VAN KAMPEN MERRITT EQUITY TRUST, N-30D, 1996-02-28

VAN KAMPEN MERRITT EQUITY TRUST
N-30D, 1996-02-28

Previous: VANGUARD QUANTITATIVE PORTFOLIOS INC, 24F-2NT, 1996-02-28

Next: STANDISH AYER & WOOD INVESTMENT TRUST, 24F-2NT, 1996-02-28

<TABLE>

Table of Contents

<CAPTION>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Portfolio Management Review...................... 4
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 9
Statement of Operations.......................... 10
Statement of Changes in Net Assets............... 11
Financial Highlights............................. 12
Notes to Financial Statements.................... 15
</TABLE>

UTLF SAR 2/96

Letter to Shareholders

January 30, 1996

Dear Shareholder,
For most investors, it would be hard to surpass the success enjoyed
during the second half of 1995. After getting off to a strong start in the
first half of the year, the stock and bond markets continued to achieve
substantial gains, driven by a combination of continuing economic
growth and low inflation. The strength of equity and fixed-income securities
throughout 1995 was particularly impressive because it followed a year in
which both markets declined. People who remained invested during 1995 generally
shared in the growth of the markets, while those investors who retreated after
1994's downturn may have missed out on the double-digit returns.

The rebound in the markets last year reinforces the importance of
maintaining a long-term perspective for your investments. While the
environment for stocks and bonds remains positive, it is unlikely that 1996
will see a repeat of the markets' strong 1995 performance. However, over the
long-term, stocks have outperformed virtually all other types of investments,
and bonds have met the needs of investors who seek capital preservation and
regular income.

[PHOTO]
Dennis J. McDonnell and Don G. Powell

Economic Overview

The rate of economic growth slowed during the second half of 1995, as
measured by the gross domestic product (the value of all goods and services
produced in the United States). GDP grew at an annual rate of more than 4.2
percent in the third quarter of 1995, but slowed to an estimated 2 to 3
percent in the fourth quarter, with retail and auto sales particularly
sluggish. The slower growth rate eased concerns about a rise in inflation and
allowed the Federal Reserve Board in late December to lower short-term
interest rates by a quarter-percentage point. The reduction in rates during
the latter half of 1995 is expected to help generate moderate economic growth
in 1996, just as the Fed's raising of short-term rates in 1994 helped slow
economic growth in 1995.
The cut in short-term rates, combined with modest growth forecasts, was
viewed by the financial markets as a positive event, pushing up both stock and
bond prices. For the six months ended December 31, 1995, the Standard & Poor's
500-Stock Index achieved a total return of 14.40 percent. The yield on 10-year
Treasury notes was 5.57 percent on December 31, compared to 6.20 percent on
June 30. Bond prices and yields move in opposite directions, so bond prices
rose. Many observers expect the Fed to cut rates further if Congress and the
President are able to reach an agreement on the federal budget, provided
economic conditions justify further easing.
With a low inflation, low interest rate environment, corporate earnings
remained quite strong during the year, helping to push stocks to new highs.
The strongest sectors were technology and finance, as these stocks benefited
from the impact of the Internet, telecommunications deregulation and bank
mergers. U.S. companies with global operations also did well, aided by a
declining U.S. dollar.

Continued on page two

Economic Outlook

Looking ahead, we are cautiously optimistic. We expect the economy to grow
at a rate of 2 to 3 percent throughout 1996, with growth stronger in the
second half of the year as the full impact of the Fed's rate cuts take effect.
Lower rates will have the greatest impact on interest-sensitive industries,
such as housing. Although inflation appears to be under control, there
probably will be some cyclical upward pressure in 1996.
The current economic conditions are ideal for stocks, especially those of
smaller companies, because they tend to be affected less by economic cycles.
The outlook for the fixed-income market--including municipal bonds--is
positive, too. In the near-term, we believe domestic markets will benefit from
a stable U.S. dollar and increased business activity driven in part by a
number of strategic reorganizations of some of the nation's blue chip industry
leaders.
During recent months, debate over tax reform and the federal deficit has
dominated the agenda in Washington. Now that we are in a presidential election
year, tax reform likely will replace the budget battle as the top issue in
Washington. There has been varied speculation about the impact of these issues
on the economy and on various types of investments. We are following the tax
reform debate very closely, and we will keep you updated on this issue
throughout the year. See the winter issue of "Your Portfolio" for a detailed
discussion of tax reform.
On the following pages, you can read about your Fund's performance in
1995, as well as the portfolio management team's outlook for the Fund in the
coming months. We hope that you will find this information helpful.

Corporate News

As part of our commitment to helping you achieve your investment goals,
Van Kampen American Capital strives to provide shareholders with the best
service in the mutual fund industry. That is why we are especially pleased to
have received the 1995 Quality Tested Service Seal, which is awarded annually
by DALBAR, Inc., an independent research firm. The Seal, which symbolizes the
achievement of the highest tier of service in the mutual fund industry, was
awarded to American Capital annually from 1990 to 1994 and we are honored that
the service provided by Van Kampen American Capital has achieved the same
level of excellence.

Sincerely,

Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Investment Advisory Corp. Investment Advisory Corp.

Performance Results for the Period Ended December 31, 1995
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<F1>. 25.69% 24.43% 24.54%
One-year total return<F2>.............. 18.47% 20.43% 23.54%
Life-of-Fund average annual total
return<F2>........................... 3.98% 4.35% 5.22%
Distribution rate<F3>.................. 3.76% 3.28% 3.28%
Commencement date...................... 07/28/93 07/28/93 08/13/93

<FN>
<F1>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).

<F2>Standardized total return. Assumes reinvestment of all distributions for the
period and includes 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).

<F3>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.
</TABLE>

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 which shaped the
markets during the past fiscal year. The team includes Mary Jayne Maly,
portfolio manager, and Alan T. Sachtleben, executive vice president, equity
investments. The following excerpts reflect their views on the Fund's
performance during the six-month period ended December 31, 1995.

Q: How did utility securities perform during the second half of
1995?

A: In general, utilities did well because the bond market did well.
The bond market reacted largely to the continuing drop in short-term interest
rates, as well as slowing economic growth. In addition, there was something
positive going on in each segment of the utility sector, providing an
additional boost to performance.

The price of electric utility securities benefited from an increasing
number of mergers and a softening by regulators on the issue of competition.
While we don't doubt that deregulation will become a reality, it appears that
it will happen more slowly than first thought, giving electric utilities time
to prepare for the new business environment.
In the telephone sector, a major telecommunications bill is pending before
the Congress that could have widespread implications for both local and
long-distance telephone companies. The bill could allow local phone companies
to begin providing long-distance service, which should boost their growth
rates. Also in the long-distance sector, AT&T announced a major restructuring
that Wall Street viewed favorably and that boosted its stock price.
The stocks of natural gas utilities benefited from the seasonal increase
in gas prices and the unusually cold winter that has affected much of the
country.

Q: What changes did you make to the portfolio in light of these
market conditions?

A: First, we increased our weighting in utilities versus non-utility
stocks; and, within utilities, we increased the percentage of the portfolio
invested in electric utilities,while decreasing slightly the amount invested
in telephone and gas companies. The valuation of electric utility stocks
remained attractive based on their dividend yields relative to other competing
investments. Additionally, Van Kampen American Capital Utilities
Income Fund was merged into Van Kampen American Capital Utility Fund
earlier this year. The merger went smoothly and did not significantly
change the structure of the portfolio. The diversification of the
portfolio at the end of December is illustrated by the chart below.

[PIE CHART]
Portfolio Holdings by Sector as a Percentage of Long-Term Investments as of
December 31, 1995

Electric 50.2%
Telecommunications 26.1%
Oil, Gas, Pipeline
and Distribution 18.7%
Other 5.0%

Q: How did the Fund perform during the reporting period?

A: Class A shares of the Fund achieved a total return at net asset value
of 15.79 percent<F1>. By comparison, the Standard & Poor's 40 Utilities Index
achieved a total return of 23.52 percent and the Lipper Utility Fund Index
achieved a total return of 14.21 percent. 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 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. The S&P 40 Utilities Index significantly out-performed most
utility funds during the reporting period because of the Index's heavy
weighting of telephone utility stocks, which achieved strong total returns.
(Please refer to the chart on page three for additional Fund performance
results.)

Q: What is the outlook for the Fund in the next six months?

A: Stocks and bonds are projected to perform well in 1996, but probably
not as well as last year. Since utility securities have usually done well when
bonds performed well, utilities should provide competitive returns this year.
We expect to maintain our position in electric and natural gas stocks, but
we may reduce the Fund's holdings of U.S. telephone stocks. We would take this
action for two reasons: first, telephone stocks did so well in 1995 that it
makes sense to take some profits from their gains, and, second, the stocks
probably will not perform as well this year. Additionally, we are beginning to
examine the stocks of some foreign telephone companies. However, because of
the special risks of foreign investing, we will proceed cautiously before
making any foreign investments.
The Fund is well positioned to take advantage of the positive fundamentals
occurring within the various utility sectors. Furthermore, because utility
stocks typically are considered to be defensive holdings, the securities in
the portfolio should be less vulnerable than others to an economic slowdown
and should provide stability regardless of economic conditions.

Alan T. Sachtleben Mary Jayne Maly
Executive Vice President Portfolio Manager
Equity Investments

Please see footnotes on page three

<TABLE>
<CAPTION>
Portfolio of Investments
December 31, 1995 (Unaudited)
- -----------------------------------------------------------------------------------------
Security
Description Shares Market Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Common and Preferred Stocks 91.1%
Buildings & Real Estate 2.0%
Bay Apartment Community Inc. ..................................... 65,000 $ 1,576,251
Cali Realty Corp. ................................................ 50,000 1,093,750
Debartolo Realty Corp. ........................................... 50,000 650,000
------------
3,320,001
------------
Electric Utilities 47.3%
Carolina Power & Light Co. ....................................... 97,000 3,346,500
CMS Energy Corp. ................................................. 117,000 3,495,375
Detroit Edison Co. ............................................... 99,000 3,415,500
DPL Inc. ......................................................... 132,700 3,284,325
DQE Inc. ......................................................... 123,391 3,794,273
Duke Power Co. ................................................... 55,740 2,640,683
Empresa Nacional de Electricidad -- ADR (Spain)................... 60,000 3,435,000
Florida Progress Corp. ........................................... 73,000 2,582,375
FPL Group Inc. ................................................... 80,000 3,710,000
General Public Utilities Corp. ................................... 104,175 3,541,950
Illinova Corp. ................................................... 120,000 3,600,000
National Grid Group............................................... 48,422 149,650
National Power PLC -- ADR (UK).................................... 64,500 596,625
New England Electric Systems...................................... 77,000 3,051,125
New York St Electric & Gas Corp. ................................. 102,000 2,639,250
Nipsco Inc. ...................................................... 93,800 3,587,850
Ohio Edison Co. .................................................. 118,000 2,773,000
P P & L Resources Inc. ........................................... 118,000 2,950,000
Peco Energy Co. .................................................. 101,923 3,070,430
Pinnacle West Capital Corp. ...................................... 125,400 3,605,250
Portland General Corp. ........................................... 117,000 3,407,625
Powergen PLC -- ADR (UK) <F2>..................................... 75,000 984,375
Rochester Gas & Electric Corp. ................................... 108,000 2,443,500
SCE Corp. ........................................................ 100,000 1,775,000
Teco Energy Inc. ................................................. 135,300 3,467,063
Texas Utilities Co. .............................................. 109,000 4,482,625
Unicom Corp. ..................................................... 95,000 3,111,250
Yorkshire Electric................................................ 64,000 663,954
------------
79,604,553
------------
Energy 1.2%
Repsol SA -- ADR (Spain).......................................... 60,300 1,982,362
------------
Oil, Gas, Pipeline and Distribution 16.4%
Coastal Corp. .................................................... 95,000 3,538,750
</TABLE>

See Notes to Financial Statements

<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
December 31, 1995 (Unaudited)
- -----------------------------------------------------------------------------------------
Security
Description Shares Market Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Oil, Gas, Pipeline and Distribution (Continued)
El Paso Natural Gas Co. ......................................... 80,000 $ 2,270,000
KN Energy Inc. ................................................... 87,313 2,542,991
MCN Corp. ........................................................ 124,000 2,883,000
National Fuel Gas Co. NJ.......................................... 84,300 2,834,587
Nicor Inc. ....................................................... 98,211 2,700,803
Northwest Natural Gas Co. ........................................ 30,300 999,900
Panhandle Eastern Corp. .......................................... 109,000 3,038,375
Southwest Gas Corp. .............................................. 100,000 1,762,500
TransCanada Pipelines Ltd. (Canada)............................... 125,000 1,718,750
Westcoast Energy Inc. (Canada).................................... 100,000 1,462,500
Williams Cos Inc. -- Preferred.................................... 25,000 1,856,250
------------
27,608,406
------------
Telecommunications 22.4%
Airtouch Communications Inc. <F2>................................. 106,700 3,014,275
Alltel Corp. ..................................................... 81,150 2,393,925
Ameritech Corp. .................................................. 61,670 3,638,530
AT & T Corp. ..................................................... 51,600 3,341,100
Bellsouth Corp. .................................................. 88,000 3,828,000
Century Telephone Enterprises Inc. ............................... 98,150 3,116,263
Frontier Corp. ................................................... 105,250 3,157,500
MCI Communications Corp. ......................................... 124,000 3,239,500
Nynex Corp. ...................................................... 71,000 3,834,000
Portugal Telecom SA -- ADR (Portugual) <F2>....................... 14,200 269,800
Royal PTT-ADR (Netherlands)....................................... 55,000 1,996,173
SBC Communications Inc. .......................................... 30,000 1,725,000
Telefonos De Mexico SA ADR (Mexico)............................... 73,000 2,326,875
U.S. West Inc. ................................................... 35,000 1,251,250
U.S. West Media Group <F2>........................................ 35,000 665,000
------------
37,797,191
------------
Water & Sewer Utilities 1.8%
American Water Works Inc. ........................................ 61,083 2,374,601
North West Water.................................................. 28,000 267,868
United Water Resources Inc. ...................................... 31,400 376,800
------------
3,019,269
------------
Total Common and Preferred Stocks......................................... 153,331,782
------------
Fixed Income Securities 6.7%
Electric Utilities 1.8%
Idaho Power Co. ($500,000 par, 8.000% coupon, 03/15/04 maturity,
S&P rating A)........................................................... 556,133
Iowa Electric Light & Power Co. ($700,000 par, 8.625% coupon,
05/15/01 maturity, S&P rating A)........................................ 786,197
</TABLE>

See Notes to Financial Statements

<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
December 31, 1995 (Unaudited)
- -----------------------------------------------------------------------------------------
Security
Description Market Value
- -----------------------------------------------------------------------------------------
<S> <C>
Electric Utilities (Continued)
Texas Utilities Electric Co. ($1,000,000 par, 8.250% coupon,
04/01/04 maturity, S&P rating BBB+)............................. $ 1,121,832
Union Electric Co. ($500,000 par, 7.375% coupon, 12/15/04
maturity, S&P rating AA-)....................................... 544,108
------------
3,008,270
------------
Telecommunications 3.0%
AT & T Corp. ($1,000,000 par, 7.500% coupon, 06/01/06 maturity,
S&P rating AA).................................................. 1,107,403
Cox Communications Inc. ($1,000,000 par, 6.875% coupon, 06/15/05
maturity, S&P rating A-)........................................ 1,039,710
GTE Corp. ($355,000 par, 9.375% coupon, 12/01/00 maturity, S&P
rating BBB+).................................................... 403,069
MCI Communications Corp. ($635,000 par, 7.500% coupon, 08/20/04
maturity, S&P rating A-)........................................ 697,499
Time Warner Inc. ($1,158,000 par, 8.750% coupon, 01/10/15
maturity, S&P rating BB+)....................................... 1,204,372
United Telecommunications Kansas ($617,000 par, 9.750% coupon,
04/01/00 maturity, S&P rating BBB).............................. 700,599
------------
5,152,652
------------
Oil, Gas, Pipeline and Distribution 1.9%
Colorado Interstate Gas Co. ($500,000 par, 10.000% coupon,
06/15/05 maturity, S&P rating BBB-)............................. 620,269
Enron Corp. ($1,000,000 par, 7.125% coupon, 05/15/07 maturity, S&P
rating BBB+).................................................... 1,062,662
Laclede Gas Co. ($330,000 par, 8.500% coupon, 11/15/04 maturity,
S&P
rating AA-)..................................................... 382,599
Panhandle Eastern Pipe Line Co. ($500,000 par, 7.875% coupon,
08/15/04 maturity, S&P rating BBB).............................. 553,911
Southwest Gas Corp. ($400,000 par, 9.750% coupon, 06/15/02
maturity, S&P rating BBB-)...................................... 468,018
Texas Eastern Transmission Corp. ($100,000 par, 8.000% coupon,
07/15/02 maturity, S&P rating BBB).............................. 110,087
------------
3,197,546
------------
Total Fixed Income Securities............................................. 11,358,468
------------
Total Long-Term Investments 97.8%
(Cost $144,008,160)<F1>................................................. 164,690,250
Short-Term Investments at Amortized Cost 2.3%............................. 3,844,386
Liabilities in Excess of Other Assets (0.1%).............................. (245,758)
------------
Net Assets 100%........................................................... $168,288,878
============

<FN>
<F1> At December 31, 1995, cost for federal income tax purposes is
$144,008,160; the aggregate gross unrealized appreciation is $22,425,936
and the aggregate gross unrealized depreciation is $1,743,953, resulting
in net unrealized appreciation including foreign currency translation of
$20,681,983.

<F2> Non-income producing security as this stock currently does not declare
dividends.
</TABLE>

See Notes to Financial Statements

<TABLE>
<CAPTION>
Statement of Assets and Liabilities
December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at Market Value (Cost $144,008,160) (Note 1).............. $164,690,250
Short-Term Investments (Note 1)........................................ 3,844,386
Cash................................................................... 3,053
Receivables:
Dividends............................................................ 767,710
Interest............................................................. 146,745
Fund Shares Sold..................................................... 75,851
Unamortized Organizational Expenses (Note 1)........................... 59,119
Other.................................................................. 15,501
------------
Total Assets..................................................... 169,602,615
------------
Liabilities:
Payables:
Income Distribution.................................................. 298,545
Investment Advisory Fee (Note 2)..................................... 241,052
Fund Shares Repurchased.............................................. 222,491
Accrued Expenses....................................................... 551,649
------------
Total Liabilities................................................ 1,313,737
------------
Net Assets............................................................. $168,288,878
============
Net Assets Consist of:
Capital (Note 3)....................................................... $160,186,557
Net Unrealized Appreciation on Investments............................. 20,681,983
Accumulated Distributions in Excess of Net Investment Income........... (23,562)
Accumulated Net Realized Loss on Investments........................... (12,556,100)
------------
Net Assets............................................................. $168,288,878
============
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $62,603,219
and 4,169,029 shares of capital stock issued and outstanding) (Note
3)................................................................. $ 15.02
Maximum sales charge (5.75%* of offering price).................... .92
------------
Maximum offering price to public................................... $ 15.94
============
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $100,685,595 and
6,706,347 shares of capital stock issued and outstanding) (Note
3)................................................................. $ 15.01
============
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $5,000,064 and
333,074 shares of capital stock issued and outstanding) (Note 3)... $ 15.01
============
</TABLE>

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

See Notes to Financial Statements

<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (Net of foreign withholding taxes of $88,139)................ $ 3,445,883
Interest............................................................... 430,686
------------
Total Income....................................................... 3,876,569
------------
Expenses:
Distribution (12b-1) and Service Fees (Allocated to Classes A, B and C
of $70,281, $451,334 and $15,099, respectively) (Note 5)............. 536,714
Investment Advisory Fee (Note 2)....................................... 485,323
Shareholder Services (Note 2).......................................... 138,612
Trustees Fees and Expenses (Note 2).................................... 31,700
Amortization of Organizational Expenses (Note 1)....................... 11,592
Legal (Note 2)......................................................... 6,440
Other.................................................................. 251,559
------------
Total Expenses..................................................... 1,461,940
Less Expenses Reimbursed........................................... 13,125
------------
Net Expenses....................................................... 1,448,815
------------
Net Investment Income.................................................. $ 2,427,754
============
Realized and Unrealized Gain/Loss on Investments and Foreign Currency:
Net Realized Gain on Investments and Foreign Currency (Including
realized loss on foreign currency transactions of $59,842)........... $ 1,067,467
------------
Unrealized Appreciation/Depreciation on Investments and Foreign
Currency:
Beginning of the Period.............................................. 319,167
End of the Period (Including unrealized depreciation on foreign
currency translation of $107)...................................... 20,681,983
------------
Net Unrealized Appreciation on Investments and Foreign Currency During
the Period........................................................... 20,362,816
------------
Net Realized and Unrealized Gain on Investments and Foreign Currency... $ 21,430,283
============
Net Increase in Net Assets from Operations............................. $ 23,858,037
============
</TABLE>

See Notes to Financial Statements

<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the Six Months Ended December 31, 1995 and the Year Ended June 30, 1995
(Unaudited)
- -------------------------------------------------------------------------------------------
Six Months Ended Year Ended
December 31, 1995 June 30, 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income................................ $ 2,427,754 $ 5,542,812
Net Realized Gain/Loss on Investments and Foreign
Currency........................................... 1,067,467 (11,154,213)
Net Unrealized Appreciation on
Investments and Foreign Currency During the
Period............................................. 20,362,816 15,931,333
---------- ----------
Change in Net Assets from Operations................. 23,858,037 10,319,932
---------- ----------
Distributions from Net Investment Income............. (3,991,364) (5,566,468)
Distributions in Excess of Net Investment Income
(Note 1)........................................... (76,720) -0-
---------- ----------
Total Distributions from and in Excess of Net
Investment Income*................................. (4,068,084) (5,566,468)
---------- ----------
Net Change in Net Assets from Investment
Activities......................................... 19,789,953 4,753,464
---------- ----------
From Capital Transactions (Note 3):
Proceeds from Shares Sold............................ 35,611,729 19,193,852
Net Asset Value of Shares Issued Through Dividend
Reinvestment....................................... 3,236,666 4,462,088
Cost of Shares Repurchased........................... (23,011,543) (32,083,914)
---------- ----------
Net Change in Net Assets from Capital Transactions... 15,836,852 (8,427,974)
---------- ----------
Total Increase/Decrease in Net Assets................ 35,626,805 (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 $(23,562) and $1,563,610,
respectively)...................................... $168,288,878 $132,662,073
============ ============
</TABLE>

<TABLE>
<CAPTION>
Six Months Ended Year Ended
*Distributions by Class December 31, 1995 June 30, 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of Net Investment Income:
Class A Shares............................... $(1,726,795) $(2,381,991)
Class B Shares............................... (2,277,186) (3,137,968)
Class C Shares............................... (64,103) (46,441)
Class D Shares............................... N/A (68)
----------- ----------
$(4,068,084) $(5,566,468)
=========== ==========
</TABLE>

See Notes to Financial Statements

<TABLE>
<CAPTION>
Financial Highlights
- --------------------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------------------
From July 28, 1993
(Commencement
of Investment
Six Months Ended Year Ended Operations) to
Class A Shares December 31, 1995 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.......... .270 .595 .479
Net Realized and Unrealized
Gain/Loss on Investments and
Foreign Currency............. 1.810 .485 (1.513)
------ ------ ------
Total from Investment
Operations................... 2.080 1.080 (1.034)
------ ------ ------
Less:
Distributions from and in
Excess of Net Investment
Income (Note 1)............ .450 .600 .323
Distributions in Excess of
Net Realized Gain on
Investments................ -0- -0- .037
------ ------ ------
Total Distributions............ .450 .600 .360
------ ------ ------
Net Asset Value, End of the
Period....................... $15.016 $13.386 $12.906
====== ====== ======
Total Return*.................. 15.79%** 8.70% (7.38%)**
Net Assets at End of the Period
(In millions)................ $62.6 $50.4 $51.5
Ratio of Expenses to Average
Net Assets* (Annualized)..... 1.47% 1.34% 1.34%
Ratio of Net Investment Income
to Average Net Assets*
(Annualized)................. 3.70% 4.55% 4.10%
Portfolio Turnover............. 48.68% 109.10% 101.54%
*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 (Annualized)...... 1.49% N/A N/A
Ratio of Net Investment Income
to Average Net Assets
(Annualized)................. 3.68% N/A N/A
**Non-Annualized
</TABLE>

N/A = Not Applicable

See Notes to Financial Statements

<TABLE>
<CAPTION>
Financial Highlights (Continued)
- --------------------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------------------
From July 28, 1993
(Commencement
of Investment
Six Months Ended Year Ended Operations) to
Class B Shares December 31, 1995 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............. .215 .507 .394
Net Realized and Unrealized
Gain/Loss on Investments and
Foreign Currency................ 1.811 .461 (1.519)
------ ------ ------
Total from Investment
Operations...................... 2.026 .968 (1.125)
------ ------ ------
Less:
Distributions from and in Excess
of Net Investment Income (Note
1)............................ .369 .492 .258
Distributions in Excess of Net
Realized Gain on
Investments................... -0- -0- .037
------ ------ ------
Total Distributions............... .369 .492 .295
------ ------ ------
Net Asset Value, End of the
Period.......................... $15.013 $13.356 $12.880
====== ====== ======
Total Return*..................... 15.31%** 7.80% (8.02%)**
Net Assets at End of the Period
(In millions)................... $100.7 $81.0 $83.7
Ratio of Expenses to Average Net
Assets* (Annualized)............ 2.22% 2.05% 2.06%
Ratio of Net Investment Income to
Average Net Assets*
(Annualized).................... 2.97% 3.84% 3.36%
Portfolio Turnover................ 48.68% 109.10% 101.54%
*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 (Annualized)............. 2.24% N/A N/A
Ratio of Net Investment Income to
Average Net Assets
(Annualized).................... 2.96% N/A N/A
**Non-Annualized
N/A = Not Applicable
</TABLE>

See Notes to Financial Statements

<TABLE>
<CAPTION>
Financial Highlights (Continued)
- --------------------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------------------
From August 13, 1993
(Commencement
of Distribution)
Six Months Ended Year Ended to
Class C Shares December 31, 1995 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....... .259 .482 .330
Net Realized and Unrealized
Gain/Loss on Investments
and Foreign Currency...... 1.766 .498 (1.627)
------ ------ ------
Total from Investment
Operations................ 2.025 .980 (1.297)
------ ------ ------
Less:
Distributions from and in
Excess of Net Investment
Income
(Note 1)................ .369 .492 .258
Distributions in Excess of
Net Realized Gain on
Investments............. -0- -0- .037
------ ------ ------
Total Distributions......... .369 .492 .295
------ ------ ------
Net Asset Value, End of the
Period.................... $15.012 $13.356 $12.868
====== ====== ======
Total Return*............... 15.31%** 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*
(Annualized).............. 2.20% 2.09% 2.05%
Ratio of Net Investment
Income to Average Net
Assets* (Annualized)...... 2.98% 3.80% 3.38%
Portfolio Turnover.......... 48.68% 109.10% 101.54%
*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 (Annualized)... 2.23% N/A N/A
Ratio of Net Investment
Income to Average Net
Assets (Annualized)....... 2.95% N/A N/A
**Non-Annualized
</TABLE>

N/A = Not Applicable

See Notes to Financial Statements

Notes to Financial Statements
December 31, 1995 (Unaudited)
- ------------------------------------------------------------------------------

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 seek 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.

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.

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.

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 December 31,
1995, there were no when issued or delayed delivery purchase commitments.

C. Investment Income and Expenses--Dividend income is recorded on the ex-
dividend date; interest income and expenses are recorded on an accrual basis.
Bond discount is amortized over the expected life of each applicable security.

Notes to Financial Statements (Continued)
December 31, 1995 (Unaudited)
- ------------------------------------------------------------------------------

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.

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, 1995, the Fund had an accumulated capital
loss carryforward for tax purposes of $5,186,334, 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 $59,842 were reclassified from
accumulated net realized gain/loss on investments to accumulated undistributed
net investment income. Additional permanent differences

Notes to Financial Statements (Continued)
December 31, 1995 (Unaudited)
- ------------------------------------------------------------------------------

related to expenses associated with fund mergers (see Note 3) totaling
$113,000 were reclassified from accumulated undistributed net investment
income 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 distributable 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 distribution in excess of
net investment income for certain periods.

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 six months ended December 31, 1995, the Fund recognized expenses
of approximately $12,800 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., an
affiliate of the Adviser, as the transfer agent of the Fund. For the six
months ended December 31, 1995, the Fund recognized expenses of approximately
$96,000, 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.

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

Notes to Financial Statements (Continued)
December 31, 1995 (Unaudited)
- ------------------------------------------------------------------------------

who are not officers of VKAC. The Fund's liability under the deferred
compensation and retirement plans at December 31, 1995, was approximately
$31,300.

At December 31, 1995, VKAC owned 104, 103 and 100 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 December 31, 1995, capital aggregated $59,609,611, $95,954,309 and
$4,622,637 for Classes A, B and C, respectively. For the period ended December
31, 1995, transactions were as follows:

Shares Value
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 835,635 $ 10,936,282
Class B.................................. 1,553,316 20,480,539
Class C.................................. 303,355 4,194,908
---------- ------------
Total Sales................................ 2,692,306 $ 35,611,729
========== ============
Dividend Reinvestment:
Class A.................................. 97,844 $ 1,382,698
Class B.................................. 128,176 1,811,585
Class C.................................. 2,935 42,383
---------- ------------
Total Dividend Reinvestment................ 228,955 $ 3,236,666
========== ============
Repurchases:
Class A.................................. (529,235) $ (7,442,257)
Class B.................................. (1,039,474) (14,612,668)
Class C.................................. (68,578) (956,618)
---------- ------------
Total Repurchases.......................... (1,637,287) $(23,011,543)
========== ============
</TABLE>

Notes to Financial Statements (Continued)
December 31, 1995 (Unaudited)
- ------------------------------------------------------------------------------

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:

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>

Notes to Financial Statements (Continued)
December 31, 1995 (Unaudited)
- ------------------------------------------------------------------------------

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 six months ended December 31, 1995, VKAC, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $8,500 and CDSC on the redeemed shares of Classes B and C of
approximately $300,700. 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. These shares 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
Aggregate purchases and cost of sales of investment securities, excluding
short-term notes, for the year ended December 31, 1995, were $87,711,848 and
$71,184,810, respectively.

Notes to Financial Statements (Continued)
December 31, 1995 (Unaudited)
- ------------------------------------------------------------------------------

5. Distribution and Service Plans
The Fund and its shareholders have adopted a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act
of 1940 and a service plan (the "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 six months ended December 31, 1995, are payments to VKAC of
approximately $323,600.

Funds Distributed by Van Kampen American Capital

GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund

EQUITY
Growth
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund

FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income

TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Limited Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund

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

Ask your investment adviser for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666
weekdays from 7:00 a.m. to 7:00 p.m. Central time.

Van Kampen American Capital Utility Fund

Board of Trustees

J. Miles Branagan
Linda Hutton Heagy
Roger Hilsman
R. Craig Kennedy
Dennis McDonnell*
Donald C. Miller - Chairman
Jack E. Nelson
Don G. Powell*
Jerome L. Robinson
Fernando Sisto
Wayne W. Whalen*
William Stewart 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

Transfer 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 Auditors

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.

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.

Van Kampen American Capital Utility Fund

This Page Intentionally Left Blank

<TABLE>
<CAPTION>
Table of Contents
<S> <C>
Letter to Shareholders................. 1
Performance Results.................... 3
Portfolio Management Review............ 4
Portfolio of Investments............... 6
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
</TABLE>

Letter to Shareholders

January 30, 1996

Dear Shareholder,

For most investors, it would be hard to surpass the success enjoyed during the
second half of 1995. After getting off to a strong start in the first half of
the year, the stock and bond markets continued to achieve substantial gains,
driven by a combination of continuing economic growth and low inflation. The
strength of equity and fixed-income securities throughout 1995 was particularly
impressive because it followed a year in which both markets declined. People who
remained invested during 1995 generally shared in the growth of the markets,
while those investors who retreated after 1994's downturn may have missed out on
the double-digit returns.

The rebound in the markets last year reinforces the importance of maintaining
a long-term perspective for your investments. While the environment for stocks
and bonds remains positive, it is unlikely that 1996 will see a repeat of the
markets' strong 1995 performance. However, over the long-term, stocks have
outperformed virtually all other types of investments, and bonds have met the
needs of investors who seek capital preservation and regular income.

[PHOTO]
Dennis J. McDonnell and Don G. Powell

Economic Overview

The cut in short-term rates, combined with modest growth forecasts, was viewed
by the financial markets as a positive event, pushing up both stock and bond
prices. For the six months ended December 31, 1995, the Standard & Poor's
500-Stock Index achieved a total return of 14.40 percent. The yield on 10-year
Treasury notes was 5.57 percent on December 31, compared to 6.20 percent on June
30. Bond prices and yields move in opposite directions, so bond prices rose.
Many observers expect the Fed to cut rates further if Congress and the President
are able to reach an agreement on the federal budget, provided economic
conditions justify further easing.

With a low inflation, low interest rate environment, corporate earnings
remained quite strong during the year, helping to push stocks to new highs. The
strongest sectors were technology and finance, as these stocks benefited from
the impact of the Internet, telecommunications deregulation and bank mergers.

Continued on page two

U.S. companies with global operations also did well, aided by a declining
U.S. dollar.

Economic Outlook

The current economic conditions are ideal for stocks, especially those of
smaller companies, because they tend to be affected less by economic cycles. The
outlook for the fixed income market---including municipal bonds---is positive,
too. In the near-term, we believe domestic markets will benefit from a stable
U.S. dollar and increased business activity driven in part by a number of
strategic reorganizations of some of the nation's blue chip industry leaders.
During recent months, debate over tax reform and the federal deficit has
dominated the agenda in Washington. Now that we are in a presidential election
year, tax reform likely will replace the budget battle as the top issue in
Washington. There has been varied speculation about the impact of these issues
on the economy and on various types of investments. We are following the tax
reform debate very closely, and we will keep you updated on this issue
throughout the year. See the winter issue of Your Portfolio for a detailed
discussion of tax reform.

On the following pages, you can read about your Fund's performance in 1995, as
well as the portfolio management team's outlook for the Fund in the coming
months. We hope that you will find this information helpful.

Corporate News

As part of our commitment to helping you achieve your investment goals, Van
Kampen American Capital strives to provide shareholders with the best service in
the mutual fund industry. That is why we are especially pleased to have received
the 1995 Quality Tested Service Seal, which is awarded annually by DALBAR, Inc.,
an independent research firm. The Seal, which symbolizes the achievement of the
highest tier of service in the mutual fund industry, was awarded to American
Capital annually from 1990 to 1994 and we are honored that the service provided
by Van Kampen American Capital has achieved the same level of excellence.

Sincerely,

Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Investment Advisory Corp. Investment Advisory Corp.

<TABLE>
<CAPTION>
Performance Results for the Period Ended December 31, 1995
Van Kampen American Capital Balanced Fund
Total Returns A Shares B Shares C Shares
<S> <C> <C> <C>
Six-month total return
based on NAV<F1>.......................... 9.56% 9.14% 9.14%
Six-month total return<F2>................ 3.26% 5.14% 8.14%
One-year total return based on NAV<F1>.... 22.07% 21.17% 21.17%
One-year total return<F2>................. 15.05% 17.17% 20.17%
Life-of-Fund average
annual total return<F2>................ 9.88% 11.16% 13.52%
Distribution rate<F3>..................... 3.63% 3.16% 3.16%
Commencement date......................... 06/24/94 06/24/94 06/24/94

<FN>

<F1>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).

<F2>Standardized total return assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge for A shares or
contingent deferred sales charge for early withdrawal for B and C shares.

<F3>Distribution rate represents the monthly annualized distributions of the Fund
at the end of the period and not the earnings of the Fund.

3
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 which shaped the markets
during the past six months. The team includes B. Robert Baker, Jr., portfolio
manager, and Alan T. Sachtleben, executive vice president, equity investments.
The following excerpts reflect their views on the Fund's performance during the
six-month period ended December 31, 1995.

Q: The stock and bond markets enjoyed strong returns during the second half of
1995. What factors had the most impact on the Fund's performance during the past
six months?

A: The stock market as a whole benefited from continued---although slower---
economic growth that generated strong corporate profits without increased
inflation. The Fund benefited from our value-oriented approach to stock
selection and our emphasis on maintaining an appropriate allocation among
stocks, bonds and cash.

Our stock-picking strategy allowed us to identify stocks that were inexpensive
but that had good potential for appreciation. It was our emphasis on stock
selection, rather than a focus on particular industries or sectors, that
provided most of the Fund's return for the year. The Fund had large holdings in
stocks such as AMR (parent company of American Airlines), Exxon and Philip
Morris that contributed significantly to the Fund's performance.

While we did not focus on particular industries, the largest percentage of the
Fund's assets were invested in finance, utility and energy stocks. In the energy
sector, stocks were somewhat inexpensive in light of the traditional seasonal
increase in demand for heating oil and gas. We already have seen an increase in
energy prices that has resulted in higher stock prices.

The Fund's allocation changed only slightly, as we established a cash
position. At the end of December, about 60 percent of the Fund's net assets were
invested in stocks, about 30 percent in bonds and about 10 percent in cash. The
Fund's diversification at the end of the year is illustrated by the chart on
page five.

Q: Can you give a few examples of other stocks the Fund owned during the
reporting period that did particularly well?

A: We owned stock in all three of the major long-distance telephone companies,
AT&T, MCI and Sprint. The prices of these stocks had been depressed because of
pending telecommunications deregulation. As the likely changes became more
evident, these stocks increased in price. In addition, AT&T announced a major
restructuring that caused further increases in the price of its stock.

The Fund's largest holding at the end of the year was WMX, one of the
country's largest waste management firms. The stock is inexpensive relative to
both similar stocks and its historical average price. In addition, the company's
North American solid waste business is good but we feel that is not reflected in
the stock price because of problems in other divisions. We believe its
management is addressing those problems, which should result in a higher stock
price.

[PIE CHART]
Portfolio Holdings by Industry as of December 31, 1995

Government 33.2%
Other* 28.3%
Oil & Gas 5.6%
Telecommunications 4.9%
Paper 4.3%
Retail 3.9%
Chemical 3.5%
Automobile 3.4%
Insurance 3.4%
Foreign 3.3%
Electric Utilities 3.2%
Healthcare 3.0%

*Other consists of 21 sectors each less than 3%

Q: How did the Fund perform during the six-months ended
December 31, 1995?

A: Class A shares of the Fund achieved a total return at net asset value of
9.56 percent<F1>,including reinvestment of dividends totaling $0.3000 per
share and a capital gains distribution of $0.9858 per share. By comparison,
the Standard & Poor's 500-Stock Index, a broad-based, unmanaged index that
reflects general stock market performance, achieved a total return of 14.40
percent for the period. The S&P 500-Stock Index does not reflect any
commissions or fees that would be paid by an investor purchasing the securities
it represents. The Lipper Balanced Fund Index, which reflects the performance
of the largest balanced funds, achieved a total return of 9.86 percent, 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: What is the outlook for the Fund?

A: The outlook is excellent, which is not to say that a general market
correction could not occur in the near-term. However, some very positive
forces are present: moderate economic growth, low inflation and acceptable
levels of interest rates. These should limit any decline to a modest one.
Should the economy slow, the Fund's investment in utility and government
securities should provide a cushion against any decline in the broader market.

Looking farther into the future, these three conditions---aided by the Federal
Reserve Board's decision in December to lower short-term interest rates---should
lead to increasing corporate profits which, in turn, should lead to higher stock
prices and competitive total returns for fixed-income investments.

Alan T. Sachtleben B. Robert Baker, Jr.
Executive Vice President Portfolio Manager
Equity Investments

5 Please see footnotes on page three

<TABLE>
<CAPTION>
Portfolio of Investments
December 31, 1995 (Unaudited)
- --------------------------------------------------------------
Security Market
Description Shares Value
- --------------------------------------------------------------
<S> <C> <C>
Common Stocks 60.8%
Aerospace & Defense 1.2%
General Dynamics Corp. .................... 1,400 $ 82,775
Rockwell International Corp. .............. 1,300 68,738
---------
151,513
---------
Automobile 3.1%
Chrysler Corp. ............................ 1,200 66,450
Ford Motor Co. ............................ 2,000 58,000
General Motors Corp. ...................... 2,500 132,187
TRW Inc. . . . ............................ 1,200 93,000
Varity Corp. <F2>.......................... 1,100 40,838
---------
390,475
---------
Banking 2.0%
Bankamerica Corp. ......................... 500 32,375
Bankers Trust NY Corp. .................... 700 46,550
Chemical Banking Corp. .................... 1,300 76,375
Fleet Financial Group Inc. ................ 700 28,525
Morgan, J.P. & Co. Inc. ................... 800 64,200
---------
248,025
---------
Broadcast, Radio & Television 0.4%
Cox Communications Inc. <F2>............... 2,900 56,550
----------
Capital Goods 0.0%
ITT Industries Inc. ....................... 100 2,400
----------
Chemical 3.2%
Du Pont (E. I.) De Nemours Co. ........... 1,600 111,800
Mallinckrodt Group Inc. ................... 2,700 98,212
Monsanto Co. .............................. 700 85,750
Nalco Chemical Co. ........................ 600 18,075
Praxair Inc. .............................. 2,000 67,250
Union Carbide Corp. ....................... 600 22,500
----------
403,587
----------
Consumer Durables 0.3%
Newell Co. ................................ 1,600 41,400
----------
Diversified/Conglomerate
Manufacturing 1.3%
General Electric Co. ...................... 2,215 159,480
----------
Electric Utilities 2.9%
Boston Edison Co. ......................... 300 8,850
Carolina Power & Light Co. ................ 200 6,887
Central & South West Corp. ................ 500 13,937
CMS Energy Corp. .......................... 300 8,963
Detroit Edison Co. ........................ 700 24,150
FPL Group Inc. ............................ 1,200 55,650
</TABLE>

6 See Notes to Financial Statements

<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
December 31, 1995 (Unaudited)
- ---------------------------------------------------------
Security Market
Description Shares Value
- ---------------------------------------------------------
<S> <C> <C>
Electric Utilities (Continued)
General Public Utilities Corp. ....... 400 $ 13,600
Illinova Corp. ....................... 1,100 33,000
New York St Electric & Gas Corp. ..... 400 10,350
Nipsco Inc. .......................... 200 7,650
Northern STS Power Co. ............... 200 9,825
Ohio Edison Co. ...................... 300 7,050
Oklahoma Gas & Electric Co. .......... 200 8,600
Pacificorp ........................... 400 8,500
Peco Energy Co. ...................... 2,580 77,722
Pinnacle West Capital Corp. .......... 400 11,500
Public Service Co. <F2>............... 1,100 19,387
Rochester Gas & Electric Corp. ....... 300 6,788
Southwestern Public Service Co. ...... 200 6,562
Texas Utilities Co. .................. 300 12,338
Unicom Corp. ......................... 400 13,100
---------
364,409
---------
Engineering & Construction 0.5%
Fluor Corp. .......................... 400 26,400
Foster Wheeler Corp. ................. 1,000 42,500
---------
68,900
---------
Environmental 2.0%
WMX Technologies Inc. ................ 8,200 244,975
---------
Financial Services 2.6%
Allmerica Financial Corp. ............ 500 13,500
Bear Stearns Cos Inc. ................ 2,500 49,688
Federal Home Loan Mortgage Corp. ..... 600 50,100
Federal National Mortgage Assn. ...... 700 86,887
Franklin Resources Inc. .............. 1,300 65,488
Great Western Financial Corp. ........ 1,300 33,150
Sunamerica Inc. ...................... 550 26,125
---------
324,938
---------
Food 1.2%
General Mills Inc. ................... 500 28,875
Nabisco Holdings Corp. ............... 1,400 45,675
Quaker Oats Co. ...................... 1,500 51,750
Ralston Purina Co. ................... 400 24,950
---------
151,250
---------
</TABLE>

7 See Notes to Financial Statements

<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
December 31, 1995 (Unaudited)
- ------------------------------------------------------------------
Security Market
Description Shares Value
- ------------------------------------------------------------------
<S> <C> <C>
Healthcare 2.7%
Bristol Myers Squibb Co. ...................... 1,040 $ 89,310
Caremark International Inc. ................... 7,000 126,875
Community Psychiatric Centers ................. 2,500 30,625
Merck & Co. Inc. .............................. 1,000 65,750
Tenet Healthcare Corp. <F2>.................... 1,400 29,050
---------
341,610
---------
Hotel & Lodging 0.3%
Marriot International Inc. .................... 1,100 42,075
---------
Insurance 3.1%
Aetna Life & Casualty Co. ..................... 600 41,550
Allstate Corp. ................................ 2,200 90,475
AMBAC Inc. .................................... 600 28,125
American Bankers Insurance Group Inc. ......... 400 15,600
American International Group Inc. ............. 500 46,250
Providian Corp. ............................... 2,000 81,500
St. Paul Cos. Inc. ............................ 1,500 83,437
---------
386,937
---------
Leisure/Entertainment 1.5%
ITT Corp. ..................................... 100 5,300
Time Warner Inc. .............................. 4,100 155,288
Walt Disney Co. ............................... 500 29,500
---------
190,088
---------
Mining 1.3%
Barrick Gold Corp. ............................ 2,900 76,487
Battle Mountain Gold Co. ...................... 1,900 16,027
Freeport McMoran Copper & Gold ................ 900 25,312
Homestake Mining Co. .......................... 900 14,063
Newmont Gold Co. .............................. 600 26,250
---------
158,139
---------
Mining, Steel, Iron & Non-Precious Metal 0.5%
Nucor Corp. ................................... 1,000 57,125
---------
Natural Gas Pipeline and Distribution 1.8%
Coastal Corp. ................................. 1,800 67,050
Pacific Enterprises ........................... 1,000 28,250
Panhandle Eastern Corp. ....................... 2,300 64,112
Sonat Inc. .................................... 1,700 60,563
---------
219,975
---------
</TABLE>

8 See Notes to Financial Statements

<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
December 31, 1995 (Unaudited)
- ----------------------------------------------------
Security Market
Description Shares Value
- ----------------------------------------------------
<S> <C> <C>
Oil & Gas 5.1%
Amoco Corp. ..................... 650 $ 46,719
Atlantic Richfield Co. .......... 300 33,225
Baker Hughes Inc. ............... 800 19,500
Exxon Corp. ..................... 1,500 120,187
Halliburton Co. ................. 700 35,438
Mobil Corp. ..................... 700 78,400
Noble Affiliates Inc. ........... 2,000 59,750
Occidental Petroleum Corp. ...... 1,900 40,612
Pogo Producing Co. .............. 1,800 50,850
Schlumberger Ltd. ............... 700 48,475
Texaco Inc. ..................... 1,200 94,200
Tosco Corp. ..................... 400 15,250
---------
642,606
---------
Paper 3.9%
Boise Cascade Corp. ............. 1,500 51,937
Consolidated Papers Inc. ........ 800 44,900
Crown Vantage Inc. <F2>.......... 210 2,993
Georgia Pacific Corp. ........... 800 54,900
International Paper Co. ......... 2,000 75,750
James River Corp. ............... 5,100 123,037
Mead Corp. ...................... 700 36,575
Union Camp Corp. ................ 1,200 57,150
Willamette Industries Inc. ...... 700 39,375
---------
486,617
---------
Personal & Non-Durable 1.9%
Clorox Co. ...................... 400 28,650
Colgate Palmolive Co. ........... 1,200 84,300
Dial Corp. ...................... 2,800 82,950
Tambrands Inc. .................. 800 38,200
---------
234,100
---------
Pharmaceuticals 1.7%
Amgen Inc. ...................... 400 23,750
Pfizer Inc. ..................... 400 25,200
Pharmacia & Upjohn Inc. <F2>..... 1,160 44,950
Schering Plough Corp. ........... 700 38,325
Warner Lambert Co. .............. 900 87,413
---------
219,638
---------
</TABLE>

9 See Notes to Financial Statements

<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
December 31, 1995 (Unaudited)
- -----------------------------------------------------------------
Security Market
Description Shares Value
- -----------------------------------------------------------------
<S> <C> <C>
Printing & Publishing 0.6%
McGraw Hill Inc. ........................ 500 $ 43,562
New York Times Co. ...................... 1,100 32,588
--------------
76,150
--------------
Retail 3.5%
Best Buy Co. Inc. <F2>................... 700 11,375
Dayton Hudson Corp. ..................... 900 67,500
Gap Inc. ................................ 800 33,600
Harcourt General Inc. ................... 1,000 41,875
Kroger Co. <F2>.......................... 2,300 86,250
May Department Stores Co. ............... 1,100 46,475
Sears Roebuck & Co. ..................... 1,300 50,700
Sports & Recreation Inc. <F2>............ 1,300 9,262
Wal-Mart Stores Inc. .................... 4,400 98,450
--------------
445,487
--------------
Technology 2.6%
Avnet Inc. .............................. 300 13,425
Emerson Electric Co. .................... 400 32,700
Gateway 2000 Inc. <F2>................... 1,100 26,950
General Motors Corp. (Class H Common).... 700 34,387
Hewlett Packard Co. ..................... 400 33,500
Honeywell Inc. .......................... 700 34,038
Intel Corp. ............................. 400 22,700
International Business Machines ......... 800 73,400
LSI Logic Corp. <F2>..................... 700 22,925
Motorola Inc. ........................... 400 22,800
National Semiconductor Corp. <F2>........ 700 15,575
--------------
332,400
--------------
Telecommunications 4.4%
Ameritech Corp. ......................... 675 39,825
AT & T Corp. ............................ 1,350 87,412
Bell Atlantic Corp. ..................... 600 40,125
Bellsouth Corp. ......................... 2,100 91,350
Frontier Corp. .......................... 1,000 30,000
MCI Communications Corp. ................ 2,200 57,475
Nynex Corp. ............................. 700 37,800
Pacific Telesis Group ................... 600 20,175
SBC Communications Inc. ................. 700 40,250
Sprint Corp. ............................ 2,400 95,700
Worldcom Inc. <F2>....................... 500 17,625
--------------
557,737
--------------
</TABLE>

10 See Notes to Financial Statements

<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
December 31, 1995 (Unaudited)

- ------------------------------------------------------------------------------------------------------
Security Market
Description Shares Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tobacco 1.6%
Philip Morris Cos. Inc. ......................................................... 2,200 $ 199,100
-----------
Transportation 0.6%
AMR Corp. <F2>................................................................... 500 37,125
Illinois Central Corp. .......................................................... 900 34,538
-----------
71,663
-----------
Foreign 3.0%
Canadian National Railway Co. (Canada) <F2>...................................... 350 5,250
Norsk Hydro A S - ADR (Norway) .................................................. 1,600 67,000
Repsol SA - ADR (Spain) ........................................................ 2,000 65,750
Royal Dutch Petroleum Co. (Netherlands) ......................................... 1,100 155,238
Telefonica de Espana - ADR (Spain) .............................................. 1,000 41,875
Total S A (France) .............................................................. 1,100 37,400
-----------
372,513
-----------
Total Common Stocks.............................................................. 7,641,862
-----------
Government and Agency Fixed-Income Securities (U.S.) 30.2%
Federal Home Loan Bank Corp. Series P2 ($1,000,000 par, 8.50% coupon, 02/08/02
maturity, S&P rating AAA)............................................................. 1,054,540
US Treasury Bond ($2,400,000 par, 7.25% coupon, 05/15/16 maturity).................... 2,741,246
-----------
Total Government and Agency Fixed-Income Securities...................................... 3,795,786
-----------
Total Long-Term Investments 91.0%
(Cost $10,752,501) <F1>............................................................... 11,437,648
Short-Term Investments at Amortized Cost 10.9%
Federal Home Loan Mtg Disc Note ($1,365,000 par, yielding 5.75%, maturing 01/02/96) .. 1,364,782
Liabilities in Excess of Other Assets (1.9%)............................................ (241,285)
-----------
Net Assets 100%......................................................................... $12,561,145
===========

<FN>

<F1> At December 31, 1995, cost for federal income tax purposes is $10,752,501;
the aggregate gross unrealized appreciation is $796,799 and the aggregate
gross unrealized depreciation is $111,652, resulting in net unrealized
appreciation of $685,147.

<F2> Non-income producing security as this stock currently does not declare
dividends.
</TABLE>

11 See Notes to Financial Statements

Liabilities:
Payables:
Income and Capital Gains Distributions............................................. 148,074
Fund Shares Repurchased............................................................ 145,597
Investments Purchased.............................................................. 103,156
Accrued Expenses..................................................................... 47,026
-------------
Total Liabilities............................................................... 443,853
-------------

Net Assets........................................................................... $ 12,564,472
=============
Net Assets Consist of:
Capital (Note 3) .................................................................... $ 11,599,214
Net Unrealized Appreciation on Investments........................................... 685,147
Accumulated Undistributed Net Investment Income...................................... 8,336
Accumulated Net Realized Gain on Investments......................................... 271,775
-------------
Net Assets........................................................................... $ 12,564,472
=============

Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$4,940,159 and 317,339 shares of capital stock issued and outstanding)
(Note 3)........................................................................ $ 15.57
Maximum sales charge (5.75%* of offering price)................................. .95
-------------
Maximum offering price to public................................................ $ 16.52
=============
Class B Shares:
Net asset value and offering price per share (Based on net assets of $6,832,865
and 439,142 shares of capital stock issued and outstanding) (Note 3)............ $ 15.56
=============
Class C Shares:
Net asset value and offering price per share (Based on net assets of $791,448
and 50,854 shares of capital stock issued and outstanding) (Note 3)............. $ 15.56
=============
*On sales of $50,000 or more, the sales charge will be reduced.
</TABLE>

12 See Notes to Financial Statements

<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended December 31, 1995 (Unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest........................................................................... $ 173,766
Dividends (Net of foreign withholding taxes of $506)............................... 84,112
---------------
Total Income.................................................................. 257,878
---------------
Expenses:
Distribution (12b-1) and Service Fees (Allocated to Classes A, B and C of
$6,109, $33,042 and $3,942, respectively) (Note 5)............................... 43,093
Investment Advisory Fee (Note 2)................................................... 42,945
Registration....................................................................... 36,500
Custody............................................................................ 31,043
Printing........................................................................... 15,640
Audit.............................................................................. 15,640
Shareholder Services (Note 2)...................................................... 13,434
Trustees Fees and Expenses (Note 2)................................................ 9,600
Amortization of Organizational Expenses (Note 1)................................... 8,067
Legal (Note 2)..................................................................... 6,072
Other.............................................................................. 3,546
---------------
Total Expenses................................................................ 225,580
Less Fees Deferred and Expenses Reimbursed ($42,945 and $111,823,
respectively)................................................................. 154,768
---------------
Net Expenses................................................................ 70,812
---------------
Net Investment Income.............................................................. $ 187,066
===============

Realized and Unrealized Gain/Loss on Investments:
Realized Gain/Loss on Investments:
Proceeds from Sales.............................................................. $ 13,017,792
Cost of Securities Sold............................................................ (11,980,453)
---------------
Net Realized Gain on Investments................................................... 1,037,339
---------------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period.......................................................... 808,706
End of the Period................................................................ 685,147
---------------
Net Unrealized Depreciation on Investments During the Period....................... (123,559)
---------------
Net Realized and Unrealized Gain on Investments.................................... $ 913,780
===============
Net Increase in Net Assets from Operations......................................... $ 1,100,846
===============
</TABLE>

13 See Notes to Financial Statements

<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the Six Months Ended December 31, 1995 and the Period Ended June 30, 1995 (Unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
From June 24, 1994
(Commencement of
Six Months Ended Investment Operations)
December 31, 1995 to June 30, 1995
------------------------------------------
From Investment Activities:
Operations:
Net Investment Income............................................ $ 187,066 $ 375,863
Net Realized Gain/Loss on Investments............................ 1,037,339 (9,560)
Net Unrealized Appreciation/Depreciation on Investments.......... (123,559) 808,706
----------------- ----------------------
Change in Net Assets from Operations ............................ 1,100,846 1,175,009
----------------- ----------------------
Distributions from Net Investment Income:
Class A Shares................................................. (91,638) (156,268)
Class B Shares................................................. (103,182) (177,438)
Class C Shares................................................. (12,096) (13,922)
Class D Shares................................................. -0- (49)
----------------- ----------------------
(206,916) (347,677)
----------------- ----------------------
Distributions from Net Realized Gain on Investments (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......................................... (962,920) -0-
----------------- ----------------------
Net Change in Net Assets from Investment Activities.............. 137,926 827,332
----------------- ----------------------
From Capital Transactions (Note 3):
Proceeds from Shares Sold........................................ 1,697,421 13,761,643
Net Asset Value of Shares Issued
Through Dividend Reinvestment.................................. 788,907 264,667
Cost of Shares Repurchased....................................... (2,129,476) (2,789,668)
----------------- ----------------------
Net Change in Net Assets from Capital Transactions............... 356,852 11,236,642
----------------- ----------------------
Total Increase in Net Assets..................................... 494,778 12,063,974
Net Assets:
Beginning of the Period.......................................... 12,069,694 5,720
----------------- ----------------------
End of the Period (Including undistributed net investment income
of $8,336 and $28,186, respectively)........................... $ 12,564,472 $ 12,069,694
================= ======================
</TABLE>

14 See Notes to Financial Statements

<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- -----------------------------------------------------------------------------------------------
From June 24, 1994
(Commencement of
Six Months Ended Investment Operations)
Class A Shares December 31, 1995 to June 30, 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period............ $ 15.388 $ 14.300
----------------- ----------------------
Net Investment Income............................. .279 .572
Net Realized and Unrealized Gain on Investments... 1.186 1.041
----------------- ----------------------
Total from Investment Operations.................... 1.465 1.613
----------------- ----------------------
Less:
Distributions from Net Investment Income.......... .300 .525
Distributions from Net Realized
Gain on Investments (Note 1)................... .986 -0-
----------------- ----------------------
Total Distributions................................. 1.286 .525
----------------- ----------------------
Net Asset Value, End of the Period.................. $ 15.567 $ 15.388
================= ======================
Total Return*....................................... 9.56%** 11.53%
Net Assets at End of the Period (In millions)....... $ 4.9 $ 4.8
Ratio of Expenses to Average Net
Assets* (Annualized).............................. .72% 1.15%
Ratio of Net Investment Income to
Average Net Assets* (Annualized).................. 3.52% 4.01%
Portfolio Turnover.................................. 107.23% 120.95%

* 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 (Annualized)........................... 3.26% 2.76%
Ratio of Net Investment Income to
Average Net Assets (Annualized)................... .98% 2.40%

**Non-Annualized
</TABLE>

15 See Notes to Financial Statements

<TABLE>
<CAPTION>
Financial Highlights (Continued)
- -----------------------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- -----------------------------------------------------------------------------------------------
From June 24, 1994
(Commencement of
Six Months Ended Investment Operations)
Class B Shares December 31, 1995 to June 30, 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period............ $ 15.389 $ 14.300
----------------- ----------------------
Net Investment Income............................. .217 .464
Net Realized and Unrealized Gain on Investments... 1.186 1.056
----------------- ----------------------
Total from Investment Operations.................... 1.403 1.520
----------------- ----------------------
Less:
Distributions from Net Investment Income.......... .246 .431
Distributions from Net Realized
Gain on Investments (Note 1)................... .986 -0
----------------- ----------------------
Total Distributions................................. 1.232 .431
----------------- ----------------------
Net Asset Value, End of the Period.................. $ 15.560 $ 15.389
----------------- ----------------------
Total Return*....................................... 9.14%** 10.82%
Net Assets at End of the Period (In millions)....... $ 6.8 $ 6.6
Ratio of Expenses to Average Net
Assets* (Annualized).............................. 1.46% 1.88%
Ratio of Net Investment Income to
Average Net Assets* (Annualized).................. 2.78% 3.27%
Portfolio Turnover.................................. 107.23% 120.95%

* 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 (Annualized)........................... 4.00% 3.48%
Ratio of Net Investment Income to
Average Net Assets (Annualized)................... .24% 1.67%

**Non-Annualized
</TABLE>

16 See Notes to Financial Statements

Financial Highlights (Continued)
- -----------------------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- -----------------------------------------------------------------------------------------------
From June 24, 1994
(Commencement of
Six Months Ended Investment Operations)
Class C Shares December 31, 1995 to June 30, 1995
==============================================================================================
<S> <C> <C>
Net Asset Value, Beginning of the Period........... $ 15.388 $ 14.300
----------------- ----------------------
Net Investment Income............................ .222 .426
Net Realized and Unrealized Gain on Investments.. 1.185 1.093
----------------- ----------------------
Total from Investment Operations................... 1.407 1.519
----------------- ----------------------
Less:
Distributions from Net Investment Income......... .246 .431
Distributions from Net Realized
Gain on Investments (Note 1).................. .986 -0-
----------------- ----------------------
Total Distributions................................ 1.232 .431
----------------- ----------------------
Net Asset Value, End of the Period................. $ 15.563 $ 15.388
================= ======================
Total Return*...................................... 9.14%** 10.82%
Net Assets at End of the Period (In millions)...... $ .8 $ .8
Ratio of Expenses to Average Net
Assets* (Annualized)............................. 1.46% 1.90%
Ratio of Net Investment Income to
Average Net Assets* (Annualized)................. 2.78% 3.19%
Portfolio Turnover................................. 107.23% 120.95%

* 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 (Annualized)........................... 4.00% 3.48%
Ratio of Net Investment Income to
Average Net Assets (Annualized)................... .24% 1.61%

**Non-Annualized
</TABLE>

17 See Notes to Financial Statements

Notes to Financial Statements
December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------

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 seek 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.

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.

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.

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 December 31, 1995, there were no
when issued or delayed delivery purchase commitments.

C. Investment Income and Expenses-Dividend income is recorded on the ex-dividend
date; interest income and expenses are recorded on an accrual basis. Bond
discount is amortized over the expected life of each applicable security.

Notes to Financial Statements (Continued)
December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------

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.

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 24, 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.

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, 1995, the Fund had an accumulated capital loss carry forward
for tax purposes of $9,560, which will expire on June 30, 2003.

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.

Notes to Financial Statements (Continued)
December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------

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 six months ended December 31, 1995, the Fund incurred expenses of
approximately $11,800 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., an
affiliate of the Adviser, as the transfer agent of the Fund. For the six months
ended December 31, 1995, the Fund incurred expenses of approximately $6,900,
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. The Fund's liability under the
deferred compensation and retirement plans at December 31, 1995, was
approximately $7,600.

At December 31, 1995, VKAC owned 106 shares each of Classes A, B and C.

Notes to Financial Statements (Continued)
December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------

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 December 31, 1995, capital aggregated $4,553,730, $6,318,484 and $727,000
for Classes A, B and C, respectively. For the six months ended December 31,
1995, transactions were as follows:

<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
Sales:
Class A...................... 53,086 $ 850,684
Class B...................... 50,786 822,156
Class C...................... 1,523 24,581
---------- ---------------
Total Sales.................... 105,395 $ 1,697,421
========== ===============
Dividend Reinvestment:
Class A...................... 22,434 $ 350,379
Class B...................... 27,282 425,706
Class C...................... 822 12,822
---------- ---------------
Total Dividend Reinvestment.... 50,538 $ 788,907
========== ===============
Repurchases:
Class A...................... (66,927) $ (1,072,247)
Class B...................... (65,734) (1,052,759)
Class C...................... (283) (4,470)
---------- ---------------
Total Repurchases.............. (132,944) $ (2,129,476)
========== ===============
</TABLE>

21
Notes to Financial Statements (Continued)
December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------

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>

Notes to Financial Statements (Continued)
December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------

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 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 December 31, 1995, VKAC, as Distributor for the Fund,
paid net commissions on sales of the Fund's Class A shares of approximately
$4,300 and received CDSC on the redeemed shares of Classes B and C of
approximately $19,800. Sales charges do not represent expenses of the Fund.

4. Investment Transactions

Aggregate purchases and cost of sales of investment securities, excluding
short-term notes, for the six months ended December 31, 1995, were $11,973,477
and $11,980,453, respectively.

5. Distribution and Service Plans

The Fund and its shareholders have adopted a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 and a service plan (the "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 six months ended December 31, 1995, are payments to VKAC of approximately
$26,100.

Funds Distributed by Van Kampen American Capital
- --------------------------------------------------------------------------------

GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund

EQUITY
Growth
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund

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

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 - Chairman
Jack E. Nelson
Don G. Powell*
Jerome L. Robinson
Fernando Sisto
Wayne W. Whalen*
William Stewart 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

Transfer 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 Auditors

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.

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.