<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 4
Portfolio Highlights........................ 5
Performance Perspective..................... 6
Portfolio Management Review................. 7
Portfolio of Investments.................... 10
Statement of Assets and Liabilities......... 18
Statement of Operations..................... 19
Statement of Changes in Net Assets.......... 20
Financial Highlights........................ 21
Notes to Financial Statements............... 24
Report of Independent Accountants........... 33
</TABLE>
GMA ANR 2/97
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DON G. POWELL AND DENNIS J. MCDONNELL]
DON G. POWELL AND DENNIS J. MCDONNELL
January 31, 1997
Dear Shareholder,
We are pleased to report that the Van Kampen American Capital Global Managed
Assets Fund has continued to generate positive investment performance. As
noted in earlier reports, 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 and investment banking. The transaction was com-
pleted in October, and we are excited about the opportunities it creates for
investors. As part of the acquisition, Van Kampen American Capital became the
distributor of Morgan Stanley retail funds on January 2, 1997.
ECONOMIC REVIEW
The U.S. economy experienced moderate growth and low inflation over the last
12 months. At the beginning of 1996, economists were concerned that the slower
economic pace of late 1995 might continue, possibly leading to a recession by
year end. That assumption soon came into question, however, when non-farm pay-
rolls increased by a stunning 705,000 in February, the biggest one-month jump
in 13 years. Then, a larger-than-expected 4.7 percent rate in real GDP (the
nation's gross domestic product, adjusted for inflation) during the second
quarter confirmed that the economy was back in a strong-growth mode. By sum-
mer, the earlier talk of recession and rate cuts had changed to concerns about
economic overheating and the possibility of interest rate hikes.
Despite mounting evidence of inflation, the Federal Reserve held to a stable
monetary policy, believing the supply-and-demand imbalances in the commodity
markets were temporary and that burdensome consumer debt loads would eventu-
ally slow the economy without the need for higher interest rates. Events dur-
ing the second half of 1996 proved the wisdom of Federal Reserve policy; real
GDP growth moderated to 2.0 percent in the third quarter while commodity
prices receded. For the year, core producer prices rose by 0.6 percent, the
second-lowest annual increase on record. Including the volatile food and en-
ergy sectors, however, prices at the retail level rose by 3.3 percent.
With the exception of Japan, which continues to struggle with the effects of
deflation and a debt-ridden banking system, most foreign economies performed
well during 1996. In Europe, the drive to create a common currency by 1999 has
forced governments to get their fiscal houses in order, a development that
supported European financial assets. Pacific Rim (excluding Japan) nations
also prospered, although growth in Singapore, Malaysia, Taiwan, and Korea was
hurt by a sharp drop in export prices. Emerging economies, particularly in
Latin America, continued to grow briskly while making progress toward price
stability and debt reduction.
1
Continued on page two
<PAGE>
MARKET REVIEW
1996 was a good time to own global financial assets (excluding Japan). The
average U.S. and European stock gained more than 20 percent, and benign infla-
tion helped fixed-income prices remain in a relatively narrow range in most
developed nations. Bond prices soared in many emerging markets as economic
fundamentals continued to improve and the global supply of new bonds slowed.
In the United States, the year began with long-term interest rates near
their lowest level since the 1960s, reflecting the view that the U.S. economy
was weakening and that a series of rate cuts by the Fed would be forthcoming.
But the Fed's quarter-percentage point reduction in the federal funds rate on
January 31 would be the only monetary easing during 1996, and long-term rates
soon began rising amid signs of a tightening labor market and stronger-than-
expected economic growth. Fears that the Fed would reverse course and raise
short-term rates became widespread after the economy experienced strong growth
in the second quarter. By July, the yield on the Treasury's benchmark 30-year
bond reached 7.2 percent, up from 5.95 percent at the beginning of the year.
The last half of 1996 was spent recovering some of the ground lost over the
first six months. Economic growth moderated, commodity prices declined, and
inflation remained tame. As the Fed held short-term rates steady, long-term
yields gradually fell back to 6.64 percent by year end. For the year, the Leh-
man Brothers Aggregate Bond Index returned 4.16 percent for the 12-month pe-
riod ended December 31, 1996, with short- and intermediate-term bonds
outperforming longer-term issues.
Global interest-rate trends generally followed those in the United States.
One consequence of the attempt to establish the European Monetary Union has
been to push long-term interest rates lower as governments cut their budget
deficits and borrowing requirements fall. On the short end of the yield curve,
foreign central banks have held rates down to counteract the fiscal drag re-
sulting from less government spending.
MARKET OUTLOOK
We expect domestic interest rates during 1997 to repeat last year's moderate
up and down pattern. Stronger-than-expected U.S. economic growth and faint
rumblings of inflationary pressures over the first half of the year could
prompt a series of modest credit tightenings by the Fed. We anticipate that by
the fourth quarter the economy will moderate enough to discourage any linger-
ing concerns about inflation and allow interest rates to decline across the
maturity spectrum. Although economic growth could be accompanied by short-term
market fluctuation, we do not believe it will be strong enough to reignite
price pressures. The results of the November elections reinforce this view--
the combination of a Democratic president and a Republican Congress should
help restrain potential spending increases and large tax cuts, and therefore,
keep the budget deficit under control.
While domestic economic fundamentals may keep bond prices relatively stable,
the risk of external shocks to the market is growing. We cannot look at the
U.S. economy in isolation. Monetary policy has been unusually accommodative in
many foreign countries. Spreads between short- and long-term rates were close
to three percent in both Japan and Germany during much of 1996; typically,
steep yield curves ignite economic activity, which in turn pushes long-term
rates higher. If global economies catch fire in 1997, the resulting demand
2
Continued on page three
<PAGE>
for capital could divert buying power from the U.S. credit market. Since for-
eign investors have become the marginal buyers of American bonds, we believe
that increased competition for the global fixed-income dollar could exert mild
upward pressure on domestic interest rates over the year.
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.
3
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1996
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
One-year total return based on NAV/1/................ 12.44% 11.51% 11.49%
One-year total return/2/............................. 7.06% 7.51% 10.49%
Life-of-Fund average annual total return/2/.......... 6.99% 7.05% 8.13%
Commencement Date.................................... 05/16/94 05/16/94 05/16/94
</TABLE>
/1/Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge(4.75% for A shares) or contingent
deferred sales charge for early withdrawal (4% for B shares and 1% for C
shares).
/2/Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or
contingent deferred sales charge for early withdrawal (B and C shares).
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.
4
<PAGE>
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1996 JUNE 30, 1996
<S> <C> <C>
U.S. Treasury Notes, 6.750%, 2/28/97.................... 6.4%............. 8.8%
U.S. Treasury Notes, 7.500%, 2/15/05.................... 3.3%............. 2.1%
Adidas, AG.............................................. 1.7%............. 1.0%
Gucci Group, NV......................................... 1.6%............. 0.7%
Reuters Holdings........................................ 1.5%............. 0.8%
Ahold (KoninkLijke), NV................................. 1.5%............. 0.8%
Adecco.................................................. 1.4%............. N/A
SGS Holdings............................................ 1.3%............. 0.8%
Mosenergo--ADR (Russia)................................. 1.3%............. 0.7%
Torgovy Dom GUM--ADR (Russia)........................... 1.3%............. 0.4%
</TABLE>
N/A=Not Applicable
ASSET ALLOCATION AS A PERCENTAGE OF TOTAL INVESTMENTS
As of December 31, 1996
Common and Preferred Stocks....74.6%
Repurchase Agreements..........15.2% [PIE CHART APPEARS HERE]
Bonds.......................... 9.8%
Convertibles................... 0.4%
As of June 30, 1996
Common and Preferred Stocks....78.4%
Bonds..........................18.3% [PIE CHART APPEARS HERE]
Repurchase Agreements.......... 2.8%
Convertibles................... 0.5%
TOP TEN COUNTRIES AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
<S> <C>
United States....... 34.5%
Japan............... 12.2%
United Kingdom...... 7.3%
Netherlands......... 6.7%
Switzerland......... 5.1%
Germany............. 3.9%
France.............. 2.9%
Hong Kong........... 2.8%
Russia.............. 2.6%
Sweden.............. 2.4%
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C>
United States....... 38.4%
Japan............... 15.5%
United Kingdom...... 7.9%
France.............. 5.0%
Netherlands......... 3.8%
Hong Kong........... 3.3%
Switzerland......... 3.0%
Sweden.............. 2.6%
Germany............. 2.5%
Norway.............. 2.0%
</TABLE>
5
<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 inter-
vals. 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 Inter-
national World Index and the J.P. Morgan Global Traded Government Index over
time. These indices are unmanaged statistical composites and do not reflect
any commissions or fees which would be incurred by an investor purchasing the
securities they represent. Similarly, their 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 Managed Assets Fund vs. Morgan Stanley
Capital International
World Index and J.P. Morgan Global Traded Government Index (May 16, 1994
through December 31, 1996)
[PERFORMANCE GRAPH APPEARS HERE]
Fund's Total Return
1 Year Avg. Annual = 7.06%
Inception Avg. Annual = 6.99%
VKAC Global Morgan Stanley Capital J.P. Morgan Global Traded
Managed Assets Fund International World Index Government Index
------------------- ------------------------- -------------------------
May-1994 $ 9,526 $10,000 $10,000
Jun-1994 $ 9,422 $ 9,966 $10,119
Dec-1994 $ 9,376 $10,021 $10,284
Jun-1995 $10,036 $10,843 $11,884
Dec-1995 $10,623 $11,895 $12,268
Jun-1996 $11,000 $12,000 $12,125
Dec-1996 $11,945 $13,290 $12,807
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions and includes payment of the maximum
sales charge (4.75% for A shares).
While past performance is not indicative of future performance, the above in-
formation provides a broader vantage point from which to evaluate the discus-
sion of the Fund's performance found in the following pages.
6
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
We recently spoke with the management team of the Van Kampen American Capital
Global Managed Assets Fund about the key events and economic forces that
shaped the markets during the past fiscal year. The Fund is co-managed by
portfolio managers Jeff D. New and John R. Reynoldson of Van Kampen American
Capital (U.S. holdings), Jonathan Hourigan and Peter Kysel of John Govett &
Co. Limited (international holdings), Alan T. Sachtleben, Van Kampen American
Capital's chief investment officer for equity investments, and Peter W. Hegel,
Van Kampen American Capital's chief investment officer for fixed-income
investments. The following excerpts reflect their views on the Fund's
performance during the 12-month period ended December 31, 1996.
Q HOW WOULD YOU DESCRIBE THE INVESTMENT ENVIRONMENT YOU FACED IN MANAGING
THE FUND DURING THE PAST FISCAL YEAR?
A Among the primary considerations driving global investment markets were
the rates of economic growth in the United States and Europe, the rate
of inflation worldwide, the anticipated effects of the planned European Mone-
tary Union (EMU), and the continued weakness of the Japanese economy.
In the United States, the markets reacted to the mixed signals sent by eco-
nomic growth indicators throughout the year. During the first half of 1996,
U.S. economic growth was much stronger than anticipated, sparking concerns
about inflation and triggering a sharp downturn in the bond market. When the
third-quarter economic data showed slower job gains and lower-than-expected
gross domestic product (GDP) growth, the bond market rallied from late summer
into early December. These developments added further momentum to an already
strong equity market, which repeatedly reached record levels (as measured by
the Dow Jones Industrial Average) as we moved into the new year.
Outside the United States, low worldwide inflation rates and slow to moder-
ate economic growth kept foreign interest rates fairly stable or trending
downward. During the fourth quarter, most European economies remained somewhat
sluggish, with the exception of the United Kingdom, which is in a more mature
stage of economic recovery. Much of the subdued economic activity in continen-
tal Europe can be attributed to the contractionary fiscal and monetary poli-
cies in place as European economies move toward convergence under EMU
agreements.
Japanese interest rates have remained very low due to anemic economic growth
and concerns about the weakening of the Japanese banking system. In fact, ten-
year yields in Japan were below 3.0 percent for much of the year, and the Jap-
anese stock market (as measured by the Nikkei Index) has lagged most other
global equity markets.
Q HOW WAS THE FUND POSITIONED WITHIN THESE MARKETS?
A With subdued economic growth and low inflation in major world economies,
we have been very selective in the global bond markets and have favored
growth-oriented companies over cyclical stocks in the equity markets. As of
December 31, 1996, approximately 75 percent of the portfolio was allocated to
equity investments, with 25 percent in fixed-income investments.
7
<PAGE>
While most of our equity holdings are in the European markets (approximately
40 percent of the Fund's long-term investments) and the U.S. stock market (ap-
proximately 22 percent), we have underweighted the Pacific basin (6.54 per-
cent) and Japan (12.19 percent). The European markets have performed well,
particularly the "emerging" markets of Eastern Europe, such as Croatia, the
Czech Republic, Hungary, Poland, Portugal, Russia, and Turkey. These markets
represent approximately 7 percent of the long-term portfolio.
Examples of our largest holdings include Adidas, the athletic footwear and
sportswear manufacturer, which has a strong global brand presence and main-
tains a high marketing profile at major international sporting events. We hold
several other strong brand names, including Gucci, which represents roughly
1.8 percent of the portfolio. We have holdings in Ahold, a Dutch supermarket-
chain retailer, and Nokia, a premier Finnish manufacturer of telecommunica-
tions equipment, the price of which was boosted by the upswing in mobile
telephone usage.
Looking at global bond markets, we have established our main commitment in
the continental European markets, where we see the greatest relative value. We
have underweighted the peripheral European markets and have no exposure to the
Japanese bond market. For additional Fund portfolio highlights, please refer
to page five.
Q HOW DID THE FUND PERFORM OVER THE 12-MONTH REPORTING PERIOD?
A The Fund achieved a total return of 12.44 percent/1/ (Class A shares at
net asset value) for the 12-month period ended December 31, 1996. Over
the same period, the Morgan Stanley Capital International World Index (an un-
managed index that is used as a benchmark for general equity funds) generated
a total return of 11.72 percent. The J.P. Morgan Global Traded Government In-
dex (an unmanaged index of major foreign and U.S. government bonds that are
weighted by the total market value of each country's securities and reflect
variations in currency value) achieved a total return of 7.59 percent. Keep in
mind that these indices are unmanaged statistical composites and do not re-
flect any commissions or fees that would be paid by an investor purchasing the
securities they represent. Please refer to the chart on page four for addi-
tional Fund performance results.
Q WHAT IS YOUR OUTLOOK FOR THE MARKETS AND FOR THE FUND'S PORTFOLIO IN THE
MONTHS AHEAD?
A We see the potential for an acceleration in worldwide economic activity
in early 1997, which might benefit companies that can market strong
brands with high profit margins to active consumers around the world. As
growth accelerates, demand for these products should increase. As a result, we
anticipate a shift from our current growth-oriented equity bias toward expo-
sure to more cyclical, consumer-oriented firms, such as European auto manufac-
turers. We will continue to be very selective, focusing on companies that we
believe can sustain profit margins, should the market react sharply to earn-
ings disappointments.
While the bond markets were quite strong in the fourth quarter of 1996, they
could be susceptible to a correction if economic activity rebounds strongly
and inflationary concerns emerge. The likelihood of fiscal tightening in Japan
suggests that we could see further pressure on the consumer spending and capi-
tal growth of the Japanese economy, so we will
8
<PAGE>
continue to underweight the Japanese bond market for the forseeable future.
Throughout Europe, the move toward more conservative fiscal policies, in line
with EMU requirements, will likely keep a damper on interest rates and economic
activity in general. In many countries, such as Germany, interest rates have
already been pushed down. The question is whether interest rates can be cut
further in order to stimulate growth.
The U.S. market should continue its significant influence on global markets,
and U.S. economic conditions will set the tone as we go into 1997. In the near
term, it appears that surging U.S. growth and inflationary pressures within the
labor market could introduce some volatility. We continue to maintain a full
allocation to the equity markets (75 percent of net assets), and remain cau-
tious in allocating the Fund's assets within the fixed-income sector.
/s/ Alan T. Sachtleben /s/ Peter W. Hegel /s/ Jeff D. New
Alan T. Sachtleben Peter W. Hegel Jeff D. New
Van Kampen American Van Kampen American Van Kampen American
Capital Capital Capital
Chief Investment Chief Investment Portfolio Manager
Officer Officer
Equity Investments Fixed Income
Investments
/s/ John R. Reynoldson /s/ Jonathan Hourigan /s/ Peter Kysel
John R. Reynoldson Jonathan Hourigan Peter Kysel
Van Kampen American Capital John Govett & Co. John Govett & Co.
Portfolio Manager Limited Limited
Portfolio Manager Portfolio Manager
9
Please see footnotes on page four
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS AND EQUIVALENTS 73.5%
ARGENTINA 0.2%
Perez Companc, SA, Class B (ADR)........................ 3,500 $ 49,000
-----------
AUSTRALIA 0.2%
TABCORP Holdings, Ltd................................... 10,000 47,691
-----------
AUSTRIA 1.2%
Scala ECE, Ltd. (b)..................................... 800 111,188
Wolford, AG............................................. 1,000 120,977
-----------
232,165
-----------
BRAZIL 0.6%
Centrais Eletricas Brasileiras, Class B (ADR)........... 3,300 60,637
Usinas Siderurgicas de Minas Gerais, SA (ADR)........... 5,000 51,150
-----------
111,787
-----------
CANADA 0.0%
Grandetel Technologies, Inc. (b)........................ 20,000 6,875
-----------
CROATIA 0.8%
Pliva DD (GDR) (b)...................................... 3,000 157,500
-----------
CZECH REPUBLIC 1.5%
Ceske Radiokomunikace (b)............................... 1,200 165,055
IPS Praha (b)........................................... 12,100 129,022
-----------
294,077
-----------
DENMARK 0.5%
Bang & Olufsen Holding, Class B......................... 2,000 97,101
-----------
FINLAND 0.3%
Oy Nokia AB Ser A--Preferred Shares..................... 1,000 58,000
-----------
FRANCE 2.4%
Cap Gemini, SA (b)...................................... 2,000 96,714
Christian Dior.......................................... 1,000 161,318
Primagaz (Cie Gaz)...................................... 924 108,811
Primagaz (Cie Gaz), Warrants, Expiring 07/01/98 (b)..... 84 2,088
Roussel Uclaf........................................... 400 117,722
-----------
486,653
-----------
GERMANY 3.2%
Adidas, AG.............................................. 3,300 285,222
Bayer, AG............................................... 2,000 81,622
Deutsche Telekom, AG (b)................................ 4,000 84,351
SAP, AG--Preferred Shares............................... 1,000 139,719
Siemens, AG............................................. 1,300 61,249
-----------
652,163
-----------
HONG KONG 2.3%
Henderson Land Development.............................. 10,000 100,847
Hong Kong Land Holding (ADR)............................ 40,000 111,200
HSBC Holdings........................................... 2,800 59,913
Sun Hung Kai Properties................................. 8,000 98,002
Swire Pacific, Ltd., Class A............................ 10,000 95,352
-----------
465,314
-----------
</TABLE>
10
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
HUNGARY 0.6%
Tiszai Vegyi Kombinat Rt (GDR) (b)...................... 10,000 $ 112,000
-----------
INDONESIA 0.6%
BK Bira................................................. 100,000 118,544
-----------
ITALY 2.7%
Bulgari SpA............................................. 8,000 162,426
Gucci Group NV.......................................... 4,125 263,484
Parmalat Finanziaria SpA................................ 80,000 122,347
-----------
548,257
-----------
IRELAND 1.4%
Adare Printing Group PLC................................ 10,000 95,940
Bank of Ireland......................................... 20,000 182,628
-----------
278,568
-----------
JAPAN 10.2%
Bank of Tokyo--Mitsubishi............................... 3,400 63,121
Daifuku Co., Ltd........................................ 15,000 189,103
Daiichi Corp............................................ 4,000 80,822
Dainippon Screen Manufacturing Co., Ltd................. 8,000 59,062
DDI Corp................................................ 6 39,686
Fuji International Co.--Preferred Shares................ 21,000,000 181,331
Honda Motor Co.......................................... 3,000 85,744
Japan Radio Co.......................................... 5,000 53,536
JGC Corp................................................ 4,000 30,015
Kawasaki Heavy Industries............................... 15,000 62,041
Koito Manufacturing Co., Ltd............................ 4,000 26,768
Komori Corp............................................. 2,000 42,483
Kyocera Corp............................................ 1,000 62,343
Marubeni Corp........................................... 10,000 43,001
Matsushita Electric Industrial Co....................... 5,000 81,599
Mitsubishi Chemical..................................... 14,000 45,333
Mitsubishi Estate....................................... 4,000 41,102
Nichiei Construction.................................... 6,000 41,551
Nippon Hodo Co.......................................... 3,000 34,712
NKK Corp................................................ 24,000 54,089
Nomura Securities Co., Ltd.............................. 6,000 90,148
NTT Data Communications Systems Corp.................... 4 117,088
Omron Corp.............................................. 4,000 75,296
Rohm Co................................................. 2,000 131,249
Secom Co................................................ 1,000 60,530
Sumitomo Electric Industries............................ 3,000 41,965
Takashimaya Co.......................................... 6,000 72,015
Tokio Marine & Fire Insurance Co........................ 4,000 37,648
Tokyu Corp.............................................. 7,000 39,772
Toshiba Corp............................................ 10,000 62,862
-----------
2,046,015
-----------
</TABLE>
11
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
MALAYSIA 1.0%
Jaya Tiasa Holdings..................................... 10,000 $ 53,059
Malaysian Pacific Industries............................ 20,000 77,608
Resort Worlds BHD....................................... 15,000 68,303
-----------
198,970
-----------
MEXICO 0.7%
Cemex, SA, Class B (ADR)................................ 8,000 61,500
Empresas ICA Sociedad Controladora, SA (ADR)............ 6,000 87,750
-----------
149,250
-----------
NETHERLANDS 5.8%
Ahold (Koninklijke) NV.................................. 4,000 250,217
ASM Lithography Holding (b)............................. 3,200 159,954
Cap Genmini NV.......................................... 7,000 203,533
Frans Maas Group........................................ 1,000 41,124
ING Groep NV............................................ 4,330 155,995
Polygram................................................ 2,000 101,940
Royal Dutch Petroleum Co................................ 200 34,150
Ver Ned Uitgevers....................................... 10,000 209,094
-----------
1,156,007
-----------
NORWAY 1.2%
Storebrand ASA.......................................... 13,000 74,654
Tandberg ASA............................................ 2,000 61,772
Visual Management Application ASA....................... 20,000 102,435
-----------
238,861
-----------
POLAND 0.2%
Stalexport, SA, Class A (b)............................. 4,000 39,199
-----------
PORTUGAL 0.7%
Portugal Telecommunications, SA (b)..................... 5,000 142,535
-----------
RUSSIA 2.2%
Mosenergo (ADR)......................................... 7,000 216,125
Torgovy Dom GUM (ADR) (b)............................... 4,000 216,000
-----------
432,125
-----------
SINGAPORE 0.7%
Overseas Union Bank..................................... 7,000 54,027
Sembawang Corp., Ltd.................................... 10,000 52,884
Singapore Land.......................................... 7,000 38,769
-----------
145,680
-----------
SOUTH KOREA 0.2%
LG Chemical, Ltd. 144A (GDR) (c)........................ 1,800 17,064
Samsung Electronics, Ltd. 144A (GDS) (c)................ 1,395 25,250
-----------
42,314
-----------
SWEDEN 2.0%
Astra AB, Class B....................................... 4,000 192,965
Autoliv AB.............................................. 2,800 122,758
Enator AB (b)........................................... 3,600 91,893
-----------
407,616
-----------
</TABLE>
12
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
SWITZERLAND 4.2%
Adecco, SA.............................................. 911 $ 229,521
Ascom Holding, AG (b)................................... 50 50,915
Danzas Holding, AG...................................... 150 166,418
Novartis, AG............................................ 160 183,238
SGS Holdings............................................ 90 221,218
-----------
851,310
-----------
TAIWAN 0.5%
Acer, Inc. (GDR) (b).................................... 11,654 108,615
-----------
THAILAND 0.3%
Siam Public Cement Co., Ltd............................. 1,000 31,350
Thailand Military Bank PLC.............................. 14,600 28,749
-----------
60,099
-----------
TURKEY 0.2%
Bati Cimento, AS........................................ 625,000 47,257
-----------
UNITED KINGDOM 6.1%
Astec (BSR)............................................. 25,000 67,209
BAA..................................................... 11,000 91,211
BOC Group............................................... 5,500 82,354
Boots Co................................................ 8,000 82,508
Dixons Group............................................ 14,000 130,238
Harvey Nichols PLC (b).................................. 8,000 47,696
Marks & Spencer......................................... 8,000 67,432
National Westminster.................................... 10,000 117,526
Next.................................................... 15,000 146,222
Reuters Holdings........................................ 20,000 257,153
Sainsbury, J............................................ 12,000 79,561
Shell Transportation & Trading.......................... 3,000 52,013
-----------
1,221,123
-----------
UNITED STATES 18.8%
Aames Financial Corp.................................... 920 33,005
AccuStaff, Inc. (b)..................................... 810 17,111
ADC Telecommunications, Inc. (b)........................ 860 26,767
Air Products & Chemicals, Inc........................... 400 27,650
Alex Brown, Inc......................................... 310 22,475
Allied Signal, Inc...................................... 300 20,100
Altera Corp. (b)........................................ 200 14,538
Amgen, Inc. (b)......................................... 560 30,450
Analog Devices, Inc. (b)................................ 400 13,550
Apache Corp............................................. 610 21,579
Ascend Communications, Inc. (b)......................... 380 23,608
Aspect Telecommunications Corp. (b)..................... 470 29,845
Atmel Corp. (b)......................................... 500 16,563
Baker Hughes, Inc....................................... 310 10,695
</TABLE>
13
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Bank of Boston Corp..................................... 590 $ 37,907
BankAmerica Corp........................................ 470 46,882
Bed Bath & Beyond, Inc. (b)............................. 500 12,125
BMC Industries Inc.-- MN................................ 370 11,655
BMC Software, Inc. (b).................................. 1,720 71,165
Boeing Co............................................... 370 39,359
Boston Chicken, Inc. (b)................................ 560 20,090
Bristol Myers Squibb Co................................. 490 53,287
Cadence Design Systems, Inc. (b)........................ 685 27,229
Chase Manhattan Corp.................................... 610 54,442
Chrysler Corp........................................... 720 23,760
Cisco Systems, Inc. (b)................................. 910 57,899
Citicorp................................................ 220 22,660
CMAC Investment Corp.................................... 820 30,135
Columbia/HCA Healthcare Corp............................ 700 28,525
Compaq Computer Corp. (b)............................... 600 44,550
CompUSA, Inc. (b)....................................... 960 19,800
Computer Associates International, Inc.................. 1,120 55,720
Compuware Corp. (b)..................................... 150 7,519
Conseco, Inc............................................ 850 54,187
Cytec Industries, Inc. (b).............................. 550 22,344
Deere & Co.............................................. 630 25,594
Dover Corp.............................................. 430 21,608
DST Systems, Inc. (b)................................... 550 17,256
Equifax Inc............................................. 740 22,663
Evergreen Media Corp. (b)............................... 1,010 25,250
Exxon Corp.............................................. 300 29,874
Federal National Mortgage Association................... 3,300 122,925
First Bank Systems, Inc................................. 250 17,063
Gap, Inc................................................ 440 13,255
General Nutrition Companies, Inc. (b)................... 610 10,294
Green Tree Financial Corp............................... 1,160 44,805
Harley Davidson, Inc.................................... 370 17,390
Health Management Association, Inc., Class A (b)........ 775 17,438
Healthsouth Corp. (b)................................... 840 32,445
Hilton Hotels Corp...................................... 680 17,765
Illinois Tool Works, Inc................................ 250 19,969
Input/Output, Inc. (b).................................. 430 7,955
Intel Corp.............................................. 610 79,872
International Business Machines Corp.................... 200 30,200
Johnson & Johnson....................................... 1,200 59,700
</TABLE>
14
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Knight Ridder, Inc...................................... 100 $ 3,933
Kroger Co. (b).......................................... 770 35,805
Lear Corp. (b).......................................... 310 10,579
Lincare Holdings, Inc. (b).............................. 580 23,780
Linear Technology Corp.................................. 400 17,550
Liz Claiborne, Inc...................................... 590 22,789
Lowe's Companies, Inc................................... 400 14,200
Lucent Technologies, Inc................................ 310 14,338
Marriot International, Inc.............................. 580 32,045
Medtronic, Inc.......................................... 410 27,880
Merck & Co., Inc........................................ 830 65,777
Merrill Lynch & Co., Inc................................ 740 60,310
Metalclad Corp. (b)..................................... 4,000 7,250
MGIC Investment Corp.................................... 350 26,600
Microsoft Corp. (b)..................................... 880 72,710
Money Store, Inc........................................ 670 18,509
Nautica Enterprises, Inc. (b)........................... 670 16,918
Nike, Inc., Class B..................................... 200 11,950
Omnicom Group, Inc...................................... 800 36,600
Pairgain Technologies, Inc. (b)......................... 400 12,175
Penncorp Financial Group, Inc........................... 550 19,800
Pfizer, Inc............................................. 570 47,239
Philip Morris Companies, Inc............................ 1,790 201,599
Phillips Petroleum Co................................... 670 29,647
Physician Reliance Network (b).......................... 610 4,728
Praxair, Inc............................................ 1,160 53,505
Procter & Gamble Co..................................... 200 21,500
Promus Hotel Corp. (b).................................. 490 14,516
RAC Financial Group, Inc. (b)........................... 1,020 21,548
Raychem Corp............................................ 380 30,447
Renal Treatment Centers, Inc. (b)....................... 670 17,085
RJR Nabisco Holdings Corp............................... 900 30,600
Ross Stores, Inc........................................ 310 15,500
Safeway, Inc. (b)....................................... 1,770 75,667
Sanmina Corp. (b)....................................... 370 20,905
Schering-Plough Corp.................................... 550 35,612
Schwab (Charles) Corp................................... 400 12,800
SCI Systems, Inc. (b)................................... 420 18,743
Scripps (E.W.) Co., Class A............................. 250 8,760
Service Corp. International............................. 1,340 37,520
Smith International, Inc. (b)........................... 860 38,592
</TABLE>
15
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ---------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Student Loan Marketing Association................. 370 $ 34,456
SunAmerica, Inc.................................... 1,660 73,662
Sun Microsystems, Inc. (b)......................... 2,220 57,026
Tellabs, Inc. (b).................................. 1,160 43,645
Texaco, Inc........................................ 310 30,419
Textron, Inc....................................... 210 19,793
3Com Corp. (b)..................................... 730 53,564
Tiffany & Co....................................... 490 17,946
TJX Companies, Inc................................. 650 30,794
Tommy Hilfiger Corp. (b)........................... 310 14,880
Transocean Offshore, Inc........................... 280 17,535
Travelers Group, Inc............................... 1,200 54,450
Tyco International, Inc............................ 500 26,437
Union Carbide Corp................................. 370 15,124
United Technologies Corp........................... 360 23,760
United Waste System, Inc. (b)...................... 1,220 41,937
Universal Health Services, Inc., Class B (b)....... 590 16,889
US Office Products Co. (b)......................... 670 22,864
USA Waste Services, Inc. (b)....................... 670 21,356
Vons Cos., Inc. (b)................................ 830 49,696
Warner-Lambert Co.................................. 300 22,500
Watson Pharmaceuticals, Inc. (b)................... 370 16,627
Williams Companies, Inc............................ 1,335 50,062
Wind River System, Inc. (b)........................ 340 16,108
WorldCom, Inc. (b)................................. 1,070 27,971
-----------
3,770,009
-----------
TOTAL COMMON AND PREFERRED STOCKS AND EQUIVALENTS............ 14,772,680
-----------
CONVERTIBLE SECURITIES 0.3%
United Micro Electric ($50,000 par, 1.250% coupon, 06/08/04
maturity, convertible to 53,640 common shares)............... 70,187
-----------
UNITED STATES GOVERNMENT/AGENCY OBLIGATIONS 9.7%
GNMA Note ($180,884 par, 8.000% coupon, 04/15/22 maturity).... 184,616
US Treasury Note ($1,075,000 par, 6.750% coupon, 02/28/97
maturity)..................................................... 1,077,860
US Treasury Note ($125,000 par, 5.750% coupon, 08/15/03
maturity)..................................................... 121,406
US Treasury Note ($525,000 par, 7.500% coupon, 02/15/05
maturity)..................................................... 562,322
-----------
TOTAL UNITED STATES GOVERNMENT/AGENCY OBLIGATIONS............ 1,946,204
-----------
TOTAL LONG-TERM INVESTMENTS 83.5%
(Cost $14,241,640) (a)....................................... 16,789,071
REPURCHASE AGREEMENT 14.9%
BA Securities ($3,005,000 par, collateralized by U.S.
Government obligations in a pooled cash account, 6.930%
coupon, dated 12/31/96, to be sold on 01/02/97 at $3,006,157)
(d).......................................................... 3,005,000
FOREIGN CURRENCY 1.7% (Various denominations, Cost $330,832)
(a)........................................................... 334,685
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%).................. (27,094)
-----------
NET ASSETS 100.0%............................................. $20,101,662
-----------
</TABLE>
16
See Notes to Financial Statements
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
(a) At December 31, 1996, for federal income tax purposes cost is $16,897,111;
the aggregate gross unrealized appreciation is $3,263,204 and the aggre-
gate gross unrealized depreciation is $709,988, resulting in net
unrealized appreciation on investments, foreign currency translation of
other assets and liabilities and forward commitments of $2,553,216.
(b) Non-income producing security as this stock currently does not declare
dividends.
(c) 144A securities are those which are exempt from registration under rule
144A of the Securities Act of 1933. These securities may be resold only in
transactions exempt from registration, which are normally those transac-
tions with qualified institutional buyers.
(d) Assets segregated as collateral for forward purchase commitments.
ADR--American Depository Receipt
GDR--Global Depository Receipt
GDS--Global Depository Shares
17
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $14,241,640) (Note
1)................................................................ $16,789,071
Repurchase Agreement (Note 1)..................................... 3,005,000
Foreign Currency, at Market Value (Cost $330,832)................. 334,685
Receivables:
Securities Sold.................................................. 89,201
Fund Shares Sold................................................. 69,869
Interest......................................................... 41,372
Dividends........................................................ 34,010
Forward Commitments and Foreign Currency Contracts................ 27,450
Other............................................................. 13,918
-----------
Total Assets..................................................... 20,404,576
-----------
LIABILITIES:
Payables:
Securities Purchased............................................. 86,537
Fund Shares Repurchased.......................................... 86,882
Distributor and Affiliates (Notes 2 and 6)....................... 32,731
Capital Gain Distributions....................................... 7,433
Investment Advisory Fee (Note 2)................................. 1,750
Custodian Bank................................................... 174
Accrued Expenses.................................................. 75,757
Deferred Compensation and Retirement Plans (Note 2)............... 11,650
-----------
Total Liabilities................................................ 302,914
-----------
NET ASSETS........................................................ $20,101,662
-----------
NET ASSETS CONSIST OF:
Capital (Note 3).................................................. $17,371,546
Net Unrealized Appreciation on Securities......................... 2,579,885
Accumulated Net Realized Gain on Securities....................... 157,379
Accumulated Distributions in Excess of Net Investment Income (Note
1)................................................................ (7,148)
-----------
NET ASSETS........................................................ $20,101,662
-----------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $8,513,467 and 808,511 shares of beneficial interest
issued and outstanding).......................................... $ 10.53
Maximum sales charge (4.75%* of offering price).................. .53
-----------
Maximum offering price to public................................. $ 11.06
-----------
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $9,904,714 and 954,327 shares of beneficial interest issued
and outstanding)................................................. $ 10.38
-----------
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $1,683,481 and 161,951 shares of beneficial interest issued
and outstanding)................................................. $ 10.40
-----------
</TABLE>
*On sales of $100,000 or more, the sales charge will be reduced.
18
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................... $ 399,022
Dividends (Net of foreign withholding taxes of $32,913)............ 307,364
----------
Total Income...................................................... 706,386
----------
EXPENSES:
Investment Advisory Fee (Note 2)................................... 250,405
Custody............................................................ 143,399
Distribution (12b-1) and Service Fees (Attributed to Classes A, B
and C of $21,146, $92,614 and $19,102, respectively) (Note 6)..... 132,862
Shareholder Services (Note 2)...................................... 131,690
Registration and Filing Fees....................................... 59,159
Printing........................................................... 57,974
Audit.............................................................. 48,495
Trustees Fees and Expenses (Note 2)................................ 10,879
Amortization of Organizational Expenses (Note 1)................... 3,298
Legal (Note 2)..................................................... 2,138
Other.............................................................. 52,398
----------
Total Expenses.................................................... 892,697
Less Fees Waived (Note 2)......................................... 73,519
----------
Net Expenses...................................................... 819,178
----------
NET INVESTMENT LOSS................................................ $ (112,792)
----------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments....................................................... $1,521,968
Forward Commitments............................................... 201,802
Foreign Currency Transactions..................................... (22,569)
----------
Net Realized Gain on Securities.................................... 1,701,201
----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period........................................... 1,574,817
----------
End of the Period:
Investments....................................................... 2,547,431
Forward Commitments............................................... 8,905
Forward Currency Contracts........................................ 18,545
Foreign Currency Translation...................................... 5,004
----------
2,579,885
----------
Net Unrealized Appreciation on Securities During the Period........ 1,005,068
----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES..................... $2,706,269
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS......................... $2,593,477
----------
</TABLE>
19
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1996
and December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income/Loss........................ $ (112,792) $ 102,217
Net Realized Gain on Securities................... 1,701,201 747,602
Net Unrealized Appreciation on Securities During
the Period....................................... 1,005,068 1,997,291
----------- -----------
Change in Net Assets from Operations.............. 2,593,477 2,847,110
----------- -----------
Distributions from Net Investment Income.......... -0- (105,143)
Distributions in Excess of Net Investment Income
(Note 1).......................................... -0- (21,853)
----------- -----------
Distributions from and in Excess of Net Investment
Income*........................................... -0- (126,996)
Distribution from Net Realized Gain on Securities
(Note 1)*......................................... (1,608,530) (444,628)
----------- -----------
Total Distributions............................... (1,608,530) (571,624)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES........................................ 984,947 2,275,486
----------- -----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold......................... 7,742,285 8,340,329
Net Asset Value of Shares Issued Through Dividend
Reinvestment...................................... 1,377,670 547,728
Cost of Shares Repurchased........................ (15,458,267) (5,860,394)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS...................................... (6,338,312) 3,027,663
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... (5,353,365) 5,303,149
NET ASSETS:
Beginning of the Period........................... 25,455,027 20,151,878
----------- -----------
End of the Period (Including accumulated
distributions in excess of net investment income
of $7,148 and $14,634, respectively)............. $20,101,662 $25,455,027
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class December 31, 1996 December 31, 1995
---------------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of
Net Investment Income (Note 1):
Class A Shares.................... $ -0- $(109,529)
Class B Shares.................... -0- (14,553)
Class C Shares.................... -0- (2,914)
----------- ---------
$ -0- $(126,996)
----------- ---------
Distributions from Net Realized
Gain on Securities (Note 1):
Class A Shares.................... $ (713,178) $(270,443)
Class B Shares.................... (762,464) (142,058)
Class C Shares.................... (132,888) (32,127)
----------- ---------
$(1,608,530) $(444,628)
----------- ---------
</TABLE>
20
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 16, 1994
Year Year (Commencement of
Ended Ended Investment
December 31, December 31, Operations) to
Class A Shares 1996 (c) 1995 December 31, 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $ 10.15 $ 9.19 $ 9.44
------- ------ ------
Net Investment Income........ -0- .08 .10
Net Realized and Unrealized
Gain/Loss on Securities..... 1.242 1.1375 (.2475)
------- ------ ------
Total from Investment
Operations.................... 1.242 1.2175 (.1475)
------- ------ ------
Less:
Distributions from and in
Excess of Net
Investment Income (Note 1).. -0- .0775 .075
Distributions from and in
Excess of Net
Realized Gain on Securities
(Note 1).................... .862 .18 .0275
------- ------ ------
Total Distributions........... .862 .2575 .1025
------- ------ ------
Net Asset Value, End of the
Period....................... $10.530 $10.15 $ 9.19
------- ------ ------
Total Return* (a)............. 12.44% 13.30% (1.57%)**
Net Assets at End of the
Period (In millions)......... $ 8.5 $ 15.5 $ 11.5
Ratio of Expenses to
Average Net Assets*.......... 2.87% 2.79% 2.75%
Ratio of Net Investment
Income/Loss to
Average Net Assets*.......... .00% .81% 1.54%
Portfolio Turnover............ 91% 135% 50%**
Average Commission Paid Per
Equity Share Traded (b)...... $ .0214 -- --
*If certain expenses had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net
Assets....................... 3.17% 3.68% 2.76%
Ratio of Net Investment
Income/Loss to
Average Net Assets........... (.30%) (.07%) 1.53%
</TABLE>
**Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This dis-
closure was not required in fiscal years prior to 1996.
(c) Based on average month-end shares outstanding.
See Notes to Financial Statements
21
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 16, 1994
Year Year (Commencement
Ended Ended of Investment
December 31, December 31, Operations) to
Class B Shares 1996 (c) 1995 December 31, 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $ 10.10 $ 9.17 $ 9.44
------- ------ ------
Net Investment Income/Loss... (.106) (.01) .01
Net Realized and Unrealized
Gain/Loss on Securities..... 1.247 1.1375 (.2065)
------- ------ ------
Total from Investment
Operations.................... 1.141 1.1275 (.1965)
------- ------ ------
Less:
Distributions from and in
Excess of Net
Investment Income (Note 1).. -0- .0175 .046
Distributions from and in
Excess of Net
Realized Gain on Securities
(Note 1).................... .862 .18 .0275
------- ------ ------
Total Distributions........... .862 .1975 .0735
------- ------ ------
Net Asset Value, End of the
Period........................ $10.379 $10.10 $ 9.17
------- ------ ------
Total Return* (a)............. 11.51% 12.31% (2.09%)**
Net Assets at End of the
Period (In millions).......... $9.9 $8.1 $7.4
Ratio of Expenses to Average
Net Assets*.................. 3.76% 3.73% 3.92%
Ratio of Net Investment
Income/Loss to
Average Net Assets*.......... (1.01%) (.09%) .13%
Portfolio Turnover............ 91% 135% 50%**
Average Commission Paid Per
Equity Share Traded (b)....... $ .0214 -- --
*If certain expenses had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net Assets................... 4.06% 4.61% 3.93%
Ratio of Net Investment
Income/Loss to
Average Net Assets........... (1.30%) (.97%) .12%
</TABLE>
**Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This dis-
closure was not required in fiscal years prior to 1996.
(c) Based on average month-end shares outstanding.
22
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 16, 1994
Year Year (Commencement
Ended Ended of Investment
December 31, December 31, Operations) to
Class C Shares 1996 (c) 1995 December 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $ 10.12 $ 9.20 $ 9.44
------- ------- ------
Net Investment Income/Loss... (.104) (.02) .05
Net Realized and Unrealized
Gain/Loss on Securities..... 1.241 1.1375 (.2165)
------- ------- ------
Total from Investment
Operations.................... 1.137 1.1175 (.1665)
------- ------- ------
Less:
Distributions from and in
Excess of Net
Investment Income (Note 1).. -0- .0175 .046
Distributions from and in
Excess of Net
Realized Gain on Securities
(Note 1).................... .862 .18 .0275
------- ------- ------
Total Distributions........... .862 .1975 .0735
------- ------- ------
Net Asset Value, End of the
Period........................ $10.395 $ 10.12 $ 9.20
------- ------- ------
Total Return*................. 11.49% 12.16% (1.77%)**
Net Assets at End of the
Period (In millions).......... $ 1.7 $ 1.9 $ 1.3
Ratio of Operating Expenses to
Average Net Assets*.......... 3.78% 3.79% 3.36%
Ratio of Net Investment
Income/Loss to
Average Net Assets*.......... (.99%) (.18%) .80%
Portfolio Turnover............ 91% 135% 50%**
Average Commission Paid Per
Equity Share Traded (b)....... $ .0214 -- --
*If certain expenses had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:
Ratio of Operating Expenses to
Average
Net Assets................... 4.07% 4.67% 3.38%
Ratio of Net Investment
Income/Loss to
Average Net Assets........... (1.28%) (1.06%) .78%
</TABLE>
**Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This dis-
closure was not required in fiscal years prior to 1996.
(c) Based on average month-end shares outstanding.
23
See Notes to Financial Statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Global Managed Assets Fund (the "Fund") is orga-
nized as a Delaware business trust, and is registered as a non-diversified
open-end management investment company under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek total return
through a managed balance of foreign and domestic equity and debt securities.
The Fund commenced investment operations on May 16, 1994, with three classes of
beneficial interest, Class A, Class B and Class C shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The prepa-
ration 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 as-
sets 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. Un-
listed securities and listed securities for which the last sales price is not
available are valued at their last quoted bid price. Fixed income securities
are stated at value using market quotations. For those securities where quota-
tions or prices are not available, valuations are determined in accordance with
procedures established in good faith by the Board of Trustees. Short-term secu-
rities with remaining maturities of 60 days or less are valued at amortized
cost.
B. SECURITY TRANSACTIONS-Security transactions are recorded on a trade date ba-
sis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term invest-
ments 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 agree-
ments. Repurchase agreements are fully collateralized by the underlying debt
security. The Fund will make payment for such securities only upon physical de-
livery or evidence of book entry transfer to the account of the custodian bank.
The seller is required to maintain the value of the underlying security at not
less than the repurchase proceeds due the Fund.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
C. INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. The Fund accounts for dis-
counts and premiums on the same basis as is used for federal income tax report-
ing. Accordingly, original issue discounts on debt securities purchased are
amortized over the life of the security. Premiums on debt securities are not
amortized. Market discounts are recognized at the time of sale as realized
gains for book purposes and ordinary income for tax purposes.
D. FOREIGN 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 pre-
vailing 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 in-
cludes the net realized amount from the sale of currency and the amount real-
ized 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 $15,000. These
costs are being amortized on a straight line basis over the 60 month period
ending May 15, 1999. The Adviser has agreed that in the event any of the ini-
tial shares of the Fund originally purchased by VKAC are redeemed during the
amortization period, the Fund will be reimbursed for any unamortized organiza-
tional expenses in the same proportion as the number of shares redeemed bears
to the number of initial shares held at the time of redemption.
F. FEDERAL INCOME TAXES-It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
G. DISTRIBUTION OF INCOME AND GAINS-The Fund declares and pays dividends annu-
ally from net investment income and from net realized gains on securities, if
any. Net investment income for federal income tax purposes includes gains and
losses realized on certain transactions in foreign currencies. These realized
gains and losses are included as net realized gains or losses for financial re-
porting purposes. For the year ended December 31, 1996 the Fund paid long-term
capital gains totaling $757,153.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
Due to inherent differences in the recognition of income, expenses and real-
ized gains/ losses under generally accepted accounting principles and for fed-
eral income tax purposes, permanent differences between book and tax basis
reporting for the 1996 fiscal year have been identified and appropriately re-
classified. As a result, permanent differences of $97,496 due to the character-
ization of distributions for tax purposes have been reclassified from
accumulated distributions in excess of net investment income to accumulated net
realized gain on securities. In addition, permanent differences of $3,118 re-
lating to net currency losses, $618 relating to net losses on paydowns of mort-
gage pool obligations, and $9,928 relating to market discount on bonds were
reclassified from accumulated net realized gain on securities to accumulated
distributions in excess of net investment income. Also, permanent differences
of $16,590 relating to the recognition of certain expenses which are not de-
ductible for tax purposes were reclassified from accumulated distributions in
excess of net investment income to capital.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly. The Adviser has entered into a subadvisory agreement which will termi-
nate on March 31, 1997 with John Govett & Co., Ltd. (the "Subadviser"), who
provides advisory services to the Fund and the Adviser with respect to the
Fund's investments in foreign securities. Investment advisory fees are calcu-
lated monthly, based on the average daily net assets of the Fund at the annual
rate of 1.00%. The Adviser pays 50% of its investment advisory fee to the
Subadviser. Shareholders have approved a change in the Subadviser from John
Govett & Co., Ltd. to Morgan Stanley Asset Management Inc. effective April 1,
1997. For the year ended December 31, 1996, the Adviser waived a portion of its
advisory fee. This waiver is voluntary and may be discontinued at any time.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.
For the year ended December 31, 1996, the Fund recognized expenses of approx-
imately $29,600 representing VKAC's cost of providing accounting services to
the Fund. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended De-
cember 31, 1996, the Fund recognized expenses of approximately $106,100, repre-
senting ACCESS' cost of providing transfer agency and shareholder services plus
a profit.
Additionally, for the year ended December 31, 1996, the Fund reimbursed VKAC
approximately $16,600 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.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
The Fund has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC.
At December 31, 1996, VKAC owned 10,604, 53 and 87 shares of Classes A, B and
C, respectively.
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Clas-
ses A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At December 31, 1996, capital aggregated $6,775,618, $9,098,727 and
$1,497,201 for Classes A, B and C, respectively. For the year ended December
31, 1996, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A............................................. 343,389 $ 3,674,083
Class B............................................. 319,565 3,371,501
Class C............................................. 66,272 696,701
---------- ------------
Total Sales.......................................... 729,226 $ 7,742,285
---------- ------------
Dividend Reinvestment:
Class A............................................. 58,774 $ 608,282
Class B............................................. 65,677 670,411
Class C............................................. 9,677 98,977
---------- ------------
Total Dividend Reinvestment.......................... 134,128 $ 1,377,670
---------- ------------
Repurchases:
Class A............................................. (1,122,082) $(11,975,953)
Class B............................................. (233,170) (2,467,031)
Class C............................................. (95,831) (1,015,283)
---------- ------------
Total Repurchases.................................... (1,451,083) $(15,458,267)
---------- ------------
</TABLE>
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
At December 31, 1995, capital aggregated $14,476,174, $7,532,071 and
$1,718,203 for Classes A, B and C, respectively. For the year ended December
31, 1995, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................................. 400,789 $ 3,909,901
Class B................................................. 315,134 3,055,675
Class C................................................. 138,887 1,374,753
-------- -----------
Total Sales.............................................. 854,810 $ 8,340,329
-------- -----------
Dividend Reinvestment:
Class A................................................. 37,488 $ 376,012
Class B................................................. 13,757 138,274
Class C................................................. 3,320 33,442
-------- -----------
Total Dividend Reinvestment.............................. 54,565 $ 547,728
-------- -----------
Repurchases:
Class A................................................. (166,010) $(1,662,569)
Class B................................................. (329,324) (3,228,108)
Class C................................................. (96,043) (969,717)
-------- -----------
Total Repurchases........................................ (591,377) $(5,860,394)
-------- -----------
</TABLE>
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within five years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear the expense of their respective deferred sales ar-
rangements, including higher distribution and service fees and incremental
transfer agency costs.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED SALES
CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C>
First........................................................... 4.00% 1.00%
Second.......................................................... 4.00% None
Third........................................................... 3.00% None
Fourth.......................................................... 2.50% None
Fifth........................................................... 1.50% None
Sixth and Thereafter............................................ None None
</TABLE>
For the year ended December 31, 1996, VKAC, as Distributor for the Fund, re-
ceived commissions on sales of the Fund's Class A shares of approximately
$3,500 and CDSC on the redeemed shares of approximately $19,100. Sales charges
do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments and forward commitments, were
$20,514,576 and $31,057,421, 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 de-
rivative instruments, are marked to market each day with the change in value
reflected in the unrealized appreciation/depreciation on securities. Upon dis-
position, a realized gain or loss is recognized accordingly.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
FORWARD COMMITMENTS
The Fund trades certain securities under the terms of forward commitments,
whereby the settlement occurs at a specific future date. Forward commitments
are privately negotiated transactions between the Fund and dealers. While for-
ward commitments are outstanding, the Fund maintains sufficient collateral of
cash or securities in a segregated account with its custodian. The commitments
are marked to market on a daily basis with changes in value reflected as a com-
ponent of unrealized appreciation on forwards. Forward commitments have a risk
of loss due to nonperformance of counterparties.
The following forward purchase commitments were outstanding as of December
31, 1996:
<TABLE>
<CAPTION>
Par Amount
in Local Unrealized
Currency Appreciation/
(000) Description Coupon Maturity Depreciation
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
AUSTRIA (Republic of)
3,220--ATS Settlement 04/07/97............... 6.250% 05/31/06 $(1,414)
GERMANY (Treuhandanstalt)
580--DEM Settlement 02/21/97............... 6.750 05/13/04 7,181
DENMARK (Kingdom of)
475--DKK Settlement 04/04/97............... 8.000 11/15/01 710
UNITED KINGDOM (Treasury)
170--GBP Settlement 04/07/97............... 7.500 12/07/06 6,572
DUTCH GOVERNMENT
890--NLG Settlement 04/04/97............... 8.500 03/15/01 (752)
UNITED STATES
208--US$ FHLMC, settlement 01/14/97........ 7.500 01/01/99 1,463
US Treasury Notes, settlement
460--US$ 11/14/97.......................... 5.750 08/15/03 (4,855)
-------
Total Forward Purchase Commitments
(Cost $2,316,515)................................. $ 8,905
-------
</TABLE>
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- -------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS
A forward currency contract is a commitment to purchase or sell a foreign
currency at a future date at a negotiated forward rate. Upon the settlement of
the contract, a realized gain or loss is recognized and is included as a com-
ponent of realized gain/loss on forwards. Risks may arise as a result of the
potential inability of the counterparties to meet the terms of their con-
tracts.
The following forward currency contracts were outstanding as of December 31,
1996:
<TABLE>
<CAPTION>
UNREALIZED
ORIGINAL CURRENT APPRECIATION/
DESCRIPTION VALUE VALUE DEPRECIATION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
BUYS TO OPEN
Austrian Schilling,
3,320,000 expiring 03/27/97.................. $310,002 $308,171 $ (1,831)
Deutsche Mark,
590,000 expiring 02/21/97.................... 386,378 384,722 (1,656)
Danish Krone,
465,000 expiring 02/21/97.................... 79,315 79,156 (159)
60,000 expiring 02/21/97..................... 10,241 10,213 (28)
Pound Sterling,
140,000 expiring 03/27/97.................... 234,402 239,346 4,944
Japanese Yen,
61,000,000 expiring 02/21/97................. 553,388 530,625 (22,763)
Netherlands Guilder,
875,000 expiring 02/21/97.................... 511,217 508,541 (2,676)
85,000 expiring 02/21/97..................... 49,707 49,401 (306)
SELLS TO OPEN
French Franc,
2,004,000 expiring 04/11/97.................. 400,000 388,556 11,444
Pound Sterling,
333,489 expiring 07/16/97.................... 500,000 568,248 (68,248)
Japanese Yen,
81,120,000 expiring 01/24/97................. 800,000 702,842 97,158
5,000,000 expiring 02/21/97.................. 45,069 43,493 1,576
Netherlands Guilder,
115,000 expiring 02/21/97.................... 67,927 66,837 1,090
--------
$18,545
--------
</TABLE>
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% for Class A and 1.00% each for
Class B and Class C shares are accrued daily. Included in these fees for the
year ended December 31, 1996, are payments to VKAC of approximately $88,700.
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Van Kampen American Capital Global Managed Assets 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 mate-
rial respects, the financial position of Van Kampen American Capital Global
Managed Assets Fund (the "Fund") at December 31, 1996 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 re-
ferred to as "financial statements") are the responsibility of the Fund's man-
agement; 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 re-
quire 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 dis-
closures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall finan-
cial statement presentation. We believe that our audits, which included confir-
mation of securities at December 31, 1996 by correspondence with the custodian
and brokers and the application of alternative auditing procedures for unset-
tled security transactions, provide a reasonable basis for the opinion ex-
pressed above.
PRICE WATERHOUSE LLP
Houston, Texas
February 7, 1997
33
<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
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
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
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.
34
<PAGE>
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
DENNIS J. MCDONNELL*
JACK E. NELSON
JEROME L. ROBINSON
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
JOHN GOVETT & CO., LTD.
Shackleton House
4 Battle Bridge Lane
London, SE1 2HR England
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICING AGENT
ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (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., 1996
All rights reserved.
(SM)denotes a service mark of
Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors un-
less it has been preceded or is accompanied by an effective prospectus of the
Fund which contains additional information on how to purchase shares, the
sales charge, and other pertinent data.
35
<PAGE>
RESULTS OF SHAREHOLDER VOTES
A Special Meeting of Shareholders of the Fund was held on March 14, 1996,
where shareholders voted on the approval of a new investment sub-advisory
agreement between Van Kampen American Capital Asset Management, Inc., the in-
vestment adviser to the Fund, and John Govett & Co. Limited, 1,768,874 shares
voted for the proposal, 10,413 shares voted against and 43,239 shares ab-
stained.
A Special Meeting of Shareholders of the Fund was held on October 25, 1996
where shareholders voted on a new investment advisory agreement, interim in-
vestment subadvisory agreements, changes to investment policies and the ratifi-
cation of Price Waterhouse LLP as independent public accountants. With regard
to the approval of a new investment advisory agreement between Van Kampen Amer-
ican Capital Asset Management, Inc. (the "Adviser") and the Fund, 1,593,488
shares voted for the proposal, 14,574 shares voted against and 70,206 shares
abstained. With regard to the approval of an investment subadvisory agreement
with Morgan Stanley Asset Management Inc. and the Adviser, 1,593,287 shares
voted for the proposal, 15,343 shares voted against the proposal and 69,638
shares abstained. The investment subadvisory agreement with Morgan Stanley As-
set Management Inc. and the Adviser will take effect on April 1, 1997. With re-
gard to the approval of an interim investment subadvisory agreement which will
terminate on March 31, 1997 with John Govett & Co. Limited and the Adviser,
1,588,770 shares voted for the proposal, 20,143 shares voted against the pro-
posal and 69,355 shares abstained. With regard to the approval of certain
changes to the Fund's fundamental investment policies with respect to invest-
ment in other investment companies, 1,362,302 shares voted for the proposal,
17,386 shares voted against and 73,745 shares abstained. With regard to the
ratification of Price Waterhouse LLP as independent public accountants for the
Fund, 1,595,568 shares voted for the proposal, 16,206 shares voted against and
66,492 shares abstained.
TAX NOTICE TO CORPORATE
SHAREHOLDERS
For 1996, 0.00% of the dividends
taxable as ordinary income qualified
for the 70% dividends received
deduction for corporations.
36
