<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......... 18
Statement of Operations..................... 19
Statement of Changes in Net Assets.......... 20
Financial Highlights........................ 21
Notes to Financial Statements............... 24
</TABLE>
GEQ SAR 1/97
<PAGE>
LETTER TO SHAREHOLDERS
DENNIS J. MCDONNELL AND DON G. POWELL
January 10, 1997
Dear Shareholder,
As you may already be aware, an agreement was reached in late June for VK/AC
Holding Inc., the parent company of Van Kampen American Capital, Inc., to be
acquired by Morgan Stanley Group Inc. This transaction was completed in Octo-
ber.
The combination of Morgan Stanley's global leadership in investment banking
and asset management and Van Kampen American Capital's reputation for competi-
tive long-term performance and superior investor services has created a world-
class company offering an extensive range of investment opportunities and
expertise.
More importantly, we expect the new ownership arrangement to strengthen our
commitment in pursuing excellence in all aspects of our business. And we ex-
pect very little change in the way your mutual fund account is maintained and
serviced. Similarly, the investment practices and policies of your Fund remain
unchanged.
MARKET REVIEW
The performance of global stock markets was mixed, but generally consistent
with an economic environment of relatively subdued growth and moderate infla-
tion. In many cases, political concerns were as important as economic factors
in terms of the market's sentiment. Overall performance was positive, as re-
flected by the Morgan Stanley Capital International World Index, which appre-
ciated by 16.85 percent (adjusted for the U.S. dollar) for the
12-month period ended November 30, 1996.
The Pacific countries, other than Japan, generated positive third-quarter
returns, in contrast with the previous quarter. Stocks in Hong Kong, New Zea-
land, and Australia showed gains in the area of 3 to 6 percent, while stocks
in Indonesia, the Philippines, Singapore, and Thailand lost ground. The Japa-
nese market suffered as domestic investors continued to bypass their own mar-
ket and foreign investors slowed their net investment into Japan.
In Europe, the U.K. stock market surged in recent months, driven by a rise
in consumer confidence and a strong currency. Other strong performers included
Sweden, Ireland, Finland, Denmark, and Belgium, which posted gains ranging
from approximately 4 percent to
11 percent during the third quarter. Lagging markets included Switzerland, It-
aly, Spain, France, and Austria, due in large part to political and budgetary
issues affecting their capital markets. In particular, these markets reacted
to the realization that the move toward a common European currency--the Euro,
likely to be introduced by January 1, 1999--would exert widespread pressure
for revised governmental budget policies. At present, the majority of European
Continued on page two
1
<PAGE>
Monetary Union countries would not qualify for Euro membership without sharp
cuts in government spending.
On an industry basis, the best performers were capital goods, financial serv-
ices, energy, consumer goods, and technology, including aerospace, computers,
electronic instruments, business services, and software. The worst performances
were seen in household appliances, beverage wholesale trade, heavy engineering,
and mining.
ECONOMIC OUTLOOK
We anticipate that smaller and emerging markets will provide important per-
formance opportunities, based on their relatively attractive risk/reward pro-
files. In general, low inflation and steady economic expansion should provide a
solid foundation for global equity investment in the near term.
Looking ahead to the coming months, the macroeconomic conditions that have
prevailed throughout the last half of the year are expected to continue. Under
these circumstances, the international equity markets could likely continue
their gradual upward trend, within the constraints normally associated with in-
vestment in foreign markets. While our outlook is positive, we urge you to work
closely with your investment representative to determine the level of exposure
to international markets that is appropriate to your situation.
As always, we appreciate your continued confidence in your Fund's portfolio
management team. We look forward to capitalizing on the combination of the tal-
ents and resources of Morgan Stanley and Van Kampen American Capital.
Sincerely,
LOGO 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 NOVEMBER 30, 1996
VAN KAMPEN AMERICAN CAPITAL GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
Six-month total return based on NAV/1/............... 6.58% 6.13% 6.08%
Six-month total return/2/............................ 0.47% 1.14% 5.08%
One-year total return/2/............................. 13.24% 14.19% 18.18%
Five-year average annual total return/2/............. 10.08% 10.27% N/A
Life-of-Fund average annual total return/2/.......... 10.12% 9.74% 12.20%
Commencement Date.................................... 08/05/91 11/15/91 06/21/93
</TABLE>
N/A=Not Applicable
/1/Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge(5.75% for A shares) or contingent
deferred sales charge for early withdrawal (5% 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).
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 GLOBAL EQUITY FUND
TOP FIVE HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1996 AS OF MAY 31, 1996
<S> <C> <C> <C>
Philip Morris Companies, Inc.. 1.5% ................ 1.2%
Adidas........................ 1.2% ................ 1.2%
Federal National Mortgage
Association.................. 1.0% ................ 0.4%
Astra, Class B................ 1.0% ................ 0.5%
Gucci Group................... 1.0% ................ 0.7%
</TABLE>
ASSET ALLOCATION AS A PERCENTAGE OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1996 AS OF MAY 31, 1996
<S> <C> <C> <C>
Stocks.............. 91.6% Stocks.............. 93.7%
Repurchase Repurchase
Agreements......... 7.8% Agreements......... 5.7%
Convertibles........ 0.6% Convertibles........ 0.6%
</TABLE>
TOP TEN COUNTRIES AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1996 AS OF MAY 31, 1996
<S> <C> <C> <C>
United States....... 32.9% United States....... 28.9%
Japan............... 11.0% Japan............... 17.4%
United Kingdom...... 8.3% United Kingdom...... 8.4%
France.............. 5.5% France.............. 4.8%
Germany............. 4.8% Hong Kong........... 4.8%
Switzerland......... 4.6% Switzerland......... 3.9%
Netherlands......... 4.0% Netherlands......... 3.7%
Hong Kong........... 3.7% Germany............. 3.5%
Sweden.............. 2.8% Sweden.............. 2.4%
Italy............... 2.7% Malaysia............ 2.2%
</TABLE>
4
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL GLOBAL EQUITY FUND
The following is an interview with the management team of the Van Kampen
American Capital Global Equity Fund. The Fund is co-managed by portfolio
manager Jeff D. New, Van Kampen American Capital (U.S. holdings), portfolio
manager Peter Kysel, John Govett & Co. Limited (international holdings), and
Alan T. Sachtleben, Van Kampen American Capital, executive vice president for
equity investments.
Q HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPER-
ATED DURING THE SIX MONTHS ENDEDNOVEMBER 30, 1996?
A During the period, there were several prevailing trends in the global
marketplace:
.Most countries experienced slow to moderate economic growth. As a result, in-
flation remained under control and, in fact, decreased in many countries.
.Due to a lack of inflationary pressure, interest rates fell or remained
steady in most countries. For example, the countries listed below
experienced a sharp decline in 10-year bond yields:
NOVEMBER 30, 1996 MAY 31, 1996
New Zealand...................... 7.04% .......... 8.64%
Spain............................ 7.01% .......... 9.16%
United Kingdom................... 7.35% .......... 8.17%
United States.................... 6.05% .......... 6.80%
Japan............................ 2.62% .......... 3.28%
.As interest rates fell, bond markets rallied worldwide. Italy, Canada, Spain,
United Kingdom, and Australia all experienced substantial rallies, producing
six-month total returns of 28.07 percent, 21.61 percent, 21.50 percent,
20.89 percent, and 19.34 percent, respectively (returns are U.S. dollar
adjusted).
.This positive bond market environment had a bullish effect on the stock
markets of many countries. In fact, the stock markets of Germany, Australia,
England, and the United States reached all-time highs during the reporting
period.
Q WHAT SIGNIFICANT INVESTMENT TECHNIQUES AND STRATEGIES WERE USED TO PUR-
SUE THE FUND'S INVESTMENT OBJECTIVES?
A Our investment strategy combines a top-down asset allocation process
withpreferred investment themes and bottom-up analysis of industry sec-
tors and individual
securities. As a result, the Fund's country allocations, compared to the Mor-
gan Stanley Capital International World Index, were as follows:
.An overweighted position in the European markets
.A neutral position in the Pacific Basin markets
.An underweighted position in both the U.S. and Japanese markets
5
<PAGE>
In addition, the Fund maintained a sizable position in many emerging markets,
specifically those of Eastern Europe, as we anticipated these markets would
provide superior economic performance. For example, the equity markets of Hun-
gary and Poland are up 18.97 percent and 9.11 percent respectively from May
through November 1996 (total returns are U.S. dollar adjusted).
One area in which we are currently investing in is companies that produce
luxury consumer goods. The Fund's sector exposure includes a relative
underweighting in energy, consumer goods, and financial services, and an
overweighting in capital goods and service sectors. Within the service sector,
our focus includes companies in media, merchandising, telecommunications, busi-
ness services, and trade.
During the period, the Fund's performance has also been positively affected
by our decision to hedge a portion of our Japanese equity position (denominated
in Japanese yen) into U.S. dollars. Due to the dollar's rapid appreciation ver-
sus the yen in recent months, this hedging has helped protect the dollar value
of the Japanese investments within the Fund. For additional Fund portfolio
highlights, please refer to page four.
Q HOW HAS THE FUND PERFORMED DURING THE REPORTING PERIOD?
The Fund achieved a six-month total return of 6.58 percent/1/ (Class A
shares at net asset value). Over the same period, the Morgan Stanley
Capital International World Index achieved a total return of 8.49 percent.
Please keep in mind that this is an unmanaged index used as a benchmark for
general global equity funds. It does not reflect any commissions or fees that
would be paid by an investor purchasing the securities it represents. Please
refer to the chart on page three for additional Fund performance results.
A WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
The world economy appears to be moving into another year of gradual eco-
nomic growth and low inflation, which should be positive for equities
worldwide. We expect that growth companies will continue to generate satisfac-
tory investment performance, generally outperforming stocks of cyclical (eco-
nomically sensitive) companies. In Europe, we believe the major factor
influencing equity markets will be the tightening of fiscal policies with the
progression toward a single currency. However, we expect monetary conditions to
remain accommodating.
LOGO LOGO LOGO
Alan T. Sachtleben Jeff D. New Peter Kysel
Van Kampen American Capital Van Kampen American Capital John Govett & Co.,
Asset Management, Inc. Asset Management, Inc. Ltd.
Executive Vice President Portfolio Manager Portfolio Manager
Equity Investments
6
<PAGE>
PORTFOLIO OF INVESTMENTS
November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS AND EQUIVALENTS 87.6%
AUSTRALIA 0.2%
100,000 TABCORP Holdings...................................... $ 460,687
------------
AUSTRIA 0.7%
13,400 Flughafen Wien........................................ 612,946
5,382 Plastika Nitra (c).................................... 139,274
13,000 Slovenske Energeticke Strojarne (c)................... 139,171
1,700 Slovakofarma (c)...................................... 201,447
5,000 Wolford............................................... 592,801
------------
1,685,639
------------
ARGENTINA 0.3%
30,000 Telefonica De Argentina (ADR)......................... 765,000
------------
BELGIUM 0.2%
9,100 GIB Holdings.......................................... 407,763
------------
BRAZIL 0.6%
70,000 Centrais Electricas Brasileiras (ADR)................. 1,146,600
40,000 Usinas Siderurgicas De Minas (ADR).................... 399,200
------------
1,545,800
------------
CANADA 0.5%
7,700 BCE, Inc.............................................. 388,540
15,000 Canadian Pacific...................................... 415,709
11,000 Inco.................................................. 384,992
------------
1,189,241
------------
CROATIA 0.4%
20,831 Pliva DD (GDR) (c).................................... 1,010,304
------------
CZECH REPUBLIC 1.4%
6,800 Ceske Radiokomunikace (c)............................. 903,688
77,000 IPS Praha (c)......................................... 787,368
12,700 Komercni Banka (GDR).................................. 317,500
9,000 Leciva (c)............................................ 782,753
6,100 Ostravar (c).......................................... 430,326
2,000 Pivovar Vratislavice (c).............................. 172,616
1,200 Prazske Pivovary (c).................................. 106,050
------------
3,500,301
------------
DENMARK 0.9%
15,000 Bang & Olufsen Holding, Class B....................... 610,863
50,310 ISS International Service System, Class B............. 1,391,501
14,000 Scandinavian Mobility International................... 225,680
------------
2,228,044
------------
FINLAND 0.4%
60,000 Kemira Oy............................................. 744,738
17,000 Valmet Corp........................................... 278,899
------------
1,023,637
------------
</TABLE>
7
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
FRANCE 4.9%
2,000 Altran Technologie.................................... $ 646,656
5,300 AGF................................................... 173,494
1,100 Canal Plus............................................ 252,268
10,000 Cap Gemini............................................ 474,942
4,000 Castorama Dubois Investissements...................... 704,468
8,400 Christian Dior (c).................................... 1,233,355
7,000 Cie De St Gobain...................................... 1,006,356
48,400 Compagnie Financiere (GDR) (c)........................ 1,288,892
3,000 Europeene De Prop Ulsion.............................. 358,934
7,000 Havas................................................. 495,808
2,450 Pathe (c)............................................. 572,189
11,880 Primagaz (Cie Gaz).................................... 1,319,040
1,080 Primagaz (Cie Gaz), Warrants, Expiring 7/01/98 (c).... 22,742
2,150 Roussel Uclaf......................................... 563,450
8,800 Sanofi................................................ 788,392
20,000 Sidel................................................. 1,274,934
4,900 Union Assurance Federales (c)......................... 605,019
------------
11,780,939
------------
GERMANY 4.3%
30,000 Adidas................................................ 2,603,861
14,000 Bayer................................................. 563,331
15,000 Bilfinger & Berger Bau................................ 562,707
21,200 Data Modul............................................ 475,522
20,000 Deutsche Bank......................................... 953,124
30,000 Deutsche Telekom (c).................................. 652,428
1,000 Ebara Corp., Warrants, Expiring 3/13/98 (c)........... 31,597
11,700 Hoechst............................................... 511,937
22,000 RWE................................................... 972,629
9,800 SAP................................................... 1,346,935
14,950 Siemens............................................... 720,236
7,500 SGL Carbon............................................ 921,592
------------
10,315,899
------------
HONG KONG 3.3%
730,000 First Pacific Co. (c)................................. 1,014,938
125,000 Henderson Land Development............................ 1,256,952
152,000 Hong Kong Ferry Holdings (c).......................... 300,776
400,000 Hong Kong Land Holding................................ 1,140,000
74,800 HSBC Holdings......................................... 1,557,527
300,000 Road King Infrastructure (c).......................... 277,419
120,000 Sun Hung Kai Properties............................... 1,489,912
90,000 Swire Pacific......................................... 852,625
------------
7,890,149
------------
</TABLE>
8
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
HUNGARY 1.4%
66,000 Borsodchem (GDR) (c).................................. $ 1,425,600
13,660 Graboplast Textiles................................... 379,050
8,823 Pick Szeged (GDR)..................................... 441,150
6,000 Primagaz Hungaria..................................... 249,740
107,000 Tiszai Vegyi Kombinat (GDR) (c)....................... 1,027,200
------------
3,522,740
------------
INDONESIA 0.8%
1,646,000 BK Bira............................................... 2,018,017
------------
IRELAND 1.1%
45,000 Adare Printing Group.................................. 427,455
170,000 Bank Of Ireland....................................... 1,480,498
77,000 CRH................................................... 776,732
------------
2,684,685
------------
ITALY 2.4%
58,000 Bulgari............................................... 1,073,188
297,500 Gruppo Ceramiche Ricchetti (c)........................ 325,769
29,375 Gucci Group........................................... 2,155,390
79,000 Mediolanum (c)........................................ 820,772
400,000 Parmalat Finanziaria.................................. 626,670
300,000 Pirelli............................................... 548,171
55,900 Rinascente............................................ 324,496
------------
5,874,456
------------
JAPAN 9.8%
50,000 Ajinomoto Co.......................................... 566,286
50,600 Bank of Tokyo......................................... 1,035,101
60,000 Daifuku Co............................................ 700,615
40,000 Daiichi Corp.......................................... 867,428
40,000 Dainippon Screen Manufacturing Co..................... 316,067
58 DDI Corp.............................................. 415,013
45,000 Honda Motor Co........................................ 1,327,480
60,000 Isuzu Motors.......................................... 299,737
40,000 Japan Radio Co........................................ 488,148
14,000 JGC Corp.............................................. 129,061
204,000 Kawasaki Heavy Industries............................. 934,925
75,000 Koito Manufacturing Co................................ 542,581
40,000 Komori Corp........................................... 856,892
9,000 Kyocera Corp. (c)..................................... 578,402
130,000 Marubeni Corp......................................... 587,796
100,000 Matsushita Electric Industries........................ 1,729,586
90,000 Mitsubishi Chemical................................... 340,562
55,000 Mitsubishi Estate..................................... 695,347
</TABLE>
9
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- ---------------------------------------------------------------------------
<C> <S> <C>
JAPAN (CONTINUED)
Mitsubishi Trust &
30,000 Banking Corp..................................... $ 482,002
46,000 Nichiei Construction............................. 333,995
16,000 Nippon Hodo Co................................... 191,045
25,000 Nippon Yusen KK.................................. 119,622
350,000 NKK Corp......................................... 860,404
40,000 Nomura Securities................................ 674,276
NTT Data Communications
42 Systems (c)...................................... 1,246,356
35,000 Omron Corp....................................... 666,813
10,000 Rohm Co.......................................... 614,574
21,000 Sankyo Co........................................ 562,335
16,000 Secom Co......................................... 965,057
21,000 Shin Etsu Chemical Co............................ 383,494
Sumitomo Electric
50,000 Industries....................................... 702,371
50,000 Takashimaya Co................................... 667,252
Tokio Marine & Fire
25,000 Insurance Co..................................... 276,558
18,000 Tokyu Corp....................................... 120,105
65,000 Toshiba Corp..................................... 418,306
45,000 Toyota Motor Corp................................ 1,228,709
35,000 Yamanouchi Pharmacy.............................. 712,906
------------
23,637,207
------------
MALAYSIA 1.6%
145,000 Commerce Asset Holding........................... 1,107,440
123,000 DCB Holdings Berhad.............................. 421,033
DCB Holdings Berhad,
Warrants, expiring
30,750 12/27/99 (c)..................................... 48,431
130,000 Jaya Tiasa Holdings.............................. 720,222
300,000 Metacorp Berhad.................................. 925,999
110,000 Resorts World.................................... 552,829
------------
3,775,954
------------
MEXICO 0.9%
100,000 Cemex (ADR)...................................... 712,500
Empresas Ica Sociedad
56,000 Control (ADR).................................... 805,000
Grupo Industria Maseca,
10,010 Class B.......................................... 12,463
Telefonos de Mexico
21,000 (ADR)............................................ 637,875
------------
2,167,838
------------
NETHERLANDS 3.5%
10,127 Aegon............................................ 570,279
20,000 Ahold (Koninklijke).............................. 1,251,522
ASM Lithography Holding
13,400 (c).............................................. 589,839
42,500 Cap Gemini Group (c)............................. 1,252,102
13,300 Frans Maas Group................................. 538,387
</TABLE>
10
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- -------------------------------------------------------------------------------
<C> <S> <C>
NETHERLANDS (CONTINUED)
31,523 ING Groep............................................ $ 1,104,210
17,500 Philips Electronics.................................. 708,750
17,000 Polygram............................................. 819,289
1,300 Royal Dutch Petroleum Co............................. 220,838
70,000 Ver Ned Uitgevers.................................... 1,428,986
------------
8,484,202
------------
NORWAY 1.1%
10,000 Netcom (c)........................................... 84,138
25,000 Tandberg (c)......................................... 677,781
100,000 Uni Storebrand....................................... 596,759
236,000 Visual Management Application........................ 1,323,777
------------
2,682,455
------------
PHILIPPINES 0.1%
2,500 Philippine Long Distance Telephone Co. (ADR)......... 143,750
------------
POLAND 0.7%
50,000 Argos Holdings, Class C.............................. 1,209,762
16,000 Bank Gdanski (GDR)................................... 222,880
20,000 Stalexport, Class A.................................. 210,393
------------
1,643,035
------------
PORTUGAL 0.7%
60,000 Mundial Confianca (c)................................ 575,274
25,000 Portugal Telecommunications (c)...................... 663,232
60,000 SOC Empre Somague.................................... 540,889
------------
1,779,395
------------
RUSSIA 0.8%
18,500 GUM (ADR) (c)........................................ 925,000
32,000 Mosenergo Sponsored (ADR)............................ 940,000
------------
1,865,000
------------
SINGAPORE 1.0%
120,000 DBS Land............................................. 427,807
113,000 Overseas Union Bank.................................. 829,875
82,000 Sembawang Corp....................................... 444,349
140,000 Singapore Land....................................... 803,565
------------
2,505,596
------------
SOUTH KOREA 0.2%
801 Samsung Electronics, Ltd. Rep Com 144A (GDR) (d)..... 20,426
10,374 Samsung Electronics, Ltd. 144A (GDR) (d)............. 264,537
3,126 Samsung Electronics, Ltd. Rep 144A Nonvt (GDR) (d)... 79,713
Samsung Electronics, Ltd. Rep Com Bonus 144A (GDR)
241 (d).................................................. 6,146
------------
370,822
------------
</TABLE>
11
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
SPAIN 0.3%
16,320 Argentaria Corp....................................... $ 636,220
1,850 Gas Y Electricidad.................................... 104,254
------------
740,474
------------
SWEDEN 2.4%
47,000 Astra, Class B........................................ 2,208,067
13,600 Autoliv............................................... 597,415
13,000 Celsius, Class B...................................... 171,318
13,000 Enator (c)............................................ 317,470
120,000 Nobel Biocare......................................... 2,054,916
200,000 Rottneros............................................. 241,229
25,500 Stora Kopparbergs, Class B............................ 345,539
------------
5,935,954
------------
SWITZERLAND 4.1%
6,142 Adecco................................................ 1,581,282
240 Baloise Holdings...................................... 535,788
1,300 Ciba Geigy............................................ 1,608,668
1,300 Danzas Holding........................................ 1,495,972
530 Kuoni Reisen Holding.................................. 1,179,133
2,000 Publicitas Holdings................................... 359,033
500 Schindler Holdings.................................... 525,125
1,300 Schweizerischer Bankverein............................ 256,809
600 SGS Holding........................................... 1,387,802
5,000 SMH Neuenburg (c)..................................... 724,971
1,500 TAG Heuer (c)......................................... 212,888
------------
9,867,471
------------
TAIWAN 0.1%
29,000 Walsin Lihwa Corp. (GDR) (c).......................... 232,000
------------
THAILAND 0.5%
19,000 Siam Cement Co........................................ 660,598
135,000 Telecomasia Corp. (c)................................. 274,858
71,600 Thai Military Bank PLC................................ 189,229
------------
1,124,685
------------
UNITED KINGDOM 7.4%
150,000 Astec................................................. 403,497
114,000 BAA................................................... 939,139
75,000 Barclays.............................................. 1,289,929
50,000 BOC Group............................................. 744,788
77,000 Boots Co.............................................. 820,746
147,000 British Petroleum..................................... 1,699,717
100,000 Cable & Wireless...................................... 800,269
129,000 Dixons Group.......................................... 1,241,636
</TABLE>
12
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- -------------------------------------------------------------------------------
<C> <S> <C>
UNITED KINGDOM (CONTINUED)
48,000 Eurotherm............................................ $ 457,566
250,000 FKI.................................................. 905,767
38,600 General Accident..................................... 475,361
Harvey Nichols PLC, Private Placement, purchased
81,000 4/23/96 for $331,665 (c)............................. 482,078
40,000 Marks & Spencer...................................... 340,282
50,000 National Westminster................................. 581,708
125,000 Next................................................. 1,237,811
20,000 Premier Farnell...................................... 239,408
37,500 Reed International................................... 726,610
88,000 Reuters Holdings..................................... 1,071,150
49,000 Sainsbury............................................ 309,339
260,000 Senior Engineering................................... 489,576
11,500 Shell Transportation & Trading....................... 191,022
100,000 Standard Chartered................................... 1,136,516
288,948 Sun Life & Provincial (c)............................ 1,214,475
------------
17,798,390
------------
UNITED STATES 28.6%
9,750 AAMES Financial Corp................................. 418,031
13,158 Accustaff, Inc. (c).................................. 266,450
17,000 ADC Telecommunications, Inc. (c)..................... 616,250
5,500 Air Products & Chemicals, Inc........................ 382,250
5,900 Alex Brown, Inc...................................... 354,738
4,800 Allied Signal, Inc................................... 351,600
4,000 Altera Corp. (c)..................................... 302,000
8,700 Amgen, Inc. (c)...................................... 529,613
5,500 Analog Devices, Inc. (c)............................. 176,688
10,000 Apache Corp.......................................... 363,750
7,700 Ascend Communications, Inc. (c)...................... 547,663
7,400 Aspect Telecommunications Corp. (c).................. 403,300
9,000 Atmel Corp. (c)...................................... 295,875
6,000 Baker Hughes, Inc. (c)............................... 219,750
9,700 Bank of Boston Corp.................................. 677,788
8,200 BankAmerica Corp..................................... 844,600
7,500 Bed Bath & Beyond, Inc............................... 196,406
6,500 Black & Decker Corp.................................. 246,188
6,300 BMC Industries, Inc.................................. 181,125
22,000 BMC Software, Inc. (c)............................... 957,000
8,200 Boeing Co............................................ 814,875
9,100 Boston Chicken, Inc. (c)............................. 352,625
9,400 Bristol Myers Squibb Co.............................. 1,069,250
</TABLE>
13
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
UNITED STATES (CONTINUED)
11,300 Cadence Design Systems, Inc. (c)....................... $ 450,588
11,000 Chase Manhattan Corp................................... 1,039,500
10,800 Chrysler Corp.......................................... 383,400
14,700 Cisco Systems, Inc. (c)................................ 997,763
3,200 Citicorp............................................... 349,600
7,200 CMAC Investment Corp................................... 549,000
11,500 Columbia/HCA Healthcare Corp........................... 460,000
10,600 Compaq Computer Corp. (c).............................. 840,050
7,500 CompUSA, Inc. (c)...................................... 337,500
27,750 Computer Associates International, Inc................. 1,824,562
2,500 Compuware Corp. (c).................................... 141,250
12,100 Conseco, Inc........................................... 676,088
8,400 Cytec Industries, Inc. (c)............................. 310,800
11,300 Deere & Co............................................. 504,263
9,100 Dover Corp............................................. 485,713
9,800 DST Systems, Inc. (c).................................. 317,275
12,900 Eckerd Corp. (c)....................................... 445,050
13,600 Equifax, Inc........................................... 445,400
17,250 Evergreen Media Co. (c)................................ 426,938
53,900 Federal National Mortgage Association.................. 2,223,374
4,800 First Bank System, Inc................................. 349,800
7,300 Gap, Inc............................................... 234,513
10,500 General Nutrition Companies, Inc.(c)................... 181,125
95,000 Grandetel Technologies, Inc. (c)....................... 47,500
20,800 Green Tree Financial Corp.............................. 871,000
7,000 Harley Davidson, Inc................................... 310,625
13,775 Health Management Association, Inc., Class A (c)....... 304,772
14,500 Healthsouth Corp. (c).................................. 545,563
12,000 Hilton Hotels Corp..................................... 351,000
5,000 Illinois Tool Works, Inc............................... 428,750
5,400 Input/Output, Inc. (c)................................. 129,600
10,500 Intel Corp............................................. 1,332,187
2,400 International Business Machines........................ 382,500
16,600 Johnson & Johnson...................................... 881,875
13,200 Kroger Co. (c)......................................... 608,850
13,600 LCI International, Inc. (c)............................ 443,700
5,200 Lear Corp. (c)......................................... 186,550
16,000 LG Chemical, Ltd....................................... 181,120
11,800 Lincare Holdings, Inc. (c)............................. 469,050
</TABLE>
14
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
UNITED STATES (CONTINUED)
6,400 Linear Technology Corp................................. $ 301,600
10,200 Liz Claiborne, Inc..................................... 432,225
7,000 Lowes Co., Inc......................................... 284,375
6,100 Lucent Technologies, Inc............................... 312,625
10,800 Marriot International, Inc............................. 602,100
6,900 Medtronic, Inc......................................... 456,263
13,700 Merck & Co., Inc....................................... 1,137,100
11,200 Merrill Lynch & Co., Inc............................... 898,800
10,000 Metalclad Corp. (c).................................... 15,313
5,500 MGIC Investment Corp................................... 411,813
7,900 Microsoft Corp. (c).................................... 1,239,313
12,400 Money Store, Inc....................................... 375,100
16,000 Nautica Enterprises, Inc. (c).......................... 512,000
2,000 Nike, Inc.............................................. 113,750
13,800 Omnicom Group.......................................... 703,800
13,650 Oracle System Corp. (c)................................ 668,850
4,000 Pairgain Technologies, Inc. (c)........................ 255,500
14,600 PanEnergy Corp......................................... 642,400
9,300 Penncorp Financial Group, Inc.......................... 319,688
11,600 Pfizer, Inc............................................ 1,039,650
30,400 Philip Morris Companies, Inc........................... 3,134,996
11,700 Phillips Petroleum Co.................................. 527,963
10,300 Physician Reliance Network, Inc. (c)................... 72,100
19,700 Praxair, Inc........................................... 957,913
3,500 Procter & Gamble Co.................................... 380,625
8,000 Promus Hotel Corp. (c)................................. 258,000
9,100 RAC Financial Group, Inc. (c).......................... 489,125
5,800 Raychem Corp........................................... 494,450
12,000 Renal Treatment Centers, Inc. (c)...................... 312,000
5,000 Ross Stores, Inc....................................... 254,375
27,800 Safeway, Inc. (c)...................................... 1,129,375
8,300 Sanmina Corp. (c)...................................... 362,088
9,500 Schering-Plough Corp................................... 676,875
5,400 Schwab Charles Corp.................................... 162,675
8,100 SCI Systems, Inc. (c).................................. 427,275
16,300 Sears, Roebuck & Co.................................... 810,925
22,800 Service Corp. International............................ 686,850
14,700 Smith International, Inc. (c).......................... 600,863
12,600 Staples, Inc. (c)...................................... 248,850
</TABLE>
15
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
UNITED STATES (CONTINUED)
6,700 Student Loan Marketing Association.................... $ 644,038
13,400 Sun Microsystems, Inc. (c)............................ 780,550
26,500 SunAmerica, Inc....................................... 1,109,688
18,200 Tellabs, Inc. (c)..................................... 723,450
9,500 Texaco, Inc........................................... 941,688
3,200 Textron, Inc.......................................... 305,200
12,800 3Com Corp. (c)........................................ 961,600
10,400 Tiffany & Co. (c)..................................... 383,500
10,500 TJX Companies, Inc.................................... 473,813
5,400 Tommy Hilfiger Corp................................... 291,600
4,400 Transocean Offshore, Inc.............................. 265,100
22,667 Travelers Group, Inc.................................. 1,020,000
11,500 Trump Hotels & Casino Resorts (c)..................... 162,438
8,400 Tyco International, Ltd............................... 459,900
6,000 UCAR International, Inc. (c).......................... 227,250
6,400 Union Carbide Corp.................................... 295,200
4,100 United Technologies Corp.............................. 575,025
24,200 United Waste Systems, Inc. (c)........................ 810,700
10,900 Universal Health Services, Inc. (c)................... 307,925
12,100 US Office Products Co. (c)............................ 375,100
5,600 US Robotics Corp. (c)................................. 440,300
11,500 USA Waste Services Inc. (c)........................... 370,875
10,600 Vons Companies, Inc. (c).............................. 557,825
4,000 Warner Lambert Co..................................... 286,000
8,100 Watson Pharmaceuticals, Inc. (c)...................... 315,900
11,400 Williams Companies, Inc............................... 639,825
5,650 Wind River System, Inc. (c)........................... 277,556
17,400 Worldcom, Inc. (c).................................... 402,375
------------
69,130,018
------------
TOTAL COMMON STOCKS AND EQUIVALENTS................... 211,787,547
------------
PREFERRED STOCKS 0.6%
FINLAND 0.4%
20,000 Nokia (Ab) Oy, Class A................................ 1,109,552
------------
GERMANY 0.2%
500 Porsche (c)........................................... 391,717
------------
TOTAL PREFERRED STOCKS................................ 1,501,269
------------
</TABLE>
16
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- --------------------------------------------------------------------------------
<S> <C>
UNITED STATES CORPORATE OBLIGATIONS 0.6%
Acer, Inc. ($290,000 par, 4.000% coupon, 06/10/01 maturity,
convertible into 563,315 common shares)........................... $ 941,050
United Micro Electric ($400,000 par, 1.250% coupon, 06/08/04
maturity, convertible into 429,120 common shares)................. 554,500
------------
TOTAL UNITED STATES CORPORATE OBLIGATIONS........................ 1,495,550
------------
TOTAL LONG-TERM INVESTMENTS 88.8% (COST $176,279,258) (A)......... 214,784,366
------------
REPURCHASE AGREEMENTS 7.5%
Bank of America Securities ($8,735,000 par, collateralized by U.S.
Government obligations in a pooled cash account, 5.65% coupon,
dated 11/29/96, to be sold on 12/02/96 at $8,739,113) (b)......... 8,735,000
Donaldson, Lufkin & Jenrette Securities ($9,390,000 par,
collateralized by U.S. Government obligations in a pooled cash
account, 5.33% coupon, dated 11/27/96, to be sold on 12/02/96 at
$9,396,951) (b)................................................... 9,390,000
------------
TOTAL REPURCHASE AGREEMENTS...................................... 18,125,000
FOREIGN CURRENCY 3.0% (VARIOUS DENOMINATIONS, COST $7,126,057)
(A)............................................................... 7,268,396
OTHER ASSETS IN EXCESS OF LIABILITIES 0.7%........................ 1,768,747
------------
NET ASSETS 100.0%................................................. $241,946,509
------------
</TABLE>
(a) At November 30, 1996, cost for federal income tax purposes is $201,530,315;
the aggregate gross unrealized appreciation is $46,189,635 and the
aggregate gross unrealized depreciation is $7,490,553, resulting in net
unrealized appreciation on investments, forward currency contracts, foreign
currency and foreign currency translation of other assets and liabilities
of $36,699,082.
(b) Assets segregated as collateral for open forward transactions.
(c) Non-income producing security as this stock currently does not declare
dividends.
(d) 144A securities are those which are exempt from registration under Rule
144A of the Securities Act of 1933. These securities may be resold only in
transactions exempt from registration which are normally those transactions
with qualified institutional buyers.
17
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $176,279,258) (Note
1)................................................................ $214,784,366
Repurchase Agreements (Note 1).................................... 18,125,000
Foreign currency, at market value (Cost $7,126,057)............... 7,268,396
Cash.............................................................. 4,732
Receivables:
Securities Sold.................................................. 1,600,678
Fund Shares Sold................................................. 927,888
Dividends........................................................ 371,930
Interest......................................................... 13,577
Forward Currency Contracts (Note 5)............................... 55,680
Other............................................................. 16
------------
Total Assets..................................................... 243,152,263
------------
LIABILITIES:
Payables:
Securities Purchased............................................. 466,193
Fund Shares Repurchased.......................................... 234,749
Distributor and Affiliates (Notes 2 and 6)....................... 204,366
Investment Advisory Fee (Note 2)................................. 195,143
Accrued Expenses.................................................. 77,512
Deferred Compensation and Retirement Plans (Note 2)............... 27,791
------------
Total Liabilities................................................ 1,205,754
------------
NET ASSETS........................................................ $241,946,509
------------
NET ASSETS CONSIST OF:
Capital (Note 3).................................................. $194,424,081
Net Unrealized Appreciation on Securities......................... 38,699,082
Accumulated Net Realized Gain on Securities....................... 8,322,113
Accumulated Undistributed Net Investment Income................... 501,233
------------
NET ASSETS........................................................ $241,946,509
------------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $124,220,603 and 8,338,931 shares of beneficial
interest issued and outstanding)................................. $ 14.90
Maximum sales charge (5.75%* of offering price).................. .91
------------
Maximum offering price to public................................. $ 15.81
------------
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $106,777,477 and 7,434,188 shares of beneficial interest
issued and outstanding).......................................... $ 14.36
------------
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $10,948,429 and 755,464 shares of beneficial interest issued
and outstanding)................................................. $ 14.49
------------
</TABLE>
*On sales of $50,000 or more, the sales charge will be reduced.
18
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
For the Six Months Ended November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $124,736).......... $ 1,324,450
Interest (Net of foreign withholdings taxes of $131).............. 376,787
-----------
Total Income..................................................... 1,701,237
-----------
EXPENSES:
Investment Advisory Fee (Note 2).................................. 1,088,889
Distribution (12b-1) and Service Fees (Attributed to Classes A, B
and C of $138,901, $484,415 and $48,870, respectively) (Note 6).. 672,186
Shareholder Services (Note 2)..................................... 611,982
Custody........................................................... 176,465
Trustees Fees and Expenses (Note 2)............................... 6,372
Legal (Note 2).................................................... 3,660
Amortization of Organizational Expenses (Note 1).................. 1,964
Other............................................................. 168,259
-----------
Total Expenses................................................... 2,729,777
Less Expenses Reimbursed (Note 2)................................ 7,800
-----------
Net Expenses..................................................... 2,721,977
-----------
NET INVESTMENT LOSS............................................... $(1,020,740)
-----------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments...................................................... $ 2,511,281
Foreign Currency Transactions.................................... 1,819,859
-----------
Net Realized Gain on Securities................................... 4,331,140
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period.......................................... 27,741,970
-----------
End of the Period:
Investments...................................................... 38,505,108
Forward Currency Contracts....................................... 55,680
Foreign Currency Translation..................................... 138,294
-----------
38,699,082
-----------
Net Unrealized Appreciation on Securities During the Period....... 10,957,112
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES.................... $15,288,252
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................ $14,267,512
-----------
</TABLE>
19
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended November 30, 1996
and the Year Ended May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
November 30, 1996 May 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss........................... $ (1,020,740) $ (1,152,058)
Net Realized Gain on Securities............... 4,331,140 14,354,171
Net Unrealized Appreciation on Securities
During the Period............................ 10,957,112 18,388,865
------------ ------------
Change in Net Assets from Operations.......... 14,267,512 31,590,978
Distribution from Net Realized Gain on
Securities* (Note 1).......................... -0- (3,883,160)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.................................... 14,267,512 27,707,818
------------ ------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold..................... 55,796,437 97,189,154
Net Asset Value of Shares Issued Through
Dividend Reinvestment......................... -0- 3,650,871
Cost of Shares Repurchased.................... (36,799,306) (51,230,990)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.................................. 18,997,131 49,609,035
------------ ------------
TOTAL INCREASE IN NET ASSETS.................. 33,264,643 77,316,853
NET ASSETS:
Beginning of the Period....................... 208,681,866 131,365,013
------------ ------------
End of the Period (Including undistributed net
investment income of $501,233 and $(297,886),
respectively)................................ $241,946,509 $208,681,866
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended
*Distributions by Class November 30, 1996 May 31, 1996
---------------------------------------------------------------------------
<S> <C> <C>
Distributions from Net Realized Gain
on Securities (Note 1):
Class A Shares........................... $ -0- $(1,775,643)
Class B Shares........................... -0- (1,920,148)
Class C Shares........................... -0- (187,369)
------ -----------
$ -0- $(3,883,160)
------ -----------
</TABLE>
20
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. (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended May 31,
Ended ----------------------------------
Class A Shares November 30, 1996 1996(a) 1995(a) 1994 1993(a)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period.............. $13.98 $11.79 $11.67 $10.76 $10.44
------- ------ ------ ------ ------
Net Investment Loss....... (.043) (.04) (.04) (.06) (.055)
Net Realized and
Unrealized Gain on
Securities............... .959 2.561 .42 1.0125 .7775
------- ------ ------ ------ ------
Totals from Investment
Operations................. .916 2.521 .38 .9525 .7225
Less Distributions from and
in excess of Net Realized
Gain on Securities........ -0- .331 .26 .0425 .4025
------- ------ ------ ------ ------
Net Asset Value, End of the
Period..................... $14.896 $13.98 $11.79 $11.67 $10.76
------- ------ ------ ------ ------
Total Return (b)........... 6.58%* 21.85% 3.36% 9.17% 7.13%
Net Assets at End of the
Period (in millions)....... $124.2 $106.7 $60.1 $41.8 $12.7
Ratio of Expenses to
Average Net Assets (c)..... 2.12% 2.22% 2.29% 2.46% 2.93%
Ratio of Net Investment
Loss to Average Net Assets
(c)....................... (.56%) (.30%) (.35%) (.46%) (.57%)
Portfolio Turnover......... 40%* 94% 120% 116% 120%
Average Commission Rate per
Equity Share Traded (d)... $.0142 $.0199 -- -- --
</TABLE>
*Non-Annualized
(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 year ended May 31, 1993, the Ratios of Expenses and Net Investment
Loss to Average Net Assets would have been 3.28% and (.92%), respectively,
had VKAC not reimbursed certain expenses of the Fund. The impact on the
Ratios due to VKAC's reimbursement of certain expenses for other periods
presented was less than 0.01%.
(d) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
21
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. (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended May 31,
Ended ---------------------------------
Class B Shares November 30, 1996 1996(a) 1995(a) 1994 1993(a)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period. $13.53 $11.50 $11.48 $10.67 $10.46
------- ------ ------ ------ ------
Net Investment Loss.... (.078) (.14) (.13) (.13) (.135)
Net Realized and
Unrealized
Gain on Securities.... .911 2.501 .41 .9825 .7475
------- ------ ------ ------ ------
Total from Investment
Operations.............. .833 2.361 .28 .8525 .6125
Less Distributions from
and in Excess of Net
Realized Gain on
Securities............. -0- .331 .26 .0425 .4025
------- ------ ------ ------ ------
Net Asset Value, End of
the Period.............. $14.363 $13.53 $11.50 $11.48 $10.67
------- ------ ------ ------ ------
Total Return (b)........ $6.13* 20.90% 2.62% 8.21% 6.15%
Net Assets at End of the
Period (in millions).... $106.8 $ 92.8 $64.7 $48.8 $6.9
Ratio of Expenses to
Average Net Assets (c).. 2.89% 2.99% 3.05% 3.21% 3.88%
Ratio of Net Investment
Loss to Average Net
Assets (c)............. (1.33%) (1.11%) (1.11%) (1.19%) (1.41%)
Portfolio Turnover...... 40%* 94% 120% 116% 120%
Average Commission Rate
per Equity Share Traded
(d).................... $.0142 $.0199 -- -- --
</TABLE>
*Non-Annualized
(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 year ended May 31, 1993, the Ratios of Expenses and Net Investment
Loss to Average Net Assets would have been 4.50% and (2.02%),
respectively, had VKAC not reimbursed certain expenses of the Fund. The
impact on the Ratios due to VKAC's reimbursement of certain expenses for
the other periods presented was less than 0.01%.
(d) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
22
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. (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended May June 21, 1993
Six Months 31, (Commencement
Ended ---------------- of Distribution)
Class C Shares November 30, 1996 1996(a) 1995(a) to May 31, 1994(a)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period. $13.66 $11.61 $11.59 $10.29
------- ------ ------ ------
Net Investment Loss.... (.077) (.14) (.13) (.13)
Net Realized and
Unrealized
Gain on Securities.... .909 2.521 .41 1.4725
------- ------ ------ ------
Total from Investment
Operations.............. .832 2.381 .28 1.3425
Less Distributions from
and in Excess of Net
Realized Gain on
Securities............. -0- .331 .26 .0425
------- ------ ------ ------
Net Asset Value, End of
the Period.............. $14.492 $13.66 $11.61 $11.59
------- ------ ------ ------
Total Return (b)........ 6.08%* 20.87% 2.60% 13.06%*
Net Assets at End of the
Period (in millions).... $10.9 $9.2 $6.6 $5.1
Ratio of Expenses to
Average Net Assets (c).. 2.90% 3.00% 3.05% 3.21%
Ratio of Net Investment
Loss to Average Net
Assets (c)............. (1.34%) (1.10%) (1.13%) (1.15%)
Portfolio Turnover...... 40%* 94% 120% 116%
Average Commission Rate
per Equity Share Traded
(d).................... $.0142 $.0199 -- --
*Non-Annualized
</TABLE>
(a) Based on average month-end shares outstanding.
(b) Total return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) The impact on the Ratios of Expenses and Net Investment Loss to Average
Net Assets due to VKAC's reimbursement of certain expenses was less than
0.01%.
(d) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
23
See Notes to Financial Statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
November 30, 1996 (Unaudited)
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Global Equity 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 diversified open-end management invest-
ment company under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to provide long-term growth of capital by investing in
an internationally diversified portfolio of equity securities. The Fund com-
menced investment operations on August 5, 1991. The distribution of the Fund's
Class B and Class C shares commenced on November 15, 1991 and June 21, 1993,
respectively.
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 reported amounts of assets and liabilities and disclosure of con-
tingent 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 ex-
change are valued at their sale price as of the close of such securities ex-
change. Unlisted securities and listed securities for which the last sales
price is not available are valued at the last bid price. Fixed income invest-
ments are stated at value using market quotations. For those securities where
quotations or prices are not available, valuations are determined in accor-
dance 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 invests 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 ad-
vised by Van Kampen American Capital Asset Management, Inc. (the "Adviser") or
its affiliates, the daily aggregate of which is invested in repurchase agree-
ments. 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 the Fund.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- -------------------------------------------------------------------------------
C. INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Original issue discount is
amortized over the life of each applicable security. Premiums on debt securi-
ties are not amortized. Market discounts are recognized at the time of sale as
realized gains for book purposes and ordinary income for tax purposes.
D. CURRENCY TRANSLATION-Assets and liabilities denominated in foreign curren-
cies 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 prevail-
ing when such securities were acquired or sold. Income and expenses are trans-
lated at rates prevailing when accrued.
E. ORGANIZATIONAL EXPENSES-The Fund has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred
in connection with the Fund's organization in the amount of approximately
$75,000. These costs were amortized over the 60 month period ended September
30, 1996.
F. FEDERAL INCOME TAXES-It is the Fund's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated investment compa-
nies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
G. DISTRIBUTION OF INCOME AND GAINS-The Fund declares and pays dividends annu-
ally from net investment income and from net realized gains on securities, if
any. Net investment income for federal income tax purposes includes gains and
losses realized on transactions in foreign currencies. These realized gains
and losses are included as net realized gains or losses for financial report-
ing purposes. Permanent book and tax basis differences relating to net cur-
rency gains totaling $1,819,859 were reclassified from accumulated net
realized gain/loss on securities 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. The Adviser has entered into a subadvisory agreement with John Govett
& Co., Ltd. (the "Subadviser"), who provides advisory services to the Fund and
the Adviser with respect to the Fund's investments in foreign securities. In-
vestment advisory 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
investment advisory fee to the Subadviser.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- -------------------------------------------------------------------------------
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.
For the six months ended November 30, 1996, the Fund recognized expenses of
approximately $13,200 representing VKAC's cost of providing accounting serv-
ices 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 six months
ended November 30, 1996, the Fund recognized expenses of approximately
$540,700, representing ACCESS' cost of providing transfer agency and share-
holder services plus a profit.
Additionally, for the six months ended November 30, 1996, the Fund paid VKAC
approximately $32,900 related to the direct cost of consolidating the VKAC
open-end fund complex. Payment was contingent upon the realization by the Fund
of cost efficiencies in shareholder services resulting from the consolidation.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer
all or a portion of their compensation to a later date. The retirement plan
covers those trustees who are not officers of VKAC. During the six months
ended November 30, 1996, VKAC reimbursed the Fund for expenses related to the
retirement plan. VKAC plans to continue to reimburse these expenses for the
remainder of the 1996 calendar year.
At November 30, 1996, VKAC owned 35,010 Class A shares of the Fund.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- -------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Clas-
ses A, B and C, each with a par value of $.01 per share. There are an unlim-
ited number of shares of each class authorized.
At November 30, 1996, capital aggregated $99,005,202, $86,355,867 and
$9,063,012 for Classes A, B and C, respectively. For the six months ended No-
vember 30, 1996, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A............................................. 2,646,605 $ 37,369,296
Class B............................................. 1,207,809 16,351,107
Class C............................................. 151,189 2,076,034
---------- ------------
Total Sales.......................................... 4,005,603 $ 55,796,437
---------- ------------
Dividend Reinvestment:
Class A............................................. -0- $ -0-
Class B............................................. -0- -0-
Class C............................................. -0- -0-
---------- ------------
Total Dividend Reinvestment.......................... -0- $ -0-
---------- ------------
Repurchases:
Class A............................................. (1,939,865) $(27,386,426)
Class B............................................. (630,784) (8,485,410)
Class C............................................. (67,597) (927,470)
---------- ------------
Total Repurchases.................................... (2,638,246) $(36,799,306)
---------- ------------
</TABLE>
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- -------------------------------------------------------------------------------
At May 31, 1996, capital aggregated $89,022,332, $78,490,170 and $7,914,448
for Classes A, B and C, respectively. For the year ended May 31, 1996, trans-
actions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.............................................. 4,966,925 $ 63,861,473
Class B.............................................. 2,370,872 29,925,908
Class C.............................................. 268,622 3,401,773
---------- ------------
Total Sales........................................... 7,606,419 $ 97,189,154
---------- ------------
Dividend Reinvestment:
Class A.............................................. 136,185 $ 1,683,743
Class B.............................................. 150,464 1,807,274
Class C.............................................. 13,189 159,854
---------- ------------
Total Dividend Reinvestment........................... 299,838 $ 3,650,871
---------- ------------
Repurchases:
Class A.............................................. (2,565,199) $(32,888,196)
Class B.............................................. (1,288,844) (16,089,389)
Class C.............................................. (181,673) (2,253,405)
---------- ------------
Total Repurchases..................................... (4,035,716) $(51,230,990)
---------- ------------
</TABLE>
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- -------------------------------------------------------------------------------
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within five years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear the expense of their respective deferred sales ar-
rangements, including higher distribution and service fees and incremental
transfer agency costs.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED SALES
CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C>
First........................................................... 5.00% 1.00%
Second.......................................................... 4.00% None
Third........................................................... 3.00% None
Fourth.......................................................... 2.50% None
Fifth........................................................... 1.50% None
Sixth and Thereafter............................................ None None
</TABLE>
For the six months ended November 30, 1996, VKAC, as Distributor for the
Fund, received commissions on sales of the Fund's Class A shares of approxi-
mately $41,300 and CDSC on the redeemed shares of approximately $90,000. Sales
charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $88,167,997 and $82,563,868, re-
spectively.
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 expo-
sure, or generate potential gain. All of the Fund's portfolio holdings, in-
cluding derivative instruments, are market to market each day with the change
in value reflected in the unrealized appreciation/depreciation on securities.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 1996 (Unaudited)
- -------------------------------------------------------------------------------
During the six months ended November 30, 1996, the Fund entered into forward
currency contracts, a type of derivative. These instruments are commitments to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Upon the settlement of the contract, a realized gain or loss is recog-
nized and is included as a component of realized gain/loss on forward currency
contracts.
At November 30, 1996, the Fund has outstanding forward currency contracts as
follows:
<TABLE>
<CAPTION>
UNREALIZED
ORIGINAL CURRENT APPRECIATION/
DESCRIPTION VALUE VALUE DEPRECIATION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
SELLS TO OPEN
British Pound Sterling,
2,667,912 expiring 07/16/97.............. $4,000,000 $4,455,988 $(455,988)
French Franc,
15,030,000 expiring 04/11/97............. 3,000,000 2,898,355 101,645
Japanese Yen,
405,600,000 expiring 01/24/97............ 4,000,000 3,589,977 410,023
---------
$ 55,680
---------
</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 (col-
lectively the "Plans"). The Plans govern payments for the distribution of the
Fund's shares, ongoing shareholder services and maintenance of shareholder ac-
counts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these
fees for the six months ended November 30, 1996, are payments to VKAC of ap-
proximately $412,200.
7. SUBSEQUENT DISTRIBUTIONS
The Board of Trustees of the Fund declared distributions per share payable
December 31, 1996 to shareholders of record on December 16, 1996 as follows:
<TABLE>
<CAPTION>
INCOME CAPITAL TOTAL
CLASS DIVIDEND GAINS DISTRIBUTIONS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
A................................................ $.1370 $.4010 $.5380
B................................................ .0298 .4010 .4308
C................................................ .0298 .4010 .4308
</TABLE>
30
<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
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.
31
<PAGE>
RESULTS OF SHAREHOLDER VOTES
A Special Meeting of Shareholders of the Fund was held on October 25, 1996
where shareholders voted on a new investment advisory agreement, new
subadvisory agreements, changes to investment policies and the ratification of
Price Waterhouse LLP as independent public accountants. With regard to the ap-
proval of a new investment advisory agreement between Van Kampen American Cap-
ital Asset Management, Inc. and the Fund, 8,411,887 shares voted for the
proposal, 142,975 shares voted against and 809,990 shares abstained. With re-
gard to the approval of an investment subadvisory agreement between the Fund
and Morgan Stanley Asset Management, Inc., 8,357,860 shares voted for the pro-
posal, 155,214 shares voted against and 851,777 shares abstained. With regard
to the approval of an interim investment subadvisory agreement between the
Fund and John Govett & Co. Limited, 8,327,736 shares voted in favor, 179,714
shares voted against and 857,402 shares abstained. With regard to the approval
of certain changes to the Fund's fundamental investment policies with respect
to investment in other investment companies, 6,809,730 shares voted for the
proposal, 204,982 shares voted against and 831,207 shares abstained. With re-
gard to the ratification of Price Waterhouse LLP as independent public accoun-
tants for the Fund, 8,494,475 shares voted for the proposal, 91,835 shares
voted against and 778,442 shares abstained.
32
<PAGE>
VAN KAMPEN AMERICAN CAPITAL GLOBAL EQUITY FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
LINDA HUTTON HEAGY
ROGER HILSMAN
R. CRAIG KENNEDY
DENNIS J. MCDONNELL*
DONALD C. MILLER - Co-Chairman
JACK E. NELSON
JEROME L. ROBINSON
FERNANDO SISTO - Co-Chairman
WAYNE W. WHALEN*
WILLIAM S. WOODSIDE
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
ALAN T. SACHTLEBEN*
PAUL R. WOLKENBERG*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
INVESTMENT SUBADVISER
JOHN GOVETT & CO., LTD.
Shackleton House
4 Battle Bridge Lane
London, SE1 2HR England
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICING AGENT
ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1201 Louisiana
Houston, Texas 77002
*"Interested" persons of the Fund, as de-
fined in the
Investment Company Act of 1940.
(C)Van Kampen American Capital Distribu-
tors, Inc., 1997
All rights reserved.
SMdenotes 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.
33
