<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio Highlights........................ 4
Portfolio Management Review................. 5
Portfolio of Investments.................... 7
Statement of Assets and Liabilities......... 9
Statement of Operations..................... 10
Statement of Changes in Net Assets.......... 11
Financial Highlights........................ 12
Notes to Financial Statements............... 15
</TABLE>
REAL SAR 8/96
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
August 1, 1996
Dear Shareholder,
As you may be aware, an agreement was reached in late June for VK/AC Hold-
ing, Inc., the parent company of Van Kampen American Capital, Inc., to be ac-
quired by the Morgan Stanley Group Inc. While this announcement may appear
commonplace in an ever-changing financial industry, we believe it represents
an exciting opportunity for shareholders of our investment products.
With Morgan Stanley's global leadership in
investment banking and asset management and Van Kampen American Capital's rep-
utation for competitive long-term performance and superior investor services,
together we will offer a broader range of investment opportunities and expert-
ise.
The new ownership will not affect our commitment to pursuing excellence in
all aspects of our business. And, we expect very little change in the way your
mutual fund account is maintained and serviced.
A proxy will be mailed to you shortly explaining the acquisition and asking
for your vote of approval. Please read it carefully and return your response
for inclusion in the shareholder vote. We value our relationship with you and
look forward to communicating more details of this transaction, which is an-
ticipated to be completed in November.
ECONOMIC REVIEW
The economy demonstrated an acceleration in growth during the six-month re-
porting period. After a nominal 0.3 percent growth rate in the last quarter of
1995, GDP (the nation's gross domestic product) rose by 2.0 percent in this
year's first quarter. And, as anticipated, the economy grew 4.2 percent in the
second quarter, partly reflecting a recovery from the effects of labor strikes
earlier in the year and extreme weather conditions across the country. Upward
momentum has been assisted by consumer spending, as indicated by a 5.6 percent
rise in retail sales in the first five months of this year versus the compara-
ble 1995 period.
In the manufacturing sector, economic reports, such as the National Associa-
tion of Purchasing Managers Index, suggested a continued rebound in production
from last winter's lower levels. In June, this index reached its highest level
since early 1995. Strong levels of exports and a replenishing of inventories
have helped support this momentum.
Surprisingly healthy economic activity led to concerns that inflation may
rise and the Federal Reserve Board might tighten monetary policy. Inflation
remains modest, however, with consumer prices rising at about a 3 percent an-
nual rate over the past year. Meanwhile, the
Continued on page two
1
<PAGE>
closely watched "core" Consumer Price Index, which excludes volatile food and
energy components, has risen year over year at rates between 2.7 and 3.0 per-
cent per year, with mid-1996 readings at a moderate 2.7 percent. In general,
recent reports have suggested an upward creep in labor-related costs, while
indicating that prices of many commodities have begun to decline.
EQUITY MARKET REVIEW
The stock market averages posted attractive gains for the six-month period
ended June 30, 1996, with most major averages posting all-time highs. The Dow
Jones Industrial Average rose 10.9 percent from 5095 to 5654, and the NASDAQ
Composite Index rose
12.6 percent from 1052 to 1185.
Corporate earnings, which were an important contributor to last year's
strong stock market, continued to move ahead during the reporting period. Un-
expectedly strong economic activity helped lift reported profits above expec-
tations for the period. Through the rest of 1996, we expect earnings will be
supportive, but perhaps not the primary factor in the movement of the major
stock market averages.
OUTLOOK
We anticipate that reasonably strong economic growth will continue during
the balance of 1996, albeit at more moderate rates than the second quarter's
swift pace. While we expect rates of inflation to remain near current levels,
the Fed may begin to lean toward greater restraint in its monetary policy in
the coming months. That suggests an upward bias for short-term interest rates
and for yields on long-term bonds to remain steady at current levels.
Additional details about your Fund, including a question and answer section
with your portfolio management team, is provided in this report. We appreciate
your continued confidence in your investment with Van Kampen American Capital.
Sincerely,
SIGNATURE LOGO SIGNATURE LOGO
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1996
VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
Six-month total return based on NAV/1/............... 8.17% 7.85% 7.86%
Six-month total return/2/............................ 3.02% 3.85% 6.86%
One-year total return/2/............................. 13.32% 14.12% 17.01%
Life-of-Fund average annual total return/3/.......... 7.75% 7.73% 9.63%
Commencement date.................................... 06/09/94 06/09/94 06/09/94
</TABLE>
/1/Assumes reinvestment of all distributions for the period and does not in-
clude payment of the maximum sales charge (4.75% for A shares) or contingent
deferred sales charge for early withdrawal (4% for B and 1% for C shares).
/2/Standardized total return. Assumes reinvestment of all distributions for
the period and includes payment of the maximum sales charge (A shares) or con-
tingent deferred sales charge for early withdrawal (B and C shares).
/3/Standardized total return. Assumes reinvestment of all distributions for
the period and includes payment of the maximum sales charge (A shares) or con-
tingent deferred sales charge for early withdrawal (B and C shares). Total re-
turn is calculated from June 30, 1994 (date the Fund began meeting its
investment objective) through the end of the period.
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth
more or less than their original cost.
3
<PAGE>
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
% OF FUND
AS OF JUNE 30, 1996 SIX MONTHS AGO
<S> <C> <C>
Starwood Lodging Trust....................... 3.1%............ 3.0%
Public Storage Inc........................... 3.1%............ 2.9%
CBL & Associates Properties Inc.............. 3.1%............ N/A
Debartolo Realty Corp........................ 3.1%............ 2.6%
JP Realty Inc................................ 3.1%............ 2.5%
Meditrust.................................... 3.1%............ N/A
Macerich Co.................................. 3.0%............ 3.0%
Felcor Suite Hotels Inc...................... 3.0%............ 2.8%
Patriot American Hospitality................. 3.0%............ 3.3%
Redwood Trust Inc............................ 2.9%............ N/A
</TABLE>
N/A = Not Applicable
TOP FIVE PORTFOLIO HOLDINGS BY SECTOR
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C>
Office/Industrial..... 21%
Apartments............ 19%
Shopping Centers...... 14%
Shopping Malls........ 14%
Hotels................ 11%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
<S> <C>
Office/Industrial..... 28%
Apartments............ 19%
Shopping Centers...... 13%
Shopping Malls........ 10%
Hotels................ 9%
</TABLE>
ASSET ALLOCATION
[PIE CHART APPEARS HERE]
As of June 30, 1996
Stocks................ 97%
Cash Equivalents...... 3%
As of December 31, 1995
Stocks................ 96%
Cash Equivalents...... 4%
4
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
We recently spoke with the management team of the Van Kampen American Capital
Real Estate Securities Fund about the key events and economic forces that
shaped the markets during the first half of the Fund's fiscal year. The team
is led by Mary Jayne Maly, portfolio manager, and Alan T. Sachtleben,
executive vice president for equity investments. The following excerpts
reflect their views on the Fund's performance during the six-month period
ended June 30, 1996.
WHAT IS THE FUND'S STRATEGY, AND HOW DID THE FUND PERFORM DURING THE SIX
Q MONTHS ENDED JUNE 30, 1996?
A We continue to invest in a diversified group of REIT stocks that operate
in healthy property sectors with attractive attributes, such as solid ge-
ographic locations, strong management teams, and consistent and growing cash
flow. We also focus on valuation to make certain that we do not overpay for
projected growth.
This strategy has served us well, as the Fund's Class A shares achieved a
total return at net asset value of 8.17 percent/1/, for the six-month period
ended June 30, 1996. During the same period, the NAREIT (National Association
of Real Estate Investment Trusts) Equity REIT Index produced a total return of
6.82 percent. The NAREIT is an unmanaged index that reflects the performance
of a broad range of equity REITs of all property types. The Standard & Poor's
500-Stock Index, a broad based, unmanaged index that reflects general stock
market performance achieved a total return of 10.08 percent. Neither the
NAREIT nor the S&P 500 Index reflect any commissions or fees that would be
paid by an investor purchasing the securities they represent. Please refer to
the chart on page three for additional Fund performance results.
OVER THE PAST SIX MONTHS, WHAT MARKET FACTORS HAD THE GREATEST IMPACT ON
Q THE PORTFOLIO?
A At the close of 1995, an economic slowdown was expected. However, by Feb-
ruary, evidence of an improving economy and unexpectedly positive corpo-
rate earnings pushed the market to new highs and provided strong performance
through the second quarter.
Our property sector weightings were critical to the Fund's performance dur-
ing the past six months. For example, an overweighted position in the
office/industrial and hotel sectors produced attractive gains. Also, avoiding
factory-outlet centers and underweighting the multi-family dwelling sector
further aided the Fund's performance. As of June 30, 1996, the portfolio was
well-diversified with over 40 stocks representing 10 property sectors. Please
see page four for Fund portfolio highlights.
WHICH HOLDINGS HAD THE MOST SIGNIFICANT IMPACT ON THE PORTFOLIO'S
Q PERFORMANCE DURING THE PERIOD?
A One of the Fund's better performing stocks was Regency Realty Corp.
(NYSE: REG), an owner, developer and manager of community and neighbor-
hood shopping centers in Florida and the Southeast. Regency possessed all the
positive attributes we look for when choosing stocks for the portfolio, namely
strong current and future cash flow with an inexpensive valuation. As more in-
vestors began to recognize Regency's growth potential, its stock price appre-
ciated because of increased demand. In addition, late in the second quarter, a
major capital infusion into Regency was the catalyst for the stock's escalat-
ing performance.
5
<PAGE>
Two regional mall REITs held in the Fund's portfolio during the period re-
cently reached a merger agreement. Debartolo Realty (NYSE: EJD) and Simon
Property Group (NYSE: SPG) will join to become the largest holder of regional
mall assets in the U.S. This important merger will allow the combined company
greater negotiating power with major, national retail tenants.
Q RECENTLY, THE FINANCIAL PRESS HAS FOCUSED ON INCREASING COMMODITY PRICES,
EMPLOYMENT, WAGE PRESSURES AND OTHER HISTORICALLY INFLATIONARY ECONOMIC
ACTIVITIES. DO THESE INDICATORS FORESHADOW A REIT-FRIENDLY ECONOMIC ENVI-
RONMENT?
A We continue to have a positive outlook for REITs in 1996. Our view is based
on positive real estate fundamentals, attractive valuations and the
defensive nature of REIT stocks. An economy that is showing signs of
renewed growth, a hint of higher inflation and extreme valuations could
indicate trou-ble for the broader stock and bond markets. However, it is
the ideal environ-ment for REIT stocks because a strengthening economy
drives the need for space and with little new construction in many property
sectors, supply will be tight. This should allow for higher occupancy
levels and rental rate increas-es. Also, as real estate is effectively a
"hard" or tangible asset, we believe it should hold its value in a rising
interest rate or inflationary environ-ment. The only threat to the REIT
market could be an outright recession, which, in our opinion, is unlikely
at this point. As a strong economy creates demand for space, a recessionary
economy creates a glut of vacancies, lowering rents and harming real estate
fundamentals.
Q DO YOU ANTICIPATE MAKING ANY CHANGES TO THE PORTFOLIO?
A Relative to the NAREIT Index, the Fund is currently overweighted in the
office/industrial and hotel sectors due to our belief that demand funda-
mentals are very positive. As long as fundamentals remain positive for
these sectors--which should allow companies to improve their occupancies
and raise rents--we will maintain our current portfolio weightings. We
remain market-weighted in the retail sector and are underweighted in
mul-ti-family/apartments. Looking ahead, we do not foresee significant
changes in our property sector weightings. However, we may reduce the
Fund's retail hold-ings by taking some of the profits resulting from their
strong performance. Our current outlook for the REIT group is generally
positive because of re-alistic valuations and positive fundamentals--even
if the market should cor-rect within the next three to six months. Real
estate stocks historically tend to act as a defensive hedge in a weakening
market due to an attractive level of income, which should protect these
stocks during a market downturn.
SIGNATURE LOGO SIGNATURE LOGO
Alan T. Sachtleben Mary Jayne Maly
Executive Vice President Portfolio Manager
Equity Investments
Please see footnotes on page three.
6
<PAGE>
PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK 97.0%
APARTMENTS 19.2%
44 Ambassador Apartments Inc............................ $ 749,250
26 Avalon Properties Inc................................ 563,325
22 Bay Apartment Communities Inc........................ 558,900
29 BRE Properties, Class A.............................. 563,550
21 Equity Residential Properties Trust.................. 693,662
33 Evans Withycombe Residential......................... 688,875
22 Gables Residential Trust............................. 514,650
27 Irvine Apartment Communities Inc..................... 543,375
31 Security Capital Pacific Trust....................... 542,850
-----------
5,418,437
-----------
HEALTH CARE FACILITIES 4.8%
25 Meditrust............................................ 834,375
24 Nationwide Health Properties Inc..................... 515,450
-----------
1,349,825
-----------
HOTELS 10.7%
27 Felcor Suite Hotels Inc.............................. 826,550
19 Hospitality Properties Trust......................... 521,625
28 Patriot American Hospitality......................... 814,688
23 Starwood Lodging Trust............................... 847,537
-----------
3,010,400
-----------
MANUFACTURED HOME COMMUNITIES 2.0%
21 Sun Communities Inc.................................. 553,625
-----------
MISCELLANEOUS 2.8%
28 Redwood Trust Inc.................................... 789,600
-----------
OFFICE/INDUSTRIAL 20.6%
21 Beacon Properties Corp............................... 533,000
44 Bedford Property Investors........................... 587,250
24 Cali Realty Corp..................................... 589,275
23 Centerpoint Properties Corp.......................... 552,900
16 Crescent Real Estate................................. 584,325
22 Duke Realty Investments Inc.......................... 656,425
19 Highwoods Properties Inc............................. 513,825
35 Meridian Industrial Trust............................ 637,613
18 Reckson Associates Realty Co......................... 590,700
20 Spieker Properties Inc............................... 550,450
-----------
5,795,763
-----------
SELF-STORAGE 5.3%
41 Public Storage Inc................................... 839,438
32 Storage Trust Realty................................. 660,100
-----------
1,499,538
-----------
</TABLE>
7
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Market Value
- -------------------------------------------------------------------------------
<C> <S> <C>
SHOPPING CENTERS 14.0%
50 Bradley Real Estate Inc............................. $ 717,750
29 Excel Realty Trust Inc.............................. 586,300
29 JDN Realty Corp..................................... 657,825
20 Kimco Realty Corp................................... 579,125
30 Regency Realty Corp................................. 638,400
19 Vornado Realty Trust................................ 772,537
-----------
3,951,937
-----------
SHOPPING MALLS 13.7%
37 CBL & Associates Properties Inc..................... 839,063
52 Debartolo Realty Corp............................... 836,888
39 JP Realty Inc....................................... 835,762
40 Macerich Co......................................... 831,600
30 Mills Corp.......................................... 532,000
-----------
3,875,313
-----------
TRIPLE NET LEASE 3.9%
26 Franchise Finance Corp of America................... 598,000
17 Trinet Corporate Realty Trust....................... 501,700
-----------
1,099,700
-----------
TOTAL COMMON STOCK (Cost $24,804,788)............... 27,344,138
-----------
<CAPTION>
Par Amount
(000)
----------
<C> <S> <C>
REPURCHASE AGREEMENT 4.4%
$ 1,245 Bank America Securities, dated 6/28/96, 5.45%, due
7/1/96 (Collateralized by U.S. Government
obligations in a pooled cash account) repurchase
proceeds $1,245,565 (Cost $1,245,000)............... 1,245,000
-----------
TOTAL INVESTMENTS (Cost $26,049,788) 101.4%..................... 28,589,138
OTHER ASSETS AND LIABILITIES, NET (1.4%)........................ (391,357)
-----------
NET ASSETS 100%................................................. $28,197,781
-----------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $26,049,788).................. $28,589,138
Receivable for investments sold.................................. 1,480,891
Dividends receivable............................................. 203,910
Receivable for Fund shares sold.................................. 74,236
Other assets and receivables..................................... 26,945
-----------
Total Assets.................................................... 30,375,120
-----------
LIABILITIES
Payable for investments purchased................................ 2,055,820
Due to Adviser................................................... 29,515
Payable for Fund shares redeemed................................. 28,008
Due to Distributor............................................... 21,196
Due to shareholder service agent................................. 13,461
Deferred Trustees' compensation.................................. 8,138
Accrued expenses................................................. 21,201
-----------
Total Liabilities............................................... 2,177,339
-----------
NET ASSETS, equivalent to $10.62 per share for Class A, $10.63
per share for Class B, and $10.62 per share for Class C shares.. $28,197,781
-----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, at par; 958,639 Class A, 1,297,228
Class B, and 398,430 Class C shares outstanding................. $ 26,543
Capital surplus.................................................. 24,504,698
Undistributed net realized gain on securities.................... 1,214,862
Net unrealized appreciation of securities........................ 2,539,350
Accumulated net investment loss.................................. (87,672)
-----------
NET ASSETS....................................................... $28,197,781
-----------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends.......................................................... $ 717,656
Interest........................................................... 25,788
----------
Investment income................................................. 743,444
----------
EXPENSES
Management fees.................................................... 127,462
Shareholder service agent's fees and expenses...................... 66,697
Accounting services................................................ 40,082
Service fees--Class A.............................................. 11,546
Distribution and service fees--Class B............................. 63,929
Distribution and service fees--Class C............................. 17,348
Trustees' fees and expenses........................................ 8,380
Audit fees......................................................... 12,344
Legal fees......................................................... 1,905
Reports to shareholders............................................ 26,400
Registration and filing fees....................................... 49,181
Organization expenses.............................................. 1,622
Miscellaneous...................................................... 6,202
Retirement plan expense reimbursement (see Note 4)................. (2,000)
Expense reimbursement (see Note 2)................................. (19,620)
----------
Total expenses.................................................... 411,478
----------
NET INVESTMENT INCOME.............................................. 331,966
----------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities.................................... 1,285,906
Net unrealized appreciation of securities.......................... 378,494
----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES..................... 1,664,400
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $1,996,366
----------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended
Ended December 31,
June 30, 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period................... $23,595,640 $15,002,284
----------- -----------
OPERATIONS
Net investment income............................ 331,966 459,194
Net realized gain on securities.................. 1,285,906 91,899
Net unrealized appreciation of securities during
the period...................................... 378,494 1,906,293
----------- -----------
Increase in net assets resulting from operations. 1,996,366 2,457,386
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM (see Note 1E)
Net investment income
Class A.......................................... (128,268) (187,314)
Class B.......................................... (140,590) (232,040)
Class C.......................................... (39,119) (43,254)
----------- -----------
(307,977) (462,608)
----------- -----------
Return of capital
Class A.......................................... (45,068) (110,152)
Class B.......................................... (49,397) (136,629)
Class C.......................................... (13,743) (25,468)
----------- -----------
(108,208) (272,249)
----------- -----------
Total distributions.............................. (416,185) (734,857)
----------- -----------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A.......................................... 2,238,035 6,021,837
Class B.......................................... 2,362,829 5,774,399
Class C.......................................... 1,079,731 2,203,176
----------- -----------
5,680,595 13,999,412
----------- -----------
Proceeds from shares issued for distributions
reinvested
Class A.......................................... 153,500 242,173
Class B.......................................... 139,354 259,807
Class C.......................................... 34,898 61,767
----------- -----------
327,752 563,747
----------- -----------
Cost of shares redeemed
Class A.......................................... (1,271,490) (3,030,909)
Class B.......................................... (1,546,186) (3,987,424)
Class C.......................................... (168,711) (673,999)
----------- -----------
(2,986,387) (7,692,332)
----------- -----------
Increase in net assets from capital transactions. 3,021,960 6,870,827
----------- -----------
INCREASE IN NET ASSETS............................ 4,602,141 8,593,356
----------- -----------
NET ASSETS, end of period (including accumulated
net investment loss of $87,672 and 3,453,
respectively).................................... $28,197,781 $23,595,640
----------- -----------
</TABLE>
See Notes to Financial Statements
11
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A(/2/)
-------------------------------------------
Six Months
Ended Year Ended June 9, 1994(/1/)
June 30, December 31, through
1996 1995 December 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period........................ $10.00 $ 9.27 $9.43
------ ------ -----
INCOME FROM OPERATIONS
Investment income............ .30 .52 .30
Expenses..................... (.14) (.25) (.07)
------ ------ -----
Net investment income......... .16 .27 .23
Net realized and unrealized
gain (loss) on securities..... .65 .85 (.18)
------ ------ -----
Total from investment
operations.................... .81 1.12 .05
------ ------ -----
DISTRIBUTIONS TO SHAREHOLDERS
FROM (see Note 1E)
Net investment income........ (.14) (.2456) (.153)
Return of capital............ (.05) (.1444) (.057)
------ ------ -----
Total distributions........... (.19) (.39) (.21)
------ ------ -----
Net asset value, end of
period........................ $10.62 $10.00 $9.27
------ ------ -----
TOTAL RETURN (/5/)............ 8.17% 12.39% .24%(/4/)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions).................... $10.2 $8.5 $4.6
Average net assets (millions). $9.2 $6.7 $2.6
Ratios to average net assets
(annualized)(/3/)
Expenses..................... 2.74% 2.67% 1.26%
Expenses, without expense
reimbursement................ 2.91% 3.16% 3.03%
Net investment income........ 3.11% 2.92% 4.28%
Net investment income,
without expense
reimbursement................ 2.94% 2.44% 2.52%
Portfolio turnover rate....... 75% 94% 28%
Average commission rate per
equity stock traded........... $.052 -- --
</TABLE>
(1) Commencement of operations.
(2) Based on average shares outstanding.
(3) See Notes 2 and 4.
(4) Total return calculated from June 30, 1994 (date the Fund began meeting its
investment objective) through December 31, 1994.
(5) Total return for a period of less than one year is not annualized. Total
return does not consider the effect of sales charges.
See Notes to Financial Statements
12
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B(/2/)
-------------------------------------------
Six Months Year
Ended Ended June 9, 1994(/1/)
June 30, December 31, through
1996 1995 December 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period....................... $10.00 $ 9.28 $ 9.43
------ ------ ------
INCOME FROM OPERATIONS
Investment income........... .30 .52 .30
Expenses.................... (.18) (.33) (.10)
------ ------ ------
Net investment income........ .12 .19 .20
Net realized and unrealized
gain (loss) on securities... .66 .843 (.176)
------ ------ ------
Total from investment
operations................... .78 1.033 .024
------ ------ ------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (see Note 1E)
Net investment income....... (.11) (.197) (.1268)
Return of capital........... (.04) (.116) (.0472)
------ ------ ------
Total distributions.......... (.15) (.313) (.174)
------ ------ ------
Net asset value, end of
period....................... $10.63 $10.00 $ 9.28
------ ------ ------
TOTAL RETURN(/5/)............ 7.85% 11.37% (.04%)(/4/)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions)................... $13.8 $12.0 $9.1
Average net assets
(millions)................... $12.8 $10.8 $4.7
Ratios to average net assets
(annualized)(/3/)
Expenses.................... 3.50% 3.50% 1.84%
Expenses, without expense
reimbursement.............. 3.67% 3.99% 3.60%
Net investment income....... 2.31% 2.07% 3.81%
Net investment income,
without expense
reimbursement.............. 2.14% 1.58% 2.05%
Portfolio turnover rate...... 75% 94% 28%
Average commission rate per
equity stock traded.......... $.052 -- --
</TABLE>
(1) Commencement of operations.
(2) Based on average shares outstanding.
(3) See Notes 2 and 4.
(4) Total return calculated from June 30, 1994 (date the Fund began meeting its
investment objective) through December 31, 1994.
(5) Total return for a period of less than one year is not annualized. Total
return does not consider the effect of sales charges.
See Notes to Financial Statements
13
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each
of the periods indicated. (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C(/2/)
-------------------------------------------
Year
Six Months Ended June 9, 1994(/1/)
Ended June December 31, through
30, 1996 1995 December 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period........................ $ 9.99 $ 9.28 $ 9.43
------ ------ ------
INCOME FROM OPERATIONS
Investment income............ .30 .53 .31
Expenses..................... (.18) (.33) (.09)
------ ------ ------
Net investment income......... .12 .20 .22
Net realized and unrealized
gain (loss) on securities.... .66 .823 (.178)
------ ------ ------
Total from investment
operations.................... .78 1.023 .042
------ ------ ------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (see Note 1E)
Net investment income........ (.11) (.197) (.1399)
Return of capital............ (.04) (.116) (.0521)
------ ------ ------
Total distributions........... (.15) (.313) (.192)
------ ------ ------
Net asset value, end of
period........................ $10.62 $ 9.99 $ 9.28
------ ------ ------
TOTAL RETURN(/5/)............. 7.86% 11.26% .15%(/4/)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions).................... $4.2 $3.1 $1.3
Average net assets (millions). $3.5 $1.8 $0.7
Ratios to average net assets
(annualized)(/3/)
Expenses..................... 3.52% 3.54% 1.62%
Expenses, without expense
reimbursement............... 3.69% 4.03% 3.38%
Net investment income........ 2.36% 2.11% 3.92%
Net investment income,
without expense
reimbursement............... 2.19% 1.62% 2.15%
Portfolio turnover rate....... 75% 94% 28%
Average commission rate per
equity stock traded........... $.052 -- --
</TABLE>
(1) Commencement of operations.
(2) Based on average shares outstanding.
(3) See Notes 2 and 4.
(4) Total return calculated from June 30, 1994 (date the Fund began meeting
its investment objective) through December 31, 1994.
(5) Total return for a period of less than one year is not annualized. Total
return does not consider the effect of sales charges.
14
See Notes to Financial Statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Real Estate Securities Fund (the "Fund") is regis-
tered under the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. The Fund seeks long-term growth of
capital by investing principally in securities of companies operating in the
real estate industry.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The prep-
aration of financial statements in conformity with generally accepted account-
ing principles requires management to make estimates and assumptions that
affect the amounts reported. Actual amounts may differ from the estimates.
A. INVESTMENT VALUATIONS-Investments listed or traded on a national securities
exchange are valued at the last sale price. Unlisted securities and listed se-
curities for which the last sale price is not available are valued at the last
reported bid price. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith by the Board of
Trustees of the Fund.
Short-term investments with a maturity of 60 days or less when purchased are
valued at amortized cost, which approximates market value. Short-term invest-
ments with a maturity of more than 60 days when purchased are valued based on
market quotations until the remaining days to maturity becomes less than 61
days. From such time, until maturity, the investments are valued at amortized
cost.
B. REPURCHASE AGREEMENTS-A repurchase agreement is a short-term investment in
which a Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. The Fund may in-
vest independently in repurchase agreements, or transfer uninvested cash bal-
ances into a pooled cash account along with other investment companies advised
by Van Kampen American Capital Asset Management, Inc. (the "Adviser"), the
daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are collateralized by the underlying debt securities. The Fund will
make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is re-
quired to maintain the value of the underlying security at not less than the
repurchase proceeds due the Fund.
C. FEDERAL INCOME TAXES-No provision for federal income taxes is required be-
cause the Fund has elected to be taxed as a "regulated investment company" un-
der the Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investment income and taxable net
realized gains to its shareholders. It is anticipated that no
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
distributions of capital gains will be made until tax basis capital loss
carryforwards expire or are offset by net realized capital gains.
The net realized capital loss carryforward for federal income tax purposes
of approximately $42,000 at December 31, 1995 may be utilized to offset cur-
rent or future capital gains until expiration in 2003. Additionally, approxi-
mately $6,000 of post October losses are deferred for federal income tax
purposes to the 1996 fiscal year.
D. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transac-
tions are accounted for on the trade date. Realized gains and losses on in-
vestments are determined on the basis of identified cost. Dividend income is
recorded on the ex-dividend date. Interest income is accrued daily.
E. DIVIDENDS AND DISTRIBUTIONS-Dividends and distributions to shareholders are
recorded on the record date. The Fund distributes tax basis earnings in accor-
dance with the minimum distribution requirements of the Internal Revenue Code,
which may differ from generally accepted accounting principles. Such dividends
or distributions may exceed financial statement earnings.
The Fund distributes the return of capital it receives from the Real Estate
Investment Trusts (the "REITs") in which the Fund invests. The REITs pay dis-
tributions based on cash flow, without regard to depreciation and amortiza-
tion. As a result, a portion of the distributions paid to the Fund and
subsequently distributed to the shareholders, is a return of capital. The fi-
nal determination of the amount of the Fund's return of capital distributions
for the period will be made after December 31, 1996.
F. ORGANIZATION COSTS-Organization expenses of approximately $16,000 were de-
ferred and are being amortized over a five-year period ending May, 1999.
NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as investment manager of the Fund. The Adviser has entered
into a subadvisory agreement with Hines Interest Realty Advisers Limited Part-
nership (the "Subadviser"), who provides advisory services to the Fund and the
Adviser with respect to the Fund's investments in real estate. Management fees
are calculated monthly, based on the average daily net assets of the Fund at
the annual rate of 1.00%. The Adviser pays 50% of its management fee to the
Subadviser.
The Adviser has agreed that it will reimburse the Fund for any expenses (in-
cluding the management fee, but excluding interest, brokerage commissions,
distribution and service fees,
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
and other extraordinary expenses) in excess of the most restrictive limitation
imposed by state securities commissions. The most restrictive expense limita-
tion is presently 2.50% of the Fund's average daily net assets up to $30 mil-
lion, 2.00% of the next $70 million of such net assets and 1.50% of the Fund's
net assets in excess of $100 million. For the period, the Adviser reimbursed
$19,620 to the Fund due to such expense limitation.
Accounting services include the salaries and overhead expenses of the Fund's
Chief Accounting Officer and the personnel operating under his direction.
Charges are allocated among investment companies advised by the Adviser. For
the period, these charges included $2,106 as the Fund's share of the employee
costs attributable to the Fund's accounting officers. A portion of the ac-
counting services expense was paid to the Adviser in reimbursement of person-
nel, facilities and equipment costs attributable to the provision of
accounting services to the Fund. The services provided by the Adviser are at
cost.
ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as the
Fund's shareholder service agent. These services are provided at cost plus a
profit. For the period, the fees for these services aggregated $54,135.
The Fund was advised that Van Kampen American Capital Distributors, Inc.
(the "Distributor"), an affiliate of the Adviser, received $71,104 as its por-
tion of the commissions charged on sales of Fund shares during the period.
Under the Distribution Plans, each class pays up to .25% per annum of its
average daily net assets to reimburse the Distributor for expenses and service
fees incurred. Class B and C shares pay an additional fee of up to .75% per
annum of their average net assets to reimburse the Distributor for its distri-
bution expenses. Actual distribution expenses incurred by the Distributor for
Class B and C shares may exceed the amounts reimbursed to the Distributor by
the Fund. At the end of the period, the unreimbursed expenses incurred by the
Distributor under the Class B and C plans aggregated approximately $539,000
and $20,738, respectively, and may be carried forward and reimbursed through
either the collection of the contingent deferred sales charges from share re-
demptions or, subject to the annual renewal of the plans, future Fund reim-
bursements of distribution fees.
Certain officers and trustees of the Fund are officers and trustees of the
Adviser, the Distributor, and the shareholder service agent.
NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $21,408,181 and $18,405,928, re-
spectively.
For federal income tax purposes, the identified cost of investments owned at
the end of the period was $26,055,923. Net unrealized appreciation of invest-
ments aggregated
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
$2,533,215, gross unrealized appreciation of investments aggregated
$2,695,698, and gross unrealized depreciation of investments aggregated
$162,483.
NOTE 4--TRUSTEE COMPENSATION
Fund trustees who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $632 plus a fee of $36 per day for Board and Com-
mittee meetings attended. During the period, such fees aggregated $5,067.
The Fund has a deferred compensation plan and a defined benefits retirement
plan for its trustees not affiliated with the Adviser. These plans are not
funded, and obligations under the plans will be paid solely out of the Fund's
general accounts. The Fund will not reserve or set aside funds for the payment
of its obligations under the plans by any form of trust or escrow.
Under the deferred compensation plan, trustees may elect to defer all or a
portion of their compensation to a later date. Each trustee covered under the
plan elects to earn on the deferred balances an amount equal to the total re-
turn of the Fund or equal to the income earned by the Fund on its short-term
investments.
Under the retirement plan which became effective in January 1996, benefits
which are based on years of service will be received by the trustee for a ten
year period. The maximum annual benefit for each trustee is $2,500. Retirement
plan expenses for the period aggregated $2,000. During the calendar year 1996,
the Adviser has agreed to reimburse the Fund for these plan expenses.
NOTE 5--CAPITAL
The Fund offers three classes of shares at their respective net asset values
per share, plus a sales charge which is imposed either at the time of purchase
(Class A) or at the time of redemption on a contingent deferred basis (Class B
and C). All classes of shares have the same rights, except that Class B and C
shares bear the cost of distribution fees and certain other class specific ex-
penses. Realized and unrealized gains or losses, investment income and ex-
penses (other than class specific expenses) are allocated daily to each class
of shares based upon the relative proportion of net assets of each class.
Class B and C shares automatically convert to Class A shares six years and ten
years after purchase, respectively, subject to certain conditions.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
The Fund has an unlimited number of shares of $.01 par value of beneficial
interest authorized. Transactions in shares of beneficial interest for the pe-
riod were as follows:
<TABLE>
<CAPTION>
Six Months Year Ended
Ended December 31,
June 30, 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A........................................... 218,578 646,768
Class B........................................... 231,467 622,484
Class C........................................... 105,000 233,898
-------- ---------
555,045 1,503,150
-------- ---------
Shares issued for distributions reinvested
Class A........................................... 14,883 25,453
Class B........................................... 13,495 27,485
Class C........................................... 3,371 6,486
-------- ---------
31,749 59,424
-------- ---------
Shares redeemed
Class A........................................... (124,292) (321,567)
Class B........................................... (151,734) (425,761)
Class C........................................... (16,467) (72,725)
-------- ---------
(292,493) (820,053)
-------- ---------
Increase in shares outstanding.................... 294,301 742,521
-------- ---------
</TABLE>
19
<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
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
20
<PAGE>
VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
LINDA HUTTON HEAGY
ROGER HILSMAN
R. CRAIG KENNEDY
DENNIS J. MCDONNELL
DONALD C. MILLER*
JACK F. NELSON
DON G. POWELL
JEROME L. ROBINSON
FERNANDO SISTO*
WAYNE W. WHALEN
WILLIAM S. WOODSIDE
*Co-Chairman of the Board
OFFICERS
DON G. POWELL
President and Chief Executive Officer
DENNIS J. MCDONNELL
Executive Vice President
RONALD A. NYBERG
Vice President and Secretary
EDWARD C. WOOD, III
Vice President and Chief Financial Officer
CURTIS W. MORELL
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN
Treasurer
TANYA M. LODEN
Controller
WILLIAM N. BROWN
PETER W. HEGEL
ROBERT C. PECK, JR.
ALAN T. SACHTLEBEN
PAUL R. WOLKENBERG
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
One Parkview Plaza Oakbrook Terrace, Illinois 60181
INVESTMENT SUBADVISER
HINES INTEREST REALTY ADVISERS LIMITED PARTNERSHIP
2800 Post Oak Blvd. Houston, Texas 77056
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICE AGENT
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256 Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606
(C)Van Kampen American Capital Distributors, Inc., 1996 All rights reserved.
SM denotes a service mark of Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors un-
less it has been preceded or is accompanied by an effective prospectus of the
Fund which contains additional information on how to purchase shares, the
sales charge, and other pertinent data.
21
