VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST/, N-30D, 1996-08-29

VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST/
N-30D, 1996-08-29

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<PAGE> 1

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Portfolio Highlights............................. 4
Performance in Perspective....................... 5
Portfolio Management Review...................... 6
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 12
Statement of Operations.......................... 13
Statement of Changes in Net Assets............... 14
Financial Highlights............................. 15
Notes to Financial Statements.................... 18
Independent Accountants' Report.................. 25
</TABLE>

UTLF ANR 8/96
<PAGE> 2

LETTER TO SHAREHOLDERS

August 1, 1996

Dear Shareholder, [PHOTO]
As you may be aware, an agreement DENNIS J. MCDONNELL AND DON G. POWELL
was reached in late June for VK/AC
Holding, Inc., the parent company of
Van Kampen American Capital, Inc., to
be acquired by the Morgan Stanley
Group Inc. While this announcement
may appear commonplace in an
ever-changing financial industry, we
believe it represents an exciting
opportunity for shareholders of our investment products.
With Morgan Stanley's global
leadership in investment banking and asset management and Van Kampen American
Capital's reputation for competitive long-term performance and superior investor
services, together we will offer a broader range of investment opportunities and
expertise.
The new ownership will not affect our commitment to pursuing excellence in
all aspects of our business. And, we expect very little change in the way your
mutual fund account is maintained and serviced.
A proxy will be mailed to you shortly explaining the acquisition and asking
for your vote of approval. Please read it carefully and return your response for
inclusion in the shareholder vote. We value our relationship with you and look
forward to communicating more details of this transaction, which is anticipated
to be completed in November.

ECONOMIC REVIEW
The economy demonstrated an acceleration in growth during the last half of
the reporting period. After a nominal 0.3 percent growth rate in the last
quarter of 1995, GDP (the nation's gross domestic product) rose by 2.0 percent
in this year's first quarter. And, as anticipated, the economy grew by 4.2
percent in the second quarter, partly reflecting a recovery from the effects of
labor strikes earlier in the year and extreme weather conditions across the
country. Upward momentum has been assisted by consumer spending, as indicated by
a 5.6 percent rise in retail sales in the first five months of this year versus
the comparable 1995 period.
In the manufacturing sector, economic reports, such as the National
Association of Purchasing Managers Index, suggested a continued rebound in
production from last winter's lower levels. In June, this index reached its
highest level since early 1995. Strong levels of exports and a replenishing of
inventories have helped support this momentum.
Surprisingly healthy economic activity led to concerns that inflation may
rise and the Federal Reserve Board might tighten monetary policy. Inflation
remains modest, however, with consumer prices rising at about a 3 percent annual
rate over the past year. Meanwhile, the closely watched "core" Consumer Price
Index, which excludes volatile food

Continued on page two

1
<PAGE> 3

and energy components, has risen year over year at rates between 2.7 and 3.0
percent per year, with mid-1996 readings at a moderate 2.7 percent. In general,
recent reports have suggested an upward creep in labor-related costs, while
indicating that prices of many commodities have begun to decline.

EQUITY MARKET REVIEW
The stock market averages posted attractive gains for the 12-month period
ended June 30, 1996, with most major averages posting all-time highs. The Dow
Jones Industrial Average rose approximately 24 percent from 4556 to 5654, and
the NASDAQ Composite Index rose approximately 27 percent from 933 to 1185.
Corporate earnings, which were an important contributor to last year's
strong stock market, continued to move ahead during the reporting period.
Unexpectedly strong economic activity helped lift reported profits above
expectations for the period. Through the rest of 1996, we expect earnings will
be supportive, but perhaps not the primary factor in the movement of the major
stock market averages.

OUTLOOK
We anticipate that reasonably strong economic growth will continue during
the balance of 1996, albeit at rates more moderate than the second quarter's
swift pace. While we expect rates of inflation to remain near current levels,
the Fed may begin to lean toward greater restraint in its monetary policy in the
coming months. That suggests an upward bias for short-term interest rates and
for yields on long-term bonds to remain steady at current levels.
Additional details about your Fund, including a Question and Answer section
with your portfolio management team, is provided in this report. We appreciate
your continued confidence in your investment with Van Kampen American Capital.

Sincerely,

[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.

2
<PAGE> 4

PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1996
VAN KAMPEN AMERICAN CAPITAL UTILITY FUND

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
One-year total return based on
NAV(1)............................... 19.93% 19.08% 19.00%
One-year total return(2)............... 13.01% 15.08% 18.00%
Life-of-Fund average annual total
return(2)............................ 4.52% 4.75% 5.51%
Distribution rate(3)................... 3.20% 2.67% 2.67%
Commencement date...................... 07/28/93 07/28/93 08/13/93
</TABLE>

(1)Assumes reinvestment of all distributions for the period and does not include
payment of the maximum sales charge (5.75% for A shares) or contingent deferred
sales charge for early withdrawal (4% for B shares and 1% for C shares).

(2)Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).

(3)Distribution rate represents the monthly annualized distributions of the Fund
at the end of the period and not the earnings of the Fund.

See the Fund Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth more
or less than their original cost.

3
<PAGE> 5

PORTFOLIO HIGHLIGHTS

VAN KAMPEN AMERICAN CAPITAL UTILITY FUND

TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF % AS OF
JUNE 30, 1996 SIX MONTHS AGO
<S> <C> <C>
Public Service Co. of New Mexico..... 3.2% ............ N/A
Nipsco, Inc. ........................ 2.9% ........... 2.2%
General Public Utilities Corp. ...... 2.4% ........... 2.2%
Scana Corp. ......................... 2.4% ............ N/A
CMS Energy Corp. .................... 2.4% ............ N/A
Illinova Corp. ...................... 2.3% ........... 2.2%
Allegheny Power Systems, Inc. ....... 2.3% ............ N/A
Pinnacle West Capital Corp. ......... 2.3% ........... 2.2%
Cinergy Corp. ....................... 2.3% ............ N/A
Texas Utilities Co................... 2.2% ........... 2.7%
</TABLE>

N/A = Not Applicable

TOP FIVE PORTFOLIO HOLDINGS BY SECTOR
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C>
Electric Utilities.......... 56.7%
Telecommunications.......... 22.1%
Oil, Gas, Pipeline and
Distribution.............. 17.6%
Real Estate................. 3.0%
Cable Television............ 0.6%

<CAPTION>
AS OF DECEMBER 31, 1995
<S> <C>
Electric Utilities.......... 50.2%
Telecommunications.......... 26.1%
Oil, Gas, Pipeline and
Distribution.............. 18.7%
Real Estate................. 2.0%
Water and Sewer Utilities... 1.8%
</TABLE>

ASSET ALLOCATION
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C> <C> <C>
Stocks............. 83.1%
Bonds.............. 9.3%
Convertibles....... 4.3%
Cash and Short-Term
Investments........ 0.7%
Other.............. 2.6%
Pie Chart

<CAPTION>
AS OF DECEMBER 31, 1995
<S> <C> <C> <C>
Stocks............. 89.3%
Bonds.............. 6.7%
Convertibles....... 1.1%
Cash and Short-Term
Investments........ 2.3%
Other.............. 0.6%
Pie Chart
</TABLE>

4
<PAGE> 6

PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:

- Illustrate the general market environment in which your investments are
being managed

- Reflect the impact of favorable market trends or difficult market
conditions

- Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over the
period measured

For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Standard & Poor's 40 Utilities
Index over time. As a broad-based, unmanaged statistical composite, this index
does not reflect any commissions or fees which would be incurred by an investor
purchasing the securities it represents. Similarly, its performance does not
reflect any sales charges or other costs which would be applicable to an
actively managed portfolio, such as that of the Fund.

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
VKAC Utility Fund vs. Standard & Poor's 40 Utilities Index
(August 1993 through June 1996)

<TABLE>
<CAPTION>
S&P'S 40 UTILITIES
VKAC UTILITY FUND INDEX
<S> <C> <C>
7/93 9427 10000
8/93 9848 10443
9/93 9848 10504
10/93 9968 10441
11/93 9465 9871
12/93 9696 9908
1/94 9776 9938
2/94 9442 9333
3/94 8994 9094
4/94 9102 9274
5/94 8913 8982
6/94 8730 9093
7/94 9004 9355
8/94 9120 9285
9/94 8867 9138
10/94 9040 9172
11/94 8721 8993
12/94 8742 9128
1/95 8952 9794
2/95 9120 9734
3/95 9043 9759
4/95 9221 10068
5/95 9476 10341
6/95 9490 10481
7/95 9626 10702
8/95 9740 10871
9/95 10228 11650
10/95 10329 11879
11/95 10561 11994
12/95 10988 12946
1/96 11149 13064
2/96 11018 12499
3/96 11020 12335
4/96 10939 12421
5/96 10939 12340
6/96 11382 12952
</TABLE>

The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions for the period ended June 30, 1996,
and includes payment of the maximum sales charge (5.75% for A shares).

While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.

5
<PAGE> 7
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL UTILITY FUND

We recently spoke with the management team of the Van Kampen American Capital
Utility Fund about the key events and economic forces that shaped the markets
during the past fiscal year. The team includes Mary Jayne Maly, 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 12-month period ended June 30, 1996.

Q DURING EACH OF THE PAST FOUR QUARTERS, WHICH FACTORS HAD THE GREATEST
IMPACT ON THE FUND'S PERFORMANCE?

A In the third quarter of 1995, two primary factors had positive effects on
the Fund: lower interest rates and the anticipated results of governmental
focus on telecommunications (telecom) reform.

Interest rates were falling from higher levels earlier in the year, and
lower interest rates almost always mean good news for utility stocks. Then,
telecom reform, the government's proposed legislation to loosen restrictions on
telecommunications companies, significantly enhanced future earnings prospects
for local telephone companies. In anticipation of this reform, the Fund took a
larger than normal position in local telephone companies. As a result, during
the quarter ended September 30, 1995, the Fund returned 7.77 percent(1) (Class A
shares at net asset value), while the Lipper Utility Fund Index returned 6.92
percent.
The Fund continued its strong performance in the fourth quarter of 1995,
thanks largely to continued declines in interest rates and the superb
performance of gas stocks (distribution companies and pipelines). During an
unusually cold winter, gas reserves had to be tapped, and, as a result, the
price of gas in the marketplace rose along with the prices of gas stocks. The
Fund returned 7.44 percent(1) (Class A shares at net asset value) versus the
Lipper Utility Fund Index at 6.81 percent in the fourth quarter.
During the first quarter of 1996, the Fund struggled--as did the entire
utility sector. This was due, in large part, to rising interest rates. Because
the economy was growing at a faster-than-expected pace, interest rates rose.
Just as falling rates generally help utility stocks, rising rates usually hurt
them. Gas stocks maintained their strong growth thanks to the cold, drawn-out
winter, but telephone and electric stocks did not fare as well. Even though the
Fund's performance slowed in the first quarter, it still outperformed the
Lipper Utility Fund Index (0.29 percent(1)--Class A shares at net asset
value--versus -0.39 percent).
Finally, during the second quarter of 1996, interest rates continued their
volatile but generally upward pace. However, a bond market rally in late June
helped utility stocks in general. Also, it appeared as if more nervous equity
investors were looking to assume more defensive postures. Utility stocks offer
this defensive position--and because many of them offered attractive
valuations--the Fund rebounded from its third quarter performance and returned
only slightly less than the Lipper Utility Fund Index (3.28 percent--Class A
shares at net asset value--versus 3.97 percent).

6
<PAGE> 8
Q HOW DID THE FUND PERFORM OVER THE LAST 12 MONTHS?

A We were very pleased with the Fund's performance. Class A shares of the
Fund provided a total return at net asset value of 19.93 percent(1). By
comparison, the Lipper Utility Fund Index achieved a total return of 18.28
percent, while the Standard & Poor's 40 Utilities Index returned 23.57 percent.
Keep in mind that the S&P 40 Utilities Index is a broad-based, unmanaged index
that reflects the general performance of utility stocks and does not reflect any
commissions or fees that would be paid by an investor purchasing the securities
it represents. The Lipper Utility Fund Index reflects the performance of the
largest utility funds and does not reflect any sales charges that would be paid
by an investor purchasing the securities it represents. Please refer to the
chart on page three for additional Fund performance results.

Q WHY THE DISPARITY BETWEEN THE FUND AND THE S&P 40 UTILITIES INDEX?

A Most utility funds, including your Fund, tend to have a large portion of
the portfolio invested in electric utility stocks, because of their
historically higher yields. During the most recent 12-month period,
electric utilities did not perform as well as gas utilities. The S&P 40
Utilities Index was heavily influenced by the performance of gas stocks, which
make up approximately 22 percent of the index and provided an average total
return in excess of 30 percent. The Lipper Utility Fund Index more accurately
reflects the Fund's heavier electric weighting--and your Fund outperformed that
Index by 1.65 percent.

Q OVER THIS 12-MONTH PERIOD, WHICH OF THE FUND'S HOLDINGS HAD THE STRONGEST
PERFORMANCE?

A Three stocks, in particular, stand out. First, Portland General (an
electric utility in Portland, Oregon) enjoyed a 44 percent total return
over the last 12 months, including reinvestment of dividends and capital
gains. In addition to having positive earnings surprises, the company also was
allowed to shut down an inefficient nuclear reactor.

The other two stocks are local telephone companies. BellSouth and Ameritech
total returns were 38 and 40 percent, respectively, including reinvestment of
dividends and capital gains, over the past 12 months. Last year at this time,
investors realized that local phone companies would be the apparent winners
after telecom reform. Both companies continue to benefit from strong management,
strong line growth (e.g. second phone lines installed into homes), and overall
earnings growth.
Two of the Fund's international holdings also performed well. Telefonica de
Espana (the Spanish telephone company) and Portugal Telecom (the Portuguese
telephone company) still appear to have strong growth prospects, thanks to the
lower penetration of phone lines across their respective countries. As the
demand for phone lines continues to increase, we expect this to be a positive
occurrence for these companies. Please refer to page four for Fund portfolio
highlights.

7
<PAGE> 9

Q WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?

A Two factors could shape a positive environment for the Fund over the next
six months: a potentially cautious stock market and the prospect of more
moderate economic growth.
First, many investors are taking a cautious approach to the stock market as
a whole. Because the market had such a tremendous upward run in 1995, some
investors are looking to alternatives that may cushion them from a market
downturn. Utility stocks have historically provided investors with that
defensive cushion.
Second, the economy is showing some signs of moderating growth. Because
utilities are typically considered necessities, earnings growth, albeit slow,
should be more consistent through a moderate or slow economy, and thus add to
the defensive characteristics of the stocks.
The potential risks going forward involve telecom reform and electric
utility deregulation. Simply stated, these industries are in a state of
transition. Historically, many utilities operated as regulated monopolies, but
as a result of reform and deregulation, they will witness competition for the
first time. This environment will seek to separate the "winners" and "losers".
For this reason, we feel it is important to invest in a utility mutual fund
where the diversification across a large number of holdings may help offset the
possible risks that lie ahead.
Our management team has extensive research capabilities, which should allow
us to select those stocks we believe are best positioned to compete in this new
environment. This includes investing in overseas utilities, where we feel a good
deal of growth opportunities exist. At the end of the reporting period, the Fund
had 8 percent of its portfolio invested in foreign utilities. As we see
opportunities overseas, that percentage may increase over the next six months.

[SIG]
Alan T. Sachtleben
Executive Vice President
Equity Investments

[SIG]
Mary Jayne Maly
Portfolio Manager

Please see footnotes on page three

8
<PAGE> 10

PORTFOLIO OF INVESTMENTS

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 88.5%
ELECTRIC UTILITIES 53.1%
Allegheny Power Systems Inc. ................................ 114,000 $ 3,519,750
Carolina Power & Light Co. .................................. 88,000 3,344,000
Cinergy Corp................................................. 109,000 3,488,000
CMS Energy Corp. ............................................ 117,000 3,612,375
DPL Inc. .................................................... 98,700 2,405,813
DTE Energy Co. .............................................. 99,000 3,056,625
Duke Power Co. .............................................. 55,740 2,856,675
Edison International......................................... 194,000 3,419,250
Empresa Nacional de Electricidad - ADR (Spain)............... 22,000 1,377,750
Entergy Corp. ............................................... 113,000 3,206,375
Florida Progress Corp. ...................................... 96,000 3,336,000
FPL Group Inc. .............................................. 74,000 3,404,000
General Public Utilities Corp. .............................. 104,175 3,672,169
Houston Industries Inc. ..................................... 135,000 3,324,375
Illinova Corp. .............................................. 124,000 3,565,000
National Power PLC - ADR (UK)................................ 99,500 2,425,312
Nipsco Inc. ................................................. 108,800 4,379,200
Ohio Edison Co. ............................................. 143,000 3,128,125
Peco Energy Co. ............................................. 75,000 1,950,000
Pinnacle West Capital Corp. ................................. 115,400 3,505,275
Portland General Corp. ...................................... 110,000 3,396,250
Powergen PLC - ADR (UK)...................................... 84,000 1,743,000
Public Service Co. of New Mexico............................. 236,000 4,838,000
Scana Corp. ................................................. 129,000 3,628,125
Sierra Pacific Resources..................................... 100,000 2,537,500
Texas Utilities Co. ......................................... 80,000 3,420,000
-------------
82,538,944
-------------
OIL, GAS, PIPELINE AND DISTRIBUTION 14.5%
Columbia Gas Systems Inc. ................................... 56,000 2,919,000
El Paso Natural Gas Co. ..................................... 43,000 1,655,500
MCN Corp. ................................................... 75,000 1,828,125
MCN Corp. - Convertible Preferred............................ 32,200 821,100
Nicor Inc. .................................................. 92,211 2,616,487
Noram Energy Corp. .......................................... 200,000 2,175,000
Panenergy Corp. ............................................. 80,000 2,630,000
Questar Corp. ............................................... 74,000 2,516,000
Sonat Inc. .................................................. 40,000 1,800,000
Southwest Gas Corp. ......................................... 100,000 1,600,000
</TABLE>

See Notes to Financial Statements

9
<PAGE> 11

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
OIL, GAS, PIPELINE AND DISTRIBUTION (CONTINUED)
Williams Cos Inc. - Convertible Preferred.................... 25,000 $ 1,965,625
-------------
22,526,837
-------------
REAL ESTATE INVESTMENT TRUSTS 3.0%
Bay Apartment Community Inc. ................................ 82,500 2,134,687
Meditrust.................................................... 75,000 2,503,125
-------------
4,637,812
-------------
TELECOMMUNICATIONS 17.9%
Ameritech Corp. ............................................. 25,670 1,524,156
AT & T Corp. ................................................ 31,600 1,959,200
Bellsouth Corp. ............................................. 48,000 2,034,000
Cable & Wireless PLC - ADR (UK).............................. 76,000 1,501,000
Century Telephone Enterprises Inc. .......................... 46,000 1,466,250
Frontier Corp. .............................................. 50,000 1,531,250
GTE Corp. ................................................... 40,000 1,790,000
Lucent Technologies Inc. .................................... 12,300 465,863
MCI Communications Corp. .................................... 55,000 1,409,375
MFS Communications Inc. - Convertible Preferred.............. 24,000 1,524,000
Nextel Communications Inc. (b)............................... 60,000 1,143,750
Pasifik Satelit Nusantara - ADR (Indonesia) (b).............. 115,000 2,300,000
Portugal Telecom SA - ADR (Portugal) (b)..................... 80,200 2,105,250
SBC Communications Inc. ..................................... 57,000 2,807,250
Sprint Corp. - Convertible Debt.............................. 60,000 2,415,000
Telefonica de Espana - ADR (Spain)........................... 26,000 1,433,250
Teleport Communications Group (b)............................ 24,300 464,859
-------------
27,874,453
-------------
TOTAL COMMON AND PREFERRED STOCKS..................................... 137,578,046
-------------
FIXED INCOME SECURITIES 9.4%
CABLE TELEVISION 0.6%
Cox Communications Inc. ($1,000,000 par, 6.875% coupon, 06/15/05
maturity, S&P rating A-)............................................ 966,435
-------------
ELECTRIC UTILITIES 2.4%
Idaho Power Co. ($500,000 par, 8.000% coupon, 03/15/04 maturity, S&P
rating A+).......................................................... 523,572
Iowa Electric Light & Pwr Co. ($700,000 par, 8.625% coupon, 05/15/01
maturity, S&P rating A)............................................. 748,213
Texas Utilities Electric Co. ($1,000,000 par, 8.250% coupon, 04/01/04
maturity, S&P rating BBB+).......................................... 1,054,061
Union Electric Co. ($500,000 par, 7.375% coupon, 12/15/04 maturity,
S&P rating AA-)..................................................... 506,595
Virginia Electric & Pwr Co. ($1,000,000 par, 6.625%
coupon, 04/01/03 maturity, S&P rating A)............................ 976,270
-------------
3,808,711
-------------
</TABLE>

See Notes to Financial Statements

10
<PAGE> 12

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security Description Market Value
- ------------------------------------------------------------------------------------
<S> <C>
OIL, GAS, PIPELINE AND DISTRIBUTION 2.7%
Colorado Interstate Gas Co. ($500,000 par, 10.000% coupon, 06/15/05
maturity, S&P rating BBB-).......................................... $ 584,869
Enron Corp. ($1,000,000 par, 7.125% coupon, 05/15/07 maturity, S&P
rating BBB+)........................................................ 980,182
Laclede Gas Co. ($330,000 par, 8.500% coupon, 11/15/04 maturity, S&P
rating AA-)......................................................... 357,363
Panhandle Eastern Pipeline Co. ($500,000 par, 7.875% coupon, 08/15/04
maturity, S&P rating BBB)........................................... 513,770
Southwest Gas Corp. ($400,000 par, 9.750% coupon, 06/15/02 maturity,
S&P rating BBB-).................................................... 439,724
Texas Eastern Transmission Corp. ($100,000 par, 8.000% coupon,
07/15/02 maturity, S&P rating BBB).................................. 103,900
Texas Gas Transmission Corp. ($1,090,000 par, 8.625% coupon,
04/01/2004 maturity, S&P rating BBB)................................ 1,175,942
------------
4,155,750
------------
TELECOMMUNICATIONS 3.7%
360 Communications ($1,000,000 par, 7.125% coupon, 03/01/03 maturity,
S&P rating BBB-).................................................... 960,450
AT & T Corp. ($1,000,000 par, 7.500% coupon, 06/01/06 maturity, S&P
rating AA).......................................................... 1,023,813
GTE Corp. ($900,000 par, 9.375% coupon, 12/01/00 maturity, S&P rating
BBB+)............................................................... 983,117
MCI Communications Corp. ($1,000,000 par, 7.500% coupon, 08/20/04
maturity, S&P rating A)............................................. 1,021,841
Sprint Corp. ($1,000,000 par, 8.125% coupon, 07/15/02 maturity, S&P
rating BBB)......................................................... 1,054,145
United Telecommunications Kansas ($617,000 par, 9.750% coupon,
04/01/00 maturity, S&P rating BBB-)................................. 671,786
------------
5,715,152
------------
TOTAL FIXED INCOME SECURITIES......................................... 14,646,048
------------
TOTAL LONG-TERM INVESTMENTS 97.9%
(Cost $140,319,058) (a)............................................. 152,224,094
SHORT-TERM INVESTMENTS AT AMORTIZED COST 0.7%......................... 1,120,000
OTHER ASSETS IN EXCESS OF LIABILITIES 1.4%............................ 2,214,895
------------
NET ASSETS 100%....................................................... $155,558,989
============
</TABLE>

* Zero coupon bond

(a) At June 30, 1996, cost for federal income tax purposes is $140,319,058; the
aggregate gross unrealized appreciation is $13,246,084 and the aggregate
gross unrealized depreciation is $1,341,137, resulting in net unrealized
appreciation including foreign currency translation of $11,904,947.

(b) Non-income producing security as this stock currently does not declare
dividends.

See Notes to Financial Statements

11
<PAGE> 13
STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $140,319,058) (Note 1).............. $152,224,094
Short-Term Investments (Note 1)........................................ 1,120,000
Cash................................................................... 2,575
Receivables:
Securities Sold...................................................... 3,243,936
Dividends............................................................ 498,736
Interest............................................................. 236,913
Fund Shares Sold..................................................... 46,803
Unamortized Organizational Expenses (Note 1)........................... 47,653
Other.................................................................. 16,263
------------
Total Assets..................................................... 157,436,973
------------
LIABILITIES:
Payables:
Fund Shares Repurchased.............................................. 962,642
Securities Purchased................................................. 388,800
Income Distribution.................................................. 232,295
Investment Advisory Fee (Note 2)..................................... 81,239
Distributor and Affiliates (Notes 2 and 5)........................... 59,399
Accrued Expenses....................................................... 102,995
Deferred Compensation and Retirement Plans (Note 2).................... 50,614
------------
Total Liabilities................................................ 1,877,984
------------
NET ASSETS............................................................. $155,558,989
============
NET ASSETS CONSIST OF:
Capital (Note 3)....................................................... $145,127,111
Net Unrealized Appreciation on Securities.............................. 11,904,947
Accumulated Undistributed Net Investment Income........................ 17,591
Accumulated Net Realized Loss on Securities............................ (1,490,660)
------------
NET ASSETS............................................................. $155,558,989
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $57,653,820
and 3,768,641 shares of capital stock issued and outstanding) (Note
3)................................................................. $ 15.30
Maximum sales charge (5.75%* of offering price).................... .93
------------
Maximum offering price to public................................... $ 16.23
============
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $92,943,641 and
6,076,415 shares of capital stock issued and outstanding) (Note
3)................................................................. $ 15.30
============
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $4,961,528 and
324,501 shares of capital stock issued and outstanding) (Note 3)... $ 15.29
============
</TABLE>

*On sales of $50,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

12
<PAGE> 14

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $171,555)................ $ 6,679,775
Interest................................................................ 1,064,961
------------
Total Income........................................................ 7,744,736
------------
EXPENSES:
Distribution (12b-1) and Service Fees (Allocated to Classes A, B and C
of $145,428, $930,703 and $40,805, respectively) (Note 5)............. 1,116,936
Investment Advisory Fee (Note 2)........................................ 1,009,003
Shareholder Services (Note 2)........................................... 278,466
Trustees Fees and Expenses (Note 2)..................................... 48,791
Amortization of Organizational Expenses (Note 1)........................ 23,058
Legal (Note 2).......................................................... 12,810
Other................................................................... 400,091
------------
Total Expenses...................................................... 2,889,155
Less Expenses Reimbursed............................................ 18,112
------------
Net Expenses........................................................ 2,871,043
------------
NET INVESTMENT INCOME................................................... $ 4,873,693
============
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments........................................................... $12,550,444
Foreign Currency Translation.......................................... (176,199)
------------
Net Realized Gain on Securities......................................... 12,374,245
------------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................... 319,167
------------
End of the Period:
Investments......................................................... 11,905,036
Foreign Currency Translation........................................ (89)
------------
11,904,947
------------
Net Unrealized Appreciation on Securities During the Period............. 11,585,780
------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES.......................... $23,960,025
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.............................. $28,833,718
============
</TABLE>

See Notes to Financial Statements

13
<PAGE> 15

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended June 30, 1996 and 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 June 30, 1995
<S> <C> <C>
- ------------------------------------------------------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 4,873,693 $ 5,542,812
Net Realized Gain/Loss on Securities..................... 12,374,245 (11,154,213)
Net Unrealized Appreciation on
Securities During the Period........................... 11,585,780 15,931,333
---------- ----------
Change in Net Assets from Operations..................... 28,833,718 10,319,932
---------- ----------
Distributions from Net Investment Income:
Class A Shares......................................... (2,717,536) (2,381,991)
Class B Shares......................................... (3,509,438) (3,137,968)
Class C Shares......................................... (129,256) (46,441)
Class D Shares......................................... -0- (68)
--------- ---------
Total Distributions.................................. (6,356,230) (5,566,468)
--------- ---------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 22,477,488 4,753,464
---------- ----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................................ 44,796,872 19,193,852
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 5,057,133 4,462,088
Cost of Shares Repurchased............................... (49,434,577) (32,083,914)
---------- ----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... 419,428 (8,427,974)
---------- ----------
TOTAL INCREASE/DECREASE IN NET ASSETS.................... 22,896,916 (3,674,510)
NET ASSETS:
Beginning of the Period.................................. 132,662,073 136,336,583
------------ ------------
End of the Period (Including undistributed net investment
income of $17,591 and $1,563,610, respectively)........ $155,558,989 $132,662,073
============ ============
</TABLE>

See Notes to Financial Statements

14
<PAGE> 16

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
From July 28, 1993
(Commencement
of Investment
Year Ended Year Ended Operations) to
Class A Shares June 30, 1996 June 30, 1995 June 30, 1994
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Net Asset Value, Beginning of the
Period........................... $13.386 $12.906 $14.300
------- ------- -------
Net Investment Income.............. .538 .595 .479
Net Realized and Unrealized
Gain/Loss on Securities.......... 2.077 .485 (1.513)
------ ------ ------
Total from Investment Operations... 2.615 1.080 (1.034)
------ ------ ------
Less:
Distributions from and in Excess
of Net Investment Income (Note
1)............................. .703 .600 .323
Distributions in Excess of Net
Realized Gain on Securities.... -0- -0- .037
------ ------ ------
Total Distributions................ .703 .600 .360
------ ------ ------
Net Asset Value, End of the
Period........................... $15.298 $13.386 $12.906
======= ======= =======
Total Return* (a).................. 19.93% 8.70% (7.38%)**
Net Assets at End of the Period
(In millions).................... $57.7 $50.4 $51.5
Ratio of Expenses to Average Net
Assets*.......................... 1.38% 1.34% 1.34%
Ratio of Net Investment Income to
Average Net Assets*.............. 3.61% 4.55% 4.10%
Portfolio Turnover................. 121% 109% 102%**
Average Commission Paid Per Equity
Share Traded (b)................. $.059 N/A N/A
*If certain expenses had not been
assumed by VKAC, total return
would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net
Assets........................... 1.39% N/A N/A
Ratio of Net Investment Income to
Average Net Assets............... 3.60% N/A N/A
</TABLE>

**Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(b) Represents the average brokerage commissions paid on equity transactions
entered into during the period for trades where commissions were applicable.
This disclosure is not applicable for years beginning prior to June 30,
1995.

N/A = Not Applicable

See Notes to Financial Statements

15
<PAGE> 17

FINANCIAL HIGHLIGHTS (CONTINUED)

The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From July 28, 1993
(Commencement
of Investment
Year Ended Year Ended Operations) to
Class B Shares June 30, 1996 June 30, 1995 June 30, 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period.............................. $13.356 $12.880 $14.300
------- ------- -------
Net Investment Income................. .426 .507 .394
Net Realized and Unrealized Gain/Loss
on Securities....................... 2.080 .461 (1.519)
------- ------- -------
Total from Investment Operations...... 2.506 .968 (1.125)
------- ------- -------
Less:
Distributions from and in Excess of
Net Investment Income (Note 1).... .566 .492 .258
Distributions in Excess of Net
Realized Gain on Securities....... -0- -0- .037
------- ------- -------
Total Distributions................... .566 .492 .295
------- ------- -------
Net Asset Value, End of the Period.... $15.296 $13.356 $12.880
======= ======= =======
Total Return* (a)..................... 19.08% 7.80% (8.02%)**
Net Assets at End of the Period
(In millions)....................... $92.9 $81.0 $83.7
Ratio of Expenses to Average Net
Assets*............................. 2.13% 2.05% 2.06%
Ratio of Net Investment Income to
Average Net Assets*................. 2.86% 3.84% 3.36%
Portfolio Turnover.................... 121% 109% 102%**
Average Commission Paid Per Equity
Share
Traded (b).......................... $.059 N/A N/A
*If certain expenses had not been
assumed by VKAC, total return would
have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net
Assets.............................. 2.14% N/A N/A
Ratio of Net Investment Income to
Average Net Assets.................. 2.85% N/A N/A
</TABLE>

**Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

N/A = Not Applicable

See Notes to Financial Statements

16
<PAGE> 18

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
From August 13, 1993
(Commencement
Year Ended Year Ended Distribution) to
Class C Shares June 30, 1996 June 30, 1995 June 30, 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period......................... $13.356 $12.868 $14.460
------ ------ ------
Net Investment Income............ .470 .482 .330
Net Realized and Unrealized
Gain/Loss on Securities........ 2.030 .498 (1.627)
------ ------ ------
Total from Investment
Operations..................... 2.500 .980 (1.297)
------ ------ ------
Less:
Distributions from and in
Excess of
Net Investment Income (Note
1)........................... .566 .492 .258
Distributions in Excess of Net
Realized Gain on
Securities................... -0- -0- .037
------ ------ ------
Total Distributions.............. .566 .492 .295
------ ------ ------
Net Asset Value, End of the
Period......................... $15.290 $13.356 $12.868
====== ====== ======
Total Return* (a)................ 19.00% 7.88% (9.11%)**
Net Assets at End of the Period
(In millions).................. $5.0 $1.3 $1.1
Ratio of Expenses to Average Net
Assets*........................ 2.13% 2.09% 2.05%
Ratio of Net Investment Income to
Average Net Assets*............ 2.78% 3.80% 3.38%
Portfolio Turnover............... 121% 109% 102%**
Average Commission Paid Per
Equity Share Traded (b)........ $.059 N/A N/A
*If certain expenses had not been
assumed by VKAC, total return
would
have been lower and the ratios
would
have been as follows:
Ratio of Expenses to Average Net
Assets......................... 2.15% N/A N/A
Ratio of Net Investment Income to
Average Net Assets............. 2.77% N/A N/A
</TABLE>

**Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

N/A = Not Applicable

See Notes to Financial Statements

17
<PAGE> 19

NOTES TO FINANCIAL STATEMENTS

June 30, 1996
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Utility Fund (the "Fund") is organized as a series
of the Van Kampen American Capital Equity Trust, a Delaware business trust and
is registered as a diversified open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to provide its shareholders with capital appreciation and current income,
through investment in common stocks and income securities of companies engaged
in the utilities industry. The Fund commenced investment operations on July 28,
1993, with two classes of common shares, Class A and Class B shares. The
distribution of the Fund's Class C shares commenced on August 13, 1993. On May
2, 1995, all Class D shareholders redeemed their shares and the class was
eliminated. The Fund will no longer offer Class D shares.

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

A. SECURITY VALUATION--Portfolio securities are valued by using market
quotations or prices provided by market makers. Any securities for which current
market quotations are not readily available are valued at their fair value as
determined in good faith using procedures established by the Board of Trustees.
Securities with remaining maturities of 60 days or less are valued at amortized
cost.

B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At June 30, 1996, there were no when
issued or delayed delivery purchase commitments.

18
<PAGE> 20

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

security. The Fund will make payment for such securities only upon physical
delivery or evidence of book entry transfer to the account of the custodian
bank. The seller is required to maintain the value of the underlying security at
not less than the repurchase proceeds due the Fund.

C. INVESTMENT INCOME--Dividend income is recorded on the ex-dividend date;
interest income is recorded on an accrual basis. Bond discount is amortized over
the expected life of each applicable security.

D. ORGANIZATIONAL EXPENSES--The Fund has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Fund's organization in the amount of $115,000. These costs
are being amortized on a straight line basis over the 60 month period ending
July 28, 1998. Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") has agreed that in the event any of the initial shares of the Fund
originally purchased by VKAC are redeemed by the Fund during the amortization
period, the Fund will be reimbursed for any unamortized organizational expenses
in the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.

E. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.

The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At June 30, 1996, the Fund had an accumulated capital loss carryforward
for tax purposes of $1,490,660, which will expire on June 30, 2003. Net realized
gains or losses may differ for financial and tax reporting purposes primarily as
a result of post October 31 losses which are not recognized for tax purposes
until the first day of the following fiscal year.

F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
quarterly from net investment income. Net investment income for federal income
tax purposes includes gains and losses realized on foreign currency
transactions. These realized gains and losses are included as net realized gains
or losses for financial reporting purposes. Permanent book and tax basis
differences relating to these items totaling $176,199 were reclassified from
accumulated net realized gain/loss on securities

19
<PAGE> 21

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

to accumulated undistributed net investment income. Additional permanent
differences relating to the recognition of fund merger expenses (see Note 3) and
certain other expenses which are not deductible for tax purposes totaling
$115,125 were reclassified from accumulated undistributed net investment income
to capital.

Net realized gains, if any, are distributed annually. Distributions from net
realized gains for book purposes may include short-term capital gains and gains
on option and futures transactions. All short-term capital gains and a portion
of option and futures gains are included as ordinary income for tax purposes.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:

<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
<S> <C>
- -----------------------------------------------------------------------
First $500 million...................................... .65 of 1%
Next $500 million....................................... .60 of 1%
Over $1 billion......................................... .55 of 1%
</TABLE>

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.

For the year ended June 30, 1996, the Fund recognized expenses of
approximately $30,100 representing VKAC's cost of providing accounting, cash
management and legal services to the Fund.

In July, 1995, the Fund began using ACCESS Investor Services, Inc.
("ACCESS"), an affiliate of the Adviser, as the shareholder servicing agent of
the Fund. For the year ended June 30, 1996, the Fund recognized expenses of
approximately $217,100, representing ACCESS' cost of providing transfer agency
and shareholder services plus a profit.

Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.

The Fund has implemented deferred compensation and retirement plans for its
Trustees. Under the deferred compensation plan, Trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those Trustees who are not officers of VKAC.

At June 30, 1996, VKAC owned 8,095, 181 and 140 shares of Classes A, B and
C, respectively.

20
<PAGE> 22

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of common shares, Classes A, B and C each
with a par value of $.01 per share. There are an unlimited number of shares of
each class authorized.

At June 30, 1996, capital aggregated $53,821,005, $86,795,620 and $4,510,486
for Classes A, B and C, respectively. For the year ended June 30, 1996,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------
Sales:
Class A.................................. 1,081,909 $ 14,643,191
Class B.................................. 1,829,596 24,638,568
Class C.................................. 391,241 5,515,113
---------- ------------
Total Sales................................ 3,302,746 $ 44,796,872
========== ============
Dividend Reinvestment:
Class A.................................. 150,482 $ 2,178,398
Class B.................................. 193,231 2,794,761
Class C.................................. 5,689 83,974
---------- ------------
Total Dividend Reinvestment................ 349,402 $ 5,057,133
========== ============
Repurchases:
Class A.................................. (1,228,535) $(17,887,971)
Class B.................................. (2,010,741) (29,087,995)
Class C.................................. (167,791) (2,458,611)
========== ============
Total Repurchases.......................... (3,407,067) $(49,434,577)
========== ============
</TABLE>

21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1995, capital aggregated $54,774,866, $88,342,760 and $1,345,079
for Classes A, B and C, respectively. For the year ended June 30, 1995,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 542,836 $ 7,012,472
Class B.................................. 907,385 11,745,156
Class C.................................. 34,020 436,224
Class D.................................. -0- -0-
--------- ------------
Total Sales................................ 1,484,241 $ 19,193,852
========= ============
Dividend Reinvestment:
Class A.................................. 150,900 $ 1,918,578
Class B.................................. 196,967 2,507,508
Class C.................................. 2,830 35,996
Class D.................................. 1 6
--------- ------------
Total Dividend Reinvestment................ 350,698 $ 4,462,088
========= ============
Repurchases:
Class A.................................. (918,564) $(11,858,442)
Class B.................................. (1,539,119) (19,841,320)
Class C.................................. (30,118) (382,553)
Class D.................................. (115) (1,599)
--------- ------------
Total Repurchases.......................... (2,487,916) $(32,083,914)
========= ============
</TABLE>

Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within six years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear

22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

the expense of their respective deferred sales arrangements, including higher
distribution and service fees and incremental transfer agency costs.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- -------------------------------------------------------------------
<S> <C> <C>
First...................................... 4.00% 1.00%
Second..................................... 3.75% None
Third...................................... 3.50% None
Fourth..................................... 2.50% None
Fifth...................................... 1.50% None
Sixth...................................... 1.00% None
Seventh and Thereafter..................... None None
</TABLE>

For the year ended June 30, 1996, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$20,800 and CDSC on redeemed shares of approximately $595,700. Sales charges do
not represent expenses of the Fund.

On September 27, 1995, the Fund acquired all of the assets and liabilities
of the Van Kampen American Capital Utilities Income Fund (the "AC Fund"),
through a tax free reorganization approved by AC Fund shareholders on September
21, 1995. The Fund issued 606,825, 1,173,732 and 219,180 shares of Classes A, B
and C valued at $8,495,564, $16,432,324 and $3,068,523, respectively, in
exchange for AC Fund's net assets. Included in these net assets was a capital
loss carryforward of $357,695 which is included in accumulated net realized
gain/loss on securities and cumulative book and tax basis timing differences of
$2,408 which is a component of undistributed net investment income. The shares
issued in connection with this transaction are included in common share sales
for the current period. Combined net assets on the date of acquisition were
$160,940,399.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $183,915,696 and $183,466,376,
respectively.

23
<PAGE> 25

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

5. DISTRIBUTION AND SERVICE PLANS

The Fund and its shareholders have adopted a distribution plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940 and a service plan
(collectively the "Plans"). The Plans govern payments for the distribution of
the Fund's shares, ongoing shareholder services and maintenance of shareholder
accounts.

Annual fees under the Plans of up to .25% for Class A shares and 1.00% each
for Class B and Class C shares are accrued daily. Included in these fees for the
year ended June 30, 1996, are payments to VKAC of approximately $685,400.

24
<PAGE> 26

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital Utility Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Utility Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Utility Fund as of June 30, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Chicago, Illinois
July 30, 1996

25
<PAGE> 27

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
Aggressive Growth Fund
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
Intermediate 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 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.

26
<PAGE> 28

VAN KAMPEN AMERICAN CAPITAL UTILITY FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN

LINDA HUTTON HEAGY

ROGER HILSMAN

R. CRAIG KENNEDY

DENNIS J. MCDONNELL*

DONALD C. MILLER - Co-Chairman

JACK E. NELSON

DON G. POWELL*

JEROME L. ROBINSON

FERNANDO SISTO - Co-Chairman

WAYNE W. WHALEN*

WILLIAM S. WOODSIDE

OFFICERS

DON G. POWELL*
President and Chief Executive Officer

DENNIS J. MCDONNELL*
Executive Vice President

RONALD A. NYBERG*
Vice President and Secretary

EDWARD C. WOOD, III*
Vice President and Chief Financial Officer

CURTIS W. MORELL*
Vice President and Chief Accounting Officer

JOHN L. SULLIVAN*
Treasurer

TANYA M. LODEN*
Controller

WILLIAM N. BROWN*

PETER W. HEGEL*

ROBERT C. PECK, JR.*

ALAN T. SACHTLEBEN*

PAUL R. WOLKENBERG*
Vice Presidents
INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

DISTRIBUTOR

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

SHAREHOLDER SERVICING AGENT

ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256

CUSTODIAN

STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL

SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive

Chicago, Illinois 60601

* "Interested" persons of the Fund, as defined in the
Investment Company Act of 1940.
(C) Van Kampen American Capital Distributors, Inc., 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 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.

27
<PAGE> 29

VAN KAMPEN AMERICAN CAPITAL UTILITY FUND

THIS PAGE INTENTIONALLY LEFT BLANK

28
<PAGE> 30

- ---------------------------------------------------------------
TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Portfolio Highlights............................. 4
Performance in Perspective....................... 5
Portfolio Management Review...................... 6
Portfolio of Investments......................... 8
Statement of Assets and Liabilities.............. 15
Statement of Operations.......................... 16
Statement of Changes in Net Assets............... 17
Financial Highlights............................. 18
Notes to Financial Statements.................... 21
Independent Accountants' Report.................. 27
</TABLE>

BALF ANR 8/96
<PAGE> 31

LETTER TO SHAREHOLDERS

August 1, 1996

Dear Shareholder,

As you may be aware, an agreement
was reached in late June for VK/AC
Holding, Inc., the parent company of
Van Kampen American Capital, Inc., to
be acquired by the Morgan Stanley [PHOTO]
Group Inc. While this announcement
may appear commonplace in an DENNIS J. MCDONNELL AND DON G. POWELL
ever-changing financial industry, we
believe it represents an exciting
opportunity for shareholders of our investment products.

With Morgan Stanley's global
leadership in investment banking and asset management and Van Kampen American
Capital's reputation for competitive long-term performance and superior investor
services, together we will offer a broader range of investment opportunities and
expertise.

The new ownership will not affect our commitment to pursuing excellence in
all aspects of our business. And, we expect very little change in the way your
mutual fund account is maintained and serviced.

A proxy will be mailed to you shortly explaining the acquisition and asking
for your vote of approval. Please read it carefully and return your response for
inclusion in the shareholder vote. We value our relationship with you and look
forward to communicating more details of this transaction, which is anticipated
to be completed in November.

ECONOMIC REVIEW

The economy demonstrated an acceleration in growth during the last half of
the reporting period. After a nominal 0.3 percent growth rate in the last
quarter of 1995, GDP (the nation's gross domestic product) rose by 2.0 percent
in this year's first quarter. And, as anticipated, the economy grew by 4.2
percent in the second quarter, partly reflecting a recovery from the effects of
labor strikes earlier in the year and extreme weather conditions across the
country. Upward momentum has been assisted by consumer spending, as indicated by
a 5.6 percent rise in retail sales in the first five months of this year versus
the comparable 1995 period.

Surprisingly healthy economic activity led to concerns that inflation may
rise and the Federal Reserve Board might tighten monetary policy. Inflation
remains modest, however, with consumer prices rising at about a 3 percent annual
rate over the past year. Meanwhile, the closely watched "core" Consumer Price
Index, which excludes volatile food and energy components, has risen year over
year at rates between 2.7 and 3.0 percent per year, with mid-1996 readings at a
moderate 2.7 percent. In general, recent reports have suggested an upward creep
in labor-related costs, while indicating that prices of many commodities have
begun to decline.

Continued on page two

1
<PAGE> 32

MARKET REVIEW

The stock market averages posted attractive gains for the 12-month period
ended June 30, 1996, with most major averages posting all-time highs. The Dow
Jones Industrial Average rose approximately 24 percent from 4556 to 5654, and
the NASDAQ Composite Index rose approximately 27 percent from 933 to 1185.

Corporate earnings, which were an important contributor to last year's
strong stock market, continued to move ahead during the reporting period.
Unexpectedly strong economic activity helped lift reported profits above
expectations for the period. Through the rest of 1996, we expect earnings will
be supportive, but perhaps not the primary factor in the movement of the major
stock market averages.

In the fixed-income market, interest rates trended lower in the last half of
1995. However, during the first half of 1996, interest rates rose sharply, and
U.S. Treasury yields increased by 1.00 to 1.25 percent. Benchmark 10-year U.S.
Treasuries declined in value by about 7.8 percent. Signs of increasing economic
momentum, as discussed above, were a major factor contributing to this decline.

OUTLOOK

We anticipate that reasonably strong economic growth will continue during
the balance of 1996, albeit at more moderate rates than the second quarter's
swift pace. While we expect rates of inflation to remain near current levels,
the Fed may begin to lean toward greater restraint in its monetary policy in the
coming months. That suggests an upward bias for short-term interest rates and
for yields on long-term bonds to remain steady at current levels.

FUND UPDATE

The Trustees of your Fund have recently approved its reorganization into the
Van Kampen American Capital Equity Income Fund. The reorganization is subject to
shareholder approval. If approved, Balanced Fund shareholders will receive
shares of the Equity Income Fund in exchange for their current shares. The
Equity Income Fund's primary investment objective is to provide shareholders
with the highest possible income consistent with safety of principal. Long-term
capital growth is a secondary objective. The Equity Income Fund seeks to achieve
its investment objective by investing primarily in income-producing equity
instruments and other debt securities.

You will receive a proxy statement and voting card in the near future. The
proxy is designed to provide you with information about the proposed
reorganization and to request your participation in the proxy process. We
appreciate your continued confidence in your investment with Van Kampen American
Capital.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

2
<PAGE> 33

PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1996

VAN KAMPEN AMERICAN CAPITAL BALANCED FUND

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
One-year total return based on
NAV(1)............................... 15.07% 14.25% 14.25%
One-year total return(2)............... 8.45% 10.25% 13.25%
Life-of-Fund average
annual total return(2)............... 9.89% 10.84% 12.38%
Commencement date...................... 06/24/94 06/24/94 06/24/94
</TABLE>

(2)Standardized total return assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).

3
<PAGE> 34

PORTFOLIO HIGHLIGHTS

VAN KAMPEN AMERICAN CAPITAL BALANCED FUND

TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF % AS OF
JUNE 30, 1996 SIX MONTHS AGO
<S> <C> <C>
U.S. Treasury Bonds .......... 28.9% ...................... 24.0%
Federal Home Loan Bank Corp... 7.4% ...................... 9.2%
U.S. Treasury Notes .......... 3.8% ...................... N/A
Bristol Myers Squibb Co. ..... 1.7% ...................... 0.1%
WMX Technologies Inc. ........ 1.5% ...................... 2.1%
Unilever ..................... 1.3% ...................... N/A
Illinova Corp. ............... 1.2% ...................... 0.3%
DTE Energy Co. ............... 1.1% ...................... N/A
Pacific Enterprises .......... 1.0% ...................... 0.2%
Philip Morris Cos., Inc. ..... 1.0% ...................... 1.7%
</TABLE>

N/A = Not Applicable

TOP FIVE PORTFOLIO HOLDINGS BY SECTOR
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C>
Government................. 40.1%
Electric Utilities......... 6.8%
Oil and Gas................ 4.7%
Pharmaceuticals............ 4.2%
Natural Gas Pipeline and
Distribution............. 3.8%

<CAPTION>
AS OF DECEMBER 31, 1995
<S> <C>
Government................. 33.2%
Oil and Gas................ 5.6%
Telecommunications......... 4.9%
Paper...................... 4.3%
Retail..................... 3.9%
</TABLE>

ASSET ALLOCATION

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C> <C> <C>
Stocks........................ 51.8%
Bonds......................... 34.6%
Cash and Short-Term [Pie Chart]
Investments.................. 11.4%
Other......................... 2.2%

<CAPTION>
AS OF DECEMBER 31, 1995
<S> <C> <C> <C>
Stocks........................ 58.8%
Bonds......................... 29.2%
Cash and Short-Term [Pie Chart]
Investments................... 10.5%
Other......................... 1.5%

</TABLE>

4
<PAGE> 35

PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

- Illustrate the general market environment in which your investments are
being managed

- Reflect the impact of favorable market trends or difficult market
conditions

- Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over the
period measured

For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Standard & Poor's 500 Composite
Stock Index over time. As a broad-based, unmanaged statistical composite, this
index does not reflect any commissions or fees which would be incurred by an
investor purchasing the securities it represents. Similarly, its performance
does not reflect any sales charges or other costs which would be applicable to
an actively managed portfolio, such as that of the Fund.

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
VKAC Balanced Fund vs. S&P 500 Composite Stock Index and a Hybrid Index
of stocks and bonds* (June 1994 through June 1996)

VKAC HYBRID INDEX S&P 500
Balanced 60% stocks and Composite Stock
Date Fund 40% bonds Index
---- ---- --------- -----
<S> <C> <C> <C>
6/30/94 9,427 10,000 10,000
7/31/94 9,529 10,249 10,394
8/31/94 9,684 10,513 10,785
9/30/94 9,562 10,324 10,569
10/31/94 9,568 10,465 10,790
------------------------------------------------------
11/30/94 9,422 10,218 10,364
12/31/94 9,436 10,322 10,567
1/31/95 9,536 10,550 10,824
2/28/95 9,797 10,878 11,214
3/31/95 9,918 11,095 11,593
------------------------------------------------------
4/30/95 10,128 11,342 11,917
5/31/95 10,351 11,742 12,350
6/30/95 10,513 11,936 12,696
7/31/95 10,725 12,176 13,100
8/31/95 10,780 12,234 13,095
------------------------------------------------------
9/30/95 11,067 12,577 13,702
10/31/95 10,977 12,605 13,634
11/30/95 11,370 12,999 14,193
12/31/95 11,519 13,201 14,524
1/31/96 11,800 13,515 14,998
------------------------------------------------------
2/28/96 11,719 13,532 15,102
3/31/96 11,859 13,585 15,303
4/30/96 11,986 13,690 15,508
5/31/96 12,016 13,899 15,863
6/30/96 12,098 13,988 15,988
</TABLE>

*The Hybrid Index is a simulated composite reflecting 60% of the S&P 500 Index
return and 40% of the Lehman Brothers Intermediate Government Index return.
This index is included in addition to the S&P 500 Index as it provides a better
approximation of the Fund's asset mix of both stocks and bonds.

5
<PAGE> 36

PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL BALANCED FUND

We recently spoke with the management team of the Van Kampen American Capital
Balanced Fund about the key events and economic forces that shaped the markets
during the past fiscal year. The team includes B. Robert Baker, Jr. (equities),
and Thomas Copper (fixed income), portfolio managers, and Alan T. Sachtleben,
executive vice president for equity investments. The following excerpts reflect
their views on the Fund's performance during the 12-month period ended June 30,
1996.

Q CAN YOU BRIEFLY DESCRIBE THE FUND'S ASSET ALLOCATION AND
THE FACTORS THAT HAD THE GREATEST IMPACT ON THE FUND'S PERFORMANCE OVER
THE PAST 12 MONTHS?

A During the last six months of 1995, we maintained the Fund's typical asset
allocation of roughly 60 percent stocks, 30 percent bonds, and 10 percent
cash (60-30-10). Continued slow economic growth, minimal inflationary
fears, and strong corporate earnings helped the Fund's equity holdings post
strong returns while falling interest rates helped the Fund's bond holdings
register gains.
Our emphasis on individual stock selection and a focus on undervalued
cyclical stocks (at the time, paper companies like Boise Cascade) accounted for
the Fund's strength in the fourth quarter. While the technology sector fell
victim to dramatic price fluctuations, this did not significantly affect the
Fund because we invest in stocks from a variety of sectors. And, with our
holdings in Treasury bonds and cyclical stocks, the Fund continued its strong
performance through the remainder of the year.
At the beginning of 1996, the market was greeted by unexpectedly strong
economic growth, better corporate earnings and rising interest rates. Although
this reduced the value of some of the Fund's bond holdings, the stock market
reacted very positively for most of the first quarter.
Because we believed bonds looked more attractive as the second quarter
began, we decided to allocate more of the Fund's assets--approximately 5
percent--to bonds, thereby shifting the asset allocation to roughly 55 percent
stocks, 35 percent bonds, and 10 percent cash. Please refer to page four for
Fund portfolio highlights.

Q OVERALL, HOW DID THE FUND PERFORM OVER THE PAST 12 MONTHS?

A We were satisfied with the Fund's performance. Class A shares of the Fund
enjoyed a total return at net asset value of 15.07 percent(1). By
comparison, the Lipper Balanced Fund Index achieved a total return of
15.03 percent, while the Standard & Poor's 500-Stock Index returned 25.93
percent. Keep in mind that the Lipper Balanced Fund Index represents the average
performance of balanced funds and does not reflect any sales charges that would
be paid by an investor purchasing the funds it represents. The S&P 500-Stock
Index is a broad-based, unmanaged index that reflects general stock market
performance and does not reflect any commissions or fees that would be paid by
an investor purchasing the securities it represents. Please refer to the chart
on page three for additional Fund performance results.

6
<PAGE> 37

Q WHY THE DISPARITY BETWEEN THE FUND AND THE
S&P 500-STOCK INDEX?

A Over the most recent 12-month period, many stocks enjoyed record or
near-record returns. Because stocks only make up a portion of the Fund's
portfolio, it obviously could not match an index consisting fully of
stocks. We believe the Lipper Balanced Fund Index more accurately reflects the
average performance of funds consisting of stocks and bonds.

Q OVER THE 12-MONTH PERIOD, WHICH OF THE FUND'S HOLDINGS HAD THE STRONGEST
PERFORMANCE?

A During the second half of 1995, the Fund's stock holdings of AMR (parent
company of American Airlines), Exxon, and Philip Morris contributed
significantly to its performance. We also owned stock in all three major
long-distance telephone companies (AT&T, MCI, and Sprint). At first, the prices
of these stocks remained depressed because of the uncertainty surrounding the
then-pending government telecommunications reform. As the positive effects of
this reform became apparent, all three companies enjoyed gains in their stock
prices.
In the first half of 1996, energy stocks performed particularly well.
Because of the long, cold winter, many natural gas reserves had to be tapped. As
the year progressed, the demand on pipeline and distribution companies to
rebuild those reserves intensified. Demand exceeded supply, and this was
reflected in the higher prices of natural gas stocks (pipelines and distribution
companies) in the Fund's portfolio.

Q
WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A
Contradictory economic and corporate reports continue to fuel uncertainty
about the direction of the economy. We anticipate a fairly flat market for
the remainder of the year along with the possibility of a minor
correction. These same factors should also result in a stable bond market.
The Fund utilizes a disciplined, value-oriented stock-picking approach that
is rooted in extensive research. By maintaining this approach and utilizing the
appropriate allocation among stocks, bonds, and cash, we feel the Fund is
well-positioned going forward.

Alan T. Sachtleben

Alan T. Sachtleben
Executive Vice President
Equity Investments

B. Robert Baker, Jr.
B. Robert Baker, Jr.
Portfolio Manager

Thomas Cooper
Thomas Copper
Portfolio Manager

Please see footnotes on page three

7
<PAGE> 38

PORTFOLIO OF INVESTMENTS

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security
Description Shares Market Value
------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 52.5%
AEROSPACE & DEFENSE 0.6%
General Dynamics Corp.......................................... 900 $ 55,800
Rockwell International Corp.................................... 700 40,075
------------
95,875
------------
AUTOMOBILE 1.1%
Chrysler Corp.................................................. 900 55,800
Daimler Benz SA (Germany)...................................... 700 37,712
Fiat SA (Italy)................................................ 1,600 27,200
General Motors Corp............................................ 600 31,425
TRW Inc........................................................ 300 26,963
------------
179,100
------------
BANKING 2.7%
Bankamerica Corp............................................... 600 45,450
Bankers Trust NY Corp.......................................... 400 29,550
Chase Manhattan Corp........................................... 1,800 127,125
Corporacion Bancaria De Espana - ADR (Spain)................... 3,500 77,000
Fleet Financial Group Inc...................................... 800 34,800
Morgan, J.P. & Co. Inc......................................... 1,100 93,087
PNC Bank Corp.................................................. 900 26,775
------------
433,787
------------
BEVERAGE 0.3%
Anheuser Busch Cos., Inc....................................... 600 45,000
------------
BROADCAST, RADIO & TELEVISION 1.1%
Cox Communications Inc. (b).................................... 3,900 84,338
Tele Communications Inc. (b)................................... 4,900 88,812
------------
173,150
------------
CAPITAL GOODS 0.5%
Cooper Industries Inc.......................................... 700 29,050
Dover Corp..................................................... 400 18,450
Honeywell Inc.................................................. 500 27,250
------------
74,750
------------
CHEMICAL 1.8%
Betz Laboratories Inc.......................................... 1,000 43,875
Dow Chemical Co................................................ 900 68,400
Du Pont (E.I.) De Nemours Co................................... 300 23,738
Lyondell Petrochemical Co. .................................... 2,600 62,725
Praxair Inc. .................................................. 2,000 84,500
------------
283,238
------------
CONSUMER DURABLES 1.8%
Alco Standard Corp. ........................................... 800 36,200
</TABLE>

See Notes to Financial Statements

8
<PAGE> 39

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security
Description Shares Market Value
------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DURABLES (CONTINUED)
Caterpillar Inc. .............................................. 400 $ 27,100
Cooper Tire & Rubber........................................... 1,500 33,375
Ingersoll Rand Co. ............................................ 1,000 43,750
Johnson Controls Inc. ......................................... 200 13,900
Masco Corp. ................................................... 800 24,200
Maytag Corp. .................................................. 1,600 33,400
Newell Co. .................................................... 1,500 45,937
Sunbeam Oster Inc. ............................................ 2,100 30,975
------------
288,837
------------
CONTAINERS, PACKAGING & GLASS 0.4%
Crown Cork & Seal Inc.......................................... 800 36,000
Temple Inland Inc. ............................................ 500 23,375
------------
59,375
------------
DIVERSIFIED/CONGLOMERATE MANUFACTURING 0.5%
General Electric Co. .......................................... 915 79,148
------------
ELECTRIC UTILITIES 6.0%
Carolina Power & Light Co. .................................... 200 7,600
Central & South West Corp. .................................... 1,600 46,400
Cilcorp Inc. .................................................. 400 17,100
DTE Energy Co. ................................................ 5,000 154,375
Florida Progress Corp. ........................................ 800 27,800
FPL Group Inc. ................................................ 1,400 64,400
Houston Industries Inc. ....................................... 3,000 73,875
Idaho Power Co. ............................................... 1,800 56,025
Illinova Corp. ................................................ 5,600 161,000
Minnesota Power & Light Co. ................................... 900 26,100
Northern STS Power Co. ........................................ 400 19,750
Ohio Edison Co. ............................................... 300 6,563
Oklahoma Gas & Electric Co. ................................... 400 15,850
Pacificorp..................................................... 1,300 28,925
Peco Energy Co. ............................................... 980 25,480
Portland General Corp. ........................................ 2,400 74,100
Southwestern Public Service Co. ............................... 1,300 42,412
Texas Utilities Co. ........................................... 1,300 55,575
Unicorn Corp. ................................................. 1,400 39,025
------------
942,355
------------
</TABLE>

See Notes to Financial Statements

9
<PAGE> 40

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security
Description Shares Market Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY 1.1%
Norsk Hydro AS - ADR (Norway).................................. 900 $ 43,987
Repsol SA - ADR (Spain)........................................ 2,000 69,500
Total SA (France).............................................. 1,100 40,838
YPF Sociedad Anonima - ADR (Argentina)......................... 1,100 24,750
------------
179,075
------------
ENGINEERING & CONSTRUCTION 0.7%
Fluor Corp..................................................... 400 26,150
Foster Wheeler Corp............................................ 800 35,900
J. Ray McDermott SA (b)........................................ 1,900 47,500
------------
109,550
------------
ENVIRONMENTAL 2.2%
Browning Ferris Industries Inc................................. 4,600 133,400
WMX Technologies Inc........................................... 6,500 212,875
------------
346,275
------------
FINANCIAL SERVICES 0.9%
Bear Stearns Cos., Inc......................................... 2,625 62,016
Franklin Resources Inc......................................... 800 48,800
Great Western Financial Corp................................... 1,000 23,875
------------
134,691
------------
FOOD 1.8%
CPC International Inc.......................................... 300 21,600
Heinz, H.J. & Co............................................... 1,600 48,600
Quaker Oats Co................................................. 500 17,062
Sara Lee Corp.................................................. 800 25,900
Unilever....................................................... 1,200 174,150
------------
287,312
------------
HEALTHCARE 1.1%
Johnson & Johnson.............................................. 1,000 49,500
Mallinckrodt Group Inc......................................... 3,300 128,288
------------
177,788
------------
INSURANCE 3.2%
Aetna Life & Casualty Co....................................... 1,200 85,800
AFLAC Inc. .................................................... 1,200 35,850
Allmerica Financial Corp. ..................................... 500 14,875
Allstate Corp. ................................................ 900 41,062
AMBAC Inc. .................................................... 600 31,275
American Bankers Insurance Group............................... 1,500 65,437
American General Corp. ........................................ 700 25,463
Cigna Corp. ................................................... 200 23,575
</TABLE>

See Notes to Financial Statements

10
<PAGE> 41

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security
Description Shares Market Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE (CONTINUED)
MBIA Inc. ..................................................... 800 $ 62,300
Providian Corp. ............................................... 600 25,725
St. Paul Cos., Inc. ........................................... 700 37,450
Sunamerica Inc................................................. 950 53,675
------------
502,487
------------
LEISURE/ENTERTAINMENT 0.8%
International Game Technology.................................. 1,600 27,000
Time Warner Inc. .............................................. 1,800 70,650
Trump Hotels & Casino Resorts (b).............................. 1,000 28,500
------------
126,150
------------
MINING, STEEL, IRON & NON-PRECIOUS METAL 0.3%
Bethleham Steel Corp. (b)...................................... 4,000 47,500
------------
NATURAL GAS PIPELINE AND DISTRIBUTION 3.4%
Coastal Corp. ................................................. 2,100 87,675
El Paso Natural Gas Co. ....................................... 700 26,950
Pacific Enterprises............................................ 4,900 145,162
Panenergy Corp. ............................................... 4,100 134,788
Sonat Inc. .................................................... 3,000 135,000
------------
529,575
------------
OIL & GAS 4.1%
Amoco Corp. ................................................... 550 39,806
Atlantic Richfield Co. ........................................ 300 35,550
British Petroleum PLC - ADR (UK)............................... 200 21,375
Burlington Resources Inc. ..................................... 700 30,100
Chevron Corp. ................................................. 600 35,400
Enron Oil & Gas Co. ........................................... 700 19,513
Exxon Corp. ................................................... 300 26,063
Louisiana Land & Exploration Co. .............................. 400 23,050
Mobil Corp. ................................................... 400 44,850
Noble Affiliates Inc. ......................................... 800 30,200
Occidental Petroleum Corp. .................................... 1,900 47,025
Phillips Petroleum Co. ........................................ 600 25,125
Pogo Producing Co. ............................................ 1,100 41,937
Royal Dutch Petroleum Co. (Netherlands)........................ 300 46,125
Schlumberger Ltd............................................... 300 25,275
Seagull Energy Corp. (b)....................................... 1,500 37,500
Shell Transport & Trading PLC - ADR (UK)....................... 400 35,200
Texaco Inc..................................................... 700 58,712
</TABLE>

See Notes to Financial Statements

11
<PAGE> 42

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security
Description Shares Market Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
OIL & GAS (CONTINUED)
USX Marathon Group............................................. 1,600 $ 32,200
------------
655,006
------------
PAPER 2.1%
Boise Cascade Corp............................................. 3,500 128,187
Champion International Corp.................................... 600 25,050
Consolidated Papers Inc........................................ 300 15,600
Georgia Pacific Corp........................................... 500 35,500
International Paper Co......................................... 1,400 51,625
Mead Corp...................................................... 500 25,938
Willamette Industries Inc...................................... 900 53,550
------------
335,450
------------
PERSONAL & NON-DURABLE 1.4%
Bausch & Lomb Inc.............................................. 400 17,000
Colgate Palmolive Co........................................... 700 59,325
Dial Corp...................................................... 1,400 40,075
Kimberly Clark Corp............................................ 400 30,900
Tambrands Inc.................................................. 1,900 77,663
------------
224,963
------------
PHARMACEUTICALS 3.7%
Abbott Labs.................................................... 1,100 47,850
American Home Products Corp.................................... 1,200 72,150
Astra AB - ADR (Sweden)........................................ 600 26,250
Bristol Myers Squibb Co........................................ 2,640 237,600
Merck & Co. Inc................................................ 700 45,237
Schering Plough Corp........................................... 600 37,650
Smithkline Beecham PLC - ADR (UK).............................. 500 27,188
Warner Lambert Co.............................................. 1,600 88,000
------------
581,925
------------
PRINTING & PUBLISHING 0.3%
Gannett Inc.................................................... 300 21,225
New York Times Co. ............................................ 800 26,100
------------
47,325
------------
RETAIL 2.4%
Dayton Hudson Corp............................................. 300 30,938
Dillard Department Stores Inc. ................................ 2,100 76,650
Federated Department Stores Inc. (b)........................... 1,100 37,537
Harcourt General Inc. ......................................... 1,200 60,000
Kroger Co. (b)................................................. 1,500 59,250
Sears Roebuck & Co. ........................................... 1,300 63,212
</TABLE>

See Notes to Financial Statements

12
<PAGE> 43

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security
Description Shares Market Value
------------------------------------------------------------------------------------
<S> <C> <C>
RETAIL (CONTINUED)
Toys R Us Inc. (b)............................................. 900 $ 25,650
Wal-Mart Stores Inc. .......................................... 700 17,763
------------
371,000
------------
TECHNOLOGY 2.5%
3Com Corp. .................................................... 400 18,300
Avnet Inc. .................................................... 1,000 42,125
BMC Software Inc. (b).......................................... 400 23,900
Cadence Design Systems Inc. ................................... 600 20,250
Cisco Systems Inc. (b)......................................... 500 28,312
Computer Associates International Inc. ........................ 500 35,625
Gateway 2000 Inc. (b).......................................... 800 27,200
Intel Corp. ................................................... 200 14,688
International Rectifier Corp. (b).............................. 1,100 17,738
Lucent Technologies Inc. (b)................................... 500 18,937
Microsoft Corp. (b)............................................ 200 24,025
Motorola Inc. ................................................. 600 37,725
Newbridge Networks Corp. (b)................................... 200 13,100
SCI Systems Inc. (b)........................................... 600 24,375
Sun Guard Data Systems (b)..................................... 1,300 52,162
------------
398,462
------------
TELECOMMUNICATIONS 2.5%
Ameritech Corp. ............................................... 875 51,953
Bellsouth Corp. ............................................... 900 38,138
Ericsson L M Telephone Co. - ADR (Sweden)...................... 900 19,350
Nynex Corp. ................................................... 2,400 114,000
Sprint Corp. .................................................. 1,000 42,000
Tele Danmark AS - ADR (Denmark)................................ 3,900 98,962
Telefonica de Espana - ADR (Spain)............................. 500 27,563
------------
391,966
------------
TOBACCO 1.0%
Philip Morris Cos., Inc. ...................................... 1,300 135,200
RJR Nabisco Holdings Corp. .................................... 800 24,800
------------
160,000
------------
TRANSPORTATION 0.2%
Illinois Central Corp. ........................................ 1,200 34,050
------------
TOTAL COMMON STOCKS............................................ 8,295,165
------------
</TABLE>

See Notes to Financial Statements

13
<PAGE> 44

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security
Description Market Value
------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT AND AGENCY FIXED-INCOME SECURITIES (U.S.) 35.1%
Federal Home Loan Bank Corp. Series P2 ($1,000,000 par, 8.50% coupon,
02/08/02 maturity, S&P rating AAA)..................................... $ 1,027,850
U.S. Treasury Bond ($3,900,000 par, 7.25% coupon, 05/15/16 maturity)... 3,995,238
U.S. Treasury Note ($500,000 par, 7.50% coupon, 02/15/05 maturity)..... 526,205
-----------
TOTAL GOVERNMENT AND AGENCY FIXED-INCOME SECURITIES (U.S.)............. 5,549,293
-----------
TOTAL LONG-TERM INVESTMENTS 87.6%
(Cost $13,472,057) (a)............................................... 13,844,458
SHORT-TERM INVESTMENTS AT AMORTIZED COST 11.5%
Student Loan Marketing Disc Note ($1,820,000 par, yielding 5.45%,
maturing 07/01/96)................................................... 1,820,000
OTHER ASSETS IN EXCESS OF LIABILITIES 0.9%............................ 143,713
-----------
NET ASSETS 100%....................................................... $15,808,171
===========
</TABLE>

(a) At June 30, 1996, cost for federal income tax purposes is $13,472,057; the
aggregate gross unrealized appreciation is $699,999 and the aggregate gross
unrealized depreciation is $327,598, resulting in net unrealized
appreciation of $372,401.

(b) Non-income producing security as this stock currently does not declare
dividends.

See Notes to Financial Statements

14
<PAGE> 45

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $13,472,057) (Note 1)................. $13,844,458
Short-Term Investments (Note 1).......................................... 1,820,000
Cash..................................................................... 7,589
Receivables:
Securities Sold........................................................ 155,366
Interest............................................................... 83,990
Fund Shares Sold....................................................... 48,750
Dividends.............................................................. 19,904
Unamortized Organizational Expenses (Note 1)............................. 47,648
-----------
Total Assets......................................................... 16,027,705
-----------
LIABILITIES:
Payables:
Securities Purchased................................................... 149,688
Distributor and Affiliates (Notes 2 and 5)............................. 33,464
Income Distributions................................................... 25,084
Fund Shares Repurchased................................................ 1,121
Deferred Compensation and Retirement Plans (Note 2)...................... 9,722
Accrued Expenses......................................................... 455
-----------
Total Liabilities.................................................... 219,534
-----------
NET ASSETS............................................................... $15,808,171
===========
NET ASSETS CONSIST OF:
Capital (Note 3)......................................................... $14,428,476
Accumulated Net Realized Gain on Securities.............................. 999,594
Net Unrealized Appreciation on Securities................................ 372,401
Accumulated Undistributed Net Investment Income.......................... 7,700
-----------
NET ASSETS............................................................... $15,808,171
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $6,514,423 and 405,826 shares of capital stock issued and
outstanding) (Note 3)................................................ $ 16.05
Maximum sales charge (5.75%* of offering price)...................... .98
-----------
Maximum offering price to public..................................... $ 17.03
===========
Class B Shares:
Net asset value and offering price per share (Based on net assets of
$8,227,046 and 512,997 shares of capital stock issued and
outstanding) (Note 3)................................................ $ 16.04
===========
Class C Shares:
Net asset value and offering price per share (Based on net assets of
$1,066,702 and 66,511 shares of capital stock issued and outstanding)
(Note 3)............................................................. $ 16.04
===========
</TABLE>

* On sales of $50,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

15
<PAGE> 46

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................................. $ 371,050
Dividends (Net of foreign withholding taxes of $2,156).................... 183,927
----------
Total Income.......................................................... 554,977
----------
EXPENSES:
Investment Advisory Fee (Note 2).......................................... 91,893
Distribution (12b-1) and Service Fees (Allocated to Classes A, B and C of
$13,183, $70,267 and $8,345, respectively) (Note 5)..................... 91,795
Custody................................................................... 82,553
Registration.............................................................. 68,699
Printing.................................................................. 41,455
Shareholder Services (Note 2)............................................. 23,504
Audit..................................................................... 18,620
Amortization of Organizational Expenses (Note 1).......................... 16,045
Trustees Fees and Expenses (Note 2)....................................... 12,699
Legal (Note 2)............................................................ 11,966
Other..................................................................... 5,984
----------
Total Expenses........................................................ 465,213
Less Fees Waived and Expenses Reimbursed ($91,893 and $236,400,
respectively)....................................................... 328,293
----------
Net Expenses........................................................ 136,920
----------
NET INVESTMENT INCOME..................................................... $ 418,057
==========
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Gain on Investments.......................................... $1,765,158
----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period................................................. 808,706
End of the Period:
Investments........................................................... 372,401
----------
Net Unrealized Depreciation on Securities During the Period............... (436,305)
----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES............................ $1,328,853
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS................................ $1,746,910
==========
</TABLE>

See Notes to Financial Statements

16
<PAGE> 47

STATEMENT OF CHANGES IN NET ASSETS

For the Year Ended June 30, 1996 and the Period June 24, 1994
(Commencement of Investment Operations) to June 30, 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
From June 24, 1994
(Commencement of
Year Ended Investment Operations)
June 30, 1996 to June 30, 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 418,057 $ 375,863
Net Realized Gain/Loss on Securities.................. 1,765,158 (9,560)
Net Unrealized Appreciation/Depreciation on
Securities.......................................... (436,305) 808,706
--------- ---------
Change in Net Assets from Operations.................. 1,746,910 1,175,009
--------- ---------
Distributions from Net Investment Income:
Class A Shares...................................... (197,797) (156,268)
Class B Shares...................................... (216,743) (177,438)
Class C Shares...................................... (25,849) (13,922)
Class D Shares...................................... -0- (49)
--------- ---------
(440,389) (347,677)
--------- ---------
Distributions from Net Realized Gain on Securities
(Note 1):
Class A Shares...................................... (297,718) -0-
Class B Shares...................................... (408,895) -0-
Class C Shares...................................... (49,391) -0-
--------- ---------
(756,004) -0-
--------- ---------
Total Distributions................................... (1,196,393) -0-
--------- ---------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... 550,517 827,332
--------- ---------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold............................. 5,236,767 13,761,643
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................ 972,782 264,667
Cost of Shares Repurchased............................ (3,021,589) (2,789,668)
--------- ---------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.... 3,187,960 11,236,642
--------- ---------
TOTAL INCREASE IN NET ASSETS.......................... 3,738,477 12,063,974
NET ASSETS:
Beginning of the Period............................... 12,069,694 5,720
--------- ---------
End of the Period (Including undistributed net
investment income of $7,700 and $28,186,
respectively)....................................... $15,808,171 $12,069,694
----------- -----------
</TABLE>

See Notes to Financial Statements

17
<PAGE> 48

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
From June 24, 1994
(Commencement of
Year Ended Investment Operations)
Class A Shares June 30, 1996 to June 30, 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period............... $15.388 $14.300
------ ------
Net Investment Income................................ .572 .572
Net Realized and Unrealized Gain on Securities....... 1.678 1.041
------ ------
Total from Investment Operations....................... 2.250 1.613
------ ------
Less:
Distributions from Net Investment Income............. .600 .525
Distributions from Net Realized Gain on Securities
(Note 1)........................................... .986 -0-
------ ------
Total Distributions.................................... 1.586 .525
------ ------
Net Asset Value, End of the Period..................... $16.052 $15.388
======= =======
Total Return*(a)....................................... 15.07% *11.53%*
Net Assets at End of the Period (In millions).......... $ 6.5 $ 4.8
Ratio of Expenses to Average Net Assets*............... .59% 1.15%
Ratio of Net Investment Income to Average Net
Assets*.............................................. 3.63% 4.01%
Portfolio Turnover..................................... 194% ** 121%
Average Commission Paid Per Equity Share Trade (b)..... $ .048 --
* If certain expenses had not been assumed by VKAC, total return would
have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets................ 3.09% 2.76%
Ratio of Net Investment Income to Average Net Assets... 1.13% 2.40%
</TABLE>

** Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(b) Represents the average brokerage commissions paid on equity transactions
entered into during the period where commissions were applicable. This
disclosure is not applicable for periods prior to June 30, 1996.

See Notes to Financial Statements

18
<PAGE> 49

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
From June 24, 1994
(Commencement of
Year Ended Investment Operations)
Class B Shares June 30, 1996 to June 30, 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period................ $15.389 $14.300
------ ------
Net Investment Income................................. .459 .464
Net Realized and Unrealized Gain on Securities........ 1.667 1.056
------ ------
Total from Investment Operations...................... 2.126 1.520
------ ------
Less:
Distributions from Net Investment Income.............. .492 .431
Distributions from Net Realized Gain on Securities
(Note 1)............................................ .986 -0-
------ ------
Total Distributions..................................... 1.478 .431
------ ------
Net Asset Value, End of the Period...................... $16.037 $15.389
======= =======
Total Return*(a)........................................ 14.25% 10.82%**
Net Assets at End of the Period (In millions)........... $ 8.2 $ 6.6
Ratio of Expenses to Average Net Assets*................ 1.34% 1.88%
Ratio of Net Investment Income to Average Net Assets*... 2.88% 3.27%
Portfolio Turnover...................................... 194% 121%**
Average Commission Paid Per Equity Share Trade (b)...... $ .048 --
*If certain expenses had not been assumed by VKAC, total return would
have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets................. 3.84% 3.48%
Ratio of Net Investment Income to Average Net Assets.... .38% 1.67%
</TABLE>

** Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

See Notes to Financial Statements

19
<PAGE> 50

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
From June 24, 1994
(Commencement of
Year Ended Investment Operations)
Class C Shares June 30, 1996 to June 30, 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period............... $15.388 $14.300
------- -------
Net Investment Income................................ .466 .426
Net Realized and Unrealized Gain on Securities....... 1.662 1.093
------- -------
Total from Investment Operations....................... 2.128 1.519
------- -------
Less:
Distributions from Net Investment Income............. .492 .431
Distributions from Net Realized Gain on Securities
(Note 1)........................................... .986 -0-
------- -------
Total Distributions.................................... 1.478 .431
------- -------
Net Asset Value, End of the Period..................... $16.038 $15.388
======= =======
Total Return* (a)...................................... 14.25% 10.82%**
Net Assets at End of the Period (In millions).......... $ 1.1 $ .8
Ratio of Expenses to Average Net Assets*............... 1.34% 1.90%
Ratio of Net Investment Income to Average Net
Assets*.............................................. 2.88% 3.19%
Portfolio Turnover..................................... 194% 121%**
Average Commission Paid Per Equity Share Trade (b)..... $ .048 --
* If certain expenses had not been assumed by the Adviser, total
return would
have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets................ 3.84% 3.48%
Ratio of Net Investment Income to Average Net Assets... .38% 1.61%
</TABLE>

** Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

See Notes to Financial Statements

20
<PAGE> 51

NOTES TO FINANCIAL STATEMENTS

June 30, 1996
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Balanced Fund (the "Fund") is organized as a series
of the Van Kampen American Capital Equity Trust, a Delaware business trust and
is registered as a diversified open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to provide its shareholders with current income, while also seeking to provide
shareholders with capital growth. The Fund commenced investment operations on
June 24, 1994, and has outstanding three classes of common shares, Classes A, B
and C. On May 2, 1995, all Class D shareholders redeemed their shares and the
class was eliminated. The Fund will no longer offer Class D shares.

A. SECURITY VALUATION--Investments in securities listed on a securities exchange
shall be valued at their sale price as of the close of such securities exchange.
Investments in securities not listed on a securities exchange shall be valued
based on their last quoted bid price or, if not available, their fair value as
determined by the Board of Trustees or its delegate. Fixed income investments
are stated at value using market quotations or, if such valuations are not
available, estimates obtained from yield data relating to instruments or
securities with similar characteristics in accordance with procedures
established in good faith by the Board of Trustees. Short-term securities with
remaining maturities of less than 60 days are valued at amortized cost.

21
<PAGE> 52

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

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. 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.

C. INVESTMENT INCOME--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Bond discount is amortized over
the expected life of each applicable security.

D. ORGANIZATIONAL EXPENSES--The Fund has agreed to reimburse Van Kampen American
Capital Distributors, Inc. or its affiliates (collectively "VKAC") for costs
incurred in connection with the Fund's organization in the amount of $80,000.
These costs are being amortized on a straight line basis over the 60 month
period ending June 23, 1999. Van Kampen American Capital Investment Advisory
Corp. (the "Adviser") has agreed that in the event any of the initial shares of
the Fund originally purchased by VKAC are redeemed during the amortization
period, the Fund will be reimbursed for any unamortized organizational expenses
in the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.

Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of post October 31 losses which are not
recognized for tax purposes until the first day of the following fiscal year.

F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays quarterly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains which are included in ordinary income for
tax purposes. Permanent book and tax basis differences relating to expenses that
are not deductible for tax purposes totaling $1,846 were reclassified from
accumulated undistributed net investment income to capital.

22
<PAGE> 53

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

For the year ended June 30, 1996, 14.3% of the distributions from net
realized gains on securities was considered long-term capital gains for Federal
income tax purposes. Since this distribution was made in December of 1995, it
was reported to shareholders along with other 1995 calendar year distributions.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:

<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ----------------------------------------------------------------------
<S> <C>
First $500 million...................................... .70 of 1%
Over $500 million....................................... .65 of 1%
</TABLE>

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.

For the year ended June 30, 1996, the Fund incurred expenses of
approximately $11,200 representing VKAC's cost of providing accounting, cash
management and legal services to the Fund all of which was waived by VKAC.

In July, 1995, the Fund began using ACCESS Investor Services, Inc.
("ACCESS"), an affiliate of the Adviser, as the shareholder servicing agent of
the Fund. For the year ended June 30, 1996, the Fund incurred expenses of
approximately $15,400, representing ACCESS' cost of providing transfer agency
and shareholder services plus a profit, all of which was assumed by VKAC.

Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.

The Fund has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC.

At June 30, 1996, VKAC owned 106 shares each of Classes A, B and C.

23
<PAGE> 54

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of common shares, Classes A, B and C each
with a par value of $.01 per share. There are an unlimited number of shares of
each class authorized.

At June 30, 1996, capital aggregated $5,958,597, $7,493,118 and $976,761 for
Classes A, B and C, respectively. For the year ended June 30, 1996, transactions
were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A....................................... 160,539 $ 2,556,624
Class B....................................... 149,768 2,395,715
Class C....................................... 17,813 284,428
-------- -----------
Total Sales..................................... 328,120 $ 5,236,767
======== ===========
Dividend Reinvestment:
Class A....................................... 27,877 $ 437,407
Class B....................................... 33,104 518,661
Class C....................................... 1,066 16,714
-------- -----------
Total Dividend Reinvestment..................... 62,047 $ 972,782
======== ===========
Repurchases:
Class A....................................... (91,336) $(1,459,621)
Class B....................................... (96,683) (1,543,634)
Class C....................................... (1,160) (18,334)
-------- -----------
Total Repurchases............................... (189,179) $(3,021,589)
======== ===========
</TABLE>

24
<PAGE> 55

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1995, capital aggregated $4,424,914, $6,123,381 and $694,067 for
Classes A, B and C, respectively. For the period ended June 30, 1995,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A...................................... 375,263 $ 5,399,046
Class B...................................... 532,317 7,659,184
Class C...................................... 49,426 703,213
Class D...................................... 14 200
-------- -----------
Total Sales.................................... 957,020 $13,761,643
======== ===========
Dividend Reinvestment:
Class A...................................... 8,285 $ 121,482
Class B...................................... 9,487 139,212
Class C...................................... 273 3,968
Class D...................................... -0- 5
-------- -----------
Total Dividend Reinvestment.................... 18,045 $ 264,667
======== ===========
Repurchases:
Class A...................................... (74,902) $(1,097,044)
Class B...................................... (115,096) (1,676,445)
Class C...................................... (1,007) (14,544)
Class D...................................... (114) (1,635)
-------- -----------
Total Repurchases.............................. (191,119) $(2,789,668)
======== ===========
</TABLE>

25
<PAGE> 56

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

the expense of their respective deferred sales arrangements, including higher
distribution and service fees and incremental transfer agency costs.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------------------------------------------------------------
<S> <C> <C>
First........................................... 4.00% 1.00%
Second.......................................... 3.75% None
Third........................................... 3.50% None
Fourth.......................................... 2.50% None
Fifth........................................... 1.50% None
Sixth........................................... 1.00% None
Seventh and Thereafter.......................... None None
</TABLE>

For the period ended June 30, 1996, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$10,100 and received CDSC on redeemed shares of approximately $31,200. Sales
charges do not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales, excluding U.S.
Government Securities and short-term investments were $16,905,770 and
$17,212,426, respectively.

5. DISTRIBUTION AND SERVICE PLANS

The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.

26
<PAGE> 57

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital Balanced Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Balanced Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1996, and the related statement of operations for
the year then ended, and the statement of changes in net assets and the
financial highlights for the year then ended and for the period from June 24,
1994 (commencement of investment operations) through June 30, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Balanced Fund as of June 30, 1996, the results of its
operations for the year then ended, the changes in its net assets and financial
highlights for the year then ended and for the period from June 24, 1994
(commencement of investment operations) through June 30, 1995, in conformity
with generally accepted accounting principles.

KPMG Peat Marwick LLP
Chicago, Illinois
August 2, 1996

27
<PAGE> 58

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

THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund

28
<PAGE> 59

VAN KAMPEN AMERICAN CAPITAL BALANCED FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN

LINDA HUTTON HEAGY

ROGER HILSMAN

R. CRAIG KENNEDY

DENNIS J. MCDONNELL*

DONALD C. MILLER - Co-Chairman

JACK E. NELSON

DON G. POWELL*

JEROME L. ROBINSON

FERNANDO SISTO - Co-Chairman

WAYNE W. WHALEN*

WILLIAM S. WOODSIDE

OFFICERS

DON G. POWELL*
President and Chief Executive Officer

DENNIS J. MCDONNELL*
Executive Vice President

RONALD A. NYBERG*
Vice President and Secretary

EDWARD C. WOOD, III*
Vice President and Chief Financial Officer

CURTIS W. MORELL*
Vice President and Chief Accounting Officer

JOHN L. SULLIVAN*
Treasurer

TANYA M. LODEN*
Controller

WILLIAM N. BROWN*

PETER W. HEGEL*

ROBERT C. PECK, JR.*

ALAN T. SACHTLEBEN*

PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

DISTRIBUTOR

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

SHAREHOLDER SERVICING AGENT

ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256

CUSTODIAN

STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL

SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601

* "Interested" persons of the Fund, as defined in the
Investment Company Act of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1996
All rights reserved.

(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.

29
<PAGE> 60

LETTER TO SHAREHOLDERS

August 15, 1996

Dear Shareholder,

As you may be aware, an agreement was reached in late June for VK/AC
Holdings, Inc., the parent company of Van Kampen American Capital, Inc., to be
acquired by the Morgan Stanley Group Inc. While this announcement may appear
commonplace in an ever-changing financial industry, we believe it represents an
exciting opportunity for shareholders of our investment products.

With Morgan Stanley's global leadership in investment banking and asset
management and Van Kampen American Capital's reputation for competitive
long-term performance and superior investor services, together we will offer a
broader range of investment opportunities and expertise.

A proxy will be mailed to you shortly explaining the acquisition and
asking for your vote of approval. Please read it carefully and return your
response for inclusion in the shareholder vote. We value our relationship with
you and look forward to communicating more details of this transaction, which
is anticipated to be completed in November.

ECONOMIC REVIEW

The economy demonstrated an acceleration in growth during the last half of
the reporting period. After a nominal 0.3 percent growth rate in the last
quarter of 1995, GDP (the nation's gross domestic product) rose by 2.0
percent in this year's first quarter. And, as anticipated, the economy grew 4.2
percent in the second quarter, partly reflecting a recovery from the effects of
labor strikes earlier in the year and extreme weather conditions across the
country. Upward momentum has been assisted by consumer spending, as indicated
by a 5.6 percent rise in retail sales in the first five months of this year
versus the comparable 1995 period.

In the manufacturing sector, economic reports, such as the National
Association of Purchasing Managers Index, suggested a continued rebound in
production from last winter's lower levels. In June, this index reached its
highest level since early 1995. Strong levels of exports and a replenishing of
inventories have helped support this momentum.

<PAGE> 61

year. Meanwhile, the closely watched "core" Consumer Price Index, which
excludes volatile food and energy components, has risen year over year at rates
between 2.7 and 3.0 percent per year, with mid-1996 readings at a moderate 2.7
percent.In general, recent reports have suggested an upward creep in
labor-related costs, while indicating that prices of many commodities have
begun to decline.

EQUITY MARKET REVIEW

The stock market averages posted attractive gains for the 12-month period
ended June 30, 1996, with most major averages posting all-time highs.
Meanwhile, the Dow Jones Industrial Average rose approximately 24 percent from
4556 to 5654, and the NASDAQ Composite Index rose approximately 27 percent from
933 to 1185.

OUTLOOK

We anticipate that reasonably strong economic growth will continue during
the balance of 1996, albeit at more moderate rates than the second quarter's
swift pace. While we expect rates of inflation to remain near current levels,
the Fed may begin to lean toward greater restraint in its monetary policy in
the coming months. That suggests an upward bias for short-term interest rates
and for yields on long-term bonds to remain steady at current levels.

Additional details about your Fund, including a question and answer
section with your portfolio management team, is provided in this report. We
appreciate your continued confidence in your investment with Van Kampen
American Capital.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

<PAGE> 62
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular
intervals. A good starting point is a comparison of your investment holdings
to an applicable benchmark, such as a broad-based market index. Such a
comparison can:

Illustrate the general market environment in which your investments are
being managed

Reflect the impact of favorable market trends or difficult market
conditions

Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over the
period measured

For these reasons, you may find it helpful to review the chart below,
which compares your Fund's performance to that of the Standard & Poor's
500-Stock Index and the Lipper Growth Fund Index over time. These indices are
unmanaged statistical composites and do not reflect any commissions or fees
which would be incurred by an investor purchasing the securities they
represent. Similarly, their performance does not reflect any sales charges or
other costs which would be applicable to an actively managed portfolio, such as
that of the Fund

[GRAPH]

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Growth Fund vs. Standard & Poor's
500-Stock Index and Lipper Growth Fund Index* (December 1995 through
June 1996)

Fund's Total Return
Inception Avg. Annual = 15.12%

DEC JAN FEB MAR APR MAY JUN
1995 1996 1996 1996 1996 1996 1996
<S> <C> <C> <C> <C> <C> <C> <C>
VKAC Value Fund 9,425 9,614 9,887 10,141 10,386 11,027 10,745

Standard & Poor's 500-Stock Index 10,000 10,409 10,482 10,621 10,764 11,010 11,096

Standard & Poor's 400 Midcap Index 10,000 10,177 10,504 10,659 10,972 11,103 10,966

</TABLE>

* The Standard & Poor's 500-Stock Index represents general stock market
performance and was initially selected as a benchmark for the Fund's
performance; additionally the Lipper Growth Fund Index was selected to
represent a more narrow-based comparison.

3
<PAGE> 63

PORTFOLIO MANAGEMENT REVIEW

Van Kampen American Capital Value Fund

We recently spoke with the management team of the Van Kampen American Capital
Value Fund about the key events and economic forces that shaped the markets
since the Fund's inception. The team is led by Bret W. Stanley, co-portfolio
manager, James A. Gilligan, co-portfolio manager, and Alan T. Sachtleben,
executive vice president of equity investments. The following excerpts reflect
their views on the Fund's performance from inception on December 27, 1995
through June 30, 1996.

Q HOW WOULD YOU DESCRIBE YOUR INVESTMENT PHILOSOPHY FOR THE VALUE FUND?

A In general, we rely on a "bottom-up" approach that concentrates on individual
stock selection, rather than economic forecasts or interest rate predictions.
In managing the Value Fund, we look for stocks that are selling at a discount
to their intrinsic value, as determined by a company's earning power and cash
flow--in other words, stocks that we believe are undervalued relative to their
worth.

There are three types of value situations that we find attractive. First,
we look for companies with a high return on capital that are selling at an
attractive valuation. Second, we seek out restructuring businesses that may
substantially increase their earning power by reducing the company's cost
structure or divesting loss-making operations. Finally, the most common value
opportunity arises when negative investor sentiment is created by a short-term
fundamental problem, such as reporting quarterly earnings below expectations.
In each situation, we require a 50 percent appreciation potential during the
two- to three-year expected holding period--thereby potentially increasing the
return of the Fund, while at the same time, potentially limiting the risk of a
permanent loss of capital.

Q WHAT FACTORS HAD THE GREATEST INFLUENCE ON THE FUND'S PERFORMANCE?

A As has been the case for the past several years, the economic environment
continued to demonstrate positive fundamentals, specifically solid corporate
earnings growth and controlled inflation.

The Fund's performance benefited from good stock selection in a variety of
industries and the absence of any large losses. The ten best performing stocks
were dominated by retail companies and businesses undergoing a restructuring.

Q HOW DID THE FUND PERFORM FROM INCEPTION TO JUNE 30, 1996?

A For the period December 27, 1995 to June 30, 1996, Class A shares of the Fund
produced a total return at net asset value of 14.00 percent. In comparison, the
Standard & Poor's Mid-Cap Index returned 9.20 percent, and the S&P 500-Stock
Index returned 10.08 percent over the same period. Keep in mind that the
Standard & Poor's indexes are unmanaged and do not reflect any commissions or
fees that would be paid by an investor purchasing the securities they
represent.

<PAGE> 64

Q WHAT ARE SOME SPECIFIC EXAMPLES OF STOCKS THAT HAVE ENHANCED THE FUND'S
PERFORMANCE TO DATE?

A Nordstrom is a good example of a stock that we purchased when we believed it
was undervalued and sold it later when it reflected its intrinsic value. This
well-known department store was among the many retailers that had fallen out of
favor during 1995. When retail sales began to accelerate, investor sentiment
quickly reversed and Nordstrom's stock price increased over
40 percent.

Nine West, a women's shoe manufacturer and retailer, was purchased after a
disappointing earnings report at the end of 1995. The company has since
reported improved sales and earnings and continues to make progress integrating
last year's U.S. Shoe acquisition. These positive developments drove the stock
price up nearly 40 percent during the first half of 1996.

Another good performer during the first half of 1996 was Dynatech, a
diversified technology company that announced a major restructuring. The stock
price rose approximately 60 percent, as the company sold unprofitable
divisions, reported unexpectedly strong earnings, and completed an aggressive
share buyback.

Q HOW IS THE FUND POSITIONED AS WE MOVE INTO THE NEXT SIX MONTHS?

A We believe the economy will reflect sustained growth and moderate inflation
for the remainder of 1996. Although it is unlikely that we will see a repeat of
last year's record-breaking stock market performance, this sort of economic
climate has historically been positive for corporate earnings and stock prices.
We do anticipate continued market volatility, which may give us the opportunity
to buy securities of what we believe are fundamentally sound companies at
relatively attractive levels.

Currently, three areas of the market are particularly exciting. First,
retail remains attractive, and we have a fairly significant portion of the
Fund's holdings in this sector. Second, health care interests us because growth
in these companies is not very dependent on the economy, and the valuations are
compelling. The third area we are pursuing is wireless equipment. The July
market correction created an opportunity for us to make Nokia, a leader in
cellular infrastructure and handsets, one of our largest holdings.

[SIG]
Alan T. Sachtleben

Executive Vice President
Equity Investments

[SIG]
Bret W. Stanley

Co-Portfolio Manager

[SIG]
James A. Gilligan

Co-Portfolio Manager

<PAGE> 65
VAN KAMPEN AMERICAN.CAPITAL VALUE FUND

PORTFOLIO OF INVESTMENTS

June 30, 1996

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Security Description Shares Market Value
- -------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 96.5%
CONSUMER DURABLES 6.7%
Newell Co. .................................. 230 $ 7,044
Sunbeam-Oster, Inc. ......................... 720 10,620
---------
17,664
---------
CONSUMER NON-DURABLES 11.5%
Designer Holdings Ltd. (b) .................. 150 3,994
Donnkenny, Inc. (b) ......................... 480 9,360
Nabisco Holdings Corp., Class A ............. 210 7,429
Philip Morris Cos., Inc. .................... 95 9,880
---------
30,663
---------

CONSUMER SERVICES 1.2%
Taco Cabana, Inc., Class A (b) .............. 450 3,263
---------

FINANCE 10.7%
American Bankers Insurance Group ............ 100 4,362
Chase Manhattan Corp. ....................... 80 5,650
Equitable of Iowa Cos. ...................... 200 7,100
Horace Mann Educators Corp. ................. 190 6,033
TIG Holdings, Inc. .......................... 180 5,220
---------
28,365
---------

HEALTH CARE 7.4%
American Home Products Corp. ................ 100 6,012
Foundation Health Corp. (b) ................. 125 4,484
Laboratory Corp. of America Holdings (b) .... 550 4,125
Tenet Healthcare Corp. (b) .................. 230 4,916
---------
19,537
---------

PHARMACEUTICALS 0.8% ........................ 100 2,175
---------
ALLEN GROUP, INC.

PRECISION INSTRUMENTS 5.3% .................. 310 8,292
Elsag Bailey Process Auto NV (b) ............ 150 5,681
---------
General Signal Corp. ........................ 13,973
---------

PRODUCER MANUFACTURING 10.6%
Belden, Inc. ................................ 160 4,800
Century Aluminum Co. ........................ 340 5,355
Corning, Inc. ............................... 150 5,756
Stewart & Stevenson Services, Inc. .......... 250 5,688
WMX Technologies, Inc. ...................... 200 6,550
---------
28,149
---------

</TABLE>

See Notes to Financial Statements

<PAGE> 66
VAN KAMPEN AMERICAN CAPITAL VALUE FUND

PORTFOLIO OF INVESTMENTS

June 30, 1996

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Security Description Shares Market Value
- -------------------------------------------------------------------
<S> <C> <C>
RAW MATERIALS/PROCESSING INDUSTRIES 8.5%
Alumax, Inc. (b) ........................... 140 $ 4,252
Boise Cascade Corp. ........................ 150 5,494
Crown Cork & Seal, Inc. .................... 230 10,350
Mead Corp. ................................. 50 2,594
---------
22,690
---------

RETAIL 13.8%
Ann Taylor Stores Corp. (b) ................ 330 6,682
Brightpoint, Inc. (b) ...................... 300 6,450
General Nutrition Cos., Inc. (b) ........... 370 6,475
Nine West Group, Inc. (b) .................. 200 10,225
Talbots, Inc. .............................. 100 3,238
Tandy Corp. ................................ 75 3,553
---------
36,623
---------

TECHNOLOGY 10.3%
Dynatech Corp. (b) ......................... 150 4,875
Harris Corp. ............................... 100 6,100
Lucent Technologies, Inc. .................. 200 7,575
Nokia Corp. ADS (Finland) .................. 240 8,880
---------
27,430
---------

TRANSPORTATION 4.4%
Genesee & Wyoming, Inc., Class A (b) ....... 350 7,175
Illinois Central Corp. ..................... 160 4,540
---------
11,715
---------

UTILITIES 5.3%
A T & T Corp. .............................. 120 7,440
Telefonos de Mexico, SA - ADR (Mexico) ..... 200 6,700
---------
14,140
---------

TOTAL LONG-TERM INVESTMENTS 96.5% ..........
(Cost $235,831) (a) 256,387
OTHER ASSETS IN EXCESS OF LIABILITIES 3.5% . 9,188
---------
NET ASSETS 100% ............................ $ 265,575
=========

</TABLE>

(a) At June 30, 1996, for federal income tax purposes, cost of investments is
$235,831, the aggregate gross unrealized appreciation is $25,715 and the
aggregate gross unrealized depreciation is $5,169, resulting in net unrealized
appreciation of $20,556.

(b) Non-income producing security as this stock does not currently declare
dividends.

<PAGE> 67

VAN KAMPEN AMERICAN CAPITAL VALUE FUND

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996

- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:

Investments, at Market Value (Cost $235,831) (Note 1)............ $ 256,387
Cash............................................................. 9,860

Receivables:
Distributor.................................................... 5,182
Securities Sold................................................ 2,969
Dividends...................................................... 302
Unamortized Organizational Expenses (Note 1)..................... 36,100
---------
Total Assets................................................ 310,800

LIABILITIES:

Payables:
Organizational Expenses........................................ 40,000
Securities Purchased........................................... 2,400
Deferred Compensation and Retirement Plans (Note 2).............. 2,825
---------

Total Liabilities........................................... 45,225
---------

NET ASSETS......................................................... 265,575
=========
NET ASSETS CONSIST OF:

Capital (Note 3)................................................. $ 235,000
Net Unrealized Appreciation on Securities........................ 20,556
Accumulated Net Realized Gain on Securities...................... 9,524
Accumulated Undistributed Net Investment Income.................. 495
---------
NET ASSETS......................................................... $ 265,575
=========

MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $117,249 and 10,277 shares of capital stock
issued and outstanding) (Note 3)............................... $ 11.41
Maximum sales charge (5.75%* of offering price) ............... .07
---------
Maximum offering Price to public............................... $ 12.11
=========

Class B Shares:

Net asset value and offering price per share (Based on net
assets of $74,163 and 6,500 shares of capital stock issued
and outstanding) (Note 3)...................................... $ 11.41
=========

Class C Shares:

Net asset value and offering price per share (Based on net
assets of $74,163 and 6,500 shares of capital stock issued
and outstanding) (Note 3)...................................... $ 11.41
=========

*On sales of $50,000 or more, the sales charge will be reduced.

</TABLE>
See Notes to Financial Statements

<PAGE> 68

VAN KAMPEN AMERICAN CAPITAL VALUE FUND

STATEMENT OF OPERATIONS

For the Period December 27, 1995 (Commencement of
Investment Operations) to June 30, 1996

- -------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ...................................................... $ 1,820
Interest ....................................................... 217
---------
Total Income .......................................... 2,037
---------

EXPENSES:
Audit ........................................................ 7,500
Trustees Fees and Expenses (Note 2) .......................... 5,250
Amortization of Organizational Expenses (Note 1) ............. 3,900
Investment Advisory Fee (Note 2) ............................. 890
Custody (Note 1) ............................................. 311
Other ........................................................ 3,000
---------

Total Expenses ......................................... 20,851

Less: Fees Waived and Expenses Reimbursed ($890 and
$18,327, respectively) ........................ 19,217
Earnings Credits on Cash Balances (Note 1) ...... 92
---------

Net Expenses ........................................... 1,542
---------

NET INVESTMENT INCOME .......................................... $ 495
=========

REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES

Net Realized Gain on Investments ............................... $ 9,524
---------

Net Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period ..................................... 0
End of the Period:
Investments ............................................... 20,556
---------
Net Unrealized Appreciation on Securities During the Period .... 20,556
---------

NET REALIZED AND UNREALIZED GAIN ON SECURITIES: ................ $ 30,080
=========

NET INCREASE IN NET ASSETS FROM OPERATIONS ..................... $ 30,575
=========

</TABLE>

See Notes to Financial Statements

<PAGE> 69

VAN KAMPEN AMERICAN CAPITAL VALUE FUND

STATEMENT OF CHANGES IN NET ASSETS

For the Period December 27, 1995 (Commencement of
Investment Operations) to June 30, 1996

- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
FROM INVESTMENT ACTIVITIES:

Operations:
Net Investment Income ..................................... $ 495
Net Realized Gain on Securities ........................... 9,524
Net Unrealized Appreciation on Securities During the Period 20,556
-----------

NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES ..................................... 30,575
-----------

FROM CAPITAL TRANSACTIONS(Note 3):

Proceeds from Shares Sold ................................... 35,000
-----------
TOTAL INCREASE IN NET ASSETS .................................. 65,575

NET ASSETS:
Beginning of the Period ..................................... 200,000
-----------
End of the Period (Including undistributed net investment
income of $495) ........................................... $ 265,575
===========
</TABLE>

See Notes to Financial Statements

<PAGE> 70
] VAN KAMPEN AMERICAN CAPITAL VALUE FUND

FINANCIAL HIGHLIGHTS

The following schedule presents financial highlights for one share
of the fund outstanding throughout the period indicated.

DECEMBER 27, 1995
(COMMENCEMENT
OF INVESTMENT
OPERATIONS) TO
CLASS A SHARES JUNE 30,1996
- -------------------------------------------------------------------------------

Net Asset Value, Beginning of the Period ..................... $10.000
-------
Net Investment Income ...................................... 0.018
Net Realized and Unrealized Gain on Securities ............. 1.391
-------
Total from Investment Operations ............................. $ 1.409
-------
Net Asset Value, End of the Period ........................... $11.409
-------
Total Return * (a) ........................................... 14.00%**

Net Assets at End of the Period (in thousands) ............... $ 117.2

Ratio of Expenses to Average Net Assets* (b) ................. 1.38%

Ratio of Net Investment Income to Average Net Assets* ........ 0.38%

Portfolio Turnover ........................................... 41%**

Average Commission Paid Per Equity Share Traded (c) .......... $ 0.025

*If certain fees had not been reimbursed by VKAC, total return
would have been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets ...................... 17.57%

Ratio of Net Investment Income to Average Not Assets ......... -15.81%

(a) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

(b) The Ratios of Expenses are based upon Total Expenses which does not
reflect Credits earned on overnight cash balances. (Note 1)

(c) Represents the average brokerage commissions paid on equity transactions
entered into during the period where commissions were applicable,

** Non-annualized
See Notes to Financial Statements

<PAGE> 71

VAN KAMPEN AMERICAN CAPITAL VALUE FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

The following schedule presents financial highlights for one share
of the fund outstanding throughout the period indicated.

DECEMBER 27, 1995
(COMMENCEMENT
OF INVESTMENT
OPERATIONS) TO
CLASS B SHARES JUNE 30, 1996
- --------------------------------------------------------------------------------
Net Asset Value. Beginning of the Period ...................... $ 10.000

Net Investment Income ........................................ 0.024
Net Realized and Unrealized Gain on Securities ............... 1.386
--------
Total from Investment Operations ............................... 1.410
--------
Net Asset Value, End of the Period ............................. $ 11.410
========
Total Return * (a) ............................................. 14.00% **

Net Assets at End of the Period (in thousands) ................. $ 74.2

Ratio of Expenses to Average Net Assets* (b) ................... 1.38%

Ratio of Net Investment Income to Average Net Assets* .......... O.44%

Portfolio Turnover ............................................. 41% **

Average Commission Paid Per Equity Share Traded (c) ............ $ 0.025

*If certain fees had not been reimbursed by VKAC, total return
would have been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets ........................ 17.57%

Ratio of Net Investment Income to Average Net Assets ........... -15.75%

(a) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

(b) The Ratios of Expenses are based upon Total Expenses which does not
reflect credits earned on overnight cash balances. (Note 1)

(c) Represents the average brokerage commissions paid on equity transactions
entered into during the period where commissions were applicable.

** Non-Annualized

See Notes to Financial Statements

<PAGE> 72
VAN KAMPEN AMERICAN CAPITAL VALUE FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

The following schedule presents financial highlights for one share
of the fund outstanding throughout the period indicated.

December 27, 1995
(Commencement
of Investment
Operations) to
CLASS C SHARES June 30, 1996
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of the Period ......................... $10.000

Net Investment Income .......................................... 0.024
Net Realized and Unrealized Gain on Securities ................. 1.386

Total from Investment Operations ................................. 1.410
-------
Net Asset Value, End of the Period ............................... $11.410
=======
Total Return * (a) ............................................... 14.00%**

Net Assets at End of the Period (in thousands) ................... 74.2

Ratio of Expenses to Average Net Assets* (b) ..................... 1.38%

Ratio of Net Investment Income to Average Net Assets* ............ 0.44%

Portfolio Turnover ............................................... 41%**

Average Commission Paid Per Equity Share Traded (c) .............. $ 0.025

*If certain fees had not been reimbursed by VKAC, total return
would have been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets .......................... 17.57%

Ratio of Net Investment Income to Average Net Assets ............. -15.75%

(a) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

(b) The Ratios of Expenses are based upon Total Expenses which does not
reflect credits earned on overnight cash balances. (Note 1)

(c) Represents the average brokerage commissions paid on equity transactions
entered into during the period where commissions were applicable.

** Non-annualized
See Notes to Financial Statements

<PAGE> 73

VAN KAMPEN AMERICAN CAPITAL
VALUE FUND

NOTES TO FINANCIAL STATEMENTS

June 30, 1996

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Value Fund (the "Fund") is organized as a series
of Van Kampen American Capital Equity Trust (the "Trust"), a Delaware business
trust, and is registered as a diversified open-end management investment
company under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek long-term growth of capital by investing
primarily in a diversified portfolio of common stocks and other equity
securities of medium and larger capitalization companies. The Fund commenced
investment operations on December 27, 1995, with three classes of common
shares, Class A, Class B and Class C.

The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sales price as of the close of such securities
exchange or, if not available, their fair value as determined by the Board of
Trustees. Short-term securities with remaining maturities of less than 60 days
are valued at amortized cost.

B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
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 account along with other investment companies advised by Van
Kampen American Capital Investment Advisory Corp. (the "Adviser"), the daily
aggregate of which is invested in repurchase agreements. Repurchase
agreements are collateralized by the underlying debt security. The Fund will
make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is
required to maintain the value of the underlying security at not less than the
repurchase proceeds due the Fund.

C. INVESTMENT INCOME - Dividend income is recorded on the ex-dividend date and
interest income is recorded an an accrual basis.

D. ORGANIZATIONAL EXPENSES - The Fund will reimburse Van Kampen American
Capital Distributors, Inc. or its affiliates ("collectively VKAC") for costs
incurred in connection with the Fund's organization in the amount of $40,000.
These costs are being amortized on a straight line basis over the 60 month
period ending December 27, 2000. The Adviser has agreed that in the event any
of the initial shares of the Fund originally purchased by VKAC are redeemed
during the amortization period, the Fund will be reimbursed for any unamortized
organizational expenses in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.

E. FEDERAL INCOME TAXES - It is the Fund's policy to Comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and gains
to its shareholders. Therefore, no provision for federal income taxes is
required.

F. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
annually from net investment income and net realized gains on securities, if
any.

G. EXPENSE REDUCTIONS - During the Period ended June 30, 1996, the Fund's
custody fee was reduced by $92 as a result of credits earned on overnight cash
balances.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER
TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:

Average Net Assets % Per Annum
- ---------------------------------------

First $500 million .75%

Next $500 million .70%

Over $1 billion .65%

For the period ended June 30, 1996, the Fund incurred expenses of
approximately $1,000 representing VKAC's cost of providing accounting services
to the Fund. These services are provided by VKAC at cost. All of this cost has
been waived by VKAC.

Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are
officers of VKAC.

<PAGE> 74
VAN KAMPEN AMERICAN CAPITAL
VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996

The Fund has implemented deferred compensation and retirement plans for
its trustees. Under the deferred compensation plan, trustees may elect to
defer all or a portion of their compensation to a later date. The retirement
plan covers those trustees who are not officers of VKAC.
At June 30, 1996, VKAC owned 7,000 shares of Class A and 6,500 shares each
of Classes B and C.

3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of common Shares, Classes A, B and C,
each with a par value of $.01 Per Share. There are an unlimited number of
shares of each class authorized.
At June 30, 1996, capital aggregated $105,000, $65,000 and $65,000 for
Classes A, B and C, respectively. For the period ended June 30, 1996,
transactions were as follows:

Shares Value
------ -----
Sales:

Class A 3,277 $35,000
====== =======

Class B and Class C shares are offered without a front end sales charge,
but are subject to a contingent deferred sales charge (CDSC). The CDSC will be
imposed on most redemptions made within six years of the purchase for Class B
and one year of the purchase for Class C as detailed in the following schedule.
The Class B and Class C shares bear the expense of their respective deferred
sales arrangements, including higher distribution and service fees and
incremental transfer agency costs.

CONTINGENT DEFERRED
SALES CHARGE
CLASS B CLASS C
YEAR OF REDEMPTION SHARES SHARES
------------------ ------- -------

First 4.00% 1.00%
Second 3.75% None
Third 3.50% None
Fourth 2.50% None
Fifth 1.50% None
Sixth 1.00% None
Seventh and Thereafter None None

4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of
investments, excluding short-term investments, were $319,908 and $93,601,
respectively.

5. DISTRIBUTION AND SERVICE PLANS
The Fund and its Shareholders have adopted a distribution plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940 and a service plan
(collectively the "Plans"). The Plans govern payments for the distribution of
the Fund's shares, ongoing shareholder services and maintenance of shareholder
accounts.
The Funds net assets are subject to annual fees under the Plans of up to
.25% for Class A shares and 1.00% each for Class B and Class C shares. No
fees related to the Plans have been accrued by the Fund as the Fund is
currently owned solely by affiliated persons.

<PAGE> 75
[KPMG PEAT MARWICK LLP LETTERHEAD]

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital Value Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Value Fund (the "Fund"), including the portfolio of
investments, and the related statement of operations, the statement of changes
in net assets and the financial highlights for the period from December 27, 1995
(commencement of investment operations) to June 30, 1996. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1996, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen American Capital Value Fund as of June 30, 1996, the results of its
operations, the changes in its net assets and financial highlights for the
period from December 27, 1995 (commencement of investment operations) to June
30, 1996, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
August 2, 1996
<PAGE> 76
VAN KAMPEN AMERICAN CAPITAL VALUE FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN

LINDA HUTTON HEAGY

ROGER HILSMAN

R. CRAIG KENNEDY

DENNIS J. MCDONNELL*

DONALD C. MILLER -
Co-Chairman

JACK E. NELSON

DON G. POWELL*

JEROME L. ROBINSON -
Co-Chairman

FERNANDO SISTO

WAYNE W. WHALEN*

WILLIAM S. WOODSIDE

OFFICERS

DON G. POWELL*
President and Chief Executive Officer

DENNIS J. MCDONNELL*
Executive Vice President

RONALD A. NYBERG*
Vice President and Secretary

EDWARD C. WOOD, III*
Vice President and
Chief Financial Officer

CURTIS W. MORELL*
Vice President and
Chief Accounting Officer

JOHN L. SULLIVAN*
Treasurer

TANYA M. LODEN*
Controller

WILLIAM N. BROWN*
PETER W. HEGEL*
ROBERT C. PECK, JR.*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

DISTRIBUTOR

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

SHAREHOLDER SERVICING AGENT

ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256

CUSTODIAN

STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL

SKADDEN, ARPS, SLATE, MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
PEAT MARWICK PLAZA
303 East Wacker Drive
Chicago, Illinois 60601

*"Interested" persons of the Fund as defined in the
Investment Company Act of 1940
<PAGE> 77

LETTER TO SHAREHOLDERS

August 15, 1996

Dear Shareholder,

With Morgan Stanley's global leadership in investment banking and asset
management and Van Kampen American Capital's reputation for competitive
long-term performance and superior investor services, together we will offer a
broader range of investment opportunities and expertise.

A proxy will be mailed to you shortly explaining the acquisition and
asking for your vote of approval. Please read it carefully and return your
response for inclusion in the shareholder vote. We value our relationship with
you and look forward to communicating more details of this transaction, which
is anticipated to be completed in November.

ECONOMIC REVIEW

The economy demonstrated an acceleration in growth during the last half of
the reporting period. After a nominal 0.3 percent growth rate in the last
quarter of 1995, GDP (the nation's gross domestic product) rose by 2.0
percent in this year's first quarter. And, as anticipated, the economy grew 4.2
percent in the second quarter, partly reflecting a recovery from the effects of
labor strikes earlier in the year and extreme weather conditions across the
country. Upward momentum has been assisted by consumer spending, as indicated
by a 5.6 percent rise in retail sales in the first five months of this year
versus the comparable 1995 period.

<PAGE> 78

EQUITY MARKET REVIEW

OUTLOOK

We anticipate that reasonably strong economic growth will continue during
the balance of 1996, albeit at more moderate rates than the second quarter's
swift pace. While we expect rates of inflation to remain near current levels,
the Fed may begin to lean toward greater restraint in its monetary policy in
the coming months. That suggests an upward bias for short-term interest rates
and for yields on long-term bonds to remain steady at current levels.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

<PAGE> 79
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular
intervals. A good starting point is a comparison of your investment holdings
to an applicable benchmark, such as a broad-based market index. Such a
comparison can:

- Illustrate the general market environment in which your investments are
being managed

- Reflect the impact of favorable market trends or difficult market
conditions

- Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over the
period measured

[GRAPH]

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Growth Fund vs. Standard & Poor's
500-Stock Index and Lipper Growth Fund Index* (December 1995 through
June 1996)

Funds Total Return
Inception Aug. Annual = 19.32%

DEC JAN FEB MAR APR MAY JUN
1995 1996 1996 1996 1996 1996 1996
<S> <C> <C> <C> <C> <C> <C> <C>
VKAC Great American Companies Fund 9,425 9,925 10,217 10,603 10,773 10,933 10,943

Standard & Poor's 500-Stock Index 10,000 10,409 10,482 10,621 10,764 11,010 11,096

Lipper Growth Fund Index 10,000 10,242 10,402 10,451 10,713 10,905 10,799

</TABLE>

3
<PAGE> 80

PORTFOLIO MANAGEMENT REVIEW

Van Kampen American Capital Great American Companies Fund

We recently spoke with the management team of the Van Kampen American Capital
Great American Companies Fund about the key events and economic forces that
shaped the markets since the Fund's inception. The team is led by Evan Harrel,
co-portfolio manager, Stephen L. Boyd, co-portfolio manager, and Alan T.
Sachtleben, executive vice president of equity investments. The following
excerpts reflect their views on the Fund's performance from its inception on
December 27, 1995 through June 30, 1996.

Q HOW WOULD YOU DESCRIBE YOUR INVESTMENT PHILOSOPHY FOR THE GREAT AMERICAN
COMPANIES FUND?

A The Great American Companies Fund invests in successful, established U.S.
companies, because we believe that stocks of such companies should perform
better than the market as a whole over the long run. Another benefit of
investing in securities of these companies is that their operating performance
has been more stable than the overall market. Investing in these companies is
expected to reduce our level of risk during volatile market environments.
Finally, the Fund remains well-diversified across a variety of market sectors
in order to maintain exposure to high-quality companies across a spectrum of
industries.

Q WHAT FACTORS HAD THE GREATEST INFLUENCE ON THE FUND'S PERFORMANCE?

A Over the short life of the Fund, we witnessed steady corporate earnings and
healthy economic growth. Because we focus the portfolio on high-quality
companies with above-average growth prospects, the Fund performed well in this
type of economic environment. In addition, the market saw some volatility in
recent months, but our growth investment style has lent relative stability to
the portfolio.

Q HOW DID THE FUND PERFORM FROM INCEPTION TO JUNE 30, 1996?

A We are quite pleased with the Fund's performance to date. For the period
December 27, 1995 to June 30, 1996, Class A shares of the Fund produced a total
return of 16.10 percent, based on net asset value. In comparison, the Standard
& Poor's 500-Stock Index produced a total return of 10.08 percent during the
same period. Keep in mind that the Standard & Poor's index is a broad-based,
unmanaged index that reflects general stock market performance and does not
include any commissions or fees that would be paid by an investor purchasing
the securities it represents.

The Lipper Growth Fund Index, which more closely resembles the Fund,
returned 7.99 percent. The Lipper index reflects the average performance of the
largest growth funds and does not reflect any sales charges that would be paid
by an investor purchasing the securities it represents.

<PAGE> 81

Q WHAT ARE SOME EXAMPLES OF "GREAT AMERICAN COMPANIES" IN THE PORTFOLIO?

A We believe that each of the companies held by the Fund is "great" in at least
one significant way, and all are traditionally market leaders in their field.
The Fund is invested in companies from across many industry sectors, such as
Praxair in chemicals, Green Tree Financial in finance, and Kroger in retail. The
companies we invest in also range in market capitalization size, from General
Electric (large cap) to Dollar General (small cap).

All these companies typically have had an above-average return on equity
or return on investment, and their ability to execute should permit them to to
sustain above-average growth rates over the long term.

Also, strong American companies often can duplicate overseas what they
have accomplished here in the U.S., so we expect the continued trend of
globalization to benefit the companies in the Fund.

Q WHAT IS YOUR OUTLOOK FOR THE FUND OVER THE NEXT SIX MONTHS?

A We believe the economy will reflect sustained growth and moderate inflation
for the remainder of 1996. Although it is unlikely that we will see a repeat of
last year's record-breaking stock market performance, this sort of economic
climate has historically been positive for corporate earnings and stock prices.
We do anticipate continued market volatility, which may give us the opportunity
to buy securities of what we feel are fundamentally sound companies at
relatively attractive levels.

[SIG]
Alan T. Sachtleben

Executive Vice President
Equity Investments

[SIG]
Evan Harrel

Co-Portfolio Manager

[SIG]
Stephen L. Boyd

Co-Portfolio Manager

<PAGE> 82

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

PORTFOLIO OF INVESTMENTS

June 30,1996
<TABLE>
<CAPTION>

Security Description Shares Market Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK 90.0%
CONSUMER DISTRIBUTION 11.1% 312 $ 9,126
Dollar General Corp. 135 5,332
Kroger Co. (b) 120 5,250
May Department Stores Co. 125 6,078
Sears Roebuck & Co. ---------
25,786
---------
CONSUMER DURABLES 4.6% 100 5,763
Armstrong World Industries, Inc.
Black & Decker Corp. 125 4,828
---------
10,591
---------
CONSUMER NON-DURABLES 8.4%
Avon Products, Inc. 125 5,641
Campbell Soup Co. 65 4,583
CPC International, Inc. 55 3,960
Nabisco Holdings Corp., Class A 150 5,306
---------
19,490
---------
CONSUMER SERVICES 5.0%
Host Marriott Corp. 300 3,938
Tele Communications, Class A 200 3,625
Walt Disney Co. 65 4,087
--------
11,650
--------
ENERGY, 4.4%
Amoco Corp. 70 5,066
Exxon Corp. 60 5,213
--------
10,279
--------
FINANCE 10,3%
American International Group, Inc. 40 3,945
Federal National Mortgage Association 160 5,360
Green Tree Financial Corp. 200 6,250
MGIC Investment Corp. 100 5,613
Travelers/Aetna Property & Casualty, Class A 100 2,837
--------
24,005
--------
</TABLE>

See Notes to Financial Statements
<PAGE> 83

Van Kampen American Capital Great American Companies Fund

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
<TABLE>
<CAPTION>

Security Description Shares Market Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE 6.4%
Becton Dickinson & Co. 65 $ 5,216
Schering-Plough Corp. 90 5,647
United Healthcare Corp. 80 4,040
--------
14,903
--------
PRODUCER MANUFACTURING 10.1%
Corning, Inc. 150 5,756
General Electric Co. 70 6,055
Honeywell, Inc. 100 5,450
Kent Electrics Corp. 200 6,250
--------
23,511
--------

RAW MATERIALS/PROCESSING INDUSTRIES 8.6%
International Paper Co. 100 3,688
Praxair, Inc. .125 5,281
Sherwin-Williams Co. 120 5,580
Union Carbide Corp. 135 5,366
--------
19,915
--------
TECHNOLOGY 9.7%
Boeing Co. 50 4,356
Hewlett-Packard Co. 70 6,974
Intel Corp. 100 7,344
Lucent Technologies, Inc. 100 3,787
--------
22,461
--------
TRANSPORTATION 3.6%
Burlington Northern Santa Fe Co. 50 4,044
Southwest Airlines Co. 150 4,369
--------
8,413
--------
</TABLE>

See Notes to Financial Statements
<PAGE> 84

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
<TABLE>
<CAPTION>

Security Description Shares Market Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES 7.8%
AT&T Corp. 75 $ 4,650
MCI Communications Corp. 200 5,125
Worldcom, Inc. 150 8,306
----------
18,081
----------

TOTAL COMMON STOCK 90.0%
(Cost $187,610) (a) 209,085
OTHER ASSETS IN EXCESS OF LIABILITIES 10.0% 23,357
----------
NET ASSETS 100.0% $ 232,442
==========
</TABLE>

(a) At June 30, 1996, for federal income tax purposes, cost of investments
is $187,610, the gross aggregrate unrealized appreciation is $24,795 and
the gross aggregate unrealized depreciation is $3,320, resulting in net
unrealized appreciation of $21,475.

(b) Non-income producing security as this stock does not currently declare
dividends.

See Notes to Financial Statements
<PAGE> 85

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $187,610) (Note 1) $ 209,085
Cash 26,260
Receivables:
Securities Sold 6,177
Distributor 5,340
Dividends 137
Unamortized Organizational Expenses (Note 1) 36,100
-----------
Total Assets 283,099
-----------
LIABILITIES:
Payables:
Organizational Expenses 40,000
Securities Purchased 7,832
Deferred Compensation and Retirement Plans (Note 2) 2,825
-----------
Total Liabilities 50,657
-----------
NET ASSETS $ 232,442
===========
NET ASSETS CONSIST OF:
Capital (Note 3) $ 200,000
Net Unrealized Appreciation on Securities 21,475
Accumulated Net Realized Gain on Securities 10,594
Accumulated Undistributed Net Investment Income 373
-----------
NET ASSETS $ 232,442
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$81,354 and 7,000 shares of capital stock issued and outstanding) (Note 3) $ 11.62
Maximum sales charge (5.75%* of offering price) 0.71
-----------
Maximum offering price to public $ 12.33
===========
Class B Shares:
Net asset value and offering price per share (Based on not assets of $75,544
and 6,500 shares of capital stock issued and outstanding) (Note 3) $ 11.62
===========
Class C Shares:
Net asset value and offering price per share (Based on net assets of $75,544
and 6,500 shares of capital stock issued and outstanding) (Note 3) $ 11.62
===========
*On sales of $50,000 or more, the sales charge will be reduced.
</TABLE>

See Notes to Financial Statements
<PAGE> 86

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

STATEMENT OF OPERATIONS

FOR THE PERIOD DECEMBER 27, 1995 (COMMENCEMENT OF INVESTMENT

OPERATIONS) TO JUNE 30, 1996

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 1,541
Interest 217
---------

Total Income 1,758
---------
EXPENSES:
Audit 7,500
Trustees Fees and Expenses (Note 2) 5,250
Amortization of Organizational Expenses (Note 1) 3,900
Accounting (Note 2) 1,000
Legal 1,000
Printing 1,000
Investment Advisory Fee (Note 2) 775
Custody (Note 1) 250
---------
Total Expenses 20,675
Less: Fees Waived and Expenses Reimbursed ($775 and $18,371, respectively) 19,146
Earnings Credits Earned on Cash Balances (Note 1) 144
---------
Net Expenses 1,385
---------
NET INVESTMENT INCOME $ 373
=========
REALIZED AND UNREALIZED GAIN ON SECURITIES:

Net Realized Gain on Investments $ 10,594
---------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period 0
End of the Period:
Investments 21,475
---------
Net Unrealized Appreciation on Securities During the Period 21,475
---------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES $ 32,069
=========
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 32,442
=========
</TABLE>

See Notes to Financial Statements
<PAGE> 87

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

STATEMENT OF CHANGES IN NET ASSETS

FOR THE PERIOD DECEMBER 27, 1995 (COMMENCEMENT OF INVESTMENT
OPERATIONS) TO JUNE 30, 1996
<TABLE>

FROM INVESTMENT ACTIVITIES:

<S> <C>

Operations:
Net Investment Income $ 373
Net Realized Gain on Securities 10,594
Net Unrealized Appreciation on Securities During the Period 21,475
---------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES 32,442
---------
TOTAL INCREASE IN NET ASSETS 32,442

NET ASSETS:
Beginning of the Period 200,000
---------
End of the Period (Including undistributed net investment
income of $373) $ 232,442
=========

</TABLE>

See Notes to Financial Statements

<PAGE> 88

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

FINANCIAL HIGHLIGHTS

The following schedule presents financial highlights for one share
of the Fund outstanding throughout the period indicated.

DECEMBER 27, 1995
(COMMENCEMENT
OF INVESTMENT
OPERATIONS TO
CLASS A SHARES JUNE 30, 1996
- -----------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of the Period $ 10.000
---------
Net Investment Income 0.019
Net Realized and Unrealized Gain on Securities 1.603
---------
Total from Investment Operations 1.622
---------
Net Asset Value, End of the Period $ 11.622
=========
Total Return * (a) 16.10% **

Net Assets at End of the Period (in thousands) $ 81.4

Ratio of Expenses to Average Net Assets* (b) 1.37%

Ratio of Net Investment Income to Average Net Assets* 0.33%

Portfolio Turnover 48% **

Average Commission Paid Per Equity Share Traded (c) $ 0.025

*If certain fees had not been assumed by VKAC, total return
would have been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets (b) 18.46%

Ratio of Net Investment Income to Average Net Assets (16.76%)
</TABLE>

**Non-Annualized

(a) Total return is based upon net asset value which does not include
payment of the maximum sales charge or contingent deferred sales charge.

(b) The Ratio of Expenses to Average Net Assets is based upon Total Expenses
which does not reflect credits earned on overnight cash balances. (Note 1)

(c) Represents the average brokerage commission paid on equity transactions
entered into during the period for trades where commissions were applicable.

See Notes to Financial Statements
<PAGE> 89

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

FINANCIAL HIGHLIGHTS (Continued)

The following schedule presents financial highlights for one share
of the Fund outstanding throughout the period indicated.

December 27, 1995
(Commencement
of Investment
Operations) to
Class B Shares June 30, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of the Period $ 10.000
---------
Net Investment Income 0.019
Net Realized and Unrealized Gain on Securities 1.603
---------
Total from Investment Operations 1.622
---------
Net Asset Value, End of the Period 11.622
=========

Total Return * (a) 16.10% **

Net Assets at End of the Period (in thousands) $ 75.5

Ratio of Expenses to Average Net Assets* (b) 1.37%

Ratio of Net Investment Income to Average Net Assets* 0.33%

Portfolio Turnover 48%**

Average Commission Paid Per Equity Share Traded (c) $ 0.025

*If certain fees had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets (b) 18.46%

Ratio of Net Investment Income to Average Net Assets (16.76%)
</TABLE>

**Non-Annualized

(a) Total return is based upon net asset value which does not include
payment of the maximum sales charge or contingent deferred sales charge.

(b) The Ratio of Expenses to Average Net Assets is based upon Total
Expenses which does not reflect credits earned on overnight cash balances.
(Note 1)

(c) Represents the average brokerage commission paid on equity transactions
entered into during the period for trades where commissions were
applicable.

See Notes to Financial Statements
<PAGE> 90

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

FINANCIAL HIGHLIGHTS (Continued)

The following schedule presents financial highlights for one share
of the Fund outstanding throughout the period Indicated.
<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
OF INVESTMENT
OPERATIONS) TO
CLASS C SHARES JUNE 30, 1996
- ---------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of the Period $ 10.000
---------

Net Investment Income 0.019
Net Realized and Unrealized Gain on Securities 1.603
---------
Total from Investment Operations 1.622
---------
Not Asset Value, End of the Period $ 11.622
=========

Total Return * (a) 16.10% **

Net Assets at End of the Period (in thousands) $ 75.5

Ratio of Expenses to Average Net Assets* (b) 1.37%

Ratio of Net Investment Income to Average Net Assets* 0.33%

Portfolio Turnover 48%**

Average Commission Paid Per Equity Share Traded (c) $ 0.025

*If certain fees had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets (b) 18.46%

Ratio of Net Investment Income to Average Net Assets (16.76%)
</TABLE>

**Non-Annualized

(a) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

(b) The Ratio of Expenses to Average Net Assets is based upon Total
Expenses which does not reflect credits earned on overnight cash balances.
(Note 1)

(c) Represents the average brokerage commission paid on equity
transactions entered into during the period for trades where commissions
were applicable.

See Notes to Financial Statements
<PAGE> 91
VAN KAMPEN AMERICAN CAPITAL

GREAT AMERICAN COMPANIES FUND

NOTES TO FINANCIAL STATEMENTS

June 30, 1996

- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Great American Companies Fund (the "Fund") is
organized as a series of Van Kampen American Capital Equity Trust, a Delaware
business trust (the "Trust") and is registered as a diversified open-end
management investment company under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek long- term growth of
capital by investing principally in common stocks and other equity securities.
The Fund commenced investment operations on December 27,1995, with three classes
of common shares, Class A, Class B and Class C shares.

A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange or, if not available, their fair value as determined by the Board of
Trustees. Short-term securities with remaining maturities of less than 60 days
are valued at amortized cost.

B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade
date basis. Realized gains and losses are determined on an identified cost
basis.

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 by Van
Kampen American Capital Investment Advisory Corp. (the "Adviser"), the daily
aggregate of which is invested in repurchase agreements. Repurchase agreements
are collateralized by the underlying debt security. The Fund will make payment
for such securities only upon physical delivery or evidence of book entry
transfer to the account of the custodian bank. The seller is required to
maintain the value of the underlying security at not less than the repurchase
proceeds due the Fund.

C. INVESTMENT INCOME - Dividend income is recorded on the ex-dividend date
and interest income is recorded on an accrual basis.

D. ORGANIZATIONAL INCOME - The Fund will reimburse Van Kampen American
Capital Distributors, Inc. or its affiliates (collective "VKAC") for costs
incurred in connection with the Fund's organization in the amount of $40,000.
These costs are being amortized on a straight line basis over the 60 month
period ending December 27, 2000. The Adviser has agreed that in the event any
of the initial shares of the Fund originally purchased by VKAC are redeemed
during the amortization period, the Fund will be reimbursed for any unamortized
organizational expenses in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption

E. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulate investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.

F. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
annually from net investment income and, if any, net realized gains.

G. EXPENSE REDUCTIONS - During the period ended June 30, 1996, the Fund's
custody fee was reduced by $144 as a result of credits earned on overnight cash
balances.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:

Average Net Assets % Per Annum
---------------------------------------------
First $500 million .70 of 1%
Next $500 million .65 of 1%
Over $1 billion .60 of 1%

For the period ended June 30, 1996, the Fund incurred expenses of $1,000,
all of which was subsequently assumed by VKAC, representing VKAC's cost of
providing accounting services to the Fund. These services are provided by VKAC
at cost.

Certain officer and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
<PAGE> 92

VAN KAMPEN AMERICAN CAPITAL

GREAT AMERICAN COMPANIES FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30,1996
- --------------------------------------------------------------------------------

At June 30,1996, VKAC owned all shares of Classes A, B and C, respectively.

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of common shares, Classes A, B and C,
each with a par value of $.01 per share. There are an unlimited number of shares
of each class authorized. At June 30, 1996, capital aggregated $70,000, $65,000
and $65,000 for Classes A, B and C, respectively.

Class B and Class C shares are offered without a front end sales charge,
but are subject to a contingent deferred sales charge (CDSC). The CDSC will be
imposed on most redemptions made within six years of the purchase for Class B
and one year of the purchase for Class C as detailed in the following schedule.
The Class B and C shares bear the expense of their respective deferred sales
arrangements, including higher distribution and service fees and incremental
transfer agency costs.

Contingent Deferred
Sales Charge

Class B Class C
Year of Redemption Shares Shares
-----------------------------------------------------
First 4.00% 1.00%
Second 3.75% None
Third 3.50% None
Fourth 2.50% None
Fifth 1.50% None
Sixth 1.00% None
Seventh and Thereafter None None

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $276,167 and $99,152, respectively.

5. DISTRIBUTION AND SERVICE PLANS

The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.

The Fund's net assets are subject to annual fees under the Plans of up to
.25% for Class A shares and 1.00% each for Class B and Class C shares. Since
the Fund does not currently have any non-affiliated shareholders, no fees
related to the Plans have been accrued.
<PAGE> 93
[KPMG PEAT MARWICK LLP LETTERHEAD]

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital Great American Companies Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Great American Companies Fund (the "Fund"), including
the portfolio of investments, and the related statement of operations, the
statement of changes in net assets and the financial highlights for the period
from December 27, 1995 (commencement of investment operations) to June 30,
1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen American Capital Great American Companies Fund as of June 30, 1996, the
results of its operations, the changes in its net assets and financial
highlights for the period from December 27, 1995 (commencement of investment
operations) to June 30, 1996, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Chicago, Illinois
August 15, 1996
<PAGE> 94

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN

LINDA HUTTON HEAGY

ROGER HILSMAN

R. CRAIG KENNEDY

DENNIS J. MCDONNELL*

DONALD C. MILLER-
Co-Chairman

JACK E. NELSON

DON G. POWELL*

JEROME L. ROBINSON-
Co-Chairman

FERNANDO SISTO

WAYNE W. WHALEN*

WILLIAM S. WOODSIDE

OFFICERS

DON G. POWELL*
President and Chief Executive Officer

DENNIS J. MCDONNELL*
Executive Vice President

RONALD A. NYBERG*
Vice President and Secretary

EDWARD C. WOOD, III*
Vice President and Chief Financial Officer

CURTIS W. MORELL*
Vice President and Chief Accounting Officer

JOHN L. SULLIVAN*
Treasurer

TANYA M. LODEN*
Controller

WILLIAM N. BROWN*
PETER W. HEGEL*
ROBERT C. PECK, JR.*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

DISTRIBUTOR

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

SHAREHOLDER SERVICING AGENT

ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256

CUSTODIAN

STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL

SKADDEN, ARPS, SLATE, MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601

*"Interested" persons of the Fund as defined in the
Investment Company Act of 1940
<PAGE> 95

LETTER TO SHAREHOLDERS

August 15, 1996

Dear Shareholder,

With Morgan Stanley's global leadership in investment banking and asset
management and Van Kampen American Capital's reputation for competitive
long-term performance and superior investor services, together we will offer a
broader range of investment opportunities and expertise.

A proxy will be mailed to you shortly explaining the acquisition and
asking for your vote of approval. Please read it carefully and return your
response for inclusion in the shareholder vote. We value our relationship with
you and look forward to communicating more details of this transaction, which
is anticipated to be completed in November.

ECONOMIC REVIEW

The economy demonstrated an acceleration in growth during the last half of
the reporting period. After a nominal 0.3 percent growth rate in the last
quarter of 1995, GDP (the nation's gross domestic product) rose by 2.0
percent in this year's first quarter. And, as anticipated, the economy grew 4.2
percent in the second quarter, partly reflecting a recovery from the effects of
labor strikes earlier in the year and extreme weather conditions across the
country. Upward momentum has been assisted by consumer spending, as indicated
by a 5.6 percent rise in retail sales in the first five months of this year
versus the comparable 1995 period.

<PAGE> 96

EQUITY MARKET REVIEW

OUTLOOK

We anticipate that reasonably strong economic growth will continue during
the balance of 1996, albeit at more moderate rates than the second quarter's
swift pace. While we expect rates of inflation to remain near current levels,
the Fed may begin to lean toward greater restraint in its monetary policy in
the coming months. That suggests an upward bias for short-term interest rates
and for yields on long-term bonds to remain steady at current levels.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

<PAGE> 97
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular
intervals. A good starting point is a comparison of your investment holdings
to an applicable benchmark, such as a broad-based market index. Such a
comparison can:

- Illustrate the general market environment in which your investments are
being managed

- Reflect the impact of favorable market trends or difficult market
conditions

- Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over the
period measured

[GRAPH]

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Growth Fund vs. Standard & Poor's
500-Stock Index and Lipper Growth Fund Index* (December 1995 through
June 1996)

Fund's Total Return
Inception Avg. Annual = 62.24%

DEC JAN FEB MAR APR MAY JUN
1995 1996 1996 1996 1996 1996 1996
<S> <C> <C> <C> <C> <C> <C> <C>
VKAC Growth Fund 9,425 9,849 10,638 11,310 12,884 13,525 12,799

Standard & Poor's 500-Stock Index 10,000 10,409 10,482 10,621 10,764 11,010 11,096

Lipper Growth Fund Index 10,000 10,242 10,402 10,451 10,713 10,905 10,799

</TABLE>

3
<PAGE> 98
PORTFOLIO MANAGEMENT REVIEW

VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

We recently spoke with the management team of the Van Kampen American Capital
Growth Fund about the key events and economic forces that shaped the markets
since the Fund's inception. The team is led by Jeff D. New, co-portfolio
manager, Chris Perras, co-portfolio manager, and Alan T. Sachtleben, executive
vice president of equity investments. The following excerpts reflect their
views on the Fund's performance from inception on December 27, 1995 through
June 30, 1996.

Q HOW WOULD YOU DESCRIBE YOUR INVESTMENT STRATEGY FOR THE GROWTH FUND?

A It is a "bottom-up" strategy that focuses on individual stock selection, as
opposed to concentrating on economic forecasts or interest-rate predictions. We
have found that most stocks that significantly outperform have at least one of
the following characteristics: accelerating earnings growth due to a new
product or service; consistent earnings growth; better-than-expected
fundamentals; or a sweeping change in the industry, regulatory environment, or
management. We look for at least one of those factors, along with an attractive
stock price, in the securities we consider.

Q WHAT FACTORS HAD THE GREATEST INFLUENCE ON THE FUND'S PERFORMANCE?

A Over the short life of the Fund, we witnessed steady corporate earnings
growth. Historically, in such an environment, companies producing consistent
earnings growth will do well, and high-growth companies will do very well. The
Fund contains stocks of companies that are growing consistently at a rate
faster than average. The value of these types of stocks went up substantially
during the first half of the year, which contributed to the outstanding
performance of the Fund.

Q HOW DID THE FUND PERFORM FROM INCEPTION TO JUNE 30, 1996?

A We are pleased to report that Class A shares of the Fund produced a total
return of 35.80 percent, based on net asset value. In comparison, over the same
period, the Standard & Poor's 500-Stock Index produced a total return of 10.08
percent. Keep in mind that the Standard & Poor's index is a broad-based,
unmanaged index that reflects general stock market performance and does not
include any commissions or fees that would be paid by an investor purchasing
the securities it represents.

The Lipper Growth Fund Average, which more closely resembles the Fund,
produced a total return of 7.99 percent during the same period ended June 30,
1996. The Lipper Growth Fund Average reflects the average performance of all
growth funds and does not reflect any sales charges that would be paid by an
investor.

<PAGE> 99

Q WHAT ARE SOME SPECIFIC EXAMPLES OF FAST-GROWING COMPANIES IN THE PORTFOLIO?

A United Waste Systems, which provides basic trash collection in the
Midwest, continues to show strong internal growth as well as expansion through
acquisitions. Corporate earnings are projected to grow more than 40 percent
this year and nearly 30 percent next year.

In technology, U.S. Robotics was a solid performer for the Fund. A
large part of their business is Internet-related equipment and other data
communications. Although Internet software companies are not profitable,
companies that sell equipment to access the Internet are doing very well.
Corporate earnings are projected to grow more than 120 percent this year and 40
percent next year.

Another successful company in the portfolio is Renal Treatment Centers,
which provides kidney dialysis services on an outpatient basis. In the
healthcare industry, companies that specialize in a specific treatment process
and can perform it in a cost-effective manner will usually do very well.
Corporate earnings are projected to grow nearly 30 percent this year and more
than 20 percent next year.

Q HOW IS THE FUND POSITIONED AS WE MOVE INTO THE NEXT SIX MONTHS?

A We believe the economy will reflect sustained growth and moderate inflation
for the remainder of 1996. Although it is unlikely that we will see a repeat of
last year's record-breaking stock market performance, this sort of economic
climate has historically been positive for corporate earnings and stock prices.
We do anticipate continued market volatility, which may give us the opportunity
to buy securities of fundamentally sound companies at relatively attractive
levels.

Given these conditions, we will continue to buy higher-growth companies at
reasonable prices. We expect to maintain diversification in terms of market
capitalization as well. At the end of the period, the Fund had 22 percent of
its market weighting in companies with market capitalizations above $5 billion
(large cap), 63 percent in companies with market capitalizations between $500
million and $5 billion (mid-cap), and 15 percent in companies with market
capitalizations under $500 million (small cap)

/s/ Alan T. Sachtleben /s/ Jeff D. New /s/ Chris Perras

Alan T. Sachtleben Jeff D. New Chris Perras
Executive Vice President Co-Portfolio Manager Co-Portfolio Manager
Equity Investments

<PAGE> 100
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

PORTFOLIO OF INVESTMENTS

June 30, 1996
- ------------------------------------------------------------------------------

Security Description Shares Market Value
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 94.0%
CONSUMER NON-DURABLES - 11.0%
Designer Holdings Ltd. (b) 200 $ 5,325
Fila Holdings-ADR (Italy) 50 4,312
Liz Claiborne Inc. 130 4,501
Nautica Enterprises Inc. (b) 140 4,025
Oakley Inc. (b) 100 4,550
Philip Morns Cos. Inc. 80 8,320
Tommy Hilfiger Corp. (b) 70 3,754
-------
34,787
-------

CONSUMER SERVICES - 13.2%
Career Horizons Inc. (b) 100 3,500
Evergreen Media Corp. Class A (b) 150 6,412
First USA Paymentech Inc. (b) 200 8,000
Intelliquest Information Group (b) 200 6,550
Outback Steakhouse Inc. (b) 120 4,138
RAC Financial Group Inc. (b) 200 5,650
Sonic Corp. (b) 150 3,638
United Waste Systems Inc. (b) 120 3,870
-------
41,758
-------

FINANCE - 6.9%
Green Tree Financial Corp. 150 4,687
Money Store Inc. 200 4,425
Olympic Financial (b) 150 3,450
PennCorp Financial Group 150 4,762
SunAmerica Inc. 80 4,520
-------
21,844
-------

HEALTH CARE - 9.6%
Arterial Vascular Engineering (b) 200 7,250
Dura Pharmaceuticals Inc. (b) 60 3,360
Elan-ADR (Ireland) (b) 40 2,285
ESC Medical Systems Ltd. (b) 150 4,238
Guidant Corp. 100 4,925
Orthodontic Centers of America (b) 100 2,650
Renal Treatment Centers Inc. (b) 200 5,750
-------
30,458
-------

PRODUCER MANUFACTURING - 2.7%
Case Corp. 90 4,320
Greenfield Industries Inc. 130 4,290
-------
8,610
-------
</TABLE>

See Notes to Financial Statements

<PAGE> 101
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

PORTFOLIO OF INVESTMENTS (CONTINUED)

JUNE 30, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Security Description Shares Market Value
- ------------------------------------------------------------------------------
<S> <C> <C>

RAW MATERIALS/PROCESSING INDUSTRIES - 2.0%
Praxair Inc. 150 $ 6,337
--------
RETAIL - 7.0%
Eckerd Jack Corp. (b) 200 4,525
Saks Holdings Inc. (b) 200 6,825
TJX Cos. Inc. 130 4,388
U.S. Office Products Co. (b) 150 6,300
--------
22,038
--------

TECHNOLOGY - 39.0%
Adaptec Inc. (b) 90 4,264
ADC Telecommunications Inc. (b) 100 4,500
Analog Devices Inc. (b) 100 2,550
Ascend Communications Inc. (b) 60 3,375
Aspect Telecommunications Corp. (b) 100 4,950
BMC Software Inc. (b) 70 4,182
Boston Communications Group (b) 300 4,950
Check Point Software Tech (b) 200 4,800
Cisco Systems Inc. (b) 100 5,662
Computer Association International Inc. 70 4,987
Farallon Communications (b) 200 2,950
Inference Corp. Class A (b) 150 3,600
McAfee Associations Inc. (b) 90 4,410
Medic Computer System Inc. (b) 70 5,679
Netscape Communications Corp. (b) 50 3,112
Octel Communications (b) 200 3,950
Oracle System Corp. (b) 135 5,324
PC Docs Group International Inc. (b) 150 2,981
Proxim Inc. (b) 110 4,428
Sapient Corp. (b) 150 6,338
SCI Systems Inc. (b) 100 4,063
Siebel Systems Inc. (b) 200 6,150
Sun Microsystems Inc. (b) 100 5,888
Tellabs Inc. (b) 60 4,013
TSX Corp. (b) 150 4,163
U.S. Robotics Corp. (b) 100 8,550
Wind River Systems Inc. (b) 100 3,450
--------
123,269
--------

</TABLE>

See Notes to Financial Statements

<PAGE> 102
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

PORTFOLIO OF INVESTMENTS

June 30, 1996
- ------------------------------------------------------------------------------

Security Description Shares Market Value
- ------------------------------------------------------------------------------
<S> <C> <C>

UTILITIES - 2.6%
WorldCom Inc. (b) 150 $ 8,306
--------

TOTAL LONG-TERM INVESTMENTS 94.0%
(Cost $239,188) (a) 297,407
OTHER ASSETS IN EXCESS OF LIABILITIES 6.0% 19,139
--------
NET ASSETS 100% $316,546
========
</TABLE>

(a) At June 30, 1996, cost for federal income tax purposes is $239,188; the
aggregate gross unrealized appreciation is $62,035 and the aggregate gross
unrealized depreciation is $3,816, resulting in net unrealized appreciation
of $58,219.

(b) Non-income producing security as this stock does not currently declare
dividends.

See Notes to Financial Statements

<PAGE> 103
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:

Investments at Market Value (Cost $239,188) (Note 1) $297,407
Cash 14,766
Receivables:
Securities Sold 13,234
Distributor 4,961
Dividends 99
Other 1,404
Unamortized Organizational Expenses (Note 1) 36,100
--------
Total Assets 367,971
--------

LIABILITIES:

Payables:
Organizational Expenses 40,000
Securities Purchased 8,600
Deferred Compensation and Retirement Plans (Note 2) 2,825
--------
Total Liabilities 51,425
--------
NET ASSETS $316,546
========

NET ASSETS CONSIST OF:
Capital (Note 3) $235,843
Net Unrealized Appreciation on Securities 58,219
Accumulated Net Realized Gain on Securities 22,484
--------
NET ASSETS $316,546
========

MAXIMUM OFFERING PRICE PER SHARE:
CLASS A SHARES:
Net asset value and redemption price per share
(Based on net assets of $138,510 and 10,113 shares
of capital stock and outstanding) (Note 3) $ 13.70
Maximum sales charge (5.75% of offering price) 0.84
--------
Maximum offering price to public $ 14.54
========

CLASS B SHARES:
Net asset value and offering price per share
(Based on net assets of $89,018 and 6,500 shares
of capital stock issued and outstanding) (Note 3) $ 13.70
========

CLASS C SHARES:
Net asset value and offering price per share
(Based on net assets of $89,018 and 6,500 shares
of capital stock issued and outstanding) (Note 3) $ 13.70
========

* On sales of $50,000 or more, the sales charge
will be reduced.

</TABLE>

See Notes to Financial Statements

<PAGE> 104

VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 27, 1995 (COMMENCEMENT
OF INVESTMENT OPERATIONS) TO JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 517
Interest 217
--------
Total Income 734
--------

EXPENSES:

Audit 7,500
Trustees Fees and Expenses (Note 2) 5,250
Amortization of Organizational Expenses (Note 1) 3,900
Investment Advisory Fee (Note 2) 1,018
Legal (Note 2) 1,000
Custody (Note 1) 618
Other 2,013
--------

Total Expenses 21,299
Less: Fees Waived and Expenses Reimbursed
($1,018 and $18,298, respectively) 19,316
Earnings Credits on Cash Balances (Note 1) 219
--------
Net Expenses 1,764
--------
NET INVESTMENT LOSS $ (1,030)
========

REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:

Net Realized Gain on Investments $ 23,514
--------

Net Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period 0
End of the Period:
Investments 58,219
--------
Change in Net Unrealized Appreciation on
Investments During the Period 58,219
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS $ 81,733
========
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 80,703
========
</TABLE>

See Notes to Financial Statements

<PAGE> 105
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 27, 1995
(COMMENCEMENT OF INVESTMENT OPERATIONS)
TO JUNE 30, 1996

- -------------------------------------------------------------------------------

FROM INVESTMENT ACTIVITIES:
<TABLE>
<S> <C>
Operations:
Net Investment Loss $ (1,030)
Net Realized Gain on Securities 23,514
Net Unrealized Appreciation on Securities During the Period 58,219
--------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES 80,703
--------

FROM CAPITAL TRANSACTIONS (NOTE 3):

Proceeds of Shares Sold 35,843
--------
TOTAL INCREASE IN NET ASSETS 116,546

NET ASSETS:
Beginning of the Period 200,000
--------
End of the Period $316,546
========

</TABLE>

See Notes to Financial Statements

<PAGE> 106
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE
OF THE FUND OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>

DECEMBER 27, 1995
(COMMENCEMENT
OF INVESTMENT
OPERATIONS) TO
CLASS A SHARES JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of the Period $ 10.000
---------
Net Investment Loss (0.044)
Net Realized and Unrealized Gain on Securities 3.740
---------

Total from Investment Operations 3.696
---------

Net Asset Value, End of the Period $ 13.696
=========

Total Return * (a) 34.72%**

Net Assets at End of the Period (In thousands) $ 138.5

Ratio of Expenses to Average Net Assets* (b) 1.46%

Ratio of Net Investment Income to Average Net Assets* -0.79%

Portfolio Turnover 94%**

Average Commission Paid Per Equity Share Traded (c) $ 0.028

*If certain fees had not been assumed by VKAC, total return
would have been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets (b) 15.69%

Ratio of Net Investment Income to Average Net Assets -15.02%
</TABLE>

** Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(b) The Ratios of Expenses are based upon Total Expenses which does not reflect
credits earned on overnight cash balances. (Note 1)

(c) Represents the average brokerage commission paid on equity transactions
entered into during the period for trades where commissions were applicable.

See Notes to Financial Statements

<PAGE> 107
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

FINANCIAL HIGHLIGHTS (CONTINUED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE
OF THE FUND OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>

DECEMBER 27, 1996
(COMMENCEMENT
OF INVESTMENT
OPERATIONS) TO
CLASS B SHARES JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of the Period $ 10.000
---------
Net Investment Loss (0.045)
Net Realized and Unrealized Gain on Securities 3.740
---------

Total from Investment Operations 3.695
---------

Net Asset Value, End of the Period $ 13.695
=========

Total Return * (a) 34.72%**

Net Assets at End of the Period (In thousands) $ 89.0

Ratio of Expenses to Average Net Assets* (b) 1.46%

Ratio of Net Investment Income to Average Net Assets* -0.74%

Portfolio Turnover 94%**

Average Commission Paid Per Equity Share Traded (c) $ 0.028

*If certain fees had not been assumed by VKAC, total return
would have been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets (b) 15.70%

Ratio of Net Investment Income to Average Net Assets -14.97%
</TABLE>

** Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(b) The Ratios of Expenses are based upon Total Expenses which does not reflect
credits earned on overnight cash balances. (Note 1)

(c) Represents the average brokerage commission paid on equity transactions
entered into during the period for trades where commissions were applicable.

See Notes to Financial Statements

<PAGE> 108
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

DECEMBER 27, 1995
(COMMENCEMENT
OF INVESTMENT
OPERATIONS) TO
CLASS C SHARES JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of the Period $ 10.000
---------
Net Investment Loss (0.045)
Net Realized and Unrealized Gain on Securities 3.740
---------

Total from Investment Operations 3.695
---------

Net Asset Value, End of the Period $ 13.695
=========

Total Return * (a) 34.72%**

Net Assets at End of the Period (In thousands) $ 89.0

Ratio of Expenses to Average Net Assets* (b) 1.46%

Ratio of Net Investment Income to Average Net Assets* -0.74%

Portfolio Turnover 94%**

Average Commission Paid Per Equity Share Traded (c) $ 0.028

*If certain fees had not been assumed by VKAC, total return
would have been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets (b) 15.70%

Ratio of Net Investment Income to Average Net Assets -14.97%
</TABLE>

** Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(b) The Ratios of Expenses are based upon Total Expenses which does not reflect
credits earned on overnight cash balances. (Note 1)

(c) Represents the average brokerage commission paid on equity transactions
entered into during the period for trades where commissions were applicable.

See Notes to Financial Statements

<PAGE> 109
VAN KAMPEN AMERICAN CAPITAL
GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Growth Fund (the "Fund") is organized as a series of
Van Kampen American Capital Equity Trust (the "Trust"), a Delaware business
trust and is registered as a diversified open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek capital growth by investing primarily in a diversified
portfolio of common stocks and other equity securities of growth companies. The
Fund commenced investment operations on December 27, 1995, with three classes of
common shares, Class A, Class B and Class C.

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statement and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

A. SECURITY VALUATION - Investments in securities listed on a securities
exchange shall be valued at their sale price as of the close of such securities
exchange or, if not available, their fair value as determined by the Board of
Trustees. Short-term securities with remaining maturities of less than 60 days
are valued at amortized cost.

B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
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 by Van Kampen
American Capital Investment Advisory Corp. (the "Adviser"), the daily aggregate
of which is invested in repurchase agreements. Repurchase agreements are
collateralized by the underlying debt security. The Fund will make payment for
such securities only upon physical delivery or evidence of book entry transfer
to the account of the custodian bank. The seller is required to maintain the
value of the underlying security at not less than the repurchase proceeds due
the Fund.

C. INVESTMENT INCOME - Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis.

D. ORGANIZATIONAL EXPENSES - The Fund has agreed to reimburse Van Kampen
American Capital Distributors, Inc. or its affiliates ("collectively VKAC") for
costs incurred in connection with the Fund's organization in the amount of
$40,000. These costs are being amortized on a straight line basis over the 60
month period ending December 27, 2000. The Adviser has agreed that in the event
any of the initial shares of the Fund originally purchased by VKAC are redeemed
during the amortization period, the Fund will be reimbursed for any unamortized
organizational expenses in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.

E. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and gains
to its shareholders. Therefore, no provision for federal income taxes is
required.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of post October 31 losses which are not
recognized for tax purposes until the first day of the following fiscal year.

F. DISTRIBUTION OF INCOME AND GAINS - Distributions from net investment income
and net realized gains, if any, are made annually. Distributions from net
realized gains for book purposes may include short-term capital gains. All
short-term capital gains are included as ordinary income for tax purposes. This
tax basis ordinary income is offset by the net investment loss for tax purposes
of $1,126. As a result, this permanent book and tax basis difference has been
reclassified from accumulated net realized gain on securities to accumulated
undistributed net investment income.

G. EXPENSE REDUCTIONS - During the period ended June 30, 1996, the Fund's
custody fee was reduced by $219 as a result of credits earned on overnight cash
balances.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:

<TABLE>
<CAPTION>
Average Net Assets % Per Annum
- ---------------------------------------------------------------------
<S> <C>
First $500 million .75%

Next $500 million .70%

Over $1 billion .65%
</TABLE>
<PAGE> 110
VAN KAMPEN AMERICAN CAPITAL
GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
(CONTINUED)

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.

Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.

At June 30, 1996, VKAC owned 7,000 shares of Class A and 6,500 shares each
of Classes B and C, respectively.

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of common shares, Classes A, B and C,
each with a par value of $.01 per share. There are an unlimited number of shares
of each class authorized.

At June 30, 1996, capital aggregated $105,843, $65,000 and $65,000 for
Classes A, B and C, respectively.

For the period ended June 30, 1996, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
Sales:

Class A 3,113 $35,843
===== =======
</TABLE>

3. CAPITAL TRANSACTIONS (CONTINUED)

<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
Class B Class C
Year of Redemption Shares Shares
- -----------------------------------------------------------------------------
<S> <C> <C>
First 4.00% 1.00%
Second 3.75% None
Third 3.50% None
Fourth 2.50% None
Fifth 1.50% None
Sixth 1.00% None
Seventh and Thereafter None None
</TABLE>

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $453,171 and $237,497, respectively.

5. DISTRIBUTION AND SERVICE PLANS

The Fund and its Shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.

The Fund's net assets are subject to annual fees under the Plans of up to
.25% for Class A shares and 1.00% each for Class B and Class C shares. No fees
related to the Plans have been accrued by the Fund as the Fund is currently
owned solely by affiliated persons.

<PAGE> 111
[KPMG PEAT MARWICK LLP LETTERHEAD]

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital Growth Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Growth Fund (the "Fund"), including the portfolio of
investments, and the related statement of operations, the statement of changes
in net assets and the financial highlights for the period from December 27, 1995
(commencement of investment operations) to June 30, 1996. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen American Capital Growth Fund as of June 30, 1996, the results of its
operations, the changes in its net assets and financial highlights for the
period from December 27, 1995 (commencement of investment operations) to June
30, 1996, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
August 15, 1996
<PAGE> 112
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES

J. MILES BRANAGAN
LINDA HUTTON HEAGY
ROGER HILSMAN
R. CRAIG KENNEDY
DENNIS J. MCDONNELL*
DONALD C. MILLER - Co-Chairman
JACK E. NELSON
DON G. POWELL*
JEROME L. ROBINSON - Co-Chairman
FERNANDO SISTO
WAYNE W. WHALEN*
WILLIAM S. WOODSIDE

OFFICERS

DON G. POWELL*
President and Chief Executive Officer

DENNIS J. MCDONNELL*
Executive Vice President

RONALD A. NYBERG*
Vice President and Secretary

EDWARD C. WOOD, III*
Vice President and Chief Financial Officer

CURTIS W. MORELL*
Vice President and Chief Accounting Officer

JOHN L. SULLIVAN*
Treasurer

TANYA M. LODEN*
Controller

WILLIAM N. BROWN*
PETER W. HEGEL*
ROBERT C. PECK, JR.*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

DISTRIBUTOR

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

SHAREHOLDER SERVICING AGENT

ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141

CUSTODIAN

STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL

SKADDEN, ARPS, SLATE, MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601

*"Interested" persons of the Fund as defined in the
Investment Company Act of 1940
<PAGE> 113

LETTER TO SHAREHOLDERS

August 15, 1996

Dear Shareholder,

With Morgan Stanley's global leadership in investment banking and asset
management and Van Kampen American Capital's reputation for competitive
long-term performance and superior investor services, together we will offer a
broader range of investment opportunities and expertise.

A proxy will be mailed to you shortly explaining the acquisition and
asking for your vote of approval. Please read it carefully and return your
response for inclusion in the shareholder vote. We value our relationship with
you and look forward to communicating more details of this transaction, which
is anticipated to be completed in November.

ECONOMIC REVIEW

The economy demonstrated an acceleration in growth during the last half of
the reporting period. After a nominal 0.3 percent growth rate in the last
quarter of 1995, GDP (the nation's gross domestic product) rose by 2.0
percent in this year's first quarter. And, as anticipated, the economy grew 4.2
percent in the second quarter, partly reflecting a recovery from the effects of
labor strikes earlier in the year and extreme weather conditions across the
country. Upward momentum has been assisted by consumer spending, as indicated
by a 5.6 percent rise in retail sales in the first five months of this year
versus the comparable 1995 period.

<PAGE> 114

EQUITY MARKET REVIEW

OUTLOOK

We anticipate that reasonably strong economic growth will continue during
the balance of 1996, albeit at more moderate rates than the second quarter's
swift pace. While we expect rates of inflation to remain near current levels,
the Fed may begin to lean toward greater restraint in its monetary policy in
the coming months. That suggests an upward bias for short-term interest rates
and for yields on long-term bonds to remain steady at current levels.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

<PAGE> 115

Putting Your Fund's Performance in Perspective

As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular
intervals. A good starting point is a comparison of your investment holdings
to an applicable benchmark, such as a broad-based market index. Such a
comparison can:

Illustrate the general market environment in which your
investments are being managed

Reflect the impact of favorable market trends or difficult market conditions

Help you evaluate the extent to which your Fund's management team
has responded to the opportunities and challenges presented to them over
the period measured

For these reasons, you may find it helpful to review the chart below,
which compares your Fund's performance to that of the Standard & Poor's
500-Stock Index and the Lipper Growth and Income Fund Index over time. These
indices are unmanaged statistical composites and do not reflect any commissions
or fees which would be incurred by an investor purchasing the securities they
represent. Similarly, their performance does not reflect any sales charges or
other costs which would be applicable to an actively managed portfolio, such as
that of the Fund

[GRAPH]

Growth of a Hypothetical $10,000 Investment
Van Kampen American Capital Prospector Fund vs. Standard & Poor's
500-Stock Index and
Lipper Growth and Income Fund Index* (December 1995 through June 1996)

Fund's Total Return
Inception Avg. Annual 13.35%
<TABLE>
<CAPTION>

Dec Jan Feb Mar Apr May Jun
1995 1996 1996 1996 1996 1996 1996
<S> <C> <C> <C> <C> <C> <C> <C>
VKAC Prospector Fund 9,425 9,837 9,953 10,160 10,518 10,633 10,650

Standard & Poor's 500-Stock Index 10,000 10,409 10,482 10,621 10,764 11,010 11,096

Lipper Growth and Income Fund Index 10,000 10,297 10,441 10,574 10,736 10,913 10,867

</TABLE>

3
<PAGE> 116
PORTFOLIO MANAGEMENT REVIEW

VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

We recently spoke with the management team of the Van Kampen American Capital
Prospector Fund about the key events and economic forces that shaped the
markets since the Fund's inception. The team is led by B. Robert Baker, Jr.,
co-portfolio manager, Jason Leder, co-portfolio manager, and Alan T.
Sachtleben, executive vice president of equity investments. The following
excerpts reflect their views on the Fund's performance from inception on
December 27, 1995 through June 30, 1996.

Q HOW WOULD YOU DESCRIBE YOUR INVESTMENT PHILOSOPHY FOR THE PROSPECTOR FUND?

A We rely on a "bottom-up" approach that concentrates on individual stock
selection, rather than economic forecasts or interest rate predictions. In
managing the Prospector Fund, we try to pinpoint a limited number of
large-capitalization holdings that we believe are undervalued. We expect them
to generate high returns when they begin to be recognized by the market and
become fully valued. However, we do not buy a stock simply because it is
undervalued. We try to identify a catalyst for the valuation to be corrected by
the marketplace. As stocks in the portfolio become fully valued or expectations
for a catalyst do not develop, they are reduced or sold from the Fund.

Q WHAT FACTORS HAD THE GREATEST INFLUENCE ON THE FUND'S PERFORMANCE?

A As has been the case for the past several years, the economic environment
continued to demonstrate positive fundamentals, specifically solid corporate
earnings growth and controlled inflation.

Beginning in 1996, expectations for a sluggish economy led to
significant undervaluation in cyclical stocks--stocks of those companies most
sensitive to economic activity. However, as economic growth exceeded
expectations in the first and second quarters, cyclical stocks outperformed the
market. As a result, the Fund realized some gains, as valuations of its
cyclical stocks improved.

In addition, relatively low oil and gas prices led to general
undervaluation of stocks in the energy sector. Particularly, we were able to
capatalize on gas transmission and exploration companies as the price structure
for oil and gas improved.

Q HOW DID THE FUND PERFORM FROM INCEPTION TO JUNE 30, 1996?

A For the period December 27, 1995 to June 30, 1996, Class A shares of the Fund
produced a total return at net asset value of 13.10 percent. In comparison, the
Standard & Poor's 500-Stock Index produced a total return of 10.08 percent
during the same period. Keep in mind that the Standard & Poor's index is a
broad-based, unmanaged index that reflects general stock market performance and
does not include any commissions or fees that would be paid by an investor
purchasing the securities it represents.

4
<PAGE> 117

The Lipper Growth and Income Fund Index, which more closely resembles
the Fund, returned 8.67 percent for the same period. The Lipper index reflects
the average performance of the largest growth and income funds and does not
reflect any sales charges that would be paid by an investor purchasing the
securities it represents.

Q WHAT ARE SOME SPECIFIC EXAMPLES OF UNDERVALUED STOCKS THAT ENHANCED THE
FUND'S PERFORMANCE?

A Paper and natural gas were two industries undervalued by the marketplace at
the beginning of the year but later provided strong performance for the Fund.
The cold winter and lack of adequate reserves caused natural gas prices to rise
sharply. Consequently, stocks of producers, pipeline and distribution companies
performed extremely well. Our holdings of Sonat and Panenergy were significant
contributors to the Fund's performance.

Also, paper stocks were as relatively cheap as they have been in 20
years. We built up a large position of several paper stocks, including
Willamette Industries, in the beginning of the year and later sold them when
their prices appreciated.

Q WHAT IS YOUR OUTLOOK FOR THE FUND OVER THE NEXT SIX MONTHS?

A This is a high-risk environment where the market is fully valued based on
historical measures. In such an environment, a focus on valuation becomes even
more critical. The Fund's exposure to electric utilities, which we feel are
substantially undervalued relative to the market, should provide a cushion in
an unsettled market.

[SIG] [SIG] [SIG]
Alan T. Sachtleben B. Robert Baker, Jr. Jason Leder
Executive Vice President Co-Portfolio Manager Co-Portfolio Manager
Equity Investment

5
<PAGE> 118
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

PORTFOLIO OF INVESTMENTS
June 30, 1996
- --------------------------------------------------------------------------------

Security Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK AND EQUIVALENT 94.7%
CONSUMER DISTRIBUTION 1.9%
Dillard Department Stores, Inc. ............... 120 $ 4,380
--------

CONSUMER DURABLES 3.0%
Chrysler Corp. ................................ 35 2,170
General Motors Corp. .......................... 40 2,095
Newell Co. .................................... 80 2,450
--------
6,715
--------

CONSUMER NON-DURABLES 4.2%
Unilever ...................................... 41 5,950
Philip Morris Companies, Inc. ................. 35 3,640
--------
9,590
--------

CONSUMER SERVICES 3.8%
Cox Communications, Inc. (b) .................. 110 2,379
International Game Technologies ............... 150 2,531
Tele-Communications, Inc. (b) ................. 100 1,813
Time Warner, Inc. ............................. 50 1,963
--------
8,686
--------

ENERGY 14.7%
Coastal Corp. ................................. 50 2,088
Exxon Corp. ................................... 60 5,213
Norsk Hydro AS - ADR (Norway) ................. 120 5,865
Pacific Enterprises ........................... 85 2,518
Panhandle Eastern Corp. ....................... 140 4,603
Pogo Producing Co. ............................ 75 2,859
Repsol SA - ADR (Spain) ....................... 60 2,085
Shell Transport & Trading PLC - ADR (UK) ...... 40 3,520
Sonat, Inc. ................................... 50 2,250
Texaco, Inc. .................................. 25 2,097
--------
33,098
--------

FINANCE 22.3%
Aetna Life & Casualty Co. ..................... 30 2,145
AFLAC, Inc. ................................... 75 2,241
Allmerica Financial Corp. ..................... 80 2,380
Allstate Corp. ................................ 125 5,703
AMBAC, Inc. ................................... 45 2,346
American Bankers Insurance Group............... 245 10,684
Bear Stearns Companies, Inc. .................. 94 2,221
Chase Manhattan Corp. ......................... 125 8,828
Franklin Resources, Inc. ...................... 40 2,440
MBIA, Inc. .................................... 70 5,451
SunAmerica, Inc. .............................. 105 5,933
--------
50,372
--------

</TABLE>

See Notes to Financial Statements

<PAGE> 119

VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

PORTFOLIO OF INVESTMENTS

June 30, 1996 (Continued)
- --------------------------------------------------------------------------------

Security Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE 8.3%
Astra AB - ADR (Sweden) ........................... 45 $ 1,969
Bristol Myers Squibb Co. .......................... 75 6,750
Mallinckrodt Group, Inc. .......................... 200 7,775
Warner Lambert Co. ................................ 40 2,200
-------
18,694
-------

PRODUCER MANUFACTURING 3.1%
WMX Technologies, Inc. ............................ 215 7,041
-------

RAW MATERIAL/PROCESSING INDUSTRIES 11.4%
Boise Cascade Corp. ............................... 105 3,846
Du Pont Ei De Nemours & Co. ....................... 50 3,956
International Paper Co. ........................... 60 2,213
Lyondell Petrochemical Co. ........................ 100 2,413
Mead Corp. ........................................ 125 6,484
Monsanto Co. ...................................... 80 2,600
Willamette Industries, Inc. ....................... 490 4,165
-------
25,677
-------

TECHNOLOGY 6.1%
Avnet, Inc. ....................................... 50 2,106
Gateway 2000, Inc. (b) ............................ 150 5,100
Intel Corp. ....................................... 50 3,672
Lucent Technologies, Inc. (b) ..................... 15 568
Sun Guard Data Systems, Inc. (b) .................. 60 2,408
-------
13,854
-------

TRANSPORTATION 1.1%
Canadian National Railway Co. (Canada) ............ 130 2,389
-------

UTILITIES 14.8%
FPL Group, Inc. ................................... 45 2,070
Houston Industries, Inc. .......................... 100 2,463
Idaho Power Co. ................................... 80 2,490
Illinova Corp. .................................... 215 6,181
MCI Communications Corp. .......................... 50 1,281
Minnesota Power & Light Co. ....................... 80 2,320
Oklahoma Gas & Electric Co. ....................... 45 1,783
Portland General Corp. ............................ 70 2,161
Sprint Corp. ...................................... 50 2,100
Tele Denmark AS - ADS (Denmark) ................... 230 5,836
Telefonica De Espana - ADR (Spain) ................ 45 2,481

</TABLE>

See Notes to Financial Statements

<PAGE> 120

VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

PORTFOLIO OF INVESTMENTS

June 30, 1996 (Continued)
- --------------------------------------------------------------------------------

Security Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>

UTILITIES (CONTINUED)
Texas Utilities Co. ............................. 50 $ 2,138
--------
33,304
--------

TOTAL LONG-TERM INVESTMENTS 94.7%
(Cost $195,928) (a) ........................... 213,800

OTHER ASSETS IN EXCESS OF LIABILITIES 5.3% ...... 11,904
--------
NET ASSETS 100.0% ............................... $225,704
========
</TABLE>

(a) At June 30, 1996, cost for federal income tax purposes is $195,928; the
aggregate gross unrealized appreciation is $19,477 and the aggregate gross
unrealized depreciation is $1,605, resulting in net unrealized
appreciation of $17,872.

(b) Non-income producing security as this stock does not declare dividends.

See Notes to Financial Statements

<PAGE> 121

VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- --------------------------------------------------------------------------------

ASSETS:
<S> <C>
Investments, at Market Value (Cost $195,928) (Note 1) ...... $ 213,800
Cash ....................................................... 15,313
Receivables:
Distributor .............................................. 5,373
Securities Sold .......................................... 2,116
Dividends ................................................ 265
Unamortized Organizational Expenses (Note 1) ............... 36,100
--------
Total Assets ........................................... 272,967
--------

LIABILITIES:

Payables:
Organizational Expenses ................................. 40,000
Securities Purchased .................................... 3,911
Income Distributions .................................... 527
Deferred Compensation and Retirement Plans (Note 2) ........ 2,825
--------
Total Liabilities ...................................... 47,263
--------
NET ASSETS ................................................... $225,704
========

NET ASSETS CONSIST OF:
Capital (Note 3) ........................................... $200,000
Net Unrealized Appreciation on Securities .................. 17,872
Accumulated Net Realized Gain on Securities ................ 6,920
Accumulated Undistributed Net Investment Income ............ 912
--------
NET ASSETS ................................................... $225,704
========

MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share
(Based on net assets of $78,900 and 7,000 shares
of capital stock issued and outstanding) (Note 3) ....... $ 11.27
Maximum sales charge (5.75%* of offering price) ......... 0.69
--------

Maximum offering price to public ........................ $ 11.96
========

Class B Shares:
Net asset value and offering price per share
(Based on net assets of $73,402 and 6,500 shares
of capital stock Issued and outstanding) (Note 3) ....... $ 11.29
========
Class C Shares:
Net asset value and offering price per share
(Based on net assets of $73,402 and 6,500 shares
of capital stock issued and outstanding) (Note 3) ....... $ 11.29
========

</TABLE>

* On sales of $50,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

<PAGE> 122

VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

STATEMENT OF OPERATIONS

FOR THE PERIOD DECEMBER 27, 1995 (COMMENCEMENT
OF INVESTMENT OPERATIONS) TO JUNE 30, 1996

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend ............................................................. $ 2,547
Interest ............................................................. 244
-------
Total Income ..................................................... 2,791
-------

EXPENSES:
Audit ................................................................ 7,500
Trustees Fees and Expenses (Note 2) .................................. 5,250
Amortization of Organizational Expenses (Note 1) ..................... 3,900
Accounting (Note 2) .................................................. 1,000
Legal (Note 2) ....................................................... 1,000
Printing ............................................................. 1,000
Investment Advisory Fee (Note 2) ..................................... 757
Custody (Note 1) ..................................................... 469
-------

Total Expenses .................................................. 20,876
Less: Fees Waived and Expenses Reimbursed
($757 and $18,684, respectively) ................................ 19,441
Earning Credits on Cash Balances (Note 1) ....................... 83
-------

Net Expenses .................................................... 1,352
-------

NET INVESTMENT INCOME ................................................ $ 1,439
=======
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Gain on Investments ................................... $ 6,920
-------

Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period ............................................ 0

End of the Period:
Investments ........................................................
17,872
-------

Net Unrealized Appreciation on Securities During the Period .......... 17,872
-------

NET REALIZED AND UNREALIZED GAIN ON SECURITIES ....................... 24,792
=======
NET INCREASE IN NET ASSETS FROM OPERATIONS ........................... $26,231
=======

</TABLE>

See Notes to Financial Statements

<PAGE> 123
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

STATEMENT OF CHANGES IN NET ASSETS

FOR THE PERIOD DECEMBER 27, 1995 (COMMENCEMENT
OF INVESTMENT OPERATIONS) TO JUNE 30, 1996

<TABLE>
<S> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income ............................................. $ 1,439
Net Realized Gain on Securities ................................... 6,920
Net Unrealized Appreciation on Securities During the Period ....... 17,872
--------
Change in Net Assets from Operations .............................. 26,231
--------

Distributions from Net Investment Income:
Class A Shares .................................................. (281)
Class B Shares .................................................. (123)
Class C Shares .................................................. (123)
--------
Total Distributions ............................................... (527)
--------

NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES ........................................... 25,704
--------

TOTAL INCREASE IN NET ASSETS ...................................... 25,704

Beginning of the Period ........................................... 200,000
--------

End of the Period (including undistributed net investment
income of $912) ................................................. $225,704
========

</TABLE>

<PAGE> 124

VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

FINANCIAL HIGHLIGHTS

The following schedule presents financial highlights for one share
of the fund outstanding throughout the period indicated.

<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
OF INVESTMENT
OPERATIONS) TO
CLASS A SHARES JUNE 30,1996
- --------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of the Period ............... $10.000
-------
Net Investment Income ................................ 0.072
Not Realized and Unrealized Gain on Securities ....... 1.239
-------

Total from Investment Operations ....................... 1.311

Less Distributions from Net Investment Income .......... 0.040
-------

Net Asset Value, End of the Period ..................... $11.271
=======

Total Return * (a) ..................................... 13.10% **

Net Assets at End of the Period (in thousands) ......... $78.9

Ratio of Expenses to Average Net Assets* (b) ........... 1.33%

Ratio of Net Investment Income to Average Net Assets* .. 1.34%

Portfolio Turnover ..................................... 69% **

Average Commission Paid Per Equity Share Traded (c) .... $ .032

*If certain expenses had not been assumed by VKAC,
total return would have been lower and the ratios
would have been as follows:

Ratio of Expenses to Average Net Assets ................ 20.75%

Ratio of Net Investment Income to Average Net Assets ... -18.07%

</TABLE>

(a) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

(b) The Ratio of Expenses to Average Net Assets is based upon Total Expenses
which does not reflect credits earned on overnight cash balances. (Note 1)

(c) Represents the average brokerage commissions paid on equity transactions
entered into during the period for trades where commissions were
applicable.

** Non-Annualized

See Notes to Financial Statements

<PAGE> 125

VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

The following schedule presents financial highlights for one share
of the fund outstanding throughout the period indicated.

<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
OF INVESTMENT
OPERATIONS) TO
CLASS B SHARES JUNE 30, 1996
- ----------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of the Period .......................... $10.000
-------
Net Investment Income ........................................... 0.072
Net Realized and Unrealized Gain on Securities .................. 1.240
-------

Total from Investment Operations .................................. 1.312
Less Distributions from Net Investment Income ..................... 0.019
-------
Net Asset Value, End of the Period ................................ $11.293
=======
Total Return * (a) ................................................ 13.19% **
Net Assets at End of the Period (in thousands) .................... $73.4
Ratio of Expenses to Average Net Assets* (b) ...................... 1.33%
Ratio of Net Investment Income to Average Net Assets* ............. 1.34%
Portfolio Turnover ................................................ 69% **
Average Commission Paid Per Equity Share Traded (c) ............... $.032

*If certain expenses had not been assumed by VKAC, total return would
have been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets ............................. 20.75%

Ratio of Net Investment Income to Average Net Assets ................ -18.07%

</TABLE>

(a) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

(b) The Ratio of Expenses to Average Net Assets is based upon Total Expenses
which does not reflect credits earned on overnight cash balances. (Note 1)

(c) Represents the average brokerage commissions paid on equity transactions
entered into during the period for trades where commissions were
applicable.

** Non-Annualized
See Notes to Financial Statements

<PAGE> 126

VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

The following schedule presents financial highlights for one share
of the fund outstanding throughout the period indicated.

<TABLE>
<CAPTION>
DECEMBER 27, 1995
(COMMENCEMENT
OF INVESTMENT
OPERATIONS) TO
CLASS C SHARES JUNE 30, 1996
- ----------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of the Period ......................... $10.000
-------

Net Investment Income .......................................... 0.072
Net Realized and Unrealized Gain on Securities ................. 1.240
-------

Total from Investment Operations ................................. 1.312
Less Distributions from Net Investment Income .................... 0.019
-------
Net Asset Value, End of the Period ............................... $11.293
=======
Total Return * (a) ............................................... 13.19% **
Net Assets at End of the Period (in thousands) ................... $73.4
Ratio of Expenses to Average Net Assets* (b) ................... 1.33%
Ratio of Net Investment Income to Average Net Assets* ............ 1.34%
Portfolio Turnover ............................................... 69% **
Average Commission Paid Per Equity Share Traded (c) .............. $.032

*If certain expenses had not been assumed by VKAC, total return would
have been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets ............................ 20.75%

Ratio of Net Investment Income to Average Net Assets ............... -18.07%

</TABLE>

(a) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

(b) The Ratio of Expenses to Average Net Assets is based upon Total Expenses
which does not reflect credits earned on overnight cash balances. (Note
1)

(c) Represents the average brokerage commissions paid on equity transactions
entered into during the period for trades where commissions were
applicable.

** Non-Annualized

See Notes to Financial Statements

<PAGE> 127

VAN KAMPEN AMERICAN CAPITAL
PROSPECTOR FUND
Notes to Financial Statements
June 30, 1996

1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Prospector Fund (the "Fund") is organized as a
series of Van Kampen American Capital Equity Trust, a Delaware business trust
(the "Trust") and is registered as a diversified open-end management investment
company under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek capital growth and income through investing
principally in income producing equity securities and other equity securities.
The Fund commenced investment operations on December 27, 1995, with three
classes of common shares, Class A, Class B and Class C shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange or, if not available, their fair market value as determined by the
Board of Trustees. Short-term securities with remaining maturities of less than
60 days are valued at amortized cost.

B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
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 by Van
Kampen American Capital Investment Advisory Corp. (the "Adviser"), the daily
aggregate of which is invested in repurchase agreements. Repurchase agreements
are collateralized by the underlying debt security. The Fund will make payment
for such securities only upon physical delivery or evidence of book entry
transfer to the account of the custodian bank. The seller is required to
maintain the value of the underlying security at not less than the repurchase
proceeds due the Fund.

C. INVESTMENT INCOME - Dividend income is recorded on the ex-dividend date.

D. ORGANIZATIONAL EXPENSES - The Fund will reimburse Van Kampen American
Capital Distributors, Inc. or its affiliates ("collectively VKAC") for costs
incurred in connection with the Fund's organization in the amount of $40,000.
These costs are being amortized on a straight line basis over the 60 month
period ending December 26, 2000. The Adviser has agreed that in the event any
of the initial shares of the Fund originally purchased by VKAC are redeemed
during the amortization period, the Fund will be reimbursed for any unamortized
organizational expenses in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.

F. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually.

G. EXPENSE REDUCTIONS - During the period ended June 30, 1996, the Fund's
custody fee was reduced by $83 as a result of credits earned on overnight cash
balances.

Average Net Assets % Per Annum
- --------------------------------------
First $500 million .70%
Next $500 million .65%
Over $1 billion .60%

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.
For the period ended June 30, 1996, the Fund incurred expenses of
approximately $1,000 representing VKAC's cost of providing accounting services
to the Fund. These services are provided by VKAC at cost. All of this cost has
been waived by VKAC.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund has implemented deferred compensation and retirement plans for
its trustees. Under the deferred compensation plan, trustees may elect to
defer all or a portion of their compensation to a later date. The retirement
plan covers those trustees who are not officers of VKAC.
At June 30, 1996, VKAC owned all shares of Classes A, B and C,
respectively.

<PAGE> 128

VAN KAMPEN AMERICAN CAPITAL
PROSPECTOR FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996

3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of common shares, Classes A, B and C,
each with a par value of $.01 per share. There are an unlimited number of
shares of each class without par value authorized. At June 30, 1996, capital
aggregated $70,000, $65,000 and $65,000 for Classes A, B and C, respectively.
Class B and Class C shares are offered without a front end sales charge,
but are subject to a contingent deferred sales charge (CDSC). The CDSC will be
imposed on most redemptions made within six years of the purchase for Class B
and one year of the purchase for Class C as detailed in the following schedule.
The Class B and Class C shares bear the expense of their respective deferred
sales arrangements, including higher distribution and service fees and
incremental transfer agency costs.

Contingent Deferred
Sales Charge

Class B Class C
Year of Redemption Shares Shares
- --------------------------------------------------
First 4.00% 1.00%
Second 3.75% None
Third 3.50% None
Fourth 2.50% None
Fifth 1.50% None
Sixth 1.00% None
Seventh and Thereafter None None

4. INVESTMENT TRANSACTIONS
During the period, the cost of purchased and proceeds from sales, excluding
short-term investments, were $332,687 and $143,680, respectively.

5. DISTRIBUTION AND SERVICE PLANS
The Fund and its Shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
The Fund's net assets are subject to annual fees under the Plans of up to
.25% for Class A shares and 1.00% each for Class B and Class C shares. No fees
related to the Plans have been accrued by the Fund as the Fund is currently
owned solely by affiliated persons.

<PAGE> 129

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital Prospector Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Prospector Fund (the "Fund"), including the portfolio of
investments, the related statement of operations, the statement of changes in
net assets and the financial highlights for the period from December 27, 1995
(commencement of investment operations) to June 30, 1996. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of June 30, 1996, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen American Capital Prospector Fund as of June 30, 1996, the results of its
operations, the changes in its net assets and financial highlights for the
period from December 27, 1995 (commencement of investment operations) to June
30, 1996, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
August 15, 1996

<PAGE> 130
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

BOARD OF TRUSTEES

OFFICERS

DON G. POWELL*
President and Chief Executive Officer

DENNIS J. MCDONNELL*
Executive Vice President

RONALD A, NYBERG*
Vice President and Secretary

EDWARD C, WOOD, III*
Vice President and Chief Financial Officer

CURTIS W. MORELL*
Vice President and Chief Accounting Officer

JOHN L. SULLIVAN*
Treasurer

TANYA M. LODEN*
Controller

WILLIAM N. BROWN*
PETER W. HEGEL*
ROBERT C, PECK, JR.*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

DISTRIBUTOR

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

SHAREHOLDER SERVICING AGENT

ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256

CUSTODIAN

STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL

SKADDEN, ARPS, SLATE, MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601

*"Interested" persons of the Fund as defined in the
Investment Company Act of 1940

<PAGE> 131

TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Portfolio Highlights............................. 4
Portfolio Management Review...................... 5
Portfolio of Investments......................... 7
Statement of Assets and Liabilities.............. 11
Statement of Operations.......................... 12
Statement of Changes in Net Assets............... 13
Financial Highlights............................. 14
Notes to Financial Statements.................... 17
Independent Accountants' Report.................. 22
</TABLE>

AGG ANR 8/96
<PAGE> 132

LETTER TO SHAREHOLDERS

August 1, 1996

Dear Shareholder,
As you may be aware, an agreement
was reached in late June for VK/AC [PHOTO]
Holding, Inc., the parent company of
Van Kampen American Capital, Inc., to DENNIS J. MCDONNELL AND DON G. POWELL
be acquired by the Morgan Stanley
Group Inc. While this announcement
may appear commonplace in an
ever-changing financial industry, we
believe it represents an exciting
opportunity for shareholders of our investment products.

With Morgan Stanley's global leadership in investment banking and asset
management and Van Kampen American Capital's reputation for competitive
long-term performance and superior investor services, together we will offer a
broader range of investment opportunities and expertise.

Regarding the Aggressive Growth Fund, we are pleased to provide this first
shareholder report for the period ended June 30, 1996. Just over one month old,
the Fund offers investors another opportunity for capital growth potential
within our family of mutual funds. Included in the report, you will find
performance results since the Fund's inception on May 29, 1996, an interview
with the portfolio management team, and a comprehensive listing of the Fund's
holdings.

ECONOMIC REVIEW

Continued on page two

1
<PAGE> 133

EQUITY MARKET REVIEW
The stock market averages posted attractive gains for the period ended June
30, 1996, with most major averages posting all-time highs. The Dow Jones
Industrial Average rose approximately 24 percent from 4556 to 5654, and the
NASDAQ Composite Index rose approximately 27 percent from 933 to 1185.
Corporate earnings, which were an important contributors to last year's
strong stock market, continued to move ahead during the reporting period.
Unexpectedly strong economic activity helped lift reported profits above
expectations for the period. Through the rest of 1996, we expect earnings will
be supportive, but perhaps not the primary factor in the movement of the major
stock market averages.

OUTLOOK
We anticipate that reasonably strong economic growth will continue during
the balance of 1996, albeit at more moderate rates than the second quarter's
swift pace. While we expect rates of inflation to remain near current levels,
the Fed may begin to lean toward greater restraint in its monetary policy in the
coming months. That suggests an upward bias for short-term interest rates and
for yields on long-term bonds to remain steady at current levels. In particular,
we expect 10-year Treasury yields to remain within a trading range of 6.50 and
7.25 percent.
We appreciate your continued confidence in your investment with Van Kampen
American Capital.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

2
<PAGE> 134

PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1996

VAN KAMPEN AMERICAN CAPITAL AGGRESSIVE GROWTH FUND

<TABLE>
<CAPTION>
TOTAL RETURNS A SHARES B SHARES C SHARES
<S> <C> <C> <C>
Since inception total return based on
NAV(1)............................... (3.29%) (3.39%) (3.39%)
Since inception total return(2)........ (8.89%) (8.22%) (4.36%)
Commencement date...................... 05/29/96 05/29/96 05/29/96
</TABLE>

(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for A shares) or contingent
deferred sales charge for early withdrawal (5.00% for B and 1.00% for C shares).

(2) Standardized total return. Assumes reinvestment of all distributions for
the period and includes payment of the maximum sales charge (A shares) or
contingent deferred sales charge for early withdrawal (B and C shares).

See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth more
or less than their original cost.

3
<PAGE> 135

PORTFOLIO HIGHLIGHTS

VAN KAMPEN AMERICAN CAPITAL AGGRESSIVE GROWTH FUND

TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C>
Cascade Communications ... 2.0%
PairGain Technologies,
Inc. ................... 2.0%
Sitel Corp. .............. 2.0%
Shiva Corp. .............. 1.9%
Viasoft, Inc. ............ 1.9%
DSP Communications,
Inc. ................... 1.9%
HBO and Co. .............. 1.9%
Chesapeake Energy
Corp. .................. 1.8%
McAfee Associates,
Inc. ................... 1.8%
Claires Stores, Inc. ..... 1.8%
</TABLE>

TOP FIVE PORTFOLIO HOLDINGS BY SECTOR

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C>
Technology .................... 29%
Consumer Services ............. 19%
Health Care ................... 12%
Consumer Distribution ......... 11%
Energy ........................ 9%
</TABLE>

4
<PAGE> 136

PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL AGGRESSIVE GROWTH FUND

We recently spoke with the management team of the Van Kampen American Capital
Aggressive Growth Fund about the key events and economic forces that shaped the
markets during the period since the Fund's inception. 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 one-month period ended June 30, 1996.

Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?

A The Fund has been in existence for just over one month, so its returns are
based on an extremely short timeframe. During the reporting period (May 29
to June 30, 1996), the Fund generated a total return of -3.29 percent(1)
(Class A shares at net asset value). By comparison, the Standard & Poor's
500-Stock Index returned 0.79 percent while the Russell 2000 Stock Index
returned -4.11 percent. Keep in mind that the S&P 500-Stock Index is a
broad-based, unmanaged index that reflects general stock market performance. The
Russell 2000 Stock Index reflects the general performance of smaller
capitalization stocks. Neither of these indexes reflect any commissions or fees
that would be paid by an investor purchasing the securities they represent.
Please refer to the chart on page three for additional Fund performance results.

Q WHICH FACTORS HAD THE GREATEST IMPACT ON THE FUND'S PERFORMANCE?

A Because the Fund's performance record is short, it is difficult to
pinpoint all factors that may have substantially affected the portfolio.
Performance in June reflected a sell-off in technology and other smaller
company stocks during the last few days of the month. Although this can explain
the Fund's short-term loss, it also has presented us with a number of buying
opportunities.
When comparing the Fund's performance to the S&P 500, it is important to
note that the Fund's focus is on small company stocks. The S&P 500 Index
generally measures the performance of stocks of larger capitalization companies.
The Fund outperformed the Russell 2000 Stock Index--a more representative
benchmark that will be used in future reports to discuss the Fund's relative
performance to the market.

Q WHICH OF THE FUND'S HOLDINGS PERFORMED WELL DURING THE REPORTING PERIOD?

A Because many of the Fund's holdings have been part of the Fund for only a
few weeks, it is too early to label any stocks as the "best" performers.
The Fund's utility holdings (ACC Corp. and Cincinnati Bell), financial
holdings (Aames Financial and Imperial Credit), and energy holdings (Chesapeake
Energy Corp. and Forcenergy) appear to be the early winners. Please refer to
page four for Fund portfolio highlights.

5
<PAGE> 137

Q DO OPPORTUNITIES STILL EXIST IN THE TECHNOLOGY SECTOR?

A At the end of the reporting period, technology stocks comprised about 29
percent of the Fund's portfolio. This is a relatively low weighting
compared to many of our peers. We believe some technology stocks have
strong growth potential, but we do not see them posting the record gains they
enjoyed in 1995. Opportunities continue to exist in this sector. As 1996
progresses, we intend to use our disciplined stock selection approach to invest
in technology companies that offer strong earnings growth potential and possess
a competitive edge in the marketplace.
Q WHAT IS YOUR OUTLOOK FOR STOCKS IN THE SECOND HALF OF 1996?

A We are cautiously optimistic for three reasons: the number of potential
buying opportunities, the Fund's small size and relative youth, and its
inherent flexibility.
The market has not experienced a meaningful correction in over two years. We
believe the odds of a correction, especially among more aggressive smaller
company stocks, is high. At the same time, we view any fallback in the market as
a potential buying opportunity. Going forward, we look for technology and energy
stocks to offer the greatest growth potential, while health care and retail
stocks may lag behind. We are in the process of structuring the portfolio to
reflect this view.
Another reason to be optimistic is the Fund's small size and relative youth.
Because it has fewer assets than many of its peers, the Fund has the flexibility
to acquire or liquidate positions more quickly than larger funds. This can be an
advantage in seeking above-average returns.
Finally, because of the Fund's flexible nature, it is free to select stocks
of any market capitalization. This means it has the freedom, unlike many
small-cap funds, to invest in stocks of any size company.

[SIG]
Alan T. Sachtleben

Executive Vice President
Equity Investments

[SIG]
Gary M. Lewis

Portfolio Manager

Please see footnotes on page three

6
<PAGE> 138

PORTFOLIO OF INVESTMENTS

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security Description Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS
CONSUMER DISTRIBUTION 10.2%
Central Garden & Pet Co. (b).................................... 30,000 $ 540,000
Claires Stores, Inc............................................. 35,000 966,875
CompUSA, Inc. (b)............................................... 10,000 341,250
Consolidated Stores Corp. (b)................................... 11,000 404,250
ICT Group, Inc. (b)............................................. 9,000 173,250
Just For Feet, Inc. (b)......................................... 9,000 475,875
Regis Corp...................................................... 23,000 718,750
Ross Stores, Inc................................................ 8,000 278,000
Tiffany & Co.................................................... 8,000 584,000
TJX Cos., Inc................................................... 20,000 675,000
U.S. Office Products Co. (b).................................... 22,000 924,000
-----------
6,081,250
-----------
CONSUMER DURABLES 3.8%
Blyth Industries, Inc. (b)...................................... 16,000 726,000
Bush Industries, Inc............................................ 15,000 340,000
Gentex Corp. (b)................................................ 24,000 468,000
Sturm Ruger & Co., Inc.......................................... 16,000 744,000
-----------
2,278,000
-----------
CONSUMER NON-DURABLES 2.5%
Borders Group, Inc. (b)......................................... 10,000 322,500
Fila Holdings S.P.A. - ADR (Italy).............................. 11,000 948,750
Gadzooks, Inc. (b).............................................. 8,000 258,000
-----------
1,529,250
-----------
CONSUMER SERVICES 16.9%
Accustaff, Inc. (b)............................................. 14,000 381,500
Anchor Gaming................................................... 15,000 903,750
Apollo Group, Inc., Class A (b)................................. 20,000 560,000
Bally Entertainment Corp. (b)................................... 9,000 247,500
CKE Restaurants, Inc............................................ 15,000 382,500
Clear Channel Communications, Inc. (b).......................... 11,000 906,125
Corestaff, Inc. (b)............................................. 15,000 671,250
Corrections Corp. of America (b)................................ 6,000 420,000
Dave & Buster's, Inc. (b)....................................... 20,000 535,000
Doubletree Corp. (b)............................................ 25,000 887,500
Gartner Group, Inc. (b)......................................... 5,000 183,125
HFS, Inc. (b)................................................... 12,000 840,000
Rainforest Cafe, Inc. (b)....................................... 18,000 900,000
Regal Cinemas, Inc. (b)......................................... 16,000 732,000
</TABLE>

See Notes to Financial Statements

7
<PAGE> 139

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security Description Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
Romac International, Inc. (b)................................... 20,000 $ 510,000
Sitel Corp. (b)................................................. 25,000 1,050,000
-----------
10,110,250
-----------
ENERGY 8.0%
Benton Oil & Gas Co. (b)........................................ 20,000 440,000
Chesapeake Energy Corp. (b)..................................... 16,500 988,625
Cliffs Drilling Co. (b)......................................... 15,000 510,000
Comstock Resources, Inc. (b).................................... 35,000 356,563
Diamond Offshore Drilling (b)................................... 12,000 687,000
Energy Ventures, Inc. (b)....................................... 18,000 585,000
Forcenergy Gas Exploration, Inc. (b)............................ 15,000 283,125
Global Marine, Inc. (b)......................................... 40,000 555,000
Global Natural Resources, Inc. (b).............................. 12,000 196,500
Marine Drilling Co., Inc. (b)................................... 20,000 202,500
-----------
4,804,313
-----------
FINANCE 2.6%
Aames Financial Corp............................................ 22,000 789,250
Imperial Credit Industries, Inc. (b)............................ 25,000 756,250
-----------
1,545,500
-----------
HEATH CARE 11.1%
Advanced Technology Labs, Inc. (b).............................. 6,000 219,000
Curative Technologies, Inc. (b)................................. 30,000 787,500
FPA Medical Management, Inc. (b)................................ 15,000 233,438
Guidant Corp.................................................... 9,000 443,250
HBO & Co........................................................ 15,000 1,016,250
Health Management Systems, Inc. (b)............................. 10,000 317,500
Hologic, Inc. (b)............................................... 20,000 885,000
Jones Medical Industries, Inc................................... 6,000 199,500
Medicis Pharmaceutical, Class A (b)............................. 10,000 412,500
Minimed, Inc. (b)............................................... 25,000 743,750
Protocol System, Inc. (b)....................................... 20,000 460,000
Quintiles Transnational Corp. (b)............................... 5,000 328,750
Rexall Sundown, Inc. (b)........................................ 10,000 270,000
U.S. Diagnostic Labs, Inc. (b).................................. 25,000 303,125
-----------
6,619,563
-----------
</TABLE>

See Notes to Financial Statements

8
<PAGE> 140

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security Description Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING 5.1%
Coastcast Corp. (b)............................................. 21,000 $ 399,000
JLG Industries, Inc............................................. 3,000 222,750
Oregon Metallurgical Corp. (b).................................. 8,000 236,000
Sanifill, Inc. (b).............................................. 14,000 689,500
U.S. Filter Corp. (b)........................................... 20,000 695,000
United Waste Systems, Inc. (b).................................. 25,000 806,250
-----------
3,048,500
-----------
TECHNOLOGY 26.0%
Acxiom Corp. (b)................................................ 20,000 682,500
Ascend Communications, Inc. (b)................................. 6,000 337,500
Cadence Design Systems, Inc. (b)................................ 19,000 641,250
Cascade Communications (b)...................................... 16,000 1,088,000
Check Point Software Technology Ltd............................. 9,800 235,200
Checkpoint Systems, Inc. (b).................................... 21,000 721,875
Cisco Systems, Inc. (b)......................................... 14,000 792,750
Citrix Systems, Inc. (b)........................................ 10,000 380,000
Clarify, Inc. (b)............................................... 15,000 742,500
Cooper & Chyan Technology, Inc. (b)............................. 21,000 459,375
Davox Corp. (b)................................................. 6,000 177,000
DSP Communications, Inc. (b).................................... 20,000 1,027,500
McAfee Associates, Inc. (b)..................................... 20,000 980,000
Microlog Corp. (b).............................................. 20,000 190,000
PairGain Technologies, Inc. (b)................................. 17,000 1,054,000
Proxim, Inc. (b)................................................ 6,000 241,500
Rational Software Corp. (b)..................................... 5,000 268,750
Saville Systems Ireland PLC - ADR (Ireland) (b)................. 8,000 221,000
SDL, Inc. (b)................................................... 6,000 166,500
Shiva Corp. (b)................................................. 13,000 1,040,000
Siebel Systems, Inc. (b)........................................ 4,800 147,600
U.S. Robotics Corp. (b)......................................... 10,000 855,000
Uniphase Corp. (b).............................................. 25,000 887,500
Unison Software, Inc. (b)....................................... 23,000 580,750
Verilink Corp. (b).............................................. 5,000 127,500
Viasoft, Inc. (b)............................................... 16,000 1,034,000
Visio Corp. (b)................................................. 7,000 252,000
Vitesse Semiconductor Corp. (b)................................. 10,000 240,000
-----------
15,571,550
-----------
</TABLE>

See Notes to Financial Statements

9
<PAGE> 141

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

(a) At June 30, 1996, cost for federal income tax purposes is $53,675,342; the
aggregate gross unrealized appreciation is $2,119,998, and the aggregate
gross unrealized depreciation is $2,071,664, resulting in net unrealized
appreciation of $48,334.

(b) Non-income producing security as this stock currently does not declare
dividends.

See Notes to Financial Statements

10
<PAGE> 142

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $53,675,342) (Note 1)................. $53,723,676
Short-Term Investments (Note 1).......................................... 8,602,363
Cash..................................................................... 1,858
Receivables:
Fund Shares Sold....................................................... 6,773,470
Securities Sold........................................................ 1,828,346
Dividends.............................................................. 3,058
Other.................................................................. 2,833
Unamortized Organizational Expenses (Note 1)............................. 78,685
-----------
Total Assets....................................................... 71,014,289
-----------
LIABILITIES:
Payables:
Securities Purchased................................................... 11,035,442
Organizational Expenses................................................ 80,000
Fund Shares Repurchased................................................ 41,318
Distributor and Affiliates (Notes 2 and 5)............................. 19,545
Accrued Expenses......................................................... 23,216
Deferred Compensation and Retirement Plans (Note 2)...................... 5,125
-----------
Total Liabilities.................................................. 11,204,646
-----------
NET ASSETS............................................................... $59,809,643
===========
NET ASSETS CONSIST OF:
Capital (Note 3)......................................................... $60,637,864
Net Unrealized Appreciation on Securities................................ 48,334
Accumulated Net Investment Loss.......................................... (5,125)
Accumulated Net Realized Loss on Securities.............................. (871,430)
-----------
NET ASSETS............................................................... $59,809,643
-----------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $30,349,540 and 3,328,511 shares of capital stock issued and
outstanding) (Note 3)................................................ $ 9.12
Maximum sales charge (5.75%* of offering price)...................... .56
-----------
Maximum offering price to public......................................... $ 9.68
===========
Class B Shares:
Net asset value and offering price per share (Based on net assets of
$25,519,629 and 2,800,801 shares of capital stock issued and
outstanding) (Note 3)................................................ $ 9.11
===========
Class C Shares:
Net asset value and offering price per share (Based on net assets of
$3,940,474 and 432,385 shares of capital stock issued and
outstanding) (Note 3)................................................ $ 9.11
===========
*On sales of $50,000 or more, the sales charge will be reduced.
</TABLE>

See Notes to Financial Statements

11
<PAGE> 143

STATEMENT OF OPERATIONS

For the Period May 29, 1996 (Commencement of
Investment Operations) through June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................... $ 20,736
Dividends.................................................................. 3,158
---------
Total Income........................................................... 23,894
---------
EXPENSES:
Investment Advisory Fee (Note 2)........................................... 21,339
Distribution (12b-1) and Service Fees (Allocated to Classes A, B and C of
$4,056, $12,173 and $1,931 respectively) (Note 5)........................ 18,160
Audit Fees................................................................. 17,500
Trustees Fees and Expenses (Note 2)........................................ 8,750
Amortization of Organizational Expenses (Note 1)........................... 1,315
Legal (Note 2)............................................................. 1,000
Shareholder Services (Note 2).............................................. 1,000
Accounting (Note 2)........................................................ 385
Other...................................................................... 3,613
---------
Total Expenses......................................................... 73,062
Less Fees Waived and Expenses Reimbursed ($21,339 and $1,659,
respectively)........................................................ 22,998
---------
Net Expenses........................................................... 50,064
---------
NET INVESTMENT LOSS........................................................ $ (26,170)
=========
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Loss on Investments........................................... $(871,430)
---------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period.................................................. 0
End of the Period:
Investments............................................................ 48,334
---------
Net Unrealized Appreciation on Securities During the Period................ 48,334
---------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES............................. $(823,096)
=========
NET DECREASE IN NET ASSETS FROM OPERATIONS................................. $(849,266)
=========
</TABLE>

See Notes to Financial Statements

12
<PAGE> 144

STATEMENT OF CHANGES IN NET ASSETS

For the Period May 29, 1996 (Commencement
of Investment Operations) through June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss....................................................... $ (26,170)
Net Realized Loss on Securities........................................... (871,430)
Net Unrealized Appreciation on Securities During the Period............... 48,334
------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES....................... (849,266)
------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................................................. 61,468,641
Cost of Shares Repurchased................................................ (812,561)
------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS........................ 60,656,080
------------
TOTAL INCREASE IN NET ASSETS.............................................. 59,806,814
NET ASSETS:
Beginning of the Period................................................... 2,829
------------
End of the Period (Including accumulated net investment loss of
$(5,125))............................................................... $ 59,809,643
============
</TABLE>

See Notes to Financial Statements

13
<PAGE> 145

FINANCIAL HIGHLIGHTS

The following schedule presents financial highlights for one share of
the Fund outstanding throughout the period indicated.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
May 29, 1996
(Commencement
of Investment
Operations) to
Class A Shares June 30, 1996
- -----------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period.................................... $9.430
------
Net Investment Loss................................................... (.002)
Net Realized and Unrealized Loss on Securities........................ (.310)
------
Total from Investment Operations........................................ (.312)
------
Net Asset Value, End of Period.......................................... $9.118
======
Total Return* (a)....................................................... (3.29%)**
Net Assets at End of Period (In millions)............................... $30.3
Ratio of Expenses to Average Net Assets*................................ 1.29%
Ratio of Net Investment Loss to Average Net Assets*..................... (.50%)
Portfolio Turnover...................................................... 4%**
Average Commission Paid Per Equity Share Traded (b)..................... $.031
*If certain expenses had not been assumed by VKAC, total return would
have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets................................. 2.05%
Ratio of Net Investment Loss to Average Net Assets...................... (1.25%)
**Non-Annualized
(a) Total return is based upon net asset value which does not include
payment of the maximum sales charge or contingent deferred sales
charge.
(b) Represents the average brokerage commissions paid on equity
transactions entered into during the period for trades where
commissions were applicable.
</TABLE>

See Notes to Financial Statements

14
<PAGE> 146

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
May 29, 1996
(Commencement
of Investment
Operations) to
Class B Shares June 30, 1996
- ---------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period.................................... $9.430
------
Net Investment Loss................................................... (.006)
Net Realized and Unrealized Loss on Securities........................ (.312)
------
Total from Investment Operations........................................ (.318)
------
Net Asset Value, End of Period.......................................... $9.112
======
Total Return* (a)....................................................... (3.39%)**
Net Assets at End of Period (In millions)............................... $25.5
Ratio of Expenses to Average Net Assets*................................ 2.06%
Ratio of Net Investment Loss to Average Net Assets*..................... (1.28%)
Portfolio Turnover...................................................... 4%**
Average Commission Paid Per Equity Share Traded (b)..................... $.031
*If certain expenses had not been assumed by VKAC, total return would
have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets................................. 2.81%
Ratio of Net Investment Loss to Average Net Assets...................... (2.04%)
</TABLE>

**Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(b) Represents the average brokerage commission paid on equity transactions
entered into during the period for trades where commissions were applicable.

See Notes to Financial Statements

15
<PAGE> 147

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
May 29, 1996
(Commencement
of Investment
Operations) to
Class C Shares June 30, 1996
- ---------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period................................... $9.430
------
Net Investment Loss.................................................. (.006)
Net Realized and Unrealized Loss on Securities....................... (.311)
------
Total from Investment Operations....................................... (.317)
------
Net Asset Value, End of Period......................................... $9.113
======
Total Return* (a)...................................................... (3.39%)**
Net Assets at End of Period (In millions).............................. $3.9
Ratio of Expenses to Average Net Assets*............................... 2.05%
Ratio of Net Investment Loss to Average Net Assets*.................... (1.28%)
Portfolio Turnover..................................................... 4%**
Average Commission Paid Per Equity Share Traded (b).................... $.031
*If certain expenses had not been assumed by VKAC, total return would
have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets................................ 2.81%
Ratio of Net Investment Loss to Average Net Assets..................... (2.04%)
**Non-Annualized
</TABLE>

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(b) Represents the average brokerage commission paid on equity transactions
entered into during the period for trades where commissions were applicable.

See Notes to Financial Statements

16
<PAGE> 148

NOTES TO FINANCIAL STATEMENTS

June 30, 1996
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Aggressive Growth Fund (the "Fund") is organized as
a separate diversified series of Van Kampen American Capital Equity Trust (the
"Trust"), a Delaware business trust, which is registered as an open-end
management investment company under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek capital growth by investing
primarily in a diversified portfolio of common stocks and other equity
securities. The Fund commenced investment operations on May 29, 1996 with three
classes of common shares, Class A, Class B and Class C.

A. SECURITY VALUATION--Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Investments in securities not listed on a securities exchange are valued based
on their last sales price or, if not available, their fair value as determined
by the Board of Trustees. Short-term securities with remaining maturities of
less than 60 days are valued at amortized cost.

B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.

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 by Van Kampen American
Capital Investment Advisory Corp. (the "Adviser"), the daily aggregate of which
is invested in repurchase agreements. Repurchase agreements are collateralized
by the underlying debt security. The Fund will make payment for such securities
only upon physical delivery or evidence of book entry transfer to the account of
the custodian bank. The seller is required to maintain the value of the
underlying security at not less than the repurchase proceeds due the Fund.

17
<PAGE> 149

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

C. INVESTMENT INCOME--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis.

D. ORGANIZATIONAL EXPENSES--The Fund will reimburse Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Fund's organization in the amount of $80,000. These costs
are being amortized on a straight line basis over the 60 month period ending May
28, 2001. The Adviser has agreed that in the event any of the initial shares of
the Fund originally purchased by VKAC are redeemed by the Fund during the
amortization period, the Fund will be reimbursed for any unamortized
organizational expenses in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.

Net realized gains or losses may differ for financial and tax reporting purposes
primarily as a result of post October 31 losses which are not recognized for tax
purposes until the first day of the following fiscal year.

F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
annually from net investment income and, if any, net realized gains.

For federal income tax purposes, net operating losses may not be used to offset
income generated in future tax years. Therefore, $21,045 of net investment loss
generated by the Fund has been reclassified from accumulated net investment loss
to capital. Due to inherent differences in the recognition of certain expenses
under generally accepted accounting principles and federal income tax purposes,
the amount of net investment income may differ between book and federal income
tax purposes for a particular period. These differences are temporary in nature,
but may result in book basis net investment losses for certain periods.

18
<PAGE> 150

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $500 million...................................... .75 of 1%
Next $500 million....................................... .70 of 1%
Over $1 billion......................................... .65 of 1%
</TABLE>

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.

For the period ended June 30, 1996, the Fund recognized expenses
representing Van Kampen American Capital Distributors, Inc.'s or its affiliates'
(collectively "VKAC") cost of providing accounting services to the Fund. These
services are provided by VKAC at cost.

ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as the
shareholder servicing agent for the Fund. For the period ended June 30, 1996,
the Fund recognized expenses of approximately $1,000, representing ACCESS' cost
of providing transfer agency and shareholder services plus a profit.

Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.

At June 30, 1996, VKAC owned 100 shares each of Classes A, B and C.

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of common shares, Classes A, B and C each
with a par value of $.01 per share. There are an unlimited number of shares of
each class authorized.

19
<PAGE> 151

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1996, capital aggregated $30,826,758, $25,826,587 and $3,984,519
for Classes A, B, and C, respectively. For the period ended June 30, 1996,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A..................................... 3,364,245 $31,165,017
Class B..................................... 2,845,703 26,235,112
Class C..................................... 441,454 4,068,512
--------- -----------
Total Sales................................... 6,651,402 $61,468,641
========= ===========
Repurchases:
Class A..................................... (35,834) $ (327,971)
Class B..................................... (45,002) (400,997)
Class C..................................... (9,169) (83,593)
--------- -----------
Total Repurchases............................. (90,005) $ (812,561)
========= ===========
</TABLE>

Class B and C Shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and C
shares will be imposed on most redemptions made within six years of the purchase
for Class B and one year of the purchase for Class C as detailed in the
following schedule. The Class B and C shares bear the expense of their
respective deferred sales arrangements, including higher distribution and
service fees and incremental transfer agency costs.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALE CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------------------------------------
<S> <C> <C>
First........................................... 5.00% 1.00%
Second.......................................... 4.00% None
Third........................................... 3.00% None
Fourth.......................................... 2.50% None
Fifth........................................... 1.50% None
Sixth and Thereafter............................ None None
</TABLE>

For the period ended June 30, 1996, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$147,000 and CDSC on redeemed shares of approximately $2,800. Sales charges do
not represent expenses of the Fund.

20
<PAGE> 152

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $56,490,022 and $1,943,250, respectively.

5. DISTRIBUTION AND SERVICE PLANS

The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.

Annual fees under the Plans of up to .25% of Class A shares and 1.00% each
of Class B and Class C shares are accrued daily. Included in these fees for the
period ended June 30, 1996, are payments to VKAC of approximately $11,100.

21
<PAGE> 153

INDEPENDENT ACCOUNTANT'S REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital Aggressive Growth Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Aggressive Growth Fund (the "Fund"), including the
portfolio of investments, the related statement of operations, the statement of
changes in net assets and the financial highlights for the period from May 29,
1996 (commencement of investment operations) through June 30, 1996. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Aggressive Growth Fund as of June 30, 1996, the results
of its operations, the changes in its net assets and financial highlights for
the period from May 29, 1996 (commencement of investment operations) through
June 30, 1996, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP
Chicago, Illinois
August 12, 1996

22
<PAGE> 154

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

THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund

23
<PAGE> 155

VAN KAMPEN AMERICAN CAPITAL AGGRESSIVE GROWTH FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN

LINDA HUTTON HEAGY

ROGER HILSMAN

R. CRAIG KENNEDY

DENNIS J. MCDONNELL*

DONALD C. MILLER - Co-Chairman

JACK E. NELSON

DON G. POWELL*

JEROME L. ROBINSON

FERNANDO SISTO - Co-Chairman

WAYNE W. WHALEN*

WILLIAM S. WOODSIDE

OFFICERS

DON G. POWELL*
President and Chief Executive Officer

DENNIS J. MCDONNELL*
Executive Vice President

RONALD A. NYBERG*
Vice President and Secretary

EDWARD C. WOOD, III*
Vice President and Chief Financial Officer

CURTIS W. MORRELL*
Vice President and Chief Accounting Officer

JOHN L. SULLIVAN*
Treasurer

TANYA M. LODEN*
Controller

WILLIAM N. BROWN*

PETER W. HEGEL*

ROBERT C. PECK, JR.*

ALAN T. SACHTLEBEN*

PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

DISTRIBUTOR

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

SHAREHOLDER SERVICING AGENT

ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256

CUSTODIAN

STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL

SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601

* "Interested" persons of the
Fund, as defined in the
Investment Company Act of 1940.

(SM) denotes a service mark of
Van Kampen American Capital
Distributors, Inc.