<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders................................ 1
Performance Results................................... 3
Performance Perspective............................... 4
Portfolio Management Review........................... 5
Portfolio of Investments.............................. 7
Statement of Assets and Liabilities................... 8
Statement of Operations............................... 9
Statement of Changes in Net Assets.................... 10
Financial Highlights.................................. 11
Notes to Financial Statements......................... 14
Report of Independent Accountants..................... 18
</TABLE>
GOVT ANR 2/96
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
January 24, 1996
Dear Shareholder,
For most investors, it would be hard to surpass the success enjoyed during
1995. The stock and bond markets achieved substantial gains, driven by a
combination of continuing economic growth and low inflation. The strength of
equity and fixed-income securities in 1995 was particularly impressive because
it followed a year in which both markets declined. People who remained
invested during 1995 generally shared in the growth of the markets, while
investors who retreated after 1994's downturn may have missed out on the
double-digit returns.
The rebound in the markets last year reinforces the importance of
maintaining a long-term perspective for your investments. While the
environment for stocks and bonds remains positive, it is unlikely that 1996
will see a repeat of the markets' strong 1995 performance. However, over the
long-term, stocks have outperformed virtually all other types of investments,
and bonds have met the needs of investors who seek capital preservation and
regular income.
ECONOMIC OVERVIEW
The U.S. economy grew throughout 1995, though the rate of growth slowed
toward year-end. The gross domestic product (the value of all goods and
services produced in the United States) grew at an annual rate of more than
4.2 percent in the third quarter of 1995, but slowed to an estimated 2 to 3
percent in the fourth quarter, with retail and auto sales particularly
sluggish. The slower growth rate eased concerns about a rise in inflation and
allowed the Federal Reserve Board to lower short-term interest rates by a
quarter-percentage point in the later December. The reduction in rates during
the latter half of 1995 is expected to help generate moderate economic growth
in 1996, just as the Fed's raising of short-term rates in 1994 helped slow
economic growth in 1995.
The cut in short-term rates, combined with modest growth forecasts, was
viewed by the financial markets as a positive event, pushing up both stock and
bond prices. For the year ended December 31, 1995, the Standard & Poor's 500-
Stock Index achieved a total return of 37.45 percent. The yield on 10-year
Treasury notes was 5.57 percent on December 31, compared to 7.83 percent at
the beginning of the year. Because bond prices and yields move in opposite
directions, bond prices rose. Many observers expect the Fed to cut rates
further if Congress and the President are able to reach an agreement on the
federal budget, provided economic conditions justify further easing.
With a low inflation, low interest rate environment, corporate earnings
remained quite strong during the year, helping to push stocks to new highs.
The strongest sectors were technology and finance, as these stocks benefited
from the impact of the Internet, telecommunications deregulation and bank
mergers. U.S. companies with global operations also did well, aided by a
declining U.S. dollar.
ECONOMIC OUTLOOK
Looking ahead, we are cautiously optimistic. We expect the economy to grow
at a rate of 2 to 3 percent throughout 1996, with growth stronger in the
second half of the year as the full impact of the Fed's rate cuts take effect.
Lower rates will have the greatest impact on interest-sensitive industries,
such as housing. Although inflation appears to be under control, there
probably will be some cyclical upward pressure in 1996.
1
Continued on page two
<PAGE>
The current economic conditions are ideal for stocks, especially those of
smaller companies, because they tend to be affected less by economic cycles.
The outlook for the fixed-income market--including municipal bonds--is
positive, too. In the near-term, we believe domestic markets will benefit from
a stable U.S. dollar and increased business activity driven in part by a number
of recently announced strategic reorganizations of some of the nation's blue
chip industry leaders.
During recent months, debate over tax reform and the federal deficit has
dominated the agenda in Washington. Now that we are in a presidential election
year, tax reform likely will replace the budget battle as the top issue in
Washington. There has been varied speculation about the impact tax reform could
have on the economy and on various types of investments. We are following the
tax reform debate very closely, and we will keep you updated on this issue
throughout the year. See the winter issue of Your Portfolio for a detailed
discussion of tax reform.
On the following pages, you can read about your Fund's performance in 1995,
as well as the portfolio management team's outlook for the Fund in the coming
months. We hope that you will find this information helpful.
CORPORATE NEWS
As part of our commitment to helping you achieve your investment goals, Van
Kampen American Capital strives to provide shareholders with the best service
in the mutual fund industry. That is why we are especially pleased to have
received the 1995 Quality Tested Service Seal, which is awarded annually by
DALBAR, Inc., an independent research firm. The Seal, which symbolizes the
achievement of the highest tier of service in the mutual fund industry, was
awarded to American Capital annually from 1990 to 1994 and we are honored that
the service provided by Van Kampen American Capital has achieved the same level
of excellence.
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, 1995
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
One-year total return based on NAV1................. 16.77% 15.93% 15.96%
One-year total return/2/............................ 11.25% 11.93% 14.96%
Five-year average annual total return2.............. 7.38% N/A N/A
Ten-year average annual total return/2/............. 7.58% N/A N/A
Life-of-Fund average annual total return2........... 8.67% 5.61% 4.79%
Commencement Date................................... 07/16/84 12/20/91 03/10/93
DISTRIBUTION RATE AND YIELD
Distribution Rate3.................................. 6.28% 5.91% 5.92%
SEC Yield4.......................................... 5.29% 4.84% 4.85%
</TABLE>
N/A = Not Applicable
1Assumes reinvestment of all distributions for the period and does not include
payment of the maximum sales charge (4.75% for A shares) or contingent deferred
sales charge (4% for B shares and 1% for C shares).
2Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or
contingent deferred sales charge (B shares and C shares).
3Distribution Rate represents the monthly annualized distributions of the Fund
at the end of the period and not the earnings of the Fund.
/4/SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio should
theoretically generate for the 30-day period ending as shown above.
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth
more or less than their original cost.
3
<PAGE>
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular inter-
vals. A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison
can:
. Illustrate the general market environment in which your investments are
being managed
. Reflect the impact of favorable market trends or difficult market condi-
tions
. Help you evaluate the extent to which your Fund's management team has re-
sponded to the opportunities and challenges presented to them over the
period measured
For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Lehman Brothers Mutual Fund
U.S. Government Index over time. As a broad-based, unmanaged statistical com-
posite, this index does not reflect any commissions or fees which would be in-
curred by an investor purchasing the securities it represents. Similarly, its
performance does not reflect any sales charges or other costs which would be
applicable to an actively managed portfolio, such as that of the Fund.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Government Securities Fund vs. Lehman
Brothers Mutual Fund U.S. Government Index
(December 1985 through December 1995)
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
Lehman Bros.
Mutual Fund
VKAC Government U.S. Government
Securities Fund Index
--------------- ---------------
<S> <C> <C>
Dec. 1985 9,525 10,000
Dec. 1986 10,533 11,767
Dec. 1987 10,370 12,025
Dec. 1988 11,090 12,871
Dec. 1989 12,743 14,703
Dec. 1990 13,853 15,986
Dec. 1991 16,108 18,437
Dec. 1992 17,165 19,770
Dec. 1993 18,564 21,878
Dec. 1994 17,774 21,140
Dec. 1995 20,755 25,015
</TABLE>
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions for the period ended December 31,
1995, and includes payment of the maximum sales charge (4.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
4
<PAGE>
PORTFOLIO MANAGER COMMENTS
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
We recently spoke with the management team of the Van Kampen American Capital
Government Securities Fund about the key events and economic forces which
shaped the markets during the past fiscal year. The team includes John R.
Reynoldson, portfolio manager, and Robert C. Peck, Jr., executive vice
president for fixed-income investments. The following excerpts reflect their
views on the Fund's performance during the twelve-month period ended December
31, 1995.
Q WHAT WERE SOME OF THE KEY EVENTS AND MARKET CONDITIONS WHICH AFFECTED THE
FUND'S PERFORMANCE THIS PAST YEAR?
A The bond markets began experiencing an abrupt turnaround in terms of in-
vestor expectations late in 1994, which ultimately set the stage for
strong performance in the fixed-income sector during 1995.
The first quarter of 1995 was dominated by concerns that interest rates
could go higher, especially after the Federal Reserve Board initiated what
would turn out to be the last in a series of increases in short-term interest
rates in February. Although many investors saw this as a continuation of a
trend by the Fed, others were sensing a shift in the market environment. As a
result, bond prices, which hit lows in November 1994, began to trend
cautiously higher.
Later in February, when the economy showed signs of slowing and the
inflation rate remained low, the market began to rally. In March, as the
economic data continued to indicate a slowdown in economic growth and
inflation, more and more investors came to the conclusion that the Fed would
not need to boost interest rates (the Fed uses the federal funds rate as a
means to influence the rate of economic growth and inflation). By the end of
the first quarter, yields on 10-year Treasuries were nearly 1 percent below
their highs of 8 percent in November 1994.
As these conditions persisted, investor sentiment came full circle, and
expectations of slow economic growth and lower interest rates drove the
markets sharply higher in the second quarter (bond prices move in the opposite
direction of interest rates). The markets continued their upward trend for the
remainder of the year--yields on 10-year governments fell another 1 percent to
about 6 percent.
As it turned out, the Fed lowered the fed funds rate in July and again in
December, further fueling the rally. Over the course of the year, the yield on
the 10-year Treasury declined from around 7.75 percent to just over 5.50
percent, while the fed funds rate fell by one-half percent to yield 5.50
percent.
Q DID THE FUND BENEFIT FROM THESE CONDITIONS AND THE STRONG FIXED-INCOME
MARKETS WE SAW IN 1995?
A We were pleased with the Fund's performance for the year. Class A shares
achieved a total return at net asset value of 16.77 percent/1/ over the
twelve-month period ended December 31, 1995, with a distribution rate of 6.28
percent./3/ Over the course of the year, the Fund's net asset value increased
to $10.55 per share (as of December 31, 1995) from $9.67 per share at the be-
ginning of 1995.
To put this performance in perspective, the total return of the Lehman
Brothers Mutual Fund U.S. Government Index was 18.33 percent through the
twelve months of 1995. The Index is a broad-based, unmanaged index that
reflects the general performance of U.S. Government securities. It does not
reflect any commissions or fees that would be paid by an investor purchasing
the securities it represents.
Q WAS IT NECESSARY TO MAKE SIGNIFICANT CHANGES IN YOUR APPROACH TO MANAGING
THE FUND'S ASSETS DURING THE COURSE OF THE YEAR?
A No, not significant changes. We always keep a close watch on the portfolio
and the markets and make adjustments as we see fit, but our primary ap-
proach remained consistent.
Historically, we have tended to favor a portfolio of government securities,
predominantly U.S. Treasury securities and mortgage-backed securities such as
GNMAs. Our goal is to add value over time by making adjustments in the
allocation of the Fund's assets between Treasuries and mortgage securities,
striking a balance between securities which offer income opportunities and
those which have the potential for capital appreciation in a bull market and
preservation in a bear market. We don't make big bets on the direction of
interest rates in the hopes of large short-term gains. Our orientation is more
concerned with achieving a consistently attractive total return over the long-
term.
5
<PAGE>
Q WHAT WERE SOME OF THE ADJUSTMENTS YOU MADE TO THE PORTFOLIO DURING THE
YEAR?
A We shifted the portfolio's asset allocation more heavily toward Treasuries
as the year went on. For the first three quarters of the year, governments
and mortgages were neck-and-neck in terms of total return, but Treasuries
outperformed mortgage securities significantly in the fourth quarter (the Mer-
rill Lynch Broad Government Index was up by 4.6 percent, the Merrill Lynch
Broad Mortgage Index by 3.3 percent).
We started the year with just 28 percent of the Fund's portfolio in Treasury
securities, but had increased our holdings in that sector of the market to
around 49 percent of the portfolio by December 31, 1995.
[LOGO/ART APPEARS HERE]
[Pie Chart of Portfolio Holdings by Sector
as of December 31, 1995 appears here.]
U.S. Agency Obligations...... 50%
U.S. Treasury Notes.......... 49%
Repurchase Agreement......... 1%
Q WHAT IS YOUR OUTLOOK FOR THE FUND AND THE MARKET IN THE MONTHS AHEAD?
A The outlook for the fixed-income market in 1996 is generally positive, but
we don't expect the market to match its 1995 performance. Inflation seems
to be under control, the numbers suggest that low to moderate growth is ahead
for the economy, and the market has been anticipating a federal budget resolu-
tion and further easing by the Fed. All of these factors should have a posi-
tive impact on fixed-income securities in the near-term. The fundamentals seem
good, and we believe the portfolio is well positioned for what looks to be a
favorable climate for fixed-income investing.
/s/ Robert C. Peck, Jr. /s/ John R. Reynoldson
Robert C. Peck, Jr. John R. Reynoldson
Executive Vice President Portfolio Manager
Fixed Income Investments
Please see footnotes on page three
6
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES AGENCY
OBLIGATIONS 51.7%
$ 49,004 Federal Home Loan Mtg.
Corp., Pools............ 7.000% 02/01/23 to 09/01/24 $ 49,432,994
191,933 Federal Home Loan Mtg.
Corp., Pools............ 7.500 01/01/22 to 12/01/24 196,730,895
94,103 Federal Home Loan Mtg.
Corp., Pools............ 8.000 07/01/24 to 10/01/24 97,455,408
97,135 Federal National Mtg.
Association, Pools...... 7.000 12/01/99 to 05/01/25 97,893,392
93,535 Federal National Mtg.
Association, Pools...... 7.500 01/01/23 to 01/01/25 95,815,288
184,629 Federal National Mtg.
Association, Pools...... 8.000 12/01/22 to 07/01/25 191,206,852
489 Federal National Mtg.
Association, Pools...... 11.500 07/01/13 to 03/01/19 549,668
6,856 Federal National Mtg.
Association, Pools...... 12.000 03/01/13 to 01/01/16 7,764,002
*100,000 Government National Mtg.
Association, Forward
settling 01/96.......... 7.000 12/31/23 101,125,000
207,554 Government National Mtg.
Association, Pools...... 7.000 01/15/23 to 11/15/25 209,889,460
179,337 Government National Mtg.
Association, Pools...... 7.500 02/15/07 to 11/15/24 184,381,797
188,940 Government National Mtg.
Association, Pools...... 8.000 05/15/23 to 12/15/25 196,675,568
29,433 Government National Mtg.
Association, Pools...... 8.500 09/15/04 to 03/15/23 30,905,075
398 Government National Mtg.
Association, Pools...... 11.000 01/15/10 to 11/15/18 445,460
9,081 Government National Mtg.
Association, Pools...... 12.000 06/15/11 to 08/15/15 10,423,370
3,902 Government National Mtg.
Association, Pools...... 12.500 04/15/10 to 07/15/18 4,527,493
--------------
TOTAL UNITED STATES
AGENCY OBLIGATIONS
(Cost $1,407,893,559)... 1,475,221,722
--------------
UNITED STATES TREASURY
OBLIGATIONS 50.1%
**130,000 Treasury Notes.......... 6.500 08/15/05 138,612,500
**200,000 Treasury Notes.......... 7.750 12/31/99 217,000,000
**100,000 Treasury Notes.......... 7.875 01/15/98 105,078,000
**160,000 Treasury Notes.......... 8.000 01/15/97 164,350,400
100,000 Treasury Notes.......... 8.000 05/15/01 111,859,000
**200,000 Treasury Notes.......... 8.625 08/15/97 210,594,000
70,000 Treasury Notes.......... 8.875 02/15/96 70,295,400
**200,000 Treasury Notes.......... 8.875 02/15/99 220,406,000
100,000 Treasury Notes.......... 9.000 05/15/98 108,266,000
85,000 Treasury Notes.......... 9.375 04/15/96 85,996,200
--------------
TOTAL UNITED STATES
TREASURY OBLIGATION
(Cost $1,420,833,986)... 1,432,457,500
--------------
REPURCHASE
AGREEMENT 0.6%
17,905 SBC Capital Markets,
Inc., dated 12/29/95
(collateralized by U.S.
Government obligations
in a pooled cash
account) repurchase
proceeds $17,916,638
(Cost $17,905,000)...... 5.850 01/02/96 17,905,000
--------------
TOTAL INVESTMENTS (Cost $2,846,632,545) 102.4%................. 2,925,584,222
OTHER ASSETS AND LIABILITIES, NET (2.4%)....................... (68,735,508)
--------------
NET ASSETS 100%................................................ $2,856,848,714
--------------
</TABLE>
*Non-income producing security.
**Securities with a market value of $1.1 billion were placed as collateral for
forward commitments and futures contracts (see Note 1B).
7
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $2,846,632,545)............. $2,925,584,222
Receivable for investments sold................................ 191,321,797
Interest receivable............................................ 47,927,709
Net unrealized appreciation of forward commitments............. 3,577,000
Receivable for Fund shares sold................................ 661,407
Receivable for variation margin................................ 1,681,245
Other assets................................................... 185,770
--------------
Total Assets................................................. 3,170,939,150
--------------
LIABILITIES
Payable for investments purchased.............................. 292,002,422
Payable for Fund shares redeemed............................... 16,813,210
Due to Distributor............................................. 1,911,175
Due to Adviser................................................. 1,232,042
Dividends payable.............................................. 919,119
Due to shareholder service agent............................... 539,295
Deferred Trustees' compensation................................ 216,028
Accrued expenses and other liabilities......................... 457,145
--------------
Total Liabilities............................................ 314,090,436
--------------
NET ASSETS, equivalent to $10.55 per share for Class A, $10.56
per share for Class B, and $10.54 per share for Class C
shares........................................................ $2,856,848,714
--------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest at par: 241,180,236 Class A,
27,035,109 Class B, and 2,546,859 Class C shares outstanding.. $ 2,707,622
Capital surplus................................................ 3,604,979,979
Accumulated net realized loss on securities.................... (848,923,868)
Net unrealized appreciation of securities
Investments................................................... 78,951,677
Forward commitments........................................... 3,577,000
Futures contracts............................................. 14,308,682
Undistributed net investment income............................ 1,247,622
--------------
NET ASSETS..................................................... $2,856,848,714
--------------
</TABLE>
8
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.......................................................... $220,823,618
------------
EXPENSES
Management fees................................................... 14,930,811
Shareholder service agent's fees and expenses..................... 6,061,207
Accounting services............................................... 361,240
Service fees--Class A............................................. 6,279,943
Distribution and service fees--Class B............................ 2,837,411
Distribution and service fees--Class C............................ 299,342
Trustees' fees and expenses....................................... 83,558
Audit fees........................................................ 45,403
Custodian fees.................................................... 177,261
Legal fees........................................................ 19,268
Reports to shareholders........................................... 229,011
Registration and filing fees...................................... 86,797
Miscellaneous..................................................... 135,810
------------
Total expenses................................................... 31,547,062
------------
NET INVESTMENT INCOME............................................. 189,276,556
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized gain (loss) on securities
Investments...................................................... 16,406,866
Forward commitments.............................................. 69,362,591
Futures contracts................................................ (15,897,963)
Net unrealized appreciation of securities during the period
Investments...................................................... 171,212,232
Forward commitments.............................................. 2,544,131
Futures contracts................................................ 14,456,387
------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES.................... 258,084,244
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $447,360,800
------------
</TABLE>
9
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period................ $2,889,434,388 $3,826,260,982
-------------- --------------
OPERATIONS
Net investment income......................... 189,276,556 225,471,837
Net realized gain (loss) on securities........ 69,871,494 (339,948,125)
Net unrealized appreciation (depreciation) of
securities during the period................. 188,212,750 (44,520,752)
-------------- --------------
Increase (decrease) in net assets resulting
from operations.............................. 447,360,800 (158,997,040)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME
Class A...................................... (175,321,149) (196,817,900)
Class B...................................... (17,200,645) (18,938,944)
Class C...................................... (1,830,278) (2,253,668)
-------------- --------------
(194,352,072) (218,010,512)
-------------- --------------
NET EQUALIZATION DEBITS........................ -- (3,507,799)
-------------- --------------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A...................................... 302,620,414 553,447,542
Class B...................................... 38,792,849 61,568,635
Class C...................................... 7,126,126 24,992,564
-------------- --------------
348,539,389 640,008,741
-------------- --------------
Proceeds from shares issued for distributions
reinvested
Class A...................................... 94,006,173 102,123,069
Class B...................................... 10,412,722 11,182,131
Class C...................................... 1,142,287 1,324,949
-------------- --------------
105,561,182 114,630,149
-------------- --------------
Cost of shares redeemed
Class A...................................... (656,610,356) (1,157,041,983)
Class B...................................... (67,005,306) (125,196,156)
Class C...................................... (16,079,311) (28,711,994)
-------------- --------------
(739,694,973) (1,310,950,133)
-------------- --------------
Decrease in net assets resulting from capital
transactions................................. (285,594,402) (556,311,243)
-------------- --------------
DECREASE IN NET ASSETS....................... (32,585,674) (936,826,594)
-------------- --------------
NET ASSETS, end of period (including
undistributed net investment income of
$1,247,622 and $4,202,470, respectively)...... $2,856,848,714 $2,889,434,388
-------------- --------------
</TABLE>
10
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------------
Year Ended December 31
------------------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period...................... $9.67 $10.80 $10.75 $10.95 $10.27
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Investment income........... .77 .76 .90587 1.00 1.00
Expenses.................... (.10) (.10) (.10212) (.10) (.10)
-------- -------- -------- -------- --------
Net investment income........ .67 .66 .80375 .90 .90
Net realized and unrealized
gain (loss) on securities... .8985 (1.1145) .05 (.2225) .68
-------- -------- -------- -------- --------
Total from investment
operations.................. 1.5685 (.4545) .85375 .6775 1.58
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS FROM NET
INVESTMENT INCOME........... (.6885) (.6755) (.80375) (.8775) (.90)
-------- -------- -------- -------- --------
Net asset value, end of
period...................... $10.55 $9.67 $10.80 $10.75 $10.95
-------- -------- -------- -------- --------
TOTAL RETURN (/1/)........... 16.77% (4.26%) 8.15% 6.56% 16.28%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions).................. $2,544.5 $2,578.7 $3,418.8 $3,635.3 $3,871.5
Average net assets
(millions).................. $2,580.4 $2,919.0 $3,580.7 $3,707.6 $3,799.0
Ratios to average net assets
Expenses.................... 1.01% 1.02% .98% .97% .96%
Net investment income....... 6.62% 6.96% 7.73% 8.42% 8.65%
Portfolio turnover rate...... 231% 306% 239% 239% 131%
</TABLE>
(1) Total return does not consider the effect of sales charges.
11
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B(/1/)
----------------------------------
Year Ended December 31
----------------------------------
1995 1994 1993 1992(/2/)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........ $9.68 $10.80 $10.75 $10.95
------ ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income.......................... .78 .77 .92 .94
Expenses................................... (.18) (.17) (.18) (.18)
------ ------- ------ ------
Net investment income....................... .60 .60 .74 .76
Net realized and unrealized gain (loss) on
securities................................. .8965 (1.1275) .03 (.165)
------ ------- ------ ------
Total from investment operations............ 1.4965 (.5275) .77 .595
------ ------- ------ ------
LESS DISTRIBUTIONS FROM NET INVESTMENT
INCOME..................................... (.6165) (.5925) (.72) (.795)
------ ------- ------ ------
Net asset value, end of period.............. $10.56 $9.68 $10.80 $10.75
------ ------- ------ ------
TOTAL RETURN (/3/) ......................... 15.93% (4.95%) 7.31% 5.74%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)........ $285.5 $278.7 $368.4 $236.6
Average net assets (millions)............... $283.7 $320.7 $308.8 $92.1
Ratios to average net assets
Expenses................................... 1.77% 1.78% 1.74% 1.74%
Net investment income...................... 5.86% 6.20% 7.21% 7.20%
Portfolio turnover rate..................... 231% 306% 239% 239%
</TABLE>
(1) Class B shares commenced sales on December 20, 1991 at a net asset value of
$10.86 per share. At December 31, 1991, there were 16,980 shares
outstanding with a per share net asset value of $10.95. The increase in net
asset value was due principally to unrealized appreciation; there were no
dividends or distributions paid during the period.
(2)Based on average month-end shares outstanding.
(3)Total return does not consider the effect of sales charges.
12
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-----------------------------
March 10,
Year Ended 1993(/1/)
December 31 through
--------------- December 31,
1993(/2/)
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period............ $9.66 $10.79 $10.94
------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Investment income.............................. .78 .77 .85
Expenses....................................... (.18) (.17) (.16)
------ ------- ------
Net investment income........................... .60 .60 .69
Net realized and unrealized gain (loss) on
securities..................................... .8965 (1.1375) (.3055)
------ ------- ------
Total from investment operations................ 1.4965 (.5375) .3845
------ ------- ------
LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME... (.6165) (.5925) (.5345)
------ ------- ------
Net asset value, end of period.................. $10.54 $9.66 $10.79
------ ------- ------
TOTAL RETURN (/3/).............................. 15.96% (5.05%) 3.58%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)............ $26.8 $32.0 $39.0
Average net assets (millions)................... $29.9 $38.6 $21.0
Ratios to average net assets (annualized)
Expenses....................................... 1.77% 1.78% 1.72%
Net investment income.......................... 5.86% 6.24% 7.54%
Portfolio turnover rate......................... 231% 306% 239%
</TABLE>
(1)Commencement of offering of sales.
(2)Based on average month-end shares outstanding.
(3)Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
13
See Notes to Financial Statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Government Securities Fund (the "Fund", formerly
American Capital Government Securities, Inc.) is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end
management investment company. The Fund seeks to provide investors with a high
current return consistent with preservation of capital. The Fund invests
primarily in debt securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
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 amounts reported. Actual amounts may differ from the estimates.
A. INVESTMENT VALUATIONS-U.S. Agency and Government obligations and related
forward commitments are valued at the last reported bid price. Listed options
are valued at the last reported sale price on the exchange on which such option
is traded, or, if no sales are reported, at the mean between the last reported
bid and asked prices. Forward commitments for which market quotations are not
readily available are valued at fair value under a method approved by the Board
of Trustees.
Short-term investments with a maturity of 60 days or less when purchased are
valued at amortized cost, which approximates market value. Short-term
investments with a maturity of more than 60 days when purchased are valued
based on market quotations until the remaining days to maturity becomes less
than 61 days. From such time, until maturity, the investments are valued at
amortized cost.
B. FUTURES CONTRACTS AND FORWARD COMMITMENTS-General--Transactions in futures
contracts and forward commitments are utilized in strategies to manage the
market risk of the Fund's investments. The purchase of a futures contract or
forward commitment increases the impact on net asset value of changes in the
market price of investments. Forward commitments have a risk of loss due to
nonperformance of counter-parties. There is also a risk that the market
movement of such instruments may not be in the direction forecasted. Note 3-
Investment Activity contains additional information.
Futures Contracts--Upon entering into futures contracts, the Fund maintains,
in a segregated account with its custodian, securities with a value equal to
its obligation under the futures contracts. A portion of these funds is held as
collateral in an account in the name of the broker, the Fund's agent in
acquiring the futures position. During the period the futures contract is open,
changes in the value of the contract ("variation margin") are recognized by
marking the contract to market on a daily basis. As unrealized gains or losses
are incurred, variation margin payments are received from or made to the
broker. Upon the closing or cash settlement of a contract, gains or losses are
realized. The cost of securities acquired through delivery under a contract is
adjusted by the unrealized gain or loss on the contract.
Forward Commitments--The Fund trades certain securities under the terms of
forward commitments, whereby the settlement for payment and delivery occurs at
a specified future date. Forward commitments are privately negotiated
transactions between the Fund and dealers. Upon executing a forward commitment
and during the period of obligation, the Fund maintains collateral of cash or
securities in a segregated account with its custodian in an amount sufficient
to relieve the obligation. If the intent of the Fund is to accept delivery of a
security traded under a forward purchase commitment, the commitment is recorded
as a long-term purchase. For forward purchase commitments for which security
settlement is not intended by the Fund and all forward sales commitments,
changes in the value of the commitment are recognized by marking the commitment
to market on a daily basis. During the commitment, the Fund may either resell
or repurchase the forward commitment and enter into a new forward commitment,
the effect of which is to extend the settlement date. In addition, the Fund may
occasionally close such forward commitments prior to delivery. Gains and losses
are realized upon the ultimate closing or cash settlement of forward
commitments.
C. REPURCHASE AGREEMENTS-A repurchase agreement is a short-term investment in
which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. The Fund may
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"),
the daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are collateralized by the underlying debt security. The Fund will
make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is
required to maintain the value of the underlying security at not less than the
repurchase proceeds due the Fund.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
D. FEDERAL INCOME TAXES-No provision for federal income taxes is required
because the Fund has elected to be taxed as a "regulated investment company"
under the Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investment income and taxable net
realized capital gains to its shareholders. It is anticipated that no
distributions of capital gains will be made until tax basis capital loss
carryforwards expire or are offset by net realized capital gains.
The net realized capital loss carryforward of approximately $830.6 million
for federal income tax purposes at December 31, 1995 may be utilized to offset
future capital gains until expiration in 1996 through 2002, of which
approximately 27% will expire in 1996.
During the period, the Fund utilized approximately $79.6 million in capital
loss carryforward to offset capital gains.
E. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment
transactions are accounted for on the trade date. Realized gains and losses on
investments are determined on the basis of identified cost. Interest income is
accrued daily.
F. DIVIDENDS AND DISTRIBUTIONS-Dividends and distributions to shareholders are
recorded on the record date. The Fund distributes tax basis earnings in
accordance with the minimum distribution requirements of the Internal Revenue
Code, which may differ from generally accepted accounting principles. Such
dividends or distributions may exceed financial statement earnings.
G. EQUALIZATION-At December 31, 1994, the Fund discontinued the accounting
practice of equalization, which it had used since its inception. Equalization
is a practice whereby a portion of the proceeds from sales and costs of
redemptions of Fund shares, equivalent on a per-share basis to the amount of
the undistributed net investment income, is charged or credited to
undistributed net investment income.
The balance of equalization included in undistributed net investment income
at the date of change, which was $8,817,157, was reclassified to capital
surplus. Such reclassification had no effect on net assets, results of
operations, or net asset value per share of the Fund.
H. DEBT DISCOUNT OR PREMIUM-The Fund accounts for discounts and premiums on the
same basis as is used for federal income tax reporting. Accordingly, original
issue discounts on debt securities purchased are amortized over the life of the
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.
NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as investment manager of the Fund. Management fees are paid
monthly, based on the average daily net assets of the Fund at an annual rate as
determined by the following graduated fee schedule.
<TABLE>
<CAPTION>
Average Daily
Net Assets Annual Rate
-----------------------------
<S> <C>
First $1 billion .540%
Next $1 billion .515
Next $1 billion .490
Next $1 billion .440
Next $1 billion .390
Next $1 billion .340
Next $1 billion .290
Over $7 billion .240
</TABLE>
Accounting services include the salaries and overhead expenses of the Fund's
Treasurer and the personnel operating under his direction. Charges are
allocated among investment companies advised by the Adviser. For the period,
these charges included $48,080 as the Fund's share of the employee costs
attributable to the Fund's accounting officers. A portion of the accounting
services expense was paid to the Adviser in reimbursement of personnel,
facilities and equipment costs attributable to the provision of accounting
services to the Fund. The accounting services provided by the Adviser are at
cost.
ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as the
Fund's shareholder service agent. These services are provided at cost plus a
profit. For the period, fees for these services aggregated $4,988,910.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The Fund was advised that Van Kampen American Capital Distributors, Inc. (the
"Distributor") and Advantage Capital Corp. (the "Retail Dealer"), both
affiliates of the Adviser, received $77,457 and $127,266, respectively, as
their portion of commissions charged on sales of Fund shares during the period.
Under the Distribution Plans, each class of shares pays up to .25% per annum
of its average net assets to reimburse the Distributor for expenses and service
fees incurred. Class B shares and Class C shares pay an additional fee of up to
.75% per annum of their average net assets to reimburse the Distributor for its
distribution expenses. Actual distribution expenses incurred by the Distributor
for Class B shares and Class C shares may exceed the amounts reimbursed to the
Distributor by the Fund. At the end of the period, the unreimbursed expenses
incurred by the Distributor under the Class B and Class C plans aggregated
approximately $16.3 million and $584,000, respectively, and may be carried
forward and reimbursed through either the collection of the contingent deferred
sales charges from share redemptions or, subject to the annual renewal of the
plans, future Fund reimbursements of distribution fees.
Legal fees during the period were for services rendered by former counsel of
the Fund, O'Melveny & Myers. A former trustee was of counsel to that firm.
Certain officers and trustees of the Fund are officers and trustees of the
Adviser, the Distributor, the Retail Dealer, and the shareholder service agent.
NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of
investments, excluding short-term investments and forward commitments, were
$6,551,306,874 and $7,238,913,938, respectively.
The identified cost of investments owned at the end of the period for federal
income tax purposes was $2,850,629,811. Net unrealized appreciation was
$74,954,411, gross unrealized appreciation aggregated $77,183,508, and gross
unrealized depreciation aggregated $2,229,097.
At the end of the period, the Fund held the following forward purchase
commitments for which delivery is not intended and long futures contracts
expiring in March, 1996:
FORWARD PURCHASE COMMITMENTS
<TABLE>
<CAPTION>
Par
Amount Unrealized
(000) Security Market Value Appreciation
--------------------------------------------------------------------------
<C> <S> <C> <C>
Federal National Mortgage
$100,000 Association, 7.50%, settling 2/96.. $102,326,000 $ 607,250
200,000 Government National Mortgage
Association, 7.50%, settling 1/96.. 205,626,000 2,969,750
------------ -----------
$307,952,000 $3,577,000
------------ -----------
FUTURES CONTRACTS
<CAPTION>
Unrealized
Contracts Security Market Value Appreciation
--------------------------------------------------------------------------
<C> <S> <C> <C>
3,400 U.S. Treasury Bond................. $412,993,750 $11,665,635
1,000 U.S. Treasury Notes, five year..... 110,406,250 1,158,448
1,100 U.S. Treasury Notes, ten year...... 126,053,125 1,484,599
------------ -----------
$649,453,125 $14,308,682
------------ -----------
</TABLE>
NOTE 4--TRUSTEE COMPENSATION
Trustees who are not affiliated with the Adviser are compensated by the Fund at
the annual rate of $4,360 plus a fee of $125 per day for Board and Committee
meetings attended. During the period, such fees aggregated $78,346.
The trustees may participate in a voluntary Deferred Compensation Plan (the
"Plan"). 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. Each trustee covered by the Plan elects to be credited with an
earnings component on amounts deferred equal to the income earned by the Fund
on its short-term investments or equal to the total return of the Fund.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 5--CAPITAL
The Fund offers three classes of shares at their respective net asset values
per share, plus a sales charge which is imposed either at the time of purchase
(the Class A shares) or at the time of redemption on a contingent deferred
basis (the Class B and Class C shares). All classes of shares have the same
rights, except that Class B and Class C shares bear the cost of distribution
fees and certain other class specific expenses. Realized and unrealized gains
or losses, investment income and expenses (other than class specific expenses)
are allocated daily to each class of shares based upon the relative proportion
of net assets of each class. Class B and Class C shares automatically convert
to Class A shares six years and ten years after purchase, respectively, subject
to certain conditions.
The Fund has an unlimited number of shares of $.01 par value shares of
beneficial interest authorized. Transactions in shares of beneficial interest
were:
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------
1995 1994
---------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A....................................... 29,742,902 54,143,898
Class B....................................... 3,806,648 6,087,332
Class C....................................... 699,653 2,433,717
----------- ------------
34,249,203 62,664,947
----------- ------------
Shares issued for distributions reinvested
Class A....................................... 9,310,631 10,139,455
Class B....................................... 1,029,563 1,108,892
Class C....................................... 113,172 131,412
----------- ------------
10,453,366 11,379,759
----------- ------------
Shares redeemed
Class A....................................... (64,644,902) (114,111,603)
Class B....................................... (6,591,507) (12,508,979)
Class C....................................... (1,581,505) (2,864,864)
----------- ------------
(72,817,914) (129,485,446)
----------- ------------
Decrease in shares outstanding............... (28,115,345) (55,440,740)
----------- ------------
</TABLE>
NOTE 6--SUBSEQUENT DIVIDENDS
The Board of Trustees of the Fund declared dividends of $.058 per share for
Class A shares and $.052 per share for Class B and Class C shares from net
investment income, payable January 16, 1996 to shareholders of record on
January 2, 1996.
NOTE 7--FUND REORGANIZATION
On July 21, 1995, the shareholders approved the reorganization of the Fund to a
Delaware Business Trust and the election of fourteen trustees. On August 4,
1995, the reorganization became effective.
17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen American Capital
Government Securities Fund (the "Fund") at December 31, 1995, the results of
its operations, the changes in its net assets and the selected financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative procedures where confirmations from brokers were not received,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
January 31, 1996
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
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Limited Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund
Ask your investment adviser for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
19
<PAGE>
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
LINDA HUTTON HEAGY
ROGER HILSMAN
R. CRAIG KENNEDY
DENNIS J. MCDONNELL
DONALD C. MILLER
JACK E. NELSON
DON G. POWELL
JEROME L. ROBINSON
FERNANDO SISTO*
WAYNE W. WHALEN
WILLIAM S. WOODSIDE
*Chairman of the Board
OFFICERS
DON G. POWELL
President and Chief Executive Officer
DENNIS J. MCDONNELL
Executive Vice President
RONALD A. NYBERG
Vice President and Secretary
EDWARD C. WOOD, III
Vice President and Chief Financial Officer
CURTIS W. MORELL
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN
Treasurer
TANYA M. LODEN
Controller
WILLIAM N. BROWN
PETER W. HEGEL
ROBERT C. PECK, JR.
ALAN T. SACHTLEBEN
PAUL R. WOLKENBERG
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT INC.
2800 Post Oak Blvd.,
Houston, Texas 77056
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICE AGENT
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256,
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK AND TRUST CO.
225 Franklin Street,
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGER & FLOM
333 West Wacker Drive
Chicago, Illinois 60806
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1201 Louisiana
Houston, Texas 77002
(C)Van Kampen American Capital Distributors, Inc., 1996
All rights reserved.
SMdenotes a service mark of
Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors
unless it has been preceded or is accompanied by an effective prospectus of
the Fund which contains additional information on how to purchase shares, the
sales charge, and other pertinent data. If used for distributions to
prospective investors after 3/31/96, this annual report must be accompanied by
a Van Kampen American Capital Government Securities performance data update
for the most recent quarter.
20
