VAN KAMPEN AMERICAN CAPITAL CONVERTIBLE SECURITIES INC, N-30D, 1997-02-28

VAN KAMPEN AMERICAN CAPITAL CONVERTIBLE SECURITIES INC
N-30D, 1997-02-28

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<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio of Investments.................... 4
Statement of Assets and Liabilities......... 9
Statement of Operations..................... 10
Statement of Changes in Net Assets.......... 11
Financial Highlights........................ 12
Notes to Financial Statements............... 14
Report of Independent Accountants........... 17
Dividend Reinvestment Plan.................. 18
</TABLE>

ACS ANR 2/97

<PAGE>

LETTER TO SHAREHOLDERS

[PICTURE OF DENNIS J. MCDONNELL AND DON G. POWELL]

February 10, 1997

Dear Shareholder,

The convertible bond market, which is influenced by the stock and bond
markets, was one of the best performing sectors of the domestic fixed-income
market in 1996. Strong corporate earnings helped boost convertible bond prices
throughout the year and offset some of the negative effects of declining bond
prices during the first six months.

Bond prices fell in the first six months of 1996 due to fears that strong
economic growth would spur the Federal Reserve Board to raise interest rates.
When second-quarter economic growth (real gross domestic product, adjusted for
inflation) was reported to have risen to 4.7 percent, bond prices fell even
further, and long-term Treasury bond yields, which move in the opposite
direction of bond prices, jumped above 7.0 percent. During this same period,
equities surged, especially stocks of small capitalization companies, which
issued many of the convertible bonds that came to market.

Early in the third quarter, the scenario shifted. Stocks suffered a tempo-
rary setback but bounced back and rallied through year end, led by large capi-
talization stocks. Bonds recovered as economic growth slowed to a 2.0 percent
pace. Concerns about increasing price pressures and Fed tightening receded,
and the 30-year Treasury bond yield fell to approximately 6.6 percent in late
October, where it remained at year end.

PORTFOLIO STRATEGY

The Van Kampen American Capital Convertible Securities Fund invests primar-
ily in high-grade convertible bonds and convertible preferred stock, but the
portfolio can also include common stocks and U.S. Treasury securities. Higher-
grade issues, which typically are more sensitive to interest rate changes than
lower-grade securities, have tended to underperform the market when rates rise
and outperform when rates fall.

During the first half of the year when interest rates were rising, we liqui-
dated some of the Fund's rate-sensitive issues and used the proceeds to pur-
chase cyclical securities, such as airline and hotel stocks, which we felt
would be more responsive to increased economic growth. We also boosted the
Fund's exposure to telecommunications and oil companies, one of the best per-
forming sectors in 1996.

This strategy was reversed as interest rates retreated during the second half
of the year. Rate-sensitive issues, such as Conseco Inc., an insurance company,
were added to the portfolio and profits were taken on stock-sensitive issues,
including Delta Air Lines, Leasing Solutions, and Vanstar Corp.

Continued on page two

1
<PAGE>

PERFORMANCE SUMMARY

For the 12-month period ended December 31, 1996, the Fund generated a total
return at market price of 11.67 percent/1/. The Fund's return reflects the
change in market price per share on the New York Stock Exchange from $21.375 on
December 31, 1995 to $21.125 on December 31, 1996, and dividends and capital
gains totaling $2.695 per share. This return compared favorably with other high
grade convertible funds.

OUTLOOK

We believe that the economy will grow at a modest pace in 1997, near 2.5 per-
cent. Although economic growth could be accompanied by some short-term market
fluctuation, we do not believe it will be strong enough to reignite price pres-
sures. The results of the November elections reinforce this view--the combina-
tion of a Democratic president and a Republican Congress should help restrain
potential spending increases and large tax cuts, and therefore keep the budget
deficit under control.

We believe there is a possibility that the Fed will grow more concerned about
the economy's strength and nudge interest rates higher in 1997, though not be-
fore March. The stock market is another factor that may influence the perfor-
mance of the convertible bond market this year. If stocks continue to advance,
we believe the convertible market will reap about two-thirds of that gain, as
it has in the past. If stocks fall, we believe the income component of the con-
vertible bond market may help offset some of the negative effects of that de-
cline.

CORPORATE NEWS

As you may be aware, shareholders approved the acquisition of VK/AC Holding,
Inc. by Morgan Stanley Group Inc. We believe this acquisition will further help
investors achieve their long-term goals. Morgan Stanley's strong global pres-
ence and commitment to superior investment performance complement our broad
range of investment products, money management capability, and high level of
service. Thank you for your continued confidence in your investment with Van
Kampen American Capital.

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>

PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1996

VAN KAMPEN AMERICAN CAPITAL CONVERTIBLE SECURITIES FUND
NYSE TICKER SYMBOL -- ACS
<TABLE>

<S> <C>
TOTAL RETURNS
One-year total return based on market price/1/........................ 11.67%
One-year total return based on NAV/2/................................. 11.51%

DISTRIBUTION RATE
Distribution rate as a % of closing common stock price/3/............. 5.59%

SHARE VALUATIONS
Net asset value....................................................... $ 24.45
Closing common stock price............................................ $21.125
One-year high common stock price (12/05/96)........................... $22.500
One-year low common stock price (07/31/96)............................ $19.750
</TABLE>

/1/Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions
for the period in accordance with the Fund's dividend reinvestment plan, and
sale of all shares at the closing stock price at the end of the period
indicated.

/2/Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.

/3/Distribution rate represents the quarterly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.

Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Fund shares,
when sold, may be worth more or less than their original cost.

3
<PAGE>

PORTFOLIO OF INVESTMENTS

December 31, 1996

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE DEBT 54.0%
CONSUMER DISTRIBUTION 6.3%
$ 700 Danka Business Systems PLC................ 6.750% 04/01/02 $ 941,500
250 Eagle Hardware, Inc....................... 6.250 03/15/01 316,250
830 Home Depot, Inc........................... 3.250 10/01/01 811,325
350 Inacom Corp............................... 6.000 06/15/06 633,063
250 Mens Wearhouse, Inc....................... 5.250 03/01/03 244,375
450 Pep Boys, LYON............................ * 09/20/11 236,813
300 Pier 1 Imports, Inc....................... 5.750 10/01/03 342,000
640 Saks Holdings, Inc........................ 5.500 09/15/06 588,800
700 U.S. Office Products Co................... 5.500 02/01/01 913,500
-----------
5,027,626
-----------
CONSUMER DURABLES 4.1%
3,225 Pacific Dunlop............................ 6.750 07/02/97 3,216,938
-----------
CONSUMER SERVICES 11.3%
400 Boston Chicken, Inc....................... 4.500 02/01/04 506,500
600 HFS, Inc.................................. 4.750 03/01/03 688,500
375 Hilton Hotels Corp........................ 5.000 05/15/06 387,187
400 Imax Corp. (Canada)......................... 5.750 04/01/03 362,000
750 Jacor Communications, Inc................. * 06/12/11 333,750
600 Laidlaw, Inc., 144A-Private Placement (c). 6.000 01/15/99 807,000
1,480 Marriot International, Inc., LYON......... * 03/25/11 832,500
150 National Data Corp........................ 5.000 11/01/03 157,125
1,250 Prime Hospitality Corp.................... 7.000 04/15/02 1,831,250
3,275 Rogers Communications, Inc., (Canada),
LYON...................................... * 05/20/13 1,277,250
575 Tele Communications, Inc.................. 4.500 02/15/06 432,687
1,550 Time Warner, Inc., LYON................... * 12/17/12 577,375
1,750 Time Warner, Inc., LYON................... * 06/22/13 752,500
-----------
8,945,624
-----------
ENERGY 7.4%
900 Baker Hughes, Inc., LYON.................. * 05/05/08 660,375
1,025 Consolidated Natural Gas Co............... 7.250 12/15/15 1,107,000
500 Nabors Industries, Inc.................... 5.000 05/15/06 636,250
630 Pennzoil Co............................... 4.750 10/01/03 730,800
1,550 SFP Pipeline Holdings, Inc................ 11.163 08/15/10 1,930,901
850 USX Corp.................................. 7.000 06/15/17 843,625
-----------
5,908,951
-----------
FINANCE 6.2%
280 American Travellers Corp.................. 6.500 10/01/05 701,400
600 Berkshire Hathaway Salomon, Inc........... 1.000 12/02/01 558,000
</TABLE>
See Notes to Financial Statements
4
<PAGE>

PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1996

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FINANCE (CONTINUED)
$ 350 Equitable Cos......................... 6.125% 12/15/24 $ 401,188
600 Lai Fung Overseas..................... 5.750 02/05/98 546,000
300 Leasing Solutions, Inc................ 6.875 10/01/03 300,000
STRYPES Merrill Lynch, 23,500 shares
(convertible into 19,261 Cox
Communication common shares)......... 6.000 06/01/99 520,097
STRYPES Merrill Lynch, 12,000 shares
(convertible into 24,000 SunAmerica,
Inc. common shares).................. 7.250 06/15/99 795,683
185 Rac Financial Group, Inc., 144A-
Private Placement (c)................ 7.250 08/15/03 240,962
490 Trenwick Group, Inc................... 6.000 12/15/99 516,950
400 Zurich Insurance, 144A-Private
Placement (c)........................ 1.000 04/15/03 311,250
-----------
4,891,530
-----------
HEALTH CARE 4.4%
300 Alza Corp............................. 5.000 05/01/06 294,000
860 Chiron Corp........................... 1.900 11/17/00 757,875
375 Quantum Health Resources, Inc......... 4.750 10/01/00 339,375
725 Renal Treatment Centers, Inc.,144A-
Private Placement (c)................ 5.625 07/15/06 697,813
360 U.S Diagnostic, Inc., 144A-Private
Placement (c)........................ 9.000 03/31/03 446,400
565 United Technologies Corp.............. * 09/08/97 916,712
-----------
3,452,175
-----------
PRODUCER MANUFACTURING 6.2%
DECS Cooper Industries, Inc., 48,000 shares
(convertible into 41,381 Wyman Gordon
Co. common shares)................... 6.000 01/01/99 930,000
475 Robbins & Myers, Inc.................. 6.500 09/01/03 539,125
450 Sanifill, Inc......................... 5.000 03/01/06 569,250
500 Thermo Electron Corp.................. 5.000 04/15/01 987,500
370 U.S. Filter Corp...................... 6.000 09/15/05 664,150
1,100 Valhi, Inc., LYONS.................... * 10/20/07 506,000
774 WMX Technologies, Inc................. 2.000 01/24/05 719,820
-----------
4,915,845
-----------
RAW MATERIALS/PROCESSING
INDUSTRIES 1.9%
300 Altos Hornos de Mexico, SA (Mexico)... 5.500 12/15/01 255,000
675 Repap Enterprises, Inc................ 8.500 08/01/97 649,687
1,300 RPM, Inc., LYONS...................... * 09/30/12 591,500
-----------
1,496,187
-----------
TECHNOLOGY 4.3%
275 Altera Corp., 144A-Private Placement
(c).................................. 5.750 06/15/02 424,875
300 Cirrus Logic, Inc., 144A-Private
Placement (c)........................ 6.000 12/15/03 273,750
350 Comverse Technology, Inc., 144A-
Private Placement (c)................ 5.750 10/01/06 364,000
300 Dovatron International, Inc........... 6.000 10/15/02 284,250
300 First Financial Management Corp....... 5.000 12/15/99 521,250
725 General Instrument Corp............... 5.000 06/15/00 772,125
</TABLE>

See Notes to Financial Statements
<PAGE>

PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1996

<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED 24.0%
CONSUMER DURABLES 0.5%
Beazer Homes, $2.00 Dividend per share..................... 12,750 366,563
-----------
CONSUMER NON-DURABLES 0.4%
Designer Finance, 6.00%.................................... 7,500 346,875
-----------
CONSUMER SERVICES 5.5%
Golden Books, 8.75%, 144A-Private Placement (c)............ 10,000 567,500
Hollinger Prides, Inc., 9.75%.............................. 30,000 345,000
Host Marriott Quips, 6.75%, 144A-Private Placement (c)..... 15,000 802,500
SCI Finance LLC, TECONS, 6.25%............................. 8,000 752,000
SFX Broadcast, Inc., 6.50%, 144A-Private Placement (c)..... 9,500 416,813
TCI Communications, Inc., $2.125 Dividend per share........ 15,000 583,125
Triathlon Broadcasting, Inc., 9.00%........................ 62,500 531,250
Wendys Financing, TECONS, 5.00%............................ 7,500 390,000
-----------
4,388,188
-----------
ENERGY 2.5%
Enron Corp., ACES, 6.25%................................... 16,250 390,000
MCN Corp., PRIDES, 8.75%................................... 15,400 420,117
Nuevo Energy Co., TECONS 5.75%............................. 8,000 429,000
Williams Cos., $3.50 Dividend per share.................... 8,400 743,400
-----------
1,982,517
-----------
FINANCE 7.7%
American Bankers Insurance Group, Inc., $3.125 Dividend per
share...................................................... 10,700 639,325
Conseco, Inc., PRIDES, 7.00%............................... 13,500 1,535,625
Finova Finance Trust, 5.50%................................ 20,000 1,050,000
Jefferson Pilot Corp., ACES, 7.25%......................... 10,000 910,000
Sovereign Bancorp, $3.125 Dividend per share............... 15,000 1,040,625
SunAmerica, Inc., PERCS, 8.50%............................. 22,500 950,625
-----------
6,126,200
-----------
PRODUCER MANUFACTURING 0.7%
Corning Glassworks, MIPS, 6.00%............................ 9,000 572,625
-----------
</TABLE>

See Notes to Financial Statements
<PAGE>

PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1996

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
RAW MATERIALS/PROCESSING INDUSTRIES 4.4%
Boise Cascade Corp., $1.58 Dividend per share.............. 35,000 $ 914,375
Crown Cork & Seal, Inc., 4.50%............................. 15,000 780,000
Freeport McMoran Copper & Gold, Inc., $1.75 Dividend per
share...................................................... 46,700 1,295,925
Timet Capital Trust, 6.625%, 144A-Private Placement (c).... 8,700 473,063
-----------
3,463,363
-----------
TECHNOLOGY 1.2%
Loral Space & Communications, 6.00%, 144A-Private Placement
(c)........................................................ 8,000 452,000
Microsoft Corp., $2.196 Dividend per share................. 6,000 480,750
-----------
932,750
-----------
UTILITIES 1.1,%
Salomon, Inc., DECS, 6.25% (convertible into 6,250
Cincinnati Bell common shares)............................. 7,500 448,909
Nortel Invesora SA, (Argentina), MEDS, 10.00%.............. 9,500 389,500
-----------
838,409
-----------
TOTAL CONVERTIBLE PREFERRED............................... 19,017,490
-----------
COMMON STOCK 15.5%
CONSUMER DURABLES 0.3%
Coachmen Industries, Inc................................... 7,500 212,813
-----------
CONSUMER NON-DURABLES 0.6%
Philip Morris Cos., Inc.................................... 4,000 450,500
-----------
ENERGY 3.9%
Amoco Corp................................................. 5,000 402,500
British Petroleum PLC--ADR (United Kingdom)................ 9,000 1,272,375
Exxon Corp................................................. 10,000 980,000
Texaco, Inc................................................ 4,800 471,000
-----------
3,125,875
-----------
FINANCE 2.1%
Cigna Corp................................................. 4,000 546,500
Citicorp................................................... 5,000 515,000
First Bank System, Inc..................................... 8,628 588,861
-----------
1,650,361
-----------
HEALTH CARE 0.8%
Merck & Co., Inc........................................... 8,400 665,700
-----------
PRODUCER MANUFACTURING 0.5%
Emerson Electric Co........................................ 4,000 387,000
-----------
RAW MATERIALS/PROCESSING INDUSTRIES 0.7%
Freeport McMoran, Inc., Copper & Gold...................... 18,778 560,993
-----------
TECHNOLOGY 2.6%
Boeing Co.................................................. 6,000 638,250
Compaq Computer Corp. (a).................................. 9,000 668,250
International Business Machines Corp....................... 2,500 377,500
Lucent Technologies, Inc................................... 8,498 393,033
-----------
2,077,033
-----------
</TABLE>

See Notes to Financial Statements
<PAGE>

PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1996

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS 1.9%
$ 1,500 U.S. Treasury Notes................. 6.125% 07/31/00 1,501,635
-----------
TOTAL LONG-TERM INVESTMENTS 95.4% (Cost $67,996,652) (b)..... 75,628,895
SHORT-TERM INVESTMENTS AT AMORTIZED COST 1.2%
965 General Electric Capital Corp. (yielding 7.00%,
01/02/97 maturity)................................... 964,625
OTHER ASSETS IN EXCESS OF LIABILITIES 3.4%................... 2,672,453
-----------
NET ASSETS 100.0%............................................ $79,265,973
-----------
</TABLE>

*Zero Coupon Bond

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

(b) At December 31, 1996, for federal income tax purposes, cost of long-term
investments is $68,006,889; the aggregate gross unrealized appreciation is
$9,305,860 and the aggregate gross unrealized depreciation is $1,683,854,
resulting in net unrealized appreciation of $7,622,006.

(c) 144A securities are those which are exempt from registration under Rule
144A of the Securities Act of 1933. These securities may be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.

ACES--Automatically convertible equity securities
DECS--Debt exchangeable for common stock, traded in shares
LYON--Liquid yield option note
MEDS--Mandatorily exchangeable debt security
MIPS--Monthly income preferred shares
PERCS--Preference equity redemption cumulative stock
PRIDES--Preferred redeemable increased dividend equity security, traded in
shares
STRYPES--Structured yield product exchangeable for stock, traded in shares
TECONS--Trust convertible securities

See Notes to Financial Statements
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES

December 31, 1996

- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $67,996,652 ) (Note
1)................................................................. $75,628,895
Short-Term Investments (Note 1).................................... 964,625
Cash............................................................... 3,014
Receivables:
Investments Sold.................................................. 3,129,167
Interest.......................................................... 574,381
Dividends......................................................... 50,551
Other.............................................................. 68,674
-----------
Total Assets...................................................... 80,419,307
-----------
LIABILITIES:
Payables:
Income and Capital Gain Distributions............................. 1,004,345
Investment Advisory Fee (Note 2).................................. 33,417
Affiliates (Note 2)............................................... 1,656
Retirement Plan (Note 2)........................................... 72,237
Accrued Expenses................................................... 41,679
-----------
Total Liabilities................................................. 1,153,334
-----------
NET ASSETS......................................................... $79,265,973
-----------
NET ASSETS CONSIST OF:
Common Shares ($1.00 par value with 12,500,000 shares authorized,
3,251,324 shares issued, of which 9,500 are held in treasury and
3,241,824 are outstanding)....................................... $ 3,241,824
Paid in Surplus.................................................... 68,041,601
Net Unrealized Appreciation on Investments......................... 7,632,243
Accumulated Net Realized Gain on Investments....................... 274,482
Accumulated Undistributed Net Investment Income.................... 75,823
-----------
NET ASSETS......................................................... $79,265,973
-----------
NET ASSET VALUE PER SHARE ($79,265,973 divided
by 3,241,824 shares outstanding)................................. $ 24.45
-----------
</TABLE>

See Notes to Financial Statements

9
<PAGE>

STATEMENT OF OPERATIONS

For the Year Ended December 31, 1996

- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................. $2,869,271
Dividends............................................................ 978,064
----------
Total Income........................................................ 3,847,335
----------
EXPENSES:
Investment Advisory Fee (Note 2)..................................... 404,657
Accounting (Note 2).................................................. 56,446
Shareholder Services................................................. 45,920
Trustees Fees and Expenses (Note 2).................................. 31,747
Legal (Note 2)....................................................... 28,839
Custody.............................................................. 16,560
Other ............................................................... 126,304
----------
Total Expenses...................................................... 710,473
----------
NET INVESTMENT INCOME................................................ $3,136,862
----------
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Net Realized Gain on Investments..................................... $4,930,880
----------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period............................................. 6,830,815
End of the Period................................................... 7,632,243
----------
Net Unrealized Appreciation on Investments During the Period......... 801,428
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS...................... $5,732,308
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................... $8,869,170
----------
</TABLE>

See Notes to Financial Statements

10
<PAGE>

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended December 31, 1996 and 1995

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................... $ 3,136,862 $ 3,684,098
Net Realized Gain on Investments......... 4,930,880 3,573,846
Net Unrealized Appreciation on
Investments During the Period........... 801,428 7,901,701
----------- -----------
Change in Net Assets from Operations..... 8,869,170 15,159,645
----------- -----------
Distributions from Net Investment Income. (3,239,657) (3,728,234)
Distributions in Excess of Net Investment
Income (Note 1)......................... (18,985) -0-
----------- -----------
Distributions from and in Excess of Net
Investment Income....................... (3,258,642) (3,728,234)
Distributions from Net Realized Gain on
Investments (Note 1).................... (5,478,337) (2,374,380)
----------- -----------
Total Distributions.................... (8,736,979) (6,102,614)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES............................... 132,191 9,057,031
NET ASSETS:
Beginning of the Period.................. 79,133,782 70,076,751
----------- -----------
End of the Period (Including accumulated
undistributed net investment income of
$75,823 and $102,795, respectively)..... $79,265,973 $79,133,782
----------- -----------
</TABLE>

See Notes to Financial Statements

11
<PAGE>

FINANCIAL HIGHLIGHTS

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

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

<TABLE>
-------------------------------------
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of the Period.............................. $24.41 $21.62 $24.88
------- ------- -------
Net Investment Income................................ .968 1.14 1.09
Net Realized and Unrealized Gain/Loss on Investments. 1.768 3.5325 (2.56)
------- ------- -------
Total from Investment Operations...................... 2.736 4.6725 (1.47)
------- ------- -------
Less:
Distributions from and in Excess of Net Investment
Income (Note 1)...................................... 1.005 1.15 1.10
Distributions from and in Excess of Net Realized Gain
on Investments (Note 1).............................. 1.690 .7325 .69
------- ------- -------
Total Distributions................................... 2.695 1.8825 1.79
------- ------- -------
Net Asset Value, End of the Period.................... $24.451 $24.41 $21.62
------- ------- -------
Market Price Per Share at End of the Period........... $21.125 $21.375 $18.125
Total Investment Return at Market Price (a,d)......... 11.67% 28.88% (11.71%)
Total Return at Net Asset Value (b,d)................. 11.51% 23.42% (5.29%)
Net Assets at End of the Period (In millions)......... $79.3 $79.1 $70.1
Ratio of Expenses to Average Net Assets............... .88% .80% .82%
Ratio of Net Investment Income to Average Net Assets.. 3.88% 4.82% 4.70%
Portfolio Turnover.................................... 140% 127% 111%
Average Commission Per Equity Share
Traded (c)............................................ $.0604 $.0277 --
</TABLE>
(a) Total Investment Return at Market Price reflects the change in market
value of the shares for the period indicated with reinvestment of
dividends in accordance with the Fund's dividend reinvestment plan.
(b) Total Return at Net Asset Value (NAV) reflects the change in value of the
Fund's assets with reinvestment of dividends based upon NAV.
(c) 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.
(d) This disclosure was not required in fiscal years prior to 1992.

12
<PAGE>

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------------------------
$23.64 $22.23 $19.41 $22.73 $21.94 $21.46 $27.34
<S> <C> <C> <C> <C> <C> <C>
- --- --- --- --- --- --- ---
<CAPTION>
1.15 1.175 1.32 1.47 1.51 1.44 1.35
2.01 1.415 2.90 (3.2475) 1.595 1.8425 (1.29)
<S> <C> <C> <C> <C> <C> <C>
- --- --- --- --- --- --- ---
<CAPTION>
3.16 2.59 4.22 (1.7775) 3.105 3.2825 .06
<S> <C> <C> <C> <C> <C> <C>
- --- --- --- --- --- --- ---
<CAPTION>
1.12 1.18 1.40 1.40 1.57 1.47 2.13
.80 -0- -0- .1425 .745 1.3325 3.81
<S> <C> <C> <C> <C> <C> <C>
- --- --- --- --- --- --- ---
<CAPTION>
1.92 1.18 1.40 1.5425 2.315 2.8025 5.94
<S> <C> <C> <C> <C> <C> <C>
- --- --- --- --- --- --- ---
<CAPTION>
$24.88 $23.64 $22.23 $19.41 $22.73 $21.94 $21.46
<S> <C> <C> <C> <C> <C> <C>
- --- --- --- --- --- --- ---
<CAPTION>
$22.375 $20.375 $19.250 $16.625 $20.125 $19.875 $24.500
19.43% 12.31% 24.68% (10.39%) -- -- --
14.50% 12.84% 23.32% (7.37%) -- -- --
$80.7 $76.6 $72.1 $62.9 $73.7 $70.3 $65.6
.87% .88% .89% .86% .84% .82% .76%
4.60% 5.28% 6.41% 7.01% 6.47% 6.30% 4.72%
128% 87% 168% 95% 90% 69% 77%
-- -- -- -- -- -- --
</TABLE>

See Notes to Financial Statements

13
<PAGE>

NOTES TO FINANCIAL STATEMENTS

December 31, 1996

- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Convertible Securities Fund (the "Fund") is regis-
tered as a diversified closed-end management investment company under the In-
vestment Company Act of 1940, as amended. The Fund's investment objective is
to provide current income, capital appreciation and conservation of capital
through investment in a portfolio consisting mainly of convertible bonds and
preferred stocks.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The prep-
aration of financial statements in conformity with generally accepted account-
ing principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of con-
tingent 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-Fixed income investments are stated at value using mar-
ket quotations. Investments in securities listed on a securities exchange are
valued at their sales price as of the close of such securities exchange. Un-
listed securities and listed securities for which the last sales price is not
available are valued at the mean of the bid and asked prices. For those secu-
rities where quotations or prices are not available, valuations are determined
in accordance with procedures established in good faith by the Board of Trust-
ees. Short-term securities with remaining maturities of 60 or less days 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 17% of the investment port-
folio at the end of the period.

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 invest-
ments whereby the Fund acquires ownership of a debt security and the seller
agrees to repurchase the security at a future time and specified price. The
Fund may invest independently in repurchase agreements or transfer uninvested
cash balances into a pooled cash account along with other investment companies
advised by Van Kampen American Capital 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

14
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996

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

D. FEDERAL INCOME TAXES-It is the Fund's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated investment compa-
nies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
Net realized loss differs for financial reporting and tax purposes as a re-
sult of the deferral for tax purposes of losses resulting from wash sales.

E. DISTRIBUTION OF INCOME AND GAINS-The Fund declares and pays dividends quar-
terly from net investment income. Net realized gains, if any, are distributed
annually. Distributions from net realized gains for book purposes may include
short-term capital gains which are included in ordinary income for tax purpos-
es.
Due to inherent differences in the recognition of income, expenses and real-
ized gains/losses under generally accepted accounting principles and federal
income tax purposes, the amount of distributed net investment income may dif-
fer for a particular period. These differences are temporary in nature, but
may result in book basis distribution in excess of net investment income for
certain periods.
Permanent differences between book and tax basis reporting for the 1996 fis-
cal year have been identified and appropriately reclassified. Permanent dif-
ferences related to the recognition of market discount on bonds totaling
$94,808 were reclassified from accumulated net realized gain/loss on invest-
ments to accumulated undistributed net investment income.

15
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996

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

<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- --------------------------------------------------------------------------------
<S> <C>
First $150 million.................................................. .50 of 1%
Next $100 million................................................... .45 of 1%
Next $100 million................................................... .40 of 1%
Over $350 million................................................... .35 of 1%
</TABLE>

For the year ended December 31, 1996, the Fund recognized expenses of ap-
proximately $56,446 representing Van Kampen American Capital, Inc.'s or its
affiliates' (collectively "VKAC") cost of providing accounting services to the
Fund. These services are provided by VKAC at cost.
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 Trustees of the Trust instituted a Retirement Plan effective April 1,
1996. The Plan is not funded, and obligations under the Plan will be paid
solely out of the Trust's general account. The Trust will not reserve or set
aside funds for the payment of its obligations under the Plan by any form of
trust or escrow. For the current Trustees not affiliated with the Adviser, the
annual retirement benefit payable per year for a ten year period is based upon
the highest total annual compensation received in any of the three calendar
years preceding retirement. Trustees with more than five but less than ten
years of service at retirement will receive a proportionally reduced benefit.
Under the Plan, for the Trustees retiring with the effectiveness of the Plan,
the annual retirement benefit payable per year for a ten year period is equal
to 75% of the total compensation received from the Trust during the 1995 cal-
endar year.

3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $100,519,590 and $105,275,168,
respectively.

16
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
VAN KAMPEN AMERICAN CAPITAL CONVERTIBLE SECURITIES FUND

We have audited the accompanying statement of assets and liabilities, includ-
ing the investment portfolio of Van Kampen American Capital Convertible Secu-
rities Fund, as of December 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended, and the financial highlights for each
of the ten years in the period then ended. These financial statements and fi-
nancial highlights are the responsibility of the Fund's management. Our re-
sponsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of De-
cember 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant esti-
mates made by management, as well as evaluating the overall financial state-
ment presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Van Kampen American Capital Convertible Securities Fund at December 31, 1996,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the ten years in the period then ended, in conformity
with generally accepted accounting principles.

ERNST & YOUNG LLP

Houston, Texas
January 31, 1997

17
<PAGE>

DIVIDEND REINVESTMENT PLAN

- -------------------------------------------------------------------------------
The Fund pays distributions in cash, but if you own more than 100 shares in
your own name, you may elect to participate in the Fund's dividend reinvest-
ment plan (the "Plan"). Under the Plan, shares will be issued by the Fund at
net asset value on a date determined by the Board of Trustees between the rec-
ord and payable dates on each distribution; however, if the market price, in-
cluding brokerage commissions, is less than the net asset value, the amount of
the distribution will be paid to State Street Bank and Trust Company ("State
Street"), which will buy such shares as are available at prices below the net
asset value. (If the market price is not significantly less than the net asset
value, it is possible that open market purchases of shares may increase the
market price so that such price plus brokerage commissions would equal or ex-
ceed the net asset value of such shares.) If State Street cannot buy the nec-
essary shares at less than net asset value before the distribution date, the
balance of the distribution will be made in authorized but unissued shares of
the Fund at net asset value. The cost per share will be the average cost, in-
cluding brokerage commissions, of all shares purchased. Since all shares pur-
chased from the Fund are at net asset value, there will be no dilution, and no
brokerage commissions are charged on such shares.
You will receive tax information annually for your personal records and to
help you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gain distributions does not relieve you of any income
tax which may be payable (or required to be withheld) on dividends or distri-
butions.
You may begin or discontinue participation in the Plan at any time by writ-
ten notice to the address below. If you withdraw from the Plan, you may rejoin
at any time if you own of record the required 100 shares. Elections and termi-
nations will be effective for distributions declared after receipt. If you
withdraw from the Plan, a certificate for the whole shares and a check for the
fractional shares, if any, credited to your Plan account will be sent as soon
as practicable after receipt of your election to withdraw. Except for broker-
age commissions, if any, which are borne by Plan participants, all costs of
the Plan are borne by the Fund. The Fund reserves the right to amend or termi-
nate the Plan on 30 days' written notice prior to the record date of the dis-
tribution for which such amendment or termination is effective.
Record stockholders should address all notices, correspondence, questions or
other communications about the Plan to:
BOSTON EQUISERVE LP
P.O. BOX 8200
BOSTON, MA 02266-8200
800-341-2929
If your shares are not held directly in your name, you should contact your
brokerage firm, bank or other nominee for more information and to see if your
nominee will participate in the Plan on your behalf. If you participate
through your broker and choose to move your account to another broker, you
will need to re-enroll in the Plan through your new broker.

18
<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
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund

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

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

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
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
1-800-282-4404 for Morgan Stanley retail funds.

19
<PAGE>

RESULTS OF SHAREHOLDER VOTES

An Annual Meeting of Shareholders of the Fund was held on October 29, 1996,
where shareholders voted on a new investment advisory agreement, the reorgani-
zation and conversion of the Fund to a Delaware business trust, the election of
trustees and the ratification of Ernst & Young LLP as independent auditors.
With regard to the approval of a new investment advisory agreement between Van
Kampen American Capital Asset Management, Inc. and the Fund, 2,327,108 shares
voted for the proposal, 55,403 shares voted against, 85,634 shares abstained
and 127,729 shares represented broker non-votes. With regard to the reorganiza-
tion and conversion of the Fund to a Delaware business trust, the proposal was
adjourned to December 31, 1996. With regard to the election of Stephen R. Gross
as elected trustee by the common shareholders of the Fund 2,511,663 shares
voted in his favor, 84,212 shares withheld. With regard to the election of Alan
G. Merten, Ph.D. as elected trustee by the common shareholders of the Fund
2,511,569 shares voted in his favor, 84,306 shares withheld. With regard to the
election of F. Robert Paulsen, Ph.D. as elected trustee by the common share-
holders of the Fund 2,511,707 shares voted in his favor, 84,168 shares with-
held. With regard to the election of Don G. Powell as elected trustee by the
common shareholders of the Fund 2,514,018 shares voted in his favor, 81,856
shares withheld. The other trustees of the Fund whose terms did not expire in
1996 are Donald M. Carlton, Ph.D., A. Benton Cocanougher, Ph.D., Steven Muller,
Ph.D., R. Richard Pettit, Ph.D. and Alan B. Shepard, Jr. With regard to the
ratification of Ernst & Young LLP as independent auditors for the Fund,
2,531,223 shares voted in favor of the proposal, 28,571 shares voted against
and 36,081 shares abstained.

The Adjournment of the Special Meeting of Shareholders of the Fund was held
on December 31, 1996, where shareholders voted on the approval of the reorgani-
zation and conversion of the Fund to a Delaware business trust, 2,185,778
shares voted for the proposal, 76,084 shares voted against the proposal, 83,085
shares abstained and 491,843 shares represented broker non-votes.

20
<PAGE>

VAN KAMPEN AMERICAN CAPITAL CONVERTIBLE SECURITIES FUND

BOARD OF TRUSTEES
DONALD M. CARLTON
A. BENTON COCANOUGHER
STEPHEN R. GROSS
ALAN G. MERTEN
STEVEN MULLER
F. ROBERT PAULSEN
R. RICHARDSON PETTIT
DON G. POWELL* -- Chairman
ALAN B. SHEPARD, JR.

OFFICERS
DON G. POWELL*
President
DENNIS J. MCDONNELL*
Executive Vice President
RONALD A. NYBERG*
Vice President and Corporate 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 HEGEL*
ALAN SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
One Parkview Plaza Oakbrook Terrace, Illinois 60181

CUSTODIAN
STATE STREET BANK AND TRUST CO.
225 Franklin Street Boston, Massachusetts 02101

SHAREHOLDER SERVICING AGENT
BOSTON EQUISERVE LP
P.O. Box 8200
Boston, Massachusetts 02266-8200

INDEPENDENT ACCOUNTANTS
ERNST & YOUNG LLP
1221 McKinney Suite 2400
Houston, Texas 77010

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

(SM)denotes a service mark of Van Kampen American Capital Distributors, Inc.
- -----------------------------
INQUIRIES ABOUT AN INVESTOR'S
ACCOUNT SHOULD BE REFERRED
TO THE FUND'S TRANSFER AGENT
BOSTON EQUISERVE
P.O. BOX 8200
BOSTON, MASSACHUSETTS 02266-
8200
TELEPHONE: (800) 821-1238
ALASKA, CALIFORNIA AND
HAWAII
CALL COLLECT: (713) 993-0500
EXTENSION: 2223

- -----------------------------
Tax Notice to Corporate
Shareholders

For 1996, 21.13% of the dividends tax-
able as ordinary income qualified for the
70% dividends received deduction for
corporations.