<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders............................... 1
Performance Results.................................. 3
Portfolio Highlights................................. 4
Performance in Perspective........................... 5
Portfolio Management Review.......................... 6
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
Report of Independent Accountants.................... 20
</TABLE>
GOVT ANR 2/97
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO APPEARS HERE]
DENNIS J. MCDONNELL AND DON G. POWELL
January 31, 1997
Dear Shareholder,
As noted in earlier reports, VK/AC Holding Inc., the parent company of Van
Kampen American Capital, Inc., was acquired by Morgan Stanley Group Inc., a
world leader in asset management and investment banking. The transaction was
completed in October, and we are excited about the opportunities it creates
for investors. As part of the acquisition, Van Kampen American Capital became
the distributor of Morgan Stanley retail funds on January 2, 1997.
ECONOMIC REVIEW
The U.S. economy experienced moderate growth and low inflation during the re-
porting period. At the beginning of 1996, economists were concerned that the
tepid economic pace of late 1995 might continue, possibly leading
to a recession by year end. That assumption soon came into question, however,
when non-farm payrolls increased by a stunning 705,000 in February, the big-
gest one-month jump in 13 years. Then, a larger-than-expected 4.7 percent rate
in real GDP (the nation's gross domestic product, adjusted for inflation) dur-
ing the second quarter confirmed that the economy was back in a strong-growth
mode. By summer, the earlier talk of recession and rate cuts had changed to
concerns about economic overheating and the possibility of interest rate
hikes.
Despite mounting evidence of inflation, the Federal Reserve held to a stable
monetary policy, believing the supply-and-demand imbalances in the commodity
markets were temporary and that burdensome consumer debt loans would eventu-
ally slow the economy without the need for higher interest rates. Events dur-
ing the second half of 1996 proved the wisdom of Federal Reserve policy; real
GDP growth moderated to 2.0 percent in the third quarter while commodity
prices receded. For the year, core producer prices rose by 0.6 percent, the
second-lowest annual increase on record. Including the volatile food and en-
ergy sectors, however, prices at the retail level rose by 3.3 percent.
MARKET REVIEW
Shifting expectations and modest returns characterized the fixed-income mar-
kets in 1996. The year began with long-term interest rates near their lowest
level since the 1960s, reflecting the view that the U.S. economy was weakening
and that a series of rate cuts by the Fed would be forthcoming. But the Fed's
quarter-percentage point reduction in the federal funds rate on January 31
would be the only monetary easing during 1996, and long-term rates soon began
rising amid signs of a tightening labor market and stronger-than-expected eco-
nomic growth. Fears that the Fed would reverse course and raise short-term
rates became widespread after the economy experienced strong growth in the
second quarter. By July, the yield on the Treasury's benchmark 30-year bond
had reached 7.2 percent, up from 5.95 percent at the beginning of the year.
The last half of 1996 was spent recovering some of the ground lost over the
first six months. Economic growth moderated, commodity prices declined, and
inflation remained tame. As the Fed held short-term rates steady, long-term
yields gradually fell back to 6.64 percent by year end.
Continued on page two
1
<PAGE>
Compared to 1995, when most sectors of the taxable fixed-income market gener-
ated double-digit gains, 1996 was a year of generally lackluster performance.
The Lehman Brothers Aggregate Bond Index returned just 4.16 percent for the 12-
month period ended December 31, 1996, with short- and intermediate-term bonds
outperforming longer-term issues. Lower-rated corporate bonds also
outperformed, as investors felt comfortable enough to stretch for yield given
the better-than-expected economy. For the year, 30-year Treasury bonds lost ap-
proximately one percent on a total-return basis. Treasury bond losses might
have been larger, but heavy foreign buying, especially among Japanese invest-
ors, where low interest rates and a falling yen made high-quality American
bonds an attractive option, helped control losses.
OUTLOOK
We expect interest rates during 1997 to repeat last year's moderate up and down
pattern. Stronger-than-expected U.S. economic growth and faint rumblings of in-
flationary pressures over the first half of the year could prompt a series of
modest credit tightenings by the Fed. We anticipate that by the fourth quarter
the economy will moderate enough to discourage any lingering concerns about in-
flation and allow interest rates to begin to decline across the maturity spec-
trum. Although economic growth could be accompanied by short-term market
fluctuation, we do not believe it will be strong enough to reignite price pres-
sures. The results of the November elections reinforce this view--the combina-
tion of a Democratic president and a Republican Congress should help restrain
potential spending increases and large tax cuts, and therefore, keep the budget
deficit under control.
While domestic economic fundamentals may keep bond prices relatively stable,
the risk of external shocks to the market is growing. We cannot look at the
U.S. economy in isolation. Monetary policy has been unusually accommodative in
many foreign countries. If these economies gain significant strength in 1997,
the resulting demand for capital could divert buying power from the U.S. credit
market. Since foreign investors have become the marginal buyers of U.S. bonds,
we believe that increased competition for the global fixed-income dollar could
exert mild upward pressure on domestic interest rates over the year.
Additional details about your Fund, including a question and answer section
with your portfolio management team, are provided in this report. We appreciate
your continued confidence in your investment with Van Kampen American Capital.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1996
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
One-year total return based on NAV/1/............. 1.90% 1.17% 1.18%
One-year total return/2/.......................... (2.98%) (2.63%) 0.22%
Five-year average annual total return/2/.......... 4.57% 4.59% N/A
Ten-year average annual total return/2/........... 6.70% N/A N/A
Life-of-Fund average annual total return/2/....... 8.11% 4.96% 3.83%
Commencement Date................................. 07/16/84 12/20/91 03/10/93
DISTRIBUTION RATE AND YIELD
Distribution Rate/3/.............................. 6.26% 5.85% 5.86%
SEC Yield/4/...................................... 5.49% 4.97% 4.93%
</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 for early withdrawal (4% for B shares 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
contingent deferred sales charge for early withdrawal (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
Exchange Commission for determining the amount of net income a portfolio should
theoretically generate for the 30-day period ending December 31, 1996.
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>
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
COUPON DISTRIBUTION AS OF DECEMBER 31, 1996
[GRAPH APPEARS HERE]
Percentage of
Coupon Rate Long-Term Investments
5-6................. 3.7%
6-7................. 26.9%
7-8................. 13.7%
8-9................. 50.3%
11 or more.......... 5.4%
PORTFOLIO COMPOSITION BY SECTOR AS A PERCENTAGE OF TOTAL INVESTMENTS
[PIE CHARTS APPEAR HERE]
As of December 31, 1996
U.S. Treasuries......... 48%
GNMAs................... 32%
FNMAs................... 14%
FHLMCs.................. 5%
Cash Equivalents........ 1%
DURATION
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
<S> <C> <C>
Duration 5.3 years 4.7 years
</TABLE>
4
<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 31, 1986 through December 31, 1996)
[CHART APPEARS HERE]
Fund's Total Return
1 Year Avg. Annual = -2.98%
5 Year Avg. Annual = 4.57%
10 Year Avg. Annual = 6.70%
Inception Avg. Annual = 8.11%
VKAC Government Lehman Bros. Mutual
Securities Fund Fund U.S. Government Index
Dec 1986 $ 9,527 $10,000
Dec 1987 $ 9,380 $10,219
Dec 1988 $10,031 $10,938
Dec 1989 $11,526 $12,495
Dec 1990 $12,530 $13,587
Dec 1991 $14,570 $15,669
Dec 1992 $15,526 $16,802
Dec 1993 $16,792 $18,592
Dec 1994 $16,077 $17,965
Dec 1995 $18,774 $21,258
Dec 1996 $19,130 $21,848
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 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.
5
<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 fiscal year. The team includes John R. Reynoldson,
portfolio manager, and Peter W. Hegel, chief investment officer for fixed-
income investments. The following excerpts reflect their views on the Fund's
performance during the 12-month period ended December 31, 1996.
Q HOW WOULD YOU DESCRIBE THE KEY FACTORS THAT INFLUENCED THE FIXED-INCOME
MARKETS IN 1996?
A The year began on an optimistic note. The fixed-income markets had experi-
enced a strong 1995, and the domestic economy was expected to continue its
pattern of slow growth into the first half of 1996. In reality, the economy
proved to be healthier than anticipated. First-quarter gross domestic product
(GDP) statistics were up dramatically, and employment reports remained strong
in March, June, and July. These indicators triggered a sharp increase in inter-
est rates, beginning in February and continuing through the second quarter.
In August, Alan Greenspan, chairman of the Federal Reserve Board, cautioned
that the economy would likely slow down during the last six months of the year.
His comments were later supported by sluggish employment figures and third-
quarter GDP numbers, which came in lower than expected. Interest rate fears
were eased, and the bond market enjoyed a rally that continued until December.
Overall, rates moved upward in 1996, with the yield on the two-year Treasury
ending the year up by about three-quarters of a percentage point. This rising
rate environment made it more difficult for fixed-income funds to achieve sig-
nificant total returns.
Q HOW DID YOU REACT TO THESE MARKET CONDITIONS?
A We maintained an above-average weighting in mortgage-backed securities,
compared to other funds in our peer group. On average, about 48 percent of
the Fund's assets were invested in mortgage securities throughout the year,
with the remainder allocated toward U.S. Treasuries. This strategy was effec-
tive because mortgage securities were priced inexpensively compared to Treasur-
ies. Thus, the Fund benefited from the attractive yield spread between the
mortgage-backed bonds and U.S. Treasuries that existed early in the year. As
the year progressed, we continued to fine-tune the portfolio, particularly
looking for areas of value within the mortgage-backed sector of the market.
In addition, we adjusted the duration of the Fund. Duration, which is ex-
pressed in years, is a measurement of a bond's price sensitivity to changes in
interest rates. The longer the Fund's duration, the greater the effect of in-
terest rate movements on net asset value. Typically, funds with shorter dura-
tions have performed better in rising rate environments, while funds with
longer durations have performed better when rates are declining. We shortened
duration in February, which helped make the Fund more defensive during the
rapid increase in interest rates that began shortly thereafter. By the end of
the year, the duration was at 5.3 years, an increase from 4.7 years as of De-
cember 31, 1995. For additional Fund portfolio highlights, refer to page four.
Q HOW DID THE FUND PERFORM IN 1996?
A The Government Securities Fund's 12-month total return was 1.90 percent/1/
(Class A shares at net asset value) for the period ended December 31,
1996. By comparison, the average performance of similar funds was 1.72 percent,
according to the Lipper Analytical Services General U.S. Government Fund cate-
gory.
Despite a reduction in the monthly dividend in November from $.0580 per
Class A share to $.0550 per Class A share, the Fund continued to provide supe-
rior levels of current income. As of December 31, 1996, the distribution rate
was 6.26 percent/3/, based on a dividend of $.0550 per share and a maximum pub-
lic offering price of $10.55 per share.
6
<PAGE>
Over the same period, the total return of the Lehman Brothers Mutual Fund
U.S. Government/Mortgage Index was 3.68 percent. Please keep in mind this index
is a broad-based, unmanaged index that reflects the general performance of U.S.
government and mortgage-backed securities. It does not reflect any commissions
or fees that would be paid by an investor purchasing the securities it repre-
sents. Please refer to the chart on page three for additional Fund performance
results.
Q AS YOU LOOK AHEAD TO 1997, WHAT DO YOU SEE FOR THE FUND?
A We are approaching 1997 with a cautious attitude. The economic indicators
we saw at the end of 1996 suggest a strengthening economy, and conven-
tional wisdom says that growth could easily accelerate both here in the United
States and in a number of global economies. Also, with commodity inventories at
their lowest points in decades, any sharp increase in the economy could send
prices and interest rates higher.
Unless conditions change drastically, we have no reason to expect a dramatic
change in the current interest rate environment. We believe the prospects are
good for a continuation of the moderate economic growth and low inflation that
have been the rule rather than the exception in recent years. With Fed chairman
Greenspan entrenched for another term, we know what to expect in terms of mone-
tary policy and have no reason to believe the Fed will wander from the conser-
vative approach it has pursued during Greenspan's tenure.
While there are several factors that could positively impact the market, we
believe that it is more likely that interest rates will increase, rather than
decline in the short term. Our expectation is that most fixed-income products
will have relatively uneventful price performance over the year, but we are
confident that the Fund will provide regular dividend income.
The Fund's duration will remain at its current relatively short level, which
should prove favorable if interest rates move higher. The mortgage-backed por-
tion of the portfolio will remain at approximately 50 percent, and we may in-
crease it if the economy is particularly strong. If, on the other hand,
economic growth indicators prove to be weaker than expected, we are well posi-
tioned to lengthen the Fund's duration by increasing our Treasury holdings. Re-
gardless of what the future holds, our objective for the Fund is to seek to
provide a high level of current return consistent with preservation of capital.
/s/ Peter W. Hegel /s/ John R. Reynoldson
Peter W. Hegel John R. Reynoldson
Chief Investment Officer Portfolio Manager
Fixed-Income Investments
Please see footnotes on page three
7
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1996
All amounts reported in thousands
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES GOVERNMENT
AGENCY OBLIGATIONS 53.9%
Federal Home Loan
Mortgage Corp. Gold 30
$ 45,692 Year Pool............... 7.000% 02/01/23 to 04/01/24 $ 44,961
Federal Home Loan
Mortgage Corp. Gold 30
76,914 Year Pool............... 7.500 01/01/22 to 01/01/24 77,175
Federal Home Loan
Mortgage Corp. Gold 30
2,951 Year Pool............... 8.000 07/01/24 3,007
Federal National
Mortgage Association 15
46,583 Year Dwarf Pool......... 6.000 01/01/09 45,084
Federal National
Mortgage Association 15
23,060 Year Dwarf Pool......... 6.500 06/01/08 22,642
Federal National
Mortgage Association
100,134 Pool.................... 6.500 02/01/26 95,472
Federal National
Mortgage Association
89,699 Pool.................... 7.000 12/01/99 to 10/01/23 88,064
Federal National
Mortgage Association
84,965 Pool.................... 7.500 01/01/23 to 01/01/24 85,086
Federal National
Mortgage Association
384 Pool.................... 8.000 10/01/24 391
Federal National
Mortgage Association
307 Pool.................... 11.500 07/01/13 345
Federal National
Mortgage Association
5,037 Pool.................... 12.000 03/01/13 5,706
Government National
Mortgage Association
98,328 Pool.................... 6.500 04/15/26 93,750
Government National
Mortgage Association
197,271 Pool.................... 7.000 05/15/23 to 05/15/26 193,241
Government National
Mortgage Association
67,506 Pool.................... 7.500 12/15/22 to 03/15/23 67,830
Government National
Mortgage Association
75,553 Pool.................... 8.000 07/15/07 to 04/15/24 77,792
Government National
Mortgage Association
225,279 Pool.................... 8.500 09/15/04 to 03/15/23 236,446
Government National
Mortgage Association
142,185 Pool.................... 9.000 11/15/17 to 12/15/22 151,916
Government National
Mortgage Association
296 Pool.................... 11.000 03/15/10 330
Government National
Mortgage Association
6,981 Pool.................... 12.000 06/15/11 7,932
Government National
Mortgage Association
3,046 Pool.................... 12.500 04/15/10 3,521
----------
TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS.... 1,300,691
----------
UNITED STATES TREASURY
OBLIGATIONS 45.5%
United States Treasury
100,000 Bonds (b)............... 11.125 08/15/03 125,781
United States Treasury
50,000 Notes................... 7.500 11/15/01 52,672
United States Treasury
250,000 Notes (b)............... 8.500 04/15/97 to 02/15/00 258,414
United States Treasury
170,000 Notes (b)............... 8.625 08/15/97 173,215
United States Treasury
275,000 Notes (b)............... 8.875 10/15/97 to 11/15/97 281,839
United States Treasury
200,000 Notes (b)............... 9.000 05/15/98 208,376
----------
TOTAL UNITED STATES TREASURY OBLIGATIONS............. 1,100,297
----------
FORWARD PURCHASE
COMMITMENTS 10.9%
Federal National
Mortgage Association 15
Year Dwarf, January
25,000 Forward................. 6.500 TBA 24,563
Federal National
Mortgage Association 15
Year Dwarf, February
10,000 Forward................. 6.500 TBA 9,809
Government National
Mortgage Association,
3,000 January Forward......... 8.500 TBA 3,142
Government National
Mortgage Association,
24,000 January Forward......... 9.000 TBA 25,695
United States Treasury
100,000 Notes, February Forward. 5.750 10/31/00 98,738
United States Treasury
100,000 Notes, February Forward. 6.500 08/15/05 100,602
----------
TOTAL FORWARD PURCHASE COMMITMENTS................... 262,549
----------
TOTAL LONG-TERM INVESTMENTS 110.3%
(Cost $2,657,902) (a)........................................ 2,663,537
REPURCHASE AGREEMENT 1.2%
Lehman Brothers, Inc. ($28,540 par collateralized by U.S.
Government obligations in a pooled cash account, dated
12/31/96, to be sold on 01/02/97 at $28,551).................. 28,540
LIABILITIES IN EXCESS OF OTHER ASSETS (11.5%)................. (277,351)
----------
NET ASSETS 100.0%............................................. $2,414,726
----------
</TABLE>
(a) At December 31, 1996, cost for federal income tax purposes is $2,658,399;
the gross unrealized appreciation is $28,130 and the gross unrealized
depreciation is $22,993, resulting in net unrealized appreciation of
$5,137.
(b) Assets segregated as collateral for open forward and open futures
transactions.
TBA--To be announced, maturity date has not been established. Upon settlement
and delivery of the mortgage pools, maturity dates will be assigned.
8
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
All amounts, except for Maximum Offering Price information, reported in
thousands
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $2,657,902) (Note 1).. $2,663,537
Short-Term Investments (Note 1).................................... 28,540
Receivables:
Interest.......................................................... 32,297
Fund Shares Sold.................................................. 1,491
Other.............................................................. 86
----------
Total Assets...................................................... 2,725,951
----------
LIABILITIES:
Payables:
Securities Purchased.............................................. 265,735
Fund Shares Repurchased........................................... 35,331
Variation Margin on Futures (Note 5).............................. 6,182
Distributor and Affiliates (Notes 2 and 6)........................ 1,409
Investment Advisory Fee (Note 2).................................. 1,062
Income Distributions.............................................. 917
Accrued Expenses................................................... 341
Deferred Compensation and Retirement Plans (Note 2)................ 248
----------
Total Liabilities................................................. 311,225
----------
NET ASSETS......................................................... $2,414,726
----------
NET ASSETS CONSIST OF:
Capital (Note 3)................................................... $3,074,357
Accumulated Undistributed Net Investment Income.................... 1,350
Net Unrealized Depreciation on Securities.......................... (4,302)
Accumulated Net Realized Loss on Securities........................ (656,679)
----------
NET ASSETS......................................................... $2,414,726
----------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $2,156,391,958 and 214,670,968 shares of beneficial
interest issued and outstanding).................................. $ 10.05
Maximum sales charge (4.75%* of offering price)................... .50
----------
Maximum offering price to public.................................. $ 10.55
----------
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $236,712,629 and 23,553,740 shares of beneficial interest
issued and outstanding)........................................... $ 10.05
----------
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $21,621,196 and 2,155,369 shares of beneficial interest issued
and outstanding).................................................. $ 10.03
----------
</TABLE>
*On sales of $100,000 or more, the sales charge will be reduced.
9
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
All amounts reported in thousands
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................ $ 206,064
---------
EXPENSES:
Investment Advisory Fee (Note 2).................................... 13,463
Distribution (12b-1) and Service Fees (Attributed to Classes A, B
and C of $5,707, $2,582 and $240, respectively) (Note 6)........... 8,529
Shareholder Services (Note 2)....................................... 5,271
Legal (Note 2)...................................................... 171
Trustees Fees and Expenses (Note 2)................................. 87
Other .............................................................. 2,091
---------
Total Expenses..................................................... 29,612
Less Expenses Reimbursed (Note 2).................................. 18
---------
Net Expenses....................................................... 29,594
---------
NET INVESTMENT INCOME............................................... $ 176,470
---------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments ....................................................... $ (27,569)
Futures............................................................ (8,519)
---------
Net Realized Loss on Securities..................................... (36,088)
---------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................ 96,837
---------
End of the Period:
Investments........................................................ 5,635
Futures............................................................ (9,937)
---------
(4,302)
---------
Net Unrealized Depreciation on Securities During the Period......... (101,139)
---------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES...................... $(137,227)
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS.......................... $ 39,243
---------
</TABLE>
10
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1996 and 1995
All amounts reported in thousands
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................... $ 176,470 $ 189,277
Net Realized Gain/Loss on Securities..... (36,088) 69,871
Net Unrealized Appreciation/Depreciation
on Securities During the Period......... (101,139) 188,213
---------- ----------
Change in Net Assets from Operations..... 39,243 447,361
---------- ----------
Distributions from Net Investment Income:
Class A Shares.......................... (159,011) (175,321)
Class B Shares.......................... (15,893) (17,201)
Class C Shares.......................... (1,480) (1,830)
---------- ----------
Total Distributions...................... (176,384) (194,352)
---------- ----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES............................... (137,141) 253,009
---------- ----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................ 236,825 348,540
Net Asset Value of Shares Issued Through
Dividend Reinvestment.................... 97,997 105,561
Cost of Shares Repurchased............... (639,804) (739,695)
---------- ----------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS............................. (304,982) (285,594)
---------- ----------
TOTAL DECREASE IN NET ASSETS............. (442,123) (32,585)
NET ASSETS:
Beginning of the Period.................. 2,856,849 2,889,434
---------- ----------
End of the Period (Including accumulated
undistributed net investment income of
$1,350 and $1,248, respectively)........ $2,414,726 $2,856,849
---------- ----------
</TABLE>
11
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
Class A Shares 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period..................... $10.55 $9.67 $10.80 $10.75 $10.95
-------- -------- -------- -------- --------
Net Investment Income......... .689 .67 .66 .80375 .90
Net Realized and Unrealized
Gain/Loss on Securities...... (.504) .8985 (1.1145) .05 (.2225)
-------- -------- -------- -------- --------
Total from Investment
Operations..................... .185 1.5685 (.4545) .85375 .6775
Less Distributions from Net
Investment Income............. .690 .6885 .6755 .80375 .8775
-------- -------- -------- -------- --------
Net Asset Value, End of the
Period......................... $10.045 $10.55 $9.67 $10.80 $10.75
-------- -------- -------- -------- --------
Total Return (a)............... 1.90% 16.77% (4.26%) 8.15% 6.56%
Net Assets at End of the Period
(In millions).................. $2,156.4 $2,544.5 $2,578.7 $3,418.8 $3,635.3
Ratio of Expenses to Average
Net Assets (b)................. 1.06% 1.01% 1.02% .98% .97%
Ratio of Net Investment Income
to Average Net Assets (b)...... 6.88% 6.62% 6.96% 7.73% 8.42%
Portfolio Turnover............. 271% 231% 306% 239% 239%
</TABLE>
(a) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC's reimbursement of certain expenses was less than
0.01%.
12
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
Class B Shares 1996 1995 1994 1993 1992 (a)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................... $10.56 $9.68 $10.80 $10.75 $10.95
------- ------ ------- ------ ------
Net Investment Income............... .635 .60 .60 .74 .76
Net Realized and Unrealized
Gain/Loss on Securities............ (.527) .8965 (1.1275) .03 (.165)
------- ------ ------- ------ ------
Total from Investment Operations..... .108 1.4965 (.5275) .77 .595
Less Distributions from Net
Investment Income................... .618 .6165 .5925 .72 .795
------- ------ ------- ------ ------
Net Asset Value, End of the Period... $10.050 $10.56 $9.68 $10.80 $10.75
------- ------ ------- ------ ------
Total Return (b)..................... 1.17% 15.93% (4.95%) 7.31% 5.74%
Net Assets at End of the Period (In
millions)............................ $236.7 $285.5 $278.7 $368.4 $236.6
Ratio of Expenses to Average Net
Assets (c)........................... 1.82% 1.77% 1.78% 1.74% 1.74%
Ratio of Net Investment Income to
Average Net Assets (c)............... 6.13% 5.86% 6.20% 7.21% 7.20%
Portfolio Turnover................... 271% 231% 306% 239% 239%
</TABLE>
(a) Based on average month-end shares outstanding.
(b) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC's reimbursement of certain expenses was less than
0.01%.
13
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 10, 1993
Year Ended December (Commencement
31, of Distribution) to
----------------------- December 31,
Class C Shares 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period........................... $10.54 $9.66 $10.79 $10.94
------- ------ ------- ------
Net Investment Income........... .623 .60 .60 .69
Net Realized and Unrealized
Gain/Loss on Securities........ (.514) .8965 (1.1375) (.3055)
------- ------ ------- ------
Total from Investment Operations. .109 1.4965 (.5375) .3845
Less Distributions from Net
Investment Income............... .618 .6165 .5925 .5345
------- ------ ------- ------
Net Asset Value, End of the
Period........................... $10.031 $10.54 $9.66 $10.79
------- ------ ------- ------
Total Return (b)................. 1.18% 15.96% (5.05%) 3.58%*
Net Assets at End of the Period
(In millions).................... $21.6 $26.8 $32.0 $39.0
Ratio of Expenses to Average Net
Assets (c)....................... 1.82% 1.77% 1.78% 1.72%
Ratio of Net Investment Income to
Average Net Assets (c)........... 6.12% 5.86% 6.24% 7.54%
Portfolio Turnover............... 271% 231% 306% 239%
</TABLE>
*Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC's reimbursement of certain expenses was less than
0.01%.
14
See Notes to Financial Statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Government Securities Fund (the "Fund") is orga-
nized as a Delaware business trust, and is registered as a diversified open-end
management investment company under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek a high level of income by
primarily investing in debt securities issued or guaranteed by the U.S. Govern-
ment, its agencies or instrumentalities. The Fund commenced investment opera-
tions on July 16, 1984. The distribution of the Fund's Class B and C shares
commenced on December 20, 1991 and March 10, 1993, respectively.
The following is a summary of significant accounting policies consistently fol-
lowed by the Fund in the preparation of its financial statements. The prepara-
tion of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent as-
sets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
A. SECURITY VALUATION-Investments are stated at value using market quotations.
For those securities where quotations or prices are not available, valuations
are determined in accordance with procedures established in good faith by the
Board of Trustees. Short-term securities with remaining maturities of 60 days
or less are valued at amortized cost.
B. SECURITY TRANSACTIONS-Security transactions are recorded on a trade date ba-
sis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements which are short-term investments
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 bal-
ances into a pooled cash account along with other investment companies advised
by Van Kampen American Capital Asset Management, Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such 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.
C. INVESTMENT INCOME-Interest income is recorded on an accrual basis. Original
issue discount is amortized over the expected life of each applicable security.
Premiums on debt securities are not amortized. Market discounts are recognized
at the time of sale as realized gains for book purposes and ordinary income for
tax purposes.
D. FEDERAL INCOME TAXES-It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which al-
low it to carry a realized capital loss forward for eight years following the
year of the loss and offset these losses against any future realized capital
gains. At December 31, 1996, the Fund had an accumulated capital loss
carryforward for tax purposes of $664,420,190 which will expire between Decem-
ber 31, 1997 and December 31, 2002. Of this amount, $34,785,440, will expire on
December 31, 1997. Net realized loss differs for financial reporting and tax
purposes as a result of losses recognized for tax purposes on open futures po-
sitions at December 31, 1996, post-October 31 losses which are not recognized
for tax purposes until the first day of the following fiscal year, and the de-
ferral for tax purposes of losses resulting from wash sales.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
E. DISTRIBUTION OF INCOME AND GAINS-The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are distrib-
uted annually. Distributions from net realized gains for book purposes may in-
clude short-term capital gains and gains on futures transactions. All short-
term capital gains and a portion of futures gains are included in ordinary
income for tax purposes.
Due to inherent differences in the recognition of income, expenses and realized
gains/losses under generally accepted accounting principles and federal income
tax purposes, permanent differences between book and tax basis reporting for
the 1996 fiscal year have been identified and appropriately reclassified. Per-
manent book and tax basis differences relating to the recognition of net real-
ized losses on paydowns of mortgage pool obligations totaling $478,472 were
reclassified from accumulated net realized loss on securities to accumulated
undistributed net investment income. Permanent differences relating to the rec-
ognition of certain expenses which are not deductible for tax purposes totaling
$495,325 were reclassified from accumulated undistributed net investment income
to capital. Additionally, $227,853,021 of the capital loss carryforward for tax
purposes expired during 1996 and was reclassified from accumulated net realized
loss on securities to capital.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee, payable
monthly, as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- --------------------------------------------------------------------------------
<S> <C>
First $1 billion.................................................... .540 of 1%
Next $1 billion..................................................... .515 of 1%
Next $1 billion..................................................... .490 of 1%
Next $1 billion..................................................... .440 of 1%
Next $1 billion..................................................... .390 of 1%
Next $1 billion..................................................... .340 of 1%
Next $1 billion..................................................... .290 of 1%
Over $7 billion..................................................... .240 of 1%
</TABLE>
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom, coun-
sel to the Fund, of which a trustee of the Fund is an affiliated person.
For the year ended December 31, 1996, the Fund recognized expenses of approxi-
mately $404,500 representing VKAC's cost of providing accounting services to
the Fund. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser, serves
as the shareholder servicing agent for the Fund. For the year ended December
31, 1996, the Fund recognized expenses of approximately $4,246,500, represent-
ing ACCESS' cost of providing transfer agency and shareholder services plus a
profit.
Additionally, for the year ended December 31, 1996, the Fund paid VKAC approxi-
mately $495,300 related to the direct cost of consolidating the VKAC open-end
fund complex. Payment was contingent upon the realization by the Fund of cost
efficiencies in shareholder services resulting from the consolidation.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
The Fund has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC. During the year ended December 31,
1996, VKAC reimbursed the Fund for all expenses related to the retirement plan.
At December 31, 1996, VKAC owned 15,087 shares of Class A.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Clas-
ses A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At December 31, 1996, capital aggregated $2,865,431,316, $190,732,886 and
$18,193,187 for Classes A, B and C, respectively. For the year ended December
31, 1996, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A........................................... 19,916,758 $ 202,339,730
Class B........................................... 2,958,853 29,869,622
Class C........................................... 457,510 4,615,495
----------- -------------
Total Sales........................................ 23,333,121 $ 236,824,847
----------- -------------
Dividend Reinvestment:
Class A........................................... 8,692,189 $ 87,523,376
Class B........................................... 948,561 9,565,633
Class C........................................... 90,225 908,298
----------- -------------
Total Dividend Reinvestment........................ 9,730,975 $ 97,997,307
----------- -------------
Repurchases:
Class A........................................... (55,118,215) $(556,059,402)
Class B........................................... (7,388,783) (74,318,737)
Class C........................................... (939,225) (9,425,881)
----------- -------------
Total Repurchases.................................. (63,446,223) $(639,804,020)
----------- -------------
</TABLE>
At December 31, 1995, capital aggregated $3,335,131,658, $248,337,028 and
$24,218,915 for Classes A, B and C, respectively. For the year ended December
31, 1995, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A........................................... 29,742,902 $ 302,620,414
Class B........................................... 3,806,648 38,792,849
Class C........................................... 699,653 7,126,126
----------- -------------
Total Sales........................................ 34,249,203 $ 348,539,389
----------- -------------
Dividend Reinvestment:
Class A........................................... 9,310,631 $ 94,006,173
Class B........................................... 1,029,563 10,412,722
Class C........................................... 113,172 1,142,287
----------- -------------
Total Dividend Reinvestment........................ 10,453,366 $ 105,561,182
----------- -------------
Repurchases:
Class A........................................... (64,644,902) $(656,610,356)
Class B........................................... (6,591,507) (67,005,306)
Class C........................................... (1,581,505) (16,079,311)
----------- -------------
Total Repurchases.................................. (72,817,914) $(739,694,973)
----------- -------------
</TABLE>
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
Class B and C shares are offered without a front end sales charge, but are sub-
ject to a contingent deferred sales charge (CDSC). The CDSC will be imposed on
most redemptions made within five years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear the expense of their respective deferred sales ar-
rangements, including higher distribution and service fees and incremental
transfer agency costs.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED SALES
CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C>
First........................................................... 4.00% 1.00%
Second.......................................................... 4.00% None
Third........................................................... 3.00% None
Fourth.......................................................... 2.50% None
Fifth........................................................... 1.50% None
Sixth and Thereafter............................................ None None
</TABLE>
For the year ended December 31, 1996, VKAC, as Distributor for the Fund, re-
ceived commissions on sales of the Fund's Class A shares of approximately
$105,400 and CDSC on redeemed shares of approximately $810,600. Sales charges
do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of government
securities, including paydowns on mortgage-backed securities and excluding
short-term investments and forward purchase commitments, were $7,011,238,023
and $7,345,447,175, respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to at-
tempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund's portfolio holdings, in-
cluding derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation on securities.
Upon disposition, a realized gain or loss is recognized accordingly, except in
instances where the Fund accepts delivery of a security underlying a futures
contract or forward. In these situations, the recognition of gain or loss is
postponed until the disposal of this underlying security.
Summarized below are the specific types of derivative financial instruments
used by the Fund.
A. FUTURES CONTRACTS-A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded futures contracts on U.S. Treasury
Bonds and typically closes the contract prior to the delivery date. These con-
tracts are generally used to manage the portfolio's effective maturity and du-
ration.
Upon entering into futures contracts, the Fund maintains, in a segregated ac-
count with its custodian, securities with a value equal to its obligation under
the futures contracts. During the period the futures contract is open, payments
are received from or made to the broker based upon changes in the value of the
contract (the variation margin).
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
Transactions in futures contracts, each with a par value of $100,000, for the
year ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- --------------------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1995..................................... 5,500
Futures Opened....................................................... 69,381
Futures Closed....................................................... (69,935)
-------
Outstanding at December 31, 1996..................................... 4,946
-------
</TABLE>
The futures contracts outstanding as of December 31, 1996, and the descriptions
and unrealized depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS DEPRECIATION
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Long Bond Future
Mar 1997--Buys to Open................................. 4,202 $8,951,707
10-Year U.S. Treasury Note Future
Mar 1997--Buys to Open................................. 744 984,798
----- ----------
4,946 $9,936,505
----- ----------
</TABLE>
B. FORWARD COMMITMENTS-The Fund trades certain securities under the terms of
forward commitments, whereby the settlement occurs at a specific future date.
Forward commitments are privately negotiated transactions between the Fund and
dealers. While forward commitments are outstanding, the Fund maintains suffi-
cient collateral of cash or securities in a segregated account with its custo-
dian. Forward purchase commitments are included in the portfolio of
investments, with changes in value reflected as a component of unrealized
appreciation/depreciation on securities.
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00% each
of Class B and Class C net assets are accrued daily. Included in these fees for
the year ended December 31, 1996, are payments to VKAC of approximately
$2,176,500.
19
<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, 1996, and the results
of its operations, the changes in its net assets and the financial highlights
for each of the 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, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
January 31, 1997
20
<PAGE>
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
DENNIS J. MCDONNELL*
JACK E. NELSON
JEROME L. ROBINSON
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
OFFICERS
DENNIS J. MCDONNELL*
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
PETER W. HEGEL*
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 SERVICING AGENT
ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1201 Louisiana
Houston, Texas 77002
*"Interested" persons of the Fund,
as defined in the
Investment Company Act of 1940.
(C)Van Kampen American Capital Dis-
tributors, Inc., 1997
All rights reserved.
SMdenotes a service mark of
Van Kampen American Capital Dis-
tributors, 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.
RESULT OF SHAREHOLDER VOTES
A Special Meeting of Shareholders of the Fund was held on October 25, 1996
where shareholders voted on a new investment advisory agreement, changes to
investment policies and the ratification of Price Waterhouse LLP as
independent public accountants. With regard to the approval of a new
investment advisory agreement between Van Kampen American Capital Asset
Management, Inc. and the Fund, 148,842,255 shares voted for the proposal,
3,751,972 shares voted against and 13,661,664 shares abstained. With regard to
the approval of certain changes to the Fund's fundamental investment policies
with respect to investment in other investment companies, 129,838,827 shares
voted for the proposal, 5,111,254 shares voted against and 13,893,410 shares
abstained. With regard to the ratification of Price Waterhouse LLP as
independent public accountants for the Fund, 151,636,524 shares voted for the
proposal, 2,044,380 shares voted against and 12,574,987 shares abstained.
21
