<PAGE>
Van Kampen American Capital
GLOBAL GOVERNMENT
SECURITIES FUND
Annual Report
May 31, 1998
[ARTWORK APPEARS HERE]
____ A Wealth of Knowledge . A Knowledge of Wealth(SM) ____
VAN KAMPEN AMERICAN CAPITAL
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
Letter to Shareholders............................ 1
Performance Results............................... 4
Performance in Perspective........................ 5
Glossary of Terms................................. 6
Portfolio Management Review....................... 7
Portfolio of Investments.......................... 10
Statement of Assets and Liabilities............... 11
Statement of Operations........................... 12
Statement of Changes in Net Assets................ 13
Financial Highlights.............................. 14
Notes to Financial Statements..................... 17
Report of Independent Accountants................. 27
</TABLE>
GGS ANR 7/98
<PAGE>
Letter to Shareholders
June 19, 1998
[PHOTO]
[Dennis J. McDonnell and Don G. Powell]
Dear Shareholder,
The recent announcement that the federal government will generate a budget
surplus this year for the first time since 1969 gives us pause to reflect on how
far the nation's finances have come during the past 15 years. Many Americans can
remember the 1970s, when a painful outbreak of inflation undermined investment
returns and lowered living standards. Just a few years ago, the federal budget
was still nearly $300 billion in the red and the U.S. dollar was weak.
Today, economic growth is robust, inflation is virtually nonexistent, the
job market is healthy, and the dollar is rising around the world. Against this
backdrop, stock and bond prices have appreciated considerably since the nation's
inflationary fever began to subside more than a decade ago. From a long-term
perspective, however, history tells us that the good times will not last
forever.
At Van Kampen American Capital, we are pleased to provide investors with
products and tools for all economic climates. As always, we remain vigilant in
identifying changes in the investment environment that might affect our fund
shareholders. In the meantime, we encourage you to talk to your adviser about
how diversification can help your portfolio's long-term performance.
Economic Overview
It was the best of times and the worst of times for the global economy. The
United States and Europe enjoyed strong growth with virtually no inflation. In
Asia, however, many economies experienced their first brush with recession in
more than a decade while Japan remained mired in a deep and prolonged slump.
The American economy cruised into the eighth year of a vigorous expansion
with no end in sight. Economic growth accelerated during the later stages of the
reporting period, with the nation's total output of goods and services growing
at a 4.2 percent annualized rate in the first quarter of 1998. Meanwhile,
unemployment fell to a 28-year low of 4.3 percent in April. Despite robust
growth and low unemployment, inflation remained benign. During the 12 months
through May, consumer prices rose by only 1.7 percent. A rising dollar, tepid
demand for U.S. goods in Asia, and falling commodity prices offset the
inflationary impact of the tight labor market.
Europe also experienced solid growth with low inflation. However,
unemployment in the region remains near double digit rates, a legacy of Europe's
traditionally high cost of doing business. In May, the European Monetary Union
(EMU) named its inaugural 11 nations. The near certainty of a common currency
(the euro) led to a wave of mergers and acquisitions, particularly in the
pharmaceutical and financial industries.
1 Continued on page two
<PAGE>
As the reporting period ended, several Asian economies were struggling in
the aftermath of last year's currency crisis. South Korea, Hong Kong, and
Malaysia each showed negative economic growth during the first quarter. With
inflation reaching nearly 50 percent, social and political unrest broke out in
Indonesia, leading to the resignation of President Suharto. Rising unemployment
in South Korea resulted in nationwide strikes. Complicating the region's
problems was the inability of Japan to pull out of a nearly decade-long economic
slump. Without help from Japanese consumers, already-struggling Asian economies
lose an important export market.
Market Review
Favorable inflation reports inspired gains in most global bond markets
during the reporting period. In the 12 months through May, the J. P. Morgan
Government Bond Index increased 11.4 percent, led by double-digit gains in
Sweden and the United Kingdom. However, the strong U.S. dollar offset the gains
for dollar-based investors. For the same period, the Index increased 6.8 percent
in dollar terms.
In Europe, interest rates in secondary nations such as Italy, Spain, and
Portugal converged toward those in Germany and France in anticipation of
monetary union, scheduled to begin next January. Although economic growth is
solid throughout the region, high unemployment rates and weak commodity prices
created a favorable environment for European bonds.
Bond prices also rallied in the United States, aided by continued low
inflation. Long-term Treasury bonds gained 15.94 percent as interest rates
declined by roughly 100 basis points during the 12 months through May. Faced
with no sign of rising inflation and fearful of upsetting the fragile economic
balance in Asia, Federal Reserve policy makers kept short-term interest rates
steady at 5.5 percent during the reporting period.
Outlook
Several factors are helping to sustain a generally favorable environment
for global bonds. Extreme economic weakness in Asia is exerting downward
pressure on energy, commodity, and goods prices. Significant gains in
productivity are allowing companies to grow earnings without the need for
significant price increases. Also, the strong dollar is containing U.S.
inflation despite a tight labor market and above-trend economic growth.
While we believe these positive factors will remain in place for the
immediate future, we are monitoring the U.S. economy for signs of price
pressure. With jobs in abundance and consumer confidence at record levels,
conditions are ripe for an acceleration of inflation. Currently, the Federal
Reserve has the luxury of remaining on the sidelines, as the strong dollar and
the drag from Asia accomplish an unofficial monetary tightening. Should
inflation begin to accelerate, however, we expect that the Fed will raise
interest rates despite the potential impact on Asia. We are positioned to
underweight U.S. bonds at the first sign of higher inflation.
2 Continued on page three
<PAGE>
In Japan, we believe that exceptionally low bond yields do not provide
adequate reward for investors. The weak yen adds to the risks for dollar-based
investors. Accordingly, we expect to be underweighted in Japanese bonds going
forward. Our position on Europe is neutral. Real interest rates are attractive,
and the region's high unemployment rate provides a cushion against future
inflation.
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to serve you and your family through our
diverse selection of quality investments.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
3
<PAGE>
Performance Results for the Period Ended May 31, 1998
Van Kampen American Capital Global Government Securities Fund
<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Total Returns
One-year total return based on NAV/1/........ 5.98% 4.98% 5.02%
One-year total return/2/..................... 0.93% 1.01% 4.03%
Five-year average annual total return/2/..... 3.14% 3.11% 3.36%
Life-of-Fund average annual total return/2/.. 3.77% 3.80% 3.50%
Commencement Date............................ 11/15/91 11/15/91 04/12/93
Distribution Rate and Yield
Distribution rate/3/......................... 5.67% 5.13% 5.18%
SEC Yield/4/................................. 4.37% 3.78% 3.77%
</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, 1998.
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.
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 statistical composite, this index
does not reflect any commissions that 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, 1998)
Fund's Total Return
1 Year Avg. Annual = 0.93%
5 Year Avg. Annual = 3.14%
Inception Avg. Annual = 3.77%
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
November May May May May May May May
1991 1992 1993 1994 1995 1996 1997 1998
-------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VKAC Global Government Securities Fund 9,524 9,611 10,426 10,622 11,420 11,741 12,053 12,773
J.P. Morgan Global Traded Government Index 10,000 10,551 11,809 12,143 14,343 14,600 15,214 16,245
</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>
Glossary of Terms
Blue-chip stocks:
Stocks of large, well-known companies that have a long record of growth and
a reputation for quality management. Examples of blue-chip stocks include
General Motors, International Business Machines (IBM), Coca-Cola, and
General Electric.
Bottom-up investing:
A management style that emphasizes the analysis of individual stocks,
rather than economic and market cycles.
Currency hedging:
A technique used to offset the risks associated with the changing value of
currency.
Dow Jones Industrial Average:
The oldest and most widely recognized stock market average, which reflects
the performance of 30 actively traded stocks of well-established, blue-chip
companies.
Emerging markets:
The financial markets of developing economies. Many Latin American and
Asian countries are considered emerging markets.
European Monetary Union (EMU):
A group of European countries creating one currency for the entire region.
Growth investing:
An investment strategy that seeks to identify stocks that tend to offer
greater-than-average earnings growth. Growth stocks typically trade at
higher prices than value stocks, due to their higher expected earnings
growth.
Market capitalization:
The size of a company, as measured by the value of its issued and
outstanding shares of stock. Morningstar, Inc., an independent mutual fund
rating service, defines "small-cap" as less than $1 billion, "mid-cap" as
between $1 billion and $5 billion, and "large-cap" as more than $5 billion.
Morgan Stanley Capital International (MSCI) EAFE Index:
An international index composed of equity securities from Europe,
Australasia, and the Far East.
Net asset value (NAV):
The value of a mutual fund share, computed by deducting a fund's
liabilities from its total assets and dividing this amount by the number of
shares outstanding. It does not include any initial or contingent deferred
sales charge.
Top-down investing:
A management style where general asset allocation decisions are made
regarding various market sectors, industries, or countries. Individual
securities are then selected from within the favored sectors.
Valuation:
The estimated or determined relative worth of a stock, usually based on its
current price relative to its earnings.
Value investing:
A strategy that seeks to identify stocks that are sound investments but are
temporarily out of favor in the marketplace, due to short-term concerns. As
a result, they trade at prices below what value investors believe they are
actually worth.
6
<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. The Fund is managed by
portfolio managers Michael B. Kushma, Robert M. Smith, J. David Germany, and
Paul F. O'Brien, Morgan Stanley Asset Management Inc., subadviser to the Fund.
Q How would you characterize the market conditions in which the Fund operated
during the 12-month period ended May 31, 1998?
A During the reporting period, there were several prevailing trends in the
global marketplace:
. Bond prices rallied as good news on inflation allowed long-term interest
rates to decline. The strong U.S. currency, however, offset some of the
gains for dollar-based investors. Following is a listing of total
returns from major global bond markets in local currency and U.S. dollar
terms during the 12-month reporting period.
<TABLE>
<CAPTION>
Local Currency U.S. Dollars
-------------- ------------
<S> <C> <C>
Australia............ 15.25% -5.17%
Belgium.............. 9.05% 4.50%
Canada............... 11.59% 5.79%
Denmark.............. 10.52% 5.62%
France............... 9.68% 5.63%
Germany.............. 7.98% 3.30%
Italy................ 15.77% 11.49%
Japan................ 9.19% -8.17%
Netherlands.......... 8.68% 3.79%
Spain................ 11.41% 6.23%
Sweden............... 13.47% 11.98%
United Kingdom....... 16.24% 15.87%
United States........ 11.32% 11.32%
</TABLE>
. European bonds benefited from low inflation and a further decline in
interest rates in peripheral nations such as Italy and Spain. Despite
solid economic growth, inflation in Europe has been held in check by
weak commodity prices and high unemployment. In May, the European
Monetary Union (EMU), which is scheduled to go into effect next January,
officially named its 11 participant nations. And, by the end of May, the
market and futures contracts had fully discounted the reality of the new
common currency (the euro).
. In Japan, long-term interest rates fell below 1.5 percent as the nation
struggled to escape nearly ten years of economic stagnation. The severe
recession gripping many of its Asian trading partners compounded
weakness in the Japanese economy. In this environment of exceptionally
sluggish demand for consumer goods, Japanese bond prices rallied
sharply. However, the stark contrast between economic conditions in the
United States and Japan caused the yen to fall to a seven-year low
against the dollar, offsetting the gains for dollar-based investors.
7
<PAGE>
. Bond yields in the United States fell as economic weakness in Asia
convinced investors that the favorable inflation news was likely to
continue. Since peaking at more than 7 percent in April 1997, the yield
on the Treasury's benchmark 30-year bond declined to 5.80 percent by the
end of the reporting period. Despite the robust economic growth,
inflation in the United States was contained by the strong dollar, a
shrinking export market, and falling commodity prices. In addition,
greatly reduced borrowing requirements by the Federal government also
contributed to the decline in long-term interest rates.
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. Our
interest-rate management strategy consists of a number of value-oriented
criteria, including the level of inflation-adjusted (real) interest rates
and the magnitude of the differential between short- and long-term yields.
The Fund's country allocations, compared to the J.P. Morgan Global Traded
Government Index, were as follows:
. The Fund was underweight in Japan due to the extraordinarily low level
of nominal and real long-term interest rates and the vulnerable position
of the yen.
. We maintained market exposure in Europe, with mild overweights in Sweden
and the United Kingdom based on high levels of real interest rates in
those economies. As the reality of monetary union was reflected in a
fully discounted market, yields converged throughout Europe. The Fund
used the convergence to increase its weighting in German bonds.
. Overall, the Fund had a neutral weighting relative to dollar-block
markets. However, we were slightly overweight in Australian bonds as a
result of that country's relatively higher real interest rates and
steeper yield curve.
Q How has the Fund performed during the reporting period?
A Through May 31, 1998, the Fund achieved a 12-month total return of 5.98
percent/1/ (Class A shares at net asset value) compared to 6.77 percent for
the J. P. Morgan Global Traded Government Index. Please keep in mind that
this is a broad-based 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 sales charges that would be paid by an investor purchasing the
securities it represents. Please refer to the chart on page four for
additional Fund performance results.
8
<PAGE>
Q What is your outlook for the months ahead?
A We continue to view the low inflation-adjusted yields on Japanese bonds
negatively. Accordingly, the Fund is positioned to reduce exposure to Japan
further if interest rates remain at present levels or move lower. In the
United States and Europe, our value signals remain balanced despite a drop
in nominal yields. We view both markets as reasonably attractive at current
levels, and expect to hold market weightings going forward. Of the three
major regions, we believe that the potential for an acceleration of
inflation is greatest in the United States. Unemployment is low, and higher
labor costs could begin to pose problems in coming months. We are watching
the situation carefully, and any increase in inflation would cause us to
reduced the Fund's exposure to U.S. bonds. Conversely, if the U.S. market
were to sell off without a corresponding rise in inflation, the Fund would
use the resulting higher real interest rates and steeper yield curve as an
opportunity to extend durations. We expect that monetary union will occur
as planned. It is important to note, however, that a common European
currency will not eliminate the diversification benefits of global bond
investing. Despite the consolidation of 11 currencies into one, the global
index still contains several major fixed-income markets, including Canada,
Australia, Japan, the United States, and the United Kingdom. Also, it is
likely that over time a number of additional countries will earn credit
upgrades qualifying their bonds as investment grade.
/s/ Michael B. Kushma /s/ Robert M. Smith
Michael B. Kushma Robert M. Smith
Portfolio Manager Portfolio Manager
Morgan Stanley Asset Management Inc. Morgan Stanley Asset Management Inc.
/s/ J. David Germany /s/ Paul F. O'Brien
J. David Germany Paul F. O'Brien
Portfolio Manager Portfolio Manager
Morgan Stanley Asset Management Inc. Morgan Stanley Asset Management Inc.
Please see footnotes on page four
9
<PAGE>
Portfolio of Investments
May 31, 1998
<TABLE>
<CAPTION>
===============================================================================================
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Government & Government Agency Obligations 53.6%
$ 569 Government National Mortgage Association
Pools................................. 8.000% 11/15/00 to 12/15/25 $ 591,882
5,600 United States Treasury Bonds..........12.000 05/15/05 7,613,368
3,800 United States Treasury Bonds.......... 8.125 08/15/19 4,809,356
200 United States Treasury Bonds.......... 6.250 08/15/23 209,188
20,900 United States Treasury Notes (a)...... 7.750 12/31/99 21,579,250
-----------
Total Long-Term Investments
(Cost $34,116,678)............................................................. 34,803,044
-----------
Short-Term Investments 46.1%
United States Government & Government Agency Obligations 42.5%
4,600 Federal Farm Credit Bank Discount Note
(yielding 5.409%, 06/24/98 maturity)............................... 4,584,218
4,000 Federal Home Loan Bank Discount Note
(yielding 5.386%, 06/09/98 maturity)............................... 3,995,227
9,000 Federal Home Loan Mortgage Corp. Discount Note
(yielding 5.411%, 06/15/98 maturity) (a)........................... 8,981,275
10,000 Federal National Mortgage Association Discount Note
(yielding 5.406%, 06/09/98 maturity) (a)........................... 9,988,500
-----------
Total United States Government & Government
Agency Obligations................................................. 27,549,220
Repurchase Agreement 3.6%
State Street Bank and Trust ($2,350,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 05/29/98,
to be sold on 06/01/98 at $2,350,979).............................. 2,350,000
-----------
Total Short-Term Investments
(Cost $29,899,220)............................................................. 29,899,220
-----------
Total Investments 99.7%
(Cost $64,015,898)............................................................. 64,702,264
Other Assets in Excess of Liabilities 0.3%....................................... 186,319
-----------
Net Assets 100.0%................................................................ $64,888,583
===========
</TABLE>
(a) Assets segregated as collateral for forward purchase commitments.
10 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
May 31, 1998
================================================================================
<S> <C>
Assets:
Total Investments (Cost $64,015,898)............................. $ 64,702,264
Receivables:
Interest....................................................... 850,695
Fund Shares Sold............................................... 67,439
Other............................................................ 28,252
------------
Total Assets................................................. 65,648,650
------------
Liabilities:
Payables:
Income Distributions........................................... 127,959
Distributor and Affiliates..................................... 89,970
Fund Shares Repurchased........................................ 59,572
Investment Advisory Fee........................................ 40,230
Forward Currency Contracts and Forward Commitments............... 226,364
Accrued Expenses................................................. 147,848
Trustees' Deferred Compensation and Retirement Plans............. 68,124
------------
Total Liabilities............................................ 760,067
------------
Net Assets....................................................... $ 64,888,583
============
Net Assets Consist of:
Capital.......................................................... $102,647,317
Accumulated Undistributed Net Investment Income.................. 1,126,836
Net Unrealized Appreciation...................................... 438,434
Accumulated Net Realized Loss.................................... (39,324,004)
------------
Net Assets....................................................... $ 64,888,583
============
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share
(Based on net assets of $21,898,181 and 2,899,435
shares of beneficial interest issued and outstanding).......... $ 7.55
Maximum sales charge (4.75%* of offering price)................ .38
------------
Maximum offering price to public............................... $ 7.93
============
Class B Shares:
Net asset value and offering price per share
(Based on net assets of $39,475,639 and 5,196,861
shares of beneficial interest issued and outstanding).......... $ 7.60
============
Class C Shares:
Net asset value and offering price per share
(Based on net assets of $3,514,763 and 466,531 shares
of beneficial interest issued and outstanding)................. $ 7.53
============
</TABLE>
* On sales of $100,000 or more, the sales charge will be reduced.
11 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended May 31, 1998
================================================================================
<S> <C>
Investment Income:
Interest (Net of foreign withholding taxes of $35,968)........... $ 5,076,036
------------
Expenses:
Distribution (12b-1) and Service Fees (Attributed to
Classes A, B and C of $56,251, $484,180 and $44,655,
respectively)................................................... 585,086
Investment Advisory Fee.......................................... 565,378
Shareholder Services............................................. 331,795
Custody.......................................................... 128,870
Shareholder Reports.............................................. 101,447
Legal............................................................ 16,516
Trustees' Fees and Expenses...................................... 11,644
Other............................................................ 135,450
------------
Total Expenses............................................... 1,876,186
------------
Net Investment Income............................................ $ 3,199,850
============
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments.................................................... $ 365,527
Forward Commitments............................................ 1,678,085
Foreign Currency Transactions.................................. (16,360)
------------
Net Realized Gain................................................ 2,027,252
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period........................................ 1,613,248
------------
End of the Period:
Investments.................................................. 686,366
Forward Commitments.......................................... (247,932)
------------
438,434
------------
Net Unrealized Depreciation During the Period.................... (1,174,814)
------------
Net Realized and Unrealized Gain................................. $ 852,438
============
Net Increase in Net Assets from Operations....................... $ 4,052,288
============
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
For the Years Ended May 31, 1998 and 1997
<TABLE>
<CAPTION>
============================================================================================
Year Ended Year Ended
May 31, 1998 May 31, 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income........................................ $ 3,199,850 $ 7,404,343
Net Realized Gain/Loss....................................... 2,027,252 (9,480,352)
Net Unrealized Appreciation/Depreciation
During the Period...................................... (1,174,814) 5,119,861
------------ ------------
Change in Net Assets from Operations......................... 4,052,288 3,043,852
------------ ------------
Distributions from Net Investment Income..................... (3,294,238) (7,378,393)
Distributions in Excess of Net Investment Income............. (1,178,795) -0-
------------ ------------
Distributions from and in Excess of Net Investment Income*... (4,473,033) (7,378,393)
------------ ------------
Net Change in Net Assets from
Investment Activities.................................. (420,745) (4,334,541)
------------ ------------
From Capital Transactions:
Proceeds from Shares Sold.................................... 14,155,976 8,442,389
Net Asset Value of Shares Issued
Through Dividend Reinvestment.......................... 2,660,059 4,489,376
Cost of Shares Repurchased................................... (39,710,065) (63,966,605)
------------ ------------
Net Change in Net Assets from
Capital Transactions................................... (22,894,030) (51,034,840)
------------ ------------
Total Decrease in Net Assets................................. (23,314,775) (55,369,381)
Net Assets:
Beginning of the Period...................................... 88,203,358 143,572,739
------------ ------------
End of the Period
(Including accumulated undistributed net investment
income of $1,126,836 and $94,388, respectively)........ $ 64,888,583 $ 88,203,358
============ ============
Year Ended Year Ended
May 31, 1998 May 31, 1997
- --------------------------------------------------------------------------------------------
*Distributions from and in Excess of Net Investment Income:
Class A Shares............................................. $ (1,462,620) $ (2,102,906)
Class B Shares............................................. (2,753,416) (4,816,433)
Class C Shares............................................. (256,997) (459,054)
------------ ------------
$ (4,473,033) $ (7,378,393)
============ ============
</TABLE>
13 See Notes to Financial Statements
<PAGE>
Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
=================================================================================================
Year Ended May 31,
-----------------------------------------------
Class A Shares 1998(a) 1997(a) 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........ $7.604 $ 7.92 $ 8.24 $ 8.26 $ 9.01
------ ------ ------- ------ --------
Net Investment Income......................... .352 .526 .56 .60 .78
Net Realized and Unrealized Gain/Loss......... .088 (.310) (.328) (.016) (.5715)
------ ------ ------- ------ --------
Total from Investment Operations................ .440 .216 .232 .584 .2085
------ ------ ------- ------ --------
Less:
Distributions from and in Excess of
Net Investment Income....................... .491 .532 .552 .604 .726
Distributions from and in Excess of
Net Realized Gain........................... -0- -0- -0- -0- .2325
------ ------ ------- ------ --------
Total Distributions............................. .491 .532 .552 .604 .9585
------ ------ ------- ------ --------
Net Asset Value, End of the Period.............. $7.553 $7.604 $ 7.92 $ 8.24 $ 8.26
====== ====== ======= ====== ========
Total Return (b)................................ 5.98% 2.65% 2.81% 7.52% 1.89%
Net Assets at End of the Period (In millions)... $ 21.9 $ 25.7 $ 36.4 $ 47.9 $ 62.8
Ratio of Expenses to Average Net Assets (c)..... 1.95% 1.57% 1.51% 1.42% 1.45%
Ratio of Net Investment Income to
Average Net Assets (c)........................ 4.69% 6.58% 6.66% 7.18% 8.12%
Portfolio Turnover.............................. 276% 161% 239% 209% 236%
</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) For the years ended through May 31, 1997, 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>
Year Ended May 31,
-----------------------------------------------
Class B Shares 1998(a) 1997(a) 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period....... $7.645 $ 7.96 $ 8.28 $ 8.30 $ 9.04
------ ------ ------ ------ -------
Net Investment Income........................ .299 .477 .49 .53 .69
Net Realized and Unrealized Gain/Loss........ .083 (.320) (.318) (.006) (.5435)
------ ------ ------ ------ -------
Total from Investment Operations............... .382 .157 .172 .524 .1465
------ ------ ------ ------ -------
Less:
Distributions from and in Excess of
Net Investment Income...................... .431 .472 .492 .544 .654
Distributions from and in Excess of
Net Realized Gain.......................... -0- -0- -0- -0- .2325
------ ------ ------ ------ -------
Total Distributions............................ .431 .472 .492 .544 .8865
------ ------ ------ ------ -------
Net Asset Value, End of the Period............. $7.596 $7.645 $ 7.96 $ 8.28 $ 8.30
====== ====== ====== ====== =======
Total Return (b)............................... 4.98% 2.00% 2.06% 6.69% 1.07%
Net Assets at End of the Period (In millions).. $ 39.5 $ 56.9 $ 97.7 $123.4 $ 147.5
Ratio of Expenses to Average Net Assets (c).... 2.72% 2.33% 2.27% 2.18% 2.22%
Ratio of Net Investment Income to
Average Net Assets (c)........................ 3.91% 5.86% 5.91% 6.41% 7.30%
Portfolio Turnover............................. 276% 161% 239% 209% 236%
</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) For the years ended through May 31, 1997, 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%.
15 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
================================================================================
<TABLE>
<CAPTION>
Year Ended May 31,
----------------------------------------------
Class C Shares 1998(a) 1997(a ) 1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period....... $7.585 $ 7.91 $ 8.22 $ 8.25 $ 8.99
------ ------ ------ ------ ------
Net Investment Income........................ .293 .471 .46 .51 .63
Net Realized and Unrealized Gain/Loss........ .087 (.324) (.278) .004 (.4835)
------ ------ ------ ------ ------
Total from Investment Operations............... .380 .147 .182 .514 .1465
------ ------ ------ ------ ------
Less:
Distributions from and in Excess of
Net Investment Income...................... .431 .472 .492 .544 .654
Distributions from and in Excess of
Net Realized Gain.......................... -0- -0- -0- -0- .2325
------ ------ ------ ------ ------
Total Distributions............................ .431 .472 .492 .544 .8865
------ ------ ------ ------ ------
Net Asset Value, End of the Period............. $7.534 $7.585 $ 7.91 $ 8.22 $ 8.25
====== ====== ====== ====== ======
Total Return (b)............................... 5.02% 1.88% 2.20% 6.60% 1.19%
Net Assets at End of the Period (In millions).. $ 3.5 $ 5.6 $ 9.5 $ 18.5 $ 23.5
Ratio of Expenses to Average Net Assets (c).... 2.72% 2.33% 2.27% 2.18% 2.22%
Ratio of Net Investment Income to
Average Net Assets (c)....................... 3.90% 5.84% 5.91% 6.42% 7.13%
Portfolio Turnover............................. 276% 161% 239% 209% 236%
</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) For the years ended through May 31, 1997, 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%.
16 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
May 31, 1998
================================================================================
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.
17
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
C. Income and Expenses - 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.
Expenses of the Fund are allocated on a pro rata basis to each class of
shares, except for distribution and service fees and transfer agency costs which
are unique to each class of shares.
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. 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, 1998, for federal income tax purposes, cost of long- and short-
term investments is $64,020,822, the aggregate gross unrealized appreciation is
$689,608, and the aggregate gross unrealized depreciation is $8,164, resulting
in net unrealized appreciation of $681,444.
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, 1998, the Fund had an accumulated capital loss carryforward
for tax purposes of $38,133,185, which expires between May 31, 2003 and May 31,
2006. Net realized gains or losses may differ for financial reporting and tax
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,
wash sales, and the mark to market of open forward currency contracts at May 31,
1998.
F. 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
18
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
are included as net realized gains or losses for financial reporting purposes.
Net realized gains, 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 1998 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 $4,981 and net
realized gains on foreign currency transactions of $2,310,612 were reclassified
from accumulated net realized gain/loss to accumulated undistributed net
investment income.
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%. The Adviser has entered
into a subadvisory agreement with Morgan Stanley Asset Management Inc. (the
"Subadviser"), who provides advisory services to the Fund and the Adviser with
respect to the Fund's investments. The Adviser pays 50% of its investment
advisory fee to the Subadviser.
For the year ended May 31, 1998, the Fund recognized expenses of
approximately $16,500, representing legal services provided by 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, 1998, the Fund recognized expenses of
approximately $21,600 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, 1998, the Fund recognized expenses of approximately $220,400. Beginning in
1998, the transfer agency fees are determined through negotiations with the
Fund's Board of Trustees and are based on competitive market benchmarks.
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 $2,500.
19
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
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, 1998, capital aggregated $32,864,290, $62,712,562 and $7,070,465
for Classes A, B and C, respectively. For the year ended May 31, 1998,
transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
================================================================================
Sales:
<S> <C> <C>
Class A........................................... 752,769 $ 5,695,255
Class B........................................... 1,071,748 8,110,111
Class C........................................... 46,375 350,610
---------- ------------
Total Sales......................................... 1,870,892 $ 14,155,976
========== ============
Dividend Reinvestment:
Class A........................................... 122,857 $ 929,454
Class B........................................... 209,735 1,595,886
Class C........................................... 17,848 134,719
---------- ------------
Total Dividend Reinvestment......................... 350,440 $ 2,660,059
========== ============
Repurchases:
Class A........................................... (1,350,521) $(10,227,695)
Class B........................................... (3,525,942) (26,883,122)
Class C........................................... (343,258) (2,599,248)
---------- ------------
Total Repurchases................................... (5,219,721) $(39,710,065)
========== ============
</TABLE>
20
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
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>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B and Class C shares
will automatically convert to Class A shares after the eighth and tenth years,
respectively. 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.
<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>
21
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1998
===============================================================================
For the year ended May 31, 1998, VKAC, as Distributor for the Fund, received
commissions on sales of the Fund's Class A shares of approximately $1,700 and
CDSC on the redeemed shares of approximately $146,800. 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 $105,714,133 and
$110,206,655, 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 unrealized appreciation/depreciation. 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.
Purchasing securities on a forward commitment involves a risk that the market
value at the time of delivery may be lower than the agreed upon purchase price
resulting in an unrealized loss. Selling securities on a forward commitment
involves different risks and can result in losses more significant than those
arising from the purchase of such securities. Risks may arise as a result of the
potential inability of the counterparties to meet the terms of their contracts.
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.
22
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1998
<TABLE>
<CAPTION>
=======================================================================================================
The following forward purchase commitments were outstanding at May 31, 1998:
Par Amount
in Local Unrealized
Currency Settlement Current Appreciation/
(000) Description Date Value Depreciation
=======================================================================================================
<S> <C> <C> <C> <C>
2,025-AU$ Australia (Commonwealth of),
7.50%, 07/15/05 maturity ......................... 07/30/98 $1,431,677 $ 22,429
2,100-AU$ Australia (Commonwealth of),
9.00%, 09/15/04 maturity.......................... 08/13/98 1,573,350 23,072
1,700-CA$ Canada (Government of),
7.50%, 03/01/01 maturity.......................... 08/13/98 1,229,790 (119)
670-CA$ Canada (Government of),
9.75%, 06/01/21 maturity.......................... 08/13/98 704,272 7,516
4,900-DKK Denmark (Kingdom of),
8.00%, 03/15/06 maturity.......................... 06/26/98 855,831 1,598
9,700-DKK Denmark (Kingdom of),
8.00%, 05/15/03 maturity.......................... 08/13/98 1,617,741 15,223
2,600-DEM Germany (Federal Republic of),
6.25%, 01/04/24 maturity.......................... 08/06/98 1,622,239 21,583
5,100-DEM Germany Unity (Federal Republic),
8.00%, 01/21/02 maturity.......................... 08/06/98 3,183,024 17,865
8,200-DEM Germany (Treuhandanstalt),
7.50%, 09/09/04 maturity.......................... 08/06/98 5,264,003 40,406
3,000-DEM Germany Unity (Federal Republic),
8.00%, 01/21/02 maturity.......................... 08/13/98 1,871,091 7,366
2,900-DEM Germany (Treuhandanstalt),
7.00%, 11/25/99 maturity.......................... 08/20/98 1,684,412 2,843
5,100,000-ITL Italy (Republic of),
9.50%, 02/01/06 maturity.......................... 08/13/98 3,700,646 35,912
70,000-JPY Japan (Government of),
5.50%, 03/20/02 maturity.......................... 07/30/98 592,073 5,369
340,000-JPY Japan (Government of),
3.40%, 03/22/04 maturity.......................... 08/13/98 2,764,685 36,619
170,000-JPY Japan (Government of),
5.50%, 03/20/02 maturity.......................... 08/13/98 1,435,583 9,858
21,000-SEK Sweden (Kingdom of),
6.00%, 02/09/05 maturity.......................... 08/13/98 2,832,752 42,533
10,500-SEK Sweden (Kingdom of),
13.00%, 06/15/01 maturity......................... 08/13/98 1,630,237 14,005
2,800-GBP United Kingdom,
7.75%, 09/08/06 maturity.......................... 08/06/98 5,157,497 43,504
----------- --------
$39,150,903 $347,582
=========== ========
</TABLE>
23
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
B. Closed but Unsettled Forward Commitments-In certain situations, the Fund has
entered into offsetting transactions for outstanding forward commitments prior
to settlement of the obligation. In doing so, the Fund realizes a gain or loss
on the transaction at the time the forward commitment is closed. However,
settlement of both the purchase and sale is still scheduled to occur in the
denominated foreign currency at a future date. The net difference in the amount
of foreign currency on the trade is marked to market daily with any fluctuation
included as a component of unrealized gain/loss on forwards.
The following closed but unsettled forward transactions were outstanding at
May 31, 1998:
<TABLE>
<CAPTION>
Unrealized
Loss
Local Currency on Net
-------------------- Currency US$ Net
Description/Currency Receivable Payable Difference Receivable
=================================================================================
<S> <C> <C> <C> <C>
Ireland (Republic of) - Pound
(1,000,000 par, 8.00%, 08/18/06).. 1,264,222 1,252,142 $4,493 $17,075
====== =======
</TABLE>
24
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
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 forwards. Risks may
arise as a result of the potential inability of the counterparties to meet the
terms of their contracts.
The following forward currency contracts were outstanding as of May 31, 1998:
<TABLE>
<CAPTION>
Unrealized
Current Appreciation/
Description Value Depreciation
================================================================================
<S> <C> <C>
Long Contracts
Australian Dollar,
1,000,000 expiring 07/21/98.................... $ 626,888 $ (27,012)
Canadian Dollar,
3,800,000 expiring 07/17/98.................... 2,610,822 (48,566)
1,100,000 expiring 07/17/98.................... 755,764 (9,107)
German Mark,
4,950,000 expiring 07/13/98.................... 2,781,474 7,277
6,900,000 expiring 07/13/98.................... 3,877,206 (37,243)
14,500,000 expiring 07/13/98................... 8,147,752 (30,477)
3,855,422 expiring 07/15/98.................... 2,166,671 3,195
865,200 expiring 07/17/98...................... 486,282 2,024
Danish Krone,
7,200,000 expiring 07/22/98.................... 1,061,484 3,361
10,200,000 expiring 07/22/98................... 1,503,769 (5,107)
Spanish Peseta,
75,000,000 expiring 07/14/98................... 495,675 1,604
British Pound Sterling,
4,106,000 expiring 07/17/98.................... 6,690,391 (154,311)
Italian Lira,
6,952,000,000 expiring 07/20/98................ 3,956,348 19,122
Japanese Yen,
220,000,000 expiring 07/16/98.................. 1,599,510 (71,334)
525,000,000 expiring 07/16/98.................. 3,817,012 (130,356)
Swedish Krona,
25,730,000 expiring 07/14/98.................. 3,287,738 (107,348)
---------- --------
Total Long Contracts.......................... 43,864,786 (584,278)
---------- --------
</TABLE>
25
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1998
<TABLE>
<CAPTION>
=====================================================================
Unrealized
Current Appreciation/
Description Value Depreciation
- ---------------------------------------------------------------------
<S> <C> <C>
Forward Currency Contracts (Continued)
Short Contracts
Swiss Franc,
3,200,000 expiring 07/15/98............. $2,170,937 $(7,461)
German Mark,
4,745,000 expiring 07/13/98............. 2,666,282 8,766
Spanish Peseta,
75,000,000 expiring 07/14/98............ 495,675 357
British Pound Sterling,
300,000 expiring 07/17/98............... 488,825 (4,567)
750,000 expiring 07/17/98............... 1,222,064 (3,314)
200,000 expiring 07/17/98............... 325,884 (524)
---------- ---------
Total Short Contracts................... $7,369,667 (6,743)
---------- ---------
$(591,021)
=========
</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, 1998, are payments retained by VKAC of approximately
$373,326.
26
<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, 1998, 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, 1998 by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
July 10, 1998
27
<PAGE>
Funds Distributed by Van Kampen American Capital
EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VK Equity Growth
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International/Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS Latin American
FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Limited Maturity Government
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term
Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC Tax Free Money
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen American Capital or Morgan Stanley fund prospectus
or to receive additional fund information, choose from one of the following:
. visit our web site at www.vkac.com--to view prospectuses, select Investors'
Place, then Download a Prospectus
. call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)
. e-mail us by visiting www.vkac.com and selecting Investors' Place
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
Don G. Powell*
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*
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
PricewaterhouseCoopers LLP
200 E. Randolph 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., 1998
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, 1998, the report, if used with
prospective investors, must be accompanied by a quarterly performance update.
29
<PAGE>
-----------------
Bulk Rate
U.S. Postage
PAID
VAN KAMPEN
AMERICAN CAPITAL
-----------------
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 21
<NAME> GLOBAL GOV'T A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 64,015,898<F1>
<INVESTMENTS-AT-VALUE> 64,702,264<F1>
<RECEIVABLES> 918,134<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 28,252<F1>
<TOTAL-ASSETS> 65,648,650<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 760,067<F1>
<TOTAL-LIABILITIES> 760,067<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,864,290
<SHARES-COMMON-STOCK> 2,899,435
<SHARES-COMMON-PRIOR> 3,374,330
<ACCUMULATED-NII-CURRENT> 1,126,836<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (39,324,004)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 438,434<F1>
<NET-ASSETS> 21,898,181
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 5,076,036<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,876,186)<F1>
<NET-INVESTMENT-INCOME> 3,199,850<F1>
<REALIZED-GAINS-CURRENT> 2,027,252<F1>
<APPREC-INCREASE-CURRENT> (1,174,814)<F1>
<NET-CHANGE-FROM-OPS> 4,052,288<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,462,620)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 752,769
<NUMBER-OF-SHARES-REDEEMED> (1,350,521)
<SHARES-REINVESTED> 122,857
<NET-CHANGE-IN-ASSETS> (3,760,257)
<ACCUMULATED-NII-PRIOR> 94,388<F1>
<ACCUMULATED-GAINS-PRIOR> (39,045,625)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 565,378<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,876,186<F1>
<AVERAGE-NET-ASSETS> 22,500,321
<PER-SHARE-NAV-BEGIN> 7.604
<PER-SHARE-NII> 0.352
<PER-SHARE-GAIN-APPREC> 0.088
<PER-SHARE-DIVIDEND> (0.491)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 7.553
<EXPENSE-RATIO> 1.95
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 22
<NAME> GLOBAL GOV'T B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 64,015,898<F1>
<INVESTMENTS-AT-VALUE> 64,702,264<F1>
<RECEIVABLES> 918,134<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 28,252<F1>
<TOTAL-ASSETS> 65,648,650<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 760,067<F1>
<TOTAL-LIABILITIES> 760,067<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 62,712,562
<SHARES-COMMON-STOCK> 5,196,861
<SHARES-COMMON-PRIOR> 7,441,320
<ACCUMULATED-NII-CURRENT> 1,126,836<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (39,324,004)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 438,434<F1>
<NET-ASSETS> 39,475,639
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 5,076,036<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,876,186)<F1>
<NET-INVESTMENT-INCOME> 3,199,850<F1>
<REALIZED-GAINS-CURRENT> 2,027,252<F1>
<APPREC-INCREASE-CURRENT> (1,174,814)<F1>
<NET-CHANGE-FROM-OPS> 4,052,288<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (2,753,416)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,071,748
<NUMBER-OF-SHARES-REDEEMED> (3,525,942)
<SHARES-REINVESTED> 209,735
<NET-CHANGE-IN-ASSETS> (17,414,031)
<ACCUMULATED-NII-PRIOR> 94,388<F1>
<ACCUMULATED-GAINS-PRIOR> (39,045,625)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 565,378<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,876,186<F1>
<AVERAGE-NET-ASSETS> 48,417,968
<PER-SHARE-NAV-BEGIN> 7.645
<PER-SHARE-NII> 0.299
<PER-SHARE-GAIN-APPREC> 0.083
<PER-SHARE-DIVIDEND> (0.431)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 7.596
<EXPENSE-RATIO> 2.72
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 23
<NAME> GLOBAL GOV'T C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 64,015,898<F1>
<INVESTMENTS-AT-VALUE> 64,702,264<F1>
<RECEIVABLES> 918,134<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 28,252<F1>
<TOTAL-ASSETS> 65,648,650<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 760,067<F1>
<TOTAL-LIABILITIES> 760,067<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,070,465
<SHARES-COMMON-STOCK> 466,531
<SHARES-COMMON-PRIOR> 745,566
<ACCUMULATED-NII-CURRENT> 1,126,836<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (39,324,004)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 438,434<F1>
<NET-ASSETS> 3,514,763
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 5,076,036<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,876,186)<F1>
<NET-INVESTMENT-INCOME> 3,199,850<F1>
<REALIZED-GAINS-CURRENT> 2,027,252<F1>
<APPREC-INCREASE-CURRENT> (1,174,814)<F1>
<NET-CHANGE-FROM-OPS> 4,052,288<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (256,997)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 46,375
<NUMBER-OF-SHARES-REDEEMED> (343,258)
<SHARES-REINVESTED> 17,848
<NET-CHANGE-IN-ASSETS> (2,140,487)
<ACCUMULATED-NII-PRIOR> 94,388<F1>
<ACCUMULATED-GAINS-PRIOR> (39,045,625)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 565,378<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,876,186<F1>
<AVERAGE-NET-ASSETS> 4,465,511
<PER-SHARE-NAV-BEGIN> 7.585
<PER-SHARE-NII> 0.293
<PER-SHARE-GAIN-APPREC> 0.087
<PER-SHARE-DIVIDEND> (0.431)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 7.534
<EXPENSE-RATIO> 2.72
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
