<PAGE>
V A N K A M P E N A M E R I C A N C A P I T A L
CONVERTIBLE
SECURITIES FUNDS
ANNUAL REPORT
DECEMBER 31, 1997
[PICTURE APPEARS HERE.]
_________ A Wealth of Knowledge " A Knowledge of Wealth"__________
VAN KAMPEN AMERICAN CAPITAL
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter to Shareholders 1
Performance Results 4
Portfolio of Investments 5
Statement of Assets and Liabilities 11
Statement of Operations 12
Statement of Changes in Net Assets 13
Financial Highlights 14
Notes to Financial Statements 16
Report of Independent Accountants 19
Dividend Reinvestment Plan 20
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 28, 1998
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL APPEARS HERE]
Dear Shareholder,
The new year ushers in what promises to be an exciting and challenging time
for investors. The Taxpayer Relief Act of 1997 signed into law by President
Clinton in August creates many new opportunities for you and your family to take
a more active role in achieving your long-term financial goals.
Most Americans will benefit from the bill's $95 billion in tax cuts over
five years. The so-called Kiddie Credit gives parents $400 in immediate tax
relief for every child under age 17, and families will find it easier to save
for their children's college expenses through the new Education IRA. The bill
also cuts capital gains tax rates for the first time in over a decade and
loosens restrictions on tax-deductible IRA contributions. Perhaps the most
exciting feature of all is the new Roth IRA, which allows investment earnings to
grow tax free, not just tax deferred.
This year more than ever, it could be important for you to work with your
financial adviser to consider how the tax changes can work to your benefit. At
Van Kampen American Capital, we have prepared a variety of publications to help
you understand your choices under the new tax legislation. And with the help of
your adviser, we'll help you locate the many benefits hidden among the changing
tax landscape.
Economic Review
Declining interest rates and a strong equity market propelled convertible
securities throughout the year. Convertibles rose 18.98 percent during the
reporting period, while their underlying common stock appreciated 22.10 percent,
according to the Merrill Lynch Convertible Index. In other words, convertible
securities returned 86 percent of their underlying common stock, or
3.12 percentage points less than their underlying common stock, while enjoying
the lower levels of risk inherent in convertible securities. Most of the
companies that issue convertible securities are small caps, so many convertibles
got a boost in the third quarter when small caps outperformed the market.
1997 was also a positive year for the stock market. Moderate economic
growth and low inflation provided a very favorable environment for equity
investments and drove the market to record levels. However, the year was marked
by several periods of notable volatility. In March, the economy was growing so
rapidly that investors feared inflation might start to rise--a concern that
sparked a month-long drop in the stock market and erased its year-to-date gains.
This setback was brief, and the market had recouped its losses by early May. In
October, the stock market became very sensitive to economic turmoil in Asia,
causing the Dow Jones Industrial Average (DJIA) to drop a record number of
points in a single day. The DJIA rose back up to hover slightly below its all-
time high by the end of the reporting period.
1 Continued on page two
<PAGE>
The bond market improved steadily throughout 1997, thanks to the
continuation of controlled economic growth and negligible inflation. After a
slight raise in March, the Federal Reserve Board did not adjust interest rates
for the remainder of the year, which also contributed to the bond market rally.
Yields on the 30-year Treasury bond fell steadily, while bond prices, which move
in the opposite direction of yields, rose accordingly. In December, the yield on
the 30-year Treasury bond had dipped below six percent, reaching a four-year
low.
Portfolio Strategy
We consistently manage the Fund for capital appreciation, current income,
and the potential for preservation of capital by investing primarily in
convertible securities. In seeking to meet this objective, we focus on growth
companies and diversify across many market sectors. At the end of the reporting
period, the portfolio consisted of 56.5 percent convertible securities, 7.8
percent common stock, 27.5 preferred stock, and 8.2 percent U.S. government
obligations and short-term investments (percentage of long-term investments). We
maintained a modest weighting in the portfolio's allocation to common stock,
given concerns about the impact of economic turmoil in Asia. As often happens
when the economic picture is unclear, many equity investors have shifted their
assets to large, high-quality stocks with proven track records. Historically,
the Fund's common stock allocation has been comprised of large, established
growth companies, so this strategy has been compatible with the recent trend in
the market.
The Fund saw sector leadership rotate during the reporting period--as the
market reacted to economic and global events, investor sentiment for various
industries rose and fell throughout the year. The best-performing sector overall
was finance, thanks to favorable interest rates, low inflation, and moderate
economic growth. We had a significant weighting in finance and enjoyed solid
performance from Sovereign Bancorp, Conseco, Travelers Group, and U.S. Bancorp.
On the other hand, we maintained the Fund's moderate position in technology, as
the situation in Asia has taken a toll on this sector. The Fund had a minor
weighting in technology when the crisis began to unfold, which minimized its
impact on the portfolio.
While finance was the most consistently strong area, we found a number of
attractive opportunities in consumer distribution or retail, including Pier 1
Imports, Home Depot, and Rite Aid. Also, we uncovered several promising names in
health care, namely Sunrise Assisted Living, a provider of home-like retirement
communities. Other noteworthy holdings came from the energy sector, as oil
services companies performed well for most of the year, including Nabors
Industries and Halter Marine. A bout of profit-taking at year-end caused a dip
in oil stock prices, but we remain bullish on this sector in the long-term.
Finally, the Fund has a substantial weighting in consumer services. One of
the largest holdings in the portfolio is Snyder Communications, which provides
marketing and advertising services. Outsourcing these functions to a specialized
firm such as Snyder Communications allows companies to focus on their core
business, and we believe this will be a growth area within consumer services.
Another favorable segment of this sector is broadcast media. Deregulation of
this industry has allowed companies to own more radio or television stations
within a given market and therefore control more advertising dollars. Sinclair
Broadcasting (television) has been a leader for the Fund in this area.
2 Continued on page three
<PAGE>
Performance Summary
For the year ended December 31, 1997, the Fund generated a total return of
18.57 percent/2/ at net asset value and 19.48 percent/1/ at market price. The
Fund's market price per share on the New York Stock Exchange remained unchanged
at $21.125 on December 31, 1996 and December 31, 1997, and dividends and capital
gains totaled $4.2057 per share. Please refer to the chart on page four for
additional Fund performance results.
Outlook
We believe the economic uncertainty in Southeast Asia will be a double-
edged sword for the domestic economy. On the downside, we anticipate that U.S.
corporate profits could be negatively impacted by lower foreign sales and
increased competition from lower-priced imports. On the upside, a slowdown in
corporate profits could keep economic growth at a moderate and sustainable
level. Also, we expect that lower currency values in Asia will result in low
price inflation in the U.S. and stable or declining interest rates. Convertible
securities typically perform well when interest rates are declining and the
stock market is moderately strong, so we see this environment as favorable for
the Convertible Securities Fund.
As investor sentiment shifts back to high-quality stocks, we expect larger,
well-established companies to perform well. At the same time, we've begun to see
more convertibles issued from these types of companies, which may provide some
attractive choices for the Fund. Convertibles are considered defensive
investments, having performed competitively in up markets while reducing the
negative effects of down markets. Given the uncertain outlook for the economy,
we believe the Convertible Securities Fund may be a prudent choice for certain
investors.
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.
3 Please see footnotes on page four
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
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/................ 19.48%
One-year total return based on NAV/2/......................... 18.57%
- --------------------
Distribution Rate
- --------------------
Distribution rate as a % of closing common stock price/3/..... 4.17%
- --------------------
Share Valuations
- --------------------
Net asset value............................................... $ 24.27
Closing common stock price.................................... $21.125
One-year high common stock price (12/04/97)................... $25.625
One-year low common stock price (04/14/97).................... $20.000
</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. This
performance was achieved during generally rising stock prices. Fund shares,
when sold, may be worth more or less than their original cost.
4
<PAGE>
Portfolio of Investments
December 31, 1997
<TABLE>
<CAPTION>
============================================================================================
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONVERTIBLE DEBT 59.5%
CONSUMER DISTRIBUTION 10.0%
$ 850 Central Garden & Pet Co........................ 6.000% 11/15/03 $ 986,000
1,250 Charming Shoppes, Inc.......................... 7.500 07/15/06 1,168,750
800 CUC International, Inc......................... 3.000 02/15/02 1,002,000
830 Home Depot, Inc................................ 3.250 10/01/01 1,110,125
425 Inacom Corp.................................... 6.000 06/15/06 575,344
905 Men's Wearhouse, Inc........................... 5.250 03/01/03 1,067,900
600 Pier 1 Imports, Inc............................ 5.750 10/01/03 1,155,000
900 U. S. Office Products Co....................... 5.500 05/15/03 840,375
------------
7,905,494
------------
CONSUMER NON-DURABLES 0.5%
400 Loews Corp..................................... 3.125 09/15/07 402,000
------------
CONSUMER SERVICES 9.3%
1,760 Corestaff, Inc................................. 2.940 08/15/04 1,471,800
1,100 Interpublic Group of Companies, Inc., 144A-
Private Placement (a).......................... 1.800 09/16/04 908,875
700 Marriot International, Inc., LYON.............. * 03/25/11 458,500
1,375 National Data Corp............................. 5.000 11/01/03 1,340,625
2,000 News America Holdings, Inc., LYON.............. * 03/11/13 945,000
1,000 Omnicom Group, Inc............................. 4.250 01/03/07 1,390,000
700 Personnel Group of America, Inc., 144A-
Private Placement (a).......................... 5.750 07/01/04 787,500
------------
7,302,300
------------
ENERGY 4.7%
350 Nabors Industries, Inc......................... 5.000 05/15/06 629,125
300 Parker Drilling Co............................. 5.500 08/01/04 319,875
830 Pennzoil Co.................................... 4.750 10/01/03 1,112,200
850 Pogo Producing Co.............................. 5.500 06/15/06 820,250
500 SFP Pipeline Holdings, Inc..................... 11.163 08/15/10 816,622
------------
3,698,072
------------
</TABLE>
5 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
December 31, 1997
<TABLE>
<CAPTION>
============================================================================================
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCE 3.2%
$ 850 Aames Financial Corp........................... 5.500% 03/15/06 $ 749,063
600 Berkshire Hathaway, Inc........................ 1.000 12/02/01 970,500
STRYPES Merrill Lynch, 23,500 shares (Convertible into
19,261 Cox Communication, Inc. common shares).. 6.000 06/01/99 793,285
------------
2,512,848
------------
HEALTHCARE 14.6%
700 Alternate Living Services, Inc................. 5.250 12/15/02 813,750
1,100 Alza Corp...................................... 5.000 05/01/06 1,142,625
500 Alza Corp., LYON............................... * 07/14/14 231,250
850 Atrix Labs Inc., 144A-Private Placement (a).... 7.000 12/01/04 816,000
1,400 Dura Pharmaceuticals, Inc...................... 3.500 07/15/02 1,561,000
775 ESC Medical Systems, Ltd., 144A-
Private Placement (a).......................... 6.000 09/01/02 831,187
1,000 FPA Medical Management, Inc.................... 6.500 12/15/01 1,027,500
640 Fuisz Technologies, Ltd., 144A-
Private Placement (a).......................... 7.000 10/15/04 572,800
400 NCS Health, Inc., 144A-Private Placement (a)... 5.750 08/15/04 408,000
850 Omnicare, Inc., 144A-Private Placement (a)..... 5.000 12/01/07 871,250
875 Phycor, Inc.................................... 4.500 02/15/03 853,125
450 Renal Treatment Centers, Inc................... 5.625 07/15/06 544,500
1,000 Sunrise Assisted Living, Inc., 144A-
Private Placement (a).......................... 5.500 06/15/02 1,297,500
500 Thermo Cardiosystems, Inc., 144A-
Private Placement (a).......................... 4.750 05/15/04 535,000
------------
11,505,487
------------
PRODUCER MANUFACTURING 2.4%
475 Robbins and Myers, Inc......................... 6.500 09/01/03 741,000
1,050 USA Waste Services, Inc........................ 4.000 02/01/02 1,165,500
------------
1,906,500
------------
TECHNOLOGY 12.8%
425 American Residential Services, Inc............. 7.250 04/15/04 379,313
350 Comverse Technology, Inc., 144A-Private
Placement (a).................................. 5.750 10/01/06 377,563
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
December 31, 1997
<TABLE>
<CAPTION>
============================================================================================
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TECHNOLOGY (CONTINUED)
$1,400 Comverse Technology, Inc....................... 5.750% 10/01/06 $ 1,510,250
750 Dovatron International, Inc., 144A-Private
Placement (a).................................. 6.000 10/15/02 1,157,812
600 EMC Corp....................................... 3.250 03/15/02 814,500
1,200 Level One communications, Inc.................. 4.000 09/01/04 1,155,000
925 Motorola, Inc., LYON........................... * 09/27/13 711,094
900 Photronics, Inc................................ 6.000 06/01/04 1,037,250
850 Quantum Corp................................... 7.000 08/01/04 777,750
600 Solectron Corp., 144A-Private Placement (a).... 6.000 03/01/06 825,000
500 Spacehab, Inc., 144A-Private Placement (a)..... 8.000 10/15/07 507,500
200 Titan Corp..................................... 8.250 11/01/03 358,750
475 Vantive Corp., 144A-Private Placement (a)...... 4.750 09/01/02 438,187
------------
10,049,969
------------
TRANSPORTATION 1.4%
300 Halter Marine Group, Inc., 144A-Private
Placement (a).................................. 4.500 09/15/04 336,750
635 Seacor Holdings, Inc........................... 5.375 11/15/06 726,281
------------
1,063,031
------------
UTILITIES 0.6%
450 SmartTalk Teleservices, Inc., 144A-Private
Placement (a).................................. 5.750 09/15/04 482,625
------------
TOTAL CONVERTIBLE DEBT.................... 46,828,326
------------
</TABLE>
7 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
December 31, 1997
<TABLE>
<CAPTION>
========================================================================================================================
Description Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK 29.0%
CONSUMER DURABLES 0.7%
Newell Financial Trust, 5.25%, 144A-Private Placement (a)..................................... 10,000 $ 525,000
----------
CONSUMER NON-DURABLES 0.8%
Ralston Purina Co., 7.00%..................................................................... 9,000 620,157
----------
CONSUMER SERVICES 9.6%
Apple South Financing, Inc., TECONS, $3.500 dividend per share................................ 17,000 915,875
Cablevision Systems Corp., Ser I, 8.50%....................................................... 29,000 1,116,500
Golden Books Financing Trust, 8.75%........................................................... 35,000 1,859,375
Host Marriott Financial Trust, 6.75%, 144A-Private Placement (a).............................. 15,000 915,000
Sinclair Broadcast Group, Inc., 6.00%......................................................... 9,100 522,112
Snyder Communications, Inc., STRYPES, 6.50%................................................... 57,000 1,938,000
TCI Communications, $2.125 dividend per share................................................. 4,100 262,913
----------
7,529,775
----------
ENERGY 2.1%
EVI, Inc., 5.00%, 144A-Private Placement (a).................................................. 15,000 687,188
Tosco Financing Trust, 5.75%.................................................................. 14,700 948,150
----------
1,635,338
----------
FINANCE 9.0%
Ahmanson H.F. Co., Ser D, 6.00%............................................................... 7,100 976,250
Conseco, Inc., PRIDES, 7.00%.................................................................. 23,200 1,189,000
Finova Finance Trust, 5.50%................................................................... 20,000 1,400,000
Jefferson Pilot Corp., ACES, 7.25%............................................................ 6,000 642,000
Money Store, Inc., $1.720 dividend per share.................................................. 34,000 750,125
PLC Capital Trust II, 6.50%................................................................... 9,000 495,000
Sovereign Bancorp, Inc., $3.125 dividend per share............................................ 10,000 1,247,500
WBK Trust, STRYPES, 10.00%.................................................................... 11,000 368,500
----------
7,068,375
----------
HEALTHCARE 1.1%
MedPartners, Inc., 6.50%...................................................................... 39,000 858,000
----------
RAW MATERIALS/PROCESSING INDUSTRIES 0.5%
Timet Capital Trust, Inc., 6.625%, 144A-Private Placement (a)................................. 8,700 437,175
----------
TECHNOLOGY 0.4%
Qualcomm Financial Trust, 5.75%............................................................... 7,300 346,750
----------
TRANSPORTATION 0.5%
CNF Trust I, Ser A, TECONS, 5.00%............................................................. 6,800 397,800
----------
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
December 31, 1997
<TABLE>
<CAPTION>
=========================================================================================================================
Description Shares Market Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES 4.3%
Citizens Utilities Co. Trust, 5.00%.............................................................. 8,000 $ 382,000
Houston Industries, Inc., ACES, 7.00%............................................................ 21,250 1,212,578
Nextel Trust, STRYPES, 7.25%..................................................................... 45,000 1,068,750
Worldcom, Inc., DECS, 8.00%...................................................................... 6,800 714,000
-----------
3,377,328
-----------
TOTAL PREFERRED STOCK....................................................................... 22,795,698
-----------
COMMON STOCKS 8.3%
CONSUMER DISTRIBUTION 1.9%
Central Garden & Pet Co. (b)..................................................................... 15,000 393,750
Danka Business Systems-ADR (United Kingdom)...................................................... 21,000 334,687
Proffitt's, Inc. (b)............................................................................. 26,558 755,243
-----------
1,483,680
-----------
CONSUMER SERVICES 0.8%
Chancellor Media Corp., Class A (b).............................................................. 8,500 634,312
-----------
ENERGY 1.7%
Sun, Inc......................................................................................... 20,000 841,250
USX-Marathon Group............................................................................... 15,000 506,250
-----------
1,347,500
-----------
FINANCE 0.9%
U.S. Bancorp..................................................................................... 6,400 716,400
-----------
PRODUCER MANUFACTURING 0.7%
Thermo Electron Corp. (b)........................................................................ 13,095 582,728
-----------
TECHNOLOGY 1.1%
Atmel Corp. (b).................................................................................. 11,500 213,469
International Business Machines Corp............................................................. 4,500 470,531
Spacehab, Inc. (b)............................................................................... 15,000 158,437
-----------
842,437
-----------
TRANSPORTATION 0.5%
Halter Marine Group, Inc. (b).................................................................... 14,500 418,688
-----------
UTILITIES 0.7%
SBC Communications, Inc.......................................................................... 7,000 512,750
-----------
TOTAL COMMON STOCKS......................................................................... 6,538,495
-----------
TOTAL LONG-TERM INVESTMENTS 96.8% (Cost $70,741,209)............................................. 76,162,519
-----------
</TABLE>
9 Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
December 31, 1997
<TABLE>
<CAPTION>
============================================================================================================
Description Market Value
- ------------------------------------------------------------------------------------------------------------
<S> <C>
SHORT-TERM INVESTMENTS 8.6%
REPURCHASE AGREEMENT 2.3%
Swiss Bank Corp. ($1,770,000 par collateralized by U.S. Government
obligations in a pooled cash account, 6.10% coupon, dated 12/31/97,
to be sold on 01/02/98 at $1,770,600).......................................................... $ 1,770,000
-----------
U.S. GOVERNMENT OBLIGATIONS 6.3%
Federal Home Loan Bank Discount Note
($2,000,000 par, yielding 5.53%, 01/07/98 maturity)............................................ 1,997,867
Federal National Mortgage Association Discount Note
($2,000,000 par, yielding 5.56%, 02/05/98 maturity)............................................ 1,989,040
Federal National Mortgage Association Discount Note
($1,000,000 par, yielding 5.64%, 04/24/98 maturity)............................................ 982,580
-----------
4,969,487
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $6,739,459)................................................ 6,739,487
-----------
TOTAL INVESTMENTS 105.4% (Cost $77,480,668).................................................... 82,902,006
LIABILITIES IN EXCESS OF OTHER ASSETS (5.4%)................................................... (4,238,471)
-----------
NET ASSETS 100.0%............................................................................. $78,663,535
===========
</TABLE>
* Zero Coupon Bond
(a) 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.
(b) Non-income producing security as this stock currently does not declare
dividends.
ACES--Automatically convertible equity securities
ADR--Depository Receipts
DECS--Debt exchangeable for common stock, traded in shares
LYON--Liquid yield option note
STRYPES--Structured yield product exchangeable for stock, traded in shares
TECONS--convertible securities
10 See Notes to Financial Statements
<PAGE>
Statement Of Assets And Liabilities
December 31, 1997
<TABLE>
<CAPTION>
===========================================================================================
<S> <C>
ASSETS:
Total Investments (Cost $77,480,668).................................... $ 82,902,006
Cash.................................................................... 4,133
Receivables:
Interest........................................................... 527,225
Dividends.......................................................... 42,471
Investments Sold................................................... 18,731
Other................................................................... 56,951
------------
Total Assets....................................................... 83,551,517
------------
LIABILITIES:
Payables:
Investments Purchased.............................................. 2,763,111
Income and Capital Gain Distributions.............................. 1,987,613
Investment Advisory Fee............................................ 34,534
Affiliates......................................................... 6,880
Accrued Expenses........................................................ 23,993
Trustees' Retirement Plan............................................... 71,851
------------
Total Liabilities.................................................. 4,887,982
------------
NET ASSETS.............................................................. $ 78,663,535
============
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............................................. 5,421,338
Accumulated Net Realized Gain........................................... 1,753,439
Accumulated Undistributed Net Investment Income......................... 205,333
------------
NET ASSETS.............................................................. $ 78,663,535
============
Net Asset Value Per Share ($78,663,535 divided
by 3,241,824 shares outstanding)................................... $24.27
============
</TABLE>
11 See Notes to Financial Statements
<PAGE>
Statement Of Operations
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
================================================================================
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 2,688,327
Dividends................................................... 1,218,334
------------
Total Income........................................... 3,906,661
------------
EXPENSES:
Investment Advisory Fee..................................... 422,759
Shareholder Reports......................................... 44,246
Shareholder Services........................................ 38,712
Trustees' Fees and Expenses................................. 18,968
Custody..................................................... 13,687
Legal....................................................... 11,840
Other....................................................... 96,442
------------
Total Expenses......................................... 646,654
------------
Net Investment Income....................................... $ 3,260,007
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $11,981,751
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................ 7,632,243
End of the Period...................................... 5,421,338
------------
Net Unrealized Depreciation During the Period............... (2,210,905)
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 9,770,846
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $13,030,853
============
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Statement Of Changes In Net Assets
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
=========================================================================================================
Year Ended Year Ended
December 31, 1997 December 31, 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income......................................... $ 3,260,007 $ 3,136,862
Net Realized Gain............................................. 11,981,751 4,930,880
Net Unrealized Appreciation/Depreciation During
the Period............................................... (2,210,905) 801,428
------------ -----------
Change in Net Assets from Operations.......................... 13,030,853 8,869,170
------------ -----------
Distributions from Net Investment Income...................... (3,260,007) (3,239,657)
Distributions in Excess of Net Investment Income.............. (562,429) (18,985)
------------ -----------
Distributions from and in Excess of Net
Investment Income........................................ (3,822,436) (3,258,642)
Distributions from Net Realized Gain.......................... (9,810,855) (5,478,337)
------------ -----------
Total Distributions................................... (13,633,291) (8,736,979)
------------ -----------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES.................................... (602,438) 132,191
NET ASSETS:
Beginning of the Period....................................... 79,265,973 79,133,782
------------ -----------
End of the Period (Including accumulated undistributed net
investment income of $205,333 and
$75,823, respectively)................................... $ 78,663,535 $79,265,973
============ ===========
</TABLE>
13 See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of the
Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
========================================================================================
------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of the Period $24.451 $ 24.41 $ 21.62
------- ------- -------
Net Investment Income 1.006 .968 1.14
Net Realized and Unrealized Gain/Loss 3.014 1.768 3.5325
------- ------ ------
Total from Investment Operations 4.020 2.736 4.6725
------- ------ ------
Less:
Distributions from and in Excess of Net Investment
Income 1.179 1.005 1.15
Distributions from and in Excess of Net Realized Gain 3.027 1.690 .7325
------- ------ ------
Total Distributions 4.206 2.695 1.8825
------- ------- -------
Net Asset Value, End of the Period $24.265 $24.451 $ 24.41
======= ======= =======
Market Price Per Share at End of the Period $21.125 $21.125 $21.375
Total Investment Return at Market Price (a,d) 19.48% 11.67% 28.88%
Total Return at Net Asset Value (b,d) 18.57% 11.51% 23.42%
Net Assets at End of the Period (In millions) $ 78.7 $ 79.3 $ 79.1
Ratio of Expenses to Average Net Assets .76% .88% .80%
Ratio of Net Investment Income to Average Net Assets 3.86% 3.88% 4.82%
Portfolio Turnover 181% 140% 127%
Average Commission Per Equity Share
Traded (c) $ .0592 $ .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 periods prior to 1996.
(d) This disclosure was not required in fiscal years prior to 1992.
14
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Year Ended December 31,
- --------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 24.88 $ 23.64 $ 22.23 $ 19.41 $ 22.73 $ 21.94 $ 21.46
------- ------- ------- ------- -------- ------- -------
1.09 1.15 1.175 1.32 1.47 1.51 1.44
(2.56) 2.01 1.415 2.90 (3.2475) 1.595 1.8425
------- ------- ------- ------- -------- ------- -------
(1.47) 3.16 2.59 4.22 (1.7775) 3.105 3.2825
------- ------- ------- ------- -------- ------- -------
1.10 1.12 1.18 1.40 1.40 1.57 1.47
.69 .80 -0- -0- .1425 .745 1.3325
------- ------- ------- ------- -------- ------- -------
1.79 1.92 1.18 1.40 1.5425 2.315 2.8025
------- ------- ------- ------- -------- ------- -------
$ 21.62 $ 24.88 $ 23.64 $ 22.23 $ 19.41 $ 22.73 $ 21.94
======= ======= ======= ======= ======== ======= =======
$18.125 $22.375 $20.375 $19.250 $ 16.625 $20.125 $19.875
(11.71%) 19.43% 12.31% 24.68% (10.39%) -- --
(5.29%) 14.50% 12.84% 23.32% (7.37%) -- --
$ 70.1 $ 80.7 $ 76.6 $ 72.1 $ 62.9 $ 73.7 $ 70.3
.82% .87% .88% .89% .86% .84% .82%
4.70% 4.60% 5.28% 6.41% 7.01% 6.47% 6.30%
111% 128% 87% 168% 95% 90% 69%
-- -- -- -- -- -- --
</TABLE>
15 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
December 31, 1997
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Convertible Securities Fund (the "Fund") is
registered as a diversified closed-end management investment company under the
Investment 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
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-Fixed income investments are stated at value using
market quotations. Investments in securities listed on a securities exchange are
valued at their sales 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 mean of the bid and asked prices. 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.
Fund investments include lower rated debt securities which may be more
susceptible 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 comparable
unrated securities represented approximately 43% of the investment portfolio 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
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital 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 securi-
16
<PAGE>
Notes to Financial Statements (Continued)
December 31, 1997
================================================================================
ties 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-Interest income is recorded on an accrual basis and
dividend 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.
D. FEDERAL INCOME TAXES-It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
At December 31, 1997, for federal income tax purposes, cost of long- and
short-term investments is $77,480,918; the aggregate gross unrealized
appreciation is $7,962,733 and the aggregate gross unrealized depreciation is
$2,541,645, resulting in net unrealized appreciation of $5,421,088.
E. DISTRIBUTION OF INCOME AND GAINS-The Fund declares and pays quarterly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains which are included in ordinary income for
tax purposes.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, the amount of distributed net investment income may differ
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 1997
fiscal year have been identified and appropriately reclassified. Permanent
differences related to the recognition of market discount on bonds totaling
$691,939 were reclassified from accumulated net realized gain/loss on
investments to accumulated undistributed net investment income.
For Federal income tax purposes, the following information is furnished
with respect to the distributions paid by the Fund during its taxable year ended
December 31, 1997. The Fund designated $3,941,043 as a 28% rate capital gain
distribution and $2,172,595 as a 20% rate capital gain distribution.
Shareholders were sent a 1997 Form 1099-DIV in January 1998 representing their
proportionate share of the capital gain distribution to be reported on their
income tax returns. For corporate shareholders, 14.62% of the distributions
qualify for the dividend received deduction.
17
<PAGE>
Notes to Financial Statements (Continued)
December 31, 1997
================================================================================
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
================================================================================
<S> <C>
First $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, 1997, the Fund recognized expenses of
approximately $17,200 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 Fund 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 Fund's general accounts. The Fund 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 Fund during the 1995 calendar year.
At the Annual Meeting of Shareholders held on December 18, 1997, seven new
trustees and one incumbent trustee were elected to replace the seven trustees
that resigned, with the effective date of their resignation being December 31,
1997. In connection with their resignation from services as trustee of the Fund,
each resigning trustee will receive the vested portion of their retirement
benefits under the Fund's retirement plan. In addition, in recognition of their
years of service, VKAC will pay each resigning trustee an amount equal to the
non-vested portion of their retirement benefits. These retirement benefits are
being paid in lieu of receiving benefit payments over a ten-year period and will
not be paid to a resigning trustee who is an affiliated person of the Adviser.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $139,628,988 and $149,103,802,
respectively.
18
<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, including
the portfolio of investments of Van Kampen American Capital Convertible
Securities Fund, as of December 31, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the ten years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Convertible Securities Fund at December 31, 1997, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the ten years in the period then ended, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Houston, Texas
February 4, 1998
19
<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 reinvestment 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 record and
payable dates on each distribution; however, if the market price, including
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 exceed
the net asset value of such shares.) If State Street cannot buy the necessary
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, including
brokerage commissions, of all shares purchased. Since all shares purchased 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 distributions.
You may begin or discontinue participation in the Plan at any time by
written notice to the address below. If you withdraw from the Plan, you may
rejoin at any time if you own the required 100 shares. Elections and
terminations 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 brokerage
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 terminate the
Plan on 30 days' written notice prior to the record date of the distribution 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.
20
<PAGE>
Funds Distributed by Van Kampen American Capital
EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International /Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
VKAC Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS International Magnum
MS Latin American
FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
MS Global Fixed Income
VKAC Global Government Secuities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust or Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term
Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Limited Maturity Government
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC Tax Free Money
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen American Capital or Morgan Stanley fund prospectus
or to receive additional fund information, choose from one of the following:
. visit our web site at WWW.VKAC.COM to view prospectuses, select Investors'
Place, then Download a Prospectus
. call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central
time (Telecommunications Device for the Deaf users, call 1-800-421-2833)
. e-mail us by visiting WWW.VKAC.COM and selecting Investors' Place
21
<PAGE>
Results of Shareholder Votes
The Annual Meeting of Shareholders of the Fund was held on December 18,
1997, where shareholders voted on the election of trustees and the ratification
of Ernst & Young LLP as independent public accountants.
1) With regard to the election of the following Trustees by the
shareholders of the Fund:
<TABLE>
<CAPTION>
# of Shares
---------------------------
In Favor Withheld
- ------------------------------------------------------------------------------
<S> <C> <C>
David C. Arch................................... 1,988,608 70,433
Rod Dammeyer.................................... 1,988,848 70,193
Howard J Kerr................................... 1,988,848 70,193
Dennis J. McDonnell............................. 1,988,848 70,193
Steven Muller................................... 1,988,552 70,489
Theodore A. Myers............................... 1,988,848 70,193
Hugo F. Sonnenschein............................ 1,988,848 70,193
Wayne W. Whalen................................. 1,988,848 70,193
</TABLE>
2) With regard to the ratification of Ernst & Young LLP as independent
auditors for the Fund, 1,994,424 shares voted in favor of the proposal, 30,334
shares voted against and 34,284 shares abstained.
22
<PAGE>
Van Kampen American Capital Convertible Securities Fund
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*___CHAIRMAN
STEVEN MULLER
THEODORE A. MYERS
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN
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
__________________________________
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
__________________________________
Investment Adviser
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Custodian and Transfer Agent
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.
(C) Van Kampen American Capital Distributors, Inc. 1998
All rights reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
- --------------------------------------------------------------------------------
TAX NOTICE TO CORPORATE
SHAREHOLDERS
For 1997, 14.62% of the dividends taxable as ordinary income qualified for the
70% dividends received deduction for corporations.
- --------------------------------------------------------------------------------
23
<PAGE>
----------------
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC BULK RATE
One Parkview Plaza U.S. POSTAGE
Oakbrook Terrace, Illinois 60181 PAID
VAN KAMPEN
AMERICAN CAPITAL
----------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> Conv Secs Fd
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 77,480,668
<INVESTMENTS-AT-VALUE> 82,902,006
<RECEIVABLES> 588,427
<ASSETS-OTHER> 56,951
<OTHER-ITEMS-ASSETS> 4,133
<TOTAL-ASSETS> 83,551,517
<PAYABLE-FOR-SECURITIES> 2,763,111
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,124,871
<TOTAL-LIABILITIES> 4,887,982
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71,283,425
<SHARES-COMMON-STOCK> 3,241,824
<SHARES-COMMON-PRIOR> 3,241,824
<ACCUMULATED-NII-CURRENT> 205,333
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,753,439
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,421,338
<NET-ASSETS> 78,663,535
<DIVIDEND-INCOME> 1,218,334
<INTEREST-INCOME> 2,688,327
<OTHER-INCOME> 0
<EXPENSES-NET> (646,654)
<NET-INVESTMENT-INCOME> 3,260,007
<REALIZED-GAINS-CURRENT> 11,981,751
<APPREC-INCREASE-CURRENT> (2,210,905)
<NET-CHANGE-FROM-OPS> 13,030,853
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,822,436)
<DISTRIBUTIONS-OF-GAINS> (9,810,855)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (602,438)
<ACCUMULATED-NII-PRIOR> 75,823
<ACCUMULATED-GAINS-PRIOR> 274,482
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 422,759
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 646,654
<AVERAGE-NET-ASSETS> 84,550,673
<PER-SHARE-NAV-BEGIN> 24.451
<PER-SHARE-NII> 1.006
<PER-SHARE-GAIN-APPREC> 3.014
<PER-SHARE-DIVIDEND> (1.179)
<PER-SHARE-DISTRIBUTIONS> (3.027)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.265
<EXPENSE-RATIO> 0.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
