<PAGE>
Van Kampen American Capital
REAL ESTATE
SECURITIES FUND
Semi-Annual Report
June 30, 1997
[INSERT GRAPHIC]
---A Wealth of Knowledge . A Knowledge of Wealth---
Van Kampen American Capital
<PAGE>
Table of Contents
Letter to Shareholders.................... 1
Performance Results....................... 3
Portfolio Highlights...................... 4
Portfolio Management Review............... 5
Portfolio of Investments.................. 7
Statement of Assets and Liabilities....... 10
Statement of Operations................... 11
Statement of Changes in Net Assets........ 12
Financial Highlights...................... 13
Notes to Financial Statements............. 16
<PAGE>
Letter to Shareholders
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
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 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 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.
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 27 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
1 Continued on page two
<PAGE>
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, 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,
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
Performance Results for the Period Ended June 30, 1997
Van Kampen American Capital Real Estate Securities Fund
A Shares B Shares C Shares
Total Returns
Six-month total return based on NAV/1/....... 6.19% 5.81% 5.82%
Six-month total return/2/.................... 1.13% 1.81% 4.82%
One-year total return/2/..................... 30.74% 32.20% 35.23%
Life-of-Fund average annual total return/2*/. 16.80% 17.09% 17.86%
Commencement Date............................ 06/09/94 06/09/94 06/09/94
/1/ Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% 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).
/*/ Total return is calculated from June 30, 1994 (the date the Fund's
investment strategy was implemented) through the end of the period.
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.
Investing in REITs involves unique risks in addition to those risks associated
with investing in the real estate industry in general. Equity REITs may be
affected by changes in the value of the underlying property owned by the REITs,
while mortgage REITs may be affected by the quality of any credit extended.
REITs are dependent upon management skills, are not diversified and are subject
to the risks of financing projects. REITs are subject to heavy cash flow
dependency, default by borrowers, self-liquidation and the possibilities of
failing to qualify for tax-exempt status under the Internal Revenue Code of
1986, as amended. REITs, especially mortgage REITs, are also subject to some
interest rate risk (e.g., as interest rates rise, the value of REITs may
decline).
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE>
Portfolio Highlights
Van Kampen American Capital Real Estate Securities Fund
Top Ten Holdings as a Percentage of Long-Term Investments
As of As of
June 30, 1997 December 31, 1996
Chateau Properties, Inc.......................... 5.5% ......... N/A
American General Hospitality Corp................ 5.1% ......... 1.6%
Nationwide Health Properties, Inc................ 4.8% ......... 1.8%
Essex Property Trust, Inc........................ 4.0% ......... N/A
Urban Shopping Centers, Inc...................... 3.8% ......... 1.0%
Brandywine Realty Trust.......................... 3.7% ......... N/A
Omega Healthcare Investors, Inc.................. 3.7% ......... 2.8%
Bay Apartment Communities, Inc................... 3.5% ......... 3.0%
First Union Real Estate Investments.............. 2.9% ......... N/A
Avalon Properties, Inc........................... 2.9% ......... 2.1%
N/A = Not Applicable
Top Five Portfolio Sectors as a Percentage of Long-Term Investments
As of June 30, 1997
Office/Industrial........................ 25.2%
Apartments............................... 19.6%
Hotel & Lodging.......................... 13.9%
Shopping Malls........................... 11.1%
Healthcare Facilities.................... 10.4%
As of December 31, 1996
Office/Industrial........................ 29.5%
Apartments............................... 20.6%
Hotel & Lodging.......................... 13.3%
Shopping Centers......................... 12.9%
Shopping Malls........................... 10.8%
4
<PAGE>
Portfolio Management Review
Van Kampen American Capital Real Estate Securities Fund
We recently spoke with the management team of the Van Kampen American Capital
Real Estate Securities Fund about the key events and economic forces that
shaped the markets during the past fiscal year. The team is led by portfolio
managers Russell C. Platt and Theodore R. Bigman of Morgan Stanley Asset
Management (MSAM). The following excerpts reflect their views on the Fund's
performance during the six-month period ended June 30, 1997.
Q What were the market conditions in which the Fund operated over the past
six months?
A The combination of moderate economic growth and historically low inflation
provided a near-ideal environment for equity investments during the period.
A weak bond market was unable to siphon investment money away from the stock
market, as stocks continued to soar to record highs, although not without
occasional flashes of volatility. We saw a correction of around 10 percent (as
measured by the Dow Jones Industrial Average) that lingered from mid-March
through mid-April. Since then, however, market averages have roared back, amply
recovering from earlier losses.
Throughout the period, concerns over rising interest rates set the tone, as
investors worried that the Federal Reserve Board commitment to controlling
inflation by raising short-term interest rates might slow the economy too much
and cut into corporate earnings. On March 25, the Fed increased the federal
funds rate by one-quarter of a percentage point, reacting to strong consumer
demand and the inflationary implications of a tight labor market. This marked
the first hike in short-term interest rates in two years.
Q What strategies did you utilize to manage the Fund's portfolio during the
reporting period?
A As is the case with many other sectors in the securities market, REIT
investors can be divided into two camps--growth investors, who focus
primarily on momentum in earnings, and value investors, who focus primarily on
underlying property values or cash flow. While we do not overlook growth
companies that are able to create incremental share value through superior
property management skills, we are strong proponents of value investing. We
select securities that offer the best value relative to their underlying net
property assets. We feel that this is an appropriate strategy, adhering to the
thesis that efficient markets will, over time, drive values in the public and
private markets into equilibrium. In such an environment, we believe that the
value style of investing will prevail.
Q What was the Fund's performance during the six-month period ended June 30,
1997?
A The Fund achieved a six-month total return of 6.19 percent /1/ (Class A
shares at net asset value). This performance compares favorably to the
total return of the NAREIT (National Association of Real Estate Investment
Trusts) Equity REIT Index of 5.70 percent. The NAREIT Index is an unmanaged
index that reflects the performance of a broad range of equity REITs of all
property types. By comparison, the Standard & Poor's 500-Stock Index registered
a total return of 20.62 percent in the first six months of the year. The S&P
500-Stock Index is a broad-based, unmanaged
5
<PAGE>
index that reflects the general performance of the stock market. Keep in mind
that these indices are unmanaged statistical composites that do not reflect any
commissions, fees, or sales charges that would be incurred by an investor
purchasing the securities they represent. Please refer to the chart on page four
for additional Fund performance results.
Q What factors or sectors contributed to the Fund's success in the first six
months of the year?
A With respect to the overall portfolio, our value style of investing was
beneficial during the period. Recall that the NAREIT Equity REIT Index
registered a total return of 35.27 percent in 1996, of which 18.85 percent
occurred in the fourth quarter (with a full 10.39 percent return in the final
month alone). Given that level of performance, many growth and "momentum"
companies sold at significant premiums to underlying real estate values, and
thus experienced a retracement of stock prices in the first six months of this
year. Our value focus allowed us to avoid a number of companies in which the
retrenchment was often significant.
Our sector weighting and stock selection within sectors also contributed to
the Fund's total return in the first half of the year. After last year's
outstanding performance, office and hotel property sectors continued to show
above-average performance over the past six months, and our overweighted
positions in these sectors positively contributed to total return. Limited new
supply in both sectors has allowed for better returns. We were somewhat
surprised by the above-average performance in the retail sector in the first
half of the year, and our holdings in regional malls added significantly to
returns. Our stock selection in the manufactured-home sector and the industrial
sector also contributed to the Fund's success. For additional Fund portfolio
highlights, please refer to page five.
Q What is your outlook going forward?
A Despite the fact that an increasing number of property sectors are
approaching equilibrium, we do not believe that the end of the current
real estate cycle is near. Capital flows into this industry, while improved from
several years ago, are not at the unprecedented levels that brought about the
demise of the prior cycle. Thus, demand for space is being met with a controlled
and economically prudent level of new supply. We believe that continued
external growth via acquisitions and new development, in combination with the
internal growth that results from rising rental rates and increasing occupancy,
should lead to further real estate value creation. Consequently, we expect to
see continued attractive total returns in this sector, as value creation is
ultimately reflected in the price of shares.
/s/ Russell C. Platt /s/ Theodore R. Bigman
Russell C. Platt Theodore R. Bigman
Portfolio Manager Portfolio Manager
Morgan Stanley Asset Management Morgan Stanley Asset Management
6 Please see footnotes on page four
<PAGE>
Portfolio of Investments
June 30, 1997 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- ----------------------------------------------------------------------------------------------------------
Common and Preferred Stock 90.5%
Apartments 17.8%
<S> <C> <C>
10,500 Amli Residential Properties Trust.................................................. $ 246,750
57,400 Associated Estates Realty Corp..................................................... 1,348,900
90,500 Avalon Properties, Inc............................................................. 2,590,563
85,200 Bay Apartment Communities, Inc..................................................... 3,152,400
5,000 Columbus Realty Trust.............................................................. 113,750
112,300 Essex Property Trust, Inc.......................................................... 3,607,637
51,300 Gables Residential Trust........................................................... 1,295,325
78,800 Merry Land & Investment Co......................................................... 1,708,975
64,700 Oasis Residential, Inc............................................................. 1,520,450
79,900 Security Capital Atlantic, Inc..................................................... 1,912,606
11,500 Summit Properties, Inc............................................................. 237,188
-----------
17,734,544
-----------
Development 3.0%
192,680 Atlantic Gulf Communities Corp.
(Including 33,397 shares of each Class A, B and C
Common Stock Warrants), 144A-Private Placement (a) (b)............................. 1,228,335
35,402 Atlantic Gulf Communities Corp. - Preferred Stock,
144A-Private Placement (a) (b)..................................................... 354,020
1,700 Brookfield Properties Corp. (a).................................................... 19,822
83,400 Brookfield Properties Corp. - Common Share Installment Receipts (a)................ 586,302
44,000 Catellus Development Corp. (a)..................................................... 797,500
-----------
2,985,979
-----------
Healthcare Facilities 9.5%
29,800 Alexandria Real Estate Equities, Inc............................................... 653,738
31,400 Healthcare Property Investors, Inc................................................. 1,106,850
198,000 Nationwide Health Properties, Inc.................................................. 4,356,000
101,890 Omega Healthcare Investors, Inc.................................................... 3,330,529
-----------
9,447,117
-----------
Hotel & Lodging 12.6%
188,000 American General Hospitality Corp.................................................. 4,653,000
22,500 Bristol Hotel Co. (a).............................................................. 866,250
110,600 Extended Stay America, Inc. (a).................................................... 1,741,950
104,400 Host Marriott Corp. (a)............................................................ 1,859,625
</TABLE>
7 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Number
of Shares Description Market Value
- -------------------------------------------------------------------------------------------------
Hotel & Lodging (Continued)
65,700 Servico, Inc. (a).................................................. $ 977,288
57,250 Starwood Lodging Trust............................................. 2,443,859
-----------
12,541,972
-----------
Manufactured Home Communities 6.8%
172,994 Chateau Properties, Inc............................................ 4,951,953
76,300 Manufactured Home Communities, Inc................................. 1,759,669
-----------
6,711,622
-----------
Office/Industrial 22.9%
81,300 Arden Realty Group, Inc............................................ 2,113,800
61,300 Beacon Properties Corp............................................. 2,045,887
27,200 Boston Properties, Inc. (a)........................................ 748,000
167,000 Brandywine Realty Trust............................................ 3,381,750
65,400 CarrAmerica Realty Corp............................................ 1,880,250
44,200 Cornerstone Properties, Inc........................................ 679,575
12,050 EastGroup Properties, Inc.......................................... 242,506
103,200 Great Lakes REIT, Inc.............................................. 1,696,350
26,100 Kilroy Realty Corp................................................. 659,025
45,000 Koger Equity, Inc.................................................. 821,250
37,300 Meridan Industrial Trust, Inc...................................... 876,550
105,200 Pacific Gulf Properties, Inc....................................... 2,314,400
25,900 Prentiss Properties Trust.......................................... 663,688
113,800 Trizec Hahn Corp................................................... 2,432,475
200,720 Wellsford Real Properties, Inc., 144A Private Placement (a) (b).... 2,207,920
-----------
22,763,426
-----------
Retirement/Aged Care 0.8%
68,500 ARV Assisted Living, Inc. (a)...................................... 753,500
-----------
Self-Storage 1.5%
54,900 Shurgard Storage Centers, Inc., Class A............................ 1,537,200
-----------
Shopping Centers 5.5%
47,600 Alexander Haagen Properties, Inc................................... 773,500
170,500 Burnham Pacific Properties, Inc.................................... 2,344,375
26,300 Federal Reality Investment Trust................................... 710,100
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- -----------------------------------------------------------------------------------------------------------------
Shopping Centers (Continued)
<S> <C> <C>
22,300 First Washington Reality Trust, Inc. - Preferred Ser A
(Convertible into 28,589 common shares)............................................. $ 680,150
11,500 IRT Property Co..................................................................... 135,125
3,400 Price REIT, Inc..................................................................... 123,675
800 Ramco-Gershenson Properties Trust................................................... 14,100
49,200 Western Investment Real Estate Trust................................................ 679,575
------------
5,460,600
------------
Shopping Malls 10.1%
185,000 First Union Real Estate Investments................................................. 2,613,125
127,200 Taubman Centers, Inc................................................................ 1,685,400
108,400 Urban Shopping Centers, Inc......................................................... 3,455,250
136,700 Westfield America, Inc.............................................................. 2,306,812
------------
10,060,587
------------
Total Common and Preferred Stock................................................................ 89,996,547
------------
Convertible Corporate Obligations 0.5%
Development 0.5%
Brookfield Properties Corp. - Installment Receipts Representing Subordinated Debenture
($868,000 par, 6.00% coupon, 02/14/07 maturity)................................................. 490,733
------------
Total Long Term Investments 91.0%
(Cost $83,166,393)...................................................................... 90,487,280
Repurchase Agreement 4.8%
Prudential Securities Corp. ($4,785,000 par collateralized by
U.S. Government obligations in a pooled cash account, 5.85%
coupon, dated 06/30/97, to be sold on 07/01/97 at $4,785,778)................................... 4,785,000
------------
Total Investments 95.8%
(Cost $87,951,393)...................................................................... 95,272,280
Other Assets in Excess of Liabilities 4.2%...................................................... 4,185,287
------------
Net Assets 100%................................................................................. $ 99,457,567
============
</TABLE>
(a) Non-income producing security as this stock does not declare dividends.
(b) 144A securities are those which are exempt from registration under Rule
144A of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
9 See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Total Investments (Cost $87,951,393) .......................... $ 95,272,280
Receivables:
Investments Sold .......................................... 3,773,695
Fund Shares Sold .......................................... 759,244
Dividends ................................................. 449,225
Interest .................................................. 19,467
Unamortized Organizational Costs .............................. 6,058
-------------
Total Assets .............................................. 100,279,969
-------------
Liabilities:
Payables:
Investments Purchased ..................................... 418,877
Fund Shares Repurchased ................................... 141,025
Distributor and Affiliates ................................ 95,038
Investment Advisory Fee ................................... 77,723
Custodian Bank ............................................ 36,601
Income Distributions ...................................... 6,879
Deferred Compensation and Retirement Plans .................... 18,777
Accrued Expenses .............................................. 27,482
-------------
Total Liabilities ......................................... 822,402
-------------
Net Assets .................................................... $ 99,457,567
=============
Net Assets Consist of:
Capital ....................................................... $ 83,308,733
Accumulated Net Realized Gain ................................. 9,041,400
Net Unrealized Appreciation ................................... 7,320,887
Accumulated Distributions in Excess of Net Investment Income .. (213,453)
-------------
Net Assets .................................................... $ 99,457,567
=============
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share (Based
on net assets of $37,046,310 and 2,727,196 shares of
beneficial interest issued and outstanding) ........... $ 13.58
Maximum sales charge (4.75%* of offering price) ....... .68
-------------
Maximum offering price to public ...................... $ 14.26
=============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $49,543,431 and 3,647,778 shares of
beneficial interest issued and outstanding) ........... $ 13.58
=============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $12,867,826 and 948,002 shares of
beneficial interest issued and outstanding) ........... $ 13.57
=============
</TABLE>
*On sales of $100,000 or more, the sales charge will be reduced.
10
See Notes to Financial Statements
<PAGE>
Statement of Operations
For the Six Months Ended June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Investment Income:
Dividends.......................................................................... $ 1,583,357
Interest........................................................................... 204,867
--------------
Total Income............................................................... 1,788,224
--------------
Expenses:
Investment Advisory Fee............................................................ 400,938
Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $38,316,
$196,053 and $52,490, respectively)................................................ 286,859
Shareholder Services............................................................... 103,129
Registration and Filing Fees....................................................... 48,348
Trustees Fees and Expenses......................................................... 5,449
Legal.............................................................................. 2,079
Amortization of Organizational Costs............................................... 1,742
Other.............................................................................. 70,934
--------------
Net Expenses............................................................... 919,478
--------------
Net Investment Income.............................................................. $ 868,746
==============
Realized and Unrealized Gain/Loss:
Net Realized Gain.................................................................. $ 9,066,440
--------------
Unrealized Appreciation/Depreciation
Beginning of the Period.................................................... 11,896,592
End of the Period.......................................................... 7,320,887
--------------
Net Unrealized Depreciation During the Period...................................... (4,575,705)
--------------
Net Realized and Unrealized Gain................................................... $ 4,490,735
==============
Net Increase in Net Assets From Operations......................................... $ 5,359,481
==============
</TABLE>
11 See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
For the Six Months Ended June 30, 1997
and the Year Ended December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income $ 868,746 $ 842,531
Net Realized Gain 9,066,440 2,148,797
Net Unrealized Appreciation/Depreciation During the Period (4,575,705) 9,735,736
------------ ------------
Change in Net Assets from Operations 5,359,481 12,727,064
------------ ------------
Distributions from Net Investment Income (868,746) (842,531)
Distributions in Excess of Net Investment Income (206,033) (144,086)
------------ ------------
Distributions from and in Excess of Net Investment Income* (1,074,779) (986,617)
Distributions from Net Realized Gain* (132,310) (1,848,388)
------------ ------------
Total Distributions (1,207,089) (2,835,005)
------------ ------------
Net Change in Net Assets from Investment Activities 4,152,392 9,892,059
------------ ------------
From Capital Transactions:
Proceeds from Shares Sold 48,107,508 28,516,882
Net Asset Value of Shares Issued Through
Dividend Reinvestment 975,325 2,353,502
Cost of Shares Repurchased (11,247,956) (6,887,785)
------------ ------------
Net Change in Net Assets from Capital Transactions 37,834,877 23,982,599
------------ ------------
Total Increase in Net Assets 41,987,269 33,874,658
Net Assets:
Beginning of the Period 57,470,298 23,595,640
------------ ------------
End of the Period
(Including accumulated distributions in excess of net
investment income of $213,453 and $7,420 respectively) $ 99,457,567 $ 57,470,298
============ ============
</TABLE>
Six Months Ended Year Ended
*Distributions by Class June 30, 1997 December 31, 1996
---------------------------------------------------------------------------
Distributions from and in Excess of
Net Investment Income:
Class A Shares $ (483,240) $ (433,206)
Class B Shares (468,101) (431,231)
Class C Shares (123,438) (122,180)
------------- -------------
$ (1,074,779) $ (986,617)
============= =============
Distributions from Net Realized Gain:
Class A Shares $ (51,543) $ (717,981)
Class B Shares (63,616) (877,571)
Class C Shares (17,151) (252,836)
------------- -------------
$ (132,310) $ (1,848,388)
============= =============
12 See Notes to Financial Statements
<PAGE>
Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
June 9, 1994
(Commencement of
Investment
Six Months Ended Year Ended Operations) to
June 30, December 31, December 31,
Class A 1997 1996 1995 (a) 1994 (a)
===========================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period............... $13.008 $ 10.00 $ 9.27 $ 9.43
------- ------- ------ -------
Net Investment Income.......................... .159 .351 .27 .23
Net Realized and Unrealized Gain/Loss.......... .628 3.514 .85 (.18)
------- ------- ------ -------
Total from Investment Operations....................... .787 3.865 1.12 .05
------- ------- ------ -------
Less:
Distributions from and in Excess of
Net Investment Income........................ .190 .380 .2456 .153
Return of Capital Distribution................. -0- -0- .1444 .057
Distributions from Net Realized Gain........... .021 .477 -0- -0-
------- ------- ------ -------
Total Distributions.................................... .211 .857 .39 .21
------- ------- ------ -------
Net Asset Value, End of the Period..................... $13.584 $13.008 $10.00 $ 9.27
======= ======= ====== =======
Total Return (b) 6.19%* 39.82% 12.39% .24%(c)
Net Assets at End of the Period (In millions).......... $ 37.0 $ 23.3 $ 8.5 $ 4.6
Ratio of Expenses to Average Net Assets**.............. 1.82% 2.60% 2.67% 1.26%
Ratio of Net Investment Income to
Average Net Assets**............................ 2.61% 3.21% 2.92% 4.28%
Portfolio Turnover..................................... 104%* 97% 94% 28%*
Average Commission Paid Per
Equity Share Traded (d)......................... $ .0410 $ .0486 -- --
*Non-Annualized
**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................ N/A 2.61% 3.16% 3.03%
Ratio of Net Investment Income to
Average Net Assets.............................. N/A 3.19% 2.44% 2.52%
</TABLE>
N/A = Not Applicable
(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) Total return calculated from June 30, 1994 (date the Fund's investment
strategy was implemented) through December 31, 1994, non-annualized.
(d) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
13 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated (Unaudited).
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
June 9, 1994
(Commencement of
Investment
Six Months Ended Year Ended Operations) to
June 30, December 31, December 31,
Class B Shares 1997 1996 1995 (a) 1994 (a)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.......... $13.008 $ 10.00 $ 9.28 $ 9.43
------- ------- ------- -------
Net Investment Income........................... .117 .266 .19 .20
Net Realized and Unrealized Gain/Loss........... .620 3.519 .843 (.176)
------- ------- ------- -------
Total from Investment Operations.................. .737 3.785 1.033 .024
------- ------- ------- -------
Less:
Distributions from and in Excess of
Net Investment Income........................ .142 .300 .197 .1268
Return of Capital Distribution.................. -0- -0- .116 .0472
Distributions from Net Realized Gain............ .021 .477 -0- -0-
------- ------- ------- -------
Total Distributions............................... .163 .777 .313 .174
------- ------- ------- -------
Net Asset Value, End of the Period................ $13.582 $13.008 $ 10.00 $ 9.28
======= ======= ======= =======
Total Return (b).................................. 5.81%* 38.82% 11.37% (.04%)(c)
Net Assets at End of the Period (In millions)..... $ 49.5 $ 26.5 $ 12.0 $ 9.1
Ratio of Expenses to Average Net Assets**......... 2.57% 3.37% 3.50% 1.84%
Ratio of Net Investment Income to
Average Net Assets**............................ 1.89% 2.39% 2.07% 3.81%
Portfolio Turnover................................ 104%* 97% 94% 28%*
Average Commission Paid Per
Equity Share Traded (d) $ .0410 $ .0486 -- --
</TABLE>
*Non-Annualized
**If certain expenses had not been assumed by VKAC, total return would have been
lower and the ratios would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Ratio of Expenses to Average Net Assets........... N/A 3.39% 3.99% 3.60%
Ratio of Net Investment Income to
Average Net Assets.............................. N/A 2.37% 1.58% 2.05%
</TABLE>
N/A = Not Applicable
(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) Total return calculated from June 30, 1994 (date the Fund's investment
strategy was implemented) through December 31, 1994, non-annualized.
(d) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
14
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated (Unaudited).
================================================================================
<TABLE>
<CAPTION>
June 9, 1994
(Commencement of
Investment
Six Months Ended Year Ended Operations) to
June 30, December 31, December 31,
Class C Shares 1997 1996 1995(a) 1994 (a)
......................................................................................................
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period......... $12.999 $ 9.99 $ 9.28 $ 9.43
------- ------- ------- ------
Net Investment Income.......................... .117 .266 .20 .22
Net Realized and Unrealized Gain/Loss.......... .621 3.520 .823 (.178)
------- ------- ------- ------
Total from Investment Operations................. .738 3.786 1.023 .042
------- ------- ------- ------
Less:
Distributions from and in Excess of
Net Investment Income........................ .142 .300 .197 .1399
Return of Capital Distribution................. -0- -0- .116 .0521
Distributions from Net Realized Gain........... .021 .477 -0- -0-
------- ------- ------- ------
Total Distribution............................... .163 .777 .313 .192
------- ------- ------- ------
Net Asset Value, End of the Period............... $13.574 $12.999 $ 9.99 $ 9.28
======= ======= ======= ======
Total Return (b)................................. 5.82%* 38.86% 11.26% .15%(c)
Net Assets at End of the Period (In millions).... $ 12.9 $ 7.7 $ 3.1 $ 1.3
Ratio of Expenses to Average Net Assets**........ 2.58% 3.38% 3.54% 1.62%
Ratio of Net Investment Income to
Average Net Assets**........................... 1.87% 2.39% 2.11% 3.92%
Portfolio Turnover............................... 104%* 97% 94% 28%*
Average Commission Paid Per
Equity Share Traded (d)........................ $ .0410 $ .0486 - -
*Non-Annualized.
**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.......... N/A 3.40% 4.03% 3.38%
Ratio of Net Investment Income to
Average Net Assets............................... N/A 2.38% 1.62% 2.15%
</TABLE>
N/A=Not Applicable
(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) Total return calculated from June 30, 1994 (date the Fund's investment
strategy was implemented) through December 31, 1994, non-annualized.
(d) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
15 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
June 30, 1997 (Unaudited)
================================================================================
1. Significant Accounting Policies
Van Kampen American Capital Real Estate Securities 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 primary investment objective is to seek long-term growth of
capital by investing principally in securities of companies operating in the
real estate industry. The Fund commenced investment operations on June 9, 1994.
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. Unlisted securities and listed securities for which the last sales
price is not available are valued at the last bid price. For those securities
where quotations or prices are not available, valuations are 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 Asset Management, Inc. (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 and
interest income is recorded on an accrual basis.
16
<PAGE>
Notes to Financial Statements
June 30, 1997 (Unaudited)
================================================================================
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 $16,000. These costs
are being amortized on a straight line basis over the 60 month period ending
May 31, 1999. 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.
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of the deferral of losses for tax purposes
resulting from wash sales.
At June 30, 1997, for federal income tax purposes cost of long- and short-
term investments is $87,951,393; the aggregate gross unrealized appreciation is
$8,097,831 and the aggregate gross unrealized depreciation is $776,944,
resulting in net unrealized appreciation of $7,320,887.
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. All short-term capital gains are included
in ordinary income for tax purposes.
The Fund distributes the return of capital it receives from the Real Estate
Investment Trusts (the "REITs") in which the Fund invests. The REITs pay
distributions based on cash flow, without regard to depreciation and
amortization. As a result, a portion of the distributions paid to the Fund and
subsequently distributed to shareholders may be a return of 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 equal to
1.00% of the average net assets of the Fund. This fee is payable monthly.
For the six months ended June 30, 1997, the Fund recognized expenses of
approximately $2,100 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 six-months ended June 30, 1997, the Fund recognized expenses of
approximately $15,800 representing VKAC's cost of providing accounting services
to the Fund. These services are provided by VKAC at cost.
17
<PAGE>
Notes to Financial Statements (Continued)
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
June 30, 1997, the Fund recognized expenses of approximately $81,200,
representing ACCESS cost of providing transfer agency and shareholder services
plus a profit.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
The Fund 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 repayable for a ten-year period and
are based upon each trustee's years in service to the Fund. The maximum annual
benefit per trustee under the plan is equal to $2,500.
For the six months ended June 30, 1997, the Fund paid brokerage commissions
to Dean Witter, an affiliate of VKAC, totaling $7,608.
At June 30, 1997, VKAC owned 10,605 and 53 shares of Classes A and B,
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 $30,901,692, $41,628,670 and
$10,778,371 for Classes A, B, and C, respectively. For the six months ended June
30, 1997, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
==================================================================
<S> <C> <C>
Sales:
Class A........................... 1,287,506 $ 16,816,434
Class B........................... 1,996,326 25,918,046
Class C........................... 411,882 5,373,028
--------- -------------
Total Sales......................... 3,695,714 $ 48,107,508
========= =============
Dividend Reinvestment:
Class A........................... 35,459 $ 475,794
Class B........................... 29,264 392,653
Class C........................... 7,971 106,878
--------- -------------
Total Dividend Reinvestment......... 72,694 $ 975,325
========= =============
Repurchases:
Class A........................... (387,479) $ (5,060,019)
Class B........................... (415,907) (5,393,393)
Class C........................... (60,528) (794,544)
--------- -------------
Total Repurchases................... (863,914) $ (11,247,956)
========= =============
</TABLE>
18
<PAGE>
Notes to Financial Statement (Continued)
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
At December 31, 1996, capital aggregated $18,669,483, $20,711,364 and
$6,093,009 for Classes A, B, and C, respectively. For the year ended December
31, 1996, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
==============================================================================
<C> <S> <S>
Sales:
Class A.......................................... 1,142,133 $ 13,064,447
Class B.......................................... 1,012,720 11,615,644
Class C.......................................... 336,995 3,836,791
--------- ------------
Total Sales........................................ 2,491,848 $ 28,516,882
========= ============
Dividend Reinvestment:
Class A.......................................... 89,245 $ 1,046,880
Class B.......................................... 86,852 1,022,967
Class C.......................................... 24,037 283,655
--------- ------------
Total Dividend Reinvestment........................ 200,134 $ 2,353,502
========= ============
Repurchases:
Class A.......................................... (289,138) $ (3,174,901)
Class B.......................................... (265,477) (2,844,469)
Class C.......................................... (78,881) (868,415)
--------- ------------
Total Repurchases.................................. (633,496) $ (6,887,785)
========= ============
</TABLE>
19
<PAGE>
Notes to Financial Statements (Continued)
July 30, 1997 (Unaudited)
================================================================================
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC 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.
Contingent Deferred
Sales Charge
-------------------
Year of Redemption Class B Class C
================================================================================
First...................................... 4.00% 1.00%
Second..................................... 4.00% None
Third...................................... 3.00% None
Fourth..................................... 2.50% None
Fifth...................................... 1.50% None
Sixth and Thereafter....................... None None
For the six months ended June 30, 1997, VKAC, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A shares of approximately
$40,000 and CDSC on the redeemed shares of approximately $84,000. 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 $109,484,111 and $76,535,955,
respectively.
5. Distribution and Service Plans
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these
fees for the six months ended June 30, 1997, are payments to VKAC of
approximately $195,000.
20
<PAGE>
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.
21
<PAGE>
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 Price Waterhouse LLP as independent public
accountants. With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Asset Management, Inc. and the Fund,
4,450,620 shares voted for the proposal, 78,458 shares voted against and 193,720
shares abstained. With regard to the election of J. Miles Branagan as elected
trustee of the Fund, 4,662,083 shares voted in his favor and 60,715 shares
withheld. With regard to the election of Richard M. DeMartini as elected
trustee of the Fund, 4,660,668 shares voted in his favor and 62,130 shares
withheld. With regard to the election of Linda Hutton Heagy as elected trustee
of the Fund, 4,662,985 shares voted in her favor and 59,813 shares withheld.
With regard to the election of R. Craig Kennedy as elected trustee of the Fund,
4,655,693 shares voted in his favor and 67,105 shares withheld. With regard to
the election of Jack E. Nelson as elected trustee of the Fund, 4,663,742 shares
voted in his favor and 59,056 shares withheld. With regard to the election of
Jerome L. Robinson as elected trustee of the Fund, 4,652,812 shares voted in his
favor and 69,986 shares withheld. With regard to the election of Phillip B.
Rooney as elected trustee of the Fund, 4,662,985 shares voted in his favor and
59,813 shares withheld. With regard to the election of Fernando Sisto as elected
trustee of the Fund, 4,651,975 shares voted in his favor and 70,822 shares
withheld. With regard to the election of Wayne W. Whalen as elected trustee of
the Fund, 4,663,782 shares voted in his favor and 59,016 shares withheld. With
regard to the ratification of Price Waterhouse LLP as independent public
accountants for the Fund, 4,557,286 shares voted for the proposal, 21,604 shares
voted against and 143,908 shares abstained.
22
<PAGE>
Van Kampen American Capital Real Estate Securities Fund
Board of Trustees
J. Miles Branagan
Richard M. DeMartini*
Linda Hutton Heagy
R. Craig Kennedy
Jack E. Nelson
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
Asset Management Inc.
One Parkview Plaza
Oakbrook Terrace, IL 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
Price Waterhouse LLP
1201 Louisiana
Houston, Texas 77002
* "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 and other
pertinent data. After December 31, 1997 the report must be accompanied by a
quarterly performance update, if applicable.
23
<PAGE>
Van Kampen American Capital Real Estate Securities Fund
This Page Intentionally Left Blank
24
<PAGE>
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
- ------------------
Bulk Rate
U.S. Postage
PAID
VAN KAMPEN
AMERICAN CAPITAL
- ------------------
