<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Portfolio of Investments ............................... 1
Statement of Assets and Liabilities..................... 2
Statement of Operations................................. 3
Statement of Changes in Net Assets...................... 4
Financial Highlights.................................... 5
Notes to Financial Statements........................... 6
Report of Independent Accountants....................... 8
</TABLE>
FOR ANR 2/98
<PAGE> 2
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Amortized Cost
- ------------------------------------------------------------------------------------
<S> <C>
SHORT-TERM INVESTMENT 235.2%
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS
Federal Home Loan Bank Discount Note ($150,000 par, yielding 5.83%,
01/02/98 maturity)...................................................... $149,976
LIABILITIES IN EXCESS OF OTHER ASSETS (135.2)%.......................... (86,210)
--------
NET ASSETS 100.0%....................................................... $ 63,766
========
</TABLE>
See Notes to Financial Statements
1
<PAGE> 3
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $149,976)........................................................................ $ 149,976
Cash..................................................................................................... 683
Foreign Currency (Cost $3)............................................................................... 3
Receivables:
Dividend.............................................................................................. 19,035
Other................................................................................................. 2,259
Unamortized Organizational Costs......................................................................... 45,669
---------
Total Assets..................................................................................... 217,625
---------
LIABILITIES:
Payables:
Organizational Costs................................................................................... 65,000
Distributor and Affiliates............................................................................. 10,231
Fund Shares Repurchased................................................................................ 1,458
Accrued Expenses......................................................................................... 58,256
Trustees' Deferred Compensation and Retirement Plans..................................................... 18,914
---------
Total Liabilities................................................................................ 153,859
---------
NET ASSETS............................................................................................... $ 63,766
=========
NET ASSETS CONSIST OF:
Capital................................................................................................ $ 85,473
Net Unrealized Depreciation............................................................................ (2,856)
Accumulated Net Investment Loss........................................................................ (18,851)
---------
NET ASSETS............................................................................................... $ 63,766
=========
Net Asset Value, Offering Price and Redemption Price Per Share (Based on net assets of $63,766
and 10,000 shares of beneficial interest issued and outstanding)....................................... $ 6.38
=========
</TABLE>
See Notes to Financial Statements
2
<PAGE> 4
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest.............................................................................. $ 52,566
Dividends (Net of foreign withholding taxes of $5,051)................................ 32,832
-----------
Total Income.................................................................. 85,398
-----------
EXPENSES:
Custody............................................................................... 32,427
Shareholder Reports................................................................... 20,658
Audit................................................................................. 17,140
Amortization of Organizational Costs.................................................. 12,994
Trustees Fees' and Expenses........................................................... 12,813
Accounting............................................................................ 9,323
Shareholder Services.................................................................. 5,000
Legal................................................................................. 4,953
Other................................................................................. 5,717
-----------
Total Expenses................................................................ 121,025
-----------
NET INVESTMENT LOSS................................................................... $ (35,627)
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments........................................................................ $ 1,783,372
Foreign Currency Transactions...................................................... (4,899)
-----------
Net Realized Gain..................................................................... 1,778,473
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period............................................................ 2,487,779
End of the Period:.................................................................
Foreign Currency Translation..................................................... (2,856)
-----------
Net Unrealized Depreciation During the Period......................................... (2,490,635)
-----------
NET REALIZED AND UNREALIZED LOSS...................................................... $ (712,162)
===========
NET DECREASE IN NET ASSETS FROM OPERATIONS............................................ $ (747,789)
===========
</TABLE>
See Notes to Financial Statements
3
<PAGE> 5
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1997 and the Period July 1, 1996
(Commencement of Investment Operations) to December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 1, 1996
(Commencement
of Investment
Year Ended Operations) to
December 31, 1997 December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income/Loss................................................ $ (35,627) $ 252,616
Net Realized Gain......................................................... 1,778,473 2,224,597
Net Unrealized Appreciation/Depreciation During the Period................ (2,490,635) 2,487,779
------------ ------------
Change in Net Assets from Operations...................................... (747,789) 4,964,992
------------ ------------
Distributions from Net Investment Income.................................. 0 (252,616)
Distributions in Excess of Net Investment Income.......................... 0 (61,398)
------------ ------------
Distributions from and in Excess of Net Investment Income................. 0 (314,014)
Distributions from Net Realized Gain...................................... (8,725) 0
------------ ------------
Total Distributions....................................................... (8,725) (314,014)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES....................... (756,514) 4,650,978
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................................. 0 80,500,000
Net Asset Value of Shares Issued Through Dividend Reinvestment............ 0 313,364
Cost of Shares Repurchased................................................ (43,744,062) (41,000,000)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS........................ (43,744,062) 39,813,364
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS..................................... (44,500,576) 44,464,342
NET ASSETS:
Beginning of the Period................................................... 44,564,342 100,000
------------ ------------
End of the Period (including accumulated distributions in excess of net
investment income of $18,851 and $54,939, respectively)................. $ 63,766 $ 44,564,342
============ ============
</TABLE>
See Notes to Financial Statements
4
<PAGE> 6
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 1, 1996
(Commencement
of Investment
Year Ended Operations) to
December 31, 1997 (a) December 31, 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period................................ $ 10.400 $ 10.000
----------- -----------
Net Investment Income/Loss.............................................. (0.652) .052
Net Realized and Unrealized Gain/Loss................................... (2.498) .413
----------- -----------
Total from Investment Operations........................................ (3.150) .465
----------- -----------
Less:
Distributions from and in Excess of Net Investment Income............. 0.000 0.065
Distributions from Net Realized Gain.................................. 0.873 0.000
----------- -----------
Total Distributions..................................................... 0.873 0.065
----------- -----------
Net Asset Value, End of the Period...................................... $ 6.377 $ 10.400
=========== ==========
Total Return............................................................ (30.26%) 4.65%*
Net Assets at End of the Period (In millions)........................... $0.1 $44.6
Ratio of Expenses to Average Net Assets................................. 4.63% 0.45%
Ratio of Net Investment Income to Average Net Assets.................... (1.36%) 0.70%
Portfolio Turnover...................................................... 1% 76%*
Average Commission Paid Per Equity Share Traded (b)..................... $.0129 $.0149
</TABLE>
(a) Based on average month-end shares outstanding.
(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable.
* Non-Annualized
See Notes to Financial Statements
5
<PAGE> 7
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Foreign Securities Fund (the "Fund") is organized as
a Delaware business trust, and is registered as a diversified open-end
management investment company under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to provide long-term growth of
capital through investments in an internationally diversified portfolio of
equity securities of companies of any country. The Fund commenced investment
operations on July 1, 1996.
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 in securities listed on a securities
exchange are valued at their sales price as of the close of such securities
exchange. Unlisted securities and listed securities for which the last sales
price is not available are valued at the last bid price. For those securities
where quotations or prices are not available, valuations are determined in
accordance with the 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 specific 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 Investment Advisory Corp. (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are fully collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due to the Fund.
C. INVESTMENT INCOME - Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis.
D. CURRENCY TRANSLATION - Assets and liabilities denominated in foreign
currencies 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.
E. ORGANIZATIONAL COSTS - The Fund will reimburse Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Fund's organization in the amount of $65,000. These costs
are being amortized on a straight line basis over the 60 month period ending
June 30, 2001. The Adviser has agreed that in the event any of the initial
shares of the Fund originally purchased by VKAC are redeemed during the
amortization period, the Fund will be reimbursed for any unamortized
organizational costs in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.
F. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and gains to
its shareholders. Therefore, no provision for federal income taxes is required.
At December 31, 1997, for federal income tax purposes, the cost of
short-term investments is $149,976; the aggregate gross unrealized appreciation
is $0 and the aggregate gross unrealized depreciation is $0, resulting in no
unrealized appreciation or depreciation.
G. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
annually from net investment income and net realized gains on securities, if
any.
Permanent differences between book and tax basis reporting have been
identified and appropriately reclassified. Permanent miscellaneous differences
of $3,916,171 were reclassified from accumlated net realized gain to capital.
Additionally, permanent differences relating to net operating losses of $71,715
were reclassified from accumulated undistributed net investment income to
accumulated net realized gain/loss.
6
<PAGE> 8
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31,1997
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as the investment manager of the Fund, but receives no
compensation for its investment management services.
For the year ended December 31, 1997, the Fund recognized expenses of
approximately $1,300 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 December 31, 1997, the Fund recognized expenses of
approximately $10,200, representing VKAC's cost of providing accounting and
legal services to the Fund.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended
December 31, 1997, the Fund recognized expenses of approximately $5,000,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
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 are payable for a ten-year period and are based upon each
trustee's years of service to the fund. The maximum annual benefit per trustee
under the plan is equal to $2,500.
At December 31, 1997, VKAC owned 10,000 shares representing 100% of the
outstanding shares.
3. CAPITAL TRANSACTIONS
The Fund is authorized to issue an unlimited number of shares of beneficial
interest with a par value of $.01 per share. Fund shares are only available for
purchase by Funds for which VKAC serves as investment adviser.
At December 31, 1997 and December 31, 1996, capital aggregated $85,340 and
$39,913,364, respectively. Transactions in common shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares........................ 4,284,714 10,000
Shares Sold............................. 0 8,206,435
Shares Issued Through Dividend
Reinvestment.......................... 0 30,102
Shares Redeemed......................... (4,274,714) (3,961,823)
Net Increase/Decrease
in Shares Outstanding................. (4,274,714) 4,274,714
---------- ----------
Ending Shares........................... 10,000 4,284,714
========== ==========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $29,718 and $33,699,031 respectively.
7
<PAGE> 9
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen American Capital Foreign Securities Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Foreign Securities Fund (the "Fund"), including the
portfolio of investments, as of December 31, 1997, the related statement of
operations for the year then ended, and the statement of changes in net assets
and financial highlights for the year then ended and for the period from July
1, 1996 (commencement of investment operations) through December 31, 1996.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen American Capital Foreign Securities Fund as of December 31, 1997, the
results of its operations for the year then ended, and the changes in its net
assets and financial highlights for the year then ended and for the period from
July 1, 1996 (commencement of investment operations) through December 31, 1996,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
February 12, 1998
8
<PAGE> 10
VAN KAMPEN AMERICAN CAPITAL FOREIGN 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*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICING AGENT
ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601
* "Interested" persons of the Fund as defined in the
Investment Company Act of 1940
(1) Van Kampen American Capital Distributors, Inc., 1998
All rights reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
9
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> FOREIGN SEC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 149,979
<INVESTMENTS-AT-VALUE> 149,979
<RECEIVABLES> 21,294
<ASSETS-OTHER> 45,669
<OTHER-ITEMS-ASSETS> 683
<TOTAL-ASSETS> 217,625
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 153,859
<TOTAL-LIABILITIES> 153,859
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 85,473
<SHARES-COMMON-STOCK> 10,000
<SHARES-COMMON-PRIOR> 4,284,714
<ACCUMULATED-NII-CURRENT> (18,851)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,856)
<NET-ASSETS> 63,766
<DIVIDEND-INCOME> 32,832
<INTEREST-INCOME> 52,566
<OTHER-INCOME> 0
<EXPENSES-NET> (121,025)
<NET-INVESTMENT-INCOME> (35,627)
<REALIZED-GAINS-CURRENT> 1,778,473
<APPREC-INCREASE-CURRENT> (2,490,635)
<NET-CHANGE-FROM-OPS> (747,789)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (8,725)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (4,274,714)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (44,500,576)
<ACCUMULATED-NII-PRIOR> (54,939)
<ACCUMULATED-GAINS-PRIOR> 2,218,138
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 121,025
<AVERAGE-NET-ASSETS> 2,616,599
<PER-SHARE-NAV-BEGIN> 10.400
<PER-SHARE-NII> (0.652)
<PER-SHARE-GAIN-APPREC> (2.498)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.873)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 6.377
<EXPENSE-RATIO> 4.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
