957,525
------------
CONSUMER DURABLES 1.8%
300,000 Daimler-Benz A.G., ................................................ 14,775,000
350,000 Echlin, Inc. ...................................................... 10,500,000
300,000 Ford Motor Co. .................................................... 8,400,000
150,000 Sunbeam-Oster Co., Inc. ........................................... 3,862,500
10,000 Winnebago Industries, Inc. ........................................ 96,250
------------
TOTAL CONSUMER DURABLES ........................................ 37,633,750
------------
CONSUMER NON-DURABLES 11.8%
400,000 Anheuser-Busch Companies, Inc. .................................... 20,350,000
1,162,500 Archer Daniels Midland Co. ........................................ 23,976,563
250,000 Avon Products, Inc. ............................................... 14,937,500
300,000 Campbell Soup Co. ................................................. 13,237,500
150,000 Coca-Cola Co. ..................................................... 7,725,000
150,000 Colgate-Palmolive Co. ............................................. 9,506,250
350,000 ConAgra, Inc. ..................................................... 10,937,500
200,000 CPC International, Inc. ........................................... 10,650,000
</TABLE>
4
<PAGE> 7
Investment Portfolio, continued
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER NON-DURABLES-continued
*950,000 Dr Pepper/Seven-Up Companies, Inc. ................................ $ 24,343,750
100,000 Duracell International, Inc. ...................................... 4,337,500
225,000 H.J. Heinz Co. .................................................... 8,268,750
225,000 IBP, Inc. ......................................................... 6,806,250
175,000 Nike, Inc., Class B ............................................... 13,059,375
550,000 PepsiCo, Inc. ..................................................... 19,937,500
165,000 Philip Morris Companies, Inc. ..................................... 9,487,500
325,000 Procter & Gamble Co. .............................................. 20,150,000
160,000 Ralston-Purina Group .............................................. 7,140,000
750,000 RJR Nabisco Holdings Corp. ........................................ 4,125,000
600,000 Sara Lee Corp. .................................................... 15,150,000
300,000 Whitman Corp. ..................................................... 5,175,000
------------
TOTAL CONSUMER NON-DURABLES .................................... 249,300,938
------------
CONSUMER SERVICES 6.7%
*5,000 American Medical Response ......................................... 144,375
175,000 Capital Cities ABC, Inc. .......................................... 14,918,750
152,500 CBS, Inc. ......................................................... 8,444,688
*74,000 Comcast UK Cable Partners, Ltd. ................................... 1,184,000
250,000 Dun & Bradstreet Corp. ............................................ 13,750,000
29,000 Equifax, Inc. ..................................................... 764,875
400,000 Marriott International, Inc. ...................................... 11,250,000
400,000 McDonald's Corp. .................................................. 11,700,000
110,000 Omnicom Group, Inc. ............................................... 5,692,500
*200,000 Promus Companies, Inc. ............................................ 6,200,000
*36,000 Robert Half International, Inc. ................................... 864,000
500,000 Service Corp. International ....................................... 13,875,000
*300,000 Tele-Communications, Inc., Class A ................................ 6,525,000
*191,000 TeleWest Communications, PLC, ADR ................................. 5,061,500
200,000 Time Warner, Inc. ................................................. 7,025,000
250,000 Tribune Co. ....................................................... 13,687,500
250,000 Walt Disney Co. ................................................... 11,531,250
*125,000 Wolters Kluwer, N.V., ADR ......................................... 9,250,000
------------
TOTAL CONSUMER SERVICES ........................................ 141,868,438
------------
ENERGY 5.5%
240,000 Amoco Corp. ....................................................... 14,190,000
87,500 British Petroleum Co., PLC, ADR ................................... 6,989,063
450,000 Chevron Corp. ..................................................... 20,081,250
</TABLE>
5
<PAGE> 8
Investment Portfolio, continued
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY-continued
425,000 Coastal Corp. ..................................................... $ 10,943,750
325,000 Exxon Corp. ....................................................... 19,743,750
250,000 Halliburton Co. ................................................... 8,281,250
250,000 Mobil Corp. ....................................................... 21,062,500
*9,000 Offshore Pipelines, Inc. .......................................... 203,625
18,000 Pacific Enterprises ............................................... 382,500
130,000 Royal Dutch Petroleum Co., ADR .................................... 13,975,000
3,000 WICOR, Inc. ....................................................... 85,125
------------
TOTAL ENERGY ................................................... 115,937,813
------------
FINANCE 10.7%
5,284,148 American Capital Small Capitalization Fund, Inc. (See Note 2) ..... 49,512,469
775,000 American Express Co. .............................................. 22,862,500
250,000 American International Group, Inc. ................................ 24,500,000
275,000 Baybanks, Inc. .................................................... 14,506,250
300,000 Chemical Banking Corp. ............................................ 10,762,500
150,000 Citicorp .......................................................... 6,206,250
25,000 Development Bank of Singapore, Ltd., ADR .......................... 1,012,500
275,000 Federal National Mortgage Association ............................. 20,040,625
200,000 First Bank System, Inc. ........................................... 6,650,000
100,000 First Interstate Bancorp .......................................... 6,762,500
5,000 Foothill Group, Inc., Class A ..................................... 75,000
350,000 Great Western Financial Corp. ..................................... 5,600,000
250,000 MBNA Corp. ........................................................ 5,843,750
21,800 MGIC Investors Corp. .............................................. 722,125
530,000 Midlantic Corp. ................................................... 14,045,000
150,000 NationsBank Corp. ................................................. 6,768,750
22,000 NWNL Companies, Inc. .............................................. 638,000
170,000 Protective Life Corp. ............................................. 8,266,250
19,000 Regions Financial Corp. ........................................... 589,000
150,000 St. Paul Companies, Inc. .......................................... 6,712,500
500,000 West One Bancorp .................................................. 13,250,000
------------
TOTAL FINANCE .................................................. 225,325,969
------------
</TABLE>
6
<PAGE> 9
Investment Portfolio, continued
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE 12.4%
700,000 Abbott Laboratories ............................................... $ 22,837,500
300,000 American Home Products Corp. ...................................... 18,825,000
*150,000 Amgen, Inc. ....................................................... 8,850,000
*400,000 Astra AB, Series A, ADR ........................................... 10,250,000
400,000 Baxter International, Inc. ........................................ 11,300,000
*125,000 Forest Labs, Inc. ................................................. 5,828,125
*250,000 Genentech, Inc. ................................................... 11,343,750
*538,000 Healthcare & Retirement Corp. ..................................... 16,207,250
195,000 Johnson & Johnson ................................................. 10,676,250
200,000 Mallinckrodt Group, Inc. .......................................... 5,975,000
600,000 Merck & Co., Inc. ................................................. 22,875,000
400,000 Mylan Laboratories, Inc. .......................................... 10,800,000
*25,000 Nellcor, Inc. ..................................................... 825,000
*14,000 Pacificare Health Systems, Inc., Class A .......................... 911,750
275,000 Pfizer, Inc. ...................................................... 21,243,750
*19,000 Quantum Health Resources, Inc. .................................... 546,250
325,000 Scherer (R.P.) Corp. .............................................. 14,746,875
300,000 Schering-Plough Corp. ............................................. 22,200,000
700,000 Upjohn Co. ........................................................ 21,525,000
235,000 Warner-Lambert Co. ................................................ 18,095,000
*151,500 Watsons Pharmaceuticals, Inc. ..................................... 3,976,875
------------
TOTAL HEALTH CARE .............................................. 259,838,375
------------
PRODUCER MANUFACTURING 7.5%
200,000 AKZO N.V. ......................................................... 11,625,000
400,000 Allied Signal, Inc. ............................................... 13,600,000
9,600 Aptar Group, Inc. ................................................. 276,000
*130,000 BBC Brown Boveri, Ltd. ............................................ 11,147,500
750,000 Browning-Ferris Industries, Inc. .................................. 21,281,250
300,000 Caterpillar, Inc. ................................................. 16,537,500
500,000 General Electric Co. .............................................. 25,500,000
*15,000 IDEX Corp. ........................................................ 633,750
200,000 Illinois Tool Works, Inc. ......................................... 8,750,000
750,000 Philips N.V., ADR ................................................. 22,031,250
13,000 SPS Technologies, Inc. ............................................ 329,875
</TABLE>
7
<PAGE> 10
Investment Portfolio, continued
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING-continued
*14,000 Thermo Instrument Systems, Inc. ................................... $ 444,500
100,000 TRW, Inc. ......................................................... 6,600,000
700,000 WMX Technologies, Inc. ............................................ 18,375,000
------------
TOTAL PRODUCER MANUFACTURING ................................... 157,131,625
------------
RAW MATERIALS/PROCESSING INDUSTRIES 4.5%
150,000 Dow Chemical Co. .................................................. 10,087,500
300,000 DuPont (E.I.) de Nemours & Co., Inc. .............................. 16,875,000
100,000 International Paper Co. ........................................... 7,537,500
250,000 James River Corp. ................................................. 5,062,500
325,000 Lubrizol Corp. .................................................... 11,009,375
325,000 Newmont Mining Corp. .............................................. 11,700,000
425,000 Praxair, Inc. ..................................................... 8,712,500
150,000 Scott Paper Co. ................................................... 10,368,750
*2,000 Sealed Air Corp. .................................................. 72,500
425,000 Sherwin Williams Co. .............................................. 14,078,125
------------
TOTAL RAW MATERIALS/PROCESSING INDUSTRIES ...................... 95,503,750
------------
TECHNOLOGY 17.1%
135,000 Adobe Systems, Inc. ............................................... 4,016,250
*385,000 BMC Software, Inc. ................................................ 21,896,875
250,000 Boeing Co. ........................................................ 11,687,500
*125,000 Chipcom Corp. ..................................................... 6,250,000
*750,000 Cisco Systems, Inc. ............................................... 26,343,750
*500,000 Compaq Computer Corp. ............................................. 19,750,000
390,000 Computer Associates International, Inc. ........................... 18,915,000
*500,000 Compuware Corp. ................................................... 18,000,000
*550,000 DSC Communications Corp. .......................................... 19,731,250
*250,000 General Instrument Corp. .......................................... 7,500,000
155,000 Hewlett-Packard Co. ............................................... 15,480,625
*400,000 Integrated Device Technology, Inc. ................................ 11,800,000
400,000 Intel Corp. ....................................................... 25,550,000
400,000 International Business Machines Corp. ............................. 29,400,000
150,000 Linear Technology Corp. ........................................... 7,425,000
*250,000 LSI Logic Corp. ................................................... 10,093,750
200,000 Motorola, Inc. .................................................... 11,575,000
</TABLE>
8
<PAGE> 11
Investment Portfolio, continued
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY-continued
*450,000 Silicon Graphics, Inc. ............................................ $ 13,893,750
*600,000 Sun Microsystems, Inc. ............................................ 21,300,000
*425,000 Symantec Corp. .................................................... 7,437,500
*180,000 Synopsys, Inc. .................................................... 7,875,000
250,000 Texas Instruments, Inc. ........................................... 18,718,750
100,000 Xerox Corp. ....................................................... 9,900,000
*300,000 3Com Corp. ........................................................ 15,468,750
-------------
TOTAL TECHNOLOGY ............................................... 360,008,750
-------------
TRANSPORTATION 0.3%
*100,000 Federal Express Corp. ............................................. 6,025,000
-------------
UTILITIES 4.4%
*120,200 ALC Communications Corp. .......................................... 3,741,225
250,000 American Telephone & Telegraph Co. ................................ 12,562,500
300,000 Baltimore Gas & Electric Co. ...................................... 6,637,500
*600,000 Cellular Communications, Inc., Class A ............................ 32,100,000
300,000 FPL Group, Inc. ................................................... 10,537,500
23,000 Illinova Corp. .................................................... 500,250
37,000 Lincoln Telecommunications Co. .................................... 629,000
142,100 PacifiCorp ........................................................ 2,575,561
300,000 Peco Energy Co. ................................................... 7,350,000
39,000 Portland General Corp. ............................................ 750,750
*155,000 PT Indosat, ADS ................................................... 5,541,250
*38,000 Public Service Co. of New Mexico .................................. 494,000
450,000 Southern Co. ...................................................... 9,000,000
-------------
TOTAL UTILITIES ................................................ 92,419,536
-------------
TOTAL COMMON STOCK (Cost $1,814,377,179) ....................... 1,880,951,469
-------------
</TABLE>
9
<PAGE> 12
Investment Portfolio, continued
<TABLE>
<CAPTION>
Principal Market
Amount Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS 14.4%
REPURCHASE AGREEMENTS 3.7%
$ 60,355,000 Lehman Government Securities, Inc., dated 12/30/94, 5.35%
due 1/3/95 (collateralized by U.S. Government obligations
in a pooled cash account) repurchase proceeds
$60,390,878 ..................................................... $ 60,355,000
18,750,000 Salomon Brothers, Inc., dated 12/30/94, 5.75% due 1/3/95
(collateralized by U.S. Government obligations in a pooled
cash account) repurchase proceeds $18,761,979 ................... 18,750,000
--------------
TOTAL REPURCHASE AGREEMENTS ..................................... 79,105,000
--------------
UNITED STATES AGENCY AND GOVERNMENT OBLIGATIONS 10.7%
**169,000,000 Federal National Mortgage Association, 5.85% to 6.11%,
1/5/95 to 2/16/95 ................................................ 168,611,677
**56,200,000 United States Treasury Bills, 4.88% to 5.44%, 1/5/95
to 2/9/95 ....................................................... 55,941,140
--------------
TOTAL UNITED STATES AGENCY AND GOVERNMENT
OBLIGATIONS ................................................... 224,552,817
--------------
TOTAL SHORT-TERM INVESTMENTS (Cost $303,657,817) ................. 303,657,817
--------------
TOTAL INVESTMENTS (Cost $2,118,034,996) 103.8% .................... 2,184,609,286
Other assets and liabilities, net (3.8%) .......................... (79,502,430)
--------------
NET ASSETS 100% ................................................... $2,105,106,856
==============
</TABLE>
*Non-income producing security.
**Securities with a market value of $176.5 million were placed as collateral
for futures contracts (see Note 1B).
See Notes to Financial Statements.
10
<PAGE> 13
Statement of Assets and Liabilities
December 31, 1994 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $2,118,034,996) ....................................... $2,184,609,286
Receivable for investments sold .......................................................... 53,168,018
Receivable for Fund shares sold .......................................................... 9,748,792
Dividends and interest receivable ........................................................ 2,842,254
Other assets ............................................................................. 280,649
--------------
TOTAL ASSETS ............................................................................ 2,250,648,999
--------------
LIABILITIES
Payable for investments purchased ........................................................ 132,492,457
Dividends payable ........................................................................ 4,859,832
Payable for Fund shares redeemed ......................................................... 4,148,380
Due to broker-variation margin ........................................................... 1,292,855
Due to Distributor ....................................................................... 1,238,100
Due to Adviser ........................................................................... 819,844
Due to shareholder service agent ......................................................... 580,800
Accrued expenses ......................................................................... 109,875
--------------
TOTAL LIABILITIES ....................................................................... 145,542,143
--------------
Net Assets, equivalent to $9.79 per share for Class A shares,
$9.75 per share for Class B shares and $9.78 per share for
Class C shares .......................................................................... $2,105,106,856
==============
NET ASSETS WERE COMPRISED OF:
Capital stock, at par; 210,450,952 Class A, 4,472,381 Class B and
163,232 Class C shares outstanding ...................................................... $ 107,543,282
Capital surplus .......................................................................... 1,940,934,781
Accumulated net realized loss on securities .............................................. (12,231,398)
Net unrealized appreciation of securities
Investments.............................................................................. 66,574,290
Futures contracts ....................................................................... 732,635
Undistributed net investment income ...................................................... 1,553,266
--------------
NET ASSETS at December 31, 1994 .......................................................... $2,105,106,856
==============
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
Statement of Operations
Six Months Ended December 31, 1994 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends ..................................................................... $18,719,341
Interest ...................................................................... 6,239,112
-----------
Investment income ............................................................ 24,958,453
-----------
EXPENSES
Management fees ............................................................... 5,115,906
Shareholder service agent's fees and expenses ................................. 3,422,069
Service fees-Class A .......................................................... 2,270,546
Distribution and service fees-Class B ......................................... 198,750
Distribution and service fees-Class C ......................................... 8,090
Reports to shareholders ....................................................... 212,400
Accounting services ........................................................... 137,619
Registration and filing fees .................................................. 65,225
Custodian fees ................................................................ 42,108
Directors' fees and expenses .................................................. 27,638
Audit fees .................................................................... 20,967
Legal fees .................................................................... 7,513
Miscellaneous ................................................................. 149,883
-----------
Total expenses ............................................................... 11,678,714
-----------
Net investment income ........................................................ 13,279,739
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized gain on securities
Investments .................................................................. 59,173,385
Futures contracts ............................................................ 6,927,103
Net unrealized appreciation (depreciation) of securities during the period
Investments .................................................................. (48,378,138)
Futures contracts ............................................................ 7,521,710
-----------
Net realized and unrealized gain on securities ............................... 25,244,060
-----------
Increase in net assets resulting from operations ............................. $38,523,799
===========
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 15
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, June 30,
1994 1994
--------------- --------------
<S> <C> <C>
NET ASSETS, beginning of period .................................. $2,189,514,914 $2,473,920,030
-------------- --------------
OPERATIONS
Net investment income ........................................... 13,279,739 23,494,898
Net realized gain on securities ................................. 66,100,488 235,361,856
Net unrealized depreciation of securities
during the period .............................................. (40,856,428) (265,562,923)
-------------- --------------
Increase (decrease) in net assets resulting
from operations ............................................... 38,523,799 (6,706,169)
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income
Class A ........................................................ (22,890,412) (24,273,814)
Class B ........................................................ (141,015) (50,746)
Class C ........................................................ (5,921) (2,996)
-------------- --------------
(23,037,348) (24,327,556)
-------------- --------------
From net realized gain on securities
Class A ........................................................ (64,539,283) (314,435,443)
Class B ........................................................ (1,498,296) (3,566,766)
Class C ........................................................ (62,909) (55,106)
-------------- --------------
(66,100,488) (318,057,315)
-------------- --------------
In excess of book-basis net realized gain on
securities (see Note 1F)
Class A ........................................................ (177,960,636) --
Class B ........................................................ (4,131,473) --
Class C ........................................................ (176,467) --
-------------- --------------
(182,268,576) --
-------------- --------------
Total dividends and distributions .............................. (271,406,412) (342,384,871)
-------------- --------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold
Class A ........................................................ 432,253,244 575,629,932
Class B ........................................................ 65,930,502 136,091,283
Class C ........................................................ 5,048,954 4,759,679
-------------- --------------
503,232,700 716,480,894
-------------- --------------
Proceeds from shares issued for dividends and
distributions reinvested
Class A ........................................................ 242,620,600 309,712,281
Class B ........................................................ 4,887,534 3,364,645
Class C ........................................................ 176,689 51,108
-------------- --------------
247,684,823 313,128,034
-------------- --------------
Cost of shares redeemed
Class A ........................................................ (539,696,123) (834,638,575)
Class B ........................................................ (58,117,314) (126,789,572)
Class C ........................................................ (4,629,531) (3,494,857)
-------------- --------------
(602,442,968) (964,923,004)
-------------- --------------
Increase in net assets resulting from Fund
share transactions ............................................. 148,474,555 64,685,924
-------------- --------------
DECREASE IN NET ASSETS ........................................... (84,408,058) (284,405,116)
-------------- --------------
NET ASSETS, end of period ........................................ $2,105,106,856 $2,189,514,914
============== ==============
</TABLE>
See Notes to Financial Statements.
13
<PAGE> 16
Notes to Financial Statements
(Unaudited)
Note 1-Significant Accounting Policies
American Capital Pace Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end
management investment company. The following is a summary of significant
accounting 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 securities and listed securities for which the
last sale price is not available are valued at the most recent bid price.
Short-term investments with a maturity of 60 days or less when purchased are
valued at amortized cost, which approximates market value. Short-term
investments 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. Futures Contracts
Transactions in futures contracts are utilized in strategies to manage the
market risk of the Fund's investments by increasing or decreasing the
percentage of assets effectively invested. The purchase of a futures
contract increases the impact of changes in the market price of
investments on net asset value. There is a risk that the market movement of
such instruments may not be in the direction forecasted.
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 are held as collateral
in an account in the name of the broker. During the period the futures
contract is open, changes in the value of the contract ("variation margin")
are recognized by marking the contracts to market on a daily basis. As
unrealized gains or losses are incurred, variation margin payments are
received 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.
C. 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 invest
independently in repurchase agreements, or transfer uninvested cash balances
into a pooled cash account along with other investment companies advised or
sub-advised by Van Kampen American Capital Asset Management, Inc. (the
"Adviser"), the
14
<PAGE> 17
daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are collateralized by the underlying debt security. The Fund will
make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is
required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
D. Federal Income Taxes
No provision for federal income taxes is required because the Fund has
elected to be taxed as a "regulated investment company" under 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.
E. Investment Transactions and Related Investment Income
Investment transactions are accounted for on the trade date. Realized gains
and losses on investments 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 accordance 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
.50% of the first $1 billion, .45% of the next $1 billion, .40% of the next $1
billion, and .35% of the amount in excess of $3 billion.
Accounting services include the salaries and overhead expenses of the Fund's
Treasurer and the personnel operating under his direction. Charges are allocated
among all investment companies advised or sub-advised by the Adviser. For the
period ended December 31, 1994, these charges included $13,710 as the Fund's
share of the employee costs attributable to the Fund's accounting officers. 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
Adviser are at cost.
Van Kampen American Capital Shareholder Services, Inc., 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 December 31, 1994, the
fees for such services were $3,107,915.
The Fund was advised that Van Kampen American Capital Distributors, Inc. (the
"Distributor") and Advantage Capital Corporation (the "Retail Dealer"), both
affiliates of the Adviser, received $110,673
15
<PAGE> 18
and $52,407, respectively, as their portion of the commissions charged on sales
of Fund shares during the period.
During the period, the Fund paid brokerage commissions of $221,155 to companies
which are deemed affiliates of the Adviser's parent because it owns more than 5%
of the companies' outstanding voting securities.
Under the Distribution Plans, the Fund pays up to .25% per annum of its average
net assets to the Distributor for expenses and service fees incurred. 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 Distributor for Class B shares and
Class C shares may exceed the amounts reimbursed to the Distributor by the Fund.
At December 31, 1994, the unreimbursed expenses incurred by the Distributor
under the Class B and Class C plans aggregated approximately $1.6 million and
$25,000, respectively, and may be carried forward and reimbursed through either
the collection of the contingent deferred sales charges from share repurchases
or, subject to the annual renewal of the plans, future Fund reimbursements of
distribution fees.
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.
At December 31, 1994, the Fund owned approximately 50% of the American Capital
Small Capitalization Fund, Inc. ("Small Cap"), an investment company managed by
the Adviser. At December 31, 1994, Small Cap's portfolio consisted of the
following securities.
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------
<S> <C>
Common Stock
CONSUMER DISTRIBUTION
6,000 Arbor Drugs, Inc. $ 123,000
25,000 Barnes & Noble, Inc. 775,000
2,000 Best Buy, Inc. 63,250
5,000 Big B, Inc. 69,375
20,000 Burlington Coat Factory Corp. 225,000
6,000 Caldor Corp. 132,000
66,000 Claire's Stores, Inc. 759,000
5,000 Dress Barn, Inc. 53,750
26,000 Fingerhut Companies, Inc. 403,000
30,000 Food Lion, Inc. 153,750
31,000 General Nutrition Companies, Inc. 883,500
16,000 Gymboree Corp. $ 460,000
3,000 Haggar Corp. 73,875
21,000 Interface, Inc., Class A 252,000
12,900 Meyer (Fred), Inc. 396,675
1,000 Michael's Stores, Inc. 35,250
10,000 Micro Wholesale, Inc. 360,000
35,000 Musicland Stores Corp. 319,375
12,000 New England Business Service, Inc. 219,000
4,000 Nine West Group, Inc. 113,500
20,000 Revco (D.S.), Inc. 472,500
5,000 Rex Stores Corp. 80,000
5,000 Rykoff-Sexton, Inc. 101,875
5,000 Shoe Carnival, Inc. 23,750
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------
<S> <C>
1,800 Sports & Recreation, Inc. $ 45,900
19,000 Sunglass Hut International, Inc. 437,000
28,000 Tech Data Corp. 472,500
11,000 Value City Department Stores, Inc. 96,250
13,000 Viking Office Products, Inc. 399,750
31,000 Waban, Inc. 527,000
----------
TOTAL CONSUMER DISTRIBUTION 8,526,825
----------
CONSUMER DURABLES
11,000 Aldila, Inc. 125,125
2,000 Armstrong World Industries, Inc. 77,250
3,000 Borg Warner Automotive, Inc. 75,375
3,000 Breed Technologies, Inc. 85,500
4,000 Brilliance China Auto 30,500
35,000 Clayton Homes, Inc. 542,500
33,000 Echlin, Inc. 998,250
5,000 Fleetwood Enterprises, Inc. 95,000
13,000 GenCorp, Inc. 152,750
8,000 Harman International Industries, Inc. 294,000
2,000 Leggett & Platt, Inc. 69,000
24,000 Lennar Corp. 381,000
13,000 Masland Corp. 199,875
42,000 Maytag Co. 630,000
17,000 Megahertz Corp. 240,125
31,000 Oakwood Homes Corp. 732,375
25,000 Pulte Corp. 575,000
3,000 Smith (A.O.) Corp. 67,500
4,000 Sunbeam-Oster Company, Inc. 102,500
10,000 Toro Co. 281,250
5,000 Winnebago Industries, Inc. 46,875
----------
TOTAL CONSUMER DURABLES 5,801,750
----------
CONSUMER NON-DURABLES
7,000 Armour All Products Corp. 145,250
7,000 Barefoot, Inc. 91,875
4,000 Dean Foods Co. 117,500
4,000 Dial Corp. 88,500
5,000 Hormel (Geo. A.) & Co. 123,750
10,000 Instrument Systems Corp. 82,500
1,800 Jones Apparel Group, Inc. 45,900
2,000 Kellwood Co. 41,500
11,000 Lancaster Colony Corp. 321,750
5,000 Nautica Enterprises, Inc. 150,000
19,000 Paragon Trade Brands, Inc. 249,375
3,000 Scotts Co., Class A 47,625
6,000 Smithfield Foods, Inc. 193,500
12,000 Springs Industries, Inc. 445,500
4,000 Topps, Inc. $ 20,500
19,000 Universal Foods Corp. 522,500
4,000 Warnaco Group, Inc. 68,500
8,000 Westpoint Stevens, Inc. 114,000
56,000 Whitman Corp. 931,000
6,000 WLR Foods, Inc. 155,250
8,000 Wolverine World Wide, Inc. 204,000
----------
TOTAL CONSUMER
NON-DURABLES 4,160,275
----------
CONSUMER SERVICES
4,000 ADVO, Inc. 68,000
4,500 American Medical Response 126,000
3,000 Banta Corp. 89,250
2,000 Belo (A.H.) Corp. 113,250
25,000 Bowne & Co., Inc. 418,750
6,000 Brinker International, Inc. 108,000
17,240 Chris Craft Industries, Inc. 590,470
11,000 Hospitality Franchise System, Inc. 291,500
5,000 Jones Intercable, Inc., Class A 60,000
1,000 Lee Enterprises, Inc. 34,000
2,000 Merrill Corp. 35,000
23,000 Mirage Resorts, Inc. 471,500
44,000 Ogden Corp. 814,000
5,200 PHH Corp. 176,800
17,000 Players International, Inc. 378,250
4,500 Sbarro, Inc. 113,063
3,000 Scripps (E.W.) Co., Class A 88,875
61,000 Spelling Entertainment, Group I 655,750
18,000 SPS Transaction Services 472,500
67,000 Wendy's International, Inc. 963,125
19,000 Westcott Communications, Inc. 242,250
----------
TOTAL CONSUMER SERVICES 6,310,333
----------
ENERGY
5,000 Addington Resources, Inc. 46,250
15,000 Ashland Oil, Inc. 521,250
4,000 Columbia Gas System, Inc. 95,000
28,000 Eastern Enterprises 735,000
19,000 El Paso Natural Gas Co. 577,125
14,000 KCS Energy, Inc. 227,500
11,000 Magma Power Co. 413,875
2,000 MAPCO, Inc. 103,000
53,000 Nabors Industries, Inc. 344,500
5,000 NACCO Industries, Inc. 241,875
15,500 National Fuel Gas 397,188
8,000 New Jersey Resources 177,000
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------
<S> <C>
37,000 NICOR, Inc. $ 855,625
16,000 Offshore Logistics, Inc. 199,000
14,400 ONEOK, Inc. 257,400
25,000 Pacific Enterprises 521,875
7,000 Southwestern Energy Co. 103,250
3,000 Tesoro Petroleum Corp. 28,125
4,000 Tosco Corp. 115,000
1,000 Transco Energy Co. 16,500
11,000 Varco International, Inc. 67,375
7,000 Weatherford International, Inc. 67,375
11,400 WICOR, Inc. 312,075
----------
TOTAL ENERGY 6,423,163
----------
FINANCE
2,000 Advanta Corp., Class A 54,500
1,020 Alleghany Corp. 155,933
17,000 AMBAC, Inc. 629,000
48,000 Anchor Bancorp, Inc. 642,000
4,000 Argonaut Group, Inc. 111,000
750 Associated Group, Class A 17,625
750 Associated Group, Class B 17,063
29,000 Bankers Life Holding Corp. 543,750
1,000 BanPonce Corp. 28,000
16,000 Brown (Alex), Inc. 482,000
7,000 Capital Re Corp. 179,375
6,000 Capitol American Financial Corp. 132,750
9,000 CMAC Investment Corp. 255,375
5,000 Comdisco, Inc. 116,875
7,000 Commercial Federal Corp. 145,250
11,500 Compass Bancshares, Inc. 248,688
2,000 Duff & Phelps Corp. 16,500
666 Duff & Phelps Credit Rating Co. 6,410
8,000 Fidelity National Financial, Inc. 88,000
4,000 First American Financial Corp. 67,000
1,000 First Commercial Corp. 22,250
6,000 First Financial Corp. 81,000
2,000 First USA, Inc. 65,250
24,000 Firstfederal Michigan Corp. 486,000
9,000 Foothill Group, Inc., Class A 132,750
5,000 Fremont General Corp. 116,250
3,000 GFC Financial Corp. 98,625
9,000 Hibernia Corp., Class A 68,625
15,000 Integra Financial Corp. 586,875
10,000 Inter-Regional Financial Group, Inc. 225,000
1,000 Kimco Realty Corp. 38,250
2,000 Mercantile Bancorporation, Inc. 62,000
17,000 Mercury General Corp. $ 485,563
4,000 MGIC Investment Corp. 134,000
3,000 Ohio Casualty Corp. 84,750
4,000 Old Kent Financial Corp. 121,000
7,000 Obancorp, Inc. 160,563
5,000 Orion Capital Corp. 173,750
24,000 PaineWebber Group, Inc. 360,000
21,000 Regions Financial Corp. 652,313
1,000 Southern National Corp. 19,250
47,000 SouthTrust Corp. 851,875
2,000 Standard Federal Bank 48,000
21,300 Star Banc Corp. 774,788
1,000 TCF Financial Corp. 40,375
4,000 Washington National Corp. 76,000
6,000 Zenith National Insurance Corp. 138,000
1,000 Zions Bancorporation 35,750
----------
TOTAL FINANCE 10,075,946
----------
HEALTH CARE
10,000 Caremark International, Inc. 170,000
4,000 Charter Medical Corp. 84,000
10,000 Circa Pharmaceuticals, Inc. 178,750
3,000 Copley Pharmaceutical, Inc. 39,750
1,000 Cordis Corp. 60,875
35,000 Datascope Corp. 577,500
4,000 Dentsply International, Inc. 127,000
480 FHP International Corp. 12,360
1,600 FHP International Corp.,
Series A, Preferred, $1.25 39,200
18,000 Genetic Therapy, Inc. 121,500
57,000 Gilead Sciences, Inc. 570,000
1,000 Haemonetics Corp. 17,375
4,000 Healthsouth Rehabilitation 148,000
31,000 Icos Corp. 110,438
1,000 Integrated Health Services, Inc. 39,375
5,000 Lincare Holdings, Inc. 141,250
6,000 Mariner Health Group, Inc. 129,000
4,000 Mylan Laboratories, Inc. 108,500
1,000 Nellcor, Inc. 32,750
5,000 Oxford Health Plans, Inc. 400,000
9,000 Pacificare Health Systems, Inc. 587,250
19,000 Quantum Health Resources, Inc. 546,250
1,000 Sierra Health Services, Inc. 31,500
3,000 Target Therapeutics, Inc. 85,500
15,000 U.S. Homecare Corp. 24,375
25,000 Vivra, Inc. 690,625
----------
TOTAL HEALTH CARE 5,073,123
----------
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------
<S> <C>
PRODUCER MANUFACTURING
8,000 Allwaste, Inc. $ 44,000
6,000 American Power Conversion Corp. 99,750
5,000 Ametek, Inc. 83,125
3,000 Beldon, Inc. 66,375
1,500 Briggs & Stratton Corp. 478,125
11,000 Clark Equipment Co. 599,500
5,000 Coltec Industries, Inc. 86,250
23,000 Cummins Engine Co., Inc. 1,046,500
11,000 Dames & Moore, Inc. 154,000
14,000 Danaher Corp. 724,500
6,000 Detroit Diesel Corp. 126,000
2,000 Idex Corp. 82,250
30,000 Juno Lighting, Inc. 525,000
3,000 Kaydon Corp. 72,000
46,000 Manville Corp. 419,750
12,000 Mueller Industries, Inc. 351,000
4,000 National Service Industries, Inc. 103,000
11,000 Ogden Projects, Inc. 170,500
5,000 Pec Israel Economic Corp. 139,375
8,000 Ruddick Corp. 150,000
5,000 Saint Joe Paper Co. 272,500
7,200 Sanifill, Inc. 177,300
6,000 Thermo Instrument Systems, Inc. 189,750
1,294 Tyco International, Ltd. 61,627
12,000 Varity Corp. 436,500
6,000 Watts Industries, Inc., Class A 123,000
2,000 Wellman, Inc. 57,000
----------
TOTAL PRODUCER MANUFACTURING 6,838,677
----------
RAW MATERIALS/PROCESSING INDUSTRIES
12,400 Amcast Industrial Corp. 261,950
35,000 Ecolab, Inc. 735,000
6,000 First Mississippi Corp. 144,750
40,000 Handy & Harmon 620,000
12,000 Hanna (M.A.), Inc. 288,000
8,000 Inland Steel Industries, Inc. 273,000
6,000 International Specialty
Products, Inc. 40,500
28,000 Justin Industries, Inc. 329,000
6,000 Kaiser Aluminum Corp. 63,750
3,000 Medusa Corp. 70,875
11,000 Minerals Technologies, Inc. 310,750
4,000 NCH Corp. 262,500
73,000 Owens-Illinois, Inc. $ 784,750
2,000 Pentair, Inc. 85,000
4,000 Riverwood International Corp. 63,000
105,000 Royal Oak Mines, Inc. 341,250
33,000 RPM, Inc. 614,625
8,000 Sealed Air Corp. 285,000
1,000 Sequa Corp., Class A 25,750
15,000 Terra Industries, Inc. 148,125
14,000 Vigoro Corp. 413,000
1,466 Wausau Paper Mills Co. 33,352
37,500 Worthington Industries, Inc. 740,625
----------
TOTAL RAW MATERIALS/
PROCESSING INDUSTRIES 6,934,552
----------
TECHNOLOGY
7,500 Altera Corp. 314,531
9,300 Analog Devices, Inc. 327,825
10,000 Aspect Telecommunications Corp. 335,000
3,000 Augat, Inc. 57,000
9,400 Avnet, Inc. 346,625
7,400 BMC Software, Inc. 421,800
9,000 Chipman Corp. 434,250
3,000 Cirrus Logic, Inc. 70,125
5,000 Conner Peripherals, Inc. 46,250
18,000 Credence Systems Corp. 405,000
2,000 Cyrix Corp. 39,000
12,000 Electroglas, Inc. 397,500
17,000 Electronics For Imaging 463,250
12,000 Exabyte Corp. 256,500
18,000 Filenet Corp. 481,500
13,000 Frame Technology Corp. 221,000
46,000 Gateway 2000, Inc. 1,000,500
400 Harris Computer Systems Corp. 4,850
8,000 Harris Corp. 339,000
4,200 Input/Output, Inc. 99,750
33,000 Intervoice, Inc. 451,688
3,000 Komag, Inc. 77,250
14,000 Lam Research Corp. 521,500
10,000 LEGENT Corp. 292,500
12,000 National Semiconductor Corp. 232,500
3,000 Pioneer Standard Electronics, Inc. 48,750
5,000 Quantum Corp. 75,000
4,000 Recoton Corp. 75,000
2,000 Seagate Technology 48,250
30,000 Sequent Computer Systems, Inc. 596,250
3,000 Smart & Final, Inc. $ 41,250
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------
<S> <C>
34,000 Solectron Corp. 935,000
8,000 Sybase, Inc. 417,000
9,000 Synopsys, Inc. 387,000
15,000 Tandem Computers, Inc. 258,750
6,000 Teradyne, Inc. 201,750
5,000 VLSI Technology, Inc. 58,125
52,000 Western Digital Corp. 877,500
6,000 3Com Corp. 310,500
----------
TOTAL TECHNOLOGY 11,966,819
----------
TRANSPORTATION
11,000 Airborne Freight Corp. 221,375
50,000 Arkansas Best Corp. 600,000
4,000 Arnold Industries, Inc. 81,000
6,000 Chicago & Northwestern
Holdings Corp. 115,500
6,800 Consolidated Freightways, Inc. 153,000
1,000 Harper Group, Inc. 15,750
8,000 Illinois Central Corp. 247,000
9,000 Skywest, Inc. 110,250
3,000 Werner Enterprises, Inc. 70,500
----------
TOTAL TRANSPORTATION 1,614,375
----------
UTILITIES
15,000 Atlantic Energy 266,250
3,000 Black Hills Corp. 62,625
44,100 Boston Edison Co. 1,052,888
7,300 Central Hudson Gas & Electric 193,450
5,000 Central Louisiana Electric Co., Inc. 112,500
1,000 Central Vermont Public
Service Corp. 13,250
2,000 Cilcorp, Inc. 63,750
4,000 Cipsco, Inc. $ 108,500
6,000 Citizens Utilities Co. 76,500
7,000 C-TEC Corp. 137,375
40,000 Delmarva Power & Lighting Co. 725,000
31,000 DQE, Inc. 914,500
8,000 Eastern Utilities Association 174,000
5,000 IES Industries, Inc. 126,875
9,000 Kansas City Power & Lighting Co. 210,375
11,000 Lincoln Telecommunications 176,000
31,000 Oklahoma Gas & Electric Co. 1,030,750
3,000 Orange & Rockland Utilities 96,000
1,000 Philadelphia Suburban Corp. 17,875
42,000 Pinnacle West Capital Corp. 819,000
18,000 Portland General Corp. 342,000
6,000 Rochester Gas & Electric 125,250
4,000 Sierra Pacific Resources 73,500
1,000 Southern California Water Co. 17,500
14,200 Southern New England
Telecommunications 465,050
----------
TOTAL UTILITIES 7,400,763
----------
TOTAL COMMON STOCK 81,126,601
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000)
--------- Repurchase Agreement
<S> <C> <C>
$ 935 Salomon Brothers, Inc., 5.75%,
1/3/95 935,000
-----------
TOTAL INVESTMENTS 82,061,601
Other assets and liabilities, net 17,313,860
-----------
NET ASSETS at December 31, 1994 $99,375,461
===========
</TABLE>
Note 3-Investment Activity
During the period, the cost of purchases and proceeds from sales of
investments, excluding short-term investments, were $2,448,724,334 and
$2,440,931,433, respectively.
At December 31, 1994, the Fund held 765 long Standard & Poor's 500-Index
futures contracts expiring in March, 1995. The market value of such contracts
was $176,469,675 and the unrealized appreciation was $732,635.
For federal income tax purposes, the identified cost of investments owned at
December 31, 1994, was $2,118,861,294, net unrealized appreciation of
investments aggregated $65,747,992, gross
20
<PAGE> 23
unrealized appreciation of investments aggregated $118,774,039 and gross
unrealized depreciation of investments aggregated $53,026,047.
Note 4-Director Compensation
Fund directors who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $4,210 plus a fee of $105 per day for Board and
Committee meetings attended. The Chairman receives additional fees from the
Fund at the annual rate of $1,580. During the period, such fees aggregated
$22,637.
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. At December 31, 1994, the liability for the Plan aggregated
$144,139. Each director covered under the Plan elects to be credited with an
earnings component or 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
basis (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.
21
<PAGE> 24
The Fund has 600 million Class A and 300 million each of Class B and Class C
shares of $.50 par value capital stock authorized. Transactions in shares of
capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
December 31, June 30,
1994 1994
----------- ------------
<S> <C> <C>
Shares sold
Class A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,758,950 48,584,035
Class B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,008,883 11,172,261
Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458,390 405,848
----------- ------------
45,226,223 60,162,144
----------- ------------
Shares issued for dividends and distributions reinvested
Class A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,115,797 27,048,575
Class B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507,550 294,834
Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,310 4,467
----------- ------------
25,641,657 27,347,876
----------- ------------
Shares redeemed
Class A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48,301,091) (69,697,790)
Class B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,307,540) (10,358,193)
Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (422,525) (301,258)
----------- ------------
(54,031,156) (80,357,241)
----------- ------------
Increase in shares outstanding . . . . . . . . . . . . . . . . . 16,836,724 7,152,779
=========== ============
</TABLE>
22
<PAGE> 25
Financial Highlights
Selected data for a share of capital stock outstanding throughout each of the
periods indicated. (Unaudited)
<TABLE>
<CAPTION>
Class A(1)
-----------------------------------------------------------------------
Six Months
Ended Year Ended June 30
December 31, ------------------------------------------------------
1994 1994 1993 1992 1991 1990
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of period . . . . . . . . $11.05 $12.95 $13.21 $12.37 $12.69 $12.72
-------- -------- ------- -------- -------- --------
INCOME FROM OPERATIONS
Investment income. . . . . . . . . . . . . . . . . . .13 .26 .305 .335 .40 .465
Expenses . . . . . . . . . . . . . . . . . . . . . . (.06) (.13) (.14) (.14) (.125) (.12)
-------- -------- ------- -------- -------- --------
Net investment income. . . . . . . . . . . . . . . . .07 .13 .165 .195 .275 .345
Net realized and unrealized gains or
losses on securities. . . . . . . . . . . . . . . . .09 (.1475) 1.69 1.095 .1575 1.3188
-------- -------- ------- -------- -------- --------
Total from investment operations . . . . . . . . . . .16 (.0175) 1.855 1.29 .4325 1.6638
-------- -------- ------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income . . . . . . . . (.1225) (.135) (.145) (.2375) (.29) (.3675)
Distributions from net realized
gains on securities . . . . . . . . . . . . . . . . (.0306) (1.7475) (1.97) (.2125) (.4625) (1.3263)
Distributions in excess of book-basis
net realized gains on securities
(see Note 1F) . . . . . . . . . . . . . . . . . . . (1.2669) -- -- -- -- --
-------- -------- ------- -------- -------- --------
Total distributions. . . . . . . . . . . . . . . . . (1.42) (1.8825) (2.115) (.45) (.7525) (1.6938)
-------- -------- ------- ------- -------- --------
Net asset value, end of period . . . . . . . . . . . $ 9.79 $11.05 $12.95 $13.21 $12.37 $12.69
======== ======== ======= ======== ======== ========
TOTAL RETURN(2). . . . . . . . . . . . . . . . . . . 1.62% .64% 15.20% 10.58% 4.31% 13.69%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions) . . . . . . . . $2,059.9 $2,152.5 $2,446.2 $2,350.2 $2,348.7 $2,456.8
Average net assets (millions). . . . . . . . . . . . $2,141.5 $2,378.3 $2,409.0 $2,456.5 $2,275.2 $2,441.2
Ratios to average net assets
Expenses. . . . . . . . . . . . . . . . . . . . . . 1.05%(3) 1.02% 1.06% 1.00% 1.01% 0.88%
Net investment income . . . . . . . . . . . . . . . 1.22%(3) .99% 1.22% 1.38% 2.22% 2.55%
Portfolio turnover rate . . . . . . . . . . . . . . 124% 112% 113% 54% 40% 39%
</TABLE>
(1) Per share information for the year 1990 has been adjusted to reflect a 2 for
1 stock split effective June 8, 1990.
(2) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
(3) Annualized.
See Notes to Financial Statements.
23
<PAGE> 26
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
--------------------------------------------------- --------------------------
January 10, August 27,
Six Months 1992(1) Six Months 1993(1)
Ended Year Ended June 30 through Ended through
December 31, --------------------- June 30, December 31, June 30,
1994 1994(2) 1993(2) 1992(2) 1994 1994(2)
------------ -------- ------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning
of period. . . . . . . . . . . . . . . . . . $10.96 $12.86 $13.13 $13.87 $10.99 $13.25
-------- -------- ------- ------ -------- --------
INCOME FROM OPERATIONS
Investment income . . . . . . . . . . . . . . .40 .25 .29 .15 .12 .17
Expenses . . . . . . . . . . . . . . . . . . (.33) (.22) (.26) (.10) (.10) (.15)
-------- -------- ------- ------ -------- --------
Net investment income . . . . . . . . . . . . .07 .03 .03 .05 .02 .02
Net realized and unrealized
gains or losses on securities . . . . . . . .05 (.1575) 1.705 (.79) .10 (.4375)
-------- -------- ------- ------ -------- --------
Total from investment operations . . . . . . .12 (.1275) 1.735 (.74) .12 (.4175)
-------- -------- ------- ------ -------- --------
LESS DISTRIBUTIONS
Dividends from net investment
income . . . . . . . . . . . . . . . . . . . (.0325) (.025) (.035) -- (.0325) (.095)
Distributions from net realized
gains on securities . . . . . . . . . . . . (.029) (1.7475) (1.97) -- (.0012) (1.7475)
Distributions in excess of
book-basis net realized gains
on securities (see Note 1F). . . . . . . . . (1.2685) -- -- -- (1.2963) --
-------- -------- ------- ------ -------- --------
Total distributions . . . . . . . . . . . . . (1.33) (1.7725) (2.005) -- (1.33) (1.8425)
-------- -------- ------- ------ -------- --------
Net asset value, end of period . . . . . . . $ 9.75 $10.96 $12.86 $13.13 $ 9.78 $10.99
======== ======== ======= ====== ======== ========
TOTAL RETURN(3) . . . . . . . . . . . . . . . 1.25% (1.46%) 12.84% (5.34%) 1.26% (3.70%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions) . . . . . . . . . . . . . . . . . $ 43.6 $ 35.8 $ 27.7 $ 11.7 $ 1.6 $ 1.2
Average net assets (millions) . . . . . . . . $ 39.8 $ 31.5 $ 16.8 $ 3.9 $ 1.6 $ 0.7
Ratios to average net assets
Expenses . . . . . . . . . . . . . . . . . . 1.84%(4) 1.79% 1.98% 1.82%(4) 1.84%(4) 1.81%(4)
Net investment income . . . . . . . . . . . .43%(4) .21% 0.25% 0.56%(4) .41%(4) .24%(4)
Portfolio turnover rate . . . . . . . . . . . 124% 112% 113% 54% 124% 112%
</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
See Notes to Financial Statements.
24
<PAGE> 27
American Capital Pace Fund, Inc.
Board of Directors Lawrence J. Sheehan
J. Miles Branagan Fernando Sisto*
Richard E. Caruso William S. Woodside
Roger Hilsman
Don G. Powell
David Rees *Chairman of the Board
- --------------------------------------------------------------
Officers
Don G. Powell Nori L. Gabert
President Vice President and Secretary
Curtis W. Morell J. David Wise
Vice President Vice President and
and Treasurer Assistant Secretary
Stephen L. Boyd Perry F. Farrell
Alan T. Sachtleben M. Robert Sullivan
Paul R. Wolkenberg Assistant Treasurers
Vice Presidents
Tanya M. Loden Huey P. Falgout
Vice President Assistant Secretary
and Controller
- --------------------------------------------------------------
Investment Manager
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
Van Kampen American Capital Shareholder Services, Inc.
P.O. Box 418256, Kansas City, Missouri 64141-9256
- --------------------------------------------------------------
Custodian
State Street Bank and Trust Company
225 Franklin Street, Boston, Massachusetts 02110
- --------------------------------------------------------------
Counsel
O'Melveny & Myers
400 South Hope Street, Los Angeles, California 90071
- --------------------------------------------------------------------------------
The performance data quoted represents past performance which is not indicative
of future performance. Investment return and net asset value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund
which contains additional information on how to purchase shares, the sales
charge, and other pertinent data.
- --------------------------------------------------------------------------------
<PAGE> 28
American Capital Family of Funds
<TABLE>
<S> <C>
Emerging Growth Fund Corporate Bond Funds
American Capital Emerging Growth Fund, Inc. American Capital High Yield Investments, Inc.
American Capital Corporate Bond Fund, Inc.
Midcap Fund
American Capital Enterprise Fund, Inc. Government Securities Funds
American Capital Global Government Securities Fund
Core Growth Funds American Capital U.S. Government Trust for Income
American Capital Pace Fund, Inc. American Capital Government Securities, Inc.
American Capital Global Equity Fund American Capital Federal Mortgage Trust
Real Estate Fund Tax-Free Funds
American Capital Real Estate Securities Fund, Inc. American Capital Tax-Exempt Trust
High Yield Municipal Portfolio
Growth-Income Funds American Capital Texas Municipal Securities, Inc.
American Capital Comstock Fund, Inc. American Capital Municipal Bond Fund, Inc.
American Capital Growth and Income Fund, Inc. American Capital Tax-Exempt Trust
American Capital Equity Income Fund, Inc. Insured Municipal Portfolio
American Capital Global Managed Assets Fund, Inc.
American Capital Harbor Fund, Inc. Money Market Fund
American Capital Reserve Fund, Inc.
Income-Growth Fund
American Capital Utilities Income Fund, Inc.
The Govett Funds, Inc.
Nationally Distributed by Van Kampen American Capital Distributors, Inc.
(formerly American Capital Marketing, Inc.)
Govett Latin America Fund Govett Smaller Companies Fund
Govett Pacific Strategy Fund Govett International Equity Fund
Govett Emerging Markets Fund Govett Global Government Income Fund
</TABLE>
For more complete information about any Van Kampen American Capital or Govett
Fund, including charges and expenses, obtain a prospectus from your investment
professional or write Van Kampen American Capital Distributors, Inc., P.O. Box
1411, Houston, TX 77251-1411. Read the prospectus carefully before you invest
or send money.
American Capital
Pace Fund, Inc.
C/O Access
P.O. Box 418256
Kansas City, MO 64141-9256
PRINTED MATTER
Printed in U.S.A./014RPT-002
