<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<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......................... 10
Statement of Operations..................................... 11
Statement of Changes in Net Assets.......................... 12
Financial Highlights........................................ 13
Notes to Financial Statements............................... 16
Report of Independent Accountants........................... 26
</TABLE>
GGS ANR 7/97
<PAGE>
Letter to Shareholders
[PHOTO]
Dennis J. McDonnell and Don G. Powell
June 24, 1997
Dear Shareholder,
As you know, VK/AC Holding, Inc., the parent company of Van Kampen American
Capital, Inc., was acquired by Morgan Stanley Group Inc., a world leader in
asset management. More recently, on February 5, 1997, Morgan Stanley Group Inc.
and Dean Witter, Discover & Co. agreed to merge. The merger was completed on May
31, 1997, creating the combined company of Morgan Stanley, Dean Witter, Discover
& Co. Additionally, we are very pleased to announce that Philip N. Duff,
formerly of Morgan Stanley, has joined Van Kampen American Capital as president
and chief executive officer. I will continue as chairman.
Additionally, on April 1, 1997, Morgan Stanley Asset Management became
subadvisor for the Van Kampen American Capital Global Government Securities
Fund. Unlike the previous subadvisory agreement, which divided responsibility
for domestic and foreign portfolio management, Morgan Stanley Asset Management
has assumed complete responsibility for your Fund's holdings. As explained in
your proxy statement, we believe that the new advisory relationship is another
positive result of our acquisition by Morgan Stanley. We are confident that our
partnership with Morgan Stanley will continue to work to the benefit of our fund
shareholders.
Market Review
In the early stages of the fiscal year, global bond yields fell by an
average of about 1.98 percent before rebounding modestly over the last six
months of the reporting period. Bond prices, which move inversely to yields,
rose over the first six months of the fiscal year before falling back slightly.
A sharp rise in the value of the U.S. dollar, however, offset much of the
appreciation in foreign bond prices.
In Europe, economic activity was restrained by generally restrictive
monetary and fiscal policies as countries reduced inflation and budget deficits
to ensure eligibility for European Monetary Union (EMU) in 1999. The primary
beneficiaries of the move towards a common currency were bond markets in Italy
and Spain, which each gained 6 percent over the fiscal year as investors
eliminated a portion of the currency risk that historically has kept bond yields
high in those countries. Meanwhile, core markets in Germany, France, Belgium,
and the Netherlands each lost between 1 and 3 percent as investors preferred the
higher yields available in peripheral European countries, such as Italy and
Spain.
The Japanese central bank held to its highly stimulative monetary policy to
help revive that country's ailing financial sector. Low Japanese interest rates
contributed to a steep fall in the value of the yen, which in turn, produced
mild losses in dollar-denominated Japanese bonds over the reporting period.
Yields on 10-year Japanese government securities were just 2.68 percent at the
close of the fiscal year, and inflation-adjusted short-term yields were near
zero.
1 Continued on page two
<PAGE>
Bond yields in the United States fell sharply over the first six months of
the fiscal year, then rebounded modestly as the pace of economic growth
accelerated and the Federal Reserve Board raised short-term interest rates.
During the first quarter of 1997, the U.S. economy grew at its fastest pace in
nine years. Meanwhile, unemployment fell to 4.9 percent and consumer confidence
soared to its highest level in 27 years. Despite the robust growth, inflation
remained benign. For the 12 months through April, consumer prices rose just 2.5
percent.
Economic Outlook
We believe that the pace of global economic activity will increase, putting
mild downward pressure on bond prices.
In Japan, short-term interest rates should rise from the historically low
levels of recent years as the economy continues its slow recovery. We feel that
Japan has enough excess production capacity so that a surge in economic output
will not lead to higher inflation. Still, any monetary tightening is expected to
be strongly negative for Japanese bonds, which already have the lowest real and
nominal yields among industrialized economies. We believe that the U.S. dollar
has peaked against the yen, but a significant reversal of the dollar's recent
gains seems unlikely.
European economies should benefit from an end to fiscal tightening,
allowing for modestly higher growth rates throughout the region. Monetary policy
is already relatively relaxed in core European countries such as Germany and
France, and short-term rates could rise in those markets as growth accelerates.
In that environment, we expect some European bond markets to move moderately
lower. In continental Europe, restrictive labor market rules and practices will
likely keep economic growth from reaching levels necessary to bring down the
region's high unemployment rate.
In the United States, we view the current rate of economic growth as
unsustainable, although a tight labor market and record-high consumer confidence
could push short- and long-term interest rates modestly higher. While inflation
also is likely to increase, we expect that Fed policy will keep inflation
relatively contained.
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. We appreciate
your continued confidence in your investment with Van Kampen American Capital.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
- ------------------------- -------------------------------
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen America Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
Performance Results for the Period Ended May 31, 1997
Van Kampen American Capital Global Government Securities Fund
<TABLE>
<CAPTION>
A Shares B Shares C Shares
Total Returns
<S> <C> <C> <C>
One-year total return based on NAV/1/...... 2.65% 2.00% 1.88%
One-year total return/2/................... (2.17%) (1.85%) 0.92%
Five-year average annual total return/2/... 3.62% 3.65% N/A
Life-of-Fund average annual total return/2/ 3.37% 3.58% 3.14%
Commencement Date.......................... 11/15/91 11/15/91 04/12/93
Distribution Rate and Yield
Distribution rate/3/....................... 6.62% 6.12% 6.17%
SEC Yield/4/............................... 4.01% 3.31% 3.36%
</TABLE>
N/A-Not Applicable.
/1/ Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for A shares) or
contingent deferred sales charge for early withdrawal (4% for B shares and
1% for C shares).
/2/ Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or
contingent deferred sales charge for early withdrawal (B and C shares).
/3/ Distribution rate represents the monthly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.
/4/ SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio
should theoretically generate for the 30-day period ending May 31, 1997.
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.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE>
Portfolio Highlights
Van Kampen American Capital Global Government Securities Fund
<TABLE>
<CAPTION>
Top Five Holdings as a Percentage of Long-Term Investments/1/
As of May 31, 1997
<S> <C>
U.S. Treasury Notes, 5.625% Coupon, 11/30/98 Maturity..................... 22.3%
U.S. Treasury Bonds, 8.125% Coupon, 8/15/19 Maturity...................... 8.5%
U.S. Treasury Notes, 7.250% Coupon, 5/15/04 Maturity...................... 8.4%
Germany Unity (Federal Republic), 8.000% Coupon, 1/21/02 Maturity......... 6.6%
Sweden (Kingdom of), 13.000% Coupon, 6/15/01 Maturity..................... 4.5%
</TABLE>
Asset Allocation as a Percentage of Total Investments/1/
[PIE CHART APPEARS HERE]
As of May 31, 1997
[_] Forward Purchase Commitments...........36.2%
[_] U.S. Government and Government
Agency Obligations.....................28.3%
[_] Short-Term Investments.................35.5%
[PIE CHART APPEARS HERE]
As of November 30, 1996
[_] U.S. Government and Government
Agency Obligations.....................59.5%
[_] Forward Purchase Commitments...........40.5%
Top Countries as a Percentage of Long-Term Investments/1/
<TABLE>
<CAPTION>
As of May 31, 1997 As of November 30, 1996
<S> <C> <C> <C>
United States................ 43.9% United States...... 78.0%
Germany...................... 16.6% Netherlands........ 7.6%
Japan........................ 12.1% Germany............ 5.4%
Sweden....................... 7.4% Austria............ 4.0%
United Kingdom............... 5.8% United Kingdom..... 3.8%
Italy........................ 5.7% Denmark............ 1.2%
Canada....................... 2.8%
Denmark...................... 2.8%
Australia.................... 2.0%
Ireland...................... 0.9%
</TABLE>
/1/ Includes forward purchase commitments. For additional information, refer to
Note 5 in the Notes to Financial Statements section.
4
<PAGE>
Putting Your Fund's Performance in Perspective
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular 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 J.P. Morgan Global Traded
Government 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 Global Government Securities Fund vs. J.P. Morgan
Global Traded Government Index (November 30, 1991 through May 31, 1997)
[GRAPH APPEARS HERE]
Fund's Total Return
1 Year Avg. Annual = -2.17%
5 Year Avg. Annual = 3.62%
Inception Avg. Annual = 3.37%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
VKAC Global Government J.P. Morgan Global Traded
Securities Fund Government Index
- ---------------------------------------------------------------------
<S> <C> <C>
Nov-1991 9525 10000
- ---------------------------------------------------------------------
Nov-1992 9687 10881
- ---------------------------------------------------------------------
Nov-1993 11063 12206
- ---------------------------------------------------------------------
Nov-1994 10604 12458
- ---------------------------------------------------------------------
Nov-1995 11889 14717
- ---------------------------------------------------------------------
Nov-1996 12545 16664
- ---------------------------------------------------------------------
May-1997 12016 15213
- ---------------------------------------------------------------------
</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 and includes payment of the maximum
sales charge (4.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
5
<PAGE>
Portfolio Management Review
Van Kampen American Capital Global Government Securities Fund
The following is an interview with the management team of the Van Kampen
American Capital Global Government Securities Fund. Through March 31, 1997, the
Fund was co-managed by portfolio manager John R. Reynoldson, Van Kampen American
Capital (U.S. holdings), portfolio manager Peter Pejacsevich, John Govett & Co.
Limited (international holdings), and Peter W. Hegel, Van Kampen American
Capital, chief investment officer for fixed-income investments. As of April 1,
1997, the Fund is managed by portfolio managers Michael B. Kushma and Robert M.
Smith, Morgan Stanley, and portfolio managers J. David Germany and Paul E.
O'Brien, Miller Anderson & Sherrerd.
Q How would you characterize the market conditions in which the Fund
operated during the 12-month period ended May 31, 1997?
A During the reporting period, there were several prevailing trends in the
global marketplace:
. The Bank of Japan continued a stimulative monetary policy in an effort to
bolster the country's struggling financial and real estate sectors. The loose
policy lowered real Japanese short-term interest rates to near zero, and
Japan's inflation-adjusted long-term bond yields also fell to low levels
relative to global markets.
<TABLE>
<CAPTION>
Inflation-adjusted yield on
10-year government bonds
as of May 31, 1997
---------------------------
<S> <C>
Japan....................................... 2.18%
Netherlands................................. 3.81%
United States............................... 3.88%
Germany..................................... 4.46%
Spain....................................... 4.48%
United Kingdom.............................. 4.66%
France...................................... 4.76%
Denmark..................................... 4.92%
Australia................................... 6.22%
</TABLE>
. Government yields in peripheral European markets, such as Spain and Italy,
began the period substantially higher than those in core European countries.
As confidence grew that European Monetary Union (EMU) would proceed, yield
spreads between the two sectors narrowed. The following table displays
changes in 10-year government bond yields over the fiscal year:
<TABLE>
<CAPTION>
Percentage
May 31, 1997 May 31, 1996 Change
----------- ------------ ----------
<S> <C> <C> <C>
Italy................................ 7.33% ....... 9.67% ......... -24.20%
Spain................................ 6.68% ....... 9.25% ......... -27.78%
Germany.............................. 5.93% ....... 6.51% ......... -8.91%
France............................... 5.81% ....... 6.49% ......... -10.48%
Belgium.............................. 6.01% ....... 6.72% ......... -10.57%
Netherlands.......................... 5.78% ....... 6.39% ......... -9.55%
</TABLE>
6
<PAGE>
. Interest rates in the United States rose modestly over the last six months of
the reporting period as the economy accelerated and unemployment fell to
historically low levels. The Federal Reserve Board responded to a sharp surge
in economic growth and hints of wage-cost pressures by raising short-term
interest rates by one-quarter point in March. Strong economic growth and
higher interest rates contributed to a sharp rise in the value of the U.S.
dollar against most major currencies. Consequently, the dollar's bull market
offset much of the gains in foreign-denominated bonds over the fiscal year.
Q What significant investment techniques and strategies were used to pursue
the Fund's investment objective?
A Our investment strategy consists of a top-down asset allocation process in
which bond and currency exposure are analyzed and managed separately. The Fund's
country allocations, compared to the J.P. Morgan Global Government Bond Index,
were as follows:
. The Fund was underweighted in Japan as yields remained historically low and
prospects for sustainable economic growth improved.
. As the fiscal year ended, the Fund had a neutral weighting in Europe. Within
the region, the Fund was overweighted in peripheral markets such as Italy,
Sweden, and Denmark, and underweighted in core markets such as France,
Belgium, and the Netherlands. The underweighting of core European markets
reflected our view that the benefits of the region's low inflation rate were
offset by generally lower yields. Meanwhile, high real interest rates in
Sweden and Italy made those markets attractive on a valuation basis. Yields
in Spain, however, converged close enough to core European levels to make
their slight yield advantage insufficient to offset the additional risk.
. Duration and weighting of U. S. bonds were reduced, reflecting our view that
investors have underestimated the amount of monetary tightening required to
head off significant inflation.
Q How has the Fund performed during the reporting period?
A The Fund generated a 12-month total return of 2.65 percent/1/ (Class A
shares at net asset value). During the same period, the J. P. Morgan Global
Traded Government Index produced a total return of 4.21 percent. Please keep in
mind that this is an unmanaged index comprised of major foreign and U.S.
government bonds, weighted by the total market value of each country's
securities. It reflects variations in currency value with all results measured
in U.S. dollar terms. Also, keep in mind that it does not reflect any
commissions or fees that would be paid by an investor purchasing the securities
it represents. Please refer to the chart on page three for additional Fund
performance results.
7
<PAGE>
Q What is your outlook for the months ahead?
A We expect the rate of global economic activity to accelerate, although
inflation should remain moderate. However, our concerns about the effect of
quickening economic growth on bond prices have resulted in the reduction of the
portfolio's interest rate exposure to below that of the J.P. Morgan Global
Government Bond Index. Meanwhile, the election of leftist political groups in
France has increased the possibility of a delay in implementation of EMU, but we
believe progress towards a less restrictive policy is likely to continue.
/s/ Michael B. Kushma /s/ Robert M. Smith
- -------------------------- ------------------------------
Michael B. Kushma Robert M. Smith
Portfolio Manager Portfolio Manager
Morgan Stanley Morgan Stanley
/s/ J. David Germany /s/ Paul E. O'Brien
- -------------------------- ------------------------------
J. David Germany Paul E. O'Brien
Portfolio Manager Portfolio Manager
Miller Anderson & Sherrerd Miller Anderson & Sherrerd
8 Please see footnotes on page three
<PAGE>
<TABLE>
Portfolio of Investments
May 31, 1997
- -------------------------------------------------------------------------------------------------
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Government & Government Agency Obligations 43.9%
$ 2,111 Government National Mortgage Association
Pools.............................. 8.000% 11/15/00 to 12/15/25 $ 2,147,701
6,650 U.S. Treasury Bonds (a)............ 8.125 08/15/19 7,478,124
19,800 U.S. Treasury Notes (a)............ 5.625 11/30/98 19,679,418
2,000 U.S. Treasury Notes (a)............ 6.250 10/31/01 1,981,560
7,200 U.S. Treasury Notes (a)............ 7.250 05/15/04 7,457,616
-----------
Total Long-Term Investments
(Cost $38,490,820)..................................................... 38,744,419
-----------
Short-Term Investments 55.2%
United States Government & Government
Agency Obligations 54.8%
4,500 Federal Farm Credit Bank Discount Note
(yielding 4.531%, 06/02/97 maturity).............................. 4,499,311
17,000 Federal Home Loan Mortgage Corp. Discount Note
(yielding 5.472%, 06/16/97 maturity).............................. 16,961,325
27,000 Federal National Mortgage Association Discount Note
(yielding 5.409%, 06/27/97 maturity).............................. 26,895,480
-----------
Total United States Government & Government
Agency Obligations................................................ 48,356,116
-----------
Commercial Paper 0.4%
326 State Street Bank and Trust
(yielding 5.000%, 06/02/97 maturity............................... 326,000
-----------
Total Short-Term Investments
(Cost $48,682,116)..................................................... 48,682,116
-----------
Foreign Currency, Various Denominations 0.0%
(Cost $2,654).......................................................... 2,591
Other Assets in Excess of Liabilities 0.9%................................. 774,232
-----------
Net Assets 100.0%.......................................................... $88,203,358
===========
(a) Assets segregated as collateral for forward commitments.
9 See Notes to Financial Statements
</TABLE>
<PAGE>
Statement of Assets and Liabilities
May 31, 1997
<TABLE>
<CAPTION>
=================================================================================
Assets:
<S> <C>
Long-Term Investments, at Market Value (Cost $38,490,820).......... $ 38,744,419
Short-Term Investments (Cost $48,682,116).......................... 48,682,116
Foreign Currency, at Market Value (Cost $2,654).................... 2,591
Cash............................................................... 383
Receivables:
Interest......................................................... 700,787
Fund Shares Sold................................................. 14,452
Forward Currency Contracts and Forward Commitments................. 812,923
Other.............................................................. 99
------------
Total Assets.................................................. 88,957,770
------------
Liabilities:
Payables:
Fund Shares Repurchased.......................................... 271,782
Income Distributions............................................. 215,830
Distributor and Affiliates....................................... 84,131
Investment Advisory Fee.......................................... 55,536
Accrued Expenses................................................... 88,526
Deferred Compensation and Retirement Plans......................... 38,607
------------
Total Liabilities............................................. 754,412
------------
Net Assets......................................................... $ 88,203,358
============
Net Assets Consist of:
Capital............................................................ $125,541,347
Net Unrealized Appreciation on Securities.......................... 1,613,248
Accumulated Undistributed Net Investment Income.................... 94,388
Accumulated Net Realized Loss on Securities........................ (39,045,625)
------------
Net Assets......................................................... $ 88,203,358
============
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share
(Based on net assets of $25,658,438 and 3,374,330
shares of beneficial interest issued and outstanding)............ $ 7.60
Maximum sales charge (4.75%* of offering price).................. .38
------------
Maximum offering price to public................................. $ 7.98
============
Class B Shares:
Net asset value and offering price per share
(Based on net assets of $56,889,670 and 7,441,320
shares of beneficial interest issued and outstanding)............ $ 7.65
============
Class C Shares:
Net asset value and offering price per share
(Based on net assets of $5,655,250 and 745,566 shares
of beneficial interest issued and outstanding)................... $ 7.59
============
* On sales of $100,000 or more, the sales charge will be reduced.
</TABLE>
10
See Notes to Financial Statements
<PAGE>
Statement of Operations
For the Year Ended May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
Investment Income:
Interest (Net of foreign withholding taxes of $44,850)........... $10,014,924
-----------
<S> <C>
Expenses:
Distribution (12b-1) and Service Fees (Attributed to Classes A,
B and C of $79,247, $829,340 and $78,230, respectively)........ 986,817
Investment Advisory Fee.......................................... 918,419
Shareholder Services............................................. 358,976
Custody.......................................................... 102,996
Legal............................................................ 14,630
Trustees Fees and Expenses....................................... 9,642
Amortization of Organizational Costs............................. 1,070
Other............................................................ 226,831
-----------
Total Expenses.............................................. 2,619,381
Less Expenses Reimbursed 8,800
-----------
Net Expenses................................................ 2,610,581
-----------
Net Investment Income............................................ $ 7,404,343
===========
Realized and Unrealized Gain/Loss on Securities:
Realized Gain/Loss on Securities:
Investments.................................................... $(3,492,131)
Forward Commitments............................................ (6,405,574)
Foreign Currency Transactions.................................. 417,353
-----------
Net Realized Loss on Securities.................................. (9,480,352)
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period........................................ (3,506,613)
-----------
End of the Period:
Investments................................................. 253,599
Forward Commitments......................................... 1,360,144
Foreign Currency Translation................................ (495)
-----------
1,613,248
-----------
Net Unrealized Appreciation on Securities During the Period...... 5,119,861
-----------
Net Realized and Unrealized Loss on Securities................... $(4,360,491)
===========
Net Increase in Net Assets from Operations....................... $ 3,043,852
===========
</TABLE>
11 See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
For the Years Ended May 31, 1997 and 1996
===============================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1997 May 31, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income.............................. $ 7,404,343 $ 10,207,114
Net Realized Gain/Loss on Securities............... (9,480,352) 543,929
Net Unrealized Appreciation/Depreciation on
Securities During the Period...................... 5,119,861 (6,367,840)
------------ ------------
Change in Net Assets from Operations............... 3,043,852 4,383,203
------------ ------------
Distributions from Net Investment Income:..........
Class A Shares................................... (2,102,906) (2,860,078)
Class B Shares................................... (4,816,433) (6,497,549)
Class C Shares................................... (459,054) (822,565)
------------ ------------
Total Distributions................................ (7,378,393) (10,180,192)
------------ ------------
Net Change in Net Assets from
Investment Activities............................. (4,334,541) (5,796,989)
------------ ------------
From Capital Transactions:
Proceeds from Shares Sold.......................... 8,442,389 22,142,711
Net Asset Value of Shares Issued
Through Dividend Reinvestment..................... 4,489,376 5,934,913
Cost of Shares Repurchased......................... (63,966,605) (68,487,512)
------------ ------------
Net Change in Net Assets from
Capital Transactions.............................. (51,034,840) (40,409,888)
------------ ------------
Total Decrease in Net Assets....................... (55,369,381) (46,206,877)
Net Assets:
Beginning of the Period............................ 143,572,739 189,779,616
------------ ------------
End of the Period
(Including accumulated undistributed net
investment income of $94,388 and $(355,254),
respectively).................................... $ 88,203,358 $143,572,739
============ ============
</TABLE>
12 See Notes to Financial Statements
<PAGE>
<TABLE>
Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
===================================================================================================
<CAPTION>
Year Ended May 31,
Class A Shares 1997(a) 1996 1995 1994 1993(a)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.......... $ 7.92 $ 8.24 $ 8.26 $ 9.01 $ 9.07
Net Investment Income........................... .526 .56 .60 .78 .845
Net Realized and Unrealized Loss on Securities.. (.310) (.328) (.016) (.5715) (.123)
------ ------ ------ ------- ------
Total from Investment Operations.................. .216 .232 .584 .2085 .722
------ ------ ------ ------- ------
Less:
Distributions from Net Investment Income........ .532 .552 .604 .726 .782
Distributions from and in Excess of
Net Realized Gain on Securities............... --0-- --0-- --0-- .2325 --0--
------ ------ ------ ------- ------
Total Distributions............................... .532 .552 .604 .9585 .782
------ ------ ------ ------- ------
Net Asset Value, End of the Period................ $7.604 $ 7.92 $ 8.24 $ 8.26 $ 9.01
====== ====== ====== ======= ======
Total Return (b).................................. 2.65% 2.81% 7.52% 1.89% 8.47%
Net Assets at End of the Period (In millions)..... $ 25.7 $ 36.4 $ 47.9 $ 62.8 $ 36.1
Ratio of Expenses to Average Net Assets (c)....... 1.57% 1.51% 1.42% 1.45% 1.52%
Ratio of Net Investment Income to
Average Net Assets (c).......................... 6.58% 6.66% 7.18% 8.12% 9.33%
Portfolio Turnover................................ 161% 239% 209% 236% 301%
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC's reimbursement of certain expenses was less than
0.01%.
See Notes to Financial Statements
13
</TABLE>
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
=================================================================================================
Year Ended May 31,
---------------------------------------------
Class B Shares 1997(a) 1996 1995 1994 1993(a)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.......... $ 7.96 $ 8.28 $ 8.30 $ 9.04 $ 9.09
------ ------ ------ ------- ------
Net Investment Income........................... .477 .49 .53 .69 .78
Net Realized and Unrealized Loss on Securities.. (.320) (.318) (.006) (.5435) (.12)
------ ------ ------ ------- ------
Total from Investment Operations.................. .157 .172 .524 .1465 .66
------ ------ ------ ------- ------
Less:
Distributions from Net Investment Income........ .472 .492 .544 .654 .71
Distributions from and in Excess of
Net Realized Gain on Securities................ -0- -0- -0- .2325 -0-
------ ------ ------ ------- ------
Total Distributions............................... .472 .492 .544 .8865 .71
------ ------ ------ ------- ------
Net Asset Value, End of the Period................ $7.645 $ 7.96 $ 8.28 $ 8.30 $ 9.04
====== ====== ====== ======= ======
Total Return (b).................................. 2.00% 2.06% 6.69% 1.07% 7.95%
Net Assets at End of the Period (In millions)..... $ 56.9 $ 97.7 $123.4 $ 147.5 $ 56.7
Ratio of Expenses to Average Net Assets (c)....... 2.33% 2.27% 2.18% 2.22% 2.19%
Ratio of Net Investment Income to
Average Net Assets (c)........................... 5.86% 5.91% 6.41% 7.30% 8.66%
Portfolio Turnover................................ 161% 239% 209% 236% 301%
</TABLE>
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC's reimbursement of certain expenses was less than
0.01%.
14 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
================================================================================
<TABLE>
<CAPTION>
April 12, 1993
(Commencement
Year Ended May 31, of Distribution)
---------------------------------------- to May 31,
Class C Shares 1997(a) 1996 1995 1994 1993(a)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period... $ 7.91 $ 8.22 $ 8.25 $ 8.99 $ 9.00
------ ------ ------ ------ -------
Net Investment Income.................... .471 .46 .51 .63 .095
Net Realized and Unrealized
Gain/Loss on Securities................. (.324) (.278) .004 (.4835) .011
------ ------ ------ ------ -------
Total from Investment Operations........... .147 .182 .514 .1465 .106
------ ------ ------ ------ -------
Less:
Distributions from Net Investment
Income.................................. .472 .492 .544 .654 .116
Distributions from and in Excess of Net
Realized Gain on Securities............. --0-- --0-- --0-- .2325 --0--
------ ------ ------ ------ -------
Total Distributions........................ .472 .492 .544 .8865 .116
------ ------ ------ ------ -------
Net Asset Value, End of the Period......... $7.585 $ 7.91 $ 8.22 $ 8.25 $ 8.99
====== ====== ====== ====== =======
Total Return (b)........................... 1.88% 2.20% 6.60% 1.19% 8.78%*
Net Assets at End of
the Period (In millions).................. $ 5.6 $ 9.5 $ 18.5 $ 23.5 $ 1.4
Ratio of Expenses to
Average Net Assets (c).................... 2.33% 2.27% 2.18% 2.22% 2.63%
Ratio of Net Investment Income to
Average Net Assets (c).................... 5.84% 5.91% 6.42% 7.13% 10.06%
Portfolio Turnover......................... 161% 239% 209% 236% 301%
</TABLE>
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC's reimbursement of certain expenses was less than
0.01%.
* Non-Annualized
15 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
May 31, 1997
================================================================================
1. Significant Accounting Policies
Van Kampen American Capital Global Government Securities Fund (the "Fund'') is
organized as a series of Van Kampen American Capital World Portfolio Series
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 total return through a
managed balance of foreign and domestic debt securities. Investments in foreign
securities involve certain risks not ordinarily associated with investments in
securities of domestic issuers, including fluctuations in foreign exchange
rates, future political and economic developments, and the possible imposition
of exchange controls or other foreign governmental laws or restrictions. The
Fund commenced investment operations on November 15, 1991. The distribution of
the Fund's Class C shares commenced on April 12, 1993.
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 values 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 60 days or less 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 invest in repurchase agreements which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital Asset Management Inc. (the
"Adviser'') or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.
16
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
===============================================================================
C. Investment Income--Interest income is recorded on an accrual basis. The
Fund accounts for discounts and premiums on the same basis as is used for
federal income tax reporting. Accordingly, original issue discounts on debt
securities purchased are amortized over the life of the security. Premiums on
debt securities are not amortized. Market discounts are recognized at the time
of sale as realized gains for book purposes and ordinary income for tax
purposes.
D. Currency Translation--Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated into
U.S. dollars based on quoted exchange rates as of noon Eastern Time. 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. Gains and losses on the sale of
securities are not segregated for financial reporting purposes between amounts
arising from changes in exchange rates and amounts arising from changes in the
market prices of securities. Realized gain and loss on foreign currency includes
the net realized amount from the sale of currency and the amount realized
between trade date and settlement date on security transactions.
E. Organizational Costs--The Fund 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 $13,000. These costs
were amortized on a straight line basis over the 60 month period ended November,
1996.
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.
At May 31, 1997, for federal income tax purposes, cost is $87,175,590, the
aggregate gross unrealized appreciation is $2,711,974, and the aggregate gross
unrealized depreciation is $1,422,433, resulting in net unrealized appreciation
on investments, foreign currency contracts, forward commitments and foreign
currencies of $1,289,541.
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 May 31, 1997, the Fund had an accumulated capital loss carryforward
for tax purposes of $32,183,105, which will expire between May 31, 2003 and May
31, 2005. 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.
17
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
===============================================================================
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. These realized gains and losses are included as net realized gains
or losses for financial reporting purposes. Net realized gains on securities, if
any, are distributed annually.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the 1997 fiscal year have been identified and appropriately reclassified.
Permanent book and tax basis differences relating to the recognition of net
realized losses on paydowns of mortgage pool obligations totaling $14,720 and
net realized gains on foreign currency transactions of $408,170 were
reclassified from accumulated net realized gain/loss on securities to
accumulated undistributed net investment income. Additional permanent
differences relating to the recognition of certain expenses which are not
deductible for tax purposes totaling $30,242 were reclassified from accumulated
undistributed net investment income to capital.
2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly. Investment advisory fees are calculated monthly, based on the average
daily net assets of the Fund at the annual rate of .75%. On April 1, 1997, the
Adviser entered into a subadvisory agreement with Morgan Stanley Asset
Management, Inc. (the "Subadviser''), to provide advisory services to the Fund
and the Adviser with respect to the Fund's investments. Prior to April 1, 1997,
the Fund's Subadviser was John Govett & Co., Ltd. The Adviser pays 50% of its
investment advisory fee to the Subadviser.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated
person.
For the year ended May 31, 1997, the Fund recognized expenses of
approximately $25,800 representing VKAC's cost of providing accounting services
to the Fund. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc. ("ACCESS''), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended May
31, 1997, the Fund recognized expenses of approximately $282,800, representing
ACCESS' cost of providing transfer agency and shareholder services plus a
profit.
Additionally, for the year ended May 31, 1997, the Fund paid VKAC
approximately $20,500 related to the direct cost of consolidating the VKAC open-
end fund complex. Payment was contingent upon the realization by the Fund of
cost efficiencies in shareholder services resulting from the consolidation.
18
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
===============================================================================
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 provides deferred compensation and retirement plans for its trustees
who are not officers of VKAC. Under the deferred compensation plan, trustees may
elect to defer all or a portion of their compensation to a later date. Benefits
under the retirement plan are payable for a ten-year period and are based upon
each trustee's years of service to the Fund. The maximum annual benefit per
Trustee under the plan is equal to $2,500. The Adviser reimbursed the Fund for
these plan expenses through December 31, 1996.
3. Capital Transactions
The Fund has outstanding three classes of shares of beneficial interest, 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 May 31, 1997, capital aggregated $36,467,276, $79,889,687 and $9,184,384
for Classes A, B and C, respectively. For the year ended May 31, 1997,
transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
=========================================================
<S> <C> <C>
Sales:
Class A..................... 415,170 $ 3,285,624
Class B..................... 612,589 4,868,118
Class C..................... 36,431 288,647
---------- ------------
Total Sales................... 1,064,190 $ 8,442,389
========== ============
Dividend Reinvestment:
Class A..................... 169,671 $ 1,338,753
Class B..................... 365,738 2,907,050
Class C..................... 30,907 243,573
---------- ------------
Total Dividend Reinvestment... 566,316 $ 4,489,376
========== ============
Repurchases:
Class A..................... (1,805,879) $(14,262,345)
Class B..................... (5,798,718) (45,573,947)
Class C..................... (523,469) (4,130,313)
---------- ------------
Total Repurchases............. (8,128,066) $(63,966,605)
========== ============
</TABLE>
19
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
===============================================================================
At May 31, 1996, capital aggregated $46,113,074, $117,708,944 and
$12,784,411 for Classes A, B and C, respectively. For the year ended May 31,
1996, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
========================================================
<S> <C> <C>
Sales:
Class A.................... 863,668 $ 7,095,429
Class B.................... 1,568,183 12,820,664
Class C.................... 271,697 2,226,618
---------- ------------
Total Sales.................. 2,703,548 $ 22,142,711
========== ============
Dividend Reinvestment:
Class A.................... 215,647 $ 1,763,615
Class B.................... 450,331 3,699,958
Class C.................... 57,724 471,340
---------- ------------
Total Dividend Reinvestment.. 723,702 $ 5,934,913
========== ============
Repurchases:
Class A.................... (2,290,621) $(18,784,532)
Class B.................... (4,655,689) (38,363,849)
Class C.................... (1,382,547) (11,339,131)
---------- ------------
Total Repurchases............ (8,328,857) $(68,487,512)
========== ============
</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 five years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear the expense of their respective deferred sales
arrangements, including higher distribution and service fees and incremental
transfer agency costs.
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
-------------------
Year of Redemption Class B Class C
- --------------------------------------------------------
<S> <C> <C>
First............................... 4.00% 1.00%
Second.............................. 4.00% None
Third............................... 3.00% None
Fourth.............................. 2.50% None
Fifth............................... 1.50% None
Sixth and Thereafter................ None None
</TABLE>
20
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
===============================================================================
For the year ended May 31, 1997, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$2,300 and CDSC on the redeemed shares of approximately $352,000. 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 and forward commitments, were $179,181,719 and
$279,272,321, respectively.
5. Derivative Financial Instruments
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio, manage the portfolio's effective yield, foreign currency exposure, or
generate potential gain. All of the Fund's portfolio holdings, including
derivative instruments, are marked to market each day with the change in value
reflected in the unrealized appreciation/depreciation on securities. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a forward commitment. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the forward commitment.
A. Forward Purchase Commitments--The Fund trades certain securities under the
terms of forward purchase commitments, whereby the settlement occurs at a
specific future date. Forward purchase commitments are privately negotiated
transactions between the Fund and dealers. While forward purchase commitments
are outstanding, the Fund maintains sufficient collateral of cash or securities
in a segregated account with its custodian. The forward purchase commitments are
marked to market on a daily basis with changes in value reflected as a component
of unrealized appreciation/depreciation on forward commitments.
The following forward purchase commitments were outstanding at May 31,
1997:
<TABLE>
<CAPTION>
Par Amount
in Local Unrealized
Currency Settlement Current Appreciation/
(000) Description Date Value Depreciation
=========================================================================================
<S> <C> <C> <C>
2,100-AU$ Australia (Commonwealth of),
9.000%, 09/15/04 maturity............. 07/10/97 $1,748,224 $ 68,394
2,200-CA$ Canada (Government of),
7.500%, 03/01/01 maturity............. 07/10/97 1,691,038 528,817
850-CA$ Canada (Government of),
9.750%, 06/01/21 maturity............. 07/10/97 805,078 31,792
</TABLE>
21
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
Par Amount
in Local Unrealized
Currency Settlement Current Appreciation/
(000) Description Date Value Depreciation
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Forward Purchase Commitments (Continued)
9,700-DKK Denmark (Kingdom of),
8,000%, 05/15/03 maturity................ 07/10/97 $1,655,230 $35,707
4,900-DKK Denmark (Kingdom of),
8.000%, 03/15/06 maturity................ 08/28/97 823,786 (3,583)
1,400-DEM Germany (Federal Republic of),
8.375%, 05/21/01 maturity................ 08/18/97 924,869 (4,451)
1,600-DEM Germany (Federal Republic of),
6.250%, 01/04/24 maturity................ 07/03/97 880,476 11,715
5,000-DEM Germany (Federal Republic of),
7.000%, 01/13/00 maturity................ 07/03/97 3,137,595 14,313
5,000-DEM Germany (Treuhandanstalt),
7.500%, 09/09/04 maturity................ 07/03/97 3,255,413 37,345
1,000-DEM Germany (Treuhandanstalt),
7.500%, 09/09/04 maturity................ 08/18/97 648,388 (7,162)
8,800-DEM Germany Unity (Federal Republic),
8.000%, 01/21/02 maturity................ 07/03/97 5,800,932 50,658
500-IEP Ireland (Republic of),
8.000%, 08/18/06 maturity................ 08/18/97 816,904 (11,100)
2,400,000-ITL Italy (Republic of),
9.500%, 02/01/06 maturity................ 07/03/97 1,600,080 62,004
5,300,000-ITL Italy (Republic of),
10.500%, 07/15/00 maturity............... 07/03/97 3,444,939 62,023
250,000-JPY Japan (Government of),
3.100%, 09/20/06 maturity................ 08/28/97 2,206,941 (11,295)
375,000-JPY Japan (Government of),
3.400%, 03/22/04 maturity................ 07/10/97 3,417,147 (55,243)
85,000-JPY Japan (Government of),
3.400%, 03/22/04 maturity................ 08/15/97 772,411 2,412
320,000-JPY Japan (Government of),
5.500%, 03/20/02 maturity................ 07/10/97 3,177,166 (45,190)
110,000-JPY Japan (Government of),
6.400%, 03/20/00 maturity................ 07/10/97 1,069,029 (10,435)
21,000-SEK Sweden (Kingdom of),
6.000%, 02/09/05 maturity................ 07/10/97 2,567,297 57,169
25,000-SEK Sweden (Kingdom of),
13.000%, 06/15/01 maturity............... 07/10/97 4,002,819 35,692
1,500-GBP United Kingdom (Conversion),
9.000%, 07/12/11 maturity................ 07/03/97 2,808,753 120,487
</TABLE>
22
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
Par Amount
in Local Unrealized
Currency Settlement Current Appreciation/
(000) Description Date Value Depreciation
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Forward Purchase Commitments (Continued)
1,050-GBP United Kingdom,
7.000%, 11/06/01 maturity............ 07/03/97 $ 1,710,319 $ 24,867
375-GBP United Kingdom,
7.750%, 09/08/06 maturity............ 07/03/97 631,958 19,674
----------- ----------
$49,596,792 $1,014,610
=========== ==========
</TABLE>
B. Closed but Unsettled Forward Commitments--In certain situations, the Fund has
entered into offsetting transactions for outstanding forward commitments prior
to settlement of the obligation. In doing so, the Fund realizes a gain or loss
on the transaction at the time the forward commitment is closed. However,
settlement of both the purchase and sale is still scheduled to occur in the
denominated foreign currency at a future date. The net difference in the amount
of foreign currency on the trade is marked to market daily with any fluctuation
included as a component of unrealized gain/loss on forward contracts.
The following closed but unsettled forward transactions were outstanding at
May 31, 1997:
<TABLE>
<CAPTION>
Unrealized
Gain/Loss
on Net US$ Net
Local Currency Currency Receivable
Description/Currency Receivable Payable Difference (Payable)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Canada (Government of) -- Canadian Dollar
(700,000 par, 7.500%, 03/01/01)............ 747,542 529,779 $ 1,688 $ 157,605
Germany (Treuhandanstalt) -- Mark
(16,000,000 par, 6.750%, 05/13/04)......... 17,074,200 17,503,726 (99,159) (251,317)
German Unity (Federal) -- Mark
(2,000,000 par, 8.000%, 01/21/02).......... 1,343,375 2,305,200 31,424 (562,767)
United Kingdom -- Pound
(1,525,000 par, 7.750%, 09/08/06).......... 1,621,986 1,559,311 15,054 102,529
(550,000 par, 7.000%, 11/06/01)............ 558,352 545,805 4,068 20,525
Ireland (Republic of) -- Punt
(1,200,000 par, 6.250%, 04/01/99).......... 1,227,807 1,223,607 67,055 6,334
-------- ---------
$ 20,130 $(527,091)
======== =========
</TABLE>
23
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
===============================================================================
C. Forward Currency Contracts--A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Upon the settlement of the contract, a realized gain or loss is recognized
and is included as a component of realized gain/loss on forward contracts.
The following forward currency contracts were outstanding as of May 31,
1997:
<TABLE>
<CAPTION>
Unrealized
Current Appreciation/
Description Value Depreciation
- --------------------------------------------------------------------------------
<S> <C> <C>
Long Contracts
Australian Dollar,
1,800,000 expiring 07/31/97..................... $ 1,371,626 $ (25,174)
1,500,000 expiring 08/22/97..................... 1,143,246 (21,504)
Canadian Dollar,
4,200,000 expiring 07/11/97..................... 3,048,769 3,084
German Mark,
16,750,000 expiring 06/20/97.................... 9,814,428 (120,329)
7,550,000 expiring 07/11/97..................... 4,430,502 (132,535)
1,806,322 expiring 07/17/97..................... 1,060,470 4,820
817,860 expiring 08/29/97....................... 481,644 (443)
4,246,785 expiring 08/29/97..................... 2,500,965 (2,298)
5,100,000 expiring 09/05/97..................... 3,004,956 (9,941)
Danish Krone,
14,500,000 expiring 06/20/97.................... 2,230,182 (20,637)
Spanish Peseta,
830,000,000 expiring 08/29/97................... 5,748,881 (67,924)
British Pound Sterling,
3,800,000 expiring 07/11/97..................... 6,210,693 (61,967)
150,000 expiring 07/11/97....................... 245,159 (1,066)
1,000,000 expiring 07/11/97..................... 1,634,393 12,393
Italian Lira,
9,400,000,000 expiring 07/11/97................. 5,539,560 (94,817)
Japanese Yen,
1,300,000,000 expiring 06/20/97................. 11,196,057 575,142
300,000,000 expiring 07/11/97................... 2,591,649 83,288
50,000,000 expiring 07/11/97.................... 431,941 20,249
95,000,000 expiring 08/22/97.................... 825,749 9,878
Netherlands Guilder,
23,300,000 expiring 06/20/97.................... 12,135,758 (179,252)
Swedish Krona,
10,780,000 expiring 08/29/97.................... 1,395,639 (27,088)
----------- ---------
Total Long Contracts............................ 77,042,267 (56,121)
----------- ---------
</TABLE>
24
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
Unrealized
Current Appreciation/
Description Value Depreciation
===============================================================================
<S> <C> <C>
Forward Currency Contracts (Continued)
Short Contracts
Canadian Dollar,
400,000 expiring 07/11/97 ................. $ 290,359 $ (2,693)
German Mark,
1,600,000 expiring 06/20/97 ............... 937,498 21,735
350,000 expiring 06/20/97 ................. 205,078 (1,376)
3,500,000 expiring 08/29/97 ............... 2,061,177 18,443
Danish Krone,
3,100,000 expiring 06/20/97 ............... 476,798 13,414
1,200,000 expiring 06/20/97 ............... 184,567 4,098
Spanish Peseta,
360,000,000 expiring 08/29/97 ............. 2,493,491 9,772
British Pound Sterling,
300,000 expiring 07/11/97 ................. 490,318 (3,298)
300,000 expiring 08/29/97 ................. 489,794 (7,707)
800,000 expiring 08/29/97 ................. 1,306,118 (9,478)
Italian Lira,
1,800,000,000 expiring 07/17/97 ........... 1,060,552 (4,902)
Japanese Yen,
450,000,000 expiring 06/20/97 ............. 3,875,558 (4,923)
20,000,000 expiring 06/20/97 .............. 172,247 (12,681)
240,000,000 expiring 08/22/97 ............. 2,086,103 (8,181)
Netherlands Guilder,
23,300,000 expiring 06/20/97 .............. 12,135,758 372,294
----------- ---------
Total Short Contracts ..................... $28,265,416 384,517
----------- ---------
Cross Currency Contracts
Long 2,408,188 German Marks, Short 2,000,000
Swiss Franks, expiring 08/29/97 ............................ (2,992)
---------
$ 325,404
=========
</TABLE>
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 and 1.00% each for
Class B and Class C shares are accrued daily. Included in these fees for the
year ended May 31, 1997, are payments to VKAC of approximately $595,600.
25
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees of
Van Kampen American Capital Global Government Securities Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen American Capital Global
Government Securities Fund (the "Fund''), a series of Van Kampen American
Capital World Portfolio Series Trust, at May 31, 1997, and the results of its
operations, the changes in its net assets and the financial highlights for each
of the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements'') are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at May 31, 1997 by correspondence with the custodian
and brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
July 14, 1997
26
<PAGE>
Funds Distributed by Van Kampen American Capital
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
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
MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Value Fund
Worldwide High Income 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 weekdays from 7:00 a.m. to 7:00 p.m.
Central time at 1-800-341-2911 for Van Kampen American Capital funds, or 1-800-
282-4404 for Morgan Stanley retail funds.
27
<PAGE>
Results of Shareholder Votes
A Special Meeting of Shareholders of the Fund was held on May 28, 1997,
where shareholders voted on a new investment advisory agreement, a new
subadvisory agreement, the election of Trustees, and the selection of Price
Waterhouse LLP as independent public accountants for its current fiscal year.
With regard to the approval of a new investment advisory agreement between Van
Kampen American Capital Asset Management, Inc. and the Fund, 7,540,303 shares
voted for the proposal, 165,006 shares voted against and 385,935 shares
abstained. With regard to the approval of a new subadvisory agreement with
Morgan Stanley Asset Management, Inc. and the Fund 7,541,975 shares voted for
the proposal, 160,213 shares voted against and 389,056 shares abstained. With
regard to the election of Trustees, J. Miles Branagan received 7,942,894
affirmative votes and 148,349 shares withheld; Richard M. DeMartini received
7,940,780 affirmative votes and 150,464 shares withheld. Linda Hutton Heagy
received 7,938,390 affirmative votes and 152,854 shares withheld; R. Craig
Kennedy received 7,943,658 affirmative votes and 147,585 shares withheld; Jack
E. Nelson received 7,937,114 affirmative votes and 154,130 votes withheld;
Jerome L. Robinson received 7,943,658 affirmative votes and 147,585 withheld;
Phillip B. Rooney received 7,942,448 affirmative votes and 147,795 shares
withheld; Fernando Sisto received 7,942,441 affirmative votes and 148,802 shares
withheld; and, Wayne W. Whalen received 7,943,658 affirmative votes and 147,585
shares withheld. With regard to the ratification of the selection of Price
Waterhouse LLP as independent public accountants for its current fiscal year,
7,630,081 shares voted for the proposal, 93,117 shares voted against and 368,046
shares abstained.
28
<PAGE>
Van Kampen American Capital Global Government Securities Fund
Board of Trustees
J. Miles Branagan
Richard M. DeMartini*
Linda Hutton Heagy
R. Craig Kennedy
Jack E. Nelson
Jerome L. Robinson
Phillip B. Rooney
Fernando Sisto
Wayne W. Whalen* -- Chairman
Officers
Dennis J. McDonnell*
President
Ronald A. Nyberg*
Vice President and Secretary
Edward C. Wood, III*
Vice President and Chief Financial Officer
Curtis W. Morell*
Vice President and Chief Accounting Officer
John L. Sullivan*
Treasurer
Tanya M. Loden*
Controller
Peter W. Hegel*
Alan T. Sachtleben*
Paul R. Wolkenberg*
Vice Presidents
Investment Adviser
Van Kampen American Capital
Asset Management, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Investment Subadviser
Morgan Stanley Asset
Management, Inc.
1585 Broadway
New York, New York 10036
Distributor
Van Kampen American Capital
Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Shareholder Servicing Agent
ACCESS Investor
Services, Inc.
P.O. Box 418256
Kansas City, Missouri 64141-9256
Custodian
State Street Bank
and Trust Company
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Independent Accountants
Price Waterhouse LLP
1201 Louisiana
Houston, Texas 77002
* "Interested" persons of the Fund, as defined in the Investment Company Act
of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1997 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. After September 30, 1997, this report must be accompanied
by a quarterly performance update, if applicable.
29
