<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
Letter to Shareholders.................................................... 1
Performance Results....................................................... 3
Portfolio Highlights...................................................... 4
Performance in Perspective................................................ 5
Portfolio Management Review............................................... 6
Portfolio of Investments.................................................. 8
Statement of Assets and Liabilities....................................... 30
Statement of Operations................................................... 31
Statement of Changes in Net Assets........................................ 32
Financial Highlights...................................................... 33
Notes to Financial Statements............................................. 36
Report of Independent Accountants......................................... 44
</TABLE>
<PAGE>
Letter to Shareholders
[PHOTO APPEARS HERE]
Dennis J. McDonnell and Don G. Powell
June 24, 1997
Dear Shareholder,
As you know, VK/AC Holding, Inc., the parent company of Van Kampen American
Capital, Inc., was acquired by Morgan Stanley Group Inc., a world leader in
asset management. More recently, on February 5, 1997, Morgan Stanley Group Inc.
and Dean Witter, Discover & Co. agreed to merge. The merger was completed on May
31, 1997, creating the combined company of Morgan Stanley, Dean Witter, Discover
& Co. Additionally, we are very pleased to announce that Philip N. Duff,
formerly of Morgan Stanley, has joined Van Kampen American Capital as president
and chief executive officer. I will continue as chairman.
Additionally, on April 1, 1997, Morgan Stanley Asset Management became
subadvisor for the Van Kampen American Capital Global Equity Fund. Unlike the
previous subadvisory agreement, which divided responsibility for domestic and
foreign portfolio management, Morgan Stanley Asset Management has assumed
complete responsibility for your Fund's holdings. As explained in your proxy
statement, we believe that the new advisory relationship is another positive
result of our acquisition by Morgan Stanley. We are confident that our
partnership with Morgan Stanley will continue to work to the benefit of our fund
shareholders.
Market Review
Bolstered by generally solid economic growth and continued low inflation, most
global equity markets posted gains over the fiscal year. The Morgan Stanley
Capital International World Index climbed 14.6 percent in dollar terms, with
more than half of the increase coming since the beginning of the year.
Among developed markets, U.S. stocks gained 20.38 percent over the 12 months
ended May 31, 1997, based on the Wilshire 5000 Index. Equity prices in the
United States were supported by nearly perfect economic conditions. First-
quarter gross domestic product, the nation's total output of goods and services,
increased by a robust 5.6 percent annualized rate, the largest quarterly gain in
nine years. Despite rapid growth, inflation remained benign, with consumer
prices up just 2.5 percent over the 12 months through April. Meanwhile,
unemployment fell below 4.9 percent and consumer confidence soared to its
highest level in 27 years. Signs that the tight labor market was putting upward
pressure on wages led the Federal Reserve Board to raise interest rates by one-
quarter point in March.
European equity markets also were strong, with the Morgan Stanley Europe Index
climbing 22.7 percent over the fiscal year. We believe that three factors
contributed to the strong performance of European stocks. First, most of Europe
is in the relatively early stage of an economic expansion. Second, downsizing in
many European companies--while not as extensive as in the United States--has
improved profitability. Finally, the progress towards European Monetary Union
(EMU) functioned as a brake on excessive spending as governments struggled to
reduce inflation and budget deficits to levels acceptable for EMU inclusion.
1 Continued on page two
<PAGE>
In the Pacific Basin, most equity markets continued to show the effects of a
regional slowdown in export growth. Hardest hit were South Korea and Thailand,
where political jitters and concerns about economic competitiveness caused sharp
sell-offs in stock prices. Excluding Japan, the Morgan Stanley Far East Index
fell 2.4 percent over the 12-month reporting period. Strong rallies in Hong Kong
and Taiwan signaled investor confidence that Chinese officials would allow Hong
Kong's free-market economy to operate without interference after political
control reverts to China in July.
Japan continued to struggle with an ailing financial system and excess
production capacity. Despite a weakened yen, which aided the country's export
sector, Japanese stocks fell nearly 16 percent over the fiscal year. Although
profitability has soared among larger firms, the benefits of Japan's export-led
recovery generally have not passed through to the country's smaller and mid-
sized companies. In an effort to jump-start its economy, the Bank of Japan kept
monetary policy extremely loose, with real short-term interest rates falling to
near zero.
Economic Outlook
We expect economic growth to accelerate modestly worldwide, leading to mild
increases in global inflation and interest rates. Faster growth in consumer
spending should help corporate profits remain strong, providing a solid
underpinning for the relatively high price-to-earnings ratios currently found in
most global equity markets.
In Europe, we believe that progress towards monetary union will continue,
although the election of leftist political groups in France increases the
possibility that EMU will be delayed. As economic growth in Europe accelerates,
interest rates and inflation in core European countries could rise modestly. The
major beneficiaries of EMU will likely be Italy and Spain, where tighter fiscal
and monetary policies could ultimately put those economies on a path to stronger
growth with less inflation.
We expect many Pacific Basin countries to resume increasingly rapid growth
rates after the region's mild slowdown. Japanese stocks should benefit from a
gradually recovering economy, although the yen has likely bottomed against the
U.S. dollar. We also anticipate that fiscal and monetary policy will be
tightened in Japan, exerting a mild drag on corporate profitability.
Closer to home, we expect the U.S. economy to grow at a moderate pace with
relatively low inflation. The benefits of corporate downsizing will likely
diminish in coming years, leading to somewhat slower rates of profit growth and
less spectacular year-over-year earnings comparisons. While we remain optimistic
about the long-term outlook for U.S. stocks, we are concerned that the recent
extraordinary pace of earnings growth may have created unrealistic expectations
among some investors.
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. We appreciate
your continued confidence in your investment with Van Kampen American Capital.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
Performance Results for the Period Ended May 31, 1997
Van Kampen American Capital Global Equity Fund
<TABLE>
<CAPTION>
A Shares B Shares C Shares
Total Returns
<S> <C> <C> <C>
One-year total return based on NAV/1/.......... 17.67% 16.83% 16.82%
One-year total return/2/....................... 10.93% 11.83% 15.82%
Five-year average annual total return/2/....... 10.21% 10.45% N/A
Life-of-Fund average annual total return2...... 11.09% 10.75% 13.31%
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 periods 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.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE>
Portfolio Highlights
Van Kampen American Capital Global Equity Fund
<TABLE>
<CAPTION>
Top Five Holdings as a Percentage of Long-Term Investments
As of May 31, 1997 As of November 30, 1996
<S> <C> <C>
General Electric Co.................. 1.9% ................. N/A
Coca Cola Co......................... 1.7% ................. N/A
Exxon Corp........................... 1.4% ................. N/A
Korea Fund, Inc...................... 1.4% ................. N/A
Microsoft Corp....................... 1.3% ................. 0.6
N/A=Not Applicable
Asset Allocation as a Percentage of Total Investments
As of May 31, 1997 As of November 30, 1996
<S> <C> <S> <C>
Stocks...................... 96.2% Stocks................. 91.6%
Repurchase Agreements....... 3.8% Repurchase Agreements.. 7.8%
Convertibles........... 0.6%
Top Ten Countries as a Percentage of Long-Term Investments
As of May 31, 1997 As of November 30, 1996
<S> <C> <S> <C>
United States.......... 47.0% United States.......... 32.9%
Japan.................. 12.8% Japan.................. 11.0%
United Kingdom......... 8.3% United Kingdom......... 8.3%
France................. 5.4% France................. 5.5%
Germany................ 4.7% Germany................ 4.8%
Canada................. 4.4% Switzerland............ 4.6%
Singapore.............. 3.2% Netherlands............ 4.0%
Switzerland............ 3.1% Hong Kong.............. 3.7%
Spain.................. 2.2% Sweden................. 2.8%
Hong Kong.............. 2.2% Italy.................. 2.7%
</TABLE>
4
<PAGE>
Putting Your Fund's Performance in Perspective
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:
. Illustrate the general market environment in which your investments are
being managed
. Reflect the impact of favorable market trends or difficult market
conditions
. Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over
the period measured
For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Morgan Stanley Capital
International World (MSCI) Index + Dividends over time. As a broad-based,
unmanaged statistical composite, this index does not reflect any commissions or
fees which would be incurred by an investor purchasing the securities it
represents. Similarly, its performance does not reflect any sales charges or
other costs which would be applicable to an actively managed portfolio, such as
that of the Fund.
Growth of a Hypothetical $10,000 Investment
Van Kampen American Capital Global Equity Fund vs. Morgan Stanley Capital
International World (MSCI) Index + Dividends (August 31, 1991 through
May 31, 1997)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
VKAC Global Equity - A MSCI World Index + Dividends
- ---------------------------------------------------------------------
Total Total
Date Value Value
- ---- ----- -----
<S> <C> <C>
Aug 1991 $ 9424 $10000
- ---------------------------------------------------------------------
Nov-1991 9707 9979
- ---------------------------------------------------------------------
Nov-1992 10048 10125
- ---------------------------------------------------------------------
Nov-1993 11491 11981
- ---------------------------------------------------------------------
Nov-1994 12045 13142
- ---------------------------------------------------------------------
Nov-1995 13858 15640
- ---------------------------------------------------------------------
Nov-1996 16655 18649
- ---------------------------------------------------------------------
May-1997 18388 20210
- ---------------------------------------------------------------------
</TABLE>
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions and includes payment of the maximum
sales charge (5.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
5
<PAGE>
Portfolio Management Review
Van Kampen American Capital Global Equity Fund
The following is an interview with the management team of the Van Kampen
American Capital Global Equity Fund. Through March 31, 1997, the Fund was co-
managed by portfolio managers 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,
chief investment officer for equity investments. As of April 1, 1997, the Fund
is managed by portfolio managers Barton M. Biggs, Madhav Dhar, Francine J.
Bovich, and Ann D. Thivierge, Morgan Stanley Asset Management Inc.
Q How would you characterize the market conditions in which the Fund operated
during the 12-month period ended May 31, 1997?
A During the period, there were several prevailing trends in the global
marketplace:
. Interest rates fell across Europe as countries worked to meet inflation and
budget deficit criteria required for inclusion into the European Monetary
Union (EMU), scheduled for January 1, 1999. The tight fiscal policies
allowed long-term interest rates to decline, especially in peripheral
European countries whose bond yields had previously included a larger
inflation risk factor. Lower interest rates, in turn, provided a healthy
environment for equity prices. The following table displays changes in 10-
year government bond yields over the fiscal year:
<TABLE>
<CAPTION>
Percentage
May 31, 1997 May 31, 1996 Change
------------ ------------- ----------
<S> <C> <C> <C>
Italy ................ 7.33% .......... 9.67% .......... -24.2%
Spain ................ 6.68% .......... 9.25% .......... -27.8%
Germany .............. 5.93% .......... 6.51% .......... -8.9%
France ............... 5.81% .......... 6.49% .......... -10.5%
Belgium .............. 6.01% .......... 6.72% .......... -10.6%
Netherlands .......... 5.78% .......... 6.39% .......... -9.5%
</TABLE>
. Many Pacific Rim economies experienced a mild slowdown in growth rates,
primarily because of weak demand and pricing for electronic exports. Also,
Thailand and South Korea struggled with the loss of economic competitiveness
to lower-wage nations such as China, Vietnam, and Indonesia. Thailand's
massive trade deficit created fears that its currency would be devalued.
. Economic growth in the United States surged in the first quarter, leading to
concerns that the Federal Reserve Board would raise interest rates
aggressively to head off possible inflation. Continued robust growth in
corporate profits supported higher U.S. equity prices despite a mild
increase in short- and long-term interest rates over the fiscal year.
. Japan's economy continued to recover at a moderate pace, held up in large
part by exports (due to the weak Yen) and very loose monetary conditions.
6
<PAGE>
Q What significant investment techniques and strategies were used to pursue
the Fund's investment objectives?
A As a result of our top-down analysis of global markets, we took the
following approach to regional allocations at the end of the fiscal year,
relative to the Morgan Stanley Capital International (MSCI)World Index:
. A neutral position in Europe, with a slight overweighting in Germany and
Spain
. A mild overweighting in developed Asia, especially in Singapore and Hong
Kong
. A moderate underweighting in both the United States and Japan
Q How has the Fund performed during the reporting period?
A We are pleased to report that the Fund achieved a 12-month total return of
17.67 percent/1/ (Class A shares at net asset value). This compares favorably to
the Morgan Stanley Capital International World Index, which produced a total
return of 8.87 percent during the same period. Please keep in mind that the
index 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.
Q What is your outlook for the months ahead?
A We expect the rate of global economic activity to accelerate, with only a
moderate pick-up in inflation from current levels. We also anticipate that
consumer spending will increase, especially in Europe and Japan, giving
corporations some relief from the intense pricing pressures of recent years.
Overall, the pattern of moderate but accelerating growth with only mild
increases in inflation and interest rates will create a favorable backdrop for
global equity prices. In Europe, we anticipate that progress towards monetary
union will continue, although the election of leftist-leaning political groups
in France increases the risk of delay in implementation. We also believe that
growth in the Pacific Basin should rebound from its current cyclically depressed
level. In the United States, we find stock prices to be generously valued, in
part because of extreme optimism over the future growth rate of corporate
profits. Accordingly, we prefer to take a defensive approach to the domestic
equity market.
/s/ Barton M. Biggs /s/ Madhav Dhar
Barton M. Biggs Madhav Dhar
Portfolio Manager Portfolio Manager
Morgan Stanley Asset Management Inc. Morgan Stanley Asset Management Inc.
/s/ Francine J. Bovich /s/ Ann D. Thivierge
Francine J. Bovich Ann D. Thivierge
Portfolio Manager Portfolio Manager
Morgan Stanley Asset Management Inc. Morgan Stanley Asset Management Inc.
7 Please see footnotes on page three
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
May 31, 1997
================================================================================
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 93.4%
Austria 0.1%
Scala ECE (b)...................................... 1,289 $188,395
Slovenske Energeticke Strojarne (b)................ 13,000 137,754
--------
326,149
--------
Bermuda 0.0%
Applied International Holdings (b)................. 20,000 1,600
--------
Canada 4.1%
Abitibi Price, Inc. (b)............................ 4,800 86,328
Agrium, Inc........................................ 6,100 82,779
Alcan Aluminum..................................... 9,700 347,507
Avenor, Inc........................................ 2,900 56,669
Bank of Montreal................................... 11,200 426,779
Bank of Nova Scotia................................ 9,900 410,201
Barrick Gold Corp.................................. 16,900 426,873
BCE, Inc........................................... 29,800 783,984
Bombardier, Inc., Class B.......................... 13,300 279,149
Cae, Inc........................................... 5,400 42,404
Cameco Corp........................................ 2,500 97,434
Canadian Imperial Bank............................. 8,500 205,164
Canadian Natural Resources (b)..................... 4,700 123,308
Canadian Occidental Petroleum...................... 6,200 140,226
Canadian Pacific................................... 14,800 393,110
Canadian Tire, Class A............................. 5,200 97,474
Cominco............................................ 3,700 103,098
Corel Corp (b)..................................... 3,000 17,696
Cott Corp.......................................... 2,000 18,311
Dofasco, Inc....................................... 4,000 73,098
Domtar, Inc........................................ 3,600 28,139
Echo Bay Mines..................................... 6,200 38,141
Gulf Canada Resource (b)........................... 9,700 87,754
Imasco............................................. 10,600 296,895
Imperial Oil....................................... 7,100 344,286
Inco............................................... 6,900 226,721
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
<TABLE>
<CAPTION>
========================================================================================
Number
Description of Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Canada (Continued)
IPL Energy, Inc............................................. 2,300 $ 72,744
Laidlaw, Inc., Class B Non Voting........................... 12,300 166,469
Loewen Group, Inc........................................... 2,600 85,807
Macmillan Bloedel........................................... 6,500 94,087
Magna International, Inc.................................... 3,200 171,383
Methanex Corp. (b).......................................... 7,800 70,565
Molson Companies, Class A................................... 3,300 56,724
Moore Corp.................................................. 5,100 113,686
Newbridge Networks Corp. (b)................................ 6,500 258,739
Noranda, Inc................................................ 10,700 238,518
Norcen Energy Resources..................................... 5,200 125,136
Northern Telecom............................................ 10,300 861,377
Nova Corp................................................... 21,800 180,654
Petro....................................................... 12,400 215,387
Placer Dome, Inc............................................ 9,400 171,101
Potash Corporation of Saskatchewan, Inc..................... 1,900 154,701
Power Corporation of Canada................................. 5,800 133,068
Provigo, Inc. (b)........................................... 5,200 28,038
Ranger Oil.................................................. 8,400 88,152
Renaissance Energy (b)...................................... 5,100 160,009
Repap Enterprises, Inc. (b)................................. 5,100 2,178
Rogers Communications, Inc., Class B (b).................... 8,700 50,058
Royal Bank of Canada........................................ 12,800 553,984
Seagram..................................................... 14,700 590,468
Talisman Energy, Inc. (b)................................... 5,200 169,921
Teck Corp., Class B Subordinated Voting..................... 4,700 104,089
Thomson Corp................................................ 25,700 571,029
Transcanada Pipelines....................................... 9,500 183,578
Westcoast Energy, Inc....................................... 4,900 88,836
Weston George............................................... 2,700 163,169
----------
11,157,183
----------
Czech Republic 0.0%
Prazske Pivovary............................................ 24,000 144,260
----------
</TABLE>
9 See Notes to Financial Statements
<PAGE>
<TABLE>
Portfolio of Investments (Continued)
May 31, 1997
================================================================================
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
France 5.0%
Accor................................................. 1,700 $ 235,514
Air Liquide........................................... 2,850 436,783
Alcatel Alsthom....................................... 5,900 638,572
AXA-UAP............................................... 12,200 729,938
BIC................................................... 1,450 213,435
Bouygues.............................................. 1,300 112,517
BQE National Paris.................................... 8,550 350,759
Canal Plus............................................ 950 160,894
Carrefour............................................. 1,500 984,484
Cie Bancaire.......................................... 1,100 121,723
Cie De St Gobain...................................... 3,400 469,262
Cie De Suez........................................... 5,650 288,048
Cie Fin Paribas....................................... 3,400 218,852
CSF Thomson........................................... 4,650 132,464
Danone................................................ 3,050 458,984
Eaux Cie Generale..................................... 4,350 534,842
Eaux Cie Generale Warrants, expiring 5/21/02 (b)...... 3,550 2,428
Elf Aquitaine......................................... 10,750 1,074,144
Erid Beghin Say....................................... 1,150 160,912
Essilor International................................. 425 107,748
Havas................................................. 2,600 175,146
L'Oreal............................................... 2,700 979,548
Lafarge............................................... 3,950 252,407
Legrand............................................... 1,200 193,052
LVMH (Moet Hennessy Louis Vuitton) (b)................ 3,400 823,122
Lyonnaise des Eaux.................................... 2,500 245,472
Michelin (CGDE), Class B.............................. 5,950 324,877
Pernod Ricard......................................... 2,650 126,429
Peugeot............................................... 2,300 227,427
Pin Printemps Redo.................................... 850 356,215
Promodes.............................................. 800 270,841
Sagem................................................. 125 62,775
Saint Louis........................................... 425 97,959
10 See Notes to Financial Statements
</TABLE>
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
================================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
France (Continued)
Sanofi............................................... 4,200 $ 364,389
Schneider............................................ 6,000 288,124
Societe Generale..................................... 3,700 410,712
Sodexho Alliance..................................... 275 127,628
Total, Class B....................................... 9,450 864,060
Usinor Sacilor....................................... 10,350 155,216
-----------
13,777,702
-----------
Germany 4.3%
Adidas............................................... 1,400 147,036
AGIV (b)............................................. 1,350 24,803
Amb Aach & Mun Bet................................... 100 92,563
BASF................................................. 16,500 608,215
Bayerische........................................... 21,000 814,025
Bayerische Hypotheden-und-Wechsel-Bank............... 7,050 223,780
Bayerische Vereinsbank............................... 7,400 304,382
Beiersdorf, Class A.................................. 2,450 130,449
Bilfinger & Berger BAU............................... 1,400 54,473
Brau Und Brunnen (b)................................. 250 18,577
CKAG Colonia Konzern................................. 800 77,234
Continental.......................................... 2,800 63,615
Daimler Benz......................................... 14,300 1,100,257
Degussa.............................................. 2,500 121,482
Deutsche Telekom..................................... 60,000 1,330,525
Dresdner Bank........................................ 12,450 435,615
Heidelberg Zement (b)................................ 1,350 126,382
Hochtief............................................. 2,600 109,531
Karstadt............................................. 300 105,845
Klockner Humb Deut................................... 1,800 17,694
Linde................................................ 300 206,249
Lufthansa............................................ 10,800 171,943
Man.................................................. 400 114,446
Mannesmann........................................... 1,050 426,365
Merck KGaA........................................... 4,550 187,021
</TABLE>
11 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
================================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Germany (Continued)
Metro................................................ 2,900 $ 317,217
Muenchener Rueckversicherungs - Gesellschaft......... 200 509,040
Preussag............................................. 500 131,648
RWE.................................................. 9,400 400,398
SAP.................................................. 1,700 303,177
Schering............................................. 2,050 205,828
Siemens.............................................. 16,000 901,808
Strabag (b).......................................... 100 8,484
Thyssen.............................................. 1,100 249,722
Veba................................................. 14,000 791,294
Viag................................................. 800 364,168
Volkswagen........................................... 800 516,763
-----------
11,712,054
-----------
Hong Kong 2.1%
Bank of East Asia (b)................................ 22,600 82,251
Cathay Pacific Air................................... 85,000 127,799
Cheung Kong Holdings................................. 64,000 654,578
China Light & Power Co............................... 53,500 267,897
Chinese Estates Holdings............................. 48,000 48,629
Giordano International............................... 18,000 10,802
Hang Lung Development Co............................. 36,000 68,994
Hang Seng Bank....................................... 55,600 667,329
Hong Kong & China Gas Co. (ADR)...................... 97,200 169,349
Hong Kong & Shang Hotels............................. 37,000 57,301
Hong Kong Aircraft................................... 5,600 17,092
Hong Kong Telecommunications......................... 314,000 694,986
Hopewell Holdings.................................... 125,000 69,772
HSBC Holdings........................................ 1,315 39,882
Hutchison Whampoa.................................... 97,000 807,447
Hysan Development.................................... 31,000 103,420
Johnson Electric Holdings (b)........................ 11,500 33,913
Miramar Hotel & Investment........................... 17,000 32,361
Oriental Press Group................................. 42,000 14,364
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
<TABLE>
<CAPTION>
========================================================================================
Number
Description of Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Hong Kong (Continued)
Peregrine Investment......................................... 11,000 $ 19,591
Shangri-La Asia.............................................. 46,000 58,179
Shun Tak Holdings............................................ 48,000 31,593
Stelux Holdings International................................ 30,000 5,653
Sth China Morn Pst........................................... 54,000 51,920
Sun Hung Kai Properties...................................... 65,000 799,026
Swire Pacific, Class A....................................... 45,000 377,492
Television Broadcast......................................... 13,000 56,708
Wharf Holdings............................................... 63,000 282,132
Wing Lung Bank............................................... 5,280 30,323
Winsor Industrial............................................ 10,000 2,181
-----------
5,682,964
-----------
Hungary 0.1%
Tiszai Vegyi Kombinat Rt (GDR) (b)........................... 27,000 395,550
-----------
Italy 1.8%
Assic Generali............................................... 26,500 453,539
BCA Comm Italiana............................................ 42,000 82,664
BCO Ambros Veneto............................................ 16,000 39,423
Benetton Group............................................... 5,500 76,928
Burgo Cartiere............................................... 5,000 29,154
Credito Italiano............................................. 72,500 107,823
Edison....................................................... 19,000 90,041
ENI.......................................................... 229,000 1,141,993
Falck Acciaierie & Ferriere Lombarde......................... 5,000 19,254
Fiat......................................................... 97,000 318,000
Fiat Di Risp................................................. 22,000 38,561
Fiat Priv.................................................... 33,000 55,797
IMI.......................................................... 18,250 159,618
Impregilo (b)................................................ 10,000 7,283
Instituto Bancario San Paolo................................. 25,000 157,204
Instituto Nazionale delle Assicurazioni...................... 122,000 168,479
Italcementi.................................................. 7,000 40,712
Italcementi Di Risp.......................................... 4,500 11,088
</TABLE>
13 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
<TABLE>
<CAPTION>
========================================================================================
Number
Description of Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Italy (Continued)
Italgas........................................................ 19,000 $ 58,476
Magneti Marelli................................................ 15,000 23,902
Mediaset....................................................... 34,500 148,429
Montedison (b)................................................. 85,000 51,919
Montedison Di Risp (b)......................................... 30,000 19,121
Olivetti & C. (b).............................................. 105,000 30,550
Parmalat Finanz (b)............................................ 45,000 64,136
Pirelli........................................................ 50,000 108,885
Ras............................................................ 8,500 64,711
Rinascente LA.................................................. 7,000 33,875
Sasib.......................................................... 5,000 16,879
Sirti.......................................................... 9,000 51,813
Snia BPD....................................................... 20,000 16,406
Societa Assicuratrice Industriale.............................. 4,000 28,092
Telecom Italia Di Risp......................................... 45,000 98,793
Telecom Italia Mob............................................. 190,000 557,290
Telecom Italia Mob Di Risp..................................... 45,000 78,610
Telecom Italia Ord............................................. 185,000 509,325
-----------
4,958,773
-----------
Japan 12.0%
Advantest...................................................... 2,000 136,024
Ajinomoto Co., Inc............................................. 28,000 281,322
Aoki Corp. (b)................................................. 13,000 15,629
Aoyama Trading Co.............................................. 2,100 65,281
Asahi Bank..................................................... 22,000 143,770
Asahi Breweries................................................ 15,000 204,809
Asahi Chemical Industry Co..................................... 45,000 250,408
Asahi Glass Co................................................. 43,000 417,261
Bank of Tokyo.................................................. 42,600 738,961
Bridgestone Corp............................................... 16,000 361,357
Canon, Inc..................................................... 19,000 481,322
Casio Computer Co.............................................. 9,000 70,794
Chiba Bank..................................................... 12,000 62,344
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
<TABLE>
<CAPTION>
========================================================================================
Number
Description of Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Japan (Continued)
Chiyoda Corp................................................ 2,000 $ 9,412
Chugai Pharm Co. (b)........................................ 16,000 135,749
Dai Nippon Printing......................................... 20,000 400,172
Daiei, Inc. (b)............................................. 18,000 117,475
Daikin Industries........................................... 15,000 145,556
Daiwa House Industries...................................... 15,000 176,471
Daiwa Securities............................................ 31,000 228,141
Denso Corp.................................................. 19,000 474,796
East Japan Railway.......................................... 90 444,397
Ebara Corp.................................................. 11,000 159,639
Fanuc....................................................... 6,500 231,644
Fuji Bank................................................... 26,000 334,908
Fuji Photo Film Co.......................................... 10,000 387,291
Fujitsu (b)................................................. 39,000 475,569
Furukawa Electric........................................... 17,000 100,730
Hankyu Corp................................................. 21,000 109,103
Hazama Corp................................................. 15,000 28,338
Hitachi..................................................... 76,000 809,274
Honda Motor Co.............................................. 20,000 587,377
Ind Bank Japan.............................................. 22,000 264,491
Ito Yokado Co............................................... 10,000 570,202
Japan Air Lines Co. (b)..................................... 53,000 224,835
Japan Energy Corp........................................... 38,000 95,286
Joyo Bank................................................... 8,000 39,158
Jusco Co.................................................... 8,000 269,987
Kajima Corp................................................. 31,000 173,302
Kansai Electric Power....................................... 20,300 381,769
Kao Corp.................................................... 28,000 379,906
Kawasaki Steel Corp......................................... 48,000 140,970
Kinki Nippon Railway........................................ 37,000 222,095
Kirin Brewery Co............................................ 31,000 306,140
Komatsu..................................................... 31,000 234,264
Kubota Corp................................................. 45,000 206,741
</TABLE>
15 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
<TABLE>
<CAPTION>
========================================================================================
Number
Description of Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Japan (Continued)
Kumagai Gumi Co............................................. 31,000 $ 50,580
Kyocera Corp................................................ 4,500 324,216
Kyowa Hakko Kogyo........................................... 15,000 106,655
Marubeni Corp............................................... 45,000 191,284
Marui Co.................................................... 7,000 130,442
Matsushita Electric Industries.............................. 45,000 846,286
Mitsubishi Chemical......................................... 45,000 136,797
Mitsubishi Corp............................................. 42,000 494,118
Mitsubishi Electric Corp.................................... 53,000 300,386
Mitsubishi Estate........................................... 33,000 450,580
Mitsubishi Heavy Industries................................. 83,000 597,286
Mitsubishi Materials Corp................................... 31,000 120,060
Mitsubishi Trust & Banking Corp............................. 13,000 186,432
Mitsui & Co................................................. 45,000 398,025
Mitsui Engineering & Ship Building Co. (b).................. 31,000 57,235
Mitsui Trust & Banking Co................................... 13,000 97,793
Mitsukoshi.................................................. 17,000 119,562
Murata Manufacturing Co..................................... 5,000 197,939
Mycal Corp.................................................. 10,000 144,268
NEC Corp.................................................... 31,000 431,258
NGK Insulators.............................................. 15,000 146,844
Nippon Express Co........................................... 19,000 147,660
Nippon Fire & Marine Insurance.............................. 15,000 71,232
Nippon Light Metal.......................................... 15,000 58,609
Nippon Meat Packer.......................................... 15,000 182,911
Nippon Oil Co............................................... 45,000 227,995
Nippon Steel Corp........................................... 170,000 497,810
Nippon Telegraph & Telephone Corp........................... 185 1,763,418
Nippon Yusen Kabushiki Kaisha............................... 45,000 185,487
Nissan Fire & Marine Insurance.............................. 2,350 11,039
Nissan Motor Co............................................. 58,000 384,508
NKK Corp.................................................... 89,000 175,019
Nomura Securities........................................... 39,000 462,173
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
<TABLE>
<CAPTION>
========================================================================================
Number
Description of Shares Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Japan (Continued)
Odakyu Electric Railway....................................... 18,000 $ 99,699
Oji Paper Co.................................................. 31,000 179,158
Osaka Gas Co.................................................. 67,000 176,058
Penta Ocean Construction...................................... 15,000 49,077
Pioneer Electronic............................................ 5,000 123,658
Rohm Co....................................................... 2,000 207,814
Sakura Bank................................................... 34,000 203,504
Sanyo Electric Co............................................. 45,000 189,738
Secom Co...................................................... 3,000 215,887
Sega Enterprises.............................................. 3,000 100,472
Sekisui House................................................. 15,000 146,844
Sharp Corp.................................................... 30,000 386,432
Shimano, Inc.................................................. 4,000 76,599
Shimizu Corp.................................................. 22,000 130,923
Shin Etsu Chemical Co......................................... 7,000 175,526
Shiseido Co................................................... 7,000 102,190
Shizuoka Bank................................................. 10,000 96,179
Showa Denko K.K. (b).......................................... 31,000 78,532
Softbank Corp................................................. 700 47,308
Sony Corp..................................................... 7,000 589,695
Sumitomo Bank................................................. 27,000 373,293
Sumitomo Chemical............................................. 61,000 252,486
Sumitomo Corp................................................. 31,000 274,195
Sumitomo Electric Industries.................................. 21,000 330,013
Sumitomo Forestry............................................. 6,000 65,436
Sumitomo Metal Industries..................................... 78,000 198,935
Sumitomo Metal Mining Co...................................... 15,000 104,465
Sumitomo Osaka Cement Co...................................... 16,000 48,227
Taisei Corp................................................... 31,000 132,838
Taisho Pharmacy Co............................................ 9,000 225,676
Takeda Chemical Industries.................................... 19,000 481,322
Teijin........................................................ 31,000 130,708
Tobu Railway Co............................................... 21,000 94,135
</TABLE>
17 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
================================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Japan (Continued)
Tohoku Electric Power................................ 10,900 $ 186,269
Tokai Bank........................................... 22,000 180,988
Tokio Marine & Fire Insurance Co..................... 45,000 529,412
Tokyo Dome Corp...................................... 3,000 45,084
Tokyo Electric Power................................. 28,300 539,511
Tokyo Electron....................................... 2,000 100,816
Tokyo Gas Co......................................... 61,000 155,577
Tokyu Corp........................................... 26,000 148,699
Toppan Printing Co................................... 21,000 288,536
Toray Industries, Inc................................ 45,000 306,054
Toto................................................. 15,000 168,742
Toyobo Co............................................ 31,000 78,798
Toyota Motor Corp.................................... 70,000 2,007,729
Ube Industries....................................... 31,000 87,849
Yamaichi Securities Co............................... 31,000 87,849
Yasuda Trust & Banking............................... 15,000 45,084
-----------
32,834,396
-----------
Netherlands 1.5%
ABN Amro Holdings.................................... 18,800 347,152
Ahold Koninklijke.................................... 2,300 174,549
Akzo Nobel........................................... 1,100 146,304
Elsevier............................................. 9,900 167,360
Getronics............................................ 1,200 40,884
Heineken............................................. 700 118,372
ING Groep NV......................................... 10,922 482,329
KLM Royal Dutch Air Lines............................ 1,300 37,529
Koninklijke KNP BT................................... 1,500 30,897
Koninklijke Nedlloyd................................. 400 9,800
OCE.................................................. 302 39,350
Philips Electronic................................... 4,800 262,408
Royal Dutch Petroleum Co............................. 7,300 1,409,119
Royal PTT (ADR)...................................... 6,400 223,709
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
================================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Netherlands (Continued)
Stork.................................................. 500 $ 22,107
Unilever............................................... 2,200 422,835
Wolters Kluwer......................................... 1,000 120,208
-----------
4,054,912
-----------
Singapore 3.0%
City Developments...................................... 85,000 790,394
Creative Technologies Corp. (b)........................ 9,000 166,748
Cycle & Carriage....................................... 25,000 253,443
DBS Land............................................... 16,000 55,932
Development Bank of Singapore.......................... 52,000 650,773
First Capital Corp..................................... 31,000 85,395
Fraser & Neave......................................... 32,000 255,051
Hai Sun Hup Group...................................... 60,000 42,369
Hotel Properties....................................... 50,000 85,646
Inchcape Berhad........................................ 21,000 77,816
Jurong Shipyard........................................ 12,000 54,115
Keppel Corp............................................ 77,000 355,310
Keppel Corp., Class A (b).............................. 4,750 21,918
Metro Holdings......................................... 12,000 38,593
Natsteel............................................... 36,000 94,637
Neptune Orient Lines................................... 92,000 82,976
Overseas Chinese Bank.................................. 75,000 933,371
Overseas Union Enterprise.............................. 16,000 76,627
Parkway Holdings....................................... 35,000 173,740
Robinson & Co.......................................... 6,000 30,203
Shangri-La Hotel....................................... 17,000 51,108
Singapore Airlines..................................... 95,000 810,320
Singapore Press Holdings............................... 22,000 438,370
Singapore Technologies Industrial Corp................. 78,000 217,045
Singapore Telecommunications........................... 654,000 1,179,697
Straits Trading Co..................................... 37,000 86,401
United Industrial Corp................................. 151,000 122,464
United Overseas Bank................................... 87,000 894,148
</TABLE>
19 See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
May 31, 1997
================================================================================
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
Singapore (Continued)
United Overseas Land..................................... 58,000 $ 90,834
------------
8,215,444
------------
Spain 2.1%
Acerinox................................................. 500 84,740
Aguas De Barcelona....................................... 1,700 68,677
Argentaria Corp.......................................... 5,120 255,008
Autopistas Cesa.......................................... 8,200 100,969
BCO Bilbao Vizcaya....................................... 9,100 644,604
BCO Central Hispan....................................... 6,600 212,984
BCO Santander............................................ 6,500 554,407
Corp Fin Alba............................................ 600 65,993
Corporacion Mapfre....................................... 1,100 58,896
Dragados Y Construction.................................. 2,300 44,549
Ebro Agricolas........................................... 2,000 38,323
Emp Nac Electricid (b)................................... 10,400 794,245
Empresa Nacl Celul....................................... 900 13,292
Ercros (b)............................................... 6,900 5,298
Fom Const Y Contra....................................... 600 66,782
Gas Natural SDG.......................................... 1,500 285,971
Iberdrola................................................ 37,700 462,905
Metrovacesa.............................................. 900 34,989
Portland Valderriv....................................... 300 20,794
Repsol................................................... 12,200 510,584
Tabacalera, Class A...................................... 1,500 76,162
Telefonica De Espana..................................... 38,000 1,096,154
Union Electrica Fenosa................................... 11,800 104,483
Uralita.................................................. 2,100 20,338
Vallehermoso............................................. 1,700 42,923
Viscofan Envoltura....................................... 900 18,179
Zardoya Otis............................................. 400 50,083
------------
5,732,332
------------
Sweden 2.0%
ABB, Class A............................................. 32,000 431,417
20 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
================================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Sweden (Continued)
AGA, Class A........................................... 2,700 $ 36,227
AGA, Class B........................................... 4,700 61,848
Astra, Class A......................................... 60,000 967,592
Atlas Copco, Class A................................... 7,400 198,576
Electrolux, Class B.................................... 2,900 172,851
Ericsson Telephonaktiebolaget LM, Class B (b).......... 36,800 1,291,361
Esselte, Class A....................................... 1,500 34,253
Granges (b)............................................ 1,450 18,052
Hennes & Mauritz, Class B.............................. 8,000 261,121
Securitas, Class B..................................... 3,600 89,638
Skand Enskilda Banking, Class A........................ 21,100 217,773
Skandia Foersaekrings.................................. 4,600 162,310
Skanska, Class B....................................... 4,900 197,234
SKF, Class B........................................... 4,800 110,847
Stora Kopparbergs, Class A............................. 12,200 180,217
Svenska Cellulosa, Class B............................. 7,500 157,234
Svenska Handelsbkn, Class A (b)........................ 8,200 222,159
Swedish Match.......................................... 18,800 61,121
Trelleborg, Class B.................................... 5,300 91,966
Volvo.................................................. 15,600 431,701
-----------
5,395,498
-----------
Switzerland 2.9%
ABB.................................................... 210 287,927
Adecco................................................. 420 157,752
Alusuisse Lonza Holdings............................... 130 122,529
Credit Suisse Group.................................... 4,300 539,625
Georg Fischer.......................................... 20 28,523
Holderbk Fn Glarus..................................... 160 140,300
Nestle................................................. 900 1,118,328
Novartis (b)........................................... 1,466 1,987,235
Roche Holdings Bearer.................................. 37 485,880
Roche Holdings Genusscheine............................ 158 1,403,304
Sairgroup (b).......................................... 80 81,446
</TABLE>
21 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
================================================================================
<TABLE>
<CAPTION>
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Switzerland (Continued)
Schw Bankgesellsch..................................... 480 $ 525,953
Schweiz Bankverein (b)................................. 1,730 415,278
SGS Holdings........................................... 40 88,534
SMH.................................................... 120 70,743
Sulzer................................................. 90 70,785
Ubs Schw Bkgesell (b).................................. 500 109,433
Valora Holdings........................................ 150 33,412
Zuerich Versicherun.................................... 1,080 396,498
-----------
8,063,485
-----------
Thailand 0.6%
Siam Cement Co......................................... 39,000 851,487
Telecomasia (b)........................................ 135,000 153,971
Thai Military Bank Public Co........................... 501,600 618,061
-----------
1,623,519
-----------
United Kingdom 7.8%
Abbey National......................................... 28,500 411,672
Arjo Wiggins Apple..................................... 14,200 38,560
Associated British Foods............................... 10,200 94,441
B.A.T Industries....................................... 63,100 565,144
Barclays............................................... 34,600 672,982
Bass................................................... 22,400 291,863
BG..................................................... 89,500 298,675
BICC................................................... 14,200 39,490
Blue Circle Industiries................................ 26,400 181,725
BOC Group.............................................. 14,200 238,564
Boots Co............................................... 22,400 259,434
BPB.................................................... 14,200 80,257
British Aerospace...................................... 10,200 207,404
British Airways........................................ 24,400 283,396
British Petroleum...................................... 115,900 1,384,050
British Sky Broadcast.................................. 32,500 305,701
British Steel.......................................... 40,700 100,868
British Telecomunications.............................. 118,000 855,128
</TABLE>
22 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
================================================================================
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
United Kingdom (Continued)
BTR ................................................ 85,400 $ 278,008
Burmah Castrol ..................................... 6,100 105,775
Cable & Wireless ................................... 50,900 415,493
Cadbury Schweppes .................................. 22,400 200,805
Caradon ............................................ 14,670 51,116
Centrica (b) ....................................... 89,500 92,970
Coats Viyella ...................................... 18,300 36,223
Commercial Union ................................... 14,200 159,584
Courtaulds ......................................... 10,200 56,064
De Lousiana Rue .................................... 2,000 16,031
EMI Group .......................................... 10,200 195,557
General Electric ................................... 59,000 336,840
GKN ................................................ 12,200 211,150
Glaxo Wellcome ..................................... 65,100 1,301,361
Granada Group ...................................... 14,200 201,629
Grand Metropolitan ................................. 44,700 415,338
Great University Stores ............................ 24,400 257,451
Guardian Royal Exchange ............................ 16,300 74,661
Guinness ........................................... 44,800 417,000
Hanson ............................................. 12,200 63,066
Harrison & Crosfield ............................... 26,400 52,688
HSBC Holdings (ADR) ................................ 44,700 1,333,761
Imperial Chemical Industries ....................... 18,300 243,980
Ladbroke Group ..................................... 24,400 91,804
Lasmo .............................................. 16,300 65,328
Legal & General Group .............................. 24,400 176,424
Lloyds TSB Group ................................... 111,900 1,125,315
Lonrho ............................................. 16,300 36,130
Marks & Spencer .................................... 71,200 591,974
MEPC ............................................... 12,200 102,981
National Power ..................................... 28,500 257,819
North West Water (b) ............................... 14,200 162,372
P & O Finance (b) .................................. 16,300 169,786
See Notes to Financial Statements
23
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
================================================================================
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
United Kingdom (Continued)
Pilkington ......................................... 30,500 $ 62,367
Prudential Corp. ................................... 40,700 410,129
Rank Group ......................................... 18,300 128,726
Redland ............................................ 12,200 65,061
Reed International ................................. 26,600 261,592
Reuters Holdings ................................... 34,600 388,281
Rexam .............................................. 12,200 57,278
Rio Tinto .......................................... 24,400 419,107
RMC Group .......................................... 6,100 91,106
Royal Bank Scot Group .............................. 10,200 100,448
Royal Sun Alliance ................................. 28,500 214,927
Safeway ............................................ 18,300 108,070
Sainsbury J Finance ................................ 32,500 186,611
Schroders .......................................... 4,100 114,690
Scottish Power ..................................... 20,300 127,186
Sears .............................................. 40,700 51,433
Sedgwick Group ..................................... 12,200 24,947
Slough Estates ..................................... 10,200 52,894
Smithkline Beecham ................................. 50,900 875,117
Southern Electric .................................. 10,200 67,577
Tarmac ............................................. 28,500 58,977
Taylor Woodrow ..................................... 16,300 55,297
Tesco .............................................. 38,600 236,790
Thames Water ....................................... 14,200 159,526
Thorn .............................................. 10,200 25,529
TI Group ........................................... 10,200 95,276
Unilever ........................................... 14,200 379,797
Vodafone Group ..................................... 67,100 298,564
Zeneca Group ....................................... 18,300 555,915
------------
21,279,056
------------
United States 44.0%
Abbott Laboratories, Inc. (a) ...................... 18,600 1,171,800
AirTouch Communications, Inc. (b) .................. 18,300 510,113
See Notes to Financial Statements
24
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
================================================================================
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
United States (Continued)
Aluminum Company of America ........................ 8,200 $ 603,725
American Express Co. (a) ........................... 17,300 1,202,350
American Home Products Corp. ....................... 14,600 1,113,250
American International Group, Inc. (a) ............. 15,700 2,125,387
Amoco Corp. (a) .................................... 13,400 1,197,625
AMR Corp. (b) ...................................... 8,200 814,875
Applied Materials, Inc. (b) ........................ 5,400 352,350
AT&T Corp. (a) ..................................... 41,800 1,541,375
Atlantic Richfield Co. ............................. 4,300 625,650
Automatic Data Processing, Inc. .................... 8,200 402,825
BancOne Corp. ...................................... 16,400 709,300
BankAmerica Corp. (a) .............................. 15,500 1,811,562
Bankers Trust New York Corp. ....................... 2,500 211,563
Bell Atlantic Corp. (a) ............................ 15,500 1,085,000
BellSouth Corp. .................................... 17,900 812,213
Boeing Co. (a) ..................................... 9,700 1,020,925
Bristol-Myers Squibb Co. ........................... 13,000 953,875
Campbell Soup Co. .................................. 6,100 280,600
Caterpillar, Inc. .................................. 8,200 800,525
Chevron Corp. (a) .................................. 18,100 1,267,000
Chrysler Corp. ..................................... 13,800 438,150
Chubb Corp. ........................................ 8,200 500,200
CIGNA Corp. ........................................ 3,500 608,125
Cisco Systems, Inc. (b) ............................ 11,500 779,125
Citicorp (a) ....................................... 13,300 1,521,187
Coca Cola Co. ...................................... 63,100 4,306,575
Columbia / HCA Healthcare Corp. .................... 18,100 662,913
Consolidated Edison Co. ............................ 16,400 477,650
Cooper Industries, Inc. ............................ 8,200 418,200
Corning, Inc. ...................................... 8,200 413,075
CSX Corp. .......................................... 5,900 312,700
Deere & Co. ........................................ 4,100 209,613
Dow Chemical Co. ................................... 12,100 1,008,837
See Notes to Financial Statements
25
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
================================================================================
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
United States (Continued)
DSC Communications Corp. (b) ....................... 3,900 $ 99,694
Du Pont (E. I.) de Nemours & Co. ................... 22,600 2,460,575
Duke Power Co. ..................................... 16,400 738,000
Dun & Bradstreet Corp. ............................. 6,200 161,975
Eastman Kodak Co. .................................. 16,400 1,359,150
Edison International ............................... 8,300 194,013
Electronic Data Systems Corp. ...................... 13,700 512,038
Enron Corp. ........................................ 11,300 460,475
Exxon Corp. ........................................ 62,400 3,697,200
Federal National Mortgage Association .............. 27,900 1,217,137
First Data Corp. ................................... 11,600 464,000
Fleet Financial Group, Inc. ........................ 7,700 470,663
FPL Group, Inc. .................................... 16,400 762,600
Gannett, Inc. ...................................... 6,200 573,500
General Electric Co. ............................... 79,800 4,817,925
General Motors Corp. ............................... 26,500 1,517,125
General Reinsurance Corp. (b) ...................... 2,700 473,175
Gillette Co. ....................................... 11,500 1,022,062
Goodyear Tire & Rubber Co. ......................... 8,200 479,700
H & R Block, Inc. .................................. 3,500 115,500
Harrahs Entertainment, Inc. (b) .................... 1,500 27,938
Heinz, H. J. & Co. ................................. 15,600 670,800
Hewlett Packard Co. ................................ 25,500 1,313,250
Home Depot, Inc. ................................... 15,500 976,500
Intel Corp. ........................................ 15,400 2,333,100
International Business Machines Corp. .............. 31,600 2,733,400
International Paper Co. ............................ 12,300 590,400
JC Penney, Inc. .................................... 9,900 509,850
Johnson & Johnson, Inc. ............................ 33,300 1,993,837
JP Morgan & Co., Inc. .............................. 8,200 881,500
Kmart Corp. (b) .................................... 3,500 49,000
Korea Fund, Inc. ................................... 262,500 3,609,375
Latin American Discovery Fund, Inc. ................ 157,300 2,929,712
See Notes to Financial Statements
26
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
================================================================================
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
United States (Continued)
Lilly Eli & Co. (b) ................................ 12,600 $ 1,171,800
Limited, Inc. ...................................... 6,100 123,525
Lucent Technologies, Inc. .......................... 15,700 998,912
McDonalds Corp. .................................... 20,500 1,030,125
Merck & Co., Inc. .................................. 29,900 2,687,262
Microsoft Corp. (b) ................................ 27,300 3,385,200
Minnesota Mining & Manufacturing Co. ............... 14,000 1,284,500
Mobil Corp. ........................................ 12,500 1,748,437
Monsanto Co. ....................................... 5,300 233,200
Morgan Stanley Asia Pacific Fund, Inc. ............. 300,000 3,150,000
Morgan Stanley India Investment Fund (b) ........... 174,100 1,958,625
Motorola, Inc. ..................................... 16,300 1,081,912
NationsBank Corp. .................................. 16,400 965,550
Norfolk Southern Corp. ............................. 6,300 611,888
Norwest Corp. ...................................... 17,900 957,650
Novell, Inc. (b) ................................... 10,100 79,538
Nucor Corp. ........................................ 3,700 218,300
Oracle Systems Corp. (b) ........................... 21,900 1,021,087
PepsiCo, Inc. ...................................... 42,600 1,565,550
Pfizer, Inc. ....................................... 15,300 1,573,987
PG&E Corp. ......................................... 24,200 559,625
Philip Morris Cos., Inc. ........................... 48,900 2,151,600
PPG Industries, Inc. ............................... 5,400 313,875
Procter & Gamble Co. ............................... 20,900 2,881,587
Public Service Enterprise Group .................... 16,300 403,425
Rockwell International Corp. ....................... 10,100 651,450
Salomon, Inc. ...................................... 5,400 289,575
SBC Communications, Inc. ........................... 18,600 1,088,100
Schering Plough Corp. .............................. 12,500 1,134,375
Sears Roebuck & Co. ................................ 15,400 756,525
Southern Co. ....................................... 25,300 537,625
Sprint Corp. ....................................... 15,300 747,788
SunTrust Banks, Inc. ............................... 8,200 437,675
See Notes to Financial Statements
27
<PAGE>
Portfolio of Investments (Continued)
May 31, 1997
<TABLE>
<CAPTION>
================================================================================
Number
Description of Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
United States (Continued)
Tele-Communications International, Inc., Class A (b)..... 25,700 $ 388,713
Texas Instruments, Inc................................... 7,300 656,088
Texas Utilities Co....................................... 16,400 563,750
Time Warner, Inc......................................... 16,500 767,250
Toys R Us, Inc. (b)...................................... 9,900 308,138
Travelers Group, Inc..................................... 11,666 640,172
Union Pacific Corp....................................... 7,900 535,225
Viacom, Inc., Class B (b)................................ 9,500 282,031
Wal-Mart Stores, Inc..................................... 58,300 1,734,425
Walt Disney Co........................................... 17,900 1,465,562
Warner-Lambert Co........................................ 4,200 423,150
Waste Management, Inc.................................... 14,600 463,550
Wells Fargo & Co......................................... 2,300 606,050
Westinghouse Electric Corp............................... 22,000 445,500
Weyerhaeuser Co.......................................... 8,300 413,963
Xerox Corp............................................... 10,000 677,500
------------
120,656,747
------------
Total Common Stocks..................................... 256,011,624
------------
Preferred Stocks 0.2%
France 0.0%
Casino Guichard Perrach.................................. 3,400 153,143
Germany 0.2%
RWE...................................................... 6,400 222,433
SAP, Non Voting (ADR).................................... 1,150 209,262
------------
431,695
------------
Total Preferred Stocks.................................. 584,838
------------
Total Long-Term Investments 93.6% (Cost $230,596,409).... 256,596,462
</TABLE> ------------
28 See Notes to Financial Statements
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------
Portfolio of Investments (Continued)
- ----------------------------------------------------------------------------------------------------
May 31, 1997
====================================================================================================
Description Market Value
- ----------------------------------------------------------------------------------------------------
<S> <C>
Repurchase Agreement 3.7%
State Street Bank & Trust Co. ($10,223,000 par, collateralized by
U.S. Government obligations in a pooled cash account,
dated 05/30/97 to be sold on 06/02/97 at $10,227,260)............. $ 10,223,000
------------
Foreign Currency 0.6% (Various Denominations, Cost $1,545,888).... 1,550,824
------------
Other Assets in Excess of Liabilities 2.1%........................ 5,693,631
------------
Net Assets 100.0%................................................. $274,063,917
============
</TABLE>
(a) Assets segregated as collateral for open futures and forward transactions.
(b) Non-income producing security as this security currently does not declare
dividends.
ADR - American Depository Receipt
GDR - Global Depository Receipt
29 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
May 31, 1997
===================================================================================================
<S> <C>
Assets:
Long-Term Investments, at Market Value (Cost $230,596,409).......................... $256,596,462
Repurchase Agreements (Cost $10,223,000)............................................ 10,223,000
Foreign Currency, at Market Value (Cost $1,545,888)................................. 1,550,824
Cash................................................................................ 241
Receivables:
Securities Sold................................................................... 6,366,453
Dividends......................................................................... 687,506
Fund Shares Sold.................................................................. 446,015
Variation Margin on Futures....................................................... 145,656
Interest.......................................................................... 3,258
Forward Currency Contracts.......................................................... 1,097,685
Other............................................................................... 16
------------
Total Assets...................................................................... 277,117,116
------------
Liabilities:
Payables:
Securities Purchased.............................................................. 1,823,802
Fund Shares Repurchased........................................................... 523,314
Distributor and Affiliates........................................................ 240,562
Investment Advisory Fee........................................................... 225,539
Accrued Expenses.................................................................... 200,451
Deferred Compensation and Retirement Plans.......................................... 39,531
------------
Total Liabilities................................................................. 3,053,199
------------
Net Assets.......................................................................... $274,063,917
============
Net Assets Consist of:
Capital............................................................................. $209,367,174
Net Unrealized Appreciation on Securities........................................... 26,931,817
Accumulated Net Realized Gain on Securities......................................... 38,644,391
Accumulated Distributions in Excess of Net Investment Income........................ (879,465)
------------
Net Assets.......................................................................... $274,063,917
============
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share
(Based on net assets of $136,924,605 and 8,645,220
shares of beneficial interest issued and outstanding............................ $ 15.84
Maximum sales charge (5.75%* of offering price)................................... .97
------------
Maximum offering price to public.................................................. $ 16.81
============
Class B Shares:
Net asset value and offering price per share (Based on net assets of $124,096,728
and 8,101,269 shares of beneficial interest issued and outstanding)............. $ 15.32
============
Class C Shares:
Net asset value and offering price per share (Based on net assets of $13,042,584
and 843,377 shares of beneficial interest issued and outstanding)............... $ 15.46
============
*On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended May 31, 1997
======================================================================================
<S> <C>
Investment Income:
Dividends (Net of foreign withholding taxes of $283,517)................. $ 3,102,509
Interest (Net of foreign withholding taxes of $132)...................... 732,388
-----------
Total Income............................................................ 3,834,897
-----------
Expenses:
Investment Advisory Fee.................................................. 2,342,104
Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C
of $296,505, $1,048,239 and $107,844, respectively)...................... 1,452,588
Shareholder Services..................................................... 1,224,045
Custody.................................................................. 425,755
Legal.................................................................... 18,378
Trustees Fees and Expenses............................................... 11,611
Amortization of Organizational Expenses.................................. 1,964
Other.................................................................... 319,443
-----------
Total Expenses.......................................................... 5,795,888
Less Expenses Reimbursed................................................ 8,800
-----------
Net Expenses............................................................ 5,787,088
-----------
Net Investment Loss...................................................... $(1,952,191)
===========
Realized and Unrealized Gain/Loss on Securities:
Realized Gain/Loss on Securities:
Investments............................................................. $39,309,793
Futures................................................................. 108,610
Foreign Currency Transactions........................................... 2,694,435
-----------
Net Realized Gain on Securities.......................................... 42,112,838
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period................................................. 27,741,970
-----------
End of the Period:
Investments............................................................ 26,000,053
Futures................................................................ (167,954)
Forward Currency Contracts............................................. 1,097,685
Foreign Currency Translation........................................... 2,033
-----------
26,931,817
-----------
Net Unrealized Depreciation on Securities During the Period.............. (810,153)
-----------
Net Realized and Unrealized Gain on Securities........................... $41,302,685
===========
Net Increase in Net Assets from Operations............................... $39,350,494
===========
</TABLE>
31 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the Years Ended May 31, 1997 and 1996
==============================================================================================
Year Ended Year Ended
May 31, 1997 May 31, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Loss........................................... $ (1,952,191) $ (1,152,058)
Net Realized Gain on Securities............................... 42,112,838 14,354,171
Net Unrealized Appreciation/Depreciation on Securities
During the Period............................................ (810,153) 18,388,865
------------- -------------
Change in Net Assets from Operations.......................... 39,350,494 31,590,978
------------- -------------
Distributions in Excess of Net Investment Income*............. (1,377,948) -0-
Distributions from Net Realized Gain on Securities*........... (6,599,826) (3,883,160)
------------- -------------
Total Distributions........................................... (7,977,774) (3,883,160)
------------- -------------
Net Change in Net Assets from Investment Activities........... 31,372,720 27,707,818
------------- -------------
From Capital Transactions:
Proceeds from Shares Sold..................................... 127,851,283 97,189,154
Net Asset Value of Shares Issued Through Dividend Reinvestment 7,550,550 3,650,871
Cost of Shares Repurchased.................................... (101,392,502) (51,230,990)
------------- -------------
Net Change in Net Assets from Capital Transactions............ 34,009,331 49,609,035
------------- -------------
Total Increase in Net Assets.................................. 65,382,051 77,316,853
Net Assets:
Beginning of the Period....................................... 208,681,866 131,365,013
------------- -------------
End of the Period (Including accumulated distributions in
excess of net investment income of $879,465 and
$297,886, respectively)...................................... $ 274,063,917 $208,681,866
============= =============
Year Ended Year Ended
*Distributions by Class May 31, 1997 May 31, 1996
- ----------------------------------------------------------------------------------------------
Distributions in Excess of Net Investment Income:
Class A Shares............................................... $ (1,133,880) $ -0-
Class B Shares............................................... (221,577) -0-
Class C Shares............................................... (22,491) -0-
------------- -------------
$ (1,377,948) $ -0-
============= =============
Distributions from Net Realized Gain on Securities:
Class A Shares............................................... $ (3,319,275) $ (1,775,643)
Class B Shares............................................... (2,976,985) (1,920,148)
Class C Shares............................................... (303,566) (187,369)
------------- -------------
$ (6,599,826) $ (3,883,160)
============= =============
</TABLE>
See Notes to Financial Statements
32
<PAGE>
Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
================================================================================
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------------------------------
Class A Shares 1997 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.................................... (.064) (.04) (.04) (.06) (.055)
Net Realized and Unrealized Gain on
Securities............................................. 2.460 2.561 .42 1.0125 .7775
------- ------ ------ ------- ------
Total from Investment Operations......................... 2.396 2.521 .38 .9525 .7225
------- ------ ------ ------- ------
Less:
Distributions in Excess of Net Investment Income....... .137 -0- -0- -0- -0-
Distributions from and in excess of Net
Realized Gain on Securities........................... .401 .331 .26 .0425 .4025
------- ------ ------ ------- ------
Total Distributions...................................... .538 .331 .26 .0425 .4025
------- ------ ------ ------- ------
Net Asset Value, End of the Period....................... $15.838 $13.98 $11.79 $ 11.67 $10.76
======= ====== ====== ======= ======
Total Return (b)......................................... 17.67% 21.85% 3.36% 9.17% 7.13%
Net Assets at End of the Period (In millions)............ $ 136.9 $106.7 $ 60.1 $ 41.8 $ 12.7
Ratio of Expenses to Average Net Assets (c).............. 2.09% 2.22% 2.29% 2.46% 2.93%
Ratio of Net Investment Loss to Average Net
Assets (c)............................................. (.46%) (.30%) (.35%) (.46%) (.57%)
Portfolio Turnover....................................... 144% 94% 120% 116% 120%
Average Commission Rate per Equity Share
Traded (d)............................................. $ .0206 $.0199 -- -- --
</TABLE>
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) For the 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.
33 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
================================================================================
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------------------------------
Class B Shares 1997 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........................................ (.139) (.14) (.13) (.13) (.135)
Net Realized and Unrealized
Gain on Securities....................................... 2.358 2.501 .41 .9825 .7475
------- ------ ------ ------ ------
Total from Investment Operations............................. 2.219 2.361 .28 .8525 .6125
------- ------ ------ ------ ------
Less:
Distributions in Excess of Net Investment Income........... .030 -0- -0- -0- -0-
Distributions from and in Excess of Net
Realized Gain on Securities.............................. .401 .331 .26 .0425 .4025
------- ------ ------ ------ ------
Total Distributions.......................................... .431 .331 .26 .0425 .4025
------- ------ ------ ------ ------
Net Asset Value, End of the Period........................... $15.318 $13.53 $11.50 $11.48 $10.67
======= ====== ====== ====== ======
Total Return (b)............................................. 16.83% 20.90% 2.62% 8.21% 6.15%
Net Assets at End of the Period (In millions)................ $124.1 $ 92.8 $ 64.7 $ 48.8 $ 6.9
Ratio of Expenses to Average Net Assets (c).................. 2.86% 2.99% 3.05% 3.21% 3.88%
Ratio of Net Investment Loss to Average Net
Assets (c)................................................. (1.22%) (1.11%) (1.11%) (1.19%) (1.41%)
Portfolio Turnover........................................... 144% 94% 120% 116% 120%
Average Commission Rate per Equity Share
Traded (d)................................................. $ .0206 $.0199 -- -- --
</TABLE>
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) For the 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.
34 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
<TABLE>
<CAPTION>
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
=========================================================================================================
June 21, 1993
Year Ended May 31, (Commencement
-------------------------------- of Distribution)
Class C Shares 1997 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.......................... (.137) (.14) (.13) (.13)
Net Realized and Unrealized
Gain on Securities......................... 2.372 2.521 .41 1.4725
------- ------- ------- --------
Total from Investment Operations............... 2.235 2.381 .28 1.3425
------- ------- ------- --------
Less:
Distributions in Excess of Net
Investment Income.......................... .030 -0- -0- -0-
Distributions from and in Excess of
Net Realized Gain on Securities............ .401 .331 .26 .0425
------- ------- ------- --------
Total Distributions............................ .431 .331 .26 .0425
------- ------- ------- --------
Net Asset Value, End of the Period............. $15.464 $ 13.66 $ 11.61 $ 11.59
======= ======= ======= ========
Total Return (b)............................... 16.82% 20.87% 2.60% 13.06%*
Net Assets at End of the Period
(In millions)................................ $ 13.0 $ 9.2 $ 6.6 $ 5.1
Ratio of Expenses to Average
Net Assets (c)............................... 2.87% 3.00% 3.05% 3.21%
Ratio of Net Investment Loss
to Average Net Assets (c).................... (1.23%) (1.10%) (1.13%) (1.15%)
Portfolio Turnover............................. 144% 94% 120% 116%
Average Commission Rate per
Equity Share Traded (d)...................... $ .0206 $ .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) 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.
35 See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
May 31, 1997
================================================================================
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
investment 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.
Investments in foreign securities involve certain risks not ordinarily
associated with investments in securities of domestic issuers, including
fluctuations in foreign exchange rates, future political and economic
developments, and the possible imposition of exchange controls or other foreign
governmental laws or restrictions. The Fund commenced investment operations on
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
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 sale 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. Fixed income investments are stated
at value using market quotations. For those securities where quotations or
prices are not available, valuations are determined in accordance with
procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. Security Transactions--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital Asset Management, Inc. (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are fully collateralized by the
underlying debt security. The Fund will make payment for such securi-
36
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
May 31, 1997
================================================================================
ties 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.
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 securities
are not amortized. Market discounts are recognized at the time of sale as
realized gains for book purposes and ordinary income for tax purposes.
D. Currency Translation--Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated into
U.S. dollars based on quoted exchange rates as of noon Eastern Time. Purchases
and sales of portfolio securities are translated at the rate of exchange
prevailing when such securities were acquired or sold. Income and expenses are
translated at rates prevailing when accrued. Gains and losses on the sale of
securities are not segregated for financial reporting purposes between amounts
arising from changes in exchange rates and amounts arising from changes in the
market prices of securities. Realized gain and loss on foreign currency includes
the net realized amount from the sale of currency and the amount realized
between trade date and settlement date on security transactions.
E. Organizational 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 requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At May 31, 1997, for federal income tax purposes, cost of long- and short-
term investments is $242,822,509; the aggregate gross unrealized appreciation is
$31,431,024 and the aggregate gross unrealized depreciation is $4,953,516,
resulting in net unrealized appreciation on investments, futures, forward
currency contracts and foreign currency of $26,477,508.
G. Distribution of Income and Gains--The Fund declares and pays dividends
annually 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 cur-
37
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
May 31, 1997
================================================================================
rencies. These realized gains and losses are included as net realized gains or
losses for financial reporting purposes.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, the following permanent differences between book and tax
basis reporting for the 1997 fiscal year have been identified and appropriately
reclassified as follows:
Accumulated Undistributed Net Investment Income.... $ 2,748,560(a)(b)(c)
Accumulated Net Realized Gain/Loss on Securities... $(2,679,453)(a)(b)
Capital $ (69,107)(c)
(a) Represents $2,694,435 of realized gains and losses on transactions in
foreign currencies which are included as ordinary income for federal income
tax purposes. These realized gains and losses are included in net realized
gain/loss on securities for financial reporting purposes.
(b) Represents $14,982 of capital gains tax paid on a foreign equity security.
This item is recognized as an expense for federal income tax purposes but
as a component of realized loss for book purposes.
(c) Represents $69,107 of expenses recognized for financial reporting purposes,
but which are not deductible for federal income tax purposes.
2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly. Investment advisory fees are calculated monthly, based on the average
daily net assets of the Fund at the annual rate of 1.00%. On April 1, 1997, the
Adviser entered into a subadvisory agreement with Morgan Stanley Asset
Management Inc. (the "Subadviser") to provide advisory services to the Fund and
the Adviser with respect to the Fund's investments. Prior to April 1, 1997, the
Fund's Subadviser was John Govett & Co., Ltd. The Adviser pays 50% of its
investment advisory fee to the Subadviser.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated
person.
For the year ended May 31, 1997, the Fund recognized expenses of approximately
$25,800 representing VKAC's cost of providing accounting services to the Fund.
These services are provided by VKAC at cost.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended May
31, 1997, the Fund recognized expenses of approximately $1,045,500, representing
ACCESS' cost of providing transfer agency and shareholder services plus a
profit.
Additionally, for the year ended May 31, 1997, the Fund paid VKAC
approximately $70,200 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.
38
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
================================================================================
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Fund. The maximum annual
benefit per Trustee under the plan is equal to $2,500. The Adviser reimbursed
the fund for these Plan expenses for the calendar year 1996.
For the year ended May 31, 1997, the Fund paid brokerage commissions to
Morgan Stanley Group Inc. of $8,633.
At the end of the period, the Fund owned the following Morgan Stanley Funds
which were managed by the Subadviser:
<TABLE>
<CAPTION>
Transactions During the Period
------------------------------
% of Cost of Proceeds
Net Assets Purchases of Sales
=====================================================================================================
<S> <C> <C> <C>
Latin America Discovery Fund, Inc................................ 1.07% $2,468,695 $0
Morgan Stanley Asia Pacific Fund, Inc............................ 1.15% $2,965,000 $0
Morgan Stanley India Investment Fund............................. 0.71% $1,849,666 $0
</TABLE>
At May 31, 1997, VKAC owned 53,680 Class A shares of the Fund.
3. Capital Transactions
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At May 31, 1997, capital aggregated $103,173,521, $95,878,421 and
$10,315,232 for Classes A, B and C, respectively. For the year ended May 31,
1997, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
======================================================================
Sales:
<S> <C> <C>
Class A................................... 6,134,539 $ 89,228,576
Class B................................... 2,431,724 34,006,661
Class C................................... 326,525 4,616,046
--------- ------------
Total Sales................................. 8,892,788 $127,851,283
========= ============
Dividend Reinvestment:
Class A................................... 304,883 $ 4,257,239
Class B................................... 221,179 2,997,101
Class C................................... 21,652 296,210
--------- ------------
Total Dividend Reinvestment................. 547,714 $ 7,550,550
========= ============
</TABLE>
39
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
May 31, 1997
================================================================================
Shares Value
- ---------------------------------------------------------
Repurchases:
Class A.................... (5,426,393) $ (79,299,631)
Class B.................... (1,408,797) (19,584,581)
Class C.................... (176,672) (2,508,290)
---------- -------------
Total Repurchases............ (7,011,862) $(101,392,502)
========== =============
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,
transactions were as follows:
Shares Value
- --------------------------------------------------------
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)
========= ============
Class B and C shares are offered without a front-end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within five years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear the expense of their respective deferred sales
arrangements, including higher distribution and service fees and incremental
transfer agency costs.
40
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
================================================================================
<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 year ended May 31, 1997, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$87,000 and CDSC on the redeemed shares of approximately $174,500. Sales charges
do not represent expenses of the Fund.
4. Investment Transactions
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $338,593,160 and $315,447,959,
respectively.
5. Derivative Financial Instruments
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio, manage the portfolio's effective yield, foreign currency exposure, or
generate potential gain. All of the Fund's portfolio holdings, including
derivative instruments, are marked to market each day with the change in value
reflected in the unrealized appreciation/depreciation on securities. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures or forward contract. In this
instance, the recognition of gain or loss is postponed until the disposal of the
security underlying the futures or forward contract.
Summarized below are the specific types of derivative financial instruments
used by the Fund.
A. Futures Contracts-A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in stock index futures. These contracts are generally
used to provide the return of an index without purchasing all the securities
underlying the index or to manage the Fund's overall exposure to the equity
markets.
Upon entering into future contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period
41
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
================================================================================
the futures contract is open, payments are received from or made to the broker
based upon changes in the value of the contract (the variation margin).
Transactions in futures contracts for the year ended May 31, 1997, were as
follows:
<TABLE>
<CAPTION>
Contracts
===============================================================================
<S> <C>
Outstanding at May 31, 1996........................................... 0
Futures Opened........................................................ 50
Futures Closed........................................................ (25)
----
Outstanding at May 31, 1997........................................... 25
====
</TABLE>
The futures contracts outstanding as of May 31, 1997, and the description
and unrealized depreciation are as follows:
<TABLE>
<CAPTION>
Unrealized
Contracts Depreciation
===============================================================================
<S> <C> <C>
Long June 1997 CAC 40 Index Future Contracts
(Current Notional Value of $513,400 per contract).... 25 $167,954
==== ========
</TABLE>
B. Forward Currency Contracts-These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency.
At May 31, 1997, the Fund has outstanding forward currency contracts as
follows:
<TABLE>
<CAPTION>
Unrealized
Original Current Appreciation/
Description Value Value Depreciation
================================================================================
<S> <C> <C> <C>
Long Contracts
British Pound Sterling,
2,667,912 expiring 07/16/97...........$ 4,354,032 $ 4,359,896 $ 5,864
German Mark,
5,700,500 expiring 07/30/97........... 3,310,203 3,349,994 39,791
Japanese Yen,
1,816,065,372 expiring
07/18/97-01/26/98..................... 14,909,244 16,033,345 1,124,101
</TABLE>
42
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1997
================================================================================
<TABLE>
<CAPTION>
Unrealized
Original Current Appreciation/
Description Value Value Depreciation
================================================================================
Long Contracts (Continued)
<S> <C> <C> <C>
Swiss Franc,
2,783,100 expiring 08/18/97......... $ 2,000,000 $ 1,985,189 $ (14,811)
Short Contracts
British Pound Sterling,
2,667,912 expiring 07/16/97......... 4,000,000 4,359,896 (359,896)
German Mark,
11,401,560 expiring 07/30/97........ 6,900,000 6,700,316 199,684
French Franc,
45,948,432 expiring 09/15/97........ 8,108,356 8,009,107 99,249
Japanese Yen,
2,740,235,772 expiring
07/18/97-01/26/98................... 24,141,822 24,082,060 59,762
Netherlands Guilder,
3,454,320 expiring 08/18/97......... 1,820,267 1,806,622 13,645
Spanish Peseta,
375,238,689 expiring 06/13/97....... 2,624,636 2,595,994 28,642
Swiss Franc,
7,721,085 expiring 08/18/97......... 5,409,115 5,507,461 (98,346)
----------
$1,097,685
==========
</TABLE>
6. Distribution and Service Plans
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% 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 year ended May 31, 1997, are payments to VKAC of approximately $908,900.
43
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees of
Van Kampen American Capital Global Equity Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen American Capital Global
Equity Fund (the "Fund"), a series of Van Kampen American Capital World
Portfolio Series Trust, at May 31, 1997, and the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at May 31,
1997 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
July 14, 1997
44
<PAGE>
Funds Distributed by Van Kampen American Capital
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Value Fund
Worldwide High Income Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us weekdays from 7:00 a.m. to 7:00 p.m.
Central time at 1-800-341-2911 for Van Kampen American Capital funds, or 1-800-
282-4404 for Morgan Stanley retail funds.
45
<PAGE>
Results of Shareholder Votes
A Special Meeting of Shareholders of the Fund was held on May 28, 1997,
where shareholders voted on a new investment advisory agreement, a new
subadvisory agreement, the election of Trustees, and the selection of Price
Waterhouse LLP as independent public accountants for its current fiscal year.
With regard to the approval of a new investment advisory agreement between Van
Kampen American Capital Asset Management, Inc. and the Fund, 9,859,110 shares
voted for the proposal, 157,683 shares voted against and 571,138 shares
abstained. With regard to the approval of a new subadvisory agreement with
Morgan Stanley Asset Management, Inc. and the Fund, 9,880,018 shares voted for
the proposal, 152,446 shares voted against and 555,468 shares abstained. With
regard to the election of Trustees, J. Miles Branagan received 10,327,836
affirmative votes and 260,095 shares withheld; Richard M. DeMartini received
10,321,839 affirmative votes and 266,092 shares withheld; Linda Hutton Heagy
received 10,328,097 affirmative votes and 259,834 withheld; R. Craig Kennedy
received 10,325,642 affirmative votes and 262,289 shares withheld; Jack E.
Nelson received 10,325,629 affirmative votes and 262,302 shares withheld; Jerome
L. Robinson received 10,324,641 affirmative votes and 263,290 withheld; Phillip
B. Rooney received 10,328,815 affirmative votes and 259,116 withheld; Fernando
Sisto received 10,324,896 affirmative votes and 263,035 shares withheld; and,
Wayne W. Whalen received 10,324,423 affirmative votes and 263,508 abstained.
With regard to the ratification of the selection of Price Waterhouse LLP as
independent public accountants for its current fiscal year, 9,919,577 shares
voted for the proposal, 122,810 shares voted against and 545,545 shares
abstained.
46
<PAGE>
Van Kampen American Capital Global Equity Fund
Board of Trustees
J. Miles Branagan
Richard M. DeMartini*
Linda Hutton Heagy
R. Craig Kennedy
Jack E. Nelson
Jerome L. Robinson
Phillip B. Rooney
Fernando Sisto
Wayne W. Whalen*-Chairman
Officers
Dennis J. McDonnell*
President
Ronald A. Nyberg*
Vice President and Secretary
Edward C. Wood, III*
Vice President and Chief Financial Officer
Curtis W. Morell*
Vice President and Chief Accounting Officer
John L. Sullivan*
Treasurer
Tanya M. Loden*
Controller
Peter W. Hegel*
Alan T. Sachtleben*
Paul R. Wolkenberg*
Vice Presidents
Investment Adviser
Van Kampen American Capital
Asset Management, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Investment Subadviser
Morgan Stanley Asset
Management Inc.
1585 Broadway
New York, New York 10036
Distributor
Van Kampen American Capital
Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Shareholder Servicing Agent
ACCESS Investor
Services, Inc.
P.O. Box 418256
Kansas City, Missouri 64141-9256
Custodian
State Street Bank
and Trust Company
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Independent Accountants
Price Waterhouse LLP
1201 Louisiana
Houston, Texas 77002
* "Interested" persons of the Fund, as defined in the Investment Company Act
of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1997 All rights reserved.
/SM/ denotes a service mark of Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After September 30, 1997, this report must be accompanied
by a quarterly performance update, if applicable.
47
