<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio Highlights........................ 4
Portfolio Management Review................. 5
Portfolio of Investments.................... 8
Statement of Assets and Liabilities......... 9
Statement of Operations..................... 10
Statement of Changes in Net Assets.......... 11
Financial Highlights........................ 12
Notes to Financial Statements............... 15
</TABLE>
GOVT SAR 8/96
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
August 1, 1996
Dear Shareholder,
As you may be aware, an agreement was reached in late June for VK/AC Hold-
ing, Inc., the parent company of Van Kampen American Capital, Inc., to be ac-
quired by the Morgan Stanley Group, Inc. While this announcement may appear
commonplace in an ever-changing financial industry, we believe it represents
an exciting opportunity for shareholders of our investment products.
With Morgan Stanley's global leadership in
investment banking and asset management and Van Kampen American Capital's rep-
utation for competitive long-term performance and superior investor services,
together we will offer a broader range of investment opportunities and expert-
ise.
The new ownership will not affect our commitment to pursuing excellence in
all aspects of our business. And, we expect very little change in the way your
mutual fund account is maintained and serviced.
A proxy will be mailed to you shortly explaining the acquisition and asking
for your vote of approval. Please read it carefully and return your response
for inclusion in the shareholder vote. We value our relationship with you and
look forward to communicating more details of this transaction, which is an-
ticipated to be completed in November.
ECONOMIC REVIEW
The economy demonstrated an acceleration in growth during the six-month re-
porting period. After a nominal 0.3 percent growth rate in the last quarter of
1995, GDP (the nation's gross domestic product) rose by 2.0 percent in this
year's first quarter. And, as anticipated, the economy grew 4.2 percent in the
second quarter, partly reflecting a recovery from the effects of labor strikes
earlier in the year and extreme weather conditions across the country. Upward
momentum has been assisted by consumer spending, as indicated by a 5.6 percent
rise in retail sales in the first five months of this year versus the compara-
ble 1995 period.
In the manufacturing sector, economic reports, such as the National Associa-
tion of Purchasing Managers Index, suggested a continued rebound in production
from last winter's lower levels. In June, this index reached its highest level
since early 1995. Strong levels of exports and a replenishing of inventories
have helped support this momentum.
Surprisingly healthy economic activity led to concerns that inflation may
rise and the Federal Reserve Board might tighten monetary policy. Inflation
remains modest, however, with consumer prices rising at about a 3 percent an-
nual rate over the past year. Meanwhile, the
Continued on page two
1
<PAGE>
closely watched "core" Consumer Price Index, which excludes volatile food and
energy components, has risen year over year at rates between 2.7 and 3.0 per-
cent per year, with mid-1996 readings at a moderate 2.7 percent. In general,
recent reports have suggested an upward creep in labor-related costs, while
indicating that prices of many commodities have begun to decline.
MARKET REVIEW AND OUTLOOK
During the first half of 1996, interest rates rose sharply, and U.S. Trea-
sury yields
increased by 1.00 to 1.25 percent. Benchmark 10-year U.S. Treasuries declined
in value by 7.8 percent. Signs of increasing economic momentum, as discussed
above, were the major factor contributing to this decline.
We anticipate that reasonably strong economic growth will continue during
the balance of 1996, albeit at more moderate rates than the second quarter's
swift pace. While we expect rates of inflation to remain near current levels,
the Fed may begin to lean toward greater restraint in its monetary policy in
the coming months. That suggests an upward bias for short-term interest rates
and for yields on long-term bonds to remain steady at current levels. In par-
ticular, we expect 10-year Treasury yields to remain within a trading range of
6.50 and 7.25 percent.
Additional details about your Fund, including a question and answer section
with your portfolio management team, is provided in this report. We appreciate
your continued confidence in your investment with Van Kampen American Capital.
Sincerely,
SIGNATURE LOGO SIGNATURE LOGO
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1996
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV1................ (2.32%) (2.66%) (2.16%)
Six-month total return/2/........................... (7.00%) (6.44%) (3.10%)
One-year total return/2/............................ (1.49%) (1.20%) 2.24%
Five-year average annual total return/2/............ 5.98% N/A N/A
Ten-year average annual total return/2/............. 6.77% N/A N/A
Life-of-Fund average annual total return/2/........... 8.08% 4.36% 3.36%
Commencement Date................................... 07/16/84 12/20/91 03/10/93
DISTRIBUTION RATE AND YIELD
Distribution Rate/3/.................................. 6.65% 6.26% 6.27%
SEC Yield/4/.......................................... 5.42% 4.93% 4.90%
</TABLE>
N/A = Not Applicable
/1/Assumes reinvestment of all distributions for the period and does not include
payment of the maximum sales charge (4.75% for A shares) or contingent deferred
sales charge (4% for B and 1% for C shares).
/2/Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contin-
gent deferred sales charge (B and C shares).
/3/Distribution 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 Ex-
change 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.
See Notes to Financial Statements
3
<PAGE>
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
COUPON DISTRIBUTION AS OF JUNE 30, 1996
[GRAPH APPEARS HERE]
Percentage of
Coupon Rate Long-Term Investments
6-7................. 10.3%
7-8................. 26.0%
8-9................. 62.9%
10 or More.......... 0.8%
PORTFOLIO COMPOSITION BY SECTOR
[PIE CHARTS APPEAR HERE]
As of June 30, 1996
GNMAs................... 21%
FNMAs................... 9%
FHLMCs.................. 5%
U.S. Treasuries......... 65%
As of December 31, 1995
GNMAs................... 25%
FNMAs................... 13%
Cash Equivalents........ 1%
FHLMCs.................. 12%
U.S. Treasuries......... 49%
DURATION
<TABLE>
<CAPTION>
ON JUNE 30, 1996 ON DECEMBER 31, 1995
<S> <C> <C>
Duration 4.7 years 4.7 years
</TABLE>
4
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
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 that shaped
the markets during the past six months. 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 six-month period ended June 30, 1996.
THE FOLLOWING KEY TERMS HAVE BEEN LISTED IN THE ORDER IN WHICH YOU WILL FIND
THEM IN THIS REPORT.
FEDERAL FUNDS RATE: The rate that banks charge each other for overnight loans.
The Federal Reserve Board uses this rate to affect the direction of interest
rates.
GDP (GROSS DOMESTIC PRODUCT): The total value of goods and services produced in
the U.S. economy over a particular period of time. The GDP growth rate is a
primary indicator of the status of the economy.
MORTGAGE-BACKED SECURITIES: Secured by mortgages, these securities allow in-
vestors to receive payments of interest and principal passed through from the
underlying collateral. These securities are issued by U.S. government agencies
such as, Federal Home Loan Mortgage Corporation (FHLMC, "FreddieMac"), Federal
National Mortgage Association (FNMA, "FannieMae") and Government National Mort-
gage Association (GNMA, "GinnieMae").
YIELD CURVE: The relationship of yields to maturity for bonds of similar qual-
ity but differing maturity. For example, the yields of U.S. Treasury securities
maturing in 1, 5, 10 and 30 years, viewed together, will often reflect a pat-
tern of increasing yield as maturity extends--creating an upward sloping
"curve." If there is little difference among the yields, the "curve" is said to
be flat.
COUPON: The interest rate on a fixed-income security, usually expressed as an
annual percentage of the bond's principal value.
DURATION: A measure of a bond's sensitivity to changes in interest rates, mea-
sured in years. To understand the importance of duration, consider that dura-
tion has a direct impact on a fund's net asset value. The higher the duration,
the greater the effect of interest rate movements on NAV.
BASIS POINT: A measure used in quoting yields on bonds. One hundred basis
points is equal to one percent. For example, if a bond's yield changes from
7.00 to 6.65 percent, it would be considered a 35 basis point move.
Q HOW HAS THE FIXED-INCOME MARKET CHANGED OVER THE PAST SIX MONTHS?
A Investors began the period with a very positive outlook for the fixed-in-
come market, as last year's rally appeared to be extending into 1996. Ex-
pectations were high that the economy would continue to show signs of weakness,
resulting in a less restrictive monetary
5
<PAGE>
policy and lower interest rates. In late January, investors were rewarded as
the Federal Reserve lowered the federal funds rate from 5.50 percent to 5.25
percent (bonds appreciate in value as yields decline).
Then in February, the market reversed course. February's economic reports
showed significant strength in employment, indicating that growth was stronger
than expected. In response, the bond market rally ended and yields began to
climb. As 1996 progressed, the economy continued to gain momentum--GDP grew
from a benign 0.3 percent in the fourth quarter of 1995 to 2.0 percent in the
first quarter of 1996 and more recently, to 4.2 percent in the second quarter.
This led to fears of inflation and a possibility of a tighter monetary policy
by the Fed: earlier market optimism was replaced by extreme caution.
Q HOW WERE FIXED-INCOME SECURITIES AFFECTED AND HOW DID YOU POSITION THE
FUND?
A In January, as interest rates declined and bond prices increased, Trea-
suries outperformed mortgage-backed securities. Mortgage-backed securi-
ties tend to be less attractive in a declining interest rate environment
because homeowner refinancing and mortgage prepayments increase. This can cause
higher-yielding mortgage securities to be redeemed early. However, as inflation
fears grew over the period, prices of Treasury securities began to decline and
mortgage-backed issues began to outperform. Benchmark 10-year Treasury notes
declined in value by approximately 6.10 percent from January to June.
In mid-March, we began selectively purchasing GNMA securities with 8 1/2 and
9 percent coupons that were first issued in 1986-87. Buying these types of se-
curities made the portfolio more defensive, because older mortgage-backed secu-
rities typically have more stable prepayment characteristics and tend to
perform better in a declining market environment. We also purchased lower cou-
pon 6 1/2 and 7 percent mortgage securities for the Fund. We believe interest
rates likely will stabilize or decline by year-end, and these securities will
become more valuable, resulting in gains for the Fund.
Q HOW ARE THE FUND'S ASSETS ALLOCATED?
A We reduced the Fund's holdings in mortgage-backed securities from about
62 percent of the portfolio in December to roughly 50 percent in January.
The Fund's allocation has since remained the same.
At the end of this reporting period, the Fund's Treasury holdings consisted
primarily of longer- and shorter-term securities, a "barbell" maturity struc-
ture that should benefit the Fund if the yield curve flattens. We have
underweighted the Fund's position in intermediate-term Treasuries in favor of
mortgage-backed securities with similar durations. In the current market envi-
ronment, we believe the intermediate-term Treasury sector may underperform. In
order to maintain the Fund's exposure to intermediate-term securities, we have
selected comparable mortgage-backed issues. Please refer to page four for Fund
portfolio highlights.
Q HOW DID THE FUND PERFORM?
A The Fund's six-month total return (Class A shares at net asset value) of
-2.32 percent/1/ reflects the bond market's recent decline. The Fund's
return places it
6
<PAGE>
in the second quartile of the Lipper General U.S. Government Fund category,
above the average for similar government securities funds. We believe that aim-
ing for consistent investment results that place the Fund in the first and sec-
ond quartile of its peer group should produce favorable long-term results for
shareholders, without excessive risk.
Over the same six-month period, the Lehman Brothers Mutual Fund U.S.
Government/Mortgage Index* total return was -1.04 percent. The Index is a
broad-based, unmanaged index that reflects the general performance of U.S. gov-
ernment and mortgage-backed securities. It does not reflect any commissions or
fees that would be paid by an investor purchasing the securities it represents.
We are pleased to report that the Fund's distributed yield compares quite fa-
vorably to that of its peer group. For the month of June, the Fund's current
distribution rate of 6.65 percent/3/ places it in the first quartile of the
Lipper General U.S. Government Fund category, well above the group average of
5.78 percent. Please refer to the chart on page three for additional Fund per-
formance results.
WHAT IS YOUR OUTLOOK FOR THE FIXED-INCOME MARKET AND, MORE SPECIFICALLY,
Q FOR THE FUND IN THE MONTHS AHEAD?
A We believe there is value in the marketplace at current levels and that
Treasury prices already reflect an anticipated tightening in monetary
policy by the Federal Reserve. We expect long-term bond yields to remain within
their current trading range--about 6.50 to 7.25 percent for 10-year Treasury
notes. We look for inflation to remain stable and economic growth to moderate
somewhat, as higher interest rates should act to slow the current strong rate
of growth. Finally, we expect interest rates to trend lower later in 1996.
As we receive indications that investors are beginning to recognize the value
in the marketplace, and if these indicators are further supported by improving
fundamentals, we will look to extend the Fund's duration. This would be accom-
plished by increasing the Fund's Treasury holdings. Specifically, we would seek
to increase the Fund's current underweighting in intermediate-term Treasury
notes.
SIGNATURE LOGO SIGNATURE LOGO
Robert C. Peck, Jr. John R. Reynoldson
Executive Vice President Portfolio Manager
*The Lehman Brothers Mutual Fund U.S. Government Index is no longer in exist-
ence and was replaced with the Lehman Brothers Mutual Fund U.S.
Government/Mortgage Index by Lehman.
Please see footnotes on page three.
7
<PAGE>
PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES AGENCIES
OBLIGATIONS 37.5%
$ 47,414 Federal Home Loan Mortgage Corp.,
Pool............................. 7.000% various $ 45,650,869
80,308 Federal Home Loan Mortgage Corp.,
Pool............................. 7.500 various 79,254,297
3,080 Federal Home Loan Mortgage Corp.,
Pool............................. 8.000 various 3,106,014
49,770 Federal National Mortgage
Association, Pool................ 6.000 various 47,522,249
24,472 Federal National Mortgage
Association, Pool................ 6.500 various 23,661,451
93,724 Federal National Mortgage
Association, Pool................ 7.000 various 90,151,535
88,048 Federal National Mortgage
Association, Pool................ 7.500 various 86,837,533
407 Federal National Mortgage
Association, Pool................ 8.000 various 409,787
386 Federal National Mortgage
Association, Pool................ 11.500 various 426,436
6,015 Federal National Mortgage
Association, Pool................ 12.000 various 6,731,716
79,263 Government National Mortgage
Association, Pool................ 7.000 various 75,968,749
71,311 Government National Mortgage
Association, Pool................ 7.500 various 70,241,583
80,490 Government National Mortgage
Association, Pool................ 8.000 various 81,169,427
26,476 Government National Mortgage
Association, Pool................ 8.500 various 27,212,749
114,796 Government National Mortgage
Association, Pool (platinum)..... 8.500 various 119,226,177
181,185 Government National Mortgage
Association, Pool (platinum)..... 9.000 various 191,253,683
350 Government National Mortgage
Association, Pool................ 11.000 various 389,395
7,947 Government National Mortgage
Association, Pool................ 12.000 various 9,004,797
3,337 Government National Mortgage
Association, Pool................ 12.500 various 3,848,245
--------------
TOTAL UNITED STATES AGENCIES
OBLIGATIONS
(Cost $959,814,713).............. 962,066,692
--------------
UNITED STATES TREASURY
OBLIGATIONS 69.4%
100,000 Treasury Notes................... 7.750 12/31/99 104,250,000
*75,000 Treasury Notes................... 8.000 01/15/97 75,937,500
100,000 Treasury Notes................... 8.000 08/15/99 104,609,000
*100,000 Treasury Notes................... 8.000 05/15/01 106,359,000
*340,000 Treasury Notes................... 8.500 04/15/97 347,119,600
125,000 Treasury Notes................... 8.500 05/15/97 127,871,250
*200,000 Treasury Notes................... 8.625 08/15/97 205,812,000
*200,000 Treasury Notes................... 8.750 10/15/97 206,876,000
75,000 Treasury Notes................... 8.875 11/15/97 77,800,500
*200,000 Treasury Notes................... 8.875 02/15/99 212,468,000
*200,000 Treasury Notes................... 9.000 05/15/98 210,126,000
--------------
TOTAL UNITED STATES TREASURY
OBLIGATIONS
(Cost $1,803,425,799)............ 1,779,228,850
--------------
REPURCHASE AGREEMENT 0.1%
3,930 SBC Capital Markets, Inc., dated
6/28/96 (collateralized by U.S.
Government obligations in a
pooled cash account) repurchase
proceeds $3,931,775 (Cost
$3,930,000)...................... 5.420 07/01/96 3,930,000
--------------
TOTAL INVESTMENTS (Cost $2,767,170,512) 107.0%.............. 2,745,225,542
OTHER ASSETS AND LIABILITIES, NET (7.0%).................... (179,877,820)
--------------
NET ASSETS 100%............................................. $2,565,347,722
--------------
</TABLE>
*Securities with a market value of approximately $1.2 billion were placed as
collateral for forward commitments and futures contracts (see Note 1B)
See Notes to Financial Statements
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $2,767,170,512)............. $2,745,225,542
Cash........................................................... 1,585
Receivable for investments sold................................ 213,033,053
Interest receivable............................................ 45,324,215
Unrealized appreciation of forward commitments................. 4,742,295
Receivable for variation margin................................ 3,755,764
Receivable for Fund shares sold................................ 890,410
Other assets................................................... 208,790
--------------
Total Assets.................................................. 3,013,181,654
--------------
LIABILITIES
Payable for investments purchased.............................. 430,224,010
Payable for Fund shares redeemed............................... 9,852,928
Unrealized depreciation of forward commitments................. 2,047,031
Due to Distributor............................................. 1,135,797
Due to Adviser................................................. 1,106,161
Dividends payable.............................................. 1,033,691
Due to shareholder service agent............................... 463,391
Deferred Trustees' compensation................................ 231,634
Accrued expenses and other liabilities......................... 1,739,289
--------------
Total Liabilities............................................. 447,833,932
--------------
NET ASSETS, equivalent to $9.96 per share for Class A, $9.97
per share for Class B, and $9.95 per share for Class C shares. $2,565,347,722
--------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest at par: 229,455,668 Class A,
25,620,107 Class B, and 2,402,678 Class C shares outstanding.. $ 2,574,785
Capital surplus................................................ 3,470,931,818
Accumulated net realized loss on securities.................... (894,747,189)
Net unrealized appreciation (depreciation) of securities
Investments................................................... (21,944,970)
Forward commitments........................................... 2,695,264
Futures contracts............................................. 5,366,610
Undistributed net investment income............................ 471,404
--------------
NET ASSETS..................................................... $2,565,347,722
--------------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest......................................................... $105,463,741
------------
EXPENSES
Management fees.................................................. 6,972,789
Shareholder service agent's fees and expenses.................... 2,666,164
Accounting services.............................................. 225,741
Service fees--Class A............................................ 2,878,273
Distribution and service fees--Class B........................... 1,345,691
Distribution and service fees--Class C........................... 126,381
Trustees' fees and expenses...................................... 47,820
Audit fees....................................................... 23,236
Custodian fees................................................... 139,003
Legal fees....................................................... 4,405
Reports to shareholders.......................................... 114,502
Registration and filing fees..................................... 39,641
Miscellaneous.................................................... 250,984
Retirement plan expense reimbursement (see Note 4)............... (8,000)
------------
Total expenses.................................................. 14,826,630
------------
NET INVESTMENT INCOME............................................ 90,637,111
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized gain (loss) on securities
Investments..................................................... 12,938,186
Forward commitments............................................. (31,015,092)
Futures contracts............................................... (27,746,415)
Net unrealized depreciation of securities during the period
Investments..................................................... (100,896,647)
Forward commitments............................................. (881,736)
Futures contracts............................................... (8,942,072)
------------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES................... (156,543,776)
------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $(65,906,665)
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended
Ended June 30, December 31,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period................ $2,856,848,714 $2,889,434,388
-------------- --------------
OPERATIONS
Net investment income.......................... 90,637,111 189,276,556
Net realized gain (loss) on securities......... (45,823,321) 69,871,494
Net unrealized appreciation (depreciation) of
securities during the period................... (110,720,455) 188,212,750
-------------- --------------
Increase (decrease) in net assets resulting
from operations............................... (65,906,665) 447,360,800
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME
Class A....................................... (82,360,228) (175,321,149)
Class B....................................... (8,274,384) (17,200,645)
Class C....................................... (778,717) (1,830,278)
-------------- --------------
(91,413,329) (194,352,072)
-------------- --------------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A....................................... 146,551,835 302,620,414
Class B....................................... 13,514,740 38,792,849
Class C....................................... 1,629,135 7,126,126
-------------- --------------
161,695,710 348,539,389
-------------- --------------
Proceeds from shares issued for distributions
reinvested
Class A....................................... 44,909,371 94,006,173
Class B....................................... 4,983,480 10,412,722
Class C....................................... 483,885 1,142,287
-------------- --------------
50,376,736 105,561,182
-------------- --------------
Cost of shares redeemed
Class A....................................... (309,929,340) (656,610,356)
Class B....................................... (32,766,370) (67,005,306)
Class C....................................... (3,557,734) (16,079,311)
-------------- --------------
(346,253,444) (739,694,973)
-------------- --------------
Decrease in net assets resulting from capital
transactions.................................. (134,180,998) (285,594,402)
-------------- --------------
DECREASE IN NET ASSETS......................... (291,500,992) (32,585,674)
-------------- --------------
NET ASSETS, end of period (including
undistributed net investment income of
$471,404 and $1,247,622, respectively)........ $2,565,347,722 $2,856,848,714
-------------- --------------
</TABLE>
See Notes to Financial Statements
11
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
of the periods indicated. (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------
Six Months
Ended Year Ended December 31
June 30, ------------------------------------------------
1996 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period..... $ 10.55 $ 9.67 $ 10.80 $ 10.75 $ 10.95 $ 10.27
-------- -------- -------- -------- -------- --------
Income from investment
operations
Investment income...... .39 .77 .76 .90587 1.00 1.00
Expenses............... (.05) (.10) (.10) (.10212) (.10) (.10)
-------- -------- -------- -------- -------- --------
Net investment income... .34 .67 .66 .80375 .90 .90
Net realized and
unrealized gain (loss)
on securities.......... (.582) .8985 (1.1145) .05 (.2225) .68
-------- -------- -------- -------- -------- --------
Total from investment
operations.............. (.242) 1.5685 (.4545) .85375 .6775 1.58
-------- -------- -------- -------- -------- --------
Less distributions from
net investment income.. (.348) (.6885) (.6755) (.80375) (.8775) (.90)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period.................. $ 9.96 $ 10.55 $ 9.67 $ 10.80 $ 10.75 $ 10.95
-------- -------- -------- -------- -------- --------
Total Return(/1/)....... (2.32%) 16.77% (4.26%) 8.15% 6.56% 16.28%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (millions)....... $2,286.0 $2,544.5 $2,578.7 $3,418.8 $3,635.3 $3,871.5
Average net assets
(millions).............. $2,398.6 $2,580.4 $2,919.0 $3,580.7 $3,707.6 $3,799.0
Ratios to average net
assets
(annualized)(/2/)
Expenses............... 1.02% 1.01% 1.02% .98% .97% .96%
Expenses, without
expense reimbursement. 1.02% -- -- -- -- --
Net investment income.. 6.81% 6.62% 6.96% 7.73% 8.42% 8.65%
Net investment income,
without
expense reimbursement. 6.81% -- -- -- -- --
Portfolio turnover rate. 160% 231% 306% 239% 239% 131%
</TABLE>
(1) Total return for a period of less than one year is not annualized. Total
return does not consider the effect of sales charges.
(2) See Note 4.
See Notes to Financial Statements
12
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each
of the periods indicated. (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B(/1/)
------------------------------------------------
Six Months
Ended Year Ended December 31
June 30, ------------------------------------
1996 1995 1994 1993 1992(/2/)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period........................ $ 10.56 $ 9.68 $ 10.80 $ 10.75 $10.95
------- ------- ------- ------- ------
Income from investment
operations
Investment income............ .40 .78 .77 .92 .94
Expenses..................... (.09) (.18) (.17) (.18) (.18)
------- ------- ------- ------- ------
Net investment income......... .31 .60 .60 .74 .76
Net realized and unrealized
gain (loss) on securities..... (.588) .8965 (1.1275) .03 (.165)
------- ------- ------- ------- ------
Total from investment
operations.................... (.278) 1.4965 (.5275) .77 .595
------- ------- ------- ------- ------
Less distributions from net
investment income............. (.312) (.6165) (.5925) (.72) (.795)
------- ------- ------- ------- ------
Net asset value, end of
period........................ $ 9.97 $ 10.56 $ 9.68 $ 10.80 $10.75
------- ------- ------- ------- ------
Total Return(/3/) ............ (2.66%) 15.93% (4.95%) 7.31% 5.74%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions).................... $255.4 $285.5 $278.7 $368.4 $236.6
Average net assets (millions). $269.1 $283.7 $320.7 $308.8 $ 92.1
Ratios to average net assets
(annualized)(/4/)
Expenses..................... 1.78% 1.77% 1.78% 1.74% 1.74%
Expenses, without expense
reimbursement................ 1.78% -- -- -- --
Net investment income........ 6.05% 5.86% 6.20% 7.21% 7.20%
Net investment income,
without expense
reimbursement............... 6.05% -- -- -- --
Portfolio turnover rate....... 160% 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 for a period of less than one year is not annualized. Total
return does not consider the effect of sales charges.
(4) See Note 4.
See Notes to Financial Statements
13
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each
of the periods indicated. (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-----------------------------------------
March 10,
Six Months Year Ended 1993(/1/)
Ended December 31 through
June 30, --------------- December 31,
1996 1993(/2/)
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period.............................. $10.54 $ 9.66 $ 10.79 $10.94
------ ------ ------- ------
Income from investment operations
Investment income.................. .40 .78 .77 .85
Expenses........................... (.09) (.18) (.17) (.16)
------ ------ ------- ------
Net investment income............... .31 .60 .60 .69
Net realized and unrealized gain
(loss) on securities................ (.588) .8965 (1.1375) (.3055)
------ ------ ------- ------
Total from investment operations.... (.278) 1.4965 (.5375) .3845
------ ------ ------- ------
Less distributions from net
investment income................... (.312) (.6165) (.5925) (.5345)
------ ------ ------- ------
Net asset value, end of period...... $ 9.95 $10.54 $ 9.66 $10.79
------ ------ ------- ------
Total Return(/3/)................... (2.16%) 15.96% (5.05%) 3.58%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions).......................... $ 23.9 $ 26.8 $ 32.0 $ 39.0
Average net assets (millions)....... $ 25.3 $ 29.9 $ 38.6 $ 21.0
Ratios to average net assets
(annualized)(/4/)
Expenses........................... 1.79% 1.77% 1.78% 1.72%
Expenses, without expense
reimbursement...................... 1.79% -- -- --
Net investment income.............. 6.04% 5.86% 6.24% 7.54%
Net investment income, without
expense reimbursement.............. 6.04% -- -- --
Portfolio turnover rate............. 160% 231% 306% 239%
</TABLE>
(1) Commencement of offering of sales.
(2) Based on average month-end shares outstanding.
(3) Total return for a period of less than one year is not annualized. Total
return does not consider the effect of sales charges.
(4) See Note 4.
See Notes to Financial Statements
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Government Securities Fund (the "Fund") is regis-
tered 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. Govern-
ment, 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 prep-
aration of financial statements in conformity with generally accepted account-
ing 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 op-
tion is traded, or, if no sales are reported, at the mean between the last re-
ported 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 invest-
ments with a maturity of more than 60 days when purchased are valued based on
market quotations until the remaining days to maturity becomes less than 61
days. From such time, until maturity, the investments are valued at amortized
cost.
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 move-
ment 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 ac-
quiring the futures position. During the period the futures contract is open,
changes in the value of the contract ("variation margin") are recognized by
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
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 bro-
ker. 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 transac-
tions between the Fund and dealers. Upon executing a forward commitment and
during the period of obligation, the Fund maintains collateral of cash or se-
curities 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 re-
corded as a long-term purchase. For forward purchase commitments for which se-
curity 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 for-
ward commitment, the effect of which is to extend the settlement date. In ad-
dition, the Fund may occasionally close such forward commitments prior to
delivery. Gains and losses are realized upon the ultimate closing or cash set-
tlement 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 in-
vest independently in repurchase agreements, or transfer uninvested cash bal-
ances into a pooled cash account along with other investment companies advised
by Van Kampen American Capital Asset Management, Inc. (the "Adviser"), the
daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are collateralized by the underlying debt security. The Fund will
make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is re-
quired to maintain the value of the underlying security at not less than the
repurchase proceeds due the Fund.
D. FEDERAL INCOME TAXES-No provision for federal income taxes is required be-
cause the Fund has elected to be taxed as a "regulated investment company" un-
der the Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investment income and taxable net
realized capital gains to its shareholders. It is anticipated that no distri-
butions of capital gains will be made until tax basis capital loss
carryforwards expire or are offset by net realized capital gains.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
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
current or future capital gains until expiration in 1996 through 2002, of
which approximately 27% will expire in 1996.
E. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transac-
tions are accounted for on the trade date. Realized gains and losses on in-
vestments are determined on the basis of identified cost. 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 accor-
dance with the minimum distribution requirements of the Internal Revenue Code,
which may differ from generally accepted accounting principles. Such dividends
or distributions may exceed financial statement earnings.
G. DEBT DISCOUNT OR PREMIUM-The Fund accounts for discounts and premiums on
the same basis as is used for federal income tax reporting. Accordingly, orig-
inal issue discounts on debt securities purchased are amortized over the life
of the security. Premiums on debt securities are not amortized. Market dis-
counts are recognized at the time of sale as realized gains for book purposes
and ordinary income for tax purposes.
NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as investment manager of the Fund. Management fees are paid
monthly, based on the average 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>
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
Accounting services include the salaries and overhead expenses of the Fund's
Chief Accounting Officer and the personnel operating under his direction.
Charges are allocated among investment companies advised by the Adviser. For
the period, these charges included $12,633 as the Fund's share of the employee
costs attributable to the Fund's accounting officers. A portion of the ac-
counting services expense was paid to the Adviser in reimbursement of person-
nel, facilities and equipment costs attributable to the provision of
accounting services to the Fund. The accounting services provided by the Ad-
viser 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 $2,187,700.
The Fund was advised that Van Kampen American Capital Distributors, Inc.
(the "Distributor"), an affiliate of the Adviser, received $382,335 as its
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 serv-
ice fees incurred. Class B and 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 Distribu-
tor for Class B and C shares may exceed the amounts reimbursed to the Distrib-
utor by the Fund. At the end of the period, the unreimbursed expenses incurred
by the Distributor under the Class B and C plans aggregated approximately
$15.7 million and $492,000, respectively, and may be carried forward and reim-
bursed 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.
Certain officers and trustees of the Fund are officers and trustees of the
Adviser, the Distributor, and the shareholder service agent.
NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments and forward commitments, were
$4,386,749,360 and $4,364,643,220, respectively.
The identified cost of investments owned at the end of the period was the
same for federal income tax and financial reporting purposes. Net unrealized
appreciation was $21,944,970, gross unrealized appreciation aggregated
$12,420,788, and gross unrealized depreciation aggregated $34,365,758.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
At the end of the period, the Fund held the following forward commitments
for which delivery is not intended and long futures contracts expiring in Sep-
tember, 1996:
FORWARD COMMITMENTS
<TABLE>
<CAPTION>
Par Unrealized
Amount Appreciation
(000) Security Market Value (Depreciation)
- ------------------------------------------------------------------------------
<C> <S> <C> <C>
$ 35,000 Federal National Mtg Association,
6.50%, settling 7/96 (purchased) $ 33,840,800 $ 226,737
100,000 Federal National Mtg Association,
6.50%, settling 7/96 (purchased) 93,500,000 750,000
123,200 Government National Mtg Association,
7.00%, settling 7/96 (purchased) 118,098,977 1,509,308
100,000 United States Treasury Notes, 5.75%,
settling 8/96 (purchased) 97,357,000 5,438
200,000 United States Treasury Notes, 6.50%,
settling 8/96 (purchased) 196,618,000 2,250,812
------------ ----------
539,414,777 4,742,295
------------ ----------
100,000 Government National Mtg Association,
6.50%, settling 7/96 (purchased) 92,969,000 (1,031,000)
100,000 United States Treasury Notes, 6.50%,
settling 8/96 (sold) (98,309,000) (1,016,031)
------------ ----------
(5,340,000) (2,047,031)
------------ ----------
TOTAL FORWARD COMMITMENTS $534,074,777 $2,695,264
------------ ----------
FUTURES CONTRACTS
<CAPTION>
Unrealized
Contracts Security Market Value Appreciation
- ------------------------------------------------------------------------------
<C> <S> <C> <C>
3,300 United States Treasury Bonds $361,453,125 $5,234,111
500 United States Treasury Notes 53,750,000 132,499
------------ ----------
$415,203,125 $5,366,610
------------ ----------
</TABLE>
NOTE 4--TRUSTEE COMPENSATION
Trustees who are not affiliated with the Adviser are compensated by the Fund
at the annual rate of $4,072 plus a fee of $233 per day for Board and Commit-
tee meetings attended. During the period, such fees aggregated $37,696.
The Fund has a deferred compensation plan and a defined benefits retirement
plan for its trustees not affiliated with the Adviser. These plans are not
funded, and obligations under the plans 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 plans by any form of trust or escrow.
Under the deferred compensation plan, trustees may elect to defer all or a
portion of their compensation to a later date. Each trustee covered under the
plan elects to earn on the deferred balances an amount equal to the total re-
turn of the Fund or equal to the income earned by the Fund on its short-term
investments.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
Under the retirement plan which became effective in January, 1996, benefits
which are based on years of service will be received by the trustee for a ten-
year period. The maximum annual benefit for each trustee is $2,500. Retirement
plan expenses for the period aggregated $8,000. During the calendar year 1996,
the Adviser has agreed to reimburse the Fund for these plan expenses.
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
(Class A) or at the time of redemption on a contingent deferred basis (Class B
and C). All classes of shares have the same rights, except that Class B and C
shares bear the cost of distribution fees and certain other class specific ex-
penses. Realized and unrealized gains or losses, investment income and ex-
penses (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 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 bene-
ficial interest authorized. Transactions in shares of beneficial interest
were:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30,1996 DECEMBER 31, 1995
- --------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A................. 14,368,786 29,742,902
Class B................. 1,327,558 3,806,648
Class C................. 159,604 699,653
----------- -----------
15,855,948 34,249,203
----------- -----------
Shares issued for
distributions
reinvested
Class A................. 4,407,885 9,310,631
Class B................. 488,411 1,029,563
Class C................. 47,517 113,172
----------- -----------
4,943,813 10,453,366
----------- -----------
Shares redeemed
Class A................. (30,501,239) (64,644,902)
Class B................. (3,230,971) (6,591,507)
Class C................. (351,302) (1,581,505)
----------- -----------
(34,083,512) (72,817,914)
----------- -----------
Decrease in shares
outstanding............ (13,283,751) (28,115,345)
----------- -----------
</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 C shares from net invest-
ment income, payable July 15, 1996 to shareholders of record on July 1, 1996.
20
<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
*Co-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.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
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 60606
(C)VanKampen American Capital Distribu-
tors, Inc., 1996
All rights reserved.
SM denotes a service mark of
Van Kampen American Capital Distributors,
Inc.
This report is submitted for the general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors un-
less 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.
21
