<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Portfolio of Investments.................... 3
Statement of Assets and Liabilities......... 8
Statement of Operations..................... 9
Statement of Changes in Net Assets.......... 10
Financial Highlights........................ 11
Notes to Financial Statements............... 12
</TABLE>
ACD SAR 8/95
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
August 3, 1995
Dear Shareholder:
The first half of 1995 has been a very positive one for most investors. Both
the fixed-income and stock markets have made considerable gains for the period
ended June 30, 1995. This year has been particularly rewarding for investors
after weathering the difficult markets of 1994.
The first six months of 1995 serve as a reminder of just how quickly markets
can move, and how difficult it can be to predict the timing of those movements.
Moreover, this year reinforces the importance of maintaining a long-term per-
spective, and reaffirms the principle that it is time--not timing--that leads
to investment success.
ECONOMIC OVERVIEW
Due in large part to the Federal Reserve Board's efforts to tighten monetary
supply in 1994, the economy has slowed significantly this year. Evidence of
this guided slowdown was reflected in the gross domestic product for the second
quarter, which grew at an annual rate of 0.5 percent, substantially slower than
its first quarter rate of 2.7 percent and fourth quarter 1994 rate of 5.1 per-
cent. While other key economic data, including unemployment rates and housing
starts, have shown mixed signs during recent weeks, the general trend for the
first half of the year suggested a "soft landing" scenario. Subsequently, con-
cern over inflation has subsided, as its annualized rate has run at a modest
pace of 3.2 percent year-to-date.
Financial markets, perceiving that the Fed's monetary initiatives had taken
hold without driving the economy into a recession, rallied through the first
six months of the year. With slowing growth, interest rates declined and the
value of fixed-income investments rose. For example, the yield on 30-year Trea-
sury securities fell from 7.88 percent at the end of December to 6.62 percent
at the end of June, while prices on the "long bond" rose 18 percent. Likewise,
the yield on the Bond Buyer's Municipal Bond Index fell from 7.28 percent to
6.37 percent during the same period.
Corporate earnings remained quite strong during the first half of the year,
helping push stocks to new highs. The Dow Jones Industrial Average and the S&P
500 Index gained nearly 19 percent during the period. The strongest performance
has been in the science & technology sector of the market--and in big "capital-
ization" stocks. As the U.S. dollar plunged against several international cur-
rencies, companies--typically large ones--which had diversified overseas were
able to capture additional earnings, while technology stocks benefited from the
booming growth in computers and telecommunications throughout the world.
PERFORMANCE SUMMARY
Convertible securities typically offer relatively high yields and potential
appreciation. Like other fixed-income securities, declining interest rates
boosted the value of convertible bonds
(Continued on page two)
1
<PAGE>
and convertible preferred stocks. In addition, rising stock prices propelled
convertible securities. During this positive market environment, the Fund pro-
duced a six-month total return at market price of 16.15 percent. This return
reflects an increase in market price per share on the New York Stock Exchange
from $18.13 on December 31, 1994 to $20.50 on June 30, 1995.
For the same six-month period, the Merrill Lynch Convertible Investment
Grade Quality Index, an unmanaged index used as a benchmark for many convert-
ible bond funds, produced a total return of 13.83 percent and the Standard &
Poor's 500 Stock Index, used as an indicator of general stock market perfor-
mance, generated a total return of 20.15 percent. The indexes do not reflect
any commissions or fees that would be incurred by an investor purchasing the
securities they represent.
In contrast to other convertible bond funds, the American Capital Convert-
ible Securities Fund invests primarily in investment grade bonds. The Fund is
diversified across a wide range of industries including technology, paper,
airlines, financial services and metals. For instance, the Fund holds convert-
ible securities in Texas Instruments and Motorola, leading high technology
companies which have benefited from the explosive growth of personal computers
and cellular communications. In the paper industry, the Fund owns Champion In-
ternational, which has benefited from significant price increases in news-
print. Of course, not all of the Fund's securities have benefited from
favorable industry conditions, and past performance does not guarantee future
results.
OUTLOOK
Comfortable with the economy's rate of growth and level of inflation, the
Fed reversed course and lowered short-term interest rates on July 6. We be-
lieve that the Fed will move cautiously before easing again, waiting for fur-
ther signs that the economy has indeed settled into a slow growth pattern. We
anticipate that the economy will grow at an annual rate between 2 and 3 per-
cent in the second half of the year, and that inflation will run at an
annualized rate between 3.3 and 3.5 percent. Based upon a generally slow
growth and low inflation outlook, we believe that fixed-income markets will
continue to make positive gains as interest rates fall. We look for stocks to
perform well, but perhaps not as strongly as in the first half of the year, as
some companies may find it difficult to maintain their strong earnings momen-
tum. Of course, positive developments in the stock and bond markets are bene-
ficial to the value of convertible securities.
Once again, it is important to remember that financial markets will inevita-
bly experience highs and lows, but by maintaining a long-term investment per-
spective, it may allow you to ride the ups and downs of the markets more
easily as you pursue your investment goals.
We appreciate your continued confidence in your investment with Van Kampen
American Capital, and we look forward to communicating with you again regard-
ing the performance of your Fund.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
- --------------------------- ---------------------------
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
PORTFOLIO OF INVESTMENTS
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE CORPORATE
OBLIGATIONS 58.2%
CONSUMER DISTRIBUTION 3.9%
$ 300 Danka Business Systems, PLC....... 6.750% 04/01/02 $ 315,750
600 Federated Department Stores, Inc.. 9.720 02/15/02 607,500
370 Pier 1 Imports, Inc............... 6.875 04/01/02 371,850
2,085 Rite Aid Corp., LYON.............. ** 07/24/06 1,004,709
775 Waban, Inc........................ 6.500 07/01/02 705,250
--------------
TOTAL CONSUMER DISTRIBUTION....... 3,005,059
--------------
CONSUMER DURABLES 2.8%
400 American Group.................... 6.250 06/15/03 371,000
450 GenCorp, Inc...................... 8.000 08/01/02 433,125
700 Mascotech, Inc.................... 4.500 12/15/03 511,875
825 Pacific Dunlop.................... 6.750 07/02/97 827,062
--------------
TOTAL CONSUMER DURABLES........... 2,143,062
--------------
CONSUMER NON-DURABLES 4.5%
350 Alberto Culver Co................. 5.500 06/30/05 350,875
565 American Brands, Inc.............. 7.625 03/05/01 587,600
550 Far East Textiles................. 4.000 10/07/06 624,250
900 Grand Metropolitan, PLC........... 6.500 01/31/00 963,000
900 S.A.B. Finance Corp............... 7.500 08/02/98 909,000
--------------
TOTAL CONSUMER NON-DURABLES....... 3,434,725
--------------
CONSUMER SERVICES 11.2%
1,400 ADT Operations, Inc., LYON........ ** 07/06/10 549,500
1,500 Discovery Zone, Inc., LYON........ ** 10/14/13 502,500
785 Enquirer/Star, Inc................ ** 05/15/97 647,625
1,560 News America Holdings, LYON....... ** 03/11/13 744,900
712 Prime Hospitality Corp............ 7.000 04/15/02 742,260
1,050 Rogers Communications, LYON....... ** 05/20/13 359,625
1,985 Time Warner, Inc.................. 8.750 01/10/15 2,076,963
3,800 Time Warner, Inc., LYON........... ** 12/17/12 1,268,250
Turner Broadcasting System, Inc.,
2,050 LYON.............................. ** 02/13/07 886,625
530 Wendy's International, Inc........ 7.000 04/01/06 810,900
--------------
TOTAL CONSUMER SERVICES........... 8,589,148
--------------
ENERGY 8.2%
275 Amoco Petroleum, Co., Canada...... 7.375 09/01/13 347,875
775 Ashland Oil, Inc.................. 6.750 07/01/14 768,703
725 Consolidated Natural Gas Co....... 7.250 12/15/15 757,625
2,700 Halliburton Co.................... ** 03/13/06 1,431,000
800 Noble Affiliates, Inc............. 4.250 11/01/03 762,000
1,250 SFP Pipeline Holdings, Inc. ...... 11.163 08/15/10 1,601,308
1,360 USX-Marathon Group, LYON.......... ** 08/09/05 629,000
--------------
TOTAL ENERGY...................... 6,297,511
--------------
</TABLE>
See Notes to Financial Statements
3
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FINANCE 10.1%
$ 420 Aegon, N.V........................ 4.750% 11/01/04 $ 525,000
Alexander & Alexander Services,
1,549 Inc............................... 11.000 04/15/07 1,583,852
23 Allstate Corp..................... 6.760 04/15/98 939,436
300 Central International............. 10.000 08/07/96 175,500
750 Fifth Third Bancorp............... 4.250 01/15/98 758,437
500 HD Finance........................ 6.750 06/01/00 498,750
1,080 Henderson Capital International... 4.500 10/27/96 1,085,400
480 Statesman Group, Inc.............. 6.250 05/01/03 489,600
600 Swiss Re Insurance................ 2.000 07/06/00 543,000
240 Trenwick Group, Inc............... 6.000 12/15/99 243,600
United Company's Financial Corps,
10 PRIDES............................ 6.750 07/01/00 436,313
1,500 U.S. Cellular Corp., LYON......... ** 06/15/15 472,500
--------------
TOTAL FINANCE..................... 7,751,388
--------------
HEALTH CARE 3.8%
2,250 Alza Corp, LYON................... ** 07/14/14 860,625
715 IVAX Corp......................... 6.500 11/15/01 700,700
1,500 Roche Holdings, Inc., LYON........ ** 04/20/10 596,250
725 United Technologies............... ** 09/08/97 757,625
--------------
TOTAL HEALTH CARE................. 2,915,200
--------------
PRODUCER MANUFACTURING 2.4%
670 Cooper Industries, Inc............ 7.050 01/01/15 699,312
1,100 Valhi, Inc., LYON................. ** 10/20/07 385,000
874 WMX Technologies.................. 2.000 01/24/05 735,253
--------------
TOTAL PRODUCER MANUFACTURING 1,819,565
--------------
RAW MATERIALS/PROCESSING
INDUSTRIES 1.3%
800 Freeport McMoRan, Inc............. 6.550 01/15/01 744,000
190 Repap Enterprises, Inc............ 8.500 08/01/97 220,400
--------------
TOTAL RAW MATERIALS/PROCESSING
INDUSTRIES........................ 964,400
--------------
TECHNOLOGY 7.0%
270 Arrow Electronics, Inc............ 5.750 10/15/02 391,500
2,300 AST Research, Inc., LYON.......... ** 12/14/13 759,000
200 First Financial Management........ 5.000 12/15/99 267,000
450 Intergrated Devices Technology.... 5.500 06/01/02 474,750
120 LSI Logic Corp.................... 5.500 03/15/01 379,800
1,020 Motorola, Inc., LYON.............. ** 09/27/13 826,200
9 Salomon, Inc., ELKS............... 5.000 11/01/96 904,265
900 Silicon Graphics, Inc., LYON...... ** 11/02/13 591,750
280 Texas Instruments, Inc............ 2.750 09/29/02 448,700
250 3 COM Corp........................ 10.250 11/01/01 320,625
--------------
TOTAL TECHNOLOGY.................. 5,363,590
--------------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TRANSPORTATION 0.6%
$ 450 AMR Corp.......................... 6.125% 11/01/24 $ 468,000
--------------
UTILITIES 2.4%
565 LDDS Communications............... 5.000 08/15/03 545,225
1,205 Potomac Electric Power Co......... 5.000 09/01/02 1,042,325
8 Sprint Corp., DECS................ 8.250 03/30/00 260,625
--------------
TOTAL UTILITIES................... 1,848,175
--------------
TOTAL CORPORATE OBLIGATIONS (Cost
$42,353,716)...................... 44,599,823
--------------
<CAPTION>
Number
of Shares
(000)
- --------
<C> <S> <C> <C> <C>
COMMON STOCK 17.1%
CONSUMER NON-DURABLES 2.2%
8 Nabisco Holdings Corp., Class A.................... 207,900
12 Phillip Morris Companies, Inc...................... 892,500
5 Proctor & Gamble Co................................ 359,375
4 Ralston-Ralston Purina Group....................... 204,000
--------------
TOTAL CONSUMER NON-DURABLES........................ 1,663,775
--------------
CONSUMER SERVICES 1.3%
13 Disney (Walt), Co.................................. 723,125
6 Time Warner, Inc................................... 254,975
--------------
TOTAL CONSUMER SERVICES............................ 978,100
--------------
ENERGY 2.6%
11 Exxon Corp......................................... 776,875
5 Royal Dutch Petroleum, ADR......................... 609,375
10 Texaco, Inc........................................ 656,250
--------------
TOTAL ENERGY....................................... 2,042,500
--------------
FINANCE 0.5%
9 Chase Manhattan Corp............................... 399,500
--------------
PRODUCER MANUFACTURING 1.4%
14 Rockwell International Corp........................ 640,500
9 Tenneco, Inc....................................... 437,460
--------------
TOTAL PRODUCER MANUFACTURING....................... 1,077,960
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 2.0%
15 Champion International Corp........................ 766,238
5 Grace (W.R.) & Co.................................. 306,875
9 Imperial Chemical Industries, PLC, ADR............. 438,750
--------------
TOTAL RAW MATERIALS/PROCESSING INDUSTRIES.......... 1,511,863
--------------
TECHNOLOGY 1.9%
*11 Compaq Computer Corp............................... 499,125
6 International Business Machines Corp............... 576,000
6 Lockheed Martin Corp............................... 378,750
--------------
TOTAL TECHNOLOGY................................... 1,453,875
--------------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares
(000) Description Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UTILITIES 5.2%
9 Ameritech Corp............................. $ 396,000
5 Bellsouth Corp............................. 317,500
24 CMS Energy Group........................... 591,000
12 GTE Corp................................... 409,500
35 Illinova Corp.............................. 880,513
19 MCI Communications Corp.................... 413,600
18 National Power, ADR........................ 222,750
20 Powergen, PLC, ADR......................... 247,450
11 Southern Co................................ 246,125
*10 Worldcom, Inc.............................. 270,000
--------------
TOTAL UTILITIES............................ 3,994,438
--------------
TOTAL COMMON STOCK (Cost $12,013,299)...... 13,122,011
--------------
CONVERTIBLE PREFERRED STOCK 17.2%
CONSUMER NON-DURABLES 0.5%
10 ConAgra, Inc............................... 353,750
--------------
CONSUMER SERVICES 1.6%
20 SCI Finance, N.V., LLC, 6.250%............. 1,190,700
--------------
ENERGY 1.9%
13 Occidental Petroleum Co., 7.750%........... 743,438
10 Snyder Oil Corp., $1.50.................... 189,600
8 Williams Companies, $3.50.................. 518,175
--------------
TOTAL ENERGY............................... 1,451,213
--------------
FINANCE 7.1%
23 American General Corp., MIPS, 6.000% ...... 1,167,188
6 Citicorp, $5.375........................... 893,900
12 Conseco, Inc., Series D, $3.25............. 523,500
9 Great Western, $4.375...................... 541,725
15 Kemper Co., $2.875......................... 738,750
7 Roosevelt Financial Group, $3.25........... 477,300
15 Sovereign Bancorp, $3.125.................. 808,125
6 St. Paul Companies, MIPS, 6.000%........... 313,500
--------------
TOTAL FINANCE.............................. 5,463,988
--------------
PRODUCER MANUFACTURING 0.8%
Browning-Ferris Industries, Inc., ACES,
8 $7.25...................................... 281,050
300 Jardine Strategic Holdings, 7.500%......... 326,250
--------------
TOTAL PRODUCER MANUFACTURING............... 607,300
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 3.7%
20 Boise Cascade Corp., Series E, ACES, $1.58. 667,500
22 Bowater, Inc., PRIDES, 7.000%.............. 819,175
33 Freeport McMoRan C&G, $1.25................ 713,625
12 Owens Corning, $3.25....................... 615,000
--------------
TOTAL RAW MATERIALS/PROCESSING INDUSTRIES.. 2,815,300
--------------
TECHNOLOGY 1.6%
20 General Motors Corp., Series C, $3.25...... 1,260,000
--------------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost
$12,052,158)............................... 13,142,251
--------------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Market Value
- -------------------------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER 4.3%
Associates Corp., of North America, 6.150%, 7/03/95
$3,295 (Cost $3,293,311).................................. $ 3,293,311
--------------
TOTAL INVESTMENTS (Cost $69,712,484) 96.8%.................... 74,157,396
OTHER ASSETS AND LIABILITIES, NET 3.2%........................ 2,447,595
--------------
NET ASSETS 100%............................................... $ 76,604,991
--------------
</TABLE>
*Non-income producing security
**Zero coupon bond
ACES--automatically convertible equity securities
DECS--divided enhanced convertible securities
ELKS--equity linked security, traded in shares
LYON--liquid yield option notes
MIPS--monthly income paying security
PRIDES--preferred redeemable increased dividend equity security
See Notes to Financial Statements
7
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $69,712,484).................. $74,157,396
Cash............................................................. 2,405
Receivable for investments sold.................................. 4,409,919
Interest and dividends receivable................................ 731,264
Other assets and receivables..................................... 20,614
-----------
TOTAL ASSETS.................................................... 79,321,598
-----------
LIABILITIES
Payable for investments purchased................................ 2,642,272
Accrued expenses................................................. 42,525
Due to Adviser................................................... 31,810
-----------
TOTAL LIABILITIES............................................... 2,716,607
-----------
NET ASSETS, equivalent to $23.63 per share on 3,241,824 shares
of common stock outstanding..................................... $76,604,991
-----------
NET ASSETS WERE COMPRISED OF:
Common stock, par value $1 per share; 12,500,000 shares
authorized; 3,251,324 shares issued, of which 9,500 shares are
held in treasury................................................ $ 3,251,324
Capital surplus.................................................. 68,191,353
Undistributed net realized gain on securities.................... 652,135
Net unrealized appreciation of investments....................... 4,444,912
Undistributed net investment income.............................. 221,894
-----------
76,761,618
Less cost of treasury shares..................................... (156,627)
-----------
NET ASSETS....................................................... $76,604,991
-----------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest............................................................ $1,646,010
Dividends........................................................... 569,054
----------
Investment income.................................................. 2,215,064
----------
EXPENSES
Management fees..................................................... 183,779
Shareholder service agent's fees and expenses....................... 29,881
Accounting services................................................. 32,950
Directors' fees and expenses........................................ 12,623
Audit fees.......................................................... 8,400
Custodian fees...................................................... 7,359
Legal fees.......................................................... 6,267
Reports to shareholders............................................. 12,038
Registration and filing fees........................................ 8,210
State franchise fees................................................ 5,104
Miscellaneous....................................................... 3,569
----------
Total expenses..................................................... 310,180
----------
NET INVESTMENT INCOME.............................................. 1,904,884
----------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities..................................... 890,579
Net unrealized appreciation of securities during the period......... 5,515,798
----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES..................... 6,406,377
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $8,311,261
----------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, December 31,
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period..................... $70,076,751 $ 80,669,376
----------- ------------
Operations
Net investment income.............................. 1,904,884 3,529,348
Net realized gain on securities.................... 890,579 893,910
Net unrealized appreciation (depreciation) of
securities during the period...................... 5,515,798 (9,212,251)
----------- ------------
Increase (decrease) in net assets resulting from
operations......................................... 8,311,261 (4,788,993)
----------- ------------
Distributions to shareholders from
Net investment income.............................. (1,750,606) (3,566,966)
Net realized gain on securities.................... (32,415) (893,910)
Excess of book-basis net realized gain on
securities (Note 1E)............................... -- (1,342,756)
----------- ------------
Total distributions................................ (1,783,021) (5,803,632)
----------- ------------
INCREASE (DECREASE) IN NET ASSETS................... 6,528,240 (10,592,625)
----------- ------------
NET ASSETS, end of period........................... $76,604,991 $ 70,076,751
----------- ------------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each of the
periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended December 31
Ended June ------------------------------------------
30, 1995 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period..... $21.62 $ 24.88 $23.64 $22.23 $19.41 $ 22.73
------ -------- ------ ------ ------ --------
Income from investment
operations
Investment income...... .68 1.28 1.36 1.37 1.50 1.65
Expenses............... (.09) (.19) (.21) (.195) (.18) (.18)
------ -------- ------ ------ ------ --------
Net investment income... .59 1.09 1.15 1.175 1.32 1.47
Net realized and
unrealized gain or loss
on securities.......... 1.97 (2.56) 2.01 1.415 2.90 (3.2475)
------ -------- ------ ------ ------ --------
Total from investment
operations.............. 2.56 (1.47) 3.16 2.59 4.22 (1.7775)
------ -------- ------ ------ ------ --------
Less distributions from
Net investment income.. (.54) (1.10) (1.12) (1.18) (1.40) (1.40)
Net realized gains on
securities............ (.01) (.28) (.80) -- -- (.1425)
Excess of book-basis
net realized gains on
securities (Note 1E).. -- (.41) -- -- -- --
------ -------- ------ ------ ------ --------
Total distributions..... (.55) (1.79) (1.92) (1.18) (1.40) (1.5425)
------ -------- ------ ------ ------ --------
Net asset value, end of
period.................. $23.63 $ 21.62 $24.88 $23.64 $22.23 $ 19.41
------ -------- ------ ------ ------ --------
Market price, end of
period.................. $20.50 $ 18.13 $22.38 $20.38 $19.25 $ 16.63
------ -------- ------ ------ ------ --------
TOTAL RETURN, at net
asset value (/1/)....... 12.27% (5.29%) 14.50% 12.84% 23.32% (7.37%)
TOTAL RETURN, at market
price (/1/)............. 16.15% (11.71%) 19.43% 12.31% 24.68% (10.39%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (millions)....... $76.6 $70.1 $80.7 $76.6 $72.1 $62.9
Average net assets
(millions).............. $73.5 $75.1 $80.4 $72.1 $66.7 $68.2
Ratios to average net
assets (annualized)
Expenses............... .84% .82% .87% .88% .89% .86%
Net investment income.. 5.18% 4.70% 4.60% 5.28% 6.41% 7.01%
Portfolio turnover rate. 76% 111% 128% 87% 168% 95%
</TABLE>
(1)Total return for a period of less than one full year is not annualized.
See Notes to Financial Statements
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
American Capital Convertible Securities, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified closed-end
management investment company. The following is a summary of significant ac-
counting policies consistently followed by the Fund in the preparation of its
financial statements.
A. INVESTMENT VALUATIONS-Securities listed or traded on a national securities
exchange are valued at the last sale price. Unlisted securities and listed se-
curities for which the last sale price is not available are valued at the mean
between the last reported bid and asked price.
Short-term investments with a maturity of 60 days or less when purchased are
valued at amortized cost, which approximates market value. Short-term invest-
ments with a maturity of more than 60 days when purchased are valued based on
market quotations until the remaining days to maturity becomes less than 61
days. From such time, until maturity, the investments are valued at amortized
cost.
Fund investments include lower rated debt securities which may be more sus-
ceptible to adverse economic conditions than other investment grade holdings.
These securities are often subordinated to the prior claims of other senior
lenders and uncertainties exist as to an issuer's ability to meet principal
and interest payments. Debt securities rated below investment grade and compa-
rable unrated securities represented approximately 26% of the investment port-
folio at the end of the period.
B. REPURCHASE AGREEMENTS-A repurchase agreement is a short-term investment in
which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. The Fund may in-
vest independently in repurchase agreements, or transfer uninvested cash bal-
ances into a pooled cash account along with other investment companies advised
by Van Kampen American Capital Asset Management, Inc. (the "Adviser"), the
daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are collateralized by the underlying debt security. The Fund will
make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is re-
quired to maintain the value of the underlying security at not less than the
repurchase proceeds due the Fund.
C. FEDERAL INCOME TAXES-No provision for federal income taxes is required be-
cause the Fund has elected to be taxed as a "regulated investment company" un-
der the Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investment income and taxable net
realized capital gains to its shareholders.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
Approximately $216,000 of post October losses are being deferred for tax
purposes to the 1995 Fiscal year.
D. INVESTMENT TRANSACTIONS AND REALIZED INVESTMENT INCOME-Investment transac-
tions are accounted for on the trade date. Realized gains and losses on in-
vestments are determined on the basis of identified cost. Dividend income is
recorded on the ex-dividend date. Interest income is accrued weekly. Issuers
of payment-in-kind securities may make dividend or interest payments by issu-
ing additional stocks or bonds in lieu of cash payments.
E. DIVIDENDS AND DISTRIBUTIONS-Dividends and distributions to shareholders are
recorded on the record date. The Fund distributes tax basis earnings in accor-
dance with the minimum distribution requirements of the Internal Revenue Code,
which may differ from generally accepted accounting principles. Such dividends
or distributions may exceed financial statement earnings.
F. DEBT DISCOUNT AND PREMIUM-The Fund accounts for discounts and premiums on
the same basis as is used for federal income tax reporting. Accordingly, orig-
inal issue discounts on debt securities purchased are amortized over the life
of the security. Premiums on debt securities are not amortized. Market dis-
counts are recognized at the time of sale as realized gains for book purposes
and ordinary income for tax purposes.
NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as investment manager of the Fund. Management fees are paid
monthly, based on the average weekly net assets of the Fund at an annual rate
of .50% of the first $150 million, .45% of the next $100 million, .40% of the
next $100 million, and .35% of the amount in excess of $350 million.
Accounting services include the salaries and overhead expenses of the Fund's
Treasurer and the personnel operating under his direction. Charges are allo-
cated among investment companies advised by the Adviser. For the period, these
charges included $4,682 as the Fund's share of the employee costs attributable
to the Fund's accounting officers. A portion of the accounting services ex-
pense was paid to the Adviser in reimbursement of personnel, facilities and
equipment costs attributable to the provision of accounting services to the
Fund. The services provided by the Adviser are at cost.
Certain officers and directors of the Fund are officers and directors of the
Adviser.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $53,621,190 and $50,103,298, re-
spectively.
For federal income tax purposes, the identified cost of investments owned at
the end of the period was the same as for financial reporting purposes. Gross
unrealized appreciation of investments aggregated $4,928,815 and gross
unrealized depreciation of investments aggregated $483,903.
NOTE 4--DIRECTOR COMPENSATION
Fund directors who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $1,760 plus a fee of $102 per Board meetings at-
tended. During the period, such fees aggregated $11,985.
14
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Limited Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
15
<PAGE>
AMERICAN CAPITAL CONVERTIBLE SECURITIES, INC.
BOARD OF DIRECTORS
DONALD M. CARLTON
A. BENTON COCANOUGHER
STEPHEN R. GROSS
NORMAN HACKERMAN
ROBERT D.H. HARVEY
ALAN G. MERTEN
STEVE MULLER
F. ROBERT PAULSEN
R. RICHARDSON PETTIT
DON G. POWELL
ALAN B. SHEPARD, JR.
MILLER UPTON
BENJAMIN N. WOODSON
OFFICERS
DON G. POWELL
Chairman of the Board and President
CURTIS W. MORELL
Vice President and Treasurer
JAMES H. BEHRMANN
DENNIS J. MCDONNELL
RONALD A. NYBERG
ALAN T. SACHTLEBEN
PAUL R. WOLKENBERG
Vice Presidents
TANYA M. LODEN
Vice President and Controller
NORI L. GABERT
Vice President and Secretary
J. DAVID WISE
Vice President and Assistant Secretary
PERRY F. FARRELL
M. ROBERT SULLIVAN
Assistant Treasurers
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
2800 Post Oak Blvd. Houston, Texas 77056
SHAREHOLDER SERVICE AGENT
BOSTON FINANCIAL DATA SERVICES, INC.
P.O. Box 366 Boston, Massachusetts 02101
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street Boston, Massachusetts 02110
NEW YORK STOCK EXCHANGE SYMBOL: ACS
INQUIRIES ABOUT AN INVESTOR'S
ACCOUNT SHOULD BE REFERRED
TO THE FUND'S TRANSFER AGENT:
Boston Financial Data Services, Inc.
P.O. Box 366
BOSTON, MASSACHUSETTS 02101
Telephone: (800) 821-1238
Nationally distributed by Van Kampen American
Capital Distributors, Inc.
(C)Van Kampen American Capital Distributors, Inc., 1995 All rights reserved.
SM denotes a service mark of Van Kampen American Capital Distributors, Inc.
16
