VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST/, N-30D, 1997-08-28

VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST/
N-30D, 1997-08-28

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<PAGE> 1

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders......................... 1
Performance Results............................ 4
Portfolio Highlights........................... 5
Performance in Perspective..................... 6
Portfolio Management Review.................... 7
Portfolio of Investments....................... 9
Statement of Assets and Liabilities............ 12
Statement of Operations........................ 13
Statement of Changes in Net Assets............. 14
Financial Highlights........................... 15
Notes to Financial Statements.................. 18
Report of Independent Accountants.............. 25
</TABLE>

UTLF ANR 8/97
<PAGE> 2

LETTER TO SHAREHOLDERS

July 24, 1997

Dear Shareholder,
As you know, Van Kampen American
Capital was acquired by Morgan Stanley
Group Inc., a world leader in asset
management. Earlier this year, Morgan
Stanley Group Inc. and Dean Witter,
Discover & Co. agreed to merge. The [PHOTO]
merger was completed on May 31, creating
the combined company of Morgan Stanley, DENNIS J. MCDONNELL AND DON G. POWELL
Dean Witter, Discover & Co. Additionally,
we are very pleased to announce that
Philip N. Duff, formerly the chief financial officer of Morgan Stanley Group
Inc., has joined Van Kampen American Capital as president and chief executive
officer. I will continue as chairman of the firm. We are confident that the
partnership of Van Kampen American Capital and Morgan Stanley will continue to
work to the benefit of our fund shareholders.
One of the immediate privileges that we can offer fund shareholders is the
ability to make exchanges between Van Kampen American Capital and Morgan Stanley
retail funds at no charge. In our view, the rapid appreciation of U.S. stock
prices in recent years has created a need for investors to examine their
portfolios carefully to ensure proper diversification among domestic and foreign
investments. The Morgan Stanley retail funds, with their emphasis on global
markets, can be valuable tools for accomplishing this diversification.
We also urge investors to consider how their fund holdings are currently
allocated among the three major asset classes of stocks, bonds, and cash
reserves. Uneven movements in the various markets can distort a carefully
planned investment program. And, with stock prices near record highs, it is
likely that some rebalancing of your portfolio allocations may be necessary.
Once again, the exchangeability feature with the Morgan Stanley retail funds
provides additional choices and opportunities to make the necessary adjustments
to your portfolio's asset allocation.

Continued on page two

1
<PAGE> 3

by making imported goods less expensive. At the same time, continued moderation
in the cost of employee benefit packages offset mild upward pressure on wages.
In March, the inflationary implications of a tight labor market caused the
Federal Reserve Board to raise its target for a key lending rate by one-quarter
of a percentage point, the first hike in short-term interest rates in two years.
Signs that economic growth slowed markedly in the second quarter, however, led
Fed policymakers to leave rates unchanged at subsequent meetings.

MARKET OVERVIEW
With a solid underpinning of record profits, strong economic growth, and low
inflation, the U.S. equity market continued its torrid performance during the
first half of 1997. For a brief time this spring, however, investors worried
that growth was too robust and that higher interest rates were on the way. Those
fears pushed stock prices lower by about 10 percent over a one-month period
beginning in mid-March.
By mid-April, signs that the economy was cooling began to emerge, and stocks
skyrocketed to a series of record highs. The Wilshire 5000 Index of all publicly
traded domestic companies gained 16.65 percent during the first six months of
the year and increased by 25.95 percent over the 12 months through June 30. Low
inflation allowed the market's price/earnings multiple to remain high, while
strong growth in corporate profits provided solid support for stock prices.
Within the equity market, most of the gains were generated by
large-capitalization stocks. The Russell 1000 Index of large companies gained
17.57 percent over the six months through June 30, almost double the return of
the Russell 2000 Index of small-capitalization companies. Consumer non-cyclicals
such as beverages and pharmaceuticals were among the top-performing industry
groups, although the rally broadened by the end of June to include sectors that
had previously been laggards, including cyclicals and small-company stocks.

OUTLOOK

We expect the pace of economic activity during the remainder of 1997 to
accelerate modestly from the relatively sluggish rate that prevailed during the
second quarter. While we do not believe that economic growth will be rapid
enough to reignite inflation, some warning signs are present, including a tight
labor market and high consumer confidence. In this environment, at least one
additional Federal Reserve interest rate hike remains a possibility.
We believe that equities should continue to do well given the likely
continuation of the moderate- growth, low-inflation environment. We are
concerned, however, that the lengthy series of record highs in the U.S. stock
market is creating unreasonable expectations among some investors. Valuations
are extended and investment sentiment is exceptionally optimistic. Under such
circumstances, a mild correction would not be unusual.
We are fortunate to be experiencing a rare combination of sustained economic
growth, low inflation, and highly favorable performance in the financial market.
Along with our fund shareholders, we celebrate the seemingly best of economic
times. Once again,

Continued on page three

2
<PAGE> 4

we encourage you to review your portfolio with an eye toward correcting
allocation imbalances.

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

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

3
<PAGE> 5

PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1997

VAN KAMPEN AMERICAN CAPITAL UTILITY FUND

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS

One-year total return based on NAV(1).... 13.20% 12.30% 12.37%
One-year total return(2)................. 6.71% 8.30% 11.37%
Life-of-Fund average annual total
return(2)................................ 6.66% 6.92% 7.23%
Commencement date........................ 07/28/93 07/28/93 08/13/93
</TABLE>

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

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

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.

Because the Fund concentrates investments in the utility industry, it may be
more susceptible to any economic, political or regulatory occurrence effecting
this industry. Foreign securities involve the risk of fluctuations in foreign
exchange rates, future political and economic developments. Lower-rated
securities are referred to as "junk bonds"' and are considered speculative with
regards to payment of interest and principal.

Market forecasts provided in this report may not necessarily come to pass.

4
<PAGE> 6

PORTFOLIO HIGHLIGHTS

VAN KAMPEN AMERICAN CAPITAL UTILITY FUND

TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996(1)
<S> <C> <C>
Edison International............. 2.9%..... 3.0%
CMS Energy Corp.................. 2.9%..... 2.3%
Cable & Wireless, PLC-ADR (UK) .. 2.8%..... 1.3%
GPU, Inc. ....................... 2.8%..... 2.5%
Southern Co. .................... 2.6%..... 2.3%
AES Corp. ....................... 2.6%..... N/A
SCANA Corp. ..................... 2.5%..... N/A
FPL Group, Inc. ................. 2.5%..... 2.4%
SBC Communications, Inc. ........ 2.4%..... 1.5%
Public Service Co. of Colorado... 2.4%..... N/A
</TABLE>

N/A = Not Applicable

TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997 AS OF JUNE 30, 1997
<S> <C> <S> <C>
Electric Utilities.......... 48.8% Electric Utilities.......... 52.9%
Telecommunications.......... 30.2% Telecommunications.......... 20.2%
Oil, Gas, Pipeline and Oil, Gas, Pipeline and
Distribution................ 12.3% Distribution................ 18.3%
Real Estate Investment Real Estate Investment
Trusts...................... 4.1% Trusts...................... 6.5%
Natural Gas Pipeline and Cable Television............ 1.5%
Distribution................ 3.0%
</TABLE>

AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
<S> <C> <C> <C>
Stocks........................ 81.2% Stocks........................ 80.1%
Bonds......................... 11.4% Bonds......................... 11.0%
Convertibles.................. 1.9% [PIE CHART] Convertibles.................. 3.5% [PIE CHART]
Cash and Short-Term Cash and Short-Term
Investments................ 3.5% Investments................ 4.8%
Other......................... 2.0% Other......................... 0.6%

</TABLE>

ASSET ALLOCATION AS A PERCENTAGE OF TOTAL ASSETS

(1) Unaudited

5
<PAGE> 7

PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

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

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

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

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

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

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Utility Fund vs. Standard & Poor's 40
Utilities Index
(August 28, 1993 through June 30, 1997)

[LINE GRAPH]

VKAC 9,427 9,696 8,730 8,742 9,490 10,988 11,382 12,191 12,884
S&P 10,000 9,908 9,093 9,128 10,481 12,946 12,952 13,348 13,654

</TABLE>

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

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

6
<PAGE> 8

PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL UTILITY FUND

We recently spoke with the management team of the Van Kampen American Capital
Utility Fund about the key events and economic forces that shaped the markets
during the past fiscal year. The team is led by Mary Jayne Maly, portfolio
manager, and Alan T. Sachtleben, chief investment officer for equity
investments. The following excerpts reflect their views on the Fund's
performance during the 12-month period ended June 30, 1997.

Q WHAT FACTORS HAD THE GREATEST IMPACT ON THE FUND OVER THE REPORTING
PERIOD?

A A surging economy and a weak bond market created a challenging environment
for the utility sector over the past 12 months. The stock market, while
often volatile, continued to hit record highs, drafting attention away
from the utility industry. Investors tended to overlook the historically
defensive nature of utility investments in favor of participating in the broader
stock market. In addition, concerns about the direction of interest rates and
the shaky bond market fueled price fluctuations among utility stocks, which
usually have been interest-rate sensitive.
Questions about deregulation loomed large over the utility industry, further
clouding the picture for electric and telephone companies. In the electric
utility area, California paved new ground after establishing a plan and
timetable for deregulation and open competition. With other states watching and
waiting to see what will develop, performance was stunted in this sector.
Like other areas of the utility industry, the telephone sector has been
marked by recent mergers and acquisitions, which have created investment
opportunities. Due to legislation passed in 1996, the telephone industry is
wrestling with deregulation issues that will allow local and long-distance phone
companies to compete in both markets. The eventual victors in this struggle have
yet to be determined.
Gas utility companies were the lone star in the industry, resulting from a
tremendous upward move in gas prices. Continuing supply-and-demand fundamentals
generated attractive total returns among gas securities. As this area has
already survived the growing pains of deregulation, it has drawn new attention
from electric companies, which have sought to align themselves with gas
companies in an effort to deliver complete energy service to a growing number of
corporate clients.

Q HOW DID YOU MANAGE THE FUND IN RESPONSE TO THESE FACTORS?

A We maintained a significant weighting in the electric utility sector,
investing in companies with strong management teams in place that can
guide the companies through deregulation. Our stock selection in this
sector focuses on attractively valued, high-quality electric providers that we
believe would be most likely to thrive in a deregulated environment.
Our holdings in the telephone industry were predominately defensive, due to
the ongoing competition between long-distance carriers and regional telephone
companies. We reduced our position in AT&T after a management change failed to
generate the earnings growth we had anticipated. While the telephone industry
may still have near-term downside potential, we believe in the sector's
long-term growth prospects, and will

7
<PAGE> 9

continue to abide by our disciplined research techniques in seeking out
companies with strong management teams and the brightest potential for growth.
Our investments in the gas industry were instrumental to the Fund's positive
performance during the fiscal year. A number of mergers in the gas utility
industry directly benefited the portfolio, with specific holdings positively
affected and aided by the industry's total growth. We search for companies that
are strong and reasonably valued in their own right, which in turn have
attracted the attention of electric companies looking for promising
acquisitions. For additional Fund portfolio highlights, please refer to page
five.

Q HOW DID THE FUND PERFORM DURING THE FISCAL YEAR?

A For the one-year period ended June 30, 1997, the Fund generated a total
return of 13.20 percent(1) (Class A shares at net asset value). By
comparison, the Standard & Poor's 40 Utilities Index returned 5.42
percent, while the Lipper Utility Fund Index returned 14.09 percent for the
period. The S&P 40 Utilities Index is a broad-based, unmanaged index that
reflects the general performance of utility stocks and does not reflect any
commissions or fees that would be paid by an investor purchasing the securities
it represents. The Lipper Utility Fund Index reflects the average performance of
utility funds and does not reflect any sales charges that would be paid by an
investor purchasing the securities it represents. Please refer to the chart on
page four for additional Fund performance results.

Q WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?

A The Fund's performance will depend on several macroeconomic factors.
Overall, we anticipate a continuation of a moderate growth, low-inflation
environment, which would further undermine the utility industry. However,
with a stock market that continues to reach record highs on a consistent basis,
a correction is always a possibility. Extended valuations have increased the
market's volatility and suggest the potential for a significant decline in U.S.
stock prices. If the stock market falters, we believe the Fund is
well-positioned to serve as a prudently defensive investment. Additionally, a
better-performing bond market would aid the utility industry, specifically the
electric sector, which accounts for a large percentage of the Fund's portfolio.
In an area characterized by change, we will continue to seek out new and
profitable opportunities in all sectors of the utility industry. And, in keeping
with the expectations of the Fund's shareholders, we continue to refrain from
taking extreme positions that we believe will expose the portfolio to
unwarranted risk. As always, we will search for the best investments at the best
price, diversify broadly, and maintain a long-term investment horizon.

[SIG]
Alan T. Sachtleben

Chief Investment Officer
Equity Investments

[SIG]
Mary Jayne Maly

Portfolio Manager

Please see footnotes on page four

8
<PAGE> 10

PORTFOLIO OF INVESTMENTS

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 85.0%
ELECTRIC UTILITIES 44.1%
AES Corp. (a)............................................... 50,000 $ 3,537,500
Boston Edison Co. .......................................... 120,000 3,165,000
Cinergy Corp. .............................................. 93,000 3,237,562
CMS Energy Corp. ........................................... 110,000 3,877,500
DTE Energy Co. ............................................. 50,000 1,381,250
Duke Power Co. ............................................. 66,420 3,184,009
Edison International........................................ 157,000 3,905,375
Florida Progress Corp. ..................................... 96,000 3,006,000
FPL Group, Inc. ............................................ 74,000 3,408,625
GPU, Inc. .................................................. 104,175 3,737,278
Houston Industries, Inc. ................................... 129,000 2,765,438
Illinova Corp. ............................................. 65,000 1,430,000
MDU Resources Group, Inc. .................................. 56,000 1,344,000
OGE Energy Corp. ........................................... 72,000 3,276,000
Ohio Edison Co. ............................................ 138,000 3,010,125
Pinnacle West Capital Corp. ................................ 93,400 2,807,838
Public Service Co. of Colorado ............................. 79,000 3,278,500
Public Service Co. of New Mexico ........................... 78,000 1,394,250
SCANA Corp. ................................................ 139,000 3,448,937
Sierra Pacific Resources.................................... 100,000 3,200,000
Southern Co. ............................................... 163,000 3,565,625
------------
61,960,812
------------
NATURAL GAS PIPELINE AND DISTRIBUTION 2.9%
Equitable Resources, Inc. .................................. 50,000 1,418,750
National Fuel Gas Co. NJ ................................... 31,000 1,300,063
Wicor, Inc. ................................................ 36,000 1,401,750
------------
4,120,563
------------
OIL, GAS, PIPELINE AND DISTRIBUTION 8.2%
Coastal Corp. .............................................. 34,000 1,808,375
Columbia Gas Systems, Inc. ................................. 28,000 1,827,000
El Paso Natural Gas Co. .................................... 50,000 2,750,000
Nicor, Inc. ................................................ 50,000 1,793,750
Southwest Gas Corp. ........................................ 100,000 1,987,500
Williams Cos., Inc. - Convertible Preferred................. 13,000 1,339,000
------------
11,505,625
------------
</TABLE>

See Notes to Financial Statements

9
<PAGE> 11

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS 4.0%
Excel Reality Trust, Inc. - Convertible Preferred........... 50,000 $ 1,362,500
Meditrust................................................... 75,000 2,985,937
Prentiss Properties Trust................................... 50,000 1,281,250
------------
5,629,687
------------
TELECOMMUNICATIONS 25.8%
Airtouch Communications, Inc. (a)........................... 50,000 1,368,750
Ameritech Corp. ............................................ 48,000 3,261,000
AT&T Corp. ................................................. 38,600 1,353,413
BellSouth Corp. ............................................ 67,000 3,107,125
Cable & Wireless, PLC - ADR (United Kingdom)................ 136,000 3,799,500
Cincinnati Bell, Inc. ...................................... 86,000 2,709,000
Nynex Corp. ................................................ 51,000 2,938,875
Portugal Telecom SA - ADR (Portugal)........................ 58,000 2,327,250
SBC Communications, Inc. ................................... 53,000 3,279,375
Sprint Corp. ............................................... 33,000 1,736,625
Stet Societa' Finanziaria Telefonica - ADR (Italy).......... 37,000 2,159,875
Tele Danmark A/S ADR (Denmark).............................. 50,000 1,306,250
Telecomunicacoes Brasileiras - ADR (Brazil)................. 12,000 1,821,000
Teleport Communications Group Class A (a)................... 62,000 2,115,750
U.S. West Media Group....................................... 81,000 3,052,687
------------
36,336,475
------------
TOTAL COMMON AND PREFERRED STOCKS..................................... 119,553,162
------------
</TABLE>

See Notes to Financial Statements

10
<PAGE> 12

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED INCOME SECURITIES 11.6%
CABLE TELEVISION 1.5%
$1,000 Continental Cablevision, Inc. .................. 8.300% 05/15/06 $ 1,062,580
1,000 Cox Communications, Inc. ....................... 6.875 06/15/05 990,300
------------
2,052,880
------------
ELECTRIC UTILITIES 3.1%
500 Idaho Power Co. ................................ 8.000 03/15/04 530,775
700 Iowa Electric Light & Pwr Co. .................. 8.625 05/15/01 740,320
1,000 Texas Utilities Electric Co. ................... 8.250 04/01/04 1,070,480
1,000 Union Electric Co. ............................. 7.375 12/15/04 1,027,650
1,000 Virginia Electric & Pwr Co. .................... 6.625 04/01/03 994,800
------------
4,364,025
------------
OIL, GAS, PIPELINE AND DISTRIBUTION 3.7%
500 Colorado Interstate Gas Co. .................... 10.000 06/15/05 592,100
1,000 Enron Corp. .................................... 7.125 05/15/07 1,010,700
330 Laclede Gas Co. ................................ 8.500 11/15/04 360,294
1,000 NGC Corp. ...................................... 6.750 12/15/05 978,700
500 Panhandle Eastern Pipeline Co. ................. 7.875 08/15/04 529,850
400 Southwest Gas Corp. ............................ 9.750 06/15/02 444,920
100 Texas Eastern Transmission Corp. ............... 8.000 07/15/02 103,715
1,090 Texas Gas Transmission Corp. ................... 8.625 04/01/04 1,191,261
------------
5,211,540
------------
TELECOMMUNICATIONS 3.3%
1,000 360 Communications.............................. 7.125 03/01/03 1,001,000
900 GTE Corp. ...................................... 9.375 12/01/00 973,620
1,000 Sprint Corp. ................................... 8.125 07/15/02 1,055,300
617 United Telecommunications Kansas................ 9.750 04/01/00 663,738
1,000 Worldcom, Inc. ................................. 7.750 04/01/07 1,024,250
------------
4,717,908
------------
TOTAL FIXED INCOME SECURITIES............................................... 16,346,353
------------
TOTAL LONG-TERM INVESTMENTS 96.6%
(Cost $122,992,481)....................................................... 135,899,515
SHORT-TERM INVESTMENTS 3.6%
(Cost $5,064,156)......................................................... 5,064,156
------------
TOTAL INVESTMENTS 100.2%
(Cost $128,056,637)....................................................... 140,963,671
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2%)............................... (288,340)
------------
NET ASSETS 100.0%.......................................................... $140,675,331
===========
</TABLE>

(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements

11
<PAGE> 13

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $128,056,637)....................... $140,963,671
Cash........................................................ 4,144
Receivables:
Fund Shares Sold.......................................... 2,225,227
Dividends................................................. 382,759
Interest.................................................. 237,429
Unamortized Organizational Costs............................ 24,658
Other....................................................... 4,734
------------
Total Assets.......................................... 143,842,622
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 2,598,716
Fund Shares Repurchased................................... 208,176
Distributor and Affiliates................................ 154,534
Investment Advisory Fee................................... 74,259
Accrued Expenses............................................ 50,179
Deferred Compensation and Retirement Plans.................. 81,427
------------
Total Liabilities..................................... 3,167,291
------------
NET ASSETS.................................................. $140,675,331
============
NET ASSETS CONSIST OF:
Capital..................................................... $119,920,894
Net Unrealized Appreciation................................. 12,907,034
Accumulated Net Realized Gain............................... 7,464,449
Accumulated Undistributed Net Investment Income............. 382,954
------------
NET ASSETS.................................................. $140,675,331
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $52,481,801
and 3,192,071 shares of beneficial interest issued and
outstanding)............................................ $ 16.44
Maximum sales charge (5.75%* of offering price)......... 1.00
------------
Maximum offering price to public........................ $ 17.44
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $83,275,491 and
5,067,268 shares of beneficial interest issued and
outstanding)............................................ $ 16.43
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $4,918,039 and
299,404 shares of beneficial interest issued and
outstanding)............................................ $ 16.43
============
</TABLE>

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

See Notes to Financial Statements

12
<PAGE> 14

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $163,806).... $ 6,439,432
Interest.................................................... 1,414,846
-----------
Total Income............................................ 7,854,278
-----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $133,260, $859,236 and $48,593,
respectively)............................................. 1,041,089
Investment Advisory Fee..................................... 937,503
Shareholder Services........................................ 269,499
Merger Costs................................................ 156,573
Custody..................................................... 60,590
Trustees Fees and Expenses.................................. 37,907
Legal....................................................... 23,985
Amortization of Organizational Costs........................ 22,995
Other....................................................... 182,840
-----------
Total Expenses.......................................... 2,732,981
Less Expenses Reimbursed................................ 5,041
-----------
Net Expenses............................................ 2,727,940
-----------
NET INVESTMENT INCOME....................................... $ 5,126,338
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $10,817,404
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 11,904,947
End of the Period:
Investments............................................. 12,907,034
-----------
Net Unrealized Appreciation During the Period............... 1,002,087
-----------
NET REALIZED AND UNREALIZED GAIN............................ $11,819,491
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $16,945,829
===========
</TABLE>

See Notes to Financial Statements

13
<PAGE> 15

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended June 30, 1997 and 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 5,126,338 $ 4,873,693
Net Realized Gain........................................ 10,817,404 12,374,245
Net Unrealized Appreciation
During the Period...................................... 1,002,087 11,585,780
----------- -----------
Change in Net Assets from Operations..................... 16,945,829 28,833,718
----------- -----------
Distributions from Net Investment Income:
Class A Shares......................................... (2,064,034) (2,717,536)
Class B Shares......................................... (2,700,742) (3,509,438)
Class C Shares......................................... (153,673) (129,256)
----------- -----------
(4,918,449) (6,356,230)
----------- -----------
Distributions from Net Realized Gain:
Class A Shares......................................... (683,737) -0-
Class B Shares......................................... (1,114,278) -0-
Class C Shares......................................... (63,379) -0-
----------- -----------
(1,861,394) -0-
----------- -----------
Total Distributions...................................... (6,779,843) (6,356,230)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 10,165,986 22,477,488
----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................ 50,324,196 44,796,872
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 5,538,900 5,057,133
Cost of Shares Repurchased............................... (80,912,740) (49,434,577)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... (25,049,644) 419,428
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS.................... (14,883,658) 22,896,916
NET ASSETS:
Beginning of the Period.................................. 155,558,989 132,662,073
----------- -----------
End of the Period (Including accumulated undistributed
net investment income of $382,954 and $17,591,
respectively).......................................... $140,675,331 $155,558,989
============ ============

</TABLE>

See Notes to Financial Statements

14
<PAGE> 16

FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
From July 28, 1993
(Commencement
Year Ended June 30, of Investment
--------------------------- Operations) to
Class A Shares 1997 1996 1995 June 30, 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.... $15.298 $13.386 $12.906 $ 14.300
------ ------ ------ ------
Net Investment Income....................... .637 .538 .595 .479
Net Realized and Unrealized Gain/Loss....... 1.317 2.077 .485 (1.513)
------ ------ ------ ------
Total from Investment Operations............ 1.954 2.615 1.080 (1.034)
------ ------ ------ ------
Less:
Distributions from Net Investment
Income.................................. .610 .703 .600 .323
Distributions from Net Realized Gain...... .201 -0- -0- .037
------ ------ ------ ------
Total Distributions......................... .811 .703 .600 .360
------ ------ ------ ------
Net Asset Value, End of the Period.......... $16.441 $15.298 $13.386 $ 12.906
====== ====== ====== ======
Total Return (a)............................ 13.20% 19.93% 8.70% (7.38%)*
Net Assets at End of the Period
(In millions)............................. $52.5 $57.7 $50.4 $51.5
Ratio of Expenses to Average Net Assets
(b)....................................... 1.41% 1.38% 1.34% 1.34%
Ratio of Net Investment Income to Average
Net Assets (b)............................ 4.03% 3.61% 4.55% 4.10%
Portfolio Turnover.......................... 102% 121% 109% 102%*
Average Commission Paid Per Equity Share
Traded (c)................................ $.0601 $.0590 -- --
</TABLE>

*Non-Annualized

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

(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of certain expenses was less than 0.01%

(c) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure is not applicable for years beginning prior to June 30, 1995.

See Notes to Financial Statements

15
<PAGE> 17

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
From July 28, 1993
(Commencement
Year Ended June 30, of Investment
--------------------------- Operations) to
Class B Shares 1997 1996 1995 June 30, 1994
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Net Asset Value, Beginning of the Period.... $15.296 $13.356 $12.880 $ 14.300
------- ------- ------- -------
Net Investment Income....................... .519 .426 .507 .394
Net Realized and Unrealized Gain/Loss....... 1.314 2.080 .461 (1.519)
------- ------- ------- -------
Total from Investment Operations............ 1.833 2.506 .968 (1.125)
------- ------- ------- -------
Less:
Distributions from Net Investment
Income.................................. .494 .566 .492 .258
Distributions from Net Realized Gain...... .201 -0- -0- .037
------- ------- ------- -------
Total Distributions......................... .695 .566 .492 .295
------- ------- ------- -------
Net Asset Value, End of the Period.......... $16.434 $15.296 $13.356 $ 12.880
======= ======= ======= =======
Total Return (a)............................ 12.30% 19.08% 7.80% (8.02%)*
Net Assets at End of the Period
(In millions)............................. $83.3 $92.9 $81.0 $83.7
Ratio of Expenses to Average Net Assets
(b)....................................... 2.17% 2.13% 2.05% 2.06%
Ratio of Net Investment Income to Average
Net Assets (b)............................ 3.27% 2.86% 3.84% 3.36%
Portfolio Turnover.......................... 102% 121% 109% 102%*
Average Commission Paid Per Equity Share
Traded (c)................................ $.0601 $.0590 -- --
</TABLE>

*Non-Annualized

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

(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of certain expenses was less than
0.01%.

See Notes to Financial Statements

16
<PAGE> 18

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
From August 13, 1993
Year Ended June 30, (Commencement
--------------------------- Distribution) to
Class C Shares 1997 1996 1995 June 30, 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period................................ $15.290 $13.356 $12.868 $14.460
------- ------- ------- -------
Net Investment Income................... .503 .470 .482 .330
Net Realized and Unrealized Gain/Loss... 1.328 2.030 .498 (1.627)
------- ------- ------- -------
Total from Investment Operations........ 1.831 2.500 .980 (1.297)
------- ------- ------- -------
Less:
Distributions from Net Investment
Income.............................. .494 .566 .492 .258
Distributions from Net Realized
Gain................................ .201 -0- -0- .037
------- ------- ------- -------
Total Distributions..................... .695 .566 .492 .295
------- ------- ------- -------
Net Asset Value, End of the Period...... $16.426 $15.290 $13.356 $12.868
======= ======= ======= =======
Total Return (a)........................ 12.37% 19.00% 7.88% (9.11%)*
Net Assets at End of the Period (In
millions)............................. $4.9 $5.0 $1.3 $1.1
Ratio of Expenses to Average Net Assets
(b)................................... 2.17% 2.13% 2.09% 2.05%
Ratio of Net Investment Income to
Average Net Assets (b)................ 3.23% 2.78% 3.80% 3.38%
Portfolio Turnover...................... 102% 121% 109% 102%*
Average Commission Paid Per Equity Share
Traded (c)............................ $.0601 $.0590 -- --
</TABLE>

*Non-Annualized

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

(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of certain expenses was less than
0.01%.

See Notes to Financial Statements

17
<PAGE> 19

NOTES TO FINANCIAL STATEMENTS

June 30, 1997
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Utility Fund (the "Fund") is organized as a series
of the Van Kampen American Capital Equity Trust, a Delaware business trust and
is registered as a diversified open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to provide its shareholders with capital appreciation and current income,
through investment in common stocks and income securities of companies engaged
in the utilities industry. The Fund commenced investment operations on July 28,
1993, with two classes of common shares, Class A and Class B shares. The
distribution of the Fund's Class C shares commenced on August 13, 1993.

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

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

B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At June 30, 1997, there were no when
issued or delayed delivery purchase commitments.

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

18
<PAGE> 20

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

D. ORGANIZATIONAL COSTS--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 costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.

At June 30, 1997, for federal income tax purposes, cost of long- and
short-term investments is $128,056,637; the aggregate gross unrealized
appreciation is $14,626,362 and the aggregate gross unrealized depreciation is
$1,719,328, resulting in net unrealized appreciation of $12,907,034.

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 $901 were reclassified from
accumulated net realized gain/loss to accumulated undistributed net investment
income. Additional permanent differences relating to the recognition of Fund
merger expenses totaling $156,573 were reclassified from accumulated
undistributed net investment income to capital.

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

For the year ended June 30, 1997, $608,705 of the distributions from
realized gains made by the Fund were long-term capital gains. In January, 1998,
the Fund will provide tax information to shareholders for the 1997 calendar
year.

19
<PAGE> 21

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

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>

For the year ended June 30, 1997, the Fund recognized expenses of
approximately $10,100 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.

For the year ended June 30, 1997, the Fund recognized expenses of
approximately $40,000 representing VKAC's cost of providing accounting, cash
management and legal services to the Fund.

ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the year ended June
30, 1997, the Fund recognized expenses of approximately $196,000, 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. During the period, the Adviser reimbursed the Fund for certain trustees'
compensation in connection with the July, 1995 increase in the number of
trustees of the Fund.

The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Fund. The maximum annual
benefit per Trustee under the plan is equal to $2,500.

At June 30, 1997, VKAC owned 100 shares each of Classes A, B and C,
respectively.

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of shares of beneficial interest, 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.

20
<PAGE> 22

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

At June 30, 1997, capital aggregated $44,783,868, $71,029,312 and $4,107,714
for Classes A, B and C, respectively. For the year ended June 30, 1997,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.......................................... 2,620,830 $ 41,844,771
Class B.......................................... 496,213 7,650,734
Class C.......................................... 55,249 828,691
---------- ------------
Total Sales........................................ 3,172,292 $ 50,324,196
========== ============
Dividend Reinvestment:
Class A.......................................... 146,956 $ 2,266,380
Class B.......................................... 203,976 3,135,954
Class C.......................................... 8,882 136,566
---------- ------------
Total Dividend Reinvestment........................ 359,814 $ 5,538,900
========== ============
Repurchases:
Class A.......................................... (3,344,356) $(53,090,333)
Class B.......................................... (1,709,336) (26,459,861)
Class C.......................................... (89,228) (1,362,546)
---------- ------------
Total Repurchases.................................. (5,142,920) $(80,912,740)
========== ============
</TABLE>

21
<PAGE> 23

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

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

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

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

22
<PAGE> 24

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

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

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

For the year ended June 30, 1997, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$3,700 and CDSC on redeemed shares of approximately $164,400. Sales charges do
not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $141,749,073 and $169,893,143,
respectively.

5. DISTRIBUTION AND SERVICE PLANS

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

Annual fees under the Plans of up to .25% for Class A net assets and 1.00%
each for Class B and Class C net assets are accrued daily. Included in these
fees for the year ended June 30, 1997, are payments to VKAC of approximately
$620,500.

23
<PAGE> 25

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

6. FUND MERGERS

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

24
<PAGE> 26

REPORT OF INDEPENDENT ACCOUNTANTS

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

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Utility Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1997, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Utility Fund as of June 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP
Chicago, Illinois
August 11, 1997

25
<PAGE> 27

FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL

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

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

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

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

MORGAN STANLEY FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Value Fund
Worldwide High Income Fund

Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us weekdays from 7:00 a.m. to 7:00
p.m. Central time at 1-800-341-2911 for Van Kampen American Capital funds or
Morgan Stanley retail funds.

26
<PAGE> 28
VAN KAMPEN AMERICAN CAPITAL UTILITY FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
JEROME L. ROBINSON
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN*--Chairman

OFFICERS

DENNIS J. MCDONNELL*
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

PETER W. HEGEL*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

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

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

SHAREHOLDER SERVICING AGENT

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

CUSTODIAN

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

LEGAL COUNSEL

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

INDEPENDENT ACCOUNTANTS

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

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

(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.
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. After December 31, 1997, the report must be accompanied by
a quarterly performance update, if applicable.

27
<PAGE> 29

RESULTS OF SHAREHOLDER VOTES

A Special Meeting of Shareholders of the Fund was held on May 28, 1997, where
shareholders voted on a new investment advisory agreement, the election of
Trustees and the ratification of KPMG Peat Marwick LLP as independent public
accountants. With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Investment Advisory Corp. and the Fund,
5,658,549 shares voted for the proposal, 80,178 shares voted against and 178,137
shares abstained. With regard to the election of J. Miles Branagan as elected
trustee of the Fund, 5,835,137 shares voted in his favor and 82,087 shares
withheld. With regard to the election of Richard M. DeMartini as elected trustee
of the Fund, 5,834,749 shares voted in his favor and 82,476 shares withheld.
With regard to the election of Linda Hutton Heagy as elected trustee of the
Fund, 5,832,773 shares voted in her favor and 84,452 shares withheld. With
regard to the election of R. Craig Kennedy as elected trustee of the Fund,
5,834,255 shares voted in his favor and 82,970 shares withheld. With regard to
the election of Jack E. Nelson as elected trustee of the Fund, 5,832,121 shares
voted in his favor and 85,103 shares withheld. With regard to the election of
Don G. Powell as elected trustee of the Fund 5,832,915 shares voted in his favor
and 84,310 shares withheld. With regard to the election of Jerome L. Robinson as
elected trustee of the Fund, 5,833,180 shares voted in his favor and 84,044
shares withheld. With regard to the election of Phillip B. Rooney as elected
trustee of the Fund, 5,833,575 shares voted in his favor and 83,650 shares
withheld. With regard to the election of Fernando Sisto as elected trustee of
the Fund, 5,833,103 shares voted in his favor and 84,121 shares withheld. With
regard to the election of Wayne W. Whalen as elected trustee of the Fund,
5,832,050 shares voted in his favor and 85,174 shares withheld. With regard to
the ratification of KPMG Peat Marwick LLP as independent public accountants for
the Fund, 5,724,587 shares voted for the proposal, 36,973 shares voted against
and 155,664 shares abstained.

28
<PAGE> 30

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . 1
Putting Your Fund's Performance in Perspective . . . . . . . . . . 3
Portfolio Management Review . . . . . . . . . . . . . . . . . . . . 4
Portfolio of Investments . . . . . . . . . . . . . . . . . . . . . 7
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
Independent Accountants' Report . . . . . . . . . . . . . . . . . . 17
</TABLE>

VALF ANR 8/97

<PAGE> 31
LETTER TO SHAREHOLDERS

July 24, 1997

Dear Shareholder,

As you know, Van Kampen American Capital was recently acquired by
Morgan Stanley Group Inc., a world leader in asset management. Earlier this
year, Morgan Stanley Group Inc. and Dean Witter, Discover & Co. agreed to
merge. The merger was completed on May 31, creating the combined company of
Morgan Stanley, Dean Witter, Discover & Co. Additionally, we are very pleased
to announce that Philip N. Duff, formerly the chief financial officer of Morgan
Stanley Group Inc., has joined Van Kampen American Capital as president and
chief executive officer. I will continue as chairman of the firm. We are
confident that these changes will continue to work to the benefit of our fund
shareholders as we move into the next century.
One of the immediate privileges that we can offer fund shareholders is
the ability to make exchanges between Van Kampen American Capital and Morgan
Stanley retail funds at no charge. In our view, the rapid appreciation of U.S.
stock prices in recent years has created a need for investors to examine their
portfolios carefully to ensure proper diversification among domestic and
foreign investments. The Morgan Stanley retail funds, with their emphasis on
global markets, can be valuable tools to accomplishing this diversification.
We also urge investors to consider how their fund holdings are
currently allocated among the three major asset classes of stocks, bonds, and
cash reserves. Uneven movements in the various markets can distort a carefully
planned investment program. And, with stock prices near record highs, it is
likely that some rebalancing of your portfolio allocations may be necessary.
Once again, the exchangeability feature with the Morgan Stanley retail funds
provides additional choices and opportunities to make the necessary adjustments
to your portfolio's asset allocation.

ECONOMIC OVERVIEW

Growth, stability, and confidence continued to characterize the U.S.
economic environment during the past six months. In the first quarter, the
economy grew at its fastest pace since 1987. Meanwhile, consumer confidence
soared to its highest reading in 28 years, while unemployment fell as low as
4.8 percent, the lowest level since 1973.
Despite the robust pace of economic activity, there was little
evidence of troublesome inflation. Wholesale prices actually fell during each
of the first five months of 1997, the longest stretch of consecutive monthly
declines in 45 years. At the consumer level, prices rose by a mere 2.2 percent
during the 12 months through May. A strong rally in the U.S. dollar helped
dampen inflationary pressures resulting from the vigorous domestic economy by
making imported goods less expensive. At the same time, continued moderation in
the cost of employee benefit packages offset mild upward pressure on wages.
In March, the inflationary implications of a tight labor market caused
the Federal Reserve Board to raise its target for a key lending rate by
one-quarter of a percentage point, the first hike in short-term interest rates
in two years. Signs that economic growth slowed markedly in the second quarter,
however, led Fed policymakers to leave rates unchanged at subsequent meetings.

Continued on page two

<PAGE> 32

MARKET OVERVIEW

With a solid underpinning of record profits, strong economic growth,
and low inflation, the U.S. equity market continued its torrid performance
during the first half of 1997. For a brief time this spring, however, investors
worried that growth was too robust and that higher interest rates were on the
way. Those fears pushed stock prices lower by about 10 percent over a one-month
period beginning in mid-March.
By mid-April, signs that the economy was cooling began to emerge, and
stocks skyrocketed to a series of record highs. The Wilshire 5000 Index,
comprised of 5,000 publicly traded domestic companies, gained 16.65 percent
during the first six months of the year and increased by 25.95 percent over the
12 months through June 30. Low inflation allowed the market's price/earnings
multiple to remain high, while strong growth in corporate profits provided
solid support for stock prices.
Within the equity market, most of the gains were generated by
large-capitalization stocks. The Russell 1000 Index of large companies gained
17.57 percent over the six months through June 30, almost double the return of
the Russell 2000 Index of small-capitalization companies. Consumer
non-cyclicals such as beverages and pharmaceuticals were among the
top-performing industry groups, although the rally broadened by the end of June
to include sectors that had previously been laggards, including cyclicals and
small-company stocks.

OUTLOOK

We expect the pace of economic activity during the remainder of 1997
to accelerate modestly from the relatively sluggish rate that prevailed during
the second quarter. While we do not believe that economic growth will be rapid
enough to reignite inflation, some warning signs are present, including a tight
labor market and high consumer confidence. In this environment, at least one
additional Federal Reserve interest rate hike remains a possibility.
We believe that equities should continue to do well given the likely
continuation of the moderate- growth, low-inflation environment. We are
concerned, however, that the lengthy series of record highs in the U.S. stock
market is creating unreasonable expectations among some investors. Valuations
are extended and investment sentiment is exceptionally optimistic. Under such
circumstances, a mild correction would not be unusual.
We are fortunate to be experiencing a rare combination of sustained
economic growth, low inflation, and highly favorable performance in the
financial market. Along with our fund shareholders, we celebrate the seemingly
best of economic times. Once again, we encourage you to review your portfolio
with an eye toward correcting allocation imbalances.
Additional details about your Fund, including a question-and-answer
section with your portfolio management team, are provided in this report. We
appreciate your continued confidence in your investment with Van Kampen
American Capital.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

<PAGE> 33
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

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

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

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

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

For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Standard & Poor's 500-Stock
Index and the Standard & Poor's 400 Midcap Index over time. These indices are
unmanaged statistical composites and do not reflect any commissions or fees
which would be incurred by an investor purchasing the securities they
represent. Similarly, their performance does not reflect any sales charges or
other costs which would be applicable to an actively managed portfolio, such as
that of the Fund

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Value Fund vs. Standard & Poor's 500-Stock Index
and Standard & Poor's 400 Midcap Index (December 27, 1995 through June 30,
1997)

[LINE GRAPH]

<TABLE>
<CAPTION>
Dec Mar Jun Sep Dec Mar Jun
1995 1996 1996 1996 1996 1997 1997
<S> <C> <C> <C> <C> <C> <C> <C>
VKAC 9463 10141 10745 11103 12099 12208 14225
S&P 500 Stock Index 10000 10621 11096 11437 12389 12723 14940
S&P 400 Midcap Index 10000 10659 10966 11283 11965 11790 13520
</TABLE>

* The Standard & Poor's 500-Stock Index represents general stock market
performance and was initially selected as a benchmark for the Fund's
performance; additionally the Standard & Poor's 400 Midcap Index was selected
to represent a more narrow-based comparison.

3
<PAGE> 34

PORTFOLIO MANAGEMENT REVIEW

VAN KAMPEN AMERICAN CAPITAL VALUE FUND

WE RECENTLY SPOKE TO THE MANAGEMENT TEAM OF THE VAN KAMPEN AMERICAN CAPITAL
VALUE FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
DURING THE FUND'S FISCAL YEAR. THE TEAM INCLUDES JAMES A. GILLIGAN AND BRET W.
STANLEY, PORTFOLIO CO-MANAGERS, AND ALAN T. SACHTLEBEN, CHIEF INVESTMENT
OFFICER FOR EQUITY INVESTMENTS. THE FOLLOWING EXCERPTS REFLECT THEIR VIEWS ON
THE FUND'S PERFORMANCE DURING THE 12-MONTH PERIOD ENDED JUNE 30, 1997.

Q WHAT ECONOMIC FACTORS INFLUENCED THE MARKET DURING THE REPORTING
PERIOD?

A The rare combination of moderate economic growth and historically low
inflation provided a nearly ideal environment for equity investments and drove
the stock market to new heights. The Fund's fiscal year began on a low note in
July of 1996, as small- and mid-capitalization stocks were struggling to
rebound from a broad market correction. But by the end of July, technology and
financial stocks were leading the equity markets upward. The economy's sluggish
third quarter was followed by a strong fourth quarter, and corporate earnings
came in slightly better than expected. This boosted stocks through the end of
the year, generally favoring large, well-established companies over their
smaller competitors.
The economy grew at a remarkably strong pace in the first quarter of
1997, which caused investors to worry that inflation might become a problem.
This concern increased volatility in stock prices and precipitated a month-long
market correction in mid-March that wiped out all year-to-date gains. Stocks
rebounded quickly after economic data was released in April showing negligible
inflation and hints of a slowdown in growth. In May, the Dow Jones Industrial
Average rallied to record-breaking heights and recouped its losses. Again,
large-cap stocks outperformed smaller, more erratic issues during this volatile
period. The reporting period ended on a positive note, as the stock market
surged ahead through the end of June.

Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO
MEET ITS OBJECTIVE?

A We use a consistent strategy to manage the Fund: we identify stocks in
the mid-cap universe that we believe are selling at a discount to their
intrinsic value. The Fund's approach is different from other value funds in
that we don't simply consider a stock's price-to-earnings ratio, because a low
price-to-earnings ratio may be justified for a particular security or industry.
Instead, we strive to invest in quality businesses or industry leaders that
have suffered a temporary price decline due to concerns about short-term
performance. Our belief is that when temporary problems of good companies are
resolved, their stock will be favorably revalued to reflect their true worth.
Specifically, we use a "bottom up" stock selection process, which
means we evaluate our acquisitions one by one, rather than maintaining defined
sector allocations. We also require a security to have a 50-percent
appreciation potential to its intrinsic value during the two- to three-year
expected holding period.

<PAGE> 35

Q WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO?

A Our sector weightings are a reflection of where we found good
opportunities on a stock-by-stock basis, and there were winners in a variety of
sectors during the past year. One of our largest sectors was health care, which
was comprised primarily of HMOs. Here, we increased our holdings in Pacificare
and Aetna, whose valuations had dropped due to fears of industry pricing
difficulties and cost inflation, and we hope to capitalize on the current
upswing in HMO fundamentals. On the other hand, we underweighted the technology
sector because we thought it was overvalued. Other companies that performed
well include Crown Cork & Seal (raw materials/processing industries), and Nokia
(technology).
One security in particular that illustrates our approach to stock
selection is Keystone International, a worldwide leader in the pump and valve
industry. The producer manufacturing sector as a whole was undervalued at the
beginning of the reporting period, and Keystone was especially attractive.
However, new management was the catalyst for the intrinsic value to be fully
realized. We met with the new management team, reviewed their restructuring
strategy, and decided to purchase the security. It was one of the best
performers in the portfolio during the reporting period, appreciating over 72
percent, following Tyco International's bid to acquire the company.

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

A The Fund achieved a 12-month total return of 32.39 percent (Class A
shares at net asset value) as of June 30, 1997. By comparison, the Standard &
Poor's 500-Stock Index returned 34.63 percent, and the Standard & Poor's 400
Mid-Cap Index, which more closely resembles the Fund, returned 23.29 percent.
The S&P 500-Stock Index is a broad-based, unmanaged index that reflects the
general performance of the stock market, and the S&P 400 Mid-Cap Index reflects
the general performance of mid-cap stocks.
Keep in mind that these indices are unmanaged statistical composites
that do not include any commissions, fees or sales charges that would be paid
by an investor purchasing the securities or investments they represent.

Q WHAT IS YOUR OUTLOOK FOR THE FUND FOR THE REMAINDER OF THE YEAR?

<PAGE> 36

The majority of the market's gains this year have been fueled by the so-called
"super-caps" -- the giants of the S&P 500, including Coca-Cola, Procter &
Gamble, Microsoft, and General Electric. Valuations of these stocks have become
inflated, so it has been easier to find value opportunities in the mid-cap
sector, which is where the Fund concentrates its holdings. As such, we expect
the Value Fund to continue to thrive through year end.

[SIG]
Alan T. Sachtleben

Chief Investment Officer
Equity Investments

[SIG]
Bret W. Stanley

Portfolio Co-Manager

[SIG]
James A. Gilligan

Portfolio Co-Manager

<PAGE> 37
VAN KAMPEN AMERICAN CAPITAL VALUE FUND

PORTFOLIO OF INVESTMENTS

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 98.9%
CONSUMER DISTRIBUTION 7.1%
AnnTaylor Stores Corp. (a) ............................. 1,060 $ 20,670
Federated Department Stores, Inc. (a) .................. 890 30,927
Gap, Inc. .............................................. 700 27,213
Gymboree Corp. (a) ..................................... 1,170 28,080
-----------
106,890
-----------
CONSUMER DURABLES 1.8%
Black & Decker Corp. ................................... 100 3,719
Newell Co. ............................................. 600 23,775
-----------
27,494
-----------
CONSUMER NON-DURABLES 6.8%
Nabisco Holdings Corp., Class A ........................ 870 34,691
Philip Morris Cos., Inc. ............................... 870 38,607
Tommy Hilfiger Corp. (a) ............................... 700 28,131
-----------
101,429
-----------
CONSUMER SERVICES 16.0%
Bell & Howell Co. (a) .................................. 1,890 58,236
Firstplus Financial Group, Inc. (a) .................... 1,150 39,100
H & R Block, Inc. ...................................... 1,360 43,860
Landry's Seafood Restaurant, Inc. (a) .................. 1,400 32,200
Lone Star Steakhouse & Saloon (a) ...................... 2,580 67,080
-----------
240,476
-----------
ENERGY 2.5%
McDermott International, Inc. .......................... 1,300 37,944
-----------
FINANCE 15.0%
American Bankers Insurance Group, Inc. ................. 250 15,813
Chase Manhattan Corp. .................................. 380 36,884
Conseco, Inc. .......................................... 1,040 38,480
Equitable Iowa Cos. .................................... 640 35,840
Hartford Life, Inc., Class A ........................... 100 3,750
Hertz Corp., Class A (a) ............................... 100 3,600
PMI Group, Inc. ........................................ 400 24,950
Provident Cos., Inc. ................................... 620 33,170
TIG Holdings, Inc. ..................................... 1,030 32,187
-----------
224,674
-----------
</TABLE>
See Notes to Financial Statements

7
<PAGE> 38
VAN KAMPEN AMERICAN CAPITAL VALUE FUND

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE 18.7%
Aetna, Inc. ............................................................................ 700 $ 71,662
Nellcor Puritan Bennett, Inc. (a) ...................................................... 2,000 36,250
PacifiCare Health Systems, Class B (a) ................................................. 990 63,236
Pharmacia & Upjohn, Inc. ............................................................... 900 31,275
Teva Pharmaceutical Industries Ltd. - ADR (Israel) ..................................... 300 19,425
Watson Pharmaceuticals, Inc. (a) ....................................................... 1,380 58,305
-------------
280,153
-------------
PRODUCER MANUFACTURING 17.8%
Durco International, Inc. .............................................................. 800 23,400
Fluor Corp. ............................................................................ 350 19,315
Johnson Controls, Inc. ................................................................. 1,150 47,222
Keystone International, Inc. ........................................................... 1,300 45,094
Philips Electronics N.V. - N.Y. Registered Shares (Netherlands) ........................ 670 48,156
Stewart & Stevenson Services, Inc. ..................................................... 1,980 51,480
Waste Management, Inc. ................................................................. 1,000 32,125
-------------
266,792
-------------
RAW MATERIALS/PROCESSING INDUSTRIES 4.3%
Alumax, Inc. (a) ....................................................................... 640 24,280
Boise Cascade Corp. .................................................................... 560 19,775
Crown Cork & Seal, Inc. ................................................................ 400 21,375
-------------
65,430
-------------
TECHNOLOGY 6.6%
3Com Corp. (a) ......................................................................... 1,150 51,750
Nokia Corp. - ADR (Finland) ............................................................ 640 47,200
-------------
98,950
-------------
UTILITIES 2.3%
AT&T Corp. ............................................................................. 1,000 35,062
-------------
TOTAL INVESTMENTS 98.9%
(Cost $1,279,048) ...................................................................... 1,485,294
-------------
OTHER ASSETS IN EXCESS OF LIABILITIES 1.1% ........................................... 15,916
-------------
NET ASSETS 100.0% ................................................................... $ 1,501,210
-------------
</TABLE>

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

See Notes to Financial Statements

8
<PAGE> 39
VAN KAMPEN AMERICAN CAPITAL VALUE FUND

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:

Total Investments (Cost $1,279,048) .................................. $ 1,485,294
Cash ................................................................. 13,948
Receivables:
Distributor ........................................................ 25,300
Dividends .......................................................... 1,513
Unamortized Organizational Costs ..................................... 28,103
--------------
Total Assets ..................................................... 1,554,158
--------------

LIABILITIES:

Organizational Costs Payable ......................................... 40,000
Deferred Compensation and Retirement Plans ........................... 12,948
--------------
Total Liabilities ................................................ 52,948
--------------
NET ASSETS ............................................................. $ 1,501,210
==============
NET ASSETS CONSIST OF:
Capital .............................................................. $ 1,236,876
Net Unrealized Appreciation .......................................... 206,246
Accumulated Net Realized Gain ........................................ 62,157
Accumulated Net Investment Loss ...................................... (4,069)
--------------
NET ASSETS $ 1,501,210
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $1,314,954 and 91,821 shares of beneficial interest issued
and outstanding) ................................................... $ 14.32
Maximum sales charge (5.75%* of offering price) .................... 0.87
--------------
Maximum offering price to public ................................... $ 15.19
==============
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $93,128 and 6,500 shares of beneficial interest issued
and outstanding) ................................................... $ 14.33
==============
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $93,128 and 6,500 shares of beneficial interest issued
and outstanding) ................................................... $ 14.33
==============

</TABLE>

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

See Notes to Financial Statements

9
<PAGE> 40
VAN KAMPEN AMERICAN CAPITAL VALUE FUND

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ............................................................................. $ 5,832
-----------

EXPENSES:
Shareholder Reports ................................................................... 16,400
Trustees Fees and Expenses ............................................................ 16,393
Shareholder Services .................................................................. 15,600
Audit ................................................................................. 12,250
Accounting ............................................................................ 11,136
Amortization of Organizational Costs .................................................. 7,997
Legal ................................................................................. 7,500
Investment Advisory Fee ............................................................... 4,160
Registration .......................................................................... 2,225
Custody ............................................................................... 1,023
Other ................................................................................. 1,467
-----------
Total Expenses ...................................................................... 96,151
Less: Fees Waived and Expenses Reimbursed ($4,160 and $83,698, respectively) ........ 87,858
Earnings Credits on Cash Balances ............................................. 1,023
-----------
Net Expenses ........................................................................ 7,270
-----------

NET INVESTMENT LOSS ..................................................................... $ (1,438)
===========

REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain ..................................................................... $ 64,043
-----------

Unrealized Appreciation/Depreciation:
Beginning of the Period ............................................................. 20,556
End of the Period ................................................................... 206,246
-----------
Net Unrealized Appreciation During the Period ......................................... 185,690
-----------

NET REALIZED AND UNREALIZED GAIN ........................................................ $ 249,733
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS .............................................. $ 248,295
===========
</TABLE>

See Notes to Financial Statements

10
<PAGE> 41
VAN KAMPEN AMERICAN CAPITAL VALUE FUND

STATEMENT OF CHANGES IN NET ASSETS

For the Year Ended June 30, 1997 and the Period
December 27, 1995 (Commencement of Investment Operations) to June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1997 June 30, 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income/Loss ......................................................... $ (1,438) $ 495
Net Realized Gain .................................................................. 64,043 9,524
Net Unrealized Appreciation During the Period ...................................... 185,690 20,556
------------ ------------
Change in Net Assets from Operations ............................................... 248,295 30,575
------------ ------------

Distributions from Net Investment Income:
Class A Shares ................................................................. (174) -0-
Class B Shares ................................................................. (111) -0-
Class C Shares ................................................................. (111) -0-
------------ ------------
(396) -0-
------------ ------------

Distributions from Net Realized Gain:
Class A Shares ................................................................. (6,330) -0-
Class B Shares ................................................................. (4,004) -0-
Class C Shares ................................................................. (4,004) -0-
------------ ------------
(14,338) -0-
------------ ------------

Total Distributions ................................................................ (14,734) -0-
------------ ------------

NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES ................................ 233,561 30,575
------------ ------------

FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold .......................................................... 1,000,000 35,000
Net Asset Value of Shares Issued Through Dividend Reinvestment ..................... 2,074 -0-
------------ ------------

NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS ................................. 1,002,074 35,000
------------ ------------

TOTAL INCREASE IN NET ASSETS ....................................................... 1,235,635 65,575

NET ASSETS:
Beginning of the Period ............................................................ 265,575 200,000
------------ ------------

End of the Period (Including accumulated undistributed net
investment income/loss of $(4,069) and $495,
respectively) .................................................................. $ 1,501,210 $ 265,575
============ ============
</TABLE>

See Notes to Financial Statements

11
<PAGE> 42

VAN KAMPEN AMERICAN CAPITAL VALUE FUND

FINANCIAL HIGHLIGHTS

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

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Year Ended Operations) to
Class A Shares June 30, 1997 June 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period .............................. $ 11.409 $ 10.000
----------- -----------
Net Investment Income/Loss ............................................ (0.014) 0.018
Net Realized and Unrealized Gain ...................................... 3.559 1.391
----------- -----------
Total from Investment Operations ...................................... 3.545 1.409
----------- -----------
Less:
Distributions from Net Investment Income .............................. 0.017 -0-
Distributions from Net Realized Gain .................................. 0.616 -0-
----------- ----------
Total Distributions ..................................................... 0.633 -0-
----------- ----------
Net Asset Value, End of the Period ...................................... $ 14.321 $ 11.409
=========== ===========
Total Return * (a) ...................................................... 32.39% 14.00%**

Net Assets at End of the Period (In thousands) .......................... $ 1,315.0 $ 117.2

Ratio of Expenses to Average Net Assets* (b) ............................ 1.48% 1.38%

Ratio of Net Investment Income/Loss to Average Net
Assets* ................................................................ (.31%) 0.38%

Portfolio Turnover ...................................................... 85% 41%**

Average Commission Paid Per Equity Share Traded (c) ..................... $ 0.0369 $ 0.0250

*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 (b) ............................. 17.01% 17.57%

Ratio of Net Investment Income/Loss to Average Net
Assets ................................................................. (16.01%) (15.81%)

</TABLE>

** Non-Annualized

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

(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .18% and .08% for the periods
ended on June 30, 1997 and June 30, 1996, respectively.

(c) Represents the average brokerage commissions paid per equity share traded
during the period where commissions were applicable.

See Notes to Financial Statements

<PAGE> 43

VAN KAMPEN AMERICAN CAPITAL VALUE FUND

FINANCIAL HIGHLIGHTS (Continued)

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

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
of Investment
Year Ended Operations) to
Class B Shares June 30, 1997 June 30, 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value,
Beginning of the Period ............................. $ 11.410 $ 10.000
----------- -----------
Net Investment Income/Loss .......................... (0.017) 0.024
Net Realized and Unrealized Gain .................... 3.567 1.386
----------- -----------
Total from Investment Operations ...................... 3.550 1.410
----------- -----------
Less:
Distributions from Net Investment Income ............ 0.017 -0-
Distributions from Net Realized Gain ................ 0.616 -0-
----------- -----------
Total Distributions ................................... 0.633 -0-
----------- -----------
Net Asset Value, End of the Period .................... $ 14.327 $ 11.410
=========== ===========

Total Return * (a) .................................... 32.48% 14.00%**

Net Assets at End of the Period (In thousands) ........ $ 93.1 $ 74.2

Ratio of Expenses to Average Net Assets* (b) .......... 1.48% 1.38%

Ratio of Net Investment Income/Loss to Average
Net Assets* ......................................... (.14%) 0.44%

Portfolio Turnover .................................... 85% 41%**

Average Commission Paid Per Equity Share
Traded (c) .......................................... $ 0.0369 $ 0.0250

*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 (b) ........... 17.01% 17.57%

Ratio of Net Investment Income/Loss to Average
Net Assets .......................................... (15.79%) (15.75%)
</TABLE>

** Non-Annualized

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

(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a
reduction of expenses, the ratios would decrease by .18% and .08% for the
periods ended on June 30, 1997 and June 30, 1996, respectively.

(c) Represents the average brokerage commissions paid per equity share traded
during the period where commissions were applicable.

See Notes to Financial Statements

<PAGE> 44

VAN KAMPEN AMERICAN CAPITAL VALUE FUND

FINANCIAL HIGHLIGHTS (Continued)

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

Distributions from Net Realized Gain ..................... 0.616 -0-
------------ --------------
Total Distributions ........................................ 0.633 -0-
------------ --------------
Net Asset Value, End of the Period ......................... $ 14.327 $ 11.410
============ ==============

Total Return * (a) ......................................... 32.48% 14.00%**

Net Assets at End of the Period (In thousands) ............. $ 93.1 $ 74.2

Ratio of Expenses to Average Net Assets* (b) ............... 1.48% 1.38%

Ratio of Net Investment Income/Loss to Average
Net Assets* .............................................. (.14%) 0.44%

Portfolio Turnover ......................................... 85% 41%**

Average Commission Paid Per Equity Share Traded (c) ........ $ 0.0369 $ 0.0250

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

Ratio of Expenses to Average Net Assets (b) ................ 17.01% 17.57%

Ratio of Net Investment Income/Loss to Average
Net Assets ............................................... (15.79%) (15.75%)
</TABLE>

** Non-Annualized

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

(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a
reduction of expenses, the ratios would decrease by .18% and .08% for the
periods ended on June 30, 1997 and June 30, 1996, respectively.

(c) Represents the average brokerage commissions paid per equity share traded
during the period where commissions were applicable.

See Notes to Financial Statements

14
<PAGE> 45
VAN KAMPEN AMERICAN CAPITAL VALUE FUND

NOTES TO FINANCIAL STATEMENTS

June 30, 1997
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

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

At June 30, 1997, for federal income tax purposes, the cost of long-term
investments is $1,279,048; the gross aggregate unrealized appreciation is
$220,706 and the gross aggregate unrealized depreciation is $14,460, resulting
in net unrealized appreciation of $206,246.

F. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
annually from net investment income and net realized gains on securities, if
any. Distributions from net realized gains for book purposes may include
short-term capital gains. All short-term gains are included in ordinary income
for tax purposes.

Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and for
federal income tax purposes, permanent differences between book and tax basis
reporting for the 1997 fiscal year have been identified and appropriately
reclassified. As a result, permanent differences of $2,928 due to the
characterization of distributions for tax purposes have been reclassified from
accumulated net realized gain to accumulated net investment loss. In addition,
permanent differences of $198 relating to the recognition of certain expenses
which are not deductible for tax purposes were reclassified from accumulated
distributions in excess of net investment income to capital.

G. EXPENSE REDUCTIONS - During the year ended June 30, 1997, the Fund's custody
fee was reduced by $1,023 as a result of credits earned on overnight cash
balances.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- -------------------------------- -----------------
<S> <C>
First $500 million .75%
Next $500 million .70%
Over $1 billion .65%
</TABLE>

15
<PAGE> 46
VAN KAMPEN AMERICAN CAPITAL VALUE FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1997
- --------------------------------------------------------------------------------

For the year ended June 30, 1997, the Fund incurred expenses of
approximately $18,600 representing VKAC's. cost of providing accounting and
legal services to the Fund. These services are provided by VKAC at cost. All
of this cost has been waived by VKAC.

ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the year ended June
30, 1997, the Fund recognized expenses of approximately $15,000, representing
ACCESS' cost of providing transfer agency and shareholder services plus a
profit. All of this cost has been 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.

At June 30, 1997, VKAC owned 88,367 shares of Class A and 6,500 shares
each of Classes B and C.

3. CAPITAL TRANSACTIONS

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

At June 30, 1997, capital aggregated $1,106,900, $64,988 and $64,988
for Classes A, B and C, respectively. For the year ended June 30, 1997,
transactions were as follows:

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

Class A........................ 81,367 $1,000,000
====== ==========
Dividend Reinvestment:
Class A...................... 177 $ 2,074
====== ==========
</TABLE>

At June 30, 1996, capital aggregated $105,000, $65,000 and $65,000 for
Classes A, B and C, respectively. For the period ended June 30, 1996,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Sales:
Class A........................ 3,277 $35,000
===== =======
</TABLE>

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

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
---------------------
CLASS B CLASS C
YEAR OF REDEMPTION SHARES SHARES
- ------------------------------------------------------------------------------
<S> <C> <C>
First......................................... 5.00% 1.00%
Second........................................ 4.00% None
Third......................................... 3.00% None
Fourth........................................ 2.50% None
Fifth......................................... 1.50% None
Sixth and Thereafter.......................... None None
</TABLE>

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of
investments, excluding short-term investments, were $1,433,895 and $454,721,
respectively.

5. DISTRIBUTION AND SERVICE PLANS

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

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

16
<PAGE> 47
[KPMG PEAT MARWICK LLP LETTERHEAD]

REPORT OF INDEPENDENT ACCOUNTANTS

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

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Value Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1997, and the related statement of operations for
the year then ended, the statement of changes in net assets for the year then
ended and the period from December 27, 1995 (commencement of investment
operations) to June 30, 1996, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen Capital Value Fund as of June 30, 1997, the results of its operations
for the year then ended, the changes in its net assets for the year then ended
and the period from December 27, 1995 (commencement of investment operations)
to June 30, 1996, and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

Chicago, Illinois
August 15, 1997
<PAGE> 48

VAN KAMPEN AMERICAN CAPITAL VALUE FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
JEROME L. ROBINSON
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman

OFFICERS

DENNIS J. MCDONNELL*
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

PETER W. HEGEL*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

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

DISTRIBUTOR

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

SHAREHOLDER SERVICING AGENT

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

CUSTODIAN

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

LEGAL COUNSEL

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

INDEPENDENT ACCOUNTANTS

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

* "Interested" persons of the Fund, as defined in the Ivestment
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.

<PAGE> 49

RESULTS OF SHAREHOLDER VOTES

A Special Meeting of Shareholders of the Fund was held on May 28, 1997 where
shareholders voted on a new investment advisory agreement, the election of
Trustees and the ratification of KPMG Peat Marwick LLP as independent public
accountants. With regard to the approval of a new investment advisory
agreement between Van Kampen American Capital Investment Advisory Corp. and the
Fund, 13,000 shares voted for the proposal, 0 shares voted against and 0 shares
abstained. With regard to the election of J. Miles Branagan as elected trustee
of the Fund, 13,000 shares voted in his favor 0 shares withheld. With regard to
the election of Richard M. DeMartini as elected trustee of the Fund, 13,000
shares voted in his favor 0 shares withheld. With regard to the election of
Linda Hutton Heagy as elected trustee of the Fund, 13,000 shares voted in her
favor 0 shares withheld. With regard to the election of R. Craig Kennedy as
elected trustee of the Fund, 13,000 shares voted in his favor 0 shares
withheld. With regard to the election of Jack E. Nelson as elected trustee of
the Fund, 13,000 shares voted in his favor 0 shares withheld. With regard to
the election of Don G. Powell as elected trustee of the Fund, 13,000 shares
voted in his favor 0 shares withheld. With regard to the election of Jerome L.
Robinson as elected trustee of the Fund, 13,000 shares voted in his favor 0
shares withheld. With regard to the election of Phillip B. Rooney as elected
trustee of the Fund, 13,000 shares voted in his favor 0 shares withheld. With
regard to the election of Fernando Sisto as elected trustee of the Fund, 13,000
shares voted in his favor 0 shares withheld. With regard to the election of
Wayne W. Whalen as elected trustee of the Fund, 13,000 shares voted in his
favor 0 shares withheld. With regard to the ratification of KPMG Peat Marwick
LLP as independent public accountants for the Fund, 13,000 shares voted for the
proposal, 0 shares voted against and 0 shares abstained.

<PAGE> 50

TABLE OF CONTENTS

<TABLE>
<S> <C>
LETTER TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . 1
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE . . . . . . . . 3
PORTFOLIO MANAGEMENT REVIEW . . . . . . . . . . . . . . . . . . 4
PORTFOLIO OF INVESTMENTS . . . . . . . . . . . . . . . . . . . 6
STATEMENT OF ASSETS AND LIABILITIES . . . . . . . . . . . . . . 8
STATEMENT OF OPERATIONS . . . . . . . . . . . . . . . . . . . . 9
STATEMENT OF CHANGES IN NET ASSETS . . . . . . . . . . . . . . 10
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . 11
NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . 14
INDEPENDENT ACCOUNTANTS' REPORT . . . . . . . . . . . . . . . . 16
</TABLE>

GAC ANR 8/97

<PAGE> 51

LETTER TO SHAREHOLDERS

July 24, 1997

Dear Shareholder,

As you know, Van Kampen American Capital was recently acquired by
Morgan Stanley Group Inc., a world leader in asset management. Earlier this
year, Morgan Stanley Group Inc. and Dean Witter, Discover & Co. agreed to
merge. The merger was completed on May 31, creating the combined company of
Morgan Stanley, Dean Witter, Discover & Co. Additionally, we are very pleased
to announce that Philip N. Duff, formerly the chief financial officer of
Morgan Stanley Group Inc., has joined Van Kampen American Capital as president
and chief executive officer. I will continue as chairman of the firm. We are
confident that these changes will continue to work to the benefit of our fund
shareholders as we move into the next century.
One of the immediate privileges that we can offer fund shareholders is
the ability to make exchanges between Van Kampen American Capital and Morgan
Stanley retail funds at no charge. In our view, the rapid appreciation of U.S.
stock prices in recent years has created a need for investors to examine their
portfolios carefully to ensure proper diversification among domestic and
foreign investments. The Morgan Stanley retail funds, with their emphasis on
global markets, can be valuable tools to accomplishing this diversification.
We also urge investors to consider how their fund holdings are
currently allocated among the three major asset classes of stocks, bonds, and
cash reserves. Uneven movements in the various markets can distort a carefully
planned investment program. And, with stock prices near record highs, it is
likely that some rebalancing of your portfolio allocations may be necessary.
Once again, the exchangeability feature with the Morgan Stanley retail funds
provides additional choices and opportunities to make the necessary adjustments
to your portfolio's asset allocation.

ECONOMIC OVERVIEW

Continued on page two

<PAGE> 52

MARKET OVERVIEW

OUTLOOK

We expect the pace of economic activity during the remainder of 1997
to accelerate modestly from the relatively sluggish rate that prevailed during
the second quarter. While we do not believe that economic growth will be rapid
enough to reignite inflation, some warning signs are present, including a tight
labor market and high consumer confidence. In this environment, at least one
additional Federal Reserve interest rate hike remains a possibility.
We believe that equities should continue to do well given the likely
continuation of the moderate- growth, low-inflation environment. We are
concerned, however, that the lengthy series of record highs in the U.S. stock
market is creating unreasonable expectations among some investors. Valuations
are extended and investment sentiment is exceptionally optimistic. Under such
circumstances, a mild correction would not be unusual.
We are fortunate to be experiencing a rare combination of sustained
economic growth, low inflation, and highly favorable performance in the
financial market. Along with our fund shareholders, we celebrate the seemingly
best of economic times. Once again, we encourage you to review your portfolio
with an eye toward correcting allocation imbalances.
Additional details about your Fund, including a question-and-answer
section with your portfolio management team, are provided in this report. We
appreciate your continued confidence in your investment with Van Kampen
American Capital.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

<PAGE> 53
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

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

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

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

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

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

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Great American Companies Fund vs.
Standard & Poor's 500 Stock Index and the Lipper Growth Fund Index
(December 27, 1995 through June 30, 1997)

[LINE GRAPH]
<TABLE>
<CAPTION>
Dec Mar Jun Sep Dec Mar Jun
1995 1996 1996 1996 1996 1997 1997
<S> <C> <C> <C> <C> <C> <C> <C>
VKAC 9462 10603 10943 11310 12311 12463 14476
S&P 10000 10621 11096 11437 12389 12723 14940
Lipper 10000 10451 10796 11103 11748 11708 13557
</TABLE>

3
<PAGE> 54

PORTFOLIO MANAGEMENT REVIEW

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

We recently spoke to the management team of the Van Kampen American Capital
Great American Companies Fund about the key events and economic forces that
shaped the markets during the Fund's fiscal year. The team includes Stephen L.
Boyd and Evan Harrel, portfolio co-managers, and Alan T. Sachtleben, chief
investment officer for equity investments. The following excerpts reflect their
views on the Fund's performance during the 12-month period ended June 30, 1997.

Q WHAT ECONOMIC FACTORS INFLUENCED THE MARKET DURING THE REPORTING
PERIOD?

A The rare combination of moderate economic growth and historically low
inflation provided a nearly ideal environment for equity investments
and drove the stock market to new heights. The Fund's fiscal year
began on a low note in July of 1996, as small- and mid-capitalization stocks
were struggling to rebound from a broad market correction. But by the end of
July, technology and financial stocks were leading the equity markets upward.
The economy's sluggish third quarter was followed by a strong fourth quarter,
and corporate earnings came in slightly better than expected. This boosted
stocks through the end of the year, generally favoring large, well-established
companies over their smaller competitors.
The economy grew at a remarkably strong pace in the first quarter of
1997, which caused investors to worry that inflation might become a problem.
This concern increased volatility in stock prices and precipitated a month-long
market correction in mid-March that wiped out all year-to-date gains. Stocks
rebounded quickly after economic data was released in April showing negligible
inflation and hints of a slowdown in growth. In May, the Dow Jones Industrial
Average rallied to record-breaking heights and recouped its losses. Again,
large-cap stocks outperformed smaller, more erratic issues during this volatile
period. The reporting period ended on a positive note, as the stock market
surged ahead through the end of June.

Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO
MEET ITS OBJECTIVE?

A The Fund invests in successful, established U.S. companies that have
traditionally been market leaders in their respective fields. In other
words, the Fund invests in growth companies, rather than growth
stocks--we want to hold securities of companies with staying power, not the hot
stock of the month. Although quality is our primary consideration, we do make
sure the securities in the Fund's portfolio have attractive valuations relative
to their growth rates. Finally, we diversify the Fund across a variety of
market sectors to maintain exposure to high-quality companies across a spectrum
of industries.
We use a "bottom up" stock selection process, which means we
evaluate our acquisitions one by one, rather than maintaining defined sector
allocations. Specifically, we look for three criteria. First, the company
should have a high return on equity, which indicates strong cash flows. Second,
the company should maintain a lower-than-average ratio of debt to capital. And
third, the company should reinvest their profits at a high rate. The second and
third points are important because they suggest that the company is reinvesting
its cash, and this often translates into sustained growth.

4
<PAGE> 55

Q WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO?

A As a result of our bottom-up strategy, our sector weightings are a
reflection of where we found good opportunities on a stock-by-stock
basis. There were winners in a wide variety of sectors during the
past year, including technology, retail, and finance. Because the Fund invests
in companies that dominate their niche, many of the Fund's holdings are in
large-company stocks. As a result, the strength of the large-cap market during
the period added to the Fund's total return. Stocks that benefited the
portfolio included Exxon (energy), Lucent (technology), International Business
Machines (technology), Revlon (consumer non-durables), and Bristol-Myers Squibb
(health care).
One notable winner in the health-care sector was Aetna. Aetna
used to be primarily a broad-line insurance company, but in 1996 they spun off
their property and casualty insurance unit. Aetna also purchased U.S.
Healthcare, a health maintenance organization, and capitalized on the current
upswing in HMO fundamentals. Through this reorganization, Aetna shifted from a
slow-growth industry (insurance) to a high-growth industry (health care). The
result: Aetna has been revalued as a health-care company, and its stock price
appreciated almost 39 percent during the reporting period.

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

A The Fund achieved a 12-month total return of 32.29 percent (Class A
shares at net asset value) as of June 30, 1997. By comparison, the
Standard & Poor's 500-Stock Index returned 34.63 percent, and the
Lipper Growth Fund Index, which more closely resembles the Fund, returned 25.57
percent. The S&P 500-Stock Index is a broad-based, unmanaged index that
reflects the general performance of the stock market, and the Lipper Growth
Fund Index reflects the average performance of the largest growth funds.
Keep in mind that these indices are unmanaged statistical composites
that do not include any commissions, fees, or sales charges that would be paid
by an investor purchasing the securities or investments they represent.

Q WHAT IS YOUR OUTLOOK FOR THE FUND FOR THE REMAINDER OF THE YEAR?

A Currently, the stock market is basking in the best of all possible
environments: low inflation, moderate economic growth, and solid
corporate earnings. While we don't believe inflation is a serious
concern, some warning signs are present, including strong job growth, high
consumer confidence, and a mild upturn in wages. The recent rally in stock
prices suggests that investors believe the Federal Reserve Board will
successfully engineer a slowdown in growth without tipping the economy into a
recession. However, volatility could remain high until then.
Our strategy of purchasing attractively valued, high-quality companies
regardless of sector has served the Fund well since its inception, and we
believe it will continue to do so in the current market environment. Typically,
the performance of these companies has been more stable than the overall
market, so by investing in their securities, we hope to reduce our level of
risk during volatile market environments. In addition, the securities in the
Fund's portfolio have proven their ability to thrive in a variety of market
conditions, so we are confident in the Fund's ability to weather the months
ahead.

[SIG]
Alan T. Sachtleben

Chief Investment Officer
Equity Investments

[SIG]
Evan Harrel

Portfolio Co-Manager

[SIG]
Stephen Boyd

Portfolio Co-Manager

5
<PAGE> 56
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

PORTFOLIO OF INVESTMENTS

June 30, 1997
- --------------------------------------------------------------------------------

Security Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK 92.8%
CONSUMER DISTRIBUTION 11.5%
Autozone, Inc. (a) ................................ 1,000 $ 23,562
Dollar General Corp. ............................... 800 30,000
Duckwall-Alco Stores, Inc. (a) .................... 1,600 20,600
Kroger Co. (a) ..................................... 1,200 34,800
Lear Corp. (a) ..................................... 600 26,625
Polo Ralph Lauren Corp. (a) ........................ 100 2,738
Staples, Inc. (a) .................................. 1,200 27,900
--------
166,225
--------

CONSUMER DURABLES 5.3%
Armstrong World Industries, Inc. ................... 400 29,350
Hasbro, Inc. ...................................... 1,000 28,500
Newell Co. ........................................ 500 19,813
--------
77,663
--------

CONSUMER NON-DURABLES 15.2%
Anheuser Busch Cos., Inc. .......................... 700 29,356
Avon Products, Inc. ............................... 600 42,337
Canandaigua Wine, Inc., Class A (a) ............... 500 17,000
CPC International, Inc. ........................... 400 36,925
Nabisco Holdings Corp., Class A ................... 800 31,900
Philip Morris Cos., Inc. ........................... 500 22,188
Revlon, Inc., Class A (a) .......................... 800 41,450
--------
221,156
--------

CONSUMER SERVICES 7.5%
Cox Communications, Inc., Class A (a) .............. 1,200 28,800
Gannett, Inc. ...................................... 250 24,687
Host Marriott Corp. (a) ........................... 1,500 26,719
Omnicom Group, Inc. ............................... 400 24,650
Stewart Enterprises, Inc., Class A ................ 100 4,200
--------
109,056
--------

ENERGY 8.3%
Amoco Corp. ....................................... 350 30,428
Exxon Corp. ....................................... 600 36,900
Unocal Corp. ....................................... 800 31,050
Williams Cos., Inc. ............................... 500 21,875
--------
120,253
--------
FINANCE 16.0%
American International Group, Inc. ................ 125 18,672
Capital One Financial Corp. ........................ 700 26,425
Charter One Financial, Inc. ........................ 500 26,938
Chase Manhattan Corp. .............................. 300 29,119
Federal National Mortgage Association .............. 700 30,537

</TABLE>

See Notes to Financial Statements
6

<PAGE> 57
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

PORTFOLIO OF INVESTMENTS

June 30, 1997
- --------------------------------------------------------------------------------

Security Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
Green Tree Financial Corp. ........................ 650 $ 23,156
Hartford Life, Inc., Class A (a) ................... 100 3,750
Household International, Inc. ...................... 100 11,744
MGIC Investment Corp. .............................. 800 38,350
Nationwide Financial Services, Inc., Class A ....... 900 23,906
------------
232,597
------------

HEALTHCARE 7.2%
Aetna, Inc. ........................................ 150 15,356
Becton Dickinson & Co. ............................. 400 20,250
Bristol-Myers Squibb Co. ........................... 500 40,500
Medpartners, Inc. (a) .............................. 1,300 28,113
------------
104,219
------------

PRODUCER MANUFACTURING 10.2%
Corning, Inc. ...................................... 300 16,687
Cummins Engine, Inc. ............................... 300 21,169
Emerson Electric Co. ............................... 650 35,791
Honeywell, Inc. .................................... 400 30,350
Ingersoll-Rand Co. ................................. 600 37,050
Kent Electronics Corp. (a) ......................... 200 7,337
------------
148,384
------------

RAW MATERIALS/PROCESSING INDUSTRIES 2.6%
Sherwin Williams Co. ............................... 1,200 37,050
------------

TECHNOLOGY 7.5%
America Online, Inc. (a) ........................... 300 16,688
BMC Software, Inc. (a) ............................. 200 11,075
International Business Machines Corp. .............. 400 36,075
Intuit, Inc. (a) ................................... 400 9,175
Lucent Technologies, Inc. .......................... 500 36,031
------------
109,044
------------

TRANSPORTATION 1.5%
Southwest Airlines Co. ............................. 850 21,994
------------

TOTAL INVESTMENTS 92.8%
(Cost $1,149,514) .............................. 1,347,641
OTHER ASSETS IN EXCESS OF LIABILITIES 7.2% ....... 103,877
------------
NET ASSETS 100.0% ............................... $ 1,451,518
============
</TABLE>

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

See Notes to Financial Statements

<PAGE> 58
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

STATEMENT OF ASSETS AND LIABILITIES

JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $1,149,514) ..................................................... $ 1,347,641
Cash .................................................................................... 108,724
Receivables:
Distributor ........................................................................... 25,543
Investments Sold ...................................................................... 5,197
Dividends ............................................................................. 771
Unamortized Organizational Costs ........................................................ 28,103
-------------

Total Assets ..................................................................... 1,515,979
-------------

LIABILITIES:

Payables:
Organizational Costs ................................................................. 40,000
Investments Purchased ................................................................ 12,079
Deferred Compensation and Retirement Plans .............................................. 12,382
-------------

Total Liabilities ................................................................ 64,461

NET ASSETS ............................................................................. $ 1,451,518
=============
NET ASSETS CONSIST OF:
Capital ................................................................................ $ 1,204,824
Net Unrealized Appreciation ............................................................ 198,127
Accumulated Net Realized Gain ........................................................... 51,566
Accumulated Net Investment Loss ......................................................... (2,999)
-------------

NET ASSETS ............................................................................. $ 1,451,518
=============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$1,260,774 and 88,566 shares of beneficial interest issued and outstanding) ...... $ 14.24
Maximum sales charge (5.75%* of offering price) .................................. 0.87
-------------

Maximum offering price to public ................................................. $ 15.11
=============
Class B Shares:
Net asset value and offering price per share (Based on net assets of $92,538
and 6,500 shares of beneficial interest issued and outstanding) .................. $ 14.24
=============
Class C Shares:
Net asset value and offering price per share (Based on net assets of $98,206
and 6,898 shares of beneficial interest issued and outstanding) .................. $ 14.24
=============
</TABLE>

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

See Notes to Financial Statements

<PAGE> 59
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED JUNE 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ....................................................... $ 6,139
---------
EXPENSES:

Trustees Fees and Expenses ...................................... 15,826
Shareholder Services ............................................ 15,450
Shareholder Reports ............................................. 13,950
Audit ........................................................... 12,250
Accounting ...................................................... 10,820
Amortization of Organizational Costs ............................ 7,997
Legal ........................................................... 7,500
Investment Advisory Fee ......................................... 3,607
Registration and Filing ......................................... 2,225
Custody ......................................................... 1,748
Other ........................................................... 1,362
---------

Total Expenses .............................................. 92,735
Less: Fees Waived and Expenses Reimbursed ($3,607 and $80,872) 84,479
Earnings Credits on Cash Balances ................. 1,748
---------

Net Expenses .............................................. 6,508
---------

NET INVESTMENT LOSS ............................................. $ (369)
=========
REALIZED AND UNREALIZED GAIN/LOSS:

Net Realized Gain ............................................... $ 56,138
---------

Unrealized Appreciation/Depreciation:
Beginning of the Period ....................................... 21,475

End of the Period ............................................. 198,127
---------

Net Unrealized Appreciation During the Period 176,652
---------

NET REALIZED AND UNREALIZED GAIN ................................ $ 232,790
=========

NET INCREASE IN NET ASSETS FROM OPERATIONS ...................... $ 232,421
=========
</TABLE>

See Notes to Financial Statements

9
<PAGE> 60
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------------------------

<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income/Loss............................................... $ (369) $ 373
Net Realized Gain........................................................ 56,138 10,594
Net Unrealized Appreciation During the Period............................ 176,652 21,475
------------ ------------

Change in Net Assets from Operations..................................... 232,421 32,442
------------ ------------

Distributions from and in Excess of Net Investment Income:

Class A Shares......................................................... (133) ---
Class B Shares......................................................... (123) ---
Class C Shares......................................................... (123) ---
------------ ------------

(379) ---
------------ ------------

Distributions from Net Realized Gain:

Class A Shares......................................................... (6,296) ---
Class B Shares......................................................... (5,847) ---
Class C Shares......................................................... (5,847) ---
------------ ------------

(17,990) ---
------------ ------------

Total Distributions.................................................. (18,369) ---
------------ ------------

NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...................... 214,052 32,442

FROM CAPITAL TRANSACTIONS:

Proceeds from Shares Sold................................................ 1,005,024 ---
------------ ------------

TOTAL INCREASE IN NET ASSETS............................................. 1,219,076 32,442

NET ASSETS:
Beginning of the Period.................................................. 232,442 200,000
------------ ------------
End of the Period (Including accumulated undistributed net investment
income/loss of $(2,999) and $373, respectively......................... $ 1,451,518 $ 232,442
============ ============
</TABLE>

See Notes to Financial Statements

10
<PAGE> 61
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE
OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
December 27, 1995
(Commencement
Year of Investment
Ended Operations) to
Class A Shares June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------

<S> <C>
Net Asset Value, Beginning of the Period............................. $ 11.622 $ 10.000
--------- ----------

Net Investment Income/Loss......................................... (0.003) 0.019
Net Realized and Unrealized Gain................................... 3.535 1.603
--------- ----------

Total from Investment Operations..................................... 3.532 1.622
--------- ----------

Less:
Distributions from and in Excess of Net Investment Income.......... 0.019 ---
Distributions from Net Realized Gain............................... 0.900 ---
--------- ----------

Total Distributions.................................................. 0.919 ---
--------- ----------

Net Asset Value, End of the Period................................... $ 14.235 $ 11.622
========= ==========

Total Return * (a)................................................... 32.29% 16.10% **

Net Assets at End of the Period (In thousands)....................... $ 1,260.8 $81.4

Ratio of Expenses to Average Net Assets* (c)......................... 1.59% 1.37%

Ratio of Net Investment Income to Average Net Assets*................ (0.08%) 0.33%

Portfolio Turnover................................................... 100% 48% **

Average Commission Paid Per Equity Share Traded (b).................. $ 0.0320 $0.025

*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 (c).......................... 17.48% 18.46%

Ratio of Net Investment Income to Average Net Assets................. (16.31%) (16.76%)
</TABLE>

** Non-Annualized

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

(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable.

(c) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .34% and .13% for the periods
ended June 30, 1997 and 1996, respectively.

See Notes to Financial Statements

11
<PAGE> 62

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

FINANCIAL HIGHLIGHTS (CONTINUED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE
OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
December 27, 1995
(Commencement
Year of Investment
Ended Operations) to
Class B Shares June 30, 1997 June 30, 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period................. $ 11.622 $ 10.000
---------- ----------

Net Investment Income/Loss............................. (0.007) 0.019
Net Realized and Unrealized Gain....................... 3.541 1.603
---------- ----------

Total from Investment Operations......................... 3.534 1.622
---------- ----------
Less:
Distributions from and in Excess of Net Investment
Income................................................ 0.019 ---

Distributions from Net Realized Gain................... 0.900 ---
---------- ----------

Total Distributions...................................... 0.919 ---
---------- ----------

Net Asset Value, End of the Period ...................... $ 14.237 $ 11.622
========== ==========

Total Return * (a)....................................... 32.29% 16.10%**

Net Assets at End of the Period (In thousands)........... $92.5 $75.5

Ratio of Expenses to Average Net Assets* (c)............. 1.59% 1.37%

Ratio of Net Investment Income to Average Net Assets*.... (0.05%) 0.33%

Portfolio Turnover....................................... 100% 48%**

Average Commission Paid Per Equity Share Traded(b)....... $0.0320 $0.025

*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 (c).............. 17.48% 18.46%

Ratio of Net Investment Income to Average Net Assets..... (16.28%) (16.76%)
</TABLE>

** Non-Annualized

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

(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable.

(c) The Ratios of Expenses to Average Net Assets do not reflect credits
earned on overnight cash balances. If these credits were reflected
as a reduction of expenses, the ratios would decrease by .34% and
.13% for the periods ended June 30, 1997 and 1996, respectively.

See Notes to Financial Statements

<PAGE> 63

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

FINANCIAL HIGHLIGHTS (Continued)

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

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 27, 1995
(Commencement
Year of Investment
Ended Operations) to
Class C Shares June 30, 1997 June 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period.......................................... $ 11.622 $ 10.000
---------- ----------
Net Investment Income/Loss.................................................... (0.007) 0.019
Net Realized and Unrealized Gain.............................................. 3.541 1.603
---------- ----------

Total from Investment Operations.................................................. 3.534 1.622
---------- ----------

Less:
Distributions from and in Excess of Net Investment Income..................... 0.019 ---
Distributions from Net Realized Gain.......................................... 0.900 ---
---------- ----------

Total Distributions............................................................... 0.919 ---
---------- ----------

Net Asset Value, End of the Period.............................................. $ 14.237 $ 11.622
========== ==========

Total Return * (a)................................................................ 32.29% 16.10%**

Net Assets at End of the Period (In thousands).................................... $98.2 $75.5

Ratio of Expenses to Average Net Assets* (c)...................................... 1.59% 1.37%

Ratio of Net Investment Income to Average Net Assets*............................. (0.05%) 0.33%

Portfolio Turnover................................................................ 100% 48%**

Average Commission Paid Per Equity Share Traded (b)............................... $0.0320 $0.025

*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 (c)....................................... 17.48% 18.46%

Ratio of Net Investment Income to Average Net Assets.............................. (16.28%) (16.76%)
</TABLE>

** Non-Annualized

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

(b) Represents the average brokerage commission paid per equity share
traded during the period for trades where commissions were applicable.

(c) The Ratios of Expenses to Average Net Assets do not reflect credits
earned on overnight cash balances. If these credits were reflected as a
reduction of expenses, the ratios would decrease by .34% and .13% for the
periods ended June 30, 1997 and 1996, respectively.

See Notes to Financial Statements

13
<PAGE> 64
VAN KAMPEN AMERICAN CAPITAL
GREAT AMERICAN COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997

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

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

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

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

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

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

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

At June 30, 1997, for federal income tax purposes, cost of long-term
investments is $1,149,514; the gross aggregate unrealized appreciation is
$201,189 and the gross aggregate unrealized depreciation is $3,062, resulting
in net unrealized appreciation of $198,127.

F. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
annually from net investment income and, if any, net realized gains.
Distributions from net realized gains for book purpose may include short-term
capital gains. All short-term gains are included in ordinary income for tax
purposes.

Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and for
federal income tax purposes, permanent differences between book and tax basis
reporting for the 1997 fiscal year have been identified and appropriately
reclassified. As a result, permanent differences of $2,824 due to the
characterization of distributions for tax purposes have been reclassified from
accumulated net realized gains to accumulated distributions in excess of net
investment income. In addition, permanent differences of $200 relating to the
recognition of certain expenses which are not deductible for tax purposes were
reclassified from accumulated distributions in excess of net investment income
to capital.

G. EXPENSE REDUCTIONS - During the year ended June 30, 1997, the Fund's custody
fee was reduced by $1,748 as a result of credits earned on overnight cash
balances.

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

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

<PAGE> 65
VAN KAMPEN AMERICAN CAPITAL
GREAT AMERICAN COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997

For the year ended June 30, 1997, the Fund incurred expenses of
approximately $18,300, all of which was subsequently assumed by VKAC,
representing VKAC's cost of providing accounting and legal services to the
Fund. These services are provided by VKAC at cost. All of this cost has been
assumed by VKAC.

ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Advisor,
serves as the shareholder servicing agent for the Fund. For the year ended
June 30, 1997, the Fund recognized expenses of $15,000, representing ACCESS'
cost of providing transfer agency and shareholder services plus a profit. All
of this cost has been 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.

At June 30, 1997, VKAC owned all shares of Classes A and B, respectively,
and 6,500 shares of Class C.

3. CAPITAL TRANSACTIONS

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

At June 30, 1997, capital aggregated $1,069,863, $64,969 and $69,992 for
Classes A, B and C, respectively. For the year ended June 30, 1997,
transactions were as follows:

Shares Value
- --------------------------------------------------------------
<S> <C> <C>
Sales:
Class A ....................... 81,566 $1,000,000
Class B ....................... 0 0
Class C ....................... 398 5,024
------ ----------
Total Sales ..................... 81,964 $1,005,024
====== ==========
</TABLE>

At December 31, 1996, capital aggregated $70,000, $65,000 and $65,000 for
Classes A, B and C, respectively.

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

Contingent Deferred
Sales Charge
--------------------
Class B Class C
Year of Redemption Shares Shares
- -----------------------------------------------------
<S> <C> <C>
First ......................... 5.00% 1.00%
Second ........................ 4.00% None
Third ......................... 3.00% None
Fourth ........................ 2.50% None
Fifth ......................... 1.50% None
Sixth and Thereafter .......... None None
</TABLE>

4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of
investments, excluding short-term investments, were $1,376,390 and $470,624,
respectively.

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

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

<PAGE> 66
[KPMG PEAT MARKWICK LLP LETTERHEAD]

REPORT OF INDEPENDENT ACCOUNTANTS

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

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Great American Companies Fund (the "Fund"), including
the portfolio of investments, as of June 30, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
the year ended and the period from December 27, 1995 (commencement of
investment operations) to June 30, 1996, and the financial highlights for each
of the periods presented. These financial statments and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
June 30, 1997, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen American Capital Great American Companies Fund as of June 30, 1997, the
results of its operations for the year then ended, the changes in its net
assets for the year then ended and the period from December 27, 1995
(commencement of investment operations) to June 30, 1996, and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.

KPMG PEAT MARWICK LLP

Chicago, Illinois
August 15, 1997

<PAGE> 67

VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
JEROME L. ROBINSON
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman

OFFICERS

DENNIS J. MCDONNELL*
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

PETER W. HEGEL*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

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

DISTRIBUTOR

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

SHAREHOLDER SERVICING AGENT

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

CUSTODIAN

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

LEGAL COUNSEL

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

INDEPENDENT ACCOUNTANTS

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

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

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

This report is submitted for the general information of of the Fund. It is not
authorized for distribution to prospective investors unless it has been
preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge,
and other pertinent data.

<PAGE> 68
VAN KAMPEN AMERICAN CAPITAL GREAT AMERICAN COMPANIES FUND

RESULT OF SHAREHOLDER VOTES
- --------------------------------------------------------------------------------

A Special Meeting of Shareholders of the Fund was held on May 28, 1997,
where shareholders voted on a new investment advisory agreement, the election
of Trustees and the ratification of KPMG Peat Marwick LLP as independent public
accountants. With regard to the approval of a new investment advisory
agreement between Van Kampen American Capital Investment Advisory Corp. and the
Fund, 101,565 shares voted for the proposal, 0 shares voted against and 0
shares abstained. With regard to the election of J. Miles Branagan as elected
trustee of the Fund, 101,565 shares voted in his favor and 0 shares withheld.
With regard to the election of Richard M. DeMartini as elected trustee of the
Fund, 101,565 shares voted in his favor and 0 shares withheld. With regard to
the election of Linda Hutton Heagy as elected trustee of the Fund, 101,565
shares voted in her favor and 0 shares withheld. With regard to the election
of R. Craig Kennedy as elected trustee of the Fund, 101,565 shares voted in his
favor and 0 shares withheld. With regard to the election of Jack E. Nelson as
elected trustee of the Fund, 101,565 shares voted in his favor and 0 shares
withheld. With regard to the election of Don G. Powell as elected trustee of
the Fund, 101,565 shares voted in his favor and 0 shares withheld. With regard
to the election of Jerome L. Robinson as elected trustee of the Fund, 101,565
shares voted in his favor and 0 shares withheld. With regard to the election
of Phillip B. Rooney as elected trustee of the Fund, 101,565 shares voted in
his favor and 0 shares withheld. With regard to the election of Fernando Sisto
as elected trustee of the Fund, 101,565 shares voted in his favor and 0 shares
withheld. With regard to the election of Wayne W. Whalen as elected trustee of
the Fund, 101,565 shares voted in his favor and 0 shares withheld. With regard
to the ratification of KPMG Peat Marwick LLP as independent public accountants
for the Fund, 101,565 shares voted for the proposal, 0 shares voted against and
0 shares abstained.

<PAGE> 69

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 4
Portfolio Highlights............................. 5
Performance in Perspective....................... 6
Portfolio Management Review...................... 7
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 19
Report of Independent Accountants................ 26
</TABLE>

GF ANR 8/97
<PAGE> 70

LETTER TO SHAREHOLDERS

July 24, 1997

Dear Shareholder,
As you know, Van Kampen American
Capital was acquired by Morgan Stanley
Group Inc., a world leader in asset [PHOTO]
management. Earlier this year, Morgan
Stanley Group Inc. and Dean Witter,
Discover & Co. agreed to merge. The merger
was completed on May 31, creating the
combined company of Morgan Stanley,
Dean Witter, Discover & Co.
Additionally, we are very pleased to DENNIS J. MCDONNELL AND DON G. POWELL
announce that Philip N. Duff, formerly
the chief financial officer of Morgan Stanley Group Inc., has joined Van Kampen
American Capital as president and chief executive officer. I will continue as
chairman of the firm. We are confident that the partnership of Van Kampen
American Capital and Morgan Stanley will continue to work to the benefit of our
fund shareholders.
One of the immediate privileges that we can offer fund shareholders is the
ability to make exchanges between Van Kampen American Capital and Morgan Stanley
retail funds at no charge. In our view, the rapid appreciation of U.S. stock
prices in recent years has created a need for investors to examine their
portfolios carefully to ensure proper diversification among domestic and foreign
investments. The Morgan Stanley retail funds, with their emphasis on global
markets, can be valuable tools for accomplishing this diversification.
We also urge investors to consider how their fund holdings are currently
allocated among the three major asset classes of stocks, bonds, and cash
reserves. Uneven movements in the various markets can distort a carefully
planned investment program. And, with stock prices near record highs, it is
likely that some rebalancing of your portfolio allocations may be necessary.
Once again, the exchangeability feature with the Morgan Stanley retail funds
provides additional choices and opportunities to make the necessary adjustments
to your portfolio's asset allocation.

1
<PAGE> 71

MARKET OVERVIEW
With a solid underpinning of record profits, strong economic growth, and low
inflation, the U.S. equity market continued its torrid performance during the
first half of 1997. For a brief time this spring, however, investors worried
that growth was too robust and that higher interest rates were on the way. Those
fears pushed stock prices lower by about 10 percent over a one-month period
beginning in mid-March.
By mid-April, signs that the economy was cooling began to emerge, and stocks
skyrocketed to a series of record highs. The Wilshire 5000 Index, comprised of
5,000 publicly traded domestic companies, gained 16.65 percent during the first
six months of the year and increased by 25.95 percent over the 12 months through
June 30. Low inflation allowed the market's price/earnings multiple to remain
high, while strong growth in corporate profits provided solid support for stock
prices.
Within the equity market, most of the gains were generated by
large-capitalization stocks. The Russell 1000 Index of large companies gained
17.57 percent over the six months through June 30, almost double the return of
the Russell 2000 Index of small-capitalization companies. Consumer non-cyclicals
such as beverages and pharmaceuticals were among the top-performing industry
groups, although the rally broadened by the end of June to include sectors that
had previously been laggards, including cyclicals and small-company stocks.

OUTLOOK
We expect the pace of economic activity during the remainder of 1997 to
accelerate modestly from the relatively sluggish rate that prevailed during the
second quarter. While we do not believe that economic growth will be rapid
enough to reignite inflation, some warning signs are present, including a tight
labor market and high consumer confidence. In this environment, at least one
additional Federal Reserve interest rate hike remains a possibility.
We believe that equities should continue to do well given the likely
continuation of the moderate-growth, low-inflation environment. We are
concerned, however, that the lengthy series of record highs in the U.S. stock
market is creating unreasonable expectations among some investors. Valuations
are extended and investment sentiment is exceptionally optimistic. Under such
circumstances, a mild correction would not be unusual.
We are fortunate to be experiencing a rare combination of sustained economic
growth, low inflation, and highly favorable performance in the financial market.
Along with our fund shareholders, we celebrate the seemingly best of economic
times. Once again, we encourage you to review your portfolio with an eye toward
correcting allocation imbalances.

Continued on page three

2
<PAGE> 72

Sincerely,

[SIG]

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

[SIG]

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

3
<PAGE> 73

PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1997

VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
One-year total return based on NAV(1).... 36.00% 35.32% 35.32%
One-year total return(2)................. 28.15% 30.32% 34.32%
Life-of-Fund average annual total
return(2).............................. 45.20% 48.34% 50.50%
Commencement Date........................ 12/27/95 12/27/95 12/27/95
</TABLE>

(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for A shares) or contingent
deferred sales charge for early withdrawal (5% for B shares and 1% for C
shares).

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

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

During this period, certain fees were waived and expenses were reimbursed by the
Fund's adviser which had a material effect on the Fund's total return.

The Fund's investments in less seasoned companies, special situations involving
new management, special projects and techniques, unusual developments, mergers,
or liquidations involve greater risks than more conservative investments.
Securities of foreign issuers may magnify volatility due to changes in foreign
exchange rates, the political and economic uncertainties in foreign countries,
and the potential lack of liquidity, government supervision, and regulation.

Market forecasts provided in this report may not necessarily come to pass.

4
<PAGE> 74

PORTFOLIO HIGHLIGHTS

VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF JUNE AS OF DECEMBER
30, 1997 31, 1996(1)
<S> <C> <C>
Philip Morris Cos.,
Inc. .................. 5.1% ............. 5.2%
Conseco, Inc. ........... 4.5% ............. 3.2%
Compaq Computer Corp. ... 2.8% ............. N/A
BMC Software, Inc. ...... 2.7% ............. 2.1%
TJX Cos., Inc. .......... 2.4% ............. 2.2%
Bristol-Myers Squibb Co.. 2.2% ............. N/A
HFS, Inc. ............... 2.0% ............. 1.7%
Wellpoint Health
Networks, Inc. ....... 2.0% ............. N/A
Safeskin Corp. .......... 1.9% ............. N/A
Waters Corp. ............ 1.9% ............. N/A
</TABLE>

N/A = Not Applicable

TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996(1)
<S> <C> <C> <C>
Technology................. 31% Technology................. 32%
Health Care................ 22% Health Care................ 17%
Consumer Distribution...... 13% Finance.................... 17%
Finance.................... 11% Consumer Services.......... 12%
Consumer Non-Durables...... 9% Consumer Distribution...... 12%
</TABLE>

(1) Unaudited

5
<PAGE> 75

PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

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

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

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

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

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Growth Fund vs. Standard & Poor's 500-Stock Index
and the Lipper Growth Fund Index (December 27, 1995 through June 30, 1997)

[LINE GRAPH]

<TABLE>
<CAPTION>
Dec Mar Jun Sep Dec Mar Jun
1995 1996 1996 1996 1996 1997 1997
<S> <C> <C> <C> <C> <C> <C> <C>
VKAC 9425 11310 12912 14213 15390 15213 17561
S&P 10000 10621 11096 11437 12389 12723 14940
Lipper 10000 10451 10796 11103 11748 11708 13557

</TABLE>

6
<PAGE> 76

PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

We recently spoke to the management team of the Van Kampen American Capital
Growth Fund about the key events and economic forces that shaped the markets
during the Fund's fiscal year. The team includes Jeff D. New, portfolio manager,
and Alan T. Sachtleben, chief investment officer for equity investments. The
following excerpts reflect their views on the Fund's performance during the
12-month period ended June 30, 1997.

Q WHAT ECONOMIC FACTORS INFLUENCED THE MARKET DURING THE REPORTING PERIOD?

A The rare combination of moderate economic growth and historically low
inflation provided a nearly ideal environment for equity investments and
drove the stock market to new heights. The Fund's fiscal year began on a
low note in July of 1996, as small- and mid-capitalization stocks were
struggling to rebound from a broad market correction. But by the end of July,
technology and financial stocks were leading the equity markets upward. The
economy's sluggish third quarter was followed by a strong fourth quarter, and
corporate earnings came in slightly better than what had been expected. This
boosted stocks through the end of the year, generally favoring large,
well-established companies over their smaller competitors.
The economy grew at a remarkably strong pace in the first quarter of 1997,
which caused investors to worry that inflation might become a problem. This
concern increased volatility in stock prices and precipitated a month-long
market correction that began in early March, wiping out all year-to-date gains.
Stocks rebounded quickly after economic data was released in April showing
negligible inflation and hints of a slowdown in growth. In May, the Dow Jones
Industrial Average rallied to record-breaking heights and recouped its losses,
with large-cap stocks once again outperforming smaller, more erratic issues. The
reporting period ended on a positive note, as stocks continued to surge ahead
through the end of June.

Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET ITS
OBJECTIVE?

A We maintain a consistent strategy of stock selection, seeking to identify
companies with positive future fundamentals at attractive prices. We look
for stocks that have one or more of the following traits: consistently
above-average earnings growth, accelerating earnings growth,
better-than-expected fundamentals, or an underlying change in a company,
industry, or regulatory environment. Our selection process is referred to as
"bottom up," which means we evaluate stocks one by one and make purchases
wherever we find a good opportunity, rather than maintaining defined sector
allocations. This strategy of purchasing attractively valued companies with
strong fundamentals, regardless of sector, was successful for the Fund during
the reporting period.
In addition to our disciplined selection process, we believe strongly in
talking with the management teams behind the companies in whose stocks we
invest. It's the key to a

7
<PAGE> 77

bottom-up selection strategy, and we think it is the single most valuable way
for us to spend our time. These meetings help us determine if a company has an
effective business philosophy and if management is disciplined in implementing
it. We also learn about a company's opportunities within its particular
industry. During any given year, we will have in-depth discussions with 300 to
400 management teams.

Q WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE PAST YEAR?

A Most of the holdings in the portfolio when the Fund opened to investors in
February can be found in the portfolio today, and we were also able to
find some interesting new opportunities. We overweighted the health-care
sector by increasing our holdings in several pharmaceutical firms, including
Merck, Bristol-Myers Squibb, and Pfizer. We reduced our overall weighting in the
financial sector, although our position in Conseco, a financial services
company, was increased during the past six months. It is now the Fund's
second-largest equity holding.
Currently, the Fund is overweighted in technology, with about 27 percent of
the Fund's assets allocated here. Within technology, our largest industry
weightings are in electronic data processing and computer software. A new
technology stock in the portfolio, Compaq Computer Corp., is especially
attractive to us now. In the past year, the company appointed a new chief
financial officer, who has focused on increasing profitability and reducing
inventory, which should lower the company's risks and operating costs. Compaq's
stock price has returned almost 34 percent this year. This is a good example of
our stock selection strategy at work--we believe Compaq is a reasonably priced
company with positive future fundamentals. For additional Fund portfolio
highlights, please refer to page five.

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

A We were very pleased with the Fund's performance. The Fund achieved a
12-month total return of 36.00 percent(1) (Class A shares at net asset
value) as of June 30, 1997. By comparison, the Standard & Poor's 500-Stock
Index returned 34.63 percent, and the Lipper Growth Fund Index, which more
closely resembles the Fund, returned 25.57 percent. The S&P 500-Stock Index is a
broad-based, unmanaged index that reflects the general performance of the stock
market, and the Lipper Growth Fund Index reflects the average performance of the
largest growth funds.
Keep in mind that these indices are unmanaged statistical composites that do
not include any commissions, fees, or sales charges that would be paid by an
investor purchasing the securities or investments they represent. Please refer
to the chart on page four for additional Fund performance results.

8
<PAGE> 78

Q WHAT IS YOUR OUTLOOK FOR THE REMAINDER OF THE YEAR?

A Currently, the stock market is experiencing a nearly perfect environment:
low inflation, moderate economic growth, and solid corporate earnings.
While we don't believe inflation is a serious concern, some warning signs
are present, including strong job growth, high consumer confidence, and a mild
upturn in wages. The recent rally in stock prices suggests that investors
believe the Federal Reserve Board will successfully engineer a slowdown in
growth without tipping the economy into a recession. However, volatility could
remain high until then.
Because the stock market has flourished lately, we are finding it
difficult--but not impossible--to identify promising securities that we believe
are attractively priced. High-valuation stocks often carry high risk: the more
expensive a security, the farther its price can fall in a downturn. Our strategy
for the Growth Fund emphasizes securities with strong fundamentals at reasonable
prices, so we believe the Fund will be in good standing in the months ahead.

[SIG.]

Alan T. Sachtleben
Chief Investment Officer
Equity Investments

[SIG.]

Jeff D. New
Portfolio Manager

Please see footnotes on page four.

9
<PAGE> 79

PORTFOLIO OF INVESTMENTS

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 87.8%
CONSUMER DISTRIBUTION 11.1%
Bed Bath & Beyond, Inc. (a)................................. 21,350 $ 648,506
CDW Computer Centers, Inc. (a).............................. 20,000 1,061,250
Eagle Hardware & Garden, Inc. (a)........................... 37,000 846,375
Home Depot, Inc............................................. 18,000 1,240,875
Ross Stores, Inc............................................ 38,900 1,271,544
Safeway, Inc. (a)........................................... 24,200 1,116,225
Stein Mart, Inc. (a)........................................ 35,000 1,050,000
Tech Data Corp. (a)......................................... 55,500 1,744,781
TJX Cos., Inc............................................... 93,800 2,473,975
U.S. Office Products Co. (a)................................ 48,300 1,476,169
------------
12,929,700
------------
CONSUMER NON-DURABLES 7.8%
Borders Group, Inc. (a)..................................... 33,000 796,125
Intimate Brands, Inc. Class A............................... 45,000 945,000
Nautica Enterprises, Inc. (a)............................... 40,100 1,060,143
Philip Morris Cos., Inc..................................... 117,000 5,191,875
Tommy Hilfiger Corp. (a).................................... 25,700 1,032,819
------------
9,025,962
------------
CONSUMER SERVICES 6.1%
AccuStaff, Inc. (a)......................................... 63,000 1,492,313
Firstplus Financial Group, Inc. (a)......................... 30,000 1,020,000
HFS, Inc. (a)............................................... 35,500 2,059,000
Imperial Credit Industries, Inc. (a)........................ 56,100 1,153,556
Metro Networks, Inc. (a).................................... 33,200 805,100
Rental Service Corp. (a).................................... 20,000 525,000
------------
7,054,969
------------
ENERGY 0.5%
Hanover Compressor Co. (a).................................. 30,000 585,000
------------
FINANCE 10.1%
AMBAC, Inc.................................................. 17,200 1,313,650
Conseco, Inc................................................ 122,800 4,543,600
Everest Reinsurance Holdings, Inc........................... 32,000 1,268,000
Finova Group, Inc........................................... 22,900 1,751,850
Green Tree Financial Corp................................... 34,700 1,236,187
Money Store, Inc............................................ 19,600 562,275
SunAmerica, Inc............................................. 22,400 1,092,000
------------
11,767,562
------------
</TABLE>

See Notes to Financial Statements

10
<PAGE> 80

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

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

HEALTHCARE 19.1%
Bristol-Myers Squibb Co..................................... 27,100 $ 2,195,100
ESC Medical Systems Ltd. (a)................................ 56,300 1,435,650
HBO & Co.................................................... 18,000 1,239,750
Health Management Assn., Inc., Class A (a).................. 39,000 1,111,500
Healthsouth Corp. (a)....................................... 67,500 1,683,281
Hologic, Inc. (a)........................................... 43,900 1,168,838
Jones Medical Industries, Inc............................... 13,700 650,750
Lincare Holdings, Inc. (a).................................. 34,100 1,466,300
Medicis Pharmaceutical Corp., Class A (a)................... 11,400 568,575
Merck & Co., Inc............................................ 17,050 1,764,675
PacifiCare Health Systems, Class B (a)...................... 10,000 638,750
Pfizer, Inc................................................. 8,200 979,900
Renal Treatment Centers, Inc. (a)........................... 28,800 774,000
Schering-Plough Corp........................................ 28,000 1,340,500
Tenet Healthcare Corp. (a).................................. 40,000 1,182,500
Universal Health Services, Inc., Class B (a)................ 50,900 1,959,650
Wellpoint Health Networks, Inc., Class A (a)................ 44,200 2,027,675
------------
22,187,394
------------
PRODUCER MANUFACTURING 3.4%
Thermo Instrument Systems, Inc. (a)......................... 31,200 955,500
United Waste Systems, Inc. (a).............................. 36,700 1,504,700
USA Waste Services, Inc. (a)................................ 39,300 1,517,963
------------
3,978,163
------------
RAW MATERIALS/PROCESSING INDUSTRIES 2.7%
Praxair, Inc................................................ 21,300 1,192,800
Safeskin Corp. (a).......................................... 67,200 1,978,200
------------
3,171,000
------------
TECHNOLOGY 27.0%
Adaptec, Inc (a)............................................ 8,000 278,000
ADC Telecommunications, Inc. (a)............................ 7,500 250,313
Altera Corp. (a)............................................ 13,000 656,500
Applied Materials, Inc. (a)................................. 12,600 892,238
BMC Industries, Inc......................................... 43,200 1,479,600
BMC Software, Inc. (a)...................................... 50,000 2,768,750
Cisco Systems, Inc. (a)..................................... 15,000 1,006,875
Compaq Computer Corp. (a)................................... 29,100 2,888,175
Compuware Corp. (a)......................................... 19,200 916,800
Data General Corp. (a)...................................... 50,000 1,300,000
Dell Computer Corp. (a)..................................... 10,000 1,174,375

</TABLE>

See Notes to Financial Statements

11
<PAGE> 81

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

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

TECHNOLOGY (CONTINUED)
International Business Machines Corp........................ 18,000 $ 1,623,375
KLA-Tencor Corp. (a)........................................ 20,100 979,875
LSI Logic Corp. (a)......................................... 31,100 995,200
McAfee Associates, Inc. (a)................................. 20,300 1,281,437
National Instruments Corp. (a).............................. 29,800 1,050,450
National Semiconductor Corp. (a)............................ 37,000 1,133,125
Oracle Systems Corp. (a).................................... 20,500 1,032,688
Radisys Corp. (a)........................................... 47,000 1,868,250
Sanmina Corp. (a)........................................... 28,200 1,790,700
SCI Systems, Inc. (a)....................................... 21,200 1,351,500
Scientific Atlanta, Inc..................................... 45,200 988,750
Spectrian Corp. (a)......................................... 28,000 1,032,500
Tellabs, Inc. (a)........................................... 13,750 768,281
Waters Corp. (a)............................................ 54,900 1,969,537
------------
31,477,294
------------
TOTAL LONG-TERM INVESTMENTS 87.8%
(Cost $94,598,859)................................................. 102,177,044
------------
SHORT-TERM INVESTMENTS 13.3%

U.S. GOVERNMENT AGENCIES 7.6%
Federal National Mortgage Assn., ($2,940,000 par, yielding 5.519%,
08/15/97 maturity) (b).......................................... 2,919,488
Tennessee Valley Authority Discount Notes, ($6,000,000 par,
yielding 5.489%, 09/11/97 maturity).............................. 5,934,300
------------
TOTAL U.S. GOVERNMENT AGENCIES....................................... 8,853,788

REPURCHASE AGREEMENT 5.7%
SBC Warburg, Corp. ($6,635,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 06/30/97, to
be sold on 07/01/97 at $6,636,032)................................. 6,635,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $15,488,545)................................................. 15,488,788
------------
TOTAL INVESTMENTS 101.1%
(Cost $110,087,404)................................................ 117,665,832

LIABILITIES IN EXCESS OF OTHER ASSETS (1.1)%........................ (1,242,704)
------------
NET ASSETS 100.0%................................................... $116,423,128
============

</TABLE>

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

(b) Assets segregated for open option and futures transactions.

See Notes to Financial Statements

12
<PAGE> 82

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $110,087,404)....................... $117,665,832
Cash........................................................ 4,934
Receivables:
Fund Shares Sold.......................................... 61,098
Dividends................................................. 57,915
Unamortized Organizational Costs............................ 28,103
------------
Total Assets............................................ 117,817,882
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 585,000
Distributor and Affiliates................................ 300,742
Fund Shares Repurchased................................... 282,571
Organizational Costs...................................... 39,250
Variation Margin on Futures............................... 50,250
Accrued Expenses............................................ 113,823
Deferred Compensation and Retirement Plans.................. 23,118
------------
Total Liabilities....................................... 1,394,754
------------
NET ASSETS.................................................. $116,423,128
============
NET ASSETS CONSIST OF:
Capital..................................................... $110,686,302
Net Unrealized Appreciation................................. 7,542,991
Accumulated Net Investment Loss............................. (23,118)
Accumulated Net Realized Loss............................... (1,783,047)
------------
NET ASSETS.................................................. $116,423,128
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $53,137,178 and 2,972,290 shares of
beneficial interest issued and outstanding)............. $ 17.88
Maximum sales charge (5.75%* of offering price)......... 1.09
------------
Maximum offering price to public........................ $ 18.97
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $55,014,556 and 3,091,364 shares of
beneficial interest issued and outstanding)............. $ 17.80
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $8,271,394 and 464,855 shares of
beneficial interest issued and outstanding)............. $ 17.79
=============
</TABLE>

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

See Notes to Financial Statements

13
<PAGE> 83

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 441,633
Dividends................................................... 158,417
-----------
Total Income............................................ 600,050
-----------
EXPENSES:
Investment Advisory Fee..................................... 297,312
Distribution (12b-1) and Service Fees (Attributed to Class
A, B, and C of $45,628, $183,191 and $29,799,
respectively)............................................. 258,618
Shareholder Services........................................ 251,382
Registration and Filing Fees................................ 130,049
Shareholder Reports......................................... 44,669
Trustees Fees and Expenses.................................. 28,453
Legal....................................................... 24,576
Custody..................................................... 8,036
Amortization of Organizational Costs........................ 7,997
Other....................................................... 37,361
-----------
Total Expenses.......................................... 1,088,453
Less:
Fees Waived and Expenses Reimbursed ($297,312 and
$97,532, respectively).............................. 394,844
Credits Earned on Cash Balances....................... 7,335
-----------
Net Expenses.......................................... 686,274
-----------
NET INVESTMENT LOSS......................................... $ (86,224)
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $(3,305,944)
Futures................................................... 1,548,750
-----------
Net Realized Loss........................................... (1,757,194)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 58,219
-----------
End of the Period:
Investments............................................. 7,578,428
Futures................................................. (35,437)
-----------
7,542,991
-----------
Net Unrealized Appreciation During the Period............... 7,484,772
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 5,727,578
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 5,641,354
===========
</TABLE>

See Notes to Financial Statements

14
<PAGE> 84

STATEMENT OF CHANGES IN NET ASSETS

For the Year Ended June 30, 1997 and the Period from
December 27, 1995 (Commencement of Investment Operations)
to June 30, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------

Year Ended Period Ended
June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss...................................... $ (86,224) $ (1,030)
Net Realized Gain/Loss................................... (1,757,194) 23,514
Net Unrealized Appreciation During the Period............ 7,484,772 58,219
------------ ----------
Change in Net Assets from Operations..................... 5,641,354 80,703
------------ ----------
Distributions from Net Realized Gain..................... (23,514) -0-
Distributions in Excess of Net Realized Gain............. (1,799) -0-
------------ ----------
Distributions from and in Excess of Net Realized
Gain*................................................ (25,313) -0-
Return of Capital Distribution*.......................... (21,887) -0-
------------ ----------
Total Distributions.................................... (47,200) -0-
------------ ----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 5,594,154 80,703
------------ ----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................ 122,206,757 35,843
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 2,031 -0-
Cost of Shares Repurchased............................... (11,696,360) -0-
------------ ----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... 110,512,428 35,843
------------ ----------
TOTAL INCREASE IN NET ASSETS............................. 116,106,582 116,546
NET ASSETS:
Beginning of the Period.................................. 316,546 200,000
------------ ----------
End of the Period (Including accumulated net investment
loss of $23,118 and $-0-, respectively)................ $116,423,128 $ 316,546
============ ==========
</TABLE>

<TABLE>
<CAPTION>
Year Ended Period Ended
*Distributions by Class June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of Net
Realized Gain:
Class A Shares............................. $ (24,246) $ -0-
Class B Shares............................. (537) -0-
Class C Shares............................. (530) -0-
---------- ---
$ (25,313) $ -0-
========== ===
Return of Capital Distribution:
Class A Shares............................. $ (20,964) $ -0-
Class B Shares............................. (465) -0-
Class C Shares............................. (458) -0-
---------- ---
$ (21,887) $ -0-
========== ===
</TABLE>

See Notes to Financial Statements

15
<PAGE> 85

FINANCIAL HIGHLIGHTS

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

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

December 27, 1995
(Commencement of
Year Ended Investment Operations)
Class A Shares June 30, 1997(a) to June 30, 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period............ $13.696 $10.000
------- -------
Net Investment Income/Loss........................ .031 (.044)
Net Realized and Unrealized Gain.................. 4.810 3.740
------- -------
Total from Investment Operations.................... 4.841 3.696
Less:
Distributions from and in Excess of Net Realized
Gain............................................ .353 -0-
Return of Capital Distribution.................... .306 -0-
------- -------
Total Distributions................................. .659 -0-
------- -------
Net Asset Value, End of the Period.................. $17.878 $13.696
======= =======
Total Return* (b)................................... 36.00% 37.00%**
Net Assets at End of the Period (In millions)....... $ 53.1 $ .1
Ratio of Expenses to Average Net Assets* (c)........ 1.32% 1.46%
Ratio of Net Investment Income to Average Net
Assets*........................................... .19% (.79%)
Portfolio Turnover.................................. 139% 94%**
Average Commission Paid Per Equity Share Traded
(d)............................................... $ .0507 $ .0280
* If certain fees had not been assumed by VKAC,
Total Return would have been lower and the ratios
would have been as follows:
Ratio of Expenses to Average Net Assets (c)......... 2.31% 15.69%
Ratio of Net Investment Income to Average Net
Assets............................................ (.80%) (15.02%)
</TABLE>

** Non-Annualized

(a) Based on average shares outstanding.

(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(c) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .02% and .16% for the periods
ended on June 30, 1997 and 1996, respectively.

(d) Represents the Average Brokerage Commission Paid Per Equity Share Traded
during the period for trades where commissions were applicable.

See Notes to Financial Statements

16
<PAGE> 86

FINANCIAL HIGHLIGHTS (CONTINUED)

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

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

December 27, 1995
(Commencement of
Year Ended Investment Operations)
Class B Shares June 30, 1997(a) to June 30, 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period............. $13.695 $10.000
------- -------
Net Investment Loss................................ (.093) (.045)
Net Realized and Unrealized Gain................... 4.853 3.740
------- -------
Total from Investment Operations..................... 4.760 3.695
Less:
Distributions from and in Excess of Net Realized
Gain............................................. .353 -0-
Return of Capital Distribution..................... .306 -0-
------- -------
Total Distributions.................................. .659 -0-
------- -------
Net Asset Value, End of the Period................... $17.796 $13.695
======= =======
Total Return* (b).................................... 35.32% 37.00%**
Net Assets at End of the Period (In millions)........ $ 55.0 $ .1
Ratio of Expenses to Average Net Assets* (c)......... 2.07% 1.46%
Ratio of Net Investment Income to Average Net
Assets*............................................ (.56%) (.74%)
Portfolio Turnover................................... 139% 94%**
Average Commission Paid Per Equity Share Traded
(d)................................................ $ .0507 $ .0280
* If certain fees had not been assumed by VKAC, Total
Return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (c).......... 3.04% 15.70%
Ratio of Net Investment Income to Average Net
Assets............................................. (1.53%) (14.97%)
</TABLE>

** Non-Annualized

(a) Based on average shares outstanding.

(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(c) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .02% and .16% for the periods
ended on June 30, 1997 and 1996, respectively.

(d) Represents the Average Brokerage Commission Paid Per Equity Share Traded
during the period for trades where commissions were applicable.

See Notes to Financial Statements

17
<PAGE> 87

FINANCIAL HIGHLIGHTS (CONTINUED)

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

<TABLE>
<CAPTION>
December 27, 1995
(Commencement of
Year Ended Investment Operations)
Class C Shares June 30, 1997(a) to June 30, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period............. $13.695 $10.000
------- -------
Net Investment Loss................................ (.096) (.045)
Net Realized and Unrealized Gain................... 4.853 3.740
------- -------
Total from Investment Operations..................... 4.757 3.695
Less:
Distributions from and in Excess of Net Realized
Gain............................................. .353 -0-
Return of Capital Distribution..................... .306 -0-
------- -------
Total Distributions.................................. .659 -0-
------- -------
Net Asset Value, End of the Period................... $17.793 $13.695
======= =======
Total Return* (b).................................... 35.32% 37.00%**
Net Assets at End of the Period (In millions)........ $8.3 $.1
Ratio of Expenses to Average Net Assets* (c)......... 2.07% 1.46%
Ratio of Net Investment Income to Average Net
Assets*............................................ (.57%) (.74%)
Portfolio Turnover................................... 139% 94%**
Average Commission Paid Per Equity Share Traded
(d)................................................ $ .0507 $ .0280
* If certain fees had not been assumed by VKAC, Total
Return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (c).......... 3.04% 15.70%
Ratio of Net Investment Income to Average Net
Assets............................................. (1.55%) (14.97%)
</TABLE>

** Non-Annualized

(a) Based on average shares outstanding.

(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(c) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .02% and .16% for the periods
ended on June 30, 1997 and 1996, respectively.

(d) Represents the Average Brokerage Commission Paid Per Equity Share Traded
during the period for trades where commissions were applicable.

See Notes to Financial Statements

18
<PAGE> 88

NOTES TO FINANCIAL STATEMENTS

June 30, 1997
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

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

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

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

The Fund may invest in repurchase agreements, which are short-term
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are fully collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.

19
<PAGE> 89

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

C. INVESTMENT INCOME--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Original issue discount on debt
securities purchased are amortized over the expected life of each applicable
security. Premiums on debt securities are not amortized. Market discounts are
recognized at the time of sale as realized gains for book purposes and ordinary
income for tax purposes.

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

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

At June 30, 1997, for federal income tax purposes the cost of long- and
short-term investments is $110,413,419; the aggregate gross unrealized
appreciation is $7,578,428 and the aggregate gross unrealized depreciation is
$361,452, resulting in net unrealized appreciation of $7,216,976.

F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
annually 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 and gains on futures transactions. All short-term
capital gains are included in ordinary income for tax purposes.

20
<PAGE> 90

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, the following permanent differences between book and tax
basis reporting for the 1997 fiscal year have been identified and appropriately
reclassified as follows:

<TABLE>
<S> <C>
Accumulated Undistributed Net Investment Income... $ 63,106(a)(b)
Accumulated Net Realized Gain/Loss on
Securities...................................... $ (1,137)(b)(c)
Capital........................................... $(61,969)(a)(c)
</TABLE>

(a) Represents $40,082 of tax basis net operating losses which are not
deductible for tax purposes.

(b) Represents short-term gains of $23,024 recognized by the Fund which may be
used as an offset against the net operating loss for tax purposes.

(c) $21,887 represents the portion of total distributions paid by the Fund which
were recharacterized for tax purposes as return of capital distributions.

G. EXPENSE REDUCTIONS--During the year ended June 30, 1997, the Fund's custody
fee was reduced by $7,335 as a result of credits earned on overnight balances.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $500 million...................................... .75 of 1%
Next $500 million....................................... .70 of 1%
Over $1 billion......................................... .65 of 1%
</TABLE>

VKAC has agreed to waive fees or reimburse certain expenses through June 30,
1998 to the extent necessary so that the net expense based upon Average Net
Assets would not exceed 1.30%, 2.05% and 2.05% for Classes A, B and C shares,
respectively.

For the year ended June 30, 1997, the Fund recognized expenses of
approximately $24,600 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.

For the year ended June 30, 1997, the Fund recognized expenses of
approximately $19,600 representing VKAC's cost of providing accounting services
to the Fund. These services are provided by VKAC at cost.

ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the year ended June
30, 1997, the Fund recognized expenses of approximately $215,900, representing
ACCESS' cost of providing transfer agency and shareholder services plus a
profit.

21
<PAGE> 91

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

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

At June 30, 1997, VKAC owned 7,000 shares of Class A and 6,500 shares each
of Classes B and C, respectively.

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of shares of beneficial interest, 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.

22
<PAGE> 92

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

At June 30, 1997, capital aggregated $50,593,110, $52,263,425, and
$7,829,767 for Classes A, B, and C, respectively. For the year ended June 30,
1997, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 3,381,843 $ 57,414,786
Class B.................................. 3,282,280 55,512,272
Class C.................................. 548,147 9,279,699
--------- ------------
Total Sales................................ 7,212,270 $122,206,757
========= ============
Dividend Reinvestment:
Class A.................................. 132 $ 2,031
Class B.................................. -0- -0-
Class C.................................. -0- -0-
--------- ------------
Total Dividend Reinvestment................ 132 $ 2,031
========= ============
Repurchases:
Class A.................................. (419,798) $ (6,901,267)
Class B.................................. (197,416) (3,284,564)
Class C.................................. (89,792) (1,510,529)
--------- ------------
Total Repurchases.......................... (707,006) $(11,696,360)
========= ============
</TABLE>

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

Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and C
shares will be imposed on most redemptions made within five 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

<PAGE> 93

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

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.......................................... 5.00% 1.00%
Second......................................... 4.00% None
Third.......................................... 3.00% None
Fourth......................................... 2.50% None
Fifth.......................................... 1.50% None
Sixth and thereafter........................... None None
</TABLE>

For the year ended June 30, 1997, VKAC, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A shares of approximately
$204,700 and CDSC on the redeemed shares of Classes B and C of approximately
$67,000. Sales charges do not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $142,025,453 and $44,359,839,
respectively.

5. DERIVATIVE FINANCIAL INSTRUMENTS

A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.

The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In these instances,
the recognition of gain or loss is postponed until the disposal of the security
underlying futures contract.

During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in stock index futures. These contracts are generally used as
a substitute for purchasing and selling specific securities. Upon entering into
futures contracts, the Fund maintains, in a segregated

24
<PAGE> 94

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin).

Transactions in futures contracts for the year ended June 30, 1997, were as
follows:

<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1996................................ -0-
Futures Opened.............................................. 45
Futures Closed.............................................. 30
---
Outstanding at June 30, 1997................................ 15
===
</TABLE>

The futures contracts outstanding as of June 30, 1997, and the description
and unrealized depreciation are as follows:

<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS DEPRECIATION
- ---------------------------------------------------------------------------
<S> <C> <C>
Long Contracts - S&P 500 Index Futures
December 1997
(Current notional value of $449,950 per
contract).................................... 15 $35,437
==== ========

</TABLE>

6. DISTRIBUTION AND SERVICE PLANS

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

Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the year ended June 30, 1997, are payments to VKAC of approximately
$167,500.

<PAGE> 95

REPORT OF INDEPENDENT ACCOUNTANTS

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

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Growth Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1997, and the related statement of operations for
the year then ended, the statement of changes in net assets for the year then
ended and the period from December 27, 1995 (commencement of investment
operations) to June 30, 1996, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Growth Fund as of June 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and the period from December 27, 1995 (commencement of investment
operations) to June 30, 1996, and the financial highlights for each of the
periods presented, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP
Chicago, Illinois
August 11, 1997

26
<PAGE> 96

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

MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Value Fund
Worldwide High Income Fund

Ask your investment representative for a prospectus containing more
complete information, including sales charges and expenses. Please read it
carefully before you invest or send money. Or call us weekdays from 7:00
a.m. to 7:00p.m. Central time at 1-800-341-2911 for Van Kampen American
Capital funds or Morgan Stanley retail funds.

27
<PAGE> 97

VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN

RICHARD M. DEMARTINI*

LINDA HUTTON HEAGY

R. CRAIG KENNEDY

JACK E. NELSON

DON G. POWELL*

JEROME L. ROBINSON

PHILLIP B. ROONEY

FERNANDO SISTO

WAYNE W. WHALEN* - Chairman

OFFICERS

DENNIS J. MCDONNELL*
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

PETER W. HEGEL*

ALAN T. SACHTLEBEN*

PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

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

DISTRIBUTOR

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

SHAREHOLDER SERVICING AGENT

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

CUSTODIAN

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

LEGAL COUNSEL

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

INDEPENDENT ACCOUNTANTS

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

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

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

28
<PAGE> 98

RESULTS OF SHAREHOLDER VOTES

A Special Meeting of Shareholders of the Fund was held on May 28, 1997 where
shareholders voted on a new investment advisory agreement, the election of
Trustees and the ratification of KPMG Peat Marwick LLP as independent public
accountants. With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Investment Advisory Corp. and the Fund,
3,840,787 shares voted for the proposal, 291,880 shares voted against and
140,679 shares abstained. With regard to the election of J. Miles Branagan as
elected trustee of the Fund, 4,202,533 shares voted in his favor and 70,813
shares withheld. With regard to the election of Richard M. DeMartini as elected
trustee of the Fund, 4,202,165 shares voted in his favor and 71,181 shares
withheld. With regard to the election of Linda Hutton Heagy as elected trustee
of the Fund, 4,200,965 shares voted in her favor and 72,381 shares withheld.
With regard to the election of R. Craig Kennedy as elected trustee of the Fund,
4,202,010 shares voted in his favor and 71,336 shares withheld. With regard to
the election of Jack E. Nelson as elected trustee of the Fund, 4,202,533 shares
voted in his favor and 70,813 shares withheld. With regard to the election of
Don G. Powell as elected trustee of the Fund 4,202,351 shares voted in his favor
and 70,995 shares withheld. With regard to the election of Jerome L. Robinson as
elected trustee of the Fund, 4,197,764 shares voted in his favor and 75,582
shares withheld. With regard to the election of Phillip B. Rooney as elected
trustee of the Fund, 4,202,266 shares voted in his favor and 71,080 shares
withheld. With regard to the election of Fernando Sisto as elected trustee of
the Fund, 4,196,793 shares voted in his favor and 76,553 shares withheld. With
regard to the election of Wayne W. Whalen as elected trustee of the Fund,
4,200,972 shares voted in his favor and 72,374 shares withheld. With regard to
the ratification of KPMG Peat Marwick LLP as independent public accountants for
the Fund, 4,112,323 shares voted for the proposal, 37,167 shares voted against
and 123,856 shares abstained.

29
<PAGE> 99

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . 1
Putting Your Fund's Performance in Perspective . . . . . . . . . 3
Portfolio Management Review . . . . . . . . . . . . . . . . . . 4
Portfolio of Investments . . . . . . . . . . . . . . . . . . . . 7
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
Independent Accountants' Report. . . . . . . . . . . . . . . . . 17
</TABLE>

PRS ANR 8/97
<PAGE> 100
LETTER TO SHAREHOLDERS

July 24, 1997

Dear Shareholder,

As you know, Van Kampen American Capital was recently acquired by Morgan
Stanley Group Inc., a world leader in asset management. Earlier this year,
Morgan Stanley Group Inc. and Dean Witter, Discover & Co. agreed to merge. The
merger was completed on May 31, creating the combined company of Morgan
Stanley, Dean Witter, Discover & Co. Additionally, we are very pleased to
announce that Philip N. Duff, formerly the chief financial officer of Morgan
Stanley Group Inc., has joined Van Kampen American Capital as president and
chief executive officer. I will continue as chairman of the firm. We are
confident that these changes will continue to work to the benefit of our fund
shareholders as we move into the next century.
One of the immediate privileges that we can offer fund shareholders is the
ability to make exchanges between Van Kampen American Capital and Morgan
Stanley retail funds at no charge. In our view, the rapid appreciation of U.S.
stock prices in recent years has created a need for investors to examine their
portfolios carefully to ensure proper diversification among domestic and
foreign investments. The Morgan Stanley retail funds, with their emphasis on
global markets, can be valuable tools to accomplishing this diversification.
We also urge investors to consider how their fund holdings are currently
allocated among the three major asset classes of stocks, bonds, and cash
reserves. Uneven movements in the various markets can distort a carefully
planned investment program. And, with stock prices near record highs, it is
likely that some rebalancing of your portfolio allocations may be necessary.
Once again, the exchangeability feature with the Morgan Stanley retail funds
provides additional choices and opportunities to make the necessary adjustments
to your portfolio's asset allocation.

ECONOMIC OVERVIEW
Growth, stability, and confidence continued to characterize the U.S.
economic environment during the past six months. In the first quarter, the
economy grew at its fastest pace since 1987. Meanwhile, consumer confidence
soared to its highest reading in 28 years, while unemployment fell as low as
4.8 percent, the lowest level since 1973.
Despite the robust pace of economic activity, there was little evidence of
troublesome inflation. Wholesale prices actually fell during each of the first
five months of 1997, the longest stretch of consecutive monthly declines in 45
years. At the consumer level, prices rose by a mere 2.2 percent during the 12
months through May. A strong rally in the U.S. dollar helped dampen
inflationary pressures resulting from the vigorous domestic economy by making
imported goods less expensive. At the same time, continued moderation in the
cost of employee benefit packages offset mild upward pressure on wages.
In March, the inflationary implications of a tight labor market caused the
Federal Reserve Board to raise its target for a key lending rate by one-quarter
of a percentage point, the first hike in short-term interest rates in two
years. Signs that economic growth slowed markedly in the second quarter,
however, led fed policymakers to leave rates unchanged at subsequent meetings.

Continued on page two

1
<PAGE> 101
MARKET OVERVIEW

With a solid underpinning of record profits, strong economic growth, and
low inflation, the U.S. equity market continued its torrid performance during
the first half of 1997. For a brief time this spring, however, investors
worried that growth was too robust and that higher interest rates were on the
way. Those fears pushed stock prices lower by about 10 percent over a one-month
period beginning in mid-March.
By mid-April, signs that the economy was cooling began to emerge, and
stocks skyrocketed to a series of record highs. The Wilshire 5000 Index,
comprised of 5,000 publicly traded domestic companies, gained 16.65 percent
during the first six months of the year and increased by 25.95 percent over the
12 months through June 30. Low inflation allowed the market's price/earnings
multiple to remain high, while strong growth in corporate profits provided
solid support for stock prices.
Within the equity market, most of the gains were generated by
large-capitalization stocks. The Russell 1000 Index of large companies gained
17.57 percent over the six months through June 30, almost double the return of
the Russell 2000 Index of small-capitalization companies. Consumer
non-cyclicals such as beverages and pharmaceuticals were among the
top-performing industry groups, although the rally broadened by the end of June
to include sectors that had previously been laggards, including cyclicals and
small-company stocks.

OUTLOOK
We expect the pace of economic activity during the remainder of 1997 to
accelerate modestly from the relatively sluggish rate that prevailed during the
second quarter. While we do not believe that economic growth will be rapid
enough to reignite inflation, some warning signs are present, including a tight
labor market and high consumer confidence. In this environment, at least one
additional Federal Reserve interest rate hike remains a possibility.
We believe that equities should continue to do well given the likely
continuation of the moderate- growth, low-inflation environment. We are
concerned, however, that the lengthy series of record highs in the U.S. stock
market is creating unreasonable expectations among some investors. Valuations
are extended and investment sentiment is exceptionally optimistic. Under such
circumstances, a mild correction would not be unusual.
We are fortunate to be experiencing a rare combination of sustained
economic growth, low inflation, and highly favorable performance in the
financial market. Along with our fund shareholders, we celebrate the seemingly
best of economic times. Once again, we encourage you to review your portfolio
with an eye toward correcting allocation imbalances.
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. We appreciate
your continued confidence in your investment with Van Kampen American Capital.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

2
<PAGE> 102
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

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

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

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

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

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

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT

Van Kampen American Capital Prospector Fund vs. Standard & Poor's
500-Stock Index and Lipper Growth and Income Fund Index
(December 27, 1995 through June 30, 1997)

[LINE GRAPH]

<TABLE>
<CAPTION>
Dec Mar Jun Sep Dec Mar Jun
1995 1996 1996 1996 1996 1997 1997
<S> <C> <C> <C> <C> <C> <C> <C>
VKAC 9463 10160 10666 11093 12173 12135 13771
S&P 10000 10621 11096 11437 12389 12723 14940
Lipper 10000 10574 10846 11196 12069 12272 13992
</TABLE>

<PAGE> 103
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

We recently spoke to the management team of the Van Kampen American Capital
Prospector Fund about the key events and economic forces that shaped the
markets during the Fund's fiscal year. The team includes B. Robert Baker, Jr.
and Jason Leder, portfolio co-managers, and Alan T. Sachtleben, chief
investment officer for equity investments. The following excerpts reflect their
views on the Fund's performance during the 12-month period ended June 30, 1997.

Q WHAT ECONOMIC FACTORS INFLUENCED THE MARKET DURING THE REPORTING PERIOD?

A The rare combination of moderate economic growth and historically low
inflation provided a nearly ideal environment for equity investments and
drove the stock market to new heights. The Fund's fiscal year began on a
low note in July of 1996, as small- and mid-capitalization stocks were
struggling to rebound from a broad market correction. But by the end of July,
technology and financial stocks were leading the equity markets upward. The
economy's sluggish third quarter was followed by a strong fourth quarter, and
corporate earnings came in slightly better than expected. This boosted stocks
through the end of the year, generally favoring large, well-established
companies over their smaller competitors.
The economy grew at a remarkably strong pace in the first quarter of 1997,
which caused investors to worry that inflation might become a problem. This
concern increased volatility in stock prices and precipitated a month-long
market correction in mid-March that wiped out all year-to-date gains. Stocks
rebounded quickly after economic data was released in April showing negligible
inflation and hints of a slowdown in growth. In May, the Dow Jones Industrial
Average rallied to record-breaking heights and recouped its losses. Again,
large-cap stocks outperformed smaller, more erratic issues during this volatile
period. The reporting period ended on a positive note, as stocks continued to
surge ahead through the end of June.

Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET
ITS OBJECTIVE?

A We maintained our core investment philosophy, which is to concentrate
on undervalued stocks that have the potential for future appreciation. To do
this, we focus on companies with stock prices that we believe are low compared
to their intrinsic worth or future potential--companies that are temporarily
out of favor. Then, we try to identify what factors might move the stock price
from being undervalued to being fairly valued. That catalyst could include new
management, restructuring, reorganization, or a regulatory change in the
company's industry. Once we find a company that is undervalued and has an
identifiable catalyst, we consider purchasing the security.
In addition, we use what is known as a "bottom up" stock selection
process. This means we evaluate stocks one by one and make purchases wherever
we find a good opportunity, rather than maintaining defined sector allocations.
However, we do make sure that the portfolio is broadly diversified, with
investments across many sectors.

<PAGE> 104

Q WHAT FACTORS INFLUENCED THE PORTFOLIO DURING THE PERIOD?

A In the current market, mid-sized companies are offering more opportunities
for value investing than large companies, which are relatively overvalued.
We added to our position in Pier 1 Imports, one of the Fund's largest
holdings, and it has appreciated appoximately 77 percent during the
reporting period. In addition, we are optimistic about Tele Communications,
Inc. (TCI), a cable television operator. Last year, TCI's subscriber growth
was on the decline while there were concerns about competition, and the stock
became undervalued. Currently, there are several catalysts that could
potentially move the stock price up to its fair value: renewed subscriber
growth is expected later in the year, satellites are no longer considered an
imminent threat, and a new chief executive officer is focused on improving cash
flows and paying off debt. The stock price has been on the rise since April,
and we've made TCI one of the fund's largest holdings.
On the other hand, we reduced our position in WMX Technologies, whose
stock price has been flat this year. The company is in the process of
restructuring and in the midst of a search for a new chief executive officer.
We have kept the stock in the portfolio because we believe that WMX
Technologies is relatively undervalued, and its price could increase when these
management issues are resolved. Also, we underweighted the financial sector
because we believe it is generally overvalued, but holdings such as American
Bankers Insurance Group, Travelers, and AMBAC have performed well.
One factor that worked against the fund during the reporting period
was its large concentration in electric utilities. We began to purchase these
securities when they became very inexpensive, due to concerns about industry
deregulation and increased competition. Since then, they have lost a bit more
of their value, which has hindered the Fund's performance. In keeping with our
long-term perspective, we've continued to hold on to a number of these stocks
because we believe they are positioned to appreciate to their fair value.

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

A The Fund achieved a 12-month total return of 29.11 percent (Class A
shares at net asset value) as of June 30, 1997. By comparison, the Standard &
Poor's 500-Stock Index returned 34.63 percent, and the Lipper Growth and Income
Fund Index, which more closely resembles the Fund, returned 29.00 percent. The
S&P 500-Stock Index is a broad-based, unmanaged index that reflects the general
performance of the stock market, and the Lipper Growth and Income Fund Index
reflects the average performance of the largest growth and income funds.
Keep in mind that these indices are unmanaged statistical composites
that do not include any commissions, fees, or sales charges that would be paid
by an investor purchasing the securities or investments they represent.

Q WHAT IS YOUR OUTLOOK FOR THE FUND FOR THE REMAINDER OF THE YEAR?

<PAGE> 105

confidence, and a mild upturn in wages. The recent rally in stock prices
suggests that investors believe the Federal Reserve Board will successfully
engineer a slowdown in growth without tipping the economy into a recession.
However, volatility could remain high until then.
As the stock market continues to climb, it becomes increasingly
sensitive to changes in the economic environment -- even minor events can
trigger declines. In addition, high stock prices often translate into high risk
for investors, because expensive securities have farther to fall in a market
downturn than low-priced stocks. In this environment, investments such as the
Prospector Fund -- those that seek out undervalued securities -- may help
reduce the impact of a stock market decline while still allowing investors to
participate in its advances.

[SIG]
Alan T. Sachtleben

Chief Investment Officer
Equity Investments

[SIG]
B. Robert Baker, Jr.

Portfolio Co-Manager

[SIG]
Jason Leder

Portfolio Co-Manager

6
<PAGE> 106
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

PORTFOLIO OF INVESTMENTS

JUNE 30, 1997

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

Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS
CONSUMER DISTRIBUTION 5.0%
Pier 1 Imports, Inc. ........................ 2,660 $ 70,490
------------
CONSUMER DURABLES 3.0%
Cooper Tire & Rubber ........................ 600 13,200
Maytag Corp. ................................ 600 15,675
Newell Co. .................................. 340 13,473
------------
42,348
------------
CONSUMER NON-DURABLES 8.5%
Dial Corp. .................................. 3,150 49,219
Philip Morris Cos., Inc. .................... 790 35,056
RJR Nabisco Holdings Corp.................... 695 22,935
Tambrands, Inc. ............................. 250 12,469
------------
119,679
------------
CONSUMER SERVICES 8.1%
International Game Technology ............... 2,000 35,500
Outback Steakhouse, Inc. (a) ................ 100 2,419
Tele-Communications International, Inc.,
Class A (a).................................. 2,630 39,121
Time Warner, Inc. ........................... 750 36,187
------------
113,227
------------
ENERGY 7.9%
Atlantic Richfield Co. ...................... 200 14,100
British Petroleum PLC - ADR (United Kingdom. 440 32,945
Coflexip SA - ADR (France) (a) .............. 105 3,163
Duke Power Co. .............................. 741 35,522
ENI SPA- ADR (Italy) ........................ 200 11,300
YPF Sociedad Anonima - ADR (Argentina),
Class D...................................... 450 13,838
------------
110,868
------------
FINANCE 19.7%
Aetna, Inc. ................................. 320 32,760
AMBAC, Inc. ................................. 495 37,806
American Bankers Insurance Group, Inc. ...... 970 61,352
Bear Stearns Cos., Inc. ..................... 489 16,718
Chase Manhattan Corp. ....................... 130 12,618
CMAC Investment Corp. ....................... 360 17,190
Conseco, Inc. ............................... 930 34,410
Everest Reinsurance Holdings, Inc. .......... 430 17,039
First Union Corp. ........................... 100 9,250
Hartford Life, Inc., Class A (a) ............ 100 3,750
MBIA, Inc. .................................. 125 14,101
Nationwide Financial Services, Inc.,
Class A (a) ................................. 100 2,656
Norwest Corp................................. 300 16,875
------------
276,525
------------

HEALTHCARE 7.4%
Lincare Holdings, Inc. (a) .................. 310 13,330
PacifiCare Health Systems, Class B (a) ...... 750 47,906
Pharmacia & Upjohn, Inc. .................... 800 27,800
Sierra Health Services, Inc. (a) ............ 500 15,625
------------
104,661
------------
</TABLE>
See Notes to Financial Statements

7
<PAGE> 107

VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

PORTFOLIO OF INVESTMENTS

JUNE 30, 1997

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING 8.6%
Bouygues Offshore SA - ADR (France) (a) .......... 2,320 $ 29,000
Cognex Corp. (a) ................................. 645 17,092
LucasVarity PLC - ADR (United Kingdom) (a) ....... 800 27,700
Stewart & Stevenson Services, Inc. ............... 550 14,300
WMX Technologies, Inc. ........................... 1,000 32,125
------------
120,217
------------
RAW MATERIALS/PROCESSING INDUSTRIES 5.1%
Boise Cascade Corp. .............................. 825 29,133
British Steel PLC- ADR (United Kingdom) .......... 600 15,150
Georgia Pacific Corp. ............................ 150 12,806
USX - U.S. Steel, Inc. ........................... 400 14,025
------------
71,114
------------
TECHNOLOGY 7.7%
Avnet, Inc. ...................................... 410 23,575
Compaq Computer Corp. (a) ........................ 200 19,850
Dell Computer Corp. (a) .......................... 100 11,744
Gateway 2000, Inc. (a) ........................... 480 15,570
Quantum Corp. (a) ................................ 500 10,156
SunGard Data Systems, Inc. (a) ................... 600 27,900
------------
108,795
------------
TRANSPORTATION 3.0%
Canadian National Railway Co. .................... 950 41,563
------------
UTILITIES 17.5%
Cincinnati Bell, Inc. ............................ 90 2,835
CMS Energy Corp. ................................. 950 33,487
Houston Industries, Inc. ......................... 1,400 30,013
Idaho Power Co. .................................. 1,000 31,375
Illinova Corp. ................................... 560 12,320
OGE Energy Corp. ................................. 1,100 50,050
Pinnacle West Capital Corp. ...................... 1,200 36,075
Public Service Co. of New Mexico ................. 730 13,049
Texas Utilities Co. .............................. 1,070 36,848
------------
246,052
------------
TOTAL LONG-TERM INVESTMENTS 101.5%
(Cost $1,266,749) ........................... 1,425,539

LIABILITIES IN EXCESS OF OTHER ASSETS (1.5%)...... (20,490)
------------
NET ASSETS 100.0% ............................. $ 1,405,049
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.

See Notes to Financial Statements

8
<PAGE> 108
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

STATEMENT OF ASSETS AND LIABILITIES

JUNE 30, 1997
- -----------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Total Investments, at Market Value (Cost $1,266,749)............................... $ 1,425,539
Receivables:
Expense Reimbursement from Adviser............................................... 26,391
Dividends........................................................................ 3,796
Unamortized Organizational Costs................................................... 28,059
---------------
Total Assets................................................................... 1,483,785
---------------

LIABILITIES:

Payables:
Organizational Costs............................................................. 40,000
Investments Purchased............................................................ 24,858
Custodian Bank................................................................... 929
Deferred Compensation and Retirement Plans......................................... 12,949
---------------

Total Liabilities.............................................................. 78,736
---------------

NET ASSETS........................................................................... $ 1,405,049
===============

NET ASSETS CONSIST OF:
Capital............................................................................ $ 1,204,138
Net Unrealized Appreciation........................................................ 158,790
Accumulated Net Realized Gain...................................................... 41,519
Accumulated Undistributed Net Investment Income.................................... 602
----------------

NET ASSETS........................................................................... $ 1,405,049
===============

MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$1,228,961 and 91,217 shares of beneficial interest issued and outstanding...... $ 13.47
Maximum sales charge (5.75%* of offering price).................................. 0.82
---------------

Maximum offering price to public................................................. $ 14.29
===============

Class B Shares:
Net asset value and offering price per share (Based on net assets of $88,044
and 6,535 shares of beneficial interest issued and outstanding).................. $ 13.47
===============

Class C Shares:
Net asset value and offering price per share (Based on net assets of $88,044
and 6,535 shares of beneficial interest issued and outstanding).................. $ 13.47
===============
</TABLE>

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

See Notes to Financial Statements

<PAGE> 109
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1997
- -----------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................................ $ 11,985
----------
EXPENSES:
Trustees Fees and Expenses........................... 16,393
Shareholder Reports.................................. 16,260
Shareholder Services................................. 15,600
Audit................................................ 12,250
Accounting........................................... 11,133
Amortization of Organizational Costs................. 8,000
Legal................................................ 7,500
Investment Advisory Fee.............................. 3,561
Registration......................................... 2,225
Custody.............................................. 1,548
Miscellaneous........................................ 1,507
----------

Total Expenses................................... 95,977
Less: Fees Waived and Expenses Reimbursed
($3,561 and $84,457, respectively)........ 88,018
Credits Earned on Overnight Cash Balances. 1,548
----------

Net Expenses..................................... 6,411
----------

NET INVESTMENT INCOME................................ $ 5,574
==========

REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain.................................... $ 50,199
----------

Unrealized Appreciation/Depreciation:
Beginning of the Period............................ 17,872
End of the Period.................................. 158,790
----------
Net Unrealized Appreciation During the Period........ 140,918
----------

NET REALIZED AND UNREALIZED GAIN..................... $ 191,117
==========

NET INCREASE IN NET ASSETS FROM OPERATIONS............ $ 196,691
==========
</TABLE>

See Notes to Financial Statements

<PAGE> 110
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

STATEMENT OF CHANGES IN NET ASSETS

For the Year Ended June 30, 1997 and
The Period December 27, 1995 (Commencement of Investment Operations) to
June 30, 1996
- ------------------------------------------------------------------------------

NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES:................................ 175,004 25,704
---------- ---------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.................... 1,000,000 0
Net Asset Value of Shares Issued
Through Dividend Reinvestment.............. 4,341 0
---------- ---------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS............................... 1,004,341 0
---------- ---------
TOTAL INCREASE IN NET ASSETS................. 1,179,345 25,704

NET ASSETS:
Beginning of the Period...................... 225,704 200,000
---------- ---------

End of the Period (Including accumulated
undistributed net investment income
of $602 and $912, respectively)............ $1,405,049 $ 225,704
========== =========
</TABLE>

See Notes to Financial Statements

<PAGE> 111
VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

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

Total from Investment Operations 3.111 1.311
---------------------- -----------------------

Less:
Distributions from Net Investment Income 0.143 0.026
Distributions from Net Realized Gain 0.780 0.000
---------------------- -----------------------

Total Distributions 0.923 0.026
---------------------- -----------------------

Net Asset Value, End of the Period $ 13.473 $ 11.285
====================== =======================

Total Return * (b) 29.11% 13.10%**

Net Assets at End of the Period (In millions) $1.2 $0.1

Ratio of Expenses to Average Net Assets* (c) 1.55% 1.33%

Ratio of Net Investment Income to Average Net Assets* 1.19% 1.34%

Portfolio Turnover 104% 69%**

Average Commission Paid Per Equity Share Traded (d) $0.0388 $0.0319

*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 (c) 18.41% 20.75%

Ratio of Net Investment Income to Average Net Assets (15.97%) (18.07%)

** Non-Annualized
</TABLE>

(a) Based on average shares outstanding.

(b) Total Return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .30% and .04% for the periods
ending on June 30, 1997 and June 30, 1996, respectively.

(d) Represents the average brokerage commissions paid per equity share traded
during the periods for trades where commissions were applicable.

See Notes to Financial Statements

12
<PAGE> 112

VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

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

Total from Investment Operations 3.133 1.311
---------------------- -----------------------

Less:
Distributions from Net Investment Income 0.165 0.026
Distributions from Net Realized Gain 0.780 0.000
---------------------- -----------------------

Total Distributions 0.945 0.026
---------------------- -----------------------

Net Asset Value, End of the Period $ 13.473 $ 11.285
====================== =======================

Total Return * (b) 29.11% 13.19%**

Net Assets at End of the Period (In thousands) $88.0 $73.4

Ratio of Expenses to Average Net Assets* (c) 1.55% 1.33%

Ratio of Net Investment Income to Average Net Assets* 0.86% 1.34%

Portfolio Turnover 104% 69%**

Average Commission Paid Per Equity Share Traded (d) $0.0388 $0.0319

*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 (c) 18.41% 20.75%

Ratio of Net Investment Income to Average Net Assets (16.30%) (18.07%)

** Non-Annualized
</TABLE>

(a) Based on average shares outstanding.

(b) Total Return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

(d) Represents the average brokerage commissions paid per equity share traded
during the periods for trades where commissions were applicable.

See Notes to Financial Statements

13
<PAGE> 113

VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

FINANCIAL HIGHLIGHTS (CONTINUED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE
OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.

<TABLE>
<CAPTION>
DECEMBER 27,1995
(COMMENCEMENT
OF INVESTMENT
YEAR ENDED OPERATIONS) TO
CLASS C SHARES JUNE 30, 1997(A) JUNE 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period $ 11.285 $ 10.000
------------- ------------

Net Investment Income 0.113 0.072
Net Realized and Unrealized Gain on Investments 3.020 1.239
------------- ------------

Total from Investment Operations 3.133 1.311
------------- ------------
Less:
Distributions from Net Investment Income 0.165 0.026
Distributions from Net Realized Gain on Investments (Note 1) 0.780 0.000
------------- ------------

Total Distributions 0.945 0.026
------------- ------------

Net Asset Value, End of the Period $ 13.473 $ 11.285
============= ============

Total Return * (b) 29.11% 13.19%**

Net Assets at End of the Period (In thousands) $88.0 $73.4

Ratio of Expenses to Average Net Assets* (c) 1.55% 1.33%

Ratio of Net Investment Income to Average Net Assets* 0.86% 1.34%

Portfolio Turnover 104% 69%**

Average Commission Paid Per Equity Share Traded (d) $0.0388 $0.0319

*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 (c) 18.41% 20.75%

Ratio of Net Investment Income to Average Net Assets (16.30%) (18.07%)
</TABLE>

** Non-Annualized

(a) Based on average shares outstanding.

(b) Total Return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

(d) Represents the average brokerage commissions paid per equity share traded
during the periods for trades where commissions were applicable.

See Notes to Financial Statements
14

<PAGE> 114
VAN KAMPEN AMERICAN CAPITAL
PROSPECTOR FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997

1. SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are fully collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.

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

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

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

At June 30, 1997, for federal income tax purposes, cost of long-term
investments is $1,266,749; the aggregate gross unrealized appreciation is
$170,809, and the unrealized depreciation is $12,019, resulting in net
unrealized appreciation of $158,790.

F. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included in ordinary income for
tax purposes.

Due to inherent differences in the recognition of certain expenses under
generally accepted accounting principles and federal income tax purposes, the
amount of net investment income may differ between book and federal income tax
purposes for a particular period. These differences are temporary in nature,
but may result in book basis distributions in excess of net investment income
for certain periods.

Permanent book and tax basis differences relating to certain expenses
which are not deductible for tax purposes totaling $203 were reclassified from
accumulated undistributed net investment income to capital.

G. EXPENSE REDUCTIONS - During the year ended June 30,
1997, the Fund's custody fee was reduced by $1,548 as a result of credits
earned on overnight cash balances.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

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

<TABLE>
<CAPTION>
Average Net Assets % Per Annum
--------------------- ------------
<S> <C>
First $500 million .70%

Next $500 million .65%

Over $1 billion .60%
</TABLE>

For the year ended June 30, 1997, the Fund recognized expenses of
approximately $600 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of
the Fund is an affiliated person.

15
<PAGE> 115

VAN KAMPEN AMERICAN CAPITAL
PROSPECTOR FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997

For the year ended June 30, 1997, the Fund incurred expenses of
approximately $18,000 representing VKAC's cost of providing accounting and
legal services to the Fund. These services are provided by VKAC at cost. All
of this cost has been assumed by VKAC.

ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended
June 30, 1997, the Fund recognized expenses of approximately $15,000,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit. All of this cost has been 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.

At June 30, 1997, VKAC owned all shares of Classes A, B and C,
respectively.

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of shares of beneficial interest,
Classes A, B and C, each with a par value of $.01 per share. There are an
unlimited number of shares of each class authorized. At June 30, 1997 capital
aggregated $1,073,252, $65,443 and $65,443 for classes A, B, and C. For the
year ended June 30, 1997, transactions were as follows:

<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------------
<S> <C> <C>
Sales:

Class A........................... 83,963 $1,000,000
Class B........................... -0- -0-

Class C........................... -0- -0-
-------- ----------
Total Sales....................... 83,963 $1,000,000
======== ==========

Dividend Reinvestment:

Class A........................... 254 $ 3,429

Class B........................... 35 456

Class C........................... 35 456
-------- ----------

Total Dividend Reinvestments...... 324 $ 4,341
======== ==========
</TABLE>

At June 30, 1996, capital aggregated $70,000, $65,000 and $65,000 for
Classes A, B and C, respectively. For the period ended June 30, 1996 there were
no capital transactions.

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

<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
-------------------
<S> <C> <C>
Class B Class C
Year of Redemption Shares Shares
------------------ ------- -------

First 5.00% 1.00%

Second 4.00% None

Third 3.00% None

Fourth 2.50% None

Fifth 1.50% None

Sixth and thereafter None None
</TABLE>

4. INVESTMENT TRANSACTIONS
During the year ended June 30, 1997, the cost of purchases and proceeds from
sales of investments, excluding short-term investments, were $1,528,587 and
$507,964 respectively.

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

<PAGE> 116
[KPMG PEAT MARWICK LLP LETTERHEAD]

REPORT OF INDEPENDENT ACCOUNTANTS

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

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Prospector Fund (the "Fund"), including the portfolio
of investments, as of June 30, 1997, and the related statement of operations
for the year then ended, the statement of changes in net assets for the year
then ended and the period from December 27, 1995 (commencement of investment
operations) to June 30, 1996, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of June 30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen American Capital Prospector Fund as of June 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and the period from December 27, 1995 (commencement of investment
operations) to June 30, 1996, and the financial highlights for each of the
periods presented, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
August 15, 1997

<PAGE> 117

VAN KAMPEN AMERICAN CAPITAL PROSPECTOR FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
JEROME L. ROBINSON
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman

OFFICERS

DENNIS J. MCDONNELL*
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

PETER W. HEGEL*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

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

DISTRIBUTOR

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181

SHAREHOLDER SERVICING AGENT

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

CUSTODIAN

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

LEGAL COUNSEL

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

INDEPENDENT ACCOUNTANTS

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

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

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

17
<PAGE> 118

RESULTS OF SHAREHOLDER VOTES

A Special Meeting of Shareholders of the Fund was held on May 28, 1997 where
shareholders voted on a new investment advisory agreement, the election of
Trustees and the ratification of KPMG Peat Marwick LLP as independent public
accountants. With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Investment Advisory Corp. and the Fund,
13,000 shares voted for the proposal, 0 shares voted against and 0 shares
abstained. With regard to the election of J. Miles Branagan as elected trustee
of the Fund, 13,000 shares voted in his favor 0 shares withheld. With regard to
the election of Richard M. DeMartini as elected trustee of the Fund, 13,000
shares voted in his favor 0 shares withheld. With regard to the election of
Linda Hutton Heagy as elected trustee of the Fund, 13,000 shares voted in her
favor 0 shares withheld. With regard to the election of R. Craig Kennedy as
elected trustee of the Fund, 13,000 shares voted in his favor 0 shares withheld.
With regard to the election of Jack E. Nelson as elected trustee of the Fund,
13,000 shares voted in his favor 0 shares withheld. With regard to the election
of Don G. Powell as elected trustee of the Fund, 13,000 shares voted in his
favor 0 shares withheld. With regard to the election of Jerome L. Robinson as
elected trustee of the Fund, 13,000 shares voted in his favor 0 shares withheld.
With regard to the election of Phillip B. Rooney as elected trustee of the Fund,
13,000 shares voted in his favor 0 shares withheld. With regard to the election
of Fernando Sisto as elected trustee of the Fund, 13,000 shares voted in his
favor 0 shares withheld. With regard to the election of Wayne W. Whalen as
elected trustee of the Fund, 13,000 shares voted in his favor 0 shares withheld.
With regard to the ratification of KPMG Peat Marwick LLP as independent public
accountants for the Fund, 13,000 shares voted for the proposal, 0 shares voted
against and 0 shares abstained.

<PAGE> 119

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 4
Portfolio Highlights............................. 5
Performance in Perspective....................... 6
Portfolio Management Review...................... 7
Portfolio of Investments......................... 11
Statement of Assets and Liabilities.............. 16
Statement of Operations.......................... 17
Statement of Changes in Net Assets............... 18
Financial Highlights............................. 19
Notes to Financial Statements.................... 22
Independent Accountants' Report.................. 27
</TABLE>

AGG ANR 8/97
<PAGE> 120

LETTER TO SHAREHOLDERS

July 24, 1997

Dear Shareholder,
As you know, Van Kampen American
Capital was acquired by Morgan
Stanley Group Inc., a world leader in
asset management. Earlier this year,
Morgan Stanley Group Inc. and Dean
Witter, Discover & Co. agreed to [PHOTO]
merge. The merger was completed on
May 31, creating the combined company
of Morgan Stanley, Dean Witter,
Discover & Co. Additionally, we are DENNIS J. MCDONNELL AND DON G. POWELL
very pleased to announce that Philip
N. Duff, formerly the chief financial
officer of Morgan Stanley Group Inc., has joined Van Kampen American Capital as
president and chief executive officer. I will continue as chairman of the firm.
We are confident that the partnership of Van Kampen American Capital and Morgan
Stanley will continue to work to the benefit of our fund shareholders.
One of the immediate privileges that we can offer fund shareholders is the
ability to make exchanges between Van Kampen American Capital and Morgan Stanley
retail funds at no charge. In our view, the rapid appreciation of U.S. stock
prices in recent years has created a need for investors to examine their
portfolios carefully to ensure proper diversification among domestic and foreign
investments. The Morgan Stanley retail funds, with their emphasis on global
markets, can be valuable tools for accomplishing this diversification.
We also urge investors to consider how their fund holdings are currently
allocated among the three major asset classes of stocks, bonds, and cash
reserves. Uneven movements in the various markets can distort a carefully
planned investment program. And, with stock prices near record highs, it is
likely that some rebalancing of your portfolio allocations may be necessary.
Once again, the exchangeability feature with the Morgan Stanley retail funds
provides additional choices and opportunities to make the necessary adjustments
to your portfolio's asset allocation.

Continued on page two

1
<PAGE> 121

dollar helped dampen inflationary pressures resulting from the vigorous domestic
economy by making imported goods less expensive. At the same time, continued
moderation in the cost of employee benefit packages offset mild upward pressure
on wages.
In March, the inflationary implications of a tight labor market caused the
Federal Reserve Board to raise its target for a key lending rate by one-quarter
of a percentage point, the first hike in short-term interest rates in two years.
Signs that economic growth slowed markedly in the second quarter, however, led
Fed policymakers to leave rates unchanged at subsequent meetings.

Continued on page three

2
<PAGE> 122

we encourage you to review your portfolio with an eye toward correcting
allocation imbalances.
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. We appreciate
your continued confidence in your investment with Van Kampen American Capital.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

<PAGE> 123

PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1997

VAN KAMPEN AMERICAN CAPITAL AGGRESSIVE GROWTH FUND

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
TOTAL RETURNS

One-year total return based on NAV(1).... 9.10% 8.34% 8.34%

One-year total return(2)................. 2.79% 3.34% 7.34%

Life-of-Fund average annual total

return(2)................................ (.55)% .61% 4.27%

Commencement date........................ 05/29/96 05/29/96 05/29/96
</TABLE>

The Fund invests in equity securities of small- and mid-sized companies. These
types of companies may have limited product lines, markets or financial
resources and their securities may be subject to more erratic market movements
than those of larger companies. Foreign investments may magnify volatility due
to changes in foreign exchange rates, the political and economic uncertainties
in foreign countries, and the potential lack of liquidity, government
supervision, and regulation.

Market forecasts provided in this report may not necessarily come to pass.

4
<PAGE> 124

PORTFOLIO HIGHLIGHTS

VAN KAMPEN AMERICAN CAPITAL AGGRESSIVE GROWTH FUND

TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, 1997 DECEMBER 31, 1996(1)
<S> <C> <C>
Dell Computer Corp. ....... 4.2% .................. 1.4%
Microsoft Corp. ........... 2.4% .................. N/A
Compuware Corp. ........... 2.1% .................. 1.1%
Baan Co. NV,
(Netherlands) ........... 1.5% .................. N/A
Cooper Cameron Corp. ...... 1.4% .................. 1.4%
Guidant Corp. ............. 1.4% .................. N/A
Altera Corp. .............. 1.4% .................. N/A
Medicis Pharmaceutical
Corp. ................... 1.3% .................. 0.9%
Miller Herman, Inc. ....... 1.2% .................. N/A
Dallas Semiconductor
Corp. ................... 1.2% .................. N/A
</TABLE>

N/A = Not Applicable

TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, 1997 DECEMBER 31, 1996(1)
<S> <C> <C>
Technology ................ 35% ................... 42%
Consumer Services ......... 10% ................... 10%
Health Care ............... 10% ................... N/A
Energy .................... 10% ................... 18%
Consumer Distribution ..... 9% ................... 11%
</TABLE>

N/A = Not Applicable

(1)Unaudited

5
<PAGE> 125

PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

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

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

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

For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Standard & Poor's 500-Stock
Index and the Russell 2000 Stock Index over time. These indices are unmanaged
statistical composites and do not reflect any commissions or fees which would be
incurred by an investor purchasing the securities they represent. Similarly,
their performance does not reflect any sales charges or other costs which would
be applicable to an actively managed portfolio, such as that of the Fund.

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Aggressive Growth Fund vs. Standard & Poor's
500-Stock Index and the Russell 2000 Stock Index (May 29, 1996 through June
30, 1997)
[LINE GRAPH]
<TABLE>
<CAPTION>
May Jun Sep Dec Mar Jun
1996 1996 1996 1996 1997 1997
<S> <C> <C> <C> <C> <C> <C>
VKAC 9421 9101 9960 10010 8092 9940
Russell 10000 9589 9622 10122 9599 11155
S&P 10000 10097 10407 11273 11577 13594
</TABLE>

6
<PAGE> 126

PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL AGGRESSIVE GROWTH FUND

We recently spoke to the management team of the Van Kampen American Capital
Aggressive Growth Fund about the key events and economic forces that shaped the
markets during the Fund's fiscal year. The team includes Gary Lewis, portfolio
manager, David Walker and Janet Willis, associate portfolio managers, and Alan
T. Sachtleben, chief investment officer for equity investments. The following
excerpts reflect their views on the Fund's performance during the 12-month
period ended June 30, 1997.

Q WHAT ECONOMIC FACTORS INFLUENCED THE MARKET DURING THE REPORTING PERIOD?

A The rare combination of moderate economic growth and historically low
inflation provided a nearly ideal environment for equity investments and
drove the stock market to new heights. The Fund's fiscal year began on a
low note in July of 1996, as small- and mid-capitalization stocks were
struggling to rebound from a broad market correction. But by the end of July,
technology and financial stocks were leading the equity markets upward. The
economy's sluggish third quarter was followed by a strong fourth quarter, and
corporate earnings came in slightly better than expected. This boosted stocks
through the end of the year, generally favoring large well-established companies
over their smaller competitors.
The economy grew at a remarkably strong pace in the first quarter of 1997,
which caused investors to worry that inflation might become a problem. This
concern increased volatility in stock prices and precipitated a month-long
market correction in mid-March that wiped out all year-to-date gains. Stocks
rebounded quickly after economic data was released in April showing negligible
inflation and hints of a slowdown in growth. In May, the Dow Jones Industrial
Average rallied to record-breaking heights and recouped its losses. Again,
large-cap stocks outperformed smaller, more erratic issues during this volatile
period. The reporting period ended on a positive note, as stocks continued to
surge ahead through the end of June.

Q GIVEN THESE EVENTS, WHAT WAS YOUR STRATEGY IN MANAGING THE FUND TO MEET
ITS OBJECTIVE?

A Our fundamental investment strategy for the Fund remains consistent: we
look for stocks with rising earnings expectations and rising valuations.
This involves selecting stocks on the basis of a company's potential to
outperform earnings expectations--to produce an earnings surprise. Conversely,
we sell stocks quickly if their earnings estimates are declining, although we
are more patient with stocks with declining valuations. Our stock selection
process is referred to as "bottom up," which means we evaluate stocks one by one
and make purchases wherever we find a good opportunity, rather than maintaining
defined sector allocations.

7
<PAGE> 127

In addition, we maintain two general principles in managing the Fund. First,
we normally remain fully invested in equity investments, rather than holding a
large percentage of the Fund's assets in cash. And second, we place a priority
on meeting with the management teams behind the companies whose stock in which
we invest. These meetings help us determine if a company has an effective
business philosophy and if management is disciplined in implementing it. Also,
we learn about a company's opportunities within its particular industry and
decide if we have confidence in its ability to maximize its growth potential.

Q CAN YOU DISCUSS A PARTICULAR HOLDING THAT ILLUSTRATES YOUR SELECTION
PROCESS?

A A good example is Jabil Circuit, a contract manufacturer of circuit board
assemblies. There was some concern earlier in the year that the company
would falter, because much of their business was dependent on
telecommunications equipment companies, many of which were struggling at that
time. Jabil Circuit's stock price decreased in February but had earnings
surprises in March and again in June. Consistent with our strategy, we purchased
the stock, based on its valuations and positive earnings expectations. The stock
price has appreciated close to 600 percent in the past 12 months, going from
about $12 per share at the beginning of the reporting period to over $83 per
share at the end of June.
Another holding that produced a positive earnings surprise was Dallas
Semiconductor. This company stumbled in 1996 as they strove to increase their
manufacturing capacity. Recently, they seem to have gotten on track, and their
earnings estimates and stock price have risen. We purchased Dallas Semiconductor
stock when we believed it was cheap, relative to the estimated growth rate of
the company, and it has appreciated over 100 percent since the beginning of the
reporting period. Not all securities in the portfolio performed this favorably.
There is no guarantee that the stocks discussed here will continue to perform
this well.

Q WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE REPORTING PERIOD?

A No single sector stood out as a top performer during the entire reporting
period, so our portfolio changes are a reflection of where we found good
opportunities on a stock-by-stock basis. Going into 1997, the Fund was
heavily weighted in technology and energy, which had supported the Fund well in
the second half of 1996. However, a January correction in these sectors was
detrimental to the Fund, and we subsequently reduced our exposure, moving the
assets primarily into health care, finance, and retail. Lately, we have reduced
our position in specialty finance companies such as Money Store and First Plus
Financial, due to default and credit quality concerns, and we've put some assets
back into technology and energy stocks. Currently, the Fund is overweighted in
technology (35 percent), energy (10 percent), and retail (10 percent), and it is
underweighted in finance (4 percent) and health care (10 percent).

8
<PAGE> 128

The stock market's bias toward large companies during the reporting period
worked against the Fund, which focuses on small and medium-sized growth
companies. However, we took advantage of the Fund's flexibility to invest in
some large-capitalization holdings and picked up a few big names such as Intel,
Dell Computer, and Microsoft in order to participate in their potential for
gain. Lately, we have seen renewed potential in the small-cap market, so we sold
some of our holdings in Intel. For additional Fund portfolio highlights, please
refer to page five.

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

A The underperformance of small-cap stocks hindered the performance of the
Fund and the Russell 2000 Stock Index, while the strong returns of the
Standard & Poor's 500-Stock Index are indicative of the recent success of
large-company stocks. The Fund achieved a 12-month total return of 9.10
percent(1) (Class A shares at net asset value) as of June 30, 1997. By
comparison, the S&P 500-Stock Index returned 34.63 percent, and the Russell 2000
Stock Index, which more closely resembles the Fund, returned 16.33 percent. The
S&P 500-Stock Index is a broad-based, unmanaged index that reflects the general
performance of the stock market, and the Russell 2000-Stock Index reflects the
general performance of smaller-cap stocks.
Keep in mind that these indices are unmanaged statistical composites that
do not include any commissions, fees, or sales charges that would be paid by an
investor purchasing the securities or investments they represent. Please refer
to the chart on page four for additional Fund performance results.

Q WHAT IS YOUR OUTLOOK FOR THE FUND FOR THE REMAINDER OF THE YEAR?

A Currently, the stock market is basking in the best of all possible
environments: low inflation, moderate economic growth, and solid corporate
earnings. While we don't believe inflation is a serious concern, some
warning signs are present, including strong job growth, high consumer
confidence, and a mild upturn in wages. The rally in stock prices suggests that
investors believe the Federal Reserve Board will successfully engineer a
slowdown in growth without tipping the economy into a recession. However,
volatility could remain high until then.
On a relative basis, small-cap stocks generally trade at a premium to the
larger stocks of the S&P 500-Stock Index. However, the spread in relative prices
between small-cap and large-cap stocks has narrowed over the past three or four
years, and it appears to be close to bottoming out. Historically, such an event
has been followed by a rebound

9
<PAGE> 129

in small-company stock prices. As such, we anticipate a gradual--and probably
volatile--small-cap rally that could last several years. Stock selection will be
very important in such an environment, and we'll continue to implement our
disciplined process.

[SIG]
Alan T. Sachtleben

Chief Investment Officer
Equity Investments

[SIG]
Gary M. Lewis

Portfolio Manager

Please see footnotes on page four

10
<PAGE> 130

PORTFOLIO OF INVESTMENTS

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS
CONSUMER DISTRIBUTION 8.6%
Amerisource Health Corp., Class A (a)....................... 20,000 $ 997,500
Barnes & Noble, Inc. (a).................................... 20,000 860,000
Costco Cos., Inc. (a)....................................... 50,000 1,643,750
Dollar General Corp. ....................................... 50,000 1,875,000
Fine Host Corp. (a)......................................... 40,000 1,260,000
Fred Meyer, Inc. (a)........................................ 20,000 1,033,750
Genesco, Inc. (a)........................................... 30,000 425,625
Jacor Communications, Inc., Class A (a)..................... 30,000 1,147,500
Maximus, Inc. (a)........................................... 26,300 470,112
Miller Herman, Inc. ........................................ 60,000 2,160,000
Pacific Sunwear of California (a)........................... 35,000 1,128,750
Tuesday Morning Corp. (a)................................... 60,000 1,207,500
Wet Seal, Inc., Class A (a)................................. 30,000 946,875
Williams Sonoma, Inc. (a)................................... 25,000 1,068,750
------------
16,225,112
------------
CONSUMER DURABLES 2.9%
Ethan Allen Interiors, Inc. ................................ 35,000 1,995,000
Helen Troy Ltd. (a)......................................... 60,000 1,537,500
SPX Corp. .................................................. 30,000 1,944,375
------------
5,476,875
------------
CONSUMER NON-DURABLES 7.3%
Action Performance Cos., Inc. (a)........................... 55,000 1,333,750
Borders Group, Inc. (a)..................................... 80,000 1,930,000
Consolidated Cigar Holdings, Inc. (a)....................... 30,000 832,500
Converse, Inc. (a).......................................... 45,000 995,625
General Cigar Holdings, Inc., Class A (a)................... 10,000 294,375
Interstate Bakeries Corp. .................................. 25,000 1,482,813
Jones Apparel Group, Inc. (a)............................... 40,000 1,910,000
Linens N Things, Inc. (a)................................... 35,000 1,036,875
Morningstar Group, Inc. (a)................................. 70,000 2,056,250
Smithfield Foods, Inc. (a).................................. 30,000 1,845,000
------------
13,717,188
------------
CONSUMER SERVICES 10.0%
Capstar Hotel Co. (a)....................................... 60,000 1,920,000
Caribiner International, Inc. (a)........................... 60,000 1,957,500
Clear Channel Communications, Inc. (a)...................... 35,000 2,154,687
</TABLE>

See Notes to Financial Statements

11
<PAGE> 131

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
Consolidated Graphics, Inc. (a)............................. 50,000 $ 2,087,500
Corrections Corp. of America (a)............................ 25,000 993,750
Foodmaker, Inc. (a)......................................... 50,000 818,750
Imax Corp. (a).............................................. 40,000 990,000
Mail Well Holdings, Inc. (a)................................ 60,000 1,710,000
Regal Cinemas, Inc. (a)..................................... 25,000 825,000
Snyder Communications, Inc. (a)............................. 35,000 942,813
Staffmark, Inc. (a)......................................... 50,000 1,118,750
Superior Consultant, Inc. (a)............................... 25,000 921,875
TMP Worldwide, Inc. (a)..................................... 50,000 1,212,500
Valassis Communications, Inc. (a)........................... 50,000 1,200,000
------------
18,853,125
------------
ENERGY 9.3%
Cooper Cameron Corp. (a).................................... 56,000 2,618,000
Diamond Offshore Drilling, Inc. (a)......................... 25,000 1,946,875
ENSCO International, Inc. (a)............................... 35,000 1,846,250
EVI, Inc. (a)............................................... 50,000 2,100,000
Falcon Drilling Co., Inc. (a)............................... 20,000 1,152,500
Forcenergy Gas Exploration, Inc. (a)........................ 30,000 911,250
Global Marine, Inc. (a)..................................... 75,000 1,743,750
Hanover Compressor Co. (a).................................. 50,000 975,000
Key Energy Group, Inc. (a).................................. 50,000 878,125
National Oilwell, Inc. (a).................................. 20,000 1,150,000
Patterson Energy, Inc. (a).................................. 25,000 1,134,375
Smith International, Inc. (a)............................... 20,000 1,215,000
------------
17,671,125
------------
FINANCE 4.0%
Bank United Corp., Class A.................................. 25,000 950,000
Coast Savings Financial, Inc. (a)........................... 20,000 908,750
Conseco, Inc................................................ 45,000 1,665,000
Firstfed Financial Corp. (a)................................ 18,000 559,125
Frontier Insurance Group, Inc............................... 20,000 1,295,000
St. Paul Bancorp, Inc....................................... 30,000 993,750
Washington Mutual, Inc...................................... 20,000 1,195,000
------------
7,566,625
------------
</TABLE>

See Notes to Financial Statements

12
<PAGE> 132

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE 9.6%
Dekalb Genetics Corp., Class B.............................. 15,000 $ 1,196,250
Dura Pharmaceuticals, Inc. (a).............................. 45,000 1,794,375
Guidant Corp................................................ 30,000 2,550,000
Healthsouth Corp. (a)....................................... 35,000 872,812
Jones Medical Industries, Inc............................... 40,000 1,900,000
Medicis Pharmaceutical Corp., Class A (a)................... 48,562 2,422,030
Oxford Health Plans, Inc. (a)............................... 15,000 1,076,250
Parexel International Corp. (a)............................. 40,000 1,270,000
Sabratek Corp. (a).......................................... 50,000 1,400,000
Spine Tech, Inc. (a)........................................ 25,000 928,125
Sunrise Assisted Living, Inc. (a)........................... 30,000 1,050,000
Teva Pharmaceutical Industries Ltd. - ADR (Israel).......... 25,000 1,618,750
------------
18,078,592
------------
PRODUCER MANUFACTURING 5.6%
Allied Waste Industries, Inc. (a)........................... 50,000 868,750
ASM Lithography Holding NV, (Netherlands) (a)............... 20,000 1,170,000
Ballantyne of Omaha, Inc. (a)............................... 16,000 289,000
Kuhlman Corp. .............................................. 40,000 1,290,000
Kulicke and Soffa Industries, Inc. (a)...................... 30,000 974,063
Mastec, Inc. (a)............................................ 30,000 1,419,375
Newpark Resources, Inc. (a)................................. 60,000 2,025,000
United Waste Systems, Inc. (a).............................. 35,000 1,435,000
USA Waste Services, Inc. (a)................................ 31,000 1,197,375
------------
10,668,563
------------
RAW MATERIALS/PROCESSING INDUSTRIES 0.7%
Maverick Tube Corp. (a)..................................... 35,000 1,312,500
------------
TECHNOLOGY 34.1%
AAR Corp.................................................... 25,000 807,813
Advanced Fibre Communications, Inc. (a)..................... 15,000 905,625
Altera Corp. (a)............................................ 50,000 2,525,000
Applied Graphics Technologies, Inc. (a)..................... 25,000 993,750
Applied Materials, Inc. (a)................................. 30,000 2,124,375
Baan Co. NV, (Netherlands) (a).............................. 40,000 2,755,000
Barra, Inc. (a)............................................. 15,000 495,000
BMC Software, Inc. (a)...................................... 20,000 1,107,500
Cellstar Corp. (a).......................................... 45,000 1,378,125
</TABLE>

See Notes to Financial Statements

13
<PAGE> 133

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
CHS Electronics, Inc. (a)................................... 40,000 $ 1,060,000
Ciena Corp. (a)............................................. 35,000 1,649,375
Citrix Systems, Inc. (a).................................... 30,000 1,316,250
Computer Horizons Corp. (a)................................. 30,000 1,027,500
Compuware Corp. (a)......................................... 80,000 3,820,000
Comverse Technology, Inc. (a)............................... 20,000 1,040,000
Cymer, Inc. (a)............................................. 20,000 975,000
Dallas Semiconductor Corp. ................................. 55,000 2,158,750
Datum, Inc. (a)............................................. 35,000 1,085,000
Dell Computer Corp. (a)..................................... 65,000 7,633,437
Discreet Logic, Inc. (a).................................... 60,000 990,000
Engineering Animation, Inc. (a)............................. 20,000 675,000
Great Plains Software, Inc (a).............................. 20,000 540,000
Harbinger Corp. ............................................ 37,500 1,050,000
HNC Software, Inc. (a)...................................... 25,000 953,125
Information Management Resources, Inc. (a).................. 25,000 1,137,500
Jabil Circuit, Inc. (a)..................................... 20,000 1,677,500
Keane, Inc. (a)............................................. 30,000 1,560,000
Lecroy Corp. (a)............................................ 35,000 1,290,625
McAfee Associates, Inc. (a)................................. 21,600 1,363,500
Micrel, Inc. (a)............................................ 25,000 1,275,000
Micro Linear Corp. (a)...................................... 75,000 787,500
Microsoft Corp. (a)......................................... 35,000 4,423,125
Peoplesoft, Inc. (a)........................................ 20,000 1,055,000
Remec, Inc. (a)............................................. 45,000 1,057,500
Teledata Communications, Inc. (a)........................... 25,000 859,375
Teradyne, Inc. (a).......................................... 40,000 1,570,000
Uniphase Corp. (a).......................................... 15,000 873,750
Veeco Instruments, Inc. (a)................................. 30,000 1,162,500
Veritas DGC, Inc. (a)....................................... 35,000 796,250
Visio Corp. (a)............................................. 20,000 1,410,000
Vitesse Semiconductor Corp. (a)............................. 52,500 1,716,094
World Access, Inc........................................... 25,000 512,500
Wyman Gordon Co. (a)........................................ 35,000 945,000
------------
64,538,344
------------
</TABLE>

See Notes to Financial Statements

14
<PAGE> 134

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>

TRANSPORTATION 2.0%
Airborne Freight Corp....................................... 35,000 $ 1,465,625
Halter Marine Group, Inc. (a)............................... 45,000 1,080,000
Ryanair Holdings PLC -- ADR (Ireland) (a)................... 11,000 298,375
U.S. Airways Group, Inc. (a)................................ 25,000 875,000
------------
3,719,000
------------
UTILITIES 2.5%
AES Corp.................................................... 30,000 2,122,500
Genesys Telecommunications Laboratory, Inc. (a)............. 25,000 693,750
Telco Communications Group, Inc. (a)........................ 35,000 1,137,500
U.S. Long Distance Corp. (a)................................ 50,000 862,500
------------
4,816,250
------------
TOTAL LONG-TERM INVESTMENTS 96.6%
(Cost $143,521,923)............................................... 182,643,299
REPURCHASE AGREEMENT 3.9%
BankAmerica Securities ($7,420,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 06/30/97,
to be sold on 07/01/97 at $7,421,253)........................... 7,420,000
------------
TOTAL INVESTMENTS 100.5%
(Cost $150,941,923)............................................... 190,063,299
LIABILITIES IN EXCESS OF OTHER ASSETS (0.5%)....................... (1,035,397)
------------
NET ASSETS 100.0%.................................................. $189,027,902
============
</TABLE>

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

See Notes to Financial Statements

15
<PAGE> 135

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $150,941,923)....................... $190,063,299
Receivables:
Investments Sold.......................................... 1,922,767
Fund Shares Sold.......................................... 552,548
Expense Reimbursement by Adviser.......................... 228,359
Dividends................................................. 20,156
Unamortized Organizational Costs............................ 82,274
------------
Total Assets.......................................... 192,869,403
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,825,000
Fund Shares Repurchased................................... 1,666,538
Investment Advisory Fee................................... 112,684
Custodian Bank............................................ 399
Accrued Expenses............................................ 202,002
Deferred Compensation and Retirement Plans.................. 34,878
------------
Total Liabilities..................................... 3,841,501
------------
NET ASSETS.................................................. $189,027,902
============
NET ASSETS CONSIST OF:
Capital..................................................... $176,681,743
Net Unrealized Appreciation................................. 39,121,376
Accumulated Net Investment Loss............................. (34,878)
Accumulated Net Realized Loss............................... (26,740,339)
------------
NET ASSETS.................................................. $189,027,902
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $83,965,004 and 8,440,294 shares of
beneficial interest issued and outstanding)............. $ 9.95
Maximum sales charge (5.75%* of offering price)......... .61
------------
Maximum offering price to public............................ $ 10.56
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $94,224,121 and 9,548,967 shares of
beneficial interest issued and outstanding)............. $ 9.87
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $10,838,777 and 1,098,257 shares of
beneficial interest issued and outstanding)............. $ 9.87
============
</TABLE>
*On sales of $50,000 or more, the sales charge will be
reduced.

See Notes to Financial Statements

16
<PAGE> 136

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 546,602
Dividends................................................... 152,321
------------
Total Income............................................ 698,923
------------
EXPENSES:
Investment Advisory Fee..................................... 1,050,716
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $168,042, $658,556 and $74,345,
respectively)............................................. 900,943
Shareholder Services........................................ 521,554
Trustees Fees and Expenses.................................. 39,778
Legal....................................................... 14,366
Amortization of Organizational Costs........................ 21,411
Custody..................................................... 2,341
Other....................................................... 264,517
------------
Total Expenses.......................................... 2,815,626
Less Fees Waived........................................ 433,091
------------
Net Expenses............................................ 2,382,535
------------
NET INVESTMENT LOSS......................................... $ (1,683,612)
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $(25,868,909)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 48,334
End of the Period......................................... 39,121,376
------------
Net Unrealized Appreciation During the Period............... 39,073,042
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 13,204,133
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 11,520,521
============
</TABLE>

See Notes to Financial Statements

17
<PAGE> 137

STATEMENT OF CHANGES IN NET ASSETS

For the Year Ended June 30, 1997 and the Period Ended June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
May 29, 1996
(Commencement of
Year Ended Investment Operations)
June 30, 1997 to June 30, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss................................ $ (1,683,612) $ (26,170)
Net Realized Loss.................................. (25,868,909) (871,430)
Net Unrealized Appreciation During the Period...... 39,073,042 48,334
------------ -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES....................................... 11,520,521 (849,266)
------------ -----------
FROM CAPITAL TRANSACTIONS:

Proceeds from Shares Sold.......................... 183,003,605 61,468,641
Cost of Shares Repurchased......................... (65,305,867) (812,561)
------------ -----------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS..................................... 117,697,738 60,656,080
------------ -----------
TOTAL INCREASE IN NET ASSETS....................... 129,218,259 59,806,814

NET ASSETS:
Beginning of the Period............................ 59,809,643 2,829
------------ -----------
End of the Period (Including accumulated net
investment loss of $34,878 and $5,125,
respectively).................................... $189,027,902 $59,809,643
============ ===========
</TABLE>

See Notes to Financial Statements

<PAGE> 138

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
May 29, 1996
(Commencement
of Investment
Year Ended Operations) to
Class A Shares June 30, 1997 June 30, 1996
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period................ $9.118 $9.430
------- ------
Net Investment Loss................................... (.065) (.002)
Net Realized and Unrealized Gain/Loss................. .895 (.310)
------- ------
Total from Investment Operations........................ .830 (.312)
------- ------
Net Asset Value, End of the Period...................... $9.948 $9.118
======= ======
Total Return (a)........................................ 9.10% (3.29%)*
Net Assets at End of the Period (In millions)........... $84.0 $30.3
Ratio of Expenses to Average Net Assets (b)............. 1.30% 1.29%
Ratio of Net Investment Loss to Average Net Assets
(b)................................................... (.81%) (.50%)
Portfolio Turnover...................................... 186% 4%*
Average Commission Paid Per Equity Share Traded (c)..... $.0568 $.0310
</TABLE>

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

(b) If certain expenses had not been assumed by VKAC, the Ratio of Expenses to
Average Net Assets and the Ratio of Net Investment Loss to Average Net
Assets would have been 1.61% and (1.12%) for the year ended June 30, 1997
and 2.05% and (1.25%) for the period ended June 30, 1996.

(c) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable.

* Non-Annualized

See Notes to Financial Statements

19
<PAGE> 139

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
May 29, 1996
(Commencement
of Investment
Year Ended Operations) to
Class B Shares June 30, 1997 June 30, 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period................ $9.112 $9.430
------ ------
Net Investment Loss................................... (.105) (.006)
Net Realized and Unrealized Gain/Loss................. .860 (.312)
------ ------
Total from Investment Operations........................ .755 (.318)
------ ------
Net Asset Value, End of the Period...................... $9.867 $9.112
====== ======
Total Return (a)........................................ 8.34% (3.39%)*
Net Assets at End of the Period (In millions)........... $94.2 $25.5
Ratio of Expenses to Average Net Assets (b)............. 2.05% 2.06%
Ratio of Net Investment Loss to Average Net Assets
(b)................................................... (1.55%) (1.28%)
Portfolio Turnover...................................... 186% 4%*
Average Commission Paid Per Equity Share Traded (c)..... $.0568 $.0310
</TABLE>

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

(b) If certain expenses had not been assumed by VKAC, the Ratio of Expenses to
Average Net Assets and the Ratio of Net Investment Loss to Average Net
Assets would have been 2.35% and (1.86%) for the year ended June 30, 1997
and 2.81% and (2.04%) for the period ended June 30, 1996.

(c) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable.

*Non-Annualized

See Notes to Financial Statements

20
<PAGE> 140

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
May 29, 1996
(Commencement
of Investment
Year Ended Operations) to
Class C Shares June 30, 1997 June 30, 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period................ $9.113 $9.430
------ ------
Net Investment Loss................................... (.103) (.006)
Net Realized and Unrealized Gain/Loss................. .859 (.311)
------ ------
Total from Investment Operations........................ .756 (.317)
------ ------
Net Asset Value, End of the Period...................... $9.869 $9.113
====== ======
Total Return (a)........................................ 8.34% (3.39%)*
Net Assets at End of the Period (In millions)........... $10.8 $3.9
Ratio of Expenses to Average Net Assets (b)............. 2.05% 2.05%
Ratio of Net Investment Loss to Average Net Assets
(b)................................................... (1.54%) (1.28%)
Portfolio Turnover...................................... 186% 4%*
Average Commission Paid Per Equity Share Traded (c)..... $.0568 $.0310
</TABLE>

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

(b) If certain expenses had not been assumed by VKAC, the Ratio of Expenses to
Average Net Assets and the Ratio of Net Investment Loss to Average Net
Assets would have been 2.35% and (1.85%) for the year ended June 30, 1997
and 2.81% and (2.04%) for the period ended June 30, 1996.

(c) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable.

*Non-Annualized

See Notes to Financial Statements

21
<PAGE> 141

NOTES TO FINANCIAL STATEMENTS

June 30, 1997
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Aggressive Growth Fund (the "Fund") is organized as
a separate diversified series of Van Kampen American Capital Equity Trust (the
"Trust"), a Delaware business trust, which is registered as an open-end
management investment company under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek capital growth by investing
primarily in a diversified portfolio of common stocks and other equity
securities. The Fund commenced investment operations on May 29, 1996 with three
classes of common shares, Class A, Class B and Class C.

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

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

The Fund may invest in repurchase agreements which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.

22
<PAGE> 142

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

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

D. ORGANIZATIONAL COSTS--The Fund will reimburse Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Fund's organization in the amount of $105,000. These costs
are being amortized on a straight line basis over the 60 month period ending May
28, 2001. The Adviser has agreed that in the event any of the initial shares of
the Fund originally purchased by VKAC are redeemed by the Fund during the
amortization period, the Fund will be reimbursed for any unamortized
organizational costs 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 these losses against any future realized capital
gains. At June 30, 1997, the Fund had an accumulated capital loss carryforward
for tax purposes of $6,166,547 which will expire on June 30, 2005.
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.
At June 30, 1997, for federal income tax purposes, cost of long- and
short-term investments is $150,941,923; the aggregate gross unrealized
appreciation is $40,041,964 and the aggregate gross unrealized depreciation is
$920,588 resulting in net unrealized appreciation of $39,121,376.

F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
annually from net investment income and net realized gains, if any. Due to
inherent differences in the recognition of certain expenses under generally
accepted accounting principles and for federal income tax purposes, the amount
of net investment income/loss may differ between book and federal income tax
purposes for a particular period. These differences are temporary in nature, but
may result in book basis net investment losses.

23
<PAGE> 143

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

For federal income tax purposes, a net operating loss recognized in the
current year cannot be used to offset future years net investment income.
Therefore, $1,653,859 of net operating loss generated by the Fund has been
reclassified from accumulated net investment loss to capital.

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:

For the year ended June 30, 1997, the Fund recognized expenses of
approximately $14,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.

For the year ended June 30, 1997, the Fund recognized expenses of
approximately $40,200, representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting
services to the Fund. These services are provided by VKAC at cost.

ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as the
shareholder servicing agent for the Fund. For the year ended June 30, 1997, the
Fund recognized expenses of approximately $395,800, 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.

For the year ended June 30, 1997, the Fund paid brokerage commissions to
Morgan Stanley Group, Inc., an affiliate of VKAC, totaling $2,520.

At June 30, 1997, VKAC owned 100 shares each of Classes A, B and C.

24
<PAGE> 144

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

3. CAPITAL TRANSACTIONS

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

At June 30, 1997, capital aggregated $78,128,681, $88,239,951 and
$10,313,111 for Classes A, B, and C, respectively. For the year ended June 30,
1997, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................... 9,770,450 $ 92,970,307
Class B................................... 8,682,864 81,053,761
Class C................................... 950,840 8,979,537
---------- ------------
Total Sales................................. 19,404,154 $183,003,605
========== ============
Repurchases:
Class A................................... (4,658,667) $(44,877,839)
Class B................................... (1,934,698) (17,864,738)
Class C................................... (284,968) (2,563,290)
---------- ------------
Total Repurchases........................... (6,878,333) $(65,305,867)
========== ============
</TABLE>

At June 30, 1996, capital aggregated $30,826,758, $25,826,587 and $3,984,519
for Classes A, B, and C, respectively. For the period ended June 30, 1996,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A..................................... 3,364,245 $31,165,017
Class B..................................... 2,845,703 26,235,112
Class C..................................... 441,454 4,068,512
--------- -----------
Total Sales................................... 6,651,402 $61,468,641
========= ===========
Repurchases:
Class A..................................... (35,834) $ (327,971)
Class B..................................... (45,002) (400,997)
Class C..................................... (9,169) (83,593)
--------- -----------
Total Repurchases............................. (90,005) $ (812,561)
========= ===========
</TABLE>

25
<PAGE> 145

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALE CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- ---------------------------------------------------------------------------
<S> <C> <C>
First........................................... 5.00% 1.00%
Second.......................................... 4.00% None
Third........................................... 3.00% None
Fourth.......................................... 2.50% None
Fifth........................................... 1.50% None
Sixth and Thereafter............................ None None
</TABLE>

For the year ended June 30, 1997, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$284,900 and CDSC on redeemed shares of approximately $263,700. Sales charges do
not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $355,120,097 and $239,404,607,
respectively.

5. DISTRIBUTION AND SERVICE PLANS

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

26
<PAGE> 146

INDEPENDENT ACCOUNTANTS' REPORT

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

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Aggressive Growth Fund (the "Fund"), including the
portfolio of investments, as of June 30, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
the year then ended and the period from May 29, 1996 (Commencement of
Operations) to June 30, 1996, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Aggressive Growth Fund as of June 30, 1997, the results
of its operations for the year then ended, the changes in its net assets for the
year then ended and the period from May 29, 1996 (Commencement of Operations) to
June 30, 1996, and the financial highlights for each of the periods presented,
in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP
Chicago, Illinois
August 11, 1997

27
<PAGE> 147

VAN KAMPEN AMERICAN CAPITAL AGGRESSIVE GROWTH FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
JEROME L. ROBINSON
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman

OFFICERS

DENNIS J. MCDONNELL*
President

RONALD A. NYBERG*
Vice President and Secretary

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

CURTIS W. MORRELL*
Vice President and Chief Accounting Officer

JOHN L. SULLIVAN*
Treasurer

TANYA M. LODEN*
Controller

PETER W. HEGEL*

ALAN T. SACHTLEBEN*

PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

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

DISTRIBUTOR

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

SHAREHOLDER SERVICING AGENT

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

CUSTODIAN

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

LEGAL COUNSEL

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

INDEPENDENT ACCOUNTANTS

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

* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen American Capital Distributors, Inc., 1997 All rights reserved.
(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After December 31, 1997, this report must be accompanied
by a quarterly performance update, if applicable.

28
<PAGE> 148

RESULTS OF SHAREHOLDER VOTES

A Special Meeting of Shareholders of the Fund was held on May 28, 1997 where
shareholders voted on a new investment advisory agreement, the election of
Trustees and the ratification of KPMG Peat Marwick LLP as independent public
accountants. With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Investment Advisory Corp. and the Fund,
11,735,765 shares voted for the proposal, 119,797 shares voted against and
246,400 shares abstained. With regard to the election of J. Miles Branagan as
elected trustee of the Fund, 11,981,888 shares voted in his favor and 120,074
shares withheld. With regard to the election of Richard M. DeMartini as elected
trustee of the Fund, 11,982,119 shares voted in his favor and 119,844 shares
withheld. With regard to the election of Linda Hutton Heagy as elected trustee
of the Fund, 11,974,163 shares voted in her favor and 127,799 shares withheld.
With regard to the election of R. Craig Kennedy as elected trustee of the Fund,
11,976,956 shares voted in his favor and 125,007 shares withheld. With regard to
the election of Jack E. Nelson as elected trustee of the Fund, 11,975,625 shares
voted in his favor and 126,337 shares withheld. With regard to the election of
Don G. Powell as elected trustee of the Fund 11,982,439 shares voted in his
favor and 119,523 shares withheld. With regard to the election of Jerome L.
Robinson as elected trustee of the Fund, 11,971,426 shares voted in his favor
and 130,536 shares withheld. With regard to the election of Phillip B. Rooney as
elected trustee of the Fund, 11,982,439 shares voted in his favor and 119,523
shares withheld. With regard to the election of Fernando Sisto as elected
trustee of the Fund, 11,972,563 shares voted in his favor and 129,399 shares
withheld. With regard to the election of Wayne W. Whalen as elected trustee of
the Fund, 11,982,907 shares voted in his favor and 119,055 shares withheld. With
regard to the ratification of KPMG Peat Marwick LLP as independent public
accountants for the Fund, 11,822,524 shares voted for the proposal, 59,863
shares voted against and 219,575 shares abstained.