VAN KAMPEN AMERICAN CAPITAL TRUST, N-30D, 1996-08-29

VAN KAMPEN AMERICAN CAPITAL TRUST
N-30D, 1996-08-29

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<PAGE> 1

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.............. 15
Statement of Operations.......................... 16
Statement of Changes in Net Assets............... 17
Financial Highlights............................. 18
Notes to Financial Statements.................... 21
Independent Accountants' Report.................. 28
</TABLE>

HYF AR 8/96
<PAGE> 2

LETTER TO SHAREHOLDERS
PHOTO OF MCDONNELL & POWELL
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
Holding, Inc., the parent company of
Van Kampen American Capital, Inc., to
be acquired 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 reputation for competitive long-term performance and superior
investor services, together we will offer a broader range of investment
opportunities and expertise.
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 anticipated
to be completed in November.

ECONOMIC REVIEW
The economy demonstrated an acceleration in growth during the last half of
the reporting 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 by 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 comparable 1995 period.
In the manufacturing sector, economic reports, such as the National
Association 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 annual
rate over the past year. Meanwhile, the 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 percent 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.

Continued on page two

1
<PAGE> 3

BOND MARKET REVIEW
In the fixed-income market, interest rates trended lower in the last half of
1995. However, during the first half of 1996, interest rates rose sharply, and
U.S. Treasury yields increased by 1.00 to 1.25 percent. Benchmark 10-year U.S.
Treasuries declined in value by about 7.8 percent. Signs of increasing economic
momentum, as discussed above, was the major factor contributing to this decline.
Resisting this movement toward lower prices and higher interest rates was
the high yield sector of the U.S. bond market. Currently, the prices of bonds
with below investment-grade credit ratings are running at the same or slightly
higher levels than they were at the beginning of 1996. Returns on high yield
issues are linked to individual corporate developments and earnings as well as
interest rates, which has allowed them to outperform the investment-grade sector
this year.
Long-term interest rates in larger European economies reacted similarly to
U.S. rates, rising steadily after hitting their low point in late January.
However, European yields have proven more resilient than their U.S.
counterparts. Yields in Germany, France, Belgium, Austria, and the Netherlands
rose through March but have since traded in a relatively narrow range, whereas
U.S. yields have risen consistently since February.
This outperformance of foreign bond markets since February reflects
worldwide expectations that growth is reviving at a faster rate in the U.S. than
in Europe. In general, economic activity has been slow in larger economies and
slowing in the smaller economies. The easy monetary policy pursued by Japan
added further support to the international bond markets.

OUTLOOK
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 particular,
we expect 10-year Treasury yields to remain within a trading range of 6.50 and
7.25 percent. Finally, look for economies worldwide to be on stronger footing
for the rest of 1996 and into next year.
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,

Don G. Powell
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
Dennis J. McDonnell
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.

2
<PAGE> 4

PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1996

VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
One-year total return based on NAV1.... 11.26% 10.55% 10.55%
One-year total return2................. 5.96% 6.55% 9.55%
Five-year average annual total
return2.............................. 11.41% N/A N/A
Ten-year average annual total
return(2)............................ 7.92% N/A N/A
Life-of-Fund average annual total
return2.............................. 7.97% 6.89% 6.72%
Commencement date...................... 06/27/86 05/17/93 08/13/93
DISTRIBUTION RATE AND YIELD
Distribution rate3..................... 9.04% 8.72% 8.72%
SEC Yield4............................. 8.19% 7.82% 7.82%
N/A = Not Applicable
</TABLE>

1Assumes reinvestment of all distributions for the period and does not include
payment of the maximum sales charge (4.75% for A shares) or contingent deferred
sales charge for early withdrawal (4% for B shares and 1% for C shares).

2Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).

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

4SEC 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 June 30, 1996.

See the Fund 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> 5

PORTFOLIO HIGHLIGHTS

VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND
TOP TEN ISSUERS AS OF JUNE 30, 1996

<TABLE>
<CAPTION>
PERCENTAGE OF FUND'S
LONG-TERM INVESTMENTS
<S> <C>
Silgan Holdings, Inc. ...... 2.0%
Exide Corp. ................ 1.7%
Government of Poland........ 1.6%
Global Marine, Inc. ........ 1.5%
Tenet Healthcare Corp. ..... 1.5%
Panamsat L.P. .............. 1.4%
Thrifty Payless............. 1.4%
Mesa Capital Corp. ......... 1.4%
SCI Television, Inc. ....... 1.3%
Revlon Consumer Products
Corp. ................... 1.3%
</TABLE>

CREDIT QUALITY
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C> <C> <C>
AAA....... 2.0%
AA........ 1.4%
A......... 0.9%
BBB....... 3.1%
BB........ 28.0%
B......... 53.0%
CCC....... 2.1%
Non-Rated... 9.5%
Pie Chart

<CAPTION>
AS OF DECEMBER 31, 1995
<S> <C> <C> <C>
AAA....... 1.9%
AA........ 1.2%
A......... 0.5%
BBB....... 1.2%
BB........ 23.8%
B......... 56.3%
CCC....... 1.7%
Non-Rated... 13.4%
Pie Chart
</TABLE>

Based upon credit quality ratings issued by Standard & Poor's. For securities
not rated by Standard & Poor's, the Moody's rating is used.
TOP FIVE PORTFOLIO HOLDINGS BY SECTOR
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C>
Foreign Securities.... 17.6%
Printing, Publishing
and Broadcasting.... 9.3%
Oil and Gas........... 8.6%
Telecommunications.... 7.2%
Hotel, Motel, Inns and
Gaming.............. 6.9%

<CAPTION>
AS OF DECEMBER 31,
1995
<S> <C>
Foreign Securities.... 16.5%
Printing, Publishing
and Broadcasting.... 9.7%
Telecommunications.... 8.9%
Buildings and
Real Estate......... 8.0%
Oil and Gas........... 7.3%
</TABLE>

DURATION

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995
<S> <C> <C>
Duration 3.75 years 3.90 years
</TABLE>

4
<PAGE> 6

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 intervals.
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
conditions

- Help you evaluate the extent to which your Fund's management team has
responded 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 First Boston High Yield Index
over time. As a broad-based, unmanaged statistical composite, this index does
not reflect any commissions or fees which would be incurred 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 High Yield Fund vs. First Boston High Yield
Index
(June 1986 through June 1996)

Total Return Comparison

<TABLE>
<CAPTION>
VKAC HIGH FIRST BOSTON HIGH
YIELD FUND YIELD INDEX

<S> <C> <C>
6/30/86 9,522 10,000
7/31/86 9,323 9,805
8/31/86 9,414 9,972
9/30/86 9,513 10,051
10/31/86 9,742 10,246
11/30/86 9,842 10,206
12/31/86 9,903 10,234
1/31/87 10,250 10,657
2/28/87 10,496 10,793
3/31/87 10,579 10,857
4/30/87 10,591 10,531
5/31/87 10,544 10,493
6/30/87 10,744 10,700
7/31/87 10,663 10,808
8/31/87 10,814 10,919
9/30/87 10,777 10,652
10/31/87 10,272 10,244
11/30/87 10,543 10,640
12/31/87 10,600 10,902
1/31/88 11,053 11,275
2/28/88 11,350 11,601
3/31/88 11,197 11,522
4/30/88 11,157 11,604
5/31/88 11,241 11,662
6/30/88 11,417 11,909
7/31/88 11,519 11,926
8/31/88 11,503 11,891
9/30/88 11,624 11,999
10/31/88 11,782 12,164
11/30/88 11,783 12,190
12/31/88 12,037 12,268
1/31/89 12,205 12,515
2/28/89 12,261 12,572
3/31/89 12,170 12,482
4/30/89 12,051 12,452
5/31/89 12,147 12,748
6/30/89 12,326 12,932
7/31/89 12,222 12,960
8/31/89 12,233 12,959
9/30/89 11,949 12,665
10/31/89 11,435 12,347
11/30/89 11,307 12,372
12/31/89 11,007 12,316
1/31/90 10,782 11,883
2/28/90 10,522 11,663
3/31/90 10,677 11,999
4/30/90 10,611 12,049
5/31/90 10,759 12,300
6/30/90 10,985 12,687
7/31/90 11,225 13,097
8/31/90 10,765 12,492
9/30/90 10,220 11,540
10/31/90 9,633 11,249
11/30/90 9,758 11,475
12/31/90 9,731 11,530
1/31/91 9,824 11,846
2/28/91 10,572 12,867
3/31/91 11,207 13,665
4/30/91 11,627 14,232
5/31/91 11,674 14,303
6/30/91 11,888 14,678
7/31/91 12,195 15,174
8/31/91 12,440 15,450
9/30/91 12,675 15,801
10/31/91 13,047 16,324
11/30/91 13,057 16,455
12/31/91 13,150 16,575
1/31/92 13,770 17,249
2/28/92 14,019 17,669
3/31/92 14,086 17,932
4/30/92 14,387 17,948
5/31/92 14,517 18,192
6/30/92 14,604 18,372
7/31/92 14,855 18,655
8/31/92 15,064 18,905
9/30/92 15,244 19,028
10/31/92 15,031 18,830
11/30/91 15,231 19,113
12/31/92 15,386 19,329
1/31/93 15,794 19,856
2/28/93 16,189 20,249
3/31/93 16,541 20,677
4/30/93 16,589 20,794
5/31/93 16,785 21,098
6/30/93 17,245 21,480
7/31/93 17,412 21,703
8/31/93 17,328 21,888
9/30/93 17,463 22,013
10/31/93 17,924 22,415
11/30/93 17,975 22,698
12/31/93 18,114 22,984
1/31/94 18,508 23,393
2/28/94 18,622 23,428
3/31/94 17,973 22,739
4/30/94 17,749 22,435
5/31/94 17,704 22,562
6/30/94 17,749 22,411
7/31/94 17,630 22,517
8/31/94 17,583 22,679
9/30/94 17,593 22,769
10/31/94 17,545 22,785
11/30/94 17,345 22,521
12/31/94 17,509 22,760
1/31/95 17,664 22,999
2/28/95 18,076 23,565
3/31/95 18,294 23,831
4/30/95 18,734 24,360
5/31/95 19,177 25,047
6/30/95 19,258 25,212
7/31/95 19,565 25,603
8/31/95 19,648 25,675
9/30/95 19,898 25,970
10/31/95 20,129 26,258
11/30/95 20,277 26,382
12/31/95 20,577 26,717
1/31/96 21,040 27,224
2/28/96 21,116 27,368
3/31/96 21,061 27,295
4/30/96 21,227 27,442
5/31/96 21,349 27,664
6/30/96 21,427 27,725

</TABLE>

The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions for the period ended June 30, 1996,
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> 7

PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND

We recently spoke with the management team of the Van Kampen American Capital
High Yield Fund about the key events and economic forces that shaped the markets
during the past fiscal year. The team includes Anne K. Lorsung, portfolio
manager, and Robert C. Peck, Jr., executive vice president for fixed-income
investments, Van Kampen American Capital Investment Advisory Corp. The following
excerpts reflect their views on the Fund's performance during the 12-month
period ended June 30, 1996.

THE FOLLOWING KEY TERMS ARE LISTED IN THE ORDER IN WHICH YOU WILL FIND THEM IN
THIS REPORT.

YIELD SPREAD: To compensate investors for the added risk, low-quality
fixed-income securities typically offer investors higher yields than
high-quality fixed-income securities. The difference in yields is referred to as
the yield spread and is commonly expressed in basis points.

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.

PREMIUM REDEMPTION: To redeem bonds at a dollar amount above a stated par value.
Redemption of a bond by the issuer prior to its maturity date.

Q HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND
OPERATED OVER THE ONE-YEAR PERIOD ENDED
JUNE 30, 1996?

A Economic growth is important to the financial fitness of companies that
have outstanding high yield debt. In the current environment of strong
economic growth and moderate inflation, high yield securities will
typically provide greater potential for price appreciation than high-quality
bonds, which tend to outperform when the economy is weak and interest rates are
falling.
Over the course of the fiscal year, the relative performance of high yield
securities has improved. During the first half of the period, from June to
December 1995, we saw slow growth and weak earnings, and interest rate levels
were generally falling. In this environment, high-quality bonds outperformed
high yield securities.
During the second half of the reporting period, from January to June 1996,
surprisingly strong economic growth renewed inflation fears, causing
high-quality bonds to decline in value. Meanwhile, high yield securities rallied
as earnings growth reduced perceived credit risks. This was most evident for
low-quality, high-yield bonds, which have substantial credit risk and are most
sensitive to economic news.
Because of this shift in market sentiment, we saw a dramatic tightening in
yield spreads from December 1995 to June 1996. The yield spread between 10-year
Treasury notes and the Duff and Phelps High Yield Index decreased from over 400
basis points to approximately 340 basis points. This reflected investor demand
for high yield issues, as their potential for price appreciation increased
relative to Treasuries.

Q HOW DID YOU ALLOCATE THE FUND'S ASSETS?

A Because economic growth was sluggish, we underweighted the Fund's position
in cyclical industries, such as steel, paper, and retail throughout the
third and fourth quarters of 1995. We focused on issues in less cyclical
sectors, such as cable television

6
<PAGE> 8

and telecommunications. These are sectors where consumer demand has remained
fairly constant, even in a slow economic environment.
From June 1995 to June 1996, we slightly increased the Fund's exposure to
foreign corporate and government bonds, believing they hold attractive total
return potential. Because many European economies remain weak, their central
banks have reduced interest rates, which has resulted in bond price
appreciation. In terms of corporate issues, when we invest in emerging economic
regions such as Latin America, we generally seek quality issues, such as
utilities. In more growth-oriented areas such as the Far East, we will be a bit
more aggressive and willing to assume more credit risk. To take advantage of
these opportunities, we expect to maintain 15 to 20 percent of the Fund's assets
in the foreign sector. Please refer to page four for Fund portfolio highlights.

Q HOW HAS THE FUND PERFORMED DURING THE REPORTING PERIOD?

A For the one-year period, the Fund generated a total return of 11.26
percent(1) (Class A shares at net asset value). This was well above the
one-year total return of 9.97 percent achieved by the First Boston High
Yield Index. The Index is a broad-based, unmanaged index that reflects the
general performance of a wide range of selected bonds within the public high
yield debt market. It does not reflect any commissions or fees that would be
paid by an investor purchasing the securities it represents.
Our careful credit research and security selection served us well over the
period. None of the Fund's holdings were subject to default, and merger and
acquisition activity, along with early premium redemptions, provided the Fund
with capital gains from several holdings. Issues that particularly benefited the
Fund's performance were Trump Plaza, Comdata, and SHL System House. Our foreign
holdings also performed well. For example, Polish Brady bonds provided a total
return of about 30 percent for the one-year period ended June 30, 1996.
As of June 30, 1996 the Fund's annualized dividend was $0.90 per share,
which translates into a distribution rate of 9.04 percent (3) based on the
Fund's Class A maximum offering price of $9.96 per share. Please refer to the
chart on page three for additional Fund performance results.

Q WHAT IS YOUR OUTLOOK FOR THE MARKET IN THE MONTHS AHEAD?

A We expect that the increase in interest rates over the first half of 1996
will moderate but believe economic growth will continue at a relatively
strong pace. We will look to keep the Fund's portfolio flexible and
focused on better-quality, high-yield issues, to readily adapt to changes in the
marketplace. We will rely on credit research to help us focus on economically
resilient sectors--such as media and consumer products--and companies with
strong fundamentals. If U.S. economic growth were to deteriorate substantially,
we would look to shift exposure further away from U.S. corporate issues by
increasing the Fund's foreign holdings.

[SIG]
Robert C. Peck, Jr.

Executive Vice President
Fixed Income Investments

[SIG]
Anne K. Lorsung

Portfolio Manager

Please see footnotes on page three

7
<PAGE> 9

PORTFOLIO OF INVESTMENTS

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
DOMESTIC CORPORATE BONDS 70.6%
AEROSPACE & DEFENSE 1.0%
1,650 Sequa Corp................................ 9.625% 10/15/99 $ 1,662,375
2,150 Sequa Corp................................ 9.375 12/15/03 2,074,750
-------------
3,737,125
-------------
AUTOMOBILE 0.7%
2,600 Exide Corp................................ 10.750 12/15/02 2,658,500
-------------
BEVERAGE, FOOD & TOBACCO 0.5%
2,100 Pilgrims Pride Corp....................... 10.875 08/01/03 2,037,000
-------------
BUILDINGS & REAL ESTATE 3.1%
2,900 American Standard Inc..................... 10.875 05/15/99 3,074,000
1,000 American Standard Inc..................... 11.375 05/15/04 1,082,500
3,300 Schuller International Group Inc.......... 10.875 12/15/04 3,564,000
3,500 Southdown Inc............................. 14.000 10/15/01 3,745,000
-------------
11,465,500
-------------
CHEMICALS, PLASTICS & RUBBER 1.1%
4,258 G I Holdings Inc.......................... 10.000 02/15/06 4,151,550
-------------
CONTAINERS, PACKAGING & GLASS 5.1%
460 Anchor Glass Container Corp............... 10.250 06/30/02 322,000
950 Owens Illinois Inc........................ 10.250 04/01/99 966,625
2,950 Owens Illinois Inc........................ 11.000 12/01/03 3,171,250
2,100 S.D. Warren Co............................ 12.000 12/15/04 2,226,000
6,598 Silgan Holdings Inc....................... 13.250 12/15/02 6,630,990
2,000 Stone Consolidated Corp................... 10.250 12/15/00 2,060,000
3,500 U.S. Can Co............................... 13.500 01/15/02 3,727,500
-------------
19,104,365
-------------
DIVERSIFIED/CONGLOMERATE
MANUFACTURING 2.8%
3,400 Communications & Power Industries Inc..... 12.000 08/01/05 3,595,500
3,500 Jordan Industries Inc..................... 10.375 08/01/03 3,333,750
773 Talley Industries Inc. (b)................ 0/12.250 10/15/05 616,467
2,900 Talley Manufacturing & Technology Inc..... 10.750 10/15/03 3,016,000
-------------
10,561,717
-------------
ECOLOGICAL 0.7%
1,800 Envirosource Inc.......................... 9.750 06/15/03 1,629,000
1,100 Norcal Waste Systems Inc. (b)............. 12.50/13.50 11/15/05 1,163,250
-------------
2,792,250
-------------
</TABLE>

See Notes to Financial Statements

8
<PAGE> 10

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ELECTRONICS 2.5%
4,250 Bell & Howell Co. (b)..................... 0/11.500% 03/01/05 $ 2,911,250
3,400 Computervision............................ 11.375 08/15/99 3,519,000
2,950 Exide Electronics Group Inc.
(Including 2,950 common stock warrants)... 11.500 03/15/06 3,009,000
-------------
9,439,250
-------------
FARMING & AGRICULTURE 0.9%
1,100 Agco Corp................................. 8.500 03/15/06 1,078,000
2,350 Trans Resources Inc....................... 11.875 07/01/02 2,256,000
-------------
3,334,000
-------------
FINANCE 1.9%
3,650 American Annuity Group Inc................ 11.125 02/01/03 3,923,750
3,300 Americo Life Inc. (d)..................... 9.250 06/01/05 3,118,500
-------------
7,042,250
-------------
GROCERY 3.4%
3,650 Pantry Inc................................ 12.000 11/15/00 3,212,000
3,700 Pathmark Stores Inc....................... 9.625 05/01/03 3,478,000
3,550 Purity Supreme Inc........................ 11.750 08/01/99 3,851,750
2,200 Vons Cos. Inc............................. 9.625 04/01/02 2,310,000
-------------
12,851,750
-------------
HEALTHCARE 3.8%
3,100 Merit Behavioral Care Corp................ 11.500 11/15/05 3,255,000
500 Ornda Healthcorp.......................... 12.250 05/15/02 541,250
3,250 Ornda Healthcorp.......................... 11.375 08/15/04 3,583,125
1,850 Paracelsus Healthcare Corp................ 9.875 10/15/03 1,822,250
4,600 Tenet Healthcare Corp. (d)................ 10.125 03/01/05 4,876,000
-------------
14,077,625
-------------
</TABLE>

See Notes to Financial Statements

9
<PAGE> 11

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HOTEL, MOTEL, INNS & GAMING 6.1%
1,100 Argosy Gaming Co.......................... 13.250% 06/01/04 $ 1,116,500
1,000 Bally's Grand Inc......................... 10.375 12/15/03 1,097,500
1,800 Bally's Park Place Funding Inc............ 9.250 03/15/04 1,917,000
3,200 California Hotel Finance Corp............. 11.000 12/01/02 3,376,000
3,350 Coast Hotels & Casino..................... 13.000 12/15/02 3,643,125
3,300 Grand Casino Inc.......................... 10.125 12/01/03 3,390,750
2,700 Harvey's Casino Resorts................... 10.625 06/01/06 2,733,750
2,300 Hollywood Casino Inc...................... 12.750 11/01/03 2,288,500
3,325 Trump Atlantic City Associates............ 11.250 05/01/06 3,341,625
-------------
22,904,750
-------------
LEISURE/ENTERTAINMENT 1.3%
1,750 Cobblestone Holdings Inc.................. * 06/01/04 647,500
3,850 Viacom International Inc.................. 10.250 09/15/01 4,206,125
-------------
4,853,625
-------------
MINING, STEEL, IRON & NON-PRECIOUS
METAL 3.1%
3,200 Armco Inc................................. 11.375 10/15/99 3,304,000
3,000 Carbide/Graphite Group Inc................ 11.500 09/01/03 3,247,500
3,000 Easco Corp................................ 10.000 03/15/01 3,045,000
500 Magma Copper Co........................... 12.000 12/15/01 542,500
1,700 Republic Engineered Steels Inc............ 9.875 12/15/01 1,589,500
-------------
11,728,500
-------------
OIL & GAS 7.6%
1,800 Clark R & M Holdings Inc.................. * 02/15/00 1,233,000
3,600 Coda Energy Inc........................... 10.500 04/01/06 3,582,000
3,200 Giant Industries Inc...................... 9.750 11/15/03 3,136,000
4,500 Global Marine Inc. (d).................... 12.750 12/15/99 4,882,500
3,000 KCS Energy Inc............................ 11.000 01/15/03 3,172,500
4,500 Mesa Capital Corp......................... 12.750 06/30/98 4,511,250
3,650 Petroleum Heat & Power Inc................ 12.250 02/01/05 4,015,000
800 Triton Energy Corp........................ * 11/01/97 722,000
3,250 Triton Energy Corp. (b)................... 0/9.750 12/15/00 3,152,500
-------------
28,406,750
-------------
PERSONAL/FOOD 0.6%
2,600 Flagstar Corp............................. 10.750 09/15/01 2,288,000
-------------
</TABLE>

See Notes to Financial Statements

10
<PAGE> 12

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PERSONAL & NON-DURABLE 1.6%
2,000 Playtex Family Products Corp.............. 9.000% 12/15/03 $ 1,880,000
3,350 Revlon Consumer Products Corp............. 9.375 04/01/01 3,291,375
900 Revlon Consumer Products Corp............. 10.875 07/15/10 922,500
------------
6,093,875
------------
PRINTING, PUBLISHING & BROADCASTING 8.3%
1,200 Cablevision Systems Corp.................. 10.750 04/01/04 1,236,000
1,350 Cablevision Systems Corp.................. 10.500 05/15/16 1,312,875
750 Century Communications Corp............... 9.750 02/15/02 746,250
900 Century Communications Corp............... * 03/15/03 443,250
1,800 Century Communications Corp............... 11.875 10/15/03 1,921,500
3,100 Comcast Corp.............................. 9.375 05/15/05 3,007,000
3,000 Continental Cablevision Inc............... 8.300 05/15/06 3,105,000
3,675 Insight Communications Co. L.P............ 11.250 03/01/00 3,693,375
2,700 International Cabletel Inc. (b)........... 0/12.750 04/15/05 1,734,750
900 International Cabletel Inc. (b)........... 0/11.500 02/01/06 504,000
1,900 K-III Communications Corp................. 10.625 05/01/02 1,976,000
1,600 K-III Communications Corp................. 10.250 06/01/04 1,640,000
4,200 SCI Television Inc........................ 11.000 06/30/05 4,378,500
1,600 Storer Communications Inc................. 10.000 05/15/03 1,604,000
1,350 Young Broadcasting Inc.................... 10.125 02/15/05 1,302,750
2,700 Young Broadcasting Inc.................... 9.000 01/15/06 2,409,750
------------
31,015,000
------------
RETAIL 3.8%
2,950 Hosiery Corp. America Inc. (Including
2,950 common stock warrants).............. 13.750 08/01/02 3,230,250
2,800 Loehmann's Inc............................ 11.875 05/15/03 2,912,000
4,115 Thrifty Payless........................... 12.250 04/15/04 4,547,075
3,400 Waban Inc................................. 11.000 05/15/04 3,536,000
------------
14,225,325
------------
TELECOMMUNICATIONS 6.3%
3,500 Centennial Cellular Corp.................. 10.125 05/15/05 3,377,500
1,800 Echostar Communications Corp.............. * 06/01/04 1,318,500
550 Intercel Inc.............................. * 05/01/06 299,750
1,350 Intermedia Communications of Florida, Inc.
(Including 3,150 common stock warrants)... 13.500 06/01/05 1,638,000
2,700 Intermedia Communications of Florida, Inc.
(b)....................................... 0/12.500 05/15/06 1,512,000
4,000 IXC Communications Inc.................... 12.500 10/01/05 4,200,000
</TABLE>

See Notes to Financial Statements

11
<PAGE> 13

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
600 Metrocall Inc............................. 10.375% 10/01/07 $ 558,000
4,500 Mobilemedia Communications Inc. (b)....... 0/10.500 12/01/03 3,195,000
900 Panamsat L.P.............................. 9.750 08/01/00 931,500
1,800 Panamsat L.P. (b)......................... 0/11.375 08/01/03 1,566,000
3,200 Pricellular Wireless Corp. (b)............ 0/14.000 11/15/01 2,912,000
800 Pricellular Wireless Corp. (b)............ 0/12.250 10/01/03 632,000
3,000 Teleport Communications Group (b)(c)...... 0/11.125 07/01/07 1,747,500
------------
23,887,750
------------
TEXTILES 0.9%
3,300 Dan River Inc............................. 10.125 12/15/03 3,176,250
------------
TRANSPORTATION 0.7%
2,500 U.S. Air Inc.............................. 8.625 09/01/98 2,450,000
------------
UTILITIES 2.8%
2,000 AES Corp. (c)............................. 10.250 07/15/06 2,000,000
3,150 California Energy Inc..................... 9.875 06/30/03 3,205,125
2,100 El Paso Electric Co....................... 8.900 02/01/06 2,073,750
3,200 Midland Funding Corp. II.................. 11.750 07/23/05 3,360,000
------------
10,638,875
------------
TOTAL DOMESTIC CORPORATE BONDS 264,921,582
------------
FOREIGN BONDS AND DEBT SECURITIES 15.6%
ARGENTINA 2.4%
3,550 Federal Republic of Argentina
(Var. Rate Cpn.) (US$).................... 5.250 03/31/23 1,952,500
2,000 Sodigas Pampeana (US$).................... 10.500 07/06/99 2,030,000
2,000 Telefonica De Argentina (US$)............. 8.375 10/01/00 1,927,500
3,000 Transportadora De Gas Del Sur SA (US$).... 10.250 04/25/01 2,985,000
------------
8,895,000
------------
AUSTRALIA 0.6%
1,300 Commonwealth of Australia (AU$)........... 9.000 09/15/04 1,032,338
1,900 New South Wales Trust (AU$)............... 6.500 05/01/06 1,240,786
------------
2,273,124
------------
BRAZIL 0.8%
2,600 Federal Republic of Brazil (Var. Rate
Cpn.) (US$)............................... 5.000 04/15/24 1,443,000
1,862 Federal Republic of Brazil (Var. Rate
Cpn.) (US$)............................... 6.375 01/01/01 1,743,297
------------
3,186,297
------------
CANADA 3.3%
2,100 Doman Industries Ltd. (US$)............... 8.750 03/15/04 1,900,500
</TABLE>

See Notes to Financial Statements

12
<PAGE> 14

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CANADA (CONTINUED)
3,400 Fonorola Inc. (US$)....................... 12.500% 08/15/02 $ 3,672,000
3,000 Fundy Cable Ltd. (US$).................... 11.000 11/15/05 3,030,000
3,600 Rogers Communications Inc. (US$).......... 10.875 04/15/04 3,654,000
------------
12,256,500
------------
COLOMBIA 0.9%
3,500 Republic of Colombia (US$)................ 7.250 02/23/04 3,222,310
------------
ECUADOR 0.3%
2,000 Republic of Ecuador Par Bonds (Var. Rate
Cpn.) (US$)............................... 3.250 02/28/25 725,000
1,000 Republic of Ecuador (Var. Rate Cpn.)
(US$)..................................... 6.063 02/28/25 571,250
------------
1,296,250
------------
INDONESIA 1.2%
1,930 Indah Kiat International Finance Co. B.V.
(US$)..................................... 11.875 06/15/02 2,045,800
2,200 Tjiwi Kimia International Finance (US$)... 13.250 08/01/01 2,464,000
------------
4,509,800
------------
ITALY 0.6%
1,700,000 Federal Republic of Italy (Lira).......... 9.000 10/01/98 1,127,412
1,650,000 Federal Republic of Italy (Lira).......... 10.500 04/01/00 1,141,450
------------
2,268,862
------------
LUXEMBOURG 0.5%
3,200 Millicom International Cellular SA (US$)
(b)....................................... 0/13.500 06/01/06 1,696,000
------------
MEXICO 0.4%
2,000 Petroleos Mexicanos (US$)................. 8.625 12/01/23 1,490,000
------------
MOROCCO 0.6%
3,000 Morocco Trust A Loan (US$) (e)............ 6.4375 01/01/09 2,167,500
------------
NETHERLANDS 0.9%
3,700 Fresh Del Monte Produce N V (US$)......... 10.000 05/01/03 3,422,500
------------
POLAND 1.4%
5,700 Government of Poland (Var. Rate Cpn.)
(US$)..................................... 7.125 10/27/24 5,343,750
------------
SPAIN 0.8%
129,500 Government of Spain (Peseta).............. 10.250 11/30/98 1,069,750
114,000 Government of Spain (Peseta).............. 12.250 03/25/00 1,011,978
125,000 Government of Spain (Peseta).............. 10.150 01/31/06 1,056,599
------------
3,138,327
------------
SWEDEN 0.4%
7,300 Kingdom of Sweden (Krona)................. 13.000 06/15/01 1,351,362
------------
</TABLE>

See Notes to Financial Statements

13
<PAGE> 15

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED KINGDOM 0.5%
1,250 Telewest PLC (US$) (b).................... 0/11.000% 10/01/07 $ 740,625
650 United Kingdom Treasury (Pound)........... 8.500 12/07/05 1,053,012
------------
1,793,637
------------
TOTAL FOREIGN BONDS AND DEBT SECURITIES......................................... 58,311,219
------------
U.S GOVERNMENT OBLIGATIONS 0.8%
3,000 U.S. T-Notes.............................. 9.000 05/15/98 3,152,040
------------
EQUITIES 1.4%
American Telecasting Inc. (8,370 common stock warrants) (g)................... 37,665
Cablevision Systems Corp. (14,608 preferred shares) (f)....................... 1,416,976
Capital Gaming International Inc. (5,000 common stock warrants) (g)........... 0
Casino America Inc. (5,873 common stock warrants) (g)......................... 5,874
El Paso Electric Co. (9,000 preferred shares)................................. 949,500
Panamsat L.P. (1,923 preferred shares) (f).................................... 2,230,680
Supermarkets General Holdings Corp. (28,600 preferred shares)................. 736,450
------------
TOTAL EQUITIES.................................................................. 5,377,145
------------
TOTAL LONG-TERM INVESTMENTS 88.4%
(Cost $326,056,234) (a)......................................................... 331,761,986
------------
SHORT-TERM INVESTMENTS 11.1%
Repurchase Agreement (J.P. Morgan, U.S. T-Note, $29,599,000 par, 9.875%
coupon, due 11/15/15, dated 06/28/96, to be sold on 07/01/96 at
$37,740,976).................................................................. 37,724,000
J.P. Morgan Polish Zloty Linked CD, ($2,954,990 par, yielding 20.913%,
maturing 10/23/96)............................................................ 2,678,950
New Zealand T-Bills, (2,000,000 New Zealand Dollar par, yielding 9.755%,
maturing 01/08/97)............................................................ 1,308,215
------------
TOTAL SHORT-TERM INVESTMENTS (Cost $41,812,853) (a)............................. 41,711,165
OTHER ASSETS IN EXCESS OF LIABILITIES 0.5%..................................... 1,706,744
------------
NET ASSETS 100%................................................................ $375,179,895
------------
</TABLE>

*Zero coupon bond

(a) At June 30, 1996, cost for federal income tax purposes including short-term
investments is $367,869,087; the aggregate gross unrealized appreciation is
$10,127,208 and the aggregate gross unrealized depreciation is $4,572,871,
resulting in net unrealized appreciation including foreign currency
translation of other assets and liabilities and forward currency contracts
of $5,554,337.

(b) Security is a "Step-up" bond where the coupon increases or steps up at a
predetermined date.

(d) Assets segregated as collateral for when issued or delayed delivery purchase
commitments and open forward transactions.

(e) Security is a bank loan participation.

(f) Payment-in-kind security.

(g) Non-income producing security.

See Notes to Financial Statements

14
<PAGE> 16

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $326,056,234) (Note 1).............. $ 331,761,986
Short-Term Investments (Cost $41,812,853) (Note 1)..................... 41,711,165
Cash................................................................... 313
Receivables:
Interest............................................................. 7,449,171
Securities Sold...................................................... 2,946,411
Fund Shares Sold..................................................... 681,864
Other.................................................................. 45,015
-------------
Total Assets..................................................... 384,595,925
-------------
LIABILITIES:
Payables:
Securities Purchased................................................. 6,444,746
Income Distributions................................................. 1,784,659
Distributor and Affiliates (Notes 2 and 6)........................... 358,828
Fund Shares Repurchased.............................................. 334,121
Investment Advisory Fee (Note 2)..................................... 229,419
Forward Currency Contracts (Note 5).................................. 45,158
Accrued Expenses....................................................... 155,719
Deferred Compensation and Retirement Plans (Note 2).................... 63,380
-------------
Total Liabilities................................................ 9,416,030
-------------
NET ASSETS............................................................. $ 375,179,895
----------
NET ASSETS CONSIST OF:
Capital (Note 3)....................................................... $ 477,157,576
Net Unrealized Appreciation on Securities.............................. 5,542,049
Accumulated Distributions in Excess of Net Investment Income (Note
1)................................................................... (1,835,750)
Accumulated Net Realized Loss on Securities............................ (105,683,980)
-------------
NET ASSETS............................................................. $ 375,179,895
----------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $271,105,413 and 28,557,300 shares of capital stock issued and
outstanding) (Note 3).............................................. $ 9.49
Maximum sales charge (4.75%* of offering price).................... .47
-------------
Maximum offering price to public................................... $ 9.96
----------
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $97,098,815 and 10,224,423 shares of capital stock issued and
outstanding) (Note 3).............................................. $ 9.50
----------
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $6,975,667 and 734,629 shares of capital stock issued and
outstanding) (Note 3).............................................. $ 9.50
----------
*On sales of $100,000 or more, the sales charge will be reduced.
</TABLE>

See Notes to Financial Statements

15
<PAGE> 17

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Net of foreign withholding taxes of $32,955).................. $35,516,846
Dividends............................................................... 458,386
Other................................................................... 510,503
-----------
Total Income........................................................ 36,485,735
-----------
EXPENSES:
Investment Advisory Fee (Note 2)........................................ 2,614,970
Distribution (12b-1) and Service Fees (Allocated to Classes A, B, and C
of $647,486, $779,712, and $51,552, respectively) (Note 6)............ 1,478,750
Shareholder Services (Note 2)........................................... 566,209
Trustees Fees and Expenses (Note 2)..................................... 37,859
Legal (Note 2).......................................................... 24,650
Other................................................................... 485,150
-----------
Total Expenses...................................................... 5,207,588
Less Expenses Reimbursed............................................ 18,112
-----------
Net Expenses........................................................ 5,189,476
-----------
NET INVESTMENT INCOME................................................... $31,296,259
---------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments......................................................... $ 5,747,673
Forwards............................................................ 675,027
Foreign Currency Transactions....................................... (428,329)
-----------
Net Realized Gain on Securities......................................... 5,994,371
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................... 6,439,004
-----------
End of the Period:
Investments......................................................... 5,604,064
Forward Currency Contracts.......................................... (60,696)
Foreign Currency Translation........................................ (1,319)
-----------
5,542,049
-----------
Net Unrealized Depreciation on Securities During the Period............. (896,955)
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES.......................... $ 5,097,416
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS.............................. $36,393,675
---------
</TABLE>

See Notes to Financial Statements

16
<PAGE> 18

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended June 30, 1996 and 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 June 30, 1995
<S> <C> <C>
- ------------------------------------------------------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 31,296,259 $ 26,497,560
Net Realized Gain/Loss on Securities..................... 5,994,371 (18,692,466)
Net Unrealized Appreciation/Depreciation on Securities
During the Period...................................... (896,955) 16,038,701
---------- ----------
Change in Net Assets from Operations..................... 36,393,675 23,843,795
---------- ----------
Distributions from Net Investment Income................. (31,296,259) (25,471,594)
Distributions in Excess of Net Investment Income (Note
1)..................................................... (186,982) -0-
---------- ----------
Distributions from and in Excess of Net Investment
Income*.............................................. (31,483,241) (25,471,594)
Return of Capital Distribution* (Note 1)................. (1,853,192) (5,584,355)
---------- ----------
Total Distributions.................................... (33,336,433) (31,055,949)
---------- ----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 3,057,242 (7,212,154)
---------- ----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................................ 130,645,161 73,674,367
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 12,295,000 11,308,840
Cost of Shares Repurchased............................... (81,944,626) (62,721,749)
---------- ----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... 60,995,535 22,261,458
---------- ----------
TOTAL INCREASE IN NET ASSETS............................. 64,052,777 15,049,304
NET ASSETS:
Beginning of the Period.................................. 311,127,118 296,077,814
---------- ----------
End of the Period (Including undistributed net investment
income of $(1,835,750) and $(1,895,466),
respectively).......................................... $375,179,895 $311,127,118
---------- ----------
</TABLE>

<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class June 30, 1996 June 30, 1995
<S> <C> <C>
------------------------------------------------------------------
Distributions from and in Excess of
Net Investment Income:
Class A Shares....................... $(24,518,181) $(21,911,417)
Class B Shares....................... (6,539,545) (3,405,059)
Class C Shares....................... (425,515) (155,035)
Class D Shares....................... -- (83)
---------- ----------
$(31,483,241) $(25,471,594)
---------- ----------
Return of Capital Distribution:
Class A Shares....................... $ (1,394,959) $ (4,709,317)
Class B Shares....................... (427,086) (846,910)
Class C Shares....................... (31,147) (28,115)
Class D Shares....................... -- (13)
---------- ----------
$ (1,853,192) $ (5,584,355)
---------- ----------
</TABLE>

See Notes to Financial Statements

17
<PAGE> 19

FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------------------
Class A Shares 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
Net Asset Value,
Beginning of the Period.............. $ 9.398 $ 9.643 $10.380 $ 9.896 $ 9.202
------ ------ ------ ------ ------
Net Investment Income................ .878 .844 .908 1.118 1.169
Net Realized and Unrealized Gain/Loss
Securities......................... .147 (.099) (.595) .566 .813
------ ------ ------ ------ ------
Total from Investment Operations....... 1.025 .745 .313 1.684 1.982
------ ------ ------ ------ ------
Less:
Distributions from and in Excess of
Net Investment Income (Note 1)..... .880 .815 .950 1.129 1.189
Return of Capital Distribution
(Note 1)........................... .050 .175 .100 .071 .099
------ ------ ------ ------ ------
Total Distributions.................... .930 .990 1.050 1.200 1.288
------ ------ ------ ------ ------
Net Asset Value, End of the Period..... $ 9.493 $ 9.398 $ 9.643 $10.380 $ 9.896
------ ------ ------ ------ ------
Total Return* (a)...................... 11.26% 8.50% 2.92% 18.08% 22.85%
Net Assets at End of the Period (In
millions)............................ $ 271.1 $ 253.3 $ 260.7 $ 251.5 $ 221.4
Ratio of Expenses to Average Net
Assets*.............................. 1.31% 1.31% 1.32% 1.20% 1.42%
Ratio of Net Investment Income to
Average Net Assets*.................. 9.16% 9.13% 8.85% 11.13% 12.12%
Portfolio Turnover..................... 102% 152% 203% 198% 174%
*If certain expenses had not been assumed by VKAC, total return would have been lower and
the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets............................... 1.31% N/A N/A N/A N/A
Ratio of Net Investment Income to
Average Net Assets................... 9.15% N/A N/A N/A N/A
</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.

N/A = Not Applicable

See Notes to Financial Statements

18
<PAGE> 20

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
May 17, 1993
Year Ended June 30, (Commencement
------------------------------ of Distribution)
Class B Shares 1996 1995 1994 to June 30, 1993
<S> <C> <C> <C> <C>
- --------------------------------------------------------
Net Asset Value, Beginning of the
Period............................. $ 9.398 $ 9.638 $10.382 $10.190
------ ------ ------ ------
Net Investment Income.............. .797 .788 .889 .117
Net Realized and Unrealized
Gain/Loss on Securities.......... .160 (.115) (.665) .217
------ ----- ------ ------
Total from Investment Operations..... .957 .673 .224 .334
------ ----- ------ ------
Less:
Distributions from and in Excess of
Net Investment Income (Note 1)... .812 .751 .877 .128
Return of Capital Distribution
(Note 1)......................... .046 .162 .091 .014
------ ----- ------ ------
Total Distributions.................. .858 .913 .968 .142
------ ----- ------ ------
Net Asset Value, End of the Period... $ 9.497 $ 9.398 $ 9.638 $10.382
------ ------ ------ ------
Total Return* (a).................... 10.55% 7.61% 2.11% 3.27%**
Net Assets at End of the Period (In
millions).......................... $ 97.1 $ 55.9 $ 33.2 $ 2.7
Ratio of Expenses to Average Net
Assets*............................ 2.07% 2.04% 2.13% 2.06%
Ratio of Net Investment Income to
Average Net Assets*................ 8.39% 8.35% 7.94% 7.17%
Portfolio Turnover................... 102% 152% 203% 198%
*If certain expenses had not been assumed by VKAC, total return would have been lower
and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets............................. 2.07% N/A N/A N/A
Ratio of Net Investment Income to
Average
Net Assets......................... 8.38% N/A N/A N/A
**Non-Annualized
</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.

N/A = Not Applicable

See Notes to Financial Statements

19
<PAGE> 21

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
Year
Year Ended August 13, 1993
Ended June (Commencement of
June 30, 30, Distribution) to
Class C Shares 1996 1995 June 30, 1994
<S> <C> <C> <C>
- -----------------------------------------------------------------
Net Asset Value, Beginning of Period....... $ 9.396 $ 9.643 $10.340
------ ------ ------
Net Investment Income.................... .828 .745 .761
Net Realized and Unrealized Loss on
Securities............................. .129 (.079) (.605)
------ ------ ------
Total from Investment Operations........... .957 .666 .156
------ ------ ------
Less:
Distributions from and in Excess of Net
Investment Income (Note 1)............. .812 .751 .763
Return of Capital Distribution (Note
1)..................................... .046 .162 .090
------ ------ ------
Total Distributions........................ .858 .913 .853
------ ------ ------
Net Asset Value, End of Period............. $ 9.495 $ 9.396 $ 9.643
------ ------ ------
Total Return* (a).......................... 10.55% 7.61% 1.37%**
Net Assets at End of Period (In
millions)................................ $ 7.0 $ 2.0 $ 2.2
Ratio of Expenses to Average Net Assets*... 2.06% 2.12% 2.14%
Ratio of Net Investment Income to Average
Net Assets*.............................. 8.38% 8.13% 7.91%
Portfolio Turnover......................... 102% 152% 203%
*If certain expenses had not been assumed by VKAC, total return would have been lower
and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets.... 2.07% N/A N/A
Ratio of Net Investment Income to Average
Net Assets............................... 8.38% N/A N/A
**Non-Annualized
</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.

N/A = Not Applicable

See Notes to Financial Statements

20
<PAGE> 22

NOTES TO FINANCIAL STATEMENTS

June 30, 1996
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital High Yield Fund (the "Fund") is organized as a
series of Van Kampen American Capital Trust, a Delaware business trust (the
"Trust"), and is registered as a diversified open-end management investment
company under the Investment Company Act of 1940, as amended. The Fund's primary
investment objective is to provide a high level of current income through
investment in medium and lower grade domestic corporate debt securities. The
Fund also may invest up to 35% of its assets in foreign government and corporate
debt securities of comparable quality. The Fund commenced investment operations
on June 27, 1986. The Fund commenced distribution of its Class B and C shares on
May 17, 1993 and August 13, 1993, respectively. On May 2, 1995, all Class D
shareholders redeemed their shares and the class was eliminated. The Fund will
no longer offer Class D shares.

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

A. SECURITY VALUATION--Investments are stated at value using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of less than 60 days are valued at
amortized cost.

B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.

21
<PAGE> 23

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

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 and
dividend income is recorded on the ex-dividend date. Bond discount is amortized
over the expected life of each applicable security.

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
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At June 30, 1996, the Fund had an accumulated capital loss carryforward
for tax purposes of $105,683,980. Of this amount, $4,105,907, $55,112,310,
$30,038,345, $45,384, $12,726,456 and $3,655,578 will expire on June 30, 1998,
1999, 2000, 2002, 2003 and 2004, respectively. Net realized gains or losses may
differ for financial and tax reporting purposes primarily as a result of post
October 31 losses which are not recognized for tax purposes until the first day
of the following fiscal year.

E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net investment income for federal income
tax purposes includes gains and losses realized on foreign currency
transactions. These gains and losses are included as net realized gains and
losses for financial reporting purposes. Permanent book and tax basis
differences resulting from these items totaling $246,698 were reclassified from
accumulated undistributed net investment income to accumulated net realized
gain/loss on securities. Additional permanent book and tax basis differences
related to the recognition of realized gains and losses totaling $45,380 was
reclassified from accumulated realized gain/loss on securities to Class A share
capital.

Net realized gains, if any, are distributed annually. Distributions from net
realized gains for book purposes may include short-term capital gains, which are
included as ordinary income for tax purposes.

22
<PAGE> 24

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

F. CURRENCY TRANSLATION--Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated into
U.S. dollars at the mean of the quoted bid and ask prices of such currencies
against the U.S. dollar. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated at rates prevailing when accrued.

G. BANK LOAN PARTICIPATIONS--The Fund invests in participation interests of
loans to foreign entities. When the Fund purchases a participation of a foreign
loan interest, the Fund typically enters into a contractual agreement with the
lender or other third party selling the participation, but not with the borrower
directly. As such, the Fund assumes credit risk for the borrower, selling
participant or other persons positioned between the Fund and the borrower.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen American
Capital Investment Advisory Corp. (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 $500 million.................................. .75 of 1%
Over $500 million................................... .65 of 1%
</TABLE>

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.

For year ended June 30, 1996, the Fund recognized expenses of approximately
$38,900 representing Van Kampen American Capital Distributors, Inc.'s or its
affiliates' (collectively "VKAC") cost of providing accounting, cash management
and legal services to the Fund.

In July, 1995, the Fund began using ACCESS Investor Services, Inc.
("ACCESS"), an affiliate of the Adviser, as the shareholder servicing agent of
the Fund. For the year ended June 30, 1996, the Fund recognized expenses of
approximately $406,100, representing ACCESS' cost of providing transfer agency
and shareholder services plus a profit.

Additionally, for the year ended June 30, 1996, the Fund reimbursed VKAC
approximately $26,400 related to the direct cost of consolidating the VKAC
open-end fund complex. The reimbursement represents the reduction in expense
realized by the Fund during the period as a result of the consolidation.

23
<PAGE> 25

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

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.

At June 30, 1996, VKAC owned 100 shares each of Classes B and C,
respectively.

3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of common shares, Classes 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 June 30, 1996, capital aggregated $372,301,052,
$97,806,116 and $7,050,408 for Class A, B and C shares, respectively. For the
year ended June 30, 1996, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------
Sales:
Class A................................... 7,294,414 $ 69,532,238
Class B................................... 5,691,156 54,286,076
Class C................................... 717,313 6,826,847
---------- ------------
Total Sales................................. 13,702,883 $130,645,161
---------- ------------
Dividend Reinvestment:
Class A................................... 1,003,726 $ 9,564,922
Class B................................... 265,511 2,531,980
Class C................................... 20,771 198,098
---------- ------------
Total Dividend Reinvestment................. 1,290,008 $ 12,295,000
---------- ------------
Repurchases:
Class A................................... (6,692,159) $(63,898,755)
Class B................................... (1,675,635) (15,998,857)
Class C................................... (215,382) (2,047,014)
---------- ------------
Total Repurchases........................... (8,583,176) $(81,944,626)
---------- ------------
</TABLE>

24
<PAGE> 26

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1995, capital aggregated $358,452,226, $57,414,003 and
$2,103,624 for Class A, B and C shares, respectively. For the year ended June
30, 1995, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
Sales:
Class A.................................... 4,486,285 $ 41,415,162
Class B.................................... 3,320,361 30,775,474
Class C.................................... 160,125 1,483,731
Class D.................................... -0- -0-
---------- ------------
Total Sales.................................. 7,966,771 $ 73,674,367
---------- ------------
Dividend Reinvestment:
Class A.................................... 1,055,695 $ 9,744,229
Class B.................................... 159,582 1,472,222
Class C.................................... 10,007 92,378
Class D.................................... 1 11
---------- ------------
Total Dividend Reinvestment.................. 1,225,285 $ 11,308,840
---------- ------------
Repurchases:
Class A.................................... (5,626,205) $(51,959,218)
Class B.................................... (978,937) (9,050,461)
Class C.................................... (186,357) (1,710,842)
Class D.................................... (121) (1,228)
---------- ------------
Total Repurchases............................ (6,791,620) $(62,721,749)
---------- ------------
</TABLE>

Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within six 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
arrangements, including higher distribution and service fees and incremental
transfer agency costs.

25
<PAGE> 27

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
- -------------------------------------------------------------------------
First............................................ 4.00% 1.00%
Second........................................... 3.75% None
Third............................................ 3.50% None
Fourth........................................... 2.50% None
Fifth............................................ 1.50% None
Sixth............................................ 1.00% None
Seventh and Thereafter........................... None None
</TABLE>

For the year ended June 30, 1996, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$118,900 and CDSC on redeemed shares of approximately $237,600. Sales charges do
not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $373,040,141 and $312,876,157,
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
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, foreign currency
exposure, maturity and duration. All of the Fund's portfolio holdings, including
derivative instruments, are marked to market each day with the change in value
reflected in the unrealized appreciation/depreciation on investments. Upon
disposition, a realized gain or loss is recognized accordingly.

During the year ended June 30, 1996, the Fund entered into forward currency
contracts, a type of derivative. These instruments are commitments to purchase
or sell a foreign currency at a future date at a negotiated forward rate. The
gain or loss arising from the difference between the original value of the
contract and the closing value of such contract is included as a component of
realized gain/loss on investments and foreign currency.

26
<PAGE> 28

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1996, the Fund has outstanding forward currency contracts as
follows:

<TABLE>
<CAPTION>
ORIGINAL CURRENT UNREALIZED
FORWARD CURRENCY CONTRACTS VALUE VALUE DEPRECIATION
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
Sells to Open
German Deutsche Mark, expiring
07/29/96 to 08/05/96.............. $4,011,349 $4,023,637 $12,288
Italian Lira, expiring 08/02/96..... 1,000,000 1,000,000 -0-
Spanish Peseta, expiring 07/11/96 to
09/11/96.......................... 1,998,383 2,025,045 26,662
Swedish Krona, expiring 06/11/97.... 1,000,000 1,021,746 21,746
--------
$60,696
--------
</TABLE>

At June 30, 1996, the Fund had realized gains on closed but unsettled
forward currency contracts of $15,538 scheduled to settle August 2, 1996.

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% for Class A shares and 1.00% each
for Class B and Class C shares are accrued daily. Included in these fees for the
year ended June 30, 1996, are payments to VKAC of approximately $583,000.

27
<PAGE> 29

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital High Yield Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital High Yield Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital High Yield Fund as of June 30, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Chicago, Illinois
August 2, 1996

28
<PAGE> 30

VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN

LINDA HUTTON HEAGY

ROGER HILSMAN

R. CRAIG KENNEDY

DENNIS J. MCDONNELL*

DONALD C. MILLER - Co-Chairman

JACK E. NELSON

DON G. POWELL*

JEROME L. ROBINSON

FERNANDO SISTO - Co-Chairman

WAYNE W. WHALEN*

WILLIAM S. WOODSIDE

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
INVESTMENT ADVISORY CORP.
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
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive

Chicago, Illinois 60601

* "Interested" persons of the Fund, as defined in the
Investment Company Act of 1940.
(C) Van Kampen American Capital Distributors, 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 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.

29
<PAGE> 31

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
Independent Accountants' Report.................. 23
</TABLE>

STGI ANR 8/96
<PAGE> 32

LETTER TO SHAREHOLDERS

August 1, 1996

Dear Shareholder,
As you may be aware, an agreement
was reached in late June for VK/AC
Holding, Inc., the parent company of [PHOTO]
Van Kampen American Capital, Inc., to
be acquired by the Morgan Stanley
Group Inc. While this announcement
may appear commonplace in an DENNIS J. MCDONNELL AND DON G. POWELL
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 reputation for competitive
long-term performance and superior investor services, together we will offer a
broader range of investment opportunities and expertise.
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 anticipated
to be completed in November.

Continued on page two

1
<PAGE> 33

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

2
<PAGE> 34

PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1996

VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES

TOTAL RETURNS

<S> <C> <C> <C>
One-year total return based on NAV(1).... 8.81% 8.02% 8.03%
One-year total return(2)................. 5.33% 5.02% 7.03%
Five-year average annual total return(2). 3.19% N/A N/A
Life-of-Fund average annual total
return(2).............................. 3.63% 3.13% 0.32%
Commencement date........................ 09/28/90 07/22/91 08/13/93

DISTRIBUTION RATE AND YIELD

Distribution rate(3)..................... 7.16% 6.63% 6.63%
SEC Yield(4)............................. 4.47% 3.87% 3.87%
</TABLE>

N/A = Not Applicable

(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (3.25% for A shares) or contingent
deferred sales charge for early withdrawal (3% 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 June 30, 1996. Had certain
expenses of the Fund not been assumed by VKAC, the SEC Yield would have been
4.41%, 3.81% and 3.81% for Classes A, B and C, respectively, and the total
returns would have been lower.

3
<PAGE> 35

PORTFOLIO HIGHLIGHTS

VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND

HOLDINGS AS A PERCENTAGE OF INVESTMENTS

<TABLE>
<CAPTION>
AS OF % AS OF
JUNE 30, 1996 SIX MONTHS AGO
<S> <C> <C>
U.S. Treasury Notes........ 78.1% ......................... 16.4%
New Zealand Government..... 9.7% ......................... 4.8%
Vermillion International
Trust.................... 8.3% ......................... 6.1%
Kingdom of Spain........... 3.9% ......................... 6.6%
</TABLE>

ASSET ALLOCATION
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C> <C> <C>
U.S. Government Bonds...... 69.5%
Foreign Investment Grade
Bonds...................... 19.5%
Other...................... 11.0%
[PIE CHART]

<CAPTION>
AS OF DECEMBER 31, 1995
<S> <C> <C> <C>
U.S. Government Bonds...... 15.9%
Foreign Investment Grade
Bonds...................... 80.6%
Other...................... 3.5%
[PIE CHART]
</TABLE>

4
<PAGE> 36
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

- Illustrate the general market environment in which your investments are
being managed

- Reflect the impact of favorable market trends or difficult market
conditions

- Help you evaluate the extent to which your Fund's management team has
responded 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 J.P. Morgan 3-Month U.S. LIBOR
Return Index over time. As a broad-based, unmanaged statistical composite, this
index does not reflect any commissions or fees which would be incurred 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 Short-Term Global Income Fund vs. J.P. Morgan
3-Month U.S. LIBOR Return Index (September 1990 through June 1996)

[GRAPH]

SHORT-TERM GLOBAL J.P. MORGAN 3-MONTH
DATE INCOME FUND U.S. LIBOR RETURN INDEX
<S> <C> <C>
9/90 9671 10000
10/90 9651 10081
11/90 9688 10136
12/90 9755 10222
1/91 9822 10298
2/91 9932 10353
3/91 10060 10418
4/91 10106 10479
5/91 10172 10535
6/91 10152 10581
7/91 10205 10642
8/91 10299 10699
9/91 10412 10749
10/91 10546 10808
11/91 10548 10853
12/91 10695 10909
1/92 10775 10946
2/92 10970 10977
3/92 11027 11013
4/92 11108 11057
5/92 11259 11090
6/92 11304 11130
7/92 11338 11174
8/92 11313 11201
9/92 11241 11234
10/92 11323 11259
11/92 11238 11280
12/92 11257 11325
1/93 11362 11358
2/93 11284 11384
3/93 11127 11414
4/93 11218 11444
5/93 11346 11468
6/93 11627 11499
7/93 11780 11528
8/93 11945 11559
9/93 11823 11583
10/93 11958 11613
11/93 11924 11642
12/93 12074 11674
1/94 12106 11732
2/94 11752 11732
3/94 11489 11755
4/94 11360 11782
5/94 11311 11819
6/94 11207 11854
7/94 11226 11895
8/94 11218 11940
9/94 11224 11972
10/94 11243 12025
11/94 11221 12061
12/94 11184 12110
1/95 11132 12175
2/95 11124 12226
3/95 10955 12281
4/95 11107 12332
5/95 11299 12391
6/95 11284 12440
7/95 11448 12494
8/95 11583 12545
9/95 11704 12590
10/95 11780 12644
11/95 11857 12693
12/95 11919 12744
1/96 12089 12799
2/96 11980 12842
3/96 12022 12881
4/96 12192 12929
5/96 12219 12976
6/96 12278 13018
</TABLE>

5
<PAGE> 37

PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND

We recently spoke with the management team of the Van Kampen American Capital
Short-Term Global Income Fund about the key events and economic forces that
shaped the markets during the past fiscal year. The team includes Thomas J.
Slefinger, portfolio manager, and Peter W. Hegel, executive vice president for
fixed-income investments. The following excerpts reflect their views on the
Fund's performance during the 12-month period ended June 30, 1996.

Q WHAT WAS THE MOST SIGNIFICANT FACTOR DRIVING THE PERFORMANCE OF GLOBAL
MARKETS DURING THE PERIOD, AND HOW WAS THE FUND POSITIONED?

A Interest rates declined significantly in many global markets, which drove
bond prices upward. The largest gains took place in the higher-yielding
markets, such as Italy, Spain, and Sweden, although virtually all of the
key European bond markets have performed well over the past 12 months. In
contrast, the U.S. market has been declining since February 1996, due to
concerns over strong economic growth and the fear of inflation.
In an effort to stimulate economic growth, most European central banks
lowered interest rates. As a result, we saw a convergence of the rates in
higher-yielding, non-core markets, such as Australia, Italy, and Sweden, with
those of the core markets, such as Germany, France, and the Netherlands. While
rates declined in nearly every market, those in the higher-yielding markets
recorded the largest drops.
We were able to capitalize on the decline in global interest rates by
participating in several non-core markets, such as Australia, New Zealand,
Italy, Spain, and Sweden. For much of the fiscal year, 75 to 80 percent of the
Fund's assets were allocated to these and similar high-yielding markets.
Returns in some of these markets, particularly Italy, Spain, and Sweden,
exceeded 20 percent for the 12-month period, whereas returns in Germany and the
Netherlands were in the range of 9 to 10 percent.

Q HOW HAS THE FUND PERFORMED DURING THE PAST FISCAL YEAR?

A We've been pleased with the Fund's performance, especially when compared
to a portfolio invested solely in the U.S. market. The Fund's performance
underscores the reasoning behind our belief that a globally diversified
portfolio will provide attractive opportunities over time and can offset periods
of poor performance in the U.S. bond market. Please refer to page four for Fund
portfolio highlights.
For the 12 months ended June 30, 1996, the Fund achieved a total return of
8.81 percent(1) (Class A shares at net asset value). In comparison, the U.S.
bond market provided a return of approximately 5 percent for the same period
ending June 30, 1996, according to the Lehman Brothers Aggregate Bond Index.
Over this same period, the average return for short world multi-market income
funds was 8.55 percent, according to Lipper Analytical Services, Inc. In
comparison, the J.P. Morgan 3-Month U.S. LIBOR Return had a one-year total
return of 4.65 percent. Keep in mind, this is an unmanaged index that tracks the
London Interbank Offered Rate--a key short-term interest rate that the

6
<PAGE> 38

most creditworthy international banks dealing in Eurodollars charge each other
for large loans. It does not reflect any commissions or fees that would be paid
by an investor if an interest in the Index could be purchased. Please refer to
the chart on page three for additional Fund performance results.

Q WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?

A We believe the rally in the non-core markets may begin to level off. The
yield spreads between these markets and the U.S. market are now as narrow
as they have been in the past five or six years.
We expect the U.S. dollar to strengthen versus many foreign currencies, and
it appears as though the U.S. bond market may have already experienced its
largest price declines. The market's consensus is that the U.S. economy is
growing fast enough to force the Federal Reserve Board to begin raising
short-term interest rates during the second half of the year. We feel these
expectations may already have been factored into the market, so perhaps much of
the downside in the U.S. bond market has been realized.

Q GIVEN THIS OUTLOOK, WHAT PORTFOLIO CHANGES HAVE BEEN MADE OR COULD BE
ANTICIPATED OVER THE NEXT SIX MONTHS?

A Late in the period, we began to shift assets into the U.S. market, which
we believe has the greatest relative value at this time. In fact, going
into the third quarter, nearly 80 percent of the portfolio's assets had
been reallocated into the U.S. market, so we have largely reversed the sector
weightings of a year ago.
By moving aggressively into the U.S. market, we see an opportunity to
sustain the Fund's yield potential while eliminating a significant portion of
the currency risk inherent in owning foreign securities. Overweighting the U.S.
market, especially in view of our outlook for the dollar, protects the Fund's
assets from the effects of currency fluctuation.
Another important change is the increased flexibility we have gained by
revising the Fund's investment policies (changes were approved by shareholder
vote, as reflected in the Fund's prospectus, dated May 17, 1996). The Fund is
now able to invest in longer-term securities, provided the portfolio's dollar
weighted average maturity remains at three years or less, and this gives us the
ability to pursue certain opportunities that were previously unavailable to the
Fund. At the end of the reporting period, the Fund's average weighted maturity
was 2.3 years. We can also consider securities that are rated investment grade
or better (BBB or higher, as rated by Standard & Poor's Group or Baa or higher,
as rated by Moody's Investor Service), rather than being limited to securities
rated Aa or better.

Peter W. Hegel

Peter W. Hegel
Executive Vice President
Fixed Income Investments
Thomas J. Slefinger
Thomas J. Slefinger
Portfolio Manager

Please see footnotes on page three

7
<PAGE> 39

PORTFOLIO OF INVESTMENTS

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S.$
(000) Description Coupon Date Market Value
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED INCOME SECURITIES 91.3%
ITALY 7.5% LIRA
Government/Agency
15,000,000 Vermilion International Trust -- BTPS....... 9.160% 12/01/97 $ 9,924,735
------------
NEW ZEALAND 8.9% NZ$
Government/Agency
17,250 New Zealand Government...................... * 09/11/96 11,637,201
------------
SPAIN 3.6% PESETA
Government/Agency
600,000 Kingdom of Spain............................ 7.300 07/30/97 4,689,192
------------
UNITED STATES 71.3% US$
Government/Agency
30,000 U.S. Treasury Note.......................... 5.000 01/31/98 29,534,700
17,500 U.S. Treasury Note.......................... 5.000 02/15/98 16,979,200
32,000 U.S. Treasury Note.......................... 6.375 05/15/99 32,080,000
15,000 U.S. Treasury Note.......................... 6.500 05/31/01 15,014,100
------------
93,608,000
------------
TOTAL FIXED INCOME SECURITIES..................................... 119,859,128
------------
SWAP TRANSACTIONS 0.0%
Goldman Sachs, 18.75 million US$ notional amount, maturing
01/30/97, payment based upon the spread between the German Mark
swap interest rate versus the 3 month German LIBOR................ (39,292)
------------
TOTAL INVESTMENTS 91.3%
(Cost $119,166,291) (a)......................................... 119,819,836
OTHER ASSETS IN EXCESS OF LIABILITIES 8.7%........................ 11,520,371
------------
NET ASSETS 100.0%................................................. $131,340,207
------------
</TABLE>

* Zero coupon bond

(a) At June 30, 1996, the cost for federal income tax purposes is $119,166,291;
the aggregate gross unrealized appreciation is $1,358,465 and the aggregate
gross unrealized depreciation is $1,392,670, resulting in net unrealized
depreciation on investments, including foreign currency translation of other
assets and liabilities, forward currency contracts and forward swap
transactions of $34,205.

The following table summarizes the portfolio composition at June 30, 1996,
based upon quality ratings issued by Standard & Poor's. For securities not rated
by Standard & Poor's, the Moody's rating is used.

PORTFOLIO COMPOSITION BY CREDIT QUALITY

See Notes to Financial Statements

8
<PAGE> 40

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $119,166,291) (Note 1)............... $119,819,836
Receivables:
Securities Sold....................................................... 12,840,473
Interest.............................................................. 1,687,063
Forward Currency Contracts (Note 5)................................... 196,556
Fund Shares Sold...................................................... 56,763
Options at Market Value (Net premiums paid of $25,497) (Note 5)......... 6,950
Other................................................................... 5,397
------------
Total Assets...................................................... 134,613,038
------------
LIABILITIES:
Payables:
Reverse Repurchase Agreements (Note 6)................................ 1,862,000
Fund Shares Repurchased............................................... 369,840
Income Distributions.................................................. 337,320
Distributor and Affiliates (Notes 2 and 7)............................ 252,266
Investment Advisory Fee (Note 2)...................................... 59,651
Custodian Bank........................................................ 1,458
Accrued Expenses........................................................ 330,319
Deferred Compensation and Retirement Plans (Note 2)..................... 59,977
------------
Total Liabilities................................................. 3,272,831
------------
NET ASSETS.............................................................. $131,340,207
============
NET ASSETS CONSIST OF:
Capital (Note 3)........................................................ $196,507,762
Net Unrealized Depreciation on Securities............................... (284,565)
Accumulated Distributions in Excess of Net Investment Income (Note 1)... (358,000)
Accumulated Net Realized Loss on Securities............................. (64,524,990)
------------
NET ASSETS.............................................................. $131,340,207
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $50,118,757 and 6,575,159 shares of capital stock issued and
outstanding) (Note 3)............................................... $ 7.62
Maximum sales charge (3.25%* of offering price)..................... .26
------------
Maximum offering price to public.................................... $ 7.88
============
Class B Shares:
Net asset value and offering price per share (Based on net assets of
$81,057,362 and 10,639,329 shares of capital stock issued and
outstanding) (Note 3)............................................... $ 7.62
============
Class C Shares:
Net asset value and offering price per share (Based on net assets of
$164,088 and 21,536 shares of capital stock issued and outstanding)
(Note 3)............................................................ $ 7.62
============
</TABLE>

*On sales of $25,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

9
<PAGE> 41

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Net of foreign withholding taxes of $62,358)................. $ 12,560,652
EXPENSES:
Distribution (12b-1) and Service Fees (Allocated to Classes A, B and C
of $131,097, $1,019,724 and $1,665, respectively) (Note 7)........... 1,152,486
Investment Advisory Fee (Note 2)....................................... 882,054
Shareholder Services (Note 2).......................................... 373,683
Custody................................................................ 184,449
Trustees Fees and Expenses (Note 2).................................... 49,859
Interest (Note 6)...................................................... 42,719
Legal (Note 2)......................................................... 16,410
Amortization of Organizational Expenses (Note 1)....................... 2,523
Other.................................................................. 235,126
------------
Total Expenses..................................................... 2,939,309
Less Expenses Reimbursed........................................... 44,473
------------
Net Expenses....................................................... 2,894,836
------------
NET INVESTMENT INCOME.................................................. $ 9,665,816
============
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments........................................................ $ 872,668
Options............................................................ 976,960
Foreign Currency Transactions...................................... (18,050,439)
------------
Net Realized Loss on Securities........................................ (16,200,811)
------------
Net Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period.............................................. (20,294,494)
------------
End of the Period:
Investments........................................................ 653,545
Options............................................................ (18,547)
Forwards........................................................... (906,748)
Foreign Currency Translation....................................... (12,815)
------------
(284,565)
------------
Net Unrealized Appreciation on Securities During the Period............ 20,009,929
------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES......................... $ 3,809,118
============
NET INCREASE IN NET ASSETS FROM OPERATIONS............................. $ 13,474,934
============
</TABLE>

See Notes to Financial Statements

10
<PAGE> 42

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended June 30, 1996 and 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 June 30, 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 9,665,816 $ 19,761,456
Net Realized Loss on Securities......................... (16,200,811) (12,602,409)
Net Unrealized Appreciation/Depreciation on Securities
During the Period..................................... 20,009,929 (7,738,870)
------------ ------------
Change in Net Assets from Operations.................... 13,474,934 (579,823)
------------ ------------
Distributions from and in Excess of Net Investment
Income................................................ -0- (14,866,346)
Return of Capital Distribution (Note 1)................. (11,609,288) (7,736,408)
------------ ------------
Total Distributions*.................................... (11,609,288) (22,602,754)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 1,865,646 (23,182,577)
------------ ------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold............................... 2,427,135 6,199,457
Net Asset Value of Shares Issued Through Dividend
Reinvestment.......................................... 6,370,708 12,635,688
Cost of Shares Repurchased.............................. (79,947,106) (214,719,738)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS...... (71,149,263) (195,884,593)
------------ ------------
TOTAL DECREASE IN NET ASSETS............................ (69,283,617) (219,067,170)
NET ASSETS:
Beginning of the Period................................. 200,623,824 419,690,994
------------ ------------
End of the Period (Including undistributed net
investment income of $(358,000) and $(588,190),
respectively)......................................... $131,340,207 $200,623,824
============ ============
</TABLE>

<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class June 30, 1996 June 30, 1995
---------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of
Net Investment Income (Note 1):
Class A Shares...................... $ -0- $ (5,617,141)
Class B Shares...................... -0- (9,240,772)
Class C Shares...................... -0- (8,387)
Class D Shares...................... -- (46)
------------ ------------
$ -0- $(14,866,346)
============ ============
Return of Capital Distribution (Note
1):
Class A Shares...................... $ (4,481,275) $ (2,908,177)
Class B Shares...................... (7,116,453) (4,822,441)
Class C Shares...................... (11,560) (5,768)
Class D Shares...................... -- (22)
------------ ------------
$(11,609,288) $ (7,736,408)
============ ============
</TABLE>

See Notes to Financial Statements

11
<PAGE> 43

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended June 30
---------------------------------------------
Class A Shares 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Net Asset Value, Beginning of the Period....... $7.56 $8.15 $9.11 $9.65 $9.49
----- ----- ----- ----- -----
Net Investment Income.......................... .49 .50 .59 .71 .69
Net Realized and Unrealized Gain/Loss on
Securities................................... .16 (.45) (.89) (.46) .34
----- ----- ----- ----- -----
Total from Investment Operations............... .65 .05 (.30) .25 1.03
----- ----- ----- ----- -----
Less:
Distributions from and in Excess of Net
Investment Income (Note 1)................. -0- .37 .35 .79 .87
Return of Capital Distribution (Note 1)...... .59 .27 .31 -0- -0-
----- ----- ----- ----- -----
Total Distributions............................ .59 .64 .66 .79 .87
----- ----- ----- ----- -----
Net Asset Value, End of the Period............. $7.62 $7.56 $8.15 $9.11 $9.65
===== ===== ===== ===== =====
Total Return* (a).............................. 8.81% .69% (3.61%) 2.86% 11.35%
Net Assets at End of the Period (In
millions).................................... $50.1 $72.5 $147.7 $205.9 $205.1
Ratio of Expenses to Average Net Assets*....... 1.31% 1.14% 1.13% 1.14% 1.32%
Ratio of Net Investment Income to Average
Net Assets*.................................. 6.54% 7.20% 6.64% 7.87% 8.12%
Portfolio Turnover............................. 148% 204% 259% 141% 65%
</TABLE>

* If certain expenses had not been assumed by VKAC, total return would have been
lower and the ratios would have been as follows:

<TABLE>
<S> <C> <C> <C> <C> <C>
Ratio of Expenses to Average Net Assets........ 1.34% N/A N/A N/A N/A
Ratio of Net Investment Income to Average
Net Assets................................... 6.51% N/A N/A N/A N/A
</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.

N/A = Not Applicable

See Notes to Financial Statements

12
<PAGE> 44

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
Year Ended June 30 July 22, 1991
(Commencement of
----------------------------- Distribution) to
Class B Shares 1996 1995 1994 1993 June 30, 1992
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Net Asset Value, Beginning
of the Period..................... $7.56 $8.15 $9.10 $9.65 $9.43
----- ----- ----- ----- -----
Net Investment Income............... .39 .41 .54 .67 .78
Net Realized and Unrealized
Gain/Loss on Securities........... .20 (.42) (.90) (.49) .19
----- ----- ----- ----- -----
Total from Investment Operations.... .59 (.01) (.36) .18 .97
----- ----- ----- ----- -----
Less:
Distributions from and in Excess
of Net Investment Income (Note
1).............................. -0- .34 .32 .73 .75
Return of Capital Distribution
(Note 1)........................ .53 .24 .27 -0- -0-
----- ----- ----- ----- -----
Total Distributions................. .53 .58 .59 .73 .75
----- ----- ----- ----- -----
Net Asset Value, End
of the Period..................... $7.62 $7.56 $8.15 $9.10 $9.65
===== ===== ===== ===== =====
Total Return*(a).................... 8.02% (.14%) (4.22%) 2.02% 10.47%**
Net Assets at End of the Period (In
millions)......................... $81.1 $127.9 $271.8 $393.1 $241.7
Ratio of Expenses to Average Net
Assets*........................... 2.09% 1.96% 1.85% 1.85% 2.08%
Ratio of Net Investment Income to
Average Net Assets*............... 5.79% 6.42% 5.91% 7.20% 8.62%
Portfolio Turnover.................. 148% 204% 259% 141% 65%
* If certain expenses had not been assumed by VKAC, total return would have been lower and
the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets............................ 2.12% N/A N/A N/A N/A
Ratio of Net Investment Income to
Average Net Assets................ 5.76% N/A N/A N/A N/A
</TABLE>

** Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

N/A = Not Applicable

See Notes to Financial Statements

13
<PAGE> 45

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
August 13, 1993
(Commencement of
Year Ended Year Ended Distribution) to
Class C Shares June 30, 1996 June 30, 1995 June 30, 1994
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Net Asset Value, Beginning
of the Period........................ $7.56 $8.16 $9.24
----- ----- -----
Net Investment Income.................. .45 .50 .49
Net Realized and Unrealized
Gain/Loss on Securities.............. .14 (.52) (1.05)
----- ----- -----
Total from Investment Operations....... .59 (.02) (.56)
----- ----- -----
Less:
Distributions from and in Excess of
Net Investment Income (Note 1)..... -0- .34 .27
Return of Capital Distribution (Note
1)................................. .53 .24 .25
----- ----- -----
Total Distributions.................... .53 .58 .52
----- ----- -----
Net Asset Value, End of the Period..... $7.62 $7.56 $8.16
===== ===== =====
Total Return*(a)....................... 8.03% (.27%) (6.32%)**
Net Assets at End of the Period
(In millions)........................ $.2 $.2 $.2
Ratio of Expenses to Average
Net Assets*.......................... 2.07% 1.96% 1.84%
Ratio of Net Investment Income to
Average Net Assets*.................. 5.72% 6.30% 5.83%
Portfolio Turnover..................... 148% 204% 259%
* If certain expenses had not been assumed by VKAC, total return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net Assets........................... 2.09% N/A N/A
Ratio of Net Investment
Income to Average Net
Assets............................... 5.69% N/A N/A
</TABLE>

** Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

N/A = Not Applicable

See Notes to Financial Statements

14
<PAGE> 46

NOTES TO FINANCIAL STATEMENTS

June 30, 1996
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Short-Term Global Income Fund (the "Fund") is
organized as a series of Van Kampen American Capital Trust (the "Trust"), a
Delaware business trust, and is registered as a non-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 current
income, consistent with prudent investment risk through investment in a global
portfolio of investment grade debt securities denominated in various currencies
and multi-national currency units and having an average maturity of three years
or less. The Fund commenced investment operations on September 28, 1990. The
distribution of the Fund's Class B and Class C shares commenced on July 22,
1991, and August 13, 1993, respectively. On May 2, 1995, all Class D
shareholders redeemed their shares and the class was eliminated. The Fund will
no longer offer Class D shares.

A. SECURITY VALUATION--Investments are stated at value using the last available
bid price or yield equivalents obtained from dealers in the over-the-counter
(OTC) or interbank market. Short-term securities with remaining maturities of
less than 60 days are valued at amortized cost.

15
<PAGE> 47

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.

D. CURRENCY TRANSLATION--Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated into
U.S. dollars at the mean of the quoted bid and ask prices of such currencies
against the U.S. dollar. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated at rates prevailing when accrued.

F. 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
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At June 30, 1996, the Fund had an accumulated capital loss carryforward
for tax purposes of $64,736,057. Of this amount, $10,010,730, $53,019,433 and
$1,705,894 will expire on June 30, 2001, 2003 and 2004 respectively. Net
realized gains or losses may differ for financial and tax reporting purposes
primarily as a result of post October 31 losses which are not recognized for tax
purposes until the first day of the following fiscal year.

G. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net investment income for federal income
tax purposes includes gains and losses realized on transactions in foreign
currencies and options on foreign currencies. These realized gains and losses
are included as net realized gains or losses for financial reporting purposes.
Permanent book and tax basis differences relating to currency losses totaling
$17,134,347 were reclassified from accumulated net realized gain/loss on
securities to accumulated undistributed net investment income. In

16
<PAGE> 48

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

addition, a permanent book and tax basis difference due to a net operating loss
for tax purposes totaling $7,698,721 has been reclassified from accumulated
undistributed net investment income to capital.

Net realized gains on securities, if any, are distributed annually.

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.

For the year ended June 30, 1996, the Fund recognized expenses of
approximately $33,500 representing VKAC's cost of providing accounting, cash
management and legal services to the Fund. Of this amount, approximately $9,300
has been assumed by VKAC.

In July, 1995, the Fund began using ACCESS Investor Services, Inc.
("ACCESS"), an affiliate of the Adviser, as the shareholder servicing agent for
the Fund. For the year ended June 30, 1996, the Fund recognized expenses of
approximately $269,400, representing ACCESS' cost of providing transfer agency
and shareholder services plus a profit.

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.

At June 30, 1996, VKAC owned 1,428 and 100 shares of Classes B and C,
respectively.

17
<PAGE> 49

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1996, capital aggregated $71,847,960, $124,493,824 and $165,978,
for Classes A, B and C, respectively. For the year ended June 30, 1996,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
Sales:
Class A.................................. 162,018 $ 1,242,482
Class B.................................. 153,961 1,176,596
Class C.................................. 1,057 8,057
----------- ------------
Total Sales................................ 317,036 $ 2,427,135
=========== ============
Dividend Reinvestment:
Class A.................................. 356,105 $ 2,727,316
Class B.................................. 474,434 3,632,026
Class C.................................. 1,485 11,366
----------- ------------
Total Dividend Reinvestment................ 832,024 $ 6,370,708
=========== ============
Repurchases:
Class A.................................. (3,533,398) $(27,079,054)
Class B.................................. (6,899,452) (52,839,746)
Class C.................................. (3,684) (28,306)
----------- ------------
Total Repurchases.......................... (10,436,534) $(79,947,106)
=========== ============
</TABLE>

18
<PAGE> 50

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1995, capital aggregated $102,375,382, $184,393,612 and
$196,040, for Classes A, B and C, respectively. For the year ended June 30,
1995, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------
Sales:
Class A.................................. 147,880 $ 1,164,395
Class B.................................. 633,871 5,017,062
Class C.................................. 2,233 18,000
Class D.................................. -0- -0-
----------- -------------
Total Sales................................ 783,984 $ 6,199,457
=========== =============
Dividend Reinvestment:
Class A.................................. 640,247 $ 5,003,613
Class B.................................. 973,210 7,618,093
Class C.................................. 1,792 13,973
Class D.................................. 1 9
----------- -------------
Total Dividend Reinvestment................ 1,615,250 $ 12,635,688
=========== =============
Repurchases:
Class A.................................. (9,324,231) $ (73,225,277)
Class B.................................. (18,052,147) (141,454,897)
Class C.................................. (4,985) (38,532)
Class D.................................. (124) (1,032)
----------- -------------
Total Repurchases.......................... (27,381,487) $(214,719,738)
=========== =============
</TABLE>

19
<PAGE> 51

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

the expense of their respective deferred sales arrangements, including higher
distribution and service fees and incremental transfer agency costs.

For the year ended June 30, 1996, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of $1,540 and CDSC on
redeemed shares of approximately $59,300. Sales charges do not represent
expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding U.S. Government securities and short-term investments, were
$175,408,439 and $285,327,825, 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
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, foreign currency
exposure, maturity and duration. All of the Fund's portfolio holdings, including
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 for
exercised option contracts where the recognition of gain or loss is postponed
until the disposal of the security underlying the option contract.

Summarized below are the specific types of derivative financial instruments
used by the Fund.

A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Fund
to manage the portfolio's foreign currency exposure and effective maturity and
duration.

20
<PAGE> 52

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

Transactions in options for the year ended June 30, 1996, were as follows:

<TABLE>
<CAPTION>
CONTRACTS PREMIUM
<S> <C> <C>
- ---------------------------------------------------------------------------
Outstanding at June 30, 1995.................. 11 $(1,537,634)
Options Written and
Purchased (Net)............................. 44 (115,937)
Options Terminated in Closing
Transactions (Net).......................... (49) 1,044,426
Options Expired (Net)......................... (5) 583,648
--- -----------
Outstanding at June 30, 1996.................. 1 $ (25,497)
=== ===========

</TABLE>

The description and market value of the option contract outstanding as of
June 30, 1996, are as follows:

<TABLE>
<CAPTION>
OPENING EXPIRATION MARKET
DESCRIPTION TRANSACTION DATE VALUE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
DEM Call Basket Currency Put.......... Buy 11/29/96 $6,950
======
</TABLE>

B. FORWARD CURRENCY CONTRACTS--These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on investments and foreign currency.

At June 30, 1996, the Fund has outstanding forward currency contracts as
follows:

<TABLE>
<CAPTION>
UNREALIZED
FORWARD ORIGINAL CURRENT APPRECIATION/
CURRENCY CONTRACTS VALUE VALUE DEPRECIATION
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
BUYS TO OPEN
German Mark,
expiring 07/19/96-07/22/96... $24,490,548 $24,414,938 $ (75,610)
SELLS TO OPEN
Australian Dollar,
expiring 07/08/96-07/25/96... 4,497,779 4,484,806 12,973
German Mark,
expiring 09/25/96-09/30/96... 19,000,000 19,148,431 (148,431)
Italian Lira,
expiring 07/18/96............ 9,481,798 9,828,787 (346,989)
New Zealand Dollar,
expiring 07/11/96-08/01/96... 11,174,510 11,443,192 (268,682)
</TABLE>

21
<PAGE> 53

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
UNREALIZED
FORWARD ORIGINAL CURRENT APPRECIATION/
CURRENCY CONTRACTS VALUE VALUE DEPRECIATION
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
Spanish Peseta,
expiring 08/12/96............ 4,461,750 4,520,013 (58,263)
Swedish Krona,
expiring 07/11/97............ 1,000,000 1,021,746 (21,746)
---------
$(906,748)
=========
</TABLE>

At June 30, 1996, the Fund had realized gains on closed but unsettled
forward currency contracts of $1,103,304 scheduled to settle between July 3,
1996 and November 4, 1996.

C. SWAP TRANSACTIONS--These securities, which are identified in the portfolio of
investments, represent an agreement between two parties to exchange a series of
cash flows based upon various indices at specified intervals.

6. BORROWINGS

In accordance with its investment policies, the Fund may borrow money from banks
or enter into reverse repurchase agreements to enable the Fund to satisfy
redemption requests and other temporary purposes.

The Fund was entered into reverse repurchase agreements under which the Fund
sells securities and agrees to repurchase them at a mutually agreed upon date
and price. During the reverse repurchase agreement period, the Fund continues to
receive principal and interest payments on these securities but pays interest to
the counter-party based upon a short-term interest rate. The average daily
balance of reverse repurchase agreements during the period was approximately
$1,243,000 with an average interest rate of 3.360%. At June 30, 1996, the
interest rate in effect for reverse repurchase agreements was 5.450%.

7. DISTRIBUTION AND SERVICE PLANS

Annual fees under the Plans of up to .25% for Class A and 1.00% each for
Class B and Class C shares are accrued daily. Included in these fees for the
year ended June 30, 1996, are payments to VKAC of approximately $736,700.

22
<PAGE> 54

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital Short-Term Global Income Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Short-Term Global Income Fund (the "Fund"), including
the portfolio of investments, as of June 30, 1996, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Short-Term Global Income Fund as of June 30, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP
Chicago, Illinois
August 2, 1996

23
<PAGE> 55

FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL

GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund

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

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

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

THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund

Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.

24
<PAGE> 56

VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN

LINDA HUTTON HEAGY

ROGER HILSMAN

R. CRAIG KENNEDY

DENNIS J. MCDONNELL*

DONALD C. MILLER - Co-Chairman

JACK E. NELSON

DON G. POWELL*

JEROME L. ROBINSON

FERNANDO SISTO - Co-Chairman

WAYNE W. WHALEN*

WILLIAM S. WOODSIDE

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

TONYA 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
INVESTMENT ADVISORY CORP.
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
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601

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

(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.

25
<PAGE> 57

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......................... 9
Statement of Assets and Liabilities.............. 14
Statement of Operations.......................... 15
Statement of Changes in Net Assets............... 16
Financial Highlights............................. 17
Notes to Financial Statements.................... 20
Independent Accountants' Report.................. 30
</TABLE>

SIF ANR 8/96
<PAGE> 58

LETTER TO SHAREHOLDERS

August 1, 1996

Dear Shareholder,
As you may be aware, an agreement
was reached in late June for VK/AC
Holding, Inc., the parent company of
Van Kampen American Capital, Inc., to [PHOTO]
be acquired by the Morgan Stanley
Group Inc. While this announcement
may appear commonplace in an
ever-changing financial industry, we DENNIS J. MCDONNELL AND DON G. POWELL
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 reputation for competitive
long-term performance and superior investor services, together we will offer a
broader range of investment opportunities and expertise.
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 anticipated
to be completed in November.

ECONOMIC REVIEW
The economy demonstrated an acceleration in growth during the six-month
reporting 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 by 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
comparable 1995 period.
In the manufacturing sector, economic reports, such as the National
Association 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 annual
rate over the past year. Meanwhile, the 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 percent 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.

Continued on page two

1
<PAGE> 59

BOND MARKET REVIEW
In the fixed-income market, interest rates trended lower in the last half of
1995. However, during the first half of 1996, interest rates rose sharply, and
U.S. Treasury yields increased by 1.00 to 1.25 percent. Benchmark 10-year U.S.
Treasuries declined in value by about 7.8 percent. Signs of increasing economic
momentum, as discussed in the Economic Review, was the major factor contributing
to this decline.
Resisting this movement toward lower prices and higher interest rates was
the high yield sector of the U.S. bond market. Currently, the prices of bonds
with below investment-grade credit ratings are running at the same or slightly
higher levels than they were at the beginning of 1996. Returns on high yield
issues are linked to individual corporate developments and earnings as well as
interest rates, which has allowed them to outperform the investment-grade sector
this year.
Long-term interest rates in larger European economies reacted similarly to
U.S. rates, rising steadily after hitting their low point in late January.
However, European yields have proven more resilient than their U.S.
counterparts. Yields in Germany, France, Belgium, Austria, and the Netherlands
rose through March but have since traded in a relatively narrow range, whereas
U.S. yields have risen consistently since February.
This outperformance of foreign bond markets since February reflects
worldwide expectations that growth is reviving at a faster rate in the U.S. than
in Europe. In general, economic activity has been slow in larger economies and
slowing in the smaller economies. The easy monetary policy pursued by Japan
added further support to the international bond markets.

OUTLOOK
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 particular,
we expect 10-year treasury yields to remain within a trading range of 6.50 and
7.25 percent. Finally, look for economies worldwide to be on stronger footing
for the rest of 1996 and into next year.
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,

[SIG]

Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]

Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.

2
<PAGE> 60

PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1996

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
One-year total return based on NAV (1) ... 12.92% 12.06% 12.07%
One-year total return (2) ................ 7.58% 8.06% 11.07%
Life-of-Fund average annual total
return (2) ............................. 0.68% 0.68% 1.81%
Commencement date ........................ 12/31/93 12/31/93 12/31/93

DISTRIBUTION RATE AND YIELD

Distribution rate (3) .................... 8.29% 7.95% 7.96%
SEC Yield (4) ............................ 6.72% 6.29% 6.29%
</TABLE>

(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).

(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 June 30, 1996. Had certain
expenses of the Fund not been assumed by VKAC, total returns would have been
lower and the SEC Yield would have been 6.66%, 6.23% and 6.23% for Classes A, B
and C, respectively.

3
<PAGE> 61

PORTFOLIO HIGHLIGHTS

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND
TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF % AS OF
JUNE 30, 1996 SIX MONTHS AGO
<S> <C> <C>
FNMA REMICs.................................. 9.2% ........... 11.4%
Transportadora de Gas del Sur................ 6.0% ........... 2.3%
Auxiliaire du Credit Foncier de France ...... 4.8% ........... N/A
GNMA Pool #336788............................ 4.7% ........... N/A
FHLMC 1624-KZ................................ 4.3% ........... 4.1%
Western Financial Savings.................... 3.6% ........... 3.5%
Ford Motor Credit............................ 3.1% ........... N/A
Cable and Wireless Plc....................... 2.9% ........... N/A
Banco del Estado............................. 2.8% ........... 2.6%
FNMA Note.................................... 2.6% ........... 2.5%
</TABLE>

N/A = Not Applicable

ASSET ALLOCATION
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C> <C> <C>
/ / Foreign Non-Investment Grade (mainly Emerging Markets)........ 31.8%
/ / Foreign Investment Grade...................................... 21.3%
/ / U.S. Government/Mortgage Backed Securities.................... 20.9% [PIE CHART]
/ / Domestic Non-Investment Grade (mainly High Yield bonds)....... 14.9%
/ / Domestic Investment Grade..................................... 11.1%

<CAPTION>
AS OF DECEMBER 31, 1995
<S> <C> <C> <C>
/ / Foreign Non-Investment Grade (mainly Emerging Markets)........ 29.7%
/ / Foreign Investment Grade...................................... 25.3%
/ / U.S. Government/Mortgage Backed Securities.................... 22.8% [PIE CHART]
/ / Domestic Non-Investment Grade (mainly High Yield bonds)....... 14.9%
/ / Domestic Investment Grade..................................... 7.3%

</TABLE>

TOP TEN COUNTRIES AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C>
U.S..................... 46.9%
Argentina............... 11.6%
France.................. 4.8%
United Kingdom.......... 4.7%
Canada.................. 3.9%
Chile................... 3.5%
Poland.................. 3.0%
Colombia................ 3.0%
Panama.................. 2.4%
Brazil.................. 2.1%

<CAPTION>
AS OF DECEMBER 31, 1995
<S> <C>
U.S..................... 45.6%
Argentina............... 13.6%
Chile................... 5.4%
New Zealand............. 5.1%
Poland.................. 3.4%
Colombia................ 2.9%
Cayman Islands.......... 2.6%
Brazil.................. 2.5%
United Kingdom.......... 2.2%
Canada.................. 1.8%
</TABLE>

4
<PAGE> 62

PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

- Reflect the impact of favorable market trends or difficult market
conditions

- Help you evaluate the extent to which your Fund's management team has
responded 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 Aggregate Bond
Index and the hybrid index presented. These indices are unmanaged statistical
composites and do not reflect any commissions or fees that would be incurred by
an investor purchasing the securities they represent. Similarly, their
performance does not reflect any sales charges or other costs that 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 Strategic Income Fund vs. Lehman Brothers
Aggregate Bond Index and hybrid index
(December 1993 through June 1996)

[GRAPH]

STRATEGIC HYBRID OF LEHMAN BROTHERS AGGREGATE
DATE INCOME FUND SALOMON BROTHERS* BOND INDEX
<S> <C> <C> <C>

12/31/93 9527 10000 10000
1/31/94 9480 10096.42 10135
2/28/94 9167 9825.19 9958.65
3/31/94 8617 9391.74 9712.67
4/30/94 8326 9334.84 9634.97
5/31/94 8422 9428.53 9634.01
6/30/94 8305 9277.08 9612.81
7/31/94 8416 9442.08 9804.11
8/31/94 8423 9618.65 9815.87
9/30/94 8465 9587.24 9671.58
10/31/94 8316 9532.93 9662.877
11/30/94 8136 9537.80 9641.622
12/31/94 7985 9470.34 9708.144
1/31/95 8028 9564.93 9900.366
2/28/95 8102 9633.21 10135.999
3/31/95 8080 9656.06 10197.822
4/30/95 8485 9996.82 10340.599
5/31/95 8962 10446.99 10740.777
6/30/95 9007 10534.69 10819.188
7/31/95 9084 10556.89 10795.388
8/31/95 9125 10509.38 10926.000
9/30/95 9346 10703.8 11031.999
10/31/95 9396 10773.37 11175.4
11/30/95 9620 10934.97 11343.033
12/31/95 9854 11156.95 11501.833
1/31/96 10187 11286.37 11577.755
2/28/96 9986 11111.43 11376.299
3/31/96 9869 11108.1 11296.666
4/30/96 9966 11129.21 11233.4
5/31/96 10047 11153.69 11210.933
6/30/96 10171 11298.69 11361.166

</TABLE>

*This hybrid index is a simulated composite reflecting 20% of each of the
following Salomon Brothers Indices: Mortgage, High Yield Market, Corporate,
Non-U.S. Dollar World Government Bond and Brady Bond.

5
<PAGE> 63

PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND

We recently spoke with the management team of the Van Kampen American Capital
Strategic Income Fund about the key events and economic forces that shaped the
markets during the past fiscal year. The team includes Robert Hickey, portfolio
manager, and Peter W. Hegel, executive vice president for fixed-income
investments. The following excerpts reflect their views on the Fund's
performance during the 12-month period ended June 30, 1996.

THE FOLLOWING KEY TERMS ARE LISTED IN THE ORDER IN WHICH YOU WILL FIND THEM IN
THIS REPORT.
DURATION: A measure of a bond's price sensitivity to changes in interest rates,
measured in years. To understand the importance of duration, consider that it
has a direct impact on a fund's net asset value. The higher the duration, the
greater the effect of changes in interest rate movements on net asset value.
YIELD SPREAD: To compensate investors for the added risks, low quality
fixed-income securities typically offer investors higher yields than high
quality fixed-income securities. The difference in yields is what is referred to
as the yield spread and is commonly expressed in basis points.

Q WHAT EVENTS OR MARKET CONDITIONS HAD THE GREATEST IMPACT ON THE FUND
DURING THE PERIOD?

A The U.S. markets wield considerable influence on a global basis. Thus, the
factors that move the U.S. bond market are always a key consideration in
managing this Fund. About 50 percent of the Fund's assets are invested in
domestic markets.
U.S. economic growth began to show signs of acceleration during the first
half of 1996, hinting at potential inflationary pressures in the economy. As a
result, markets began to discount an adjustment in Federal Reserve policy. Such
a change would lead to potential increases in short-term interest rates as a
means of controlling the pace of the economic growth. The shift in market
sentiment led to a severe sell-off in bonds and a sharp increase in interest
rates in the first half of 1996.
While the extent of the increase in rates surprised the market, the Fund had
been positioned in anticipation of a moderate-growth, moderate-inflation
economic scenario. Our resulting sector overweightings--in investment-grade and
high yield corporate bonds and emerging market issues--performed very well.
While March was a difficult month, due to deterioration in some of the
portfolio's mortgage-backed securities, we shortened the duration of our
investments and saw a return to solid performance in the second quarter of the
year. Please refer to page four for Fund portfolio highlights.

6
<PAGE> 64

Q HAS THE FUND PERFORMED TO YOUR EXPECTATIONS DURING THE PAST FISCAL YEAR?

A Yes, the Fund had a solid year, finishing near the top of its investment
category in terms of total return for the 12 months ended June 30,
1996--ranking 9 out of 38 funds in the Multi-Sector Income category for
the period, while ranking 15 out of 17 since inception on December 31, 1993, as
measured by Lipper Analytical Services, Inc.*--with a one-year total return of
12.92 percent(1) (Class A shares at net asset value). In comparison, the Lehman
Brothers Aggregate Bond Index, a broad-based, unmanaged index, generated a total
return of 5.02 percent over the same period. Similarly, a composite index of 20
percent of each Salomon Brothers Index for Mortgages, High Yield, Corporate,
Non-U.S. Dollar World Government Bond, and Brady Bonds produced a total return
of 7.25 percent over the same period. Neither index reflects any commissions or
fees that would be paid by an investor purchasing the securities they represent.
During the period, the Fund realized a reduction in the monthly divided from
$.0925 to $.0875 per share (Class A shares), effective March 1, 1996. Despite
this reduction, the Fund still provides one of the highest distribution rates
within its Lipper peer group of 8.29 percent(3) as of June 30, 1996. Please
refer to the chart on page three for additional Fund performance results.

Q HOW WOULD YOU CHARACTERIZE THE PERFORMANCE OF THE VARIOUS MARKET SECTORS
IN WHICH THE FUND INVESTS AND THEIR IMPACT ON THE FUND?

A U.S. Government Securities. The performance of mortgage-backed securities
was hampered by the sell-off in the U.S. bond market, and this was the
worst-performing sector for the Fund. Contributing to the poor performance
of this sector of the portfolio was our position in mortgage derivatives, which
tend to enhance the Fund's yield potential while at the same time magnifying
price movements in the underlying market.

Domestic Investment Grade Income Securities. We were overweighted in this
sector for most of the first and second quarters of the year, and the Fund
benefited from the relatively strong performance of these securities. Our
emphasis had been on the BBB-rated segment of the market, but we began to shift
into the higher rated spectrum during the latter portion of the fiscal year. We
made this adjustment after concluding that the yield spread between
medium-quality and high-quality bonds was not sufficient enough to warrant the
added exposure to credit risk.

Domestic Lower Grade Income Securities. Consistent with previous
allocations, we focused on better quality securities within this sector. As with
investment grade corporates, we did not feel that we were being compensated for
the added risk associated with lower rated, high yield issues. In fact, we
underweighted the Fund's position in lower rated issues for most of the year, as
we found better opportunities in the high yield market. However, our investments
in this sector were beneficial to Fund performance, as U.S. high yield
securities outperformed all other domestic fixed-income markets in the first
half of 1996. Going forward, we will likely maintain the Fund's underweighted
position in this sector, realizing that an economic slowdown may cause these
securities to underperform relative to high quality bonds.

7
<PAGE> 65

Foreign Investment Grade Income Securities. Although we were underweighted
in this sector, we did participate in the rally enjoyed by selected foreign bond
markets. The portfolio captured positive returns from our positions in
higher-yielding foreign markets such as Spain, Italy, and Portugal. We were also
able to realize some currency-based gains.

Foreign Lower Grade Income Securities. As emerging markets continued to
recover from their depressed levels of 1994, they proved to be the strongest
performing sector for the Fund. Our overweighting here helped to support Fund
performance when the U.S. bond market sold off. In fact, in terms of total
return, during the first half of 1996, U.S. Treasuries were down by
approximately 16.3 percent, while emerging markets showed a gain of
approximately 13 percent, according to the JP Morgan Emerging Markets Bond
Index.

Q WHAT IS YOUR OUTLOOK FOR THE MARKET AND FOR POTENTIAL PORTFOLIO CHANGES IN
THE MONTHS AHEAD?

A We do not anticipate any major shifts in our portfolio allocations,
although there will be some minor adjustments. It is likely that we will
reduce the Fund's exposure to the domestic investment grade sector, as
these bonds are becoming relatively expensive. Also, we have been decreasing our
exposure to mortgage derivatives in favor of more traditional mortgage-backed
issues. We feel that we will be compensated by a certain degree of price
stability and greater total return opportunities.
With the same goal in mind, we have been reducing our use of leverage
(borrowing to purchase securities for the Fund's portfolio). Leverage now
amounts to 15 to 20 percent of net assets, down from around 30 percent in late
1995. This helped lessen the volatility of the portfolio during the first and
second quarter of this year. We expect to maintain this lower level of leverage
until markets stabilize or more attractive total return opportunities appear.
We remain bullish on the U.S. dollar and dollar bloc currencies, such as
Australia and Canada. As the Fund reaches its dollar target levels, we expect to
increase the Fund's allocation in the foreign investment grade bond markets to a
more neutral position. As for emerging markets, we continue to expect strong
investor interest and, more importantly, we are very optimistic about the
economic prospects for the immediate future.

[SIG]

Peter W. Hegel
Executive Vice President
Fixed Income Investments

[SIG]

Robert Hickey
Portfolio Manager

* Lipper Analytical Services, Inc. calculations are based upon changes in net
asset value with dividends reinvested. Lipper calculations do not include
sales charges and, if they had, results may have been less favorable.

Please see footnotes on page three

8
<PAGE> 66

PORTFOLIO OF INVESTMENTS

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S.$
(000) Description Coupon Date Market Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS 58.0%
BANKING 7.4%
3,000 Banco del Estado - US$ (c).............. 8.390% 08/01/01 $ 3,141,540
4,100 Western Financial Savings - US$ (c)..... 8.500 07/01/03 4,143,960
------------
7,285,500
------------
CONTAINERS, PACKAGING & GLASS 0.7%
40 Anchor Glass Container Corp. - US$...... 10.250 06/30/02 28,000
700 Silligan Holdings Corp. - US$........... 13.250 12/15/02 703,500
------------
731,500
------------
DIVERSIFIED/CONGLOMERATE SERVICE 1.0%
1,000 Service Corp. International - US$....... 6.750 06/01/01 993,110
------------
ELECTRONICS 1.7%
1,000 Bell & Howell Co. - US$ (d)............. 0/11.500 03/01/05 685,000
1,000 Comdisco, Inc. - US$.................... 5.750 05/22/98 1,001,555
------------
1,686,555
------------
FINANCE 10.0%
3,000 Auxiliaire du Credit Foncier de France -
US$..................................... 5.332 09/25/02 2,730,000
3,000 Auxiliaire du Credit Foncier de France -
US$..................................... 5.000 02/18/03 2,692,500
4,000 Ford Motor Credit - US$................. 5.730 01/13/05 3,550,000
1,000 Guangdong Enterprise - US$ (c).......... 8.750 12/15/03 883,000
------------
9,855,500
------------
GROCERY 0.5%
500 Purity Supreme - US$.................... 11.750 08/01/99 542,500
------------
HEALTHCARE 1.1%
1,000 Tenet Healthcare Corp. - US$ (c)........ 10.125 03/01/05 1,060,000
------------
HOTEL, MOTEL, INNS & GAMING 0.6%
500 Showboat Marina - US$................... 13.500 03/15/03 545,000
------------
LEISURE AND AMUSEMENT 2.5%
2,500 Viacom, Inc. - US$...................... 7.750 06/01/05 2,433,765
------------
MINING 0.4%
400 Carbide/Graphite, Inc. - US$ (c)........ 11.500 09/01/03 433,000
------------
OIL & GAS 9.1%
500 Coda Energy - US$....................... 10.500 04/01/06 497,500
300 Global Marine - US$ (c)................. 12.750 12/15/99 325,500
1,500 Oleoducto Central S.A. - US$............ 9.350 09/01/05 1,472,085
4,950 Transportadora de Gas del Sur S.A. -
US$..................................... 7.750 12/23/98 4,826,250
2,000 Transportadora de Gas del Sur S.A. -
US$..................................... 10.250 04/25/01 1,990,000
------------
9,111,335
------------
PAPER 2.6%
500 Doman Industries Ltd - US$ (c).......... 8.750 03/15/04 452,500
</TABLE>

See Notes to Financial Statements

9
<PAGE> 67

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S.$
(000) Description Coupon Date Market Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PAPER (CONTINUED)
500 Indah Kiat International Finance (Pulp
and Paper Corp) Global Bond - US$....... 11.375% 06/15/99 $ 525,000
500 Tjiwi Kimia International BV - US$...... 13.250 08/01/01 560,000
1,000 Willamette Industries - US$ (b)......... 7.850 07/01/26 1,023,620
------------
2,561,120
------------
PRINTING, PUBLISHING & BROADCASTING 4.2%
1,000 Century Communications - US$ (c)........ 9.750 02/15/02 995,000
500 K-III Communications - US$.............. 10.625 05/01/02 520,000
2,500 Time Warmer - US$....................... 9.150 02/01/23 2,582,475
------------
4,097,475
------------
RETAIL 3.0%
3,000 Wal-Mart Stores - US$ (c)............... 6.750 05/24/02 2,977,500
------------
TELECOMMUNICATIONS 6.6%
3,500 Cable & Wireless PLC - US$ (c).......... 6.500 12/16/03 3,333,750
1,000 Panamsat LP - US$....................... 9.750 08/01/00 1,035,000
600 Pricellular Wireless Corp - US$ (d)..... 0/12.250 10/01/03 474,000
1,000 Rogers Cablesystems - CA$............... 9.650 01/15/14 641,983
1,000 Telefonica de Argentina - US$........... 11.875 11/01/04 1,087,000
------------
6,571,733
------------
UTILITIES 6.6%
1,000 Bridas Corp - US$ (c)................... 12.500 11/15/99 1,042,500
1,000 Central Termica Guemes S.A. - US$....... 12.000 11/29/96 1,012,500
1,000 El Paso Electric Co - US$ (c)........... 7.750 05/01/01 975,000
1,500 Midland Funding Corp II - US$ (c)....... 11.750 07/23/05 1,575,000
1,000 Sodigas - US$........................... 10.500 07/06/99 1,015,000
862 Subic Power Corp - US$.................. 9.50 12/28/08 862,069
------------
6,482,069
------------
Total Corporate Bonds............................................... 57,367,662
------------
FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS 33.0%
ARGENTINA 2.3%
2,000 Goldman Sachs Argentine Bocones Trust -
US$..................................... 13.375 08/15/01 2,255,000
------------
AUSTRALIA 1.5%
1,900 Australian Government - AU$............. 7.000 04/15/00 1,426,695
------------

</TABLE>

See Notes to Financial Statements

10
<PAGE> 68

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S.$
(000) Description Coupon Date Market Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BRAZIL 2.4%
1,624 Brazil C Bond - US$ (e)................. 8.000% 04/15/14 $ 1,010,719
2,500 Brazil Pars - US$ (d) (e)............... 5.000/5.250 04/15/24 1,387,500
------------
2,398,219
------------
CANADA 3.4%
1,250 Canadian Government - CA$ (b)........... 7.500 03/01/01 931,663
2,500 Province of Quebec - US$................ 5.670 02/27/26 2,405,050
------------
3,336,713
------------
COLOMBIA 1.9%
2,000 Republic of Colombia - US$.............. 7.250 02/15/03 1,877,500
------------
COSTA RICA 0.7%
1,000 Banco Central Costa Rica - US$ (e)...... 6.250 05/21/10 715,000
------------
ECUADOR 0.6%
1,000 Ecuador Discount Bond - US$ (e)......... 6.0625 02/28/25 571,250
------------
ITALY 1.0%
1,500,000 Republic of Italy BTPS - ITL (b)........ 9.500 05/01/01 1,010,449
------------
MEXICO 1.3%
2,000 Mexico Par Bond Ser A - US$ (e)......... 6.250 12/31/19 1,292,500
------------
NEW ZEALAND 1.3%
2,000 New Zealand Government - NZ$............ 8.000 02/15/01 1,322,174
------------
PANAMA 2.8%
5,000 Panama Interest Reduction Bond - US$ (b)
(d)..................................... 3.500/3.750 07/17/14 2,768,750
------------
PHILIPPINES 0.9%
1,000 Philippines Government (FLIRB) - US$ (d)
(e)..................................... 5.000/6.000 06/01/08 897,500
------------
POLAND 3.5%
3,500 Poland PDI Bond - US$ (c) (d) (e)....... 3.750/4.000 10/27/14 2,686,250
1,000 Poland Registered PDI Bond - US$ (d)
(e)..................................... 3.750/4.000 10/27/14 767,500
------------
3,453,750
------------
RUSSIA 1.8%
5,000 Vneshekonombank Loans - DEM............. (f) (f) 1,763,400
------------
SPAIN 1.6%
200,000 Spanish Government - ESP (b)............ 8.400 04/30/01 1,576,970
------------
SWITZERLAND 0.1%
148 Swiss Franc............................. 118,481
------------
THAILAND 1.0%
25,000 ABN/AMRO Bank - THB..................... 9.100 08/05/97 982,059
------------
</TABLE>

See Notes to Financial Statements

11
<PAGE> 69

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S.$
(000) Description Coupon Date Market Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED KINGDOM 2.1%
1,000 UK Treasury Bonds - GBP (b)............. 7.000% 11/06/01 $ 1,520,516
350 UK Treasury Bonds - GBP................. 6.750 11/26/04 508,911
------------
2,029,427
------------
URAGUAY 0.7%
1,000 Banco Central del Uruguay Ser B - US$
(e)..................................... 6.750 02/19/21 710,000
------------
VENEZUELA 2.1%
3,000 Venezuelan Debt Conversion Bond - US$
(e)..................................... 6.563 12/18/07 2,118,750
------------
Total Foreign Government and Agency
Obligations...................................................... 32,624,587
------------
US GOVERNMENT AND AGENCY OBLIGATIONS 3.0%
3,000 FNMA Note............................... 8.000 04/13/05 3,012,240
-----------
MORTGAGE BACKED OBLIGATIONS (US) 21.0%
5,807 FHLMC 1624-KZ (c)....................... 6.000 12/15/08 4,935,950
2,000 FNMA REMIC #92-33 S (Inverse Fitg)
(c)..................................... 14.400 03/25/22 1,692,500
75 FNMA REMIC #93-55 M PAC (Interest
Only)................................... 727.220 09/25/06 1,856,250
3,776 FNMA REMIC #93-180 SB (Inverse Fitg).... 4.993 09/25/00 3,280,550
5,000 FNMA REMIC #95-11A (Principal Only)
(c)..................................... * 01/25/24 3,659,375
5,410 GNMA Pool #336788 (c)................... 7.500 12/15/22 5,342,348
------------
Total Mortgage Backed Obligations (US)............................... 20,766,973
------------
SWAP TRANSACTIONS 0.0%
Goldman Sachs, 40.0 million US$ notional amount, maturing
01/23/00, payment based upon the spread between the 6 year French
Franc fixed swap interest rate versus the 6 year German Mark
fixed swap interest rate
........................................................................
(37,826)
------------
TOTAL LONG-TERM INVESTMENTS 115.0%
(Cost $113,946,239) (a).............................................. 113,733,636
LIABILITIES IN EXCESS OF OTHER ASSETS (15.0%)) ........................ (14,864,868)
------------
NET ASSETS 100.0%...................................................... $ 98,868,768
============
</TABLE>

* Zero coupon bond

(a) At June 30, 1996, cost for federal income tax purposes is $113,946,239; the
aggregate gross unrealized appreciation is $2,061,121 and the aggregate
gross unrealized gross unrealized depreciation is $2,586,548, resulting in
net unrealized depreciation on investments, foreign currency translation of
other assets and liabilities, forward currency contracts and option and
futures transactions of $525,427.

(b) Securities purchased on a when issued or delayed delivery basis.

(c) Assets segregated as collateral for when issued or delayed delivery purchase
commitments, open option, futures or swap transactions or borrowings of the
Fund.

(d) Security is a "Step-up" bond where the coupon increases, or steps up, at a
predetermined date.

See Notes to Financial Statements

12
<PAGE> 70

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

(e) Items represents a "Brady Bond" which is a product of the "Brady Plan" under
which various Latin American, African and Southeast Asian nations have
converted their outstanding external defaulted commercial bank loans into
bonds. Certain Brady Bonds have been collateralized, as to principal due at
maturity, by U.S. Treasury zero coupon bonds with a maturity date equal to
the final maturity date of such Brady Bonds.

(f) Item represents an assignment of a bank loan which currently is in default
with the potential to be restructured at a future date. As of June 30, 1996,
item is a non-income producing security.

The following table summarizes the portfolio composition at June 30, 1996,
based upon quality ratings issued by Standard & Poors. For securities not rated
by Standard & Poors, the Moody's rating is used.

<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION BY CREDIT QUALITY
<S> <C>
U.S. Govt. and Agency Obligations............... 20.9%
AAA............................................. 7.9
AA.............................................. 3.5
A............................................... 11.8
BBB............................................. 9.2
BB.............................................. 28.6
B............................................... 7.3
CCC............................................. 0.4
Non-Rated....................................... 10.4
-----
100.0%
=====
</TABLE>

See Notes to Financial Statements

13
<PAGE> 71

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $113,946,239) (Note 1).............. $113,733,636
Receivables:
Securities Sold...................................................... 13,690,475
Interest............................................................. 2,358,242
Fund Shares Sold..................................................... 314,843
Options at Market Value (Net premiums paid of $458,000) (Note 5)....... 247,000
Unamortized Organizational Expenses (Note 1)........................... 85,000
Other.................................................................. 2,438
------------
Total Assets....................................................... 130,431,634
------------
LIABILITIES:
Payables:
Securities Purchased................................................. 14,330,183
Bank Borrowings (Note 8)............................................. 12,878,262
Reverse Repurchase Agreements (Note 8)............................... 3,035,171
Income Distributions................................................. 406,193
Variation Margin on Futures (Note 5)................................. 215,872
Distributor and Affiliates (Notes 2 and 7)........................... 146,717
Investment Advisory Fee (Note 2)..................................... 74,356
Fund Shares Repurchased.............................................. 63,588
Forward Currency Contracts (Note 5).................................. 6,311
Accrued Expenses....................................................... 357,716
Deferred Compensation and Retirement Plans (Note 2).................... 48,497
------------
Total Liabilities.................................................. 31,562,866
------------
NET ASSETS............................................................. $ 98,868,768
============
NET ASSETS CONSIST OF:
Capital (Note 3)....................................................... $107,528,301
Accumulated Undistributed Net Investment Income........................ 22,912
Net Unrealized Depreciation on Securities.............................. (794,446)
Accumulated Net Realized Loss on Securities............................ (7,887,999)
------------
NET ASSETS............................................................. $ 98,868,768
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $33,826,436 and 2,803,579 shares of capital stock issued and
outstanding) (Note 3).............................................. $ 12.07
Maximum sales charge (4.75%* of offering price).................... .60
------------
Maximum offering price to public................................... $ 12.67
============
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $61,941,303 and 5,132,287 shares of capital stock issued and
outstanding) (Note 3).............................................. $ 12.07
============
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $3,101,029 and 257,163 shares of capital stock issued and
outstanding) (Note 3).............................................. $ 12.06
============
</TABLE>

*On sales of $100,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

14
<PAGE> 72

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Net of foreign withholding taxes of $11,751)................. $ 11,358,305
------------
EXPENSES:
Investment Advisory Fee (Note 2)....................................... 927,893
Distribution (12b-1) and Service Fees (Allocated to Classes A, B and C
of $79,707, $569,681 and $25,454, respectively) (Note 7)............. 674,842
Shareholder Services (Note 2).......................................... 163,002
Custody................................................................ 132,458
Trustees Fees and Expenses (Note 2).................................... 50,159
Amortization of Organizational Expenses (Note 1)....................... 34,074
Legal (Note 2)......................................................... 13,930
Other.................................................................. 204,927
------------
Total Operating Expenses......................................... 2,201,285
Less Expenses Reimbursed......................................... 75,046
------------
Net Operating Expenses........................................... 2,126,239
Interest Expense (Note 8)........................................ 2,065,824
------------
NET INVESTMENT INCOME.................................................. $ 7,166,242
============
NET REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments.......................................................... $ 1,456,472
Options.............................................................. (238,148)
Futures.............................................................. (97,630)
Forwards............................................................. 388,736
Foreign Currency Transactions........................................ 578,667
------------
Net Realized Gain on Securities........................................ 2,088,097
------------
Net Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period................................................ (1,979,896)
------------
End of the Period:
Investments.......................................................... (212,603)
Options.............................................................. (211,000)
Futures.............................................................. (277,662)
Forwards............................................................. (91,819)
Foreign Currency Translation......................................... (1,362)
------------
(794,446)
------------
Net Unrealized Appreciation on Securities During the Period............ 1,185,450
------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES......................... $ 3,273,547
============
NET INCREASE IN NET ASSETS FROM OPERATIONS............................. $ 10,439,789
============
</TABLE>

See Notes to Financial Statements

15
<PAGE> 73

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended June 30, 1996 and 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 June 30, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income........................................ $ 7,166,242 $ 4,245,759
Net Realized Gain/Loss on Securities......................... 2,088,097 (5,113,942)
Net Unrealized Appreciation on Securities During the
Period...................................................... 1,185,450 6,772,099
----------- -----------
Change in Net Assets from Operations......................... 10,439,789 5,903,916
----------- -----------
Distributions from Net Investment Income..................... (7,166,242) (4,415,661)
Distributions in Excess of Net Investment Income (Note 1).... (721,843) (533,006)
----------- -----------
Distributions from and in Excess of Net Investment Income*... (7,888,085) (4,948,667)
Return of Capital Distribution*.............................. -0- (2,635,924)
----------- -----------
Total Distributions.......................................... (7,888,085) (7,584,591)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.......... 2,551,704 (1,680,675)
----------- -----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold.................................... 29,338,222 25,816,917
Net Asset Value of Shares Issued Through Dividend
Reinvestment................................................ 3,220,366 3,244,998
Cost of Shares Repurchased................................... (20,206,493) (16,415,322)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS........... 12,352,095 12,646,593
----------- -----------
TOTAL INCREASE IN NET ASSETS................................. 14,903,799 10,965,918
NET ASSETS:
Beginning of the Period...................................... 83,964,969 72,999,051
----------- -----------
End of the Period (Including undistributed net investment
income of $22,912 and $(407,598), respectively)............. $ 98,868,768 $ 83,964,969
============ ============
</TABLE>

<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class June 30, 1996 June 30, 1995
------------------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of
Net Investment Income (Note 1):
Class A Shares........................... $ (2,908,823) $ (1,773,941)
Class B Shares........................... (4,768,060) (3,039,599)
Class C Shares........................... (211,202) (135,127)
------------ ------------
$ (7,888,085) $ (4,948,667)
============ ============
Return of Capital Distribution:
Class A Shares........................... $ -0- $ (957,995)
Class B Shares........................... -0- (1,618,412)
Class C Shares........................... -0- (59,517)
------------ ------------
$ -0- $ (2,635,924)
============ ============
</TABLE>

See Notes to Financial Statements

16
<PAGE> 74

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
December 31, 1993
(Commencement
of Investment
Year Ended Year Ended Operations) to
Class A Shares June 30, 1996 June 30, 1995 June 30, 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................ $11.704 $11.975 $14.300
------- ------- -------
Net Investment Income............... 1.013 .657 .566
Net Realized and Unrealized
Gain/Loss on Securities........... .446 .272 (2.391)
------- ------- -------
Total from Investment Operations.... 1.459 .929 (1.825)
------- ------- -------
Less:
Distributions from and in Excess
of Net Investment Income (Note
1).............................. 1.098 .793 .500
Return of Capital Distribution.... -0- .407 -0-
------- ------- -------
Total Distributions................. 1.098 1.200 .500
------- ------- -------
Net Asset Value, End of the
Period............................ $12.065 $11.704 $11.975
======= ======= =======
Total Return* (a)................... 12.92% 8.46% (12.83%)**
Net Assets at End of the Period
(In millions)..................... $33.8 $29.6 $24.5
Ratio of Operating Expenses to
Average Net Assets*............... 1.84% 1.98% 1.88%
Ratio of Interest Expense to Average
Net Assets (Note 8)............... 2.27% 2.38% .96%
Ratio of Net Investment Income to
Average Net Assets*............... 8.34% 5.88% 9.27%
Portfolio Turnover.................. 248% 253% 114%**

* If certain expenses had not been assumed by VKAC, total return would have been lower
and the ratios would have been as follows:

Ratio of Operating Expenses to
Average Net Assets................ 1.92% N/A N/A
Ratio of Net Investment Income to
Average Net Assets................ 8.26% N/A N/A
</TABLE>

** Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

N/A = Not Applicable

See Notes to Financial Statements

17
<PAGE> 75

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
December 31, 1993
(Commencement
of Investment
Year Ended Year Ended Operations) to
Class B Shares June 30, 1996 June 30, 1995 June 30, 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $11.706 $11.968 $14.300
------- ------- -------
Net Investment Income........... .926 .585 .515
Net Realized and Unrealized
Gain/Loss on Securities....... .443 .245 (2.392)
------- ------- -------
Total from Investment
Operations.................... 1.369 .830 (1.877)
------- ------- -------
Less:
Distributions from and in
Excess of Net Investment
Income (Note 1)............. 1.006 .722 .455
Return of Capital
Distribution................ -0- .370 -0-
------- ------- -------
Total Distributions............. 1.006 1.092 .455
------- ------- -------
Net Asset Value, End of the
Period........................ $12.069 $11.706 $11.968
======= ======= =======
Total Return* (a)............... 12.06% 7.62% (13.21%)**
Net Assets at End of the Period
(In millions)................. $61.9 $52.6 $46.4
Ratio of Operating Expenses to
Average Net Assets*........... 2.59% 2.68% 2.63%
Ratio of Interest Expense to
Average Net Assets (Note 8)... 2.26% 2.38% .96%
Ratio of Net Investment Income
to Average Net Assets*........ 7.58% 5.30% 8.48%
Portfolio Turnover.............. 248% 253% 114%**

* If certain expenses had not been assumed by VKAC, total return would have been lower
and the ratios would have been as follows:

Ratio of Operating Expenses to
Average Net Assets............ 2.67% N/A N/A
Ratio of Net Investment Income
to Average Net Assets......... 7.50% N/A N/A
</TABLE>

** Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

N/A = Not Applicable

See Notes to Financial Statements

18
<PAGE> 76

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
December 31, 1993
(Commencement
of Investment
Year Ended Year Ended Operations) to
Class C Shares June 30, 1996 June 30, 1995 June 30, 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $11.699 $11.966 $14.300
------- ------- -------
Net Investment Income........... .944 .598 .509
Net Realized and Unrealized
Gain/Loss on Securities....... .422 .227 (2.388)
------- ------- -------
Total from Investment
Operations.................... 1.366 .825 (1.879)
------- ------- -------
Less:
Distributions from and in
Excess of Net Investment
Income (Note 1)............. 1.006 .722 .455
Return of Capital
Distribution................ -0- .370 -0-
------- ------- -------
Total Distributions............. 1.006 1.092 .455
------- ------- -------
Net Asset Value, End of the
Period........................ $12.059 $11.699 $11.966
======= ======= =======
Total Return* (a)............... 12.07% 7.53% (13.21%)**
Net Assets at End of the Period
(In millions)................. $3.1 $1.7 $2.1
Ratio of Operating Expenses to
Average Net Assets*........... 2.58% 2.69% 2.65%
Ratio of Interest Expense to
Average Net Assets (Note 8)... 2.22% 2.38% .95%
Ratio of Net Investment Income
to Average Net Assets*........ 7.49% 5.92% 8.36%
Portfolio Turnover.............. 248% 253% 114%**

* If certain expenses had not been assumed by VKAC, total return would have been lower
and the ratios would have been as follows:

Ratio of Operating Expenses to
Average Net Assets............ 2.66% N/A N/A
Ratio of Net Investment Income
to Average Net Assets......... 7.41% N/A N/A
</TABLE>
** Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

N/A = Not Applicable

See Notes to Financial Statements

19
<PAGE> 77

NOTES TO FINANCIAL STATEMENTS

June 30, 1996
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Strategic Income Fund (the "Fund") is organized as a
series of Van Kampen American Capital Trust (the "Trust"), a Delaware business
trust, and is registered as a non-diversified open-end management investment
company under the Investment Company Act of 1940, as amended. The Fund's primary
investment objective is to seek to provide shareholders with high current
income, while its' secondary investment objective is to seek capital
appreciation. The Fund will allocate its investments among the following market
sectors: U.S. government securities, domestic investment grade income
securities, domestic lower grade income securities, foreign investment grade
income securities and foreign lower grade income securities. The Fund borrows
money for investment purposes which will create the opportunity for enhanced
return, but also should be considered a speculative technique and may increase
the Fund's volatility. The Fund commenced investment operations on December 31,
1993, with three classes of common shares, Class A, Class B and Class C shares.

A. SECURITY VALUATION--Investments are stated at value using market quotations,
prices provided by market makers or, if such valuations are not available,
estimates obtained from yield data relating to instruments or securities with
similar characteristics in accordance with procedures established in good faith
by the Board of Trustees. Foreign investments are stated at value using the last
available bid price or yield equivalents obtained from dealers in the
over-the-counter (OTC) or interbank market. Short-term securities with remaining
maturities of less than 60 days are valued at amortized cost.

20
<PAGE> 78

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

with its custodian, assets having an aggregate value at least equal to the
amount of the when issued or delayed delivery purchase commitments until payment
is made.

C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Original
issue discount is amortized over the expected life of each applicable security.

E. ORGANIZATIONAL EXPENSES--The Fund has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Fund's organization in the amount of $170,000. These costs
are being amortized on a straight line basis over the 60 month period ending
December 31, 1998. Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") has agreed that in the event any of the initial shares of the Fund
originally purchased by VKAC are redeemed during the amortization period, the
Fund will be reimbursed for any unamortized organizational expenses in the same
proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.

The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At June 30, 1996, the Fund had an accumulated capital loss carryforward
for tax purposes of $7,885,927. Of this amount, $4,216,449 and $3,669,478 will
expire on June 30, 2003 and 2004, respectively. Net realized gains or losses may
differ for financial and tax reporting purposes primarily as a result of post
October 31 losses which are not recognized for tax purposes until the first day
of the following fiscal year and timing differences related to open futures and
forward transactions at year end.

21
<PAGE> 79

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

G. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net investment income for federal income
tax purposes includes gains and losses realized on transactions in foreign
currencies and options on foreign currencies. These realized gains and losses
are included as net realized gains or losses for financial reporting purposes.
Permanent book and tax basis differences relating to net currency gains totaling
$1,152,353 were reclassified from accumulated net realized gain/loss on
investments to accumulated undistributed net investment income.

Net realized gains on securities, if any, are distributed annually.

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 MANAGED ASSETS % PER ANNUM
- -----------------------------------------------------------------------
<S> <C>
First $500 million...................................... .75 of 1%
Next $500 million....................................... .70 of 1%
Over $1 billion......................................... .65 of 1%
</TABLE>

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.

For the year ended June 30, 1996, the Fund recognized expenses of
approximately $20,000 representing VKAC's cost of providing accounting, cash
management and legal services to the Fund.

In July, 1995, the Fund began using ACCESS Investor Services, Inc.
("ACCESS"), an affiliate of the Adviser, as the shareholder servicing agent for
the Fund. For the year ended June 30, 1996, the Fund recognized expenses of
approximately $128,300, representing ACCESS' cost of providing transfer agency
and shareholder services plus a profit.

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.

At June 30, 1996, VKAC owned 100 shares each of Classes A, B and C.

22
<PAGE> 80

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of common shares, Classes 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 June 30, 1996, capital aggregated $36,670,209, $67,432,261 and $3,425,831
for Classes A, B and C, respectively. For the year ended June 30, 1996,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 751,977 $ 9,046,110
Class B.................................... 1,498,860 18,147,281
Class C.................................... 178,450 2,144,831
---------- ------------
Total Sales.................................. 2,429,287 $ 29,338,222
========== ============
Dividend Reinvestment:
Class A.................................... 94,962 $ 1,139,581
Class B.................................... 163,856 1,965,307
Class C.................................... 9,612 115,478
---------- ------------
Total Dividend Reinvestment.................. 268,430 $ 3,220,366
========== ============
Repurchases:
Class A.................................... (575,267) $ (6,903,393)
Class B.................................... (1,024,433) (12,352,105)
Class C.................................... (78,275) (950,995)
---------- ------------
Total Repurchases............................ (1,677,975) $(20,206,493)
========== ============
</TABLE>

23
<PAGE> 81

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1995, capital aggregated $33,387,911, $59,671,778 and $2,116,517
for Classes A, B and C, respectively. For the year ended June 30, 1995,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 970,765 $ 11,135,557
Class B.................................... 1,206,027 13,927,571
Class C.................................... 65,188 753,789
---------- ------------
Total Sales.................................. 2,241,980 $ 25,816,917
========== ============
Dividend Reinvestment:
Class A.................................... 90,046 $ 1,025,064
Class B.................................... 185,189 2,109,222
Class C.................................... 9,720 110,712
---------- ------------
Total Dividend Reinvestment.................. 284,955 $ 3,244,998
========== ============
Repurchases:
Class A.................................... (576,467) $ (6,551,783)
Class B.................................... (772,126) (8,730,596)
Class C.................................... (103,217) (1,132,943)
---------- ------------
Total Repurchases............................ (1,451,810) $(16,415,322)
========== ============
</TABLE>

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- -------------------------------------------------------------------
<S> <C> <C>
First...................................... 4.00% 1.00%
Second..................................... 3.75% None
Third...................................... 3.50% None
Fourth..................................... 2.50% None
Fifth...................................... 1.50% None
Sixth...................................... 1.00% None
Seventh and Thereafter..................... None None
</TABLE>

24
<PAGE> 82

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

For the year ended June 30, 1996, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$28,500 and CDSC on redeemed shares of approximately $261,900. Sales charges do
not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding U.S. Government Securities and short-term investments, were
$286,944,406 and $313,642,485, 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
attempt to protect the Fund against possible changes in the market value of its
portfolio, manage the portfolio's effective yield, foreign currency exposure,
maturity and duration or generate potential gain. All of the Fund's portfolio
holdings, including 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 for exercised option contracts where the recognition of gain or loss is
postponed until the disposal of the security underlying the option contract.

Summarized below are the specific types of derivative financial instruments
used by the Fund.

25
<PAGE> 83

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

Transactions in options for the year ended June 30, 1996, were as follows:

<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- ----------------------------------------------------------------------------
<S> <C> <C>
Outstanding at June 30, 1995................... 5 $ (268,450)
Options Written and Purchased (Net)............ 2,930 (1,921,659)
Options Terminated in Closing
Transactions (Net)........................... (1,627) 1,011,934
Options Exercised.............................. (202) 56,600
Options Expired (Net).......................... (1,103) 663,575
----- -----------
Outstanding at June 30, 1996................... 3 $ (458,000)
===== ===========
</TABLE>

The descriptions and market values of the option contracts outstanding as of
June 30, 1996, are as follows:

<TABLE>
<CAPTION>
STRIKE
OPENING EXPIRATION PRICE/ MARKET
DESCRIPTION TRANSACTION DATE YIELD VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Argentina Brady Bond Put...... Buy 09/03/96 53.250% $ 72,000
German Mark Put............... Buy 01/22/97 1.57 100,000
Mexican Brady Bond Put........ Buy 09/03/96 63.813% 75,000
--------
$247,000
========
</TABLE>

B. 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 futures on U.S. Treasury Bonds and typically closes
the contract prior to the delivery date. These contracts are generally used to
manage the portfolio's effective maturity and duration.

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. 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). The cost of securities acquired through
delivery under a contract is adjusted by the unrealized gain or loss on the
contract.

Transactions in futures contracts for the year ended June 30, 1996, were as
follows:

<TABLE>
<CAPTION>
CONTRACTS
- ------------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1995.............................. 299
Futures Opened............................................ 6,699
Futures Closed............................................ (6,767)
-----
Outstanding at June 30, 1996.............................. 231
=====
</TABLE>

26
<PAGE> 84

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

The futures contracts outstanding as of June 30, 1996, and the descriptions
and unrealized depreciation are as follows:

<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS DEPRECIATION
- ----------------------------------------------------------------------------
<S> <C> <C>
10-Year Japanese Bond Future Sept 1996--
Sells to Open................................ 2 $(14,432)
10-Year U.S. Treasury Note Future Sept 1996--
Sells to Open................................ 1 (844)
U.S. Treasury Long Bond Future Sept 1996--
Sells to Open................................ 228 (262,386)
--- ---------
231 $(277,662)
=== =========
</TABLE>

C. FORWARD CURRENCY CONTRACTS--These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on investments and foreign currency.

At June 30, 1996, the Fund has outstanding forward currency contracts as
follows:

<TABLE>
<CAPTION>
UNREALIZED
FORWARD ORIGINAL CURRENT APPRECIATION/
CURRENCY VALUE VALUE DEPRECIATION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
BUYS TO OPEN
Italian Lira,
expiring 07/02/96............... $ 356,142 $ 356,142 $ -0-

SELLS TO OPEN
Australian Dollar,
expiring 07/03/96............... 1,034,721 1,022,935 11,786
British Pound Sterling,
expiring 07/02/96............... 647,641 650,573 (2,932)
Canadian Dollar,
expiring 07/03/96 -- 09/10/96... 2,333,266 2,333,860 (594)
Deutsche Mark,
expiring 07/02/96 -- 09/09/96... 3,416,385 3,430,434 (14,049)
New Zealand Dollar,
expiring 07/03/96 -- 07/05/96... 1,321,301 1,335,329 (14,028)
Spanish Peseta,
expiring 07/02/96 -- 09/11/96... 2,550,457 2,574,704 (24,247)
Swedish Krona,
expiring 07/13/96............... 2,000,000 2,047,755 (47,755)
------------
$(91,819)
============
</TABLE>

27
<PAGE> 85

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1996, the Fund had realized gains on closed but unsettled
forward currency contracts of $85,508 scheduled to settle between July 5, 1996
and July 8, 1996.

D. SWAP TRANSACTIONS--These securities, which are identified in the portfolio of
investments, represent an agreement between two parties to exchange a series of
cash flows based upon various indices at specified intervals.

E. INVERSE FLOATING SECURITY--These instruments, which are identified in the
portfolio of investments, have a coupon which is inversely indexed to a
short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. The price of these securities may be more
volatile than the price of a comparable fixed rate security. These instruments
are typically used by the Fund to enhance the yield of the portfolio.

6. MORTGAGE-BACKED SECURITIES

A Mortgage-Backed Security (MBS) is a pass-through security created by pooling
mortgages and selling participations in the principal and interest payments
received from borrowers. Most of these securities are guaranteed by federally
sponsored agencies such as Federal Home Loan Mortgage Corp (FHLMC), Federal
National Mortgage Association (FNMA) or Government National Mortgage Association
(GNMA).

A Collateralized Mortgage Obligation (CMO) is a bond which is collateralized
by a pool of MBS's. The Fund also invests in REMIC's (Real Estate Mortgage
Investment Conduit) which are simply another form of CMO. These MBS pools are
divided into classes or tranches with each class having its own characteristics.
For instance, a PAC (Planned Amortization Class) is a specific class of
mortgages with the most stable cash flows and the lowest prepayment risk.

A MBS may also be stripped to create an Interest Only (IO) or a Principal
Only (PO) security. An IO represents ownership in the cash flows of the interest
payments made from a specific pool of MBS. The cash flow on this instrument
decreases as the mortgage principal balance is repaid by the borrower.
Conversely, a PO represents an ownership interest in the cash flows of the
principal payments made from a specified pool of MBS. The cash flows on this
instrument would increase in a declining interest rate environment as
prepayments on the underlying mortgages increase. IO's and PO's are typically
used to manage interest rate exposure in the Fund's portfolio.

28
<PAGE> 86

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

7. DISTRIBUTION AND SERVICE PLANS

8. BORROWINGS

In accordance with its investment policies, the Fund may borrow money from banks
or enter into reverse repurchase agreements or dollar rolls for investment
purposes in an amount up to 33.3% of its total assets.

The Fund has entered into a $45,000,000 revolving credit agreement which
expires on February 28, 1997. Interest is charged under the agreement at a rate
of 1.10% above the federal funds rate. The interest rate in effect at June 30,
1996, was 6.25%. An annual commitment fee of .15% is charged on the unused
portion of the credit line.

The Fund has entered into reverse repurchase agreements under which the Fund
sells securities and agrees to repurchase them at a mutually agreed upon date
and price. At June 30, 1996, the average interest rate in effect for reverse
repurchase agreements was 5.59%.

The average daily balance of bank borrowings and reverse repurchase
agreements for the year ended June 30, 1996, was approximately $32,784,900 with
an average interest rate of 6.32%.

At June 30, 1996, these agreements represented 12.2% of the Fund's total
assets.

29
<PAGE> 87

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital Strategic Income Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Strategic Income Fund (the "Fund"), including the
portfolio of investments, as of June 30, 1996, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Strategic Income Fund as of June 30, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP
Chicago, Illinois
August 15, 1996

30
<PAGE> 88

FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL

GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund

THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund

31
<PAGE> 89

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN

LINDA HUTTON HEAGY

ROGER HILSMAN

R. CRAIG KENNEDY

DENNIS J. MCDONNELL*

DONALD C. MILLER - Co-Chairman

JACK E. NELSON

DON G. POWELL*

JEROME L. ROBINSON

FARNANDO SISTO - Co-Chairman

WAYNE W. WHALEN*

WILLIAM S. WOODSIDE

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
INVESTMENT ADVISORY CORP.
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
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601

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

(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.

32
<PAGE> 90
VAN KAMPEN AMERICAN CAPITAL EMERGING MARKETS INCOME FUND

PORTFOLIO OF INVESTMENTS

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Local
Currency
Par
Amount S & P Moody's U.S.$
(000) Description/Currency Denomination Rating Rating Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOREIGN BONDS AND DEBT SECURITIES 89.6%

ARGENTINA 4.6%
500 Federal Republic of Argentina Par Bond (US$)(b) ......... BB- B1 5.25/6.00% 03/31/23 $ 275,000
----------
BRAZIL 5.7%
541 Federal Republic of Brazil (US$) ........................ B+ B1 8.000 04/15/14 336,906
----------

BULGARIA 4.2%
250 Republic of Bulgaria PDI Bond (Var. Rate Cpn.) (US$) .... NR NR 6.250 07/28/11 118,750
250 Republic of Bulgaria Discount Note (Var. Rate Cpn.)
(US$) ................................................... NR NR 6.250 07/28/24 129,375
----------
248,125
----------

COLUMBIA 3.8%
250 Republic of Columbia (US$) .............................. BBB- Baa3 8.700 02/15/16 229,013
----------

COSTA RICA 10.1%
262 Banco Central Costa Rica Interest Bond (Var. Rate Cpn.)
(US$) ................................................... NR NR 6.328 05/21/05 242,461
500 Banco Central Costa Rica Principal Bond (US$) ........... NR NR 6.250 05/21/10 357,500
----------
599,961
----------
DOMINICAN REPUBLIC 5.5%
500 Central Bank Dominican Republic (Var. Rate Cpn.) (US$) .. NR NR 6.063 08/30/09 330,000
----------

ECUADOR 3.0%
500 Republic of Ecuador Par Bond (US$)(b) ................... NR NR 3.25/5.00 02/28/25 181,250
----------

INDONESIA 4.5%
250 Indah Kiat International Finance Co. B.V. (US$) ......... BB Ba3 11.875 06/15/02 265,000
----------

JORDAN 4.5%
500 Kingdom of Jordan Par Bond (US$)(b) ..................... NR Ba3 4.00/6.00 12/23/23 265,000
----------

LEBANON 3.3%
200 Lebanese Republic (US$) ................................. NR NR 9.125 07/28/00 198,250
----------

MEXICO 3.4%
250 Banco Nacional Common (US$) ............................. BB Ba2 7.250 02/02/04 204,375
----------

MOROCCO 3.0%
250 Morocco Tranche A Loan (Var. Rate Cpn.) (US$)(c) ........ NR NR 6.438 01/01/09 180,625
----------

NIGERIA 4.5%
500 Nigeria Par Bonds with Warrants (US$) ................... NR NR 6.250 11/15/20 265,000
----------

PANAMA 7.5%
500 Panama Loan Agreement (US$)(c) .......................... NR NR * 01/30/15 449,375
----------

PERU 6.2%
400 Republic of Peru (US$)(c) ............................... NR NR * 12/31/49 368,000
----------

POLAND 5.8%
500 Poland Debt Conversion Bond (US$) ....................... NR NR 5.000 10/27/19 345,000
----------

See Notes to Financial Statements
</TABLE>

<PAGE> 91
VAN KAMPEN AMERICAN CAPITAL EMERGING MARKETS INCOME FUND

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

RUSSIA 4.1%
500 Russia Syndicated Loan (Vnesh Loan) (US$) (c)... NR NR * 12/31/49 $ 241,875
------------
VENEZUELA 5.9%
500 Republic of Venezuela Debt Conversion Bond
(Var. Rate Cpn.)(US$).......................... NR Ba2 6.625 12/18/07 353,125
------------
TOTAL FOREIGN BONDS AND DEBT SECURITIES 89.6%
(Cost $4,751,730)(a).......................... 5,335,880
------------
SHORT-TERM INVESTMENTS 13.7%
Federal Home Loan Mortgage Corp. ($225,000 par, yielding 5.29%, maturing 07/01/96).................... 225,000
U.S. Treasury Bills ($300,000 par, yielding 5.23%, maturing 09/26/96)................................. 296,360
U.S. Treasury Bills ($300,000 par, yielding 5.43%, maturing 12/26/96)................................. 292,361
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $813,574)(a)................................................................................. 813,721
LIABILITIES IN EXCESS OF OTHER ASSETS (3.3%).......................................................... (197,329)
------------
NET ASSETS 100.0%..................................................................................... $ 5,952,272
============

</TABLE>
* Zero coupon bond

(a) At June 30, 1996, cost for federal income tax purposes including
short-term investments is $5,565,304; the aggregate unrealized
appreciation is $613,897 and the aggregate gross unrealized
depreciation is $29,600, resulting in net unrealized appreciation of
$584,297.

(b) Security is a "Step-up" bond where the coupon increases or steps up
at a predetermined date.

See Notes to Financial Statements
<PAGE> 92
VAN KAMPEN AMERICAN CAPITAL EMERGING MARKETS INCOME FUND

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $4,751,730) (Note 1).......................................... $ 5,335,880
Short-Term Investments (Cost $813,574) (Note 1).................................................. 813,721
Cash............................................................................................. 24,385
Receivables:
Securities Sold................................................................................. 392,622
Interest........................................................................................ 70,680
Unamortized Organizational Expenses (Note 1)..................................................... 60,392
Other............................................................................................ 184
-------------
Total Assets............................................................................. 6,697,864
-------------

LIABILITIES:
Payables:
Securities Purchased........................................................................... 613,478
Organizational Expenses........................................................................ 58,870
Distributor and Affiliates (Note 2)............................................................ 9,477
Investment Advisory Fee (Note 2)............................................................... 2,862
Accrued Expenses................................................................................. 51,184
Deferred Compensation and Retirement Plans (Note 2).............................................. 9,721
-------------
Total Liabilities........................................................................ 745,592
-------------
NET ASSETS....................................................................................... $ 5,952,272
=============

NET ASSETS CONSIST OF:
Capital (Note 3)................................................................................. $ 6,014,478
Net Unrealized Appreciation on Securities........................................................ 584,297
Accumulated Undistributed Net Investment Income.................................................. 300,798
Accumulated Net Realized Loss on Securities...................................................... (947,301)
-------------
NET ASSETS....................................................................................... $ 5,952,272
=============

MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$3,571,646 and 235,378 shares of capital stock issued and outstanding) (Note 3)............. $ 15.17
Maximum sales charge (4.75%* of offering price).............................................. 0.76
-------------
Maximum offering price to public............................................................. $ 15.93
=============

Class B Shares:
Net asset value and offering price per share (Based on net assets of $1,190,313
and 78,449 shares of capital stock issued and outstanding) (Note 3).......................... $ 15.17
=============

Class C Shares:
Net asset value and offering price per share (Based on net assets of $1,190,313
and 78,449 shares of capital stock issued and outstanding) (Note 3).......................... $ 15.17
=============
* On sales of $100,000 or more, the sales charge will be reduced.

</TABLE>

See Notes to Financial Statements

<PAGE> 93
VAN KAMPEN AMERICAN CAPITAL EMERGING MARKETS INCOME FUND

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.............................................................. $ 918,780
------------
EXPENSES:
Investment Advisory Fee (Note 2)...................................... 73,987
Custody............................................................... 46,796
Audit................................................................. 27,519
Amortization of Organizational Expenses (Note 1)...................... 24,054
Legal (Note 2)........................................................ 7,330
Trustees Fees and Expenses (Note 2)................................... 7,147
Interest Expense (Note 4)............................................. 339
Other................................................................. 19,708
------------
Total Expenses................................................ 206,880
Less Fees Waived.............................................. 29,485
------------
Net Expenses.................................................. 177,395
------------
NET INVESTMENT INCOME................................................. $ 741,385
============
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Gain on Securities:
Investments......................................................... $ 482,624
Options............................................................. 88,000
Foreign Currency Transactions....................................... 15,658
------------
Net Realized Gain on Securities....................................... $ 586,282
------------
Net Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................. (29,199)
End of the Period:
Investments....................................................... 584,297
------------
Net Unrealized Appreciation on Securities During the Period........... 613,496
------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES........................ $ 1,199,778
============
NET INCREASE IN NET ASSETS FROM OPERATIONS............................ $ 1,941,163
============
</TABLE>

See Notes to Financial Statements
<PAGE> 94
VAN KAMPEN AMERICAN CAPITAL EMERGING MARKETS INCOME FUND

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended June 30, 1996 and 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 June 30, 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income ................................ $ 741,385 $ 832,844
Net Realized Gain/Loss on Securities ................. 586,282 (864,621)
Net Unrealized Appreciation on Securities
During the Period ................................ 613,496 614,314
------------ -------------

Change in Net Assets from Operations ................. 1,941,163 582,537
------------ -------------

Distributions from Net Investment Income:
Class A Shares ................................... (588,140) (327,678)
Class B Shares ................................... (196,140) (109,278)
Class C Shares ................................... (196,140) (109,278)
------------ -------------
Total Distributions .................................. (980,420) (546,234)
------------ -------------

NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES ....................................... 960,743 36,303
------------ -------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Cost of Shares Repurchased ........................... (3,999,812) 0
------------ -------------

TOTAL INCREASE/DECREASE IN NET ASSETS ................ (3,039,069) 36,303
NET ASSETS:
Beginning of the Period .............................. 8,991,341 8,955,038
------------ -------------
End of the Period (including undistributed net
investment income of $300,798 and $524,175,
respectively) .................................... $ 5,952,272 $ 8,991,341
============ =============

See Notes to Financial Statements
</TABLE>

<PAGE> 95
VAN KAMPEN AMERICAN CAPITAL EMERGING MARKETS INCOME FUND

FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
December 31, 1993
(Commencement
of Investment
Year Ended Year Ended Operations) to
CLASS A SHARES June 30, 1996 June 30, 1995 June 30, 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period............................ $ 12.839 $ 12.806 $ 14.300
------------- ------------- -------------
Net Investment Income............................................. 1.393 1.189 0.419
Net Realized and Unrealized Gain/Loss on Securities............... 2.342 (0.376) (1.913)
------------- ------------- -------------
Total from Investment Operations.................................... 3.735 0.813 (1.494)

Less Distributions from Net Investment Income....................... 1.400 0.780 0.000
------------- ------------- -------------
Net Asset Value, End of the Period.................................. $ 15.174 $ 12.839 $ 12.806
============= ============= =============

Total Return* (a) .................................................. 30.96% 6.82% -10.42%**

Net Assets at End of the Period (In millions)....................... $3.6 $5.4 $5.4

Ratio of Expenses to Average Net Assets* ........................... 2.40% 2.11% 2.88%

Ratio of Net Investment Income to Average Net Assets* .............. 10.04% 9.64% 6.51%

Portfolio Turnover ................................................. 187% 260% 118%**

*If certain fees had not been waived by VKAC, total return would have
been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets................................ 2.80% 2.46% N/A

Ratio of Net Investment Income to Average Net Assets................... 9.64% 9.30% N/A
</TABLE>

**Non-Annualized

(a) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

N/A = Not Applicable

See Notes to Financial Statements
<PAGE> 96
VAN KAMPEN AMERICAN CAPITAL EMERGING MARKETS INCOME FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

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

<TABLE>
<CAPTION>
December 31, 1993
(Commencement
of Investment
Year Ended Year Ended Operations) to
CLASS B SHARES June 30, 1996 June 30, 1995 June 30, 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period............................ $ 12.840 $ 12.760 $ 14.300
------------- ------------- -------------
Net Investment Income............................................. 1.355 1.190 0.370
Net Realized and Unrealized Gain/Loss on Securities............... 2.378 (0.330) (1.910)
------------- ------------- -------------
Total from Investment Operations.................................... 3.733 0.860 (1.540)

Less Distributions from Net Investment Income....................... 1.400 0.780 0.000
------------- ------------- -------------
Net Asset Value, End of the Period.................................. $ 15.173 $ 12.840 $ 12.760
============= ============= =============

Total Return* (a) .................................................. 30.95% 7.24% -10.77%**

Net Assets at End of the Period (In millions)....................... $1.2 $1.8 $1.8

Ratio of Expenses to Average Net Assets* ........................... 2.40% 2.08% 3.64%

Ratio of Net Investment Income to Average Net Assets* .............. 10.04% 9.67% 5.76%

Portfolio Turnover ................................................. 187% 260% 118%**

*If certain fees had not been waived by VKAC, total return would have
been lower and the ratios would have been as follows:

Ratio of Expenses to Average Net Assets................................ 2.80% 2.43% N/A

Ratio of Net Investment Income to Average Net Assets................... 9.64% 9.33% N/A
</TABLE>

**Non-Annualized

(a) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

N/A = Not Applicable

See Notes to Financial Statements
<PAGE> 97
VAN KAMPEN AMERICAN CAPITAL EMERGING MARKETS INCOME FUND

FINANCIAL HIGHLIGHTS (CONTINUED)

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

<TABLE>
<CAPTION>
December 31, 1993
(Commencement
of Investment
Year Ended Year Ended Operations) to
CLASS C SHARES June 30, 1996 June 30, 1995 June 30, 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period............................ $ 12.840 $ 12.760 $ 14.300
------------- ------------- -------------
Net Investment Income............................................. 1.355 1.190 0.370
Net Realized and Unrealized Gain/Loss on Securities............... 2.378 (0.330) (1.910)
------------- ------------- -------------
Total from Investment Operations.................................... 3.733 0.860 (1.540)