<PAGE>
Van Kampen American Capital
GLOBAL MANAGED
ASSETS FUND
Semi-Annual Report
June 30, 1997
[ARTWORK]
---A Wealth of Knowledge . A Knowledge of Wealth---
Van Kampen American Capital
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
Letter to Shareholders...................................................... 1
Performance Results......................................................... 4
Portfolio Highlights........................................................ 5
Portfolio Management Review................................................. 6
Portfolio of Investments.................................................... 9
Statement of Assets and Liabilities......................................... 24
Statement of Operations..................................................... 25
Statement of Changes in Net Assets.......................................... 26
Financial Highlights........................................................ 27
Notes to Financial Statements............................................... 30
</TABLE>
GMA SAR 8/97
<PAGE>
Letter to Shareholders
[PHOTO]
Dennis J. McDonnell and Don G. Powell
August 4, 1997
Dear Shareholder,
As you know, Van Kampen American Capital was acquired by Morgan Stanley
Group Inc., a world leader in asset management. Earlier this year, Morgan
Stanley Group Inc. and Dean Witter, Discover & Co. agreed to merge. The merger
was completed on May 31, creating the combined company of Morgan Stanley, Dean
Witter, Discover & Co. Additionally, we are very pleased to announce that
Philip N. Duff, formerly the chief financial officer of Morgan Stanley Group
Inc., has joined Van Kampen American Capital as president and chief executive
officer. I will continue as chairman of the firm. We are confident that the
partnership of Van Kampen American Capital and Morgan Stanley will continue to
work to the benefit of our fund shareholders.
One of the immediate privileges that we can offer fund shareholders is the
ability to make exchanges between Van Kampen American Capital and Morgan
Stanley retail funds at no charge. In our view, the rapid appreciation of U.S.
stock prices in recent years has created a need for investors to examine their
portfolios carefully to ensure proper diversification among domestic and
foreign investments. The Morgan Stanley funds, with their emphasis on global
markets, can be valuable tools to accomplishing this diversification.
We also urge investors to consider how their fund holdings are currently
allocated among the three major asset classes of stocks, bonds, and cash
reserves. Uneven movements in the various markets can distort a carefully
planned investment program. And, with stock prices near record highs, it is
likely that some rebalancing of your portfolio allocations may be necessary.
Once again, the exchangeability feature with the Morgan Stanley funds provides
additional choices and opportunities to make the necessary adjustments to your
portfolio's asset allocation.
Economic Overview
Growth, stability, and confidence continued to characterize the U.S.
economic environment during the past six months. In the first quarter, the
economy grew at its fastest pace since 1987. Despite the robust rate of
economic activity, there was little evidence of troublesome inflation.
Wholesale prices actually fell during each of the first five months of 1997,
the longest stretch of consecutive monthly declines in 45 years. Continued
moderation in the cost of employee benefit packages offset mild upward pressure
on wages that resulted from the country's low unemployment rate.
1 Continued on page two
<PAGE>
In March, the inflationary implications of a tight labor market led the
Federal Reserve Board to raise its target for a key lending rate by one-quarter
of a percentage point, the first hike in short-term interest rates in two years.
In Europe, economic activity was restrained by generally restrictive
monetary and fiscal policies as countries reduced inflation and budget deficits
to ensure eligibility for European Monetary Union in 1999. In Japan, the
central bank held to its highly stimulative monetary policy to help revive that
country's ailing financial sector. Low Japanese interest rates contributed to a
steep fall in the value of the yen, which consequently helped the country's huge
export sector return to profitability.
Market Overview
The strong U.S. economy and tight labor market combined to put mild upward
pressure on domestic bond yields during the first half of 1997. For several
weeks during the spring, it appeared that economic growth was too robust and
that inflation could reemerge. The Federal Reserve's quarter-point increase in
short-term interest rates, as well as worries about inflation, pushed yields on
long-term government bonds up to 7.17 percent in April. When subsequent data
showed the economy to be decelerating during the second quarter, bond yields
gradually fell back to 6.78 percent at the end of June, slightly above where
they stood at the beginning of the year. High yield corporate bonds were the
best-performing sector of the U.S. fixed-income market, as the healthy economic
environment increased investor confidence in the creditworthiness of
lower-rated debt.
Interest rates fell across most global fixed-income markets, but a strong
rally in the value of the U.S. dollar offset the resulting appreciation in bond
prices. During the past six months, the Salomon Brothers Non-U.S. Government
Bond Index gained 3.56 percent in local currency terms, but lost 3.13 percent
after conversion to U.S. dollars.
Most global equity markets posted solid gains during the first half of
1997. The Dow Jones World Stock Index advanced 13.53 percent in dollar terms
during the period. Stocks in the United States were bolstered by exceptionally
strong growth in corporate profits and by the low-inflation environment, which
allowed price-earnings multiples to remain high. European markets, especially
those in Switzerland, Spain, and the Netherlands, also advanced as falling
interest rates made stocks more attractive. In Asia, equity prices were
generally subdued, reflecting a region-wide slowdown in economic growth rates
and global overcapacity for electronic exports. Stocks in South Korea and Japan,
however, did rebound modestly from previous declines.
Outlook
We expect the pace of economic activity during the remainder of 1997 to
accelerate modestly from the sluggish rate that prevailed during the second
quarter. While we do not believe that economic growth will be rapid enough to
reignite inflation, some warning signs are present, including a tight labor
market and high consumer confidence. In this environment, at least one
additional round of monetary tightening by the Federal Reserve remains a
possibility. We anticipate that long-term interest rates will remain within a
relatively narrow range for the remainder of the year.
Also, we believe that global economic activity will increase, putting mild
downward pressure on bond prices. In Japan, short-term interest rates should
rise from the historically low levels of recent years as the economic recovery
builds momentum. We anticipate that the dollar has peaked against the yen,
although a significant reversal of the dollar's recent gains are unlikely.
European economies should benefit from an end to fiscal tightening,
allowing for modestly higher growth rates throughout the region. Monetary policy
is already relatively easy in core European countries such as Germany and
France, and short-term rates could rise in those markets
2 Continued on page three
<PAGE>
as growth accelerates. In that environment, we expect some European bond markets
to move moderately lower.
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 June 30, 1997
Van Kampen American Capital Global Managed Assets Fund
<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Total Returns
Six-month total return based on NAV/1/................. 8.74% 8.48% 8.37%
Six-month total return/2/.............................. 3.53% 4.48% 7.37%
One-year total return/2/............................... 8.46% 9.15% 12.02%
Life-of-Fund average annual total return/2/............ 8.71% 8.88% 9.57%
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.
Investment in foreign securities involves certain risks including
fluctuations in foreign exchange rates and possible political and economic
developments.
Market forecasts provided in this report may not necessarily come to pass.
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
June 30, 1997 December 31, 1996
<S> <C> <C>
U.S. Treasury Bond, 8.125%, 08/15/19................ 4.5% .......... N/A
U.S. Treasury Note, 7.250%, 05/15/04................ 4.1% .......... N/A
U.S. Treasury Note, 6.375%, 05/15/99................ 2.8% .......... N/A
U.S. Treasury Note, 6.250%,10/31/01................. 1.8% .......... N/A
General Electric Co................................. 1.7% .......... N/A
Coca Cola Co........................................ 1.3% .......... N/A
Microsoft Corp...................................... 1.2% .......... 0.4%
Merck & Co., Inc.................................... 1.1% .......... 0.4%
International Business Machines Corp................ 1.0% .......... 0.2%
Latin American Discovery Fund, Inc.................. 1.0% .......... N/A
</TABLE>
N/A -- Not Applicable
Asset Allocation as a Percentage of Total Investments
<TABLE>
<CAPTION>
As of June 30, 1997
<C> <S> <C>
[_] Common and Preferred Stocks..... 61.3%
[_] Bonds........................... 9.3% [PIE CHART APPEARS HERE]
[_] Repurchase Agreements........... 7.9%
[_] U.S. Government Agency.......... 21.5%
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%
</TABLE>
Top Ten Countries as a Percentage of Long-Term Investments
<TABLE>
<CAPTION>
As of June 30, 1997 As of December 31, 1996
<S> <C> <C> <C>
United States........... 48.7% United States.............. 34.5%
Japan................... 13.2% Japan...................... 12.2%
United Kingdom.......... 7.2% United Kingdom............. 7.3%
Germany................. 5.2% Netherlands................ 6.7%
France.................. 5.0% Switzerland................ 5.1%
Canada.................. 4.2% Germany.................... 3.9%
Switzerland............. 3.5% France..................... 2.9%
Italy................... 3.0% Hong Kong.................. 2.8%
Spain................... 2.3% Russia..................... 2.6%
Sweden.................. 2.2% Sweden..................... 2.4%
</TABLE>
5
<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 six months. Through March 31, 1997, the Fund was co-
managed by portfolio managers Jeff D. New and John R. Reynoldson, Van Kampen
American Capital (U.S. holdings), portfolio managers Jonathan Hourigan and 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 co-managed by portfolio managers
Barton M. Biggs, Francine J. Bovich, Madhav Dhar, and Ann D. Thivierge, Morgan
Stanley Asset Management, Inc. The following excerpts reflect their views on the
Fund's performance during the six-month period ended June 30, 1997.
Q How would you describe the investment environment you faced in managing the
Fund during the past six months?
A The stock market in the United States continued its push to higher ground,
fueled by predominately positive economic conditions. Concerns that a
strengthening economy would spur interest rate hikes put a damper on the markets
early in the year; in fact, the Federal Reserve Board's action in March to
increase the federal funds rate by one-quarter of one percent was interpreted as
the first of a series of gradual increases that would stretch out into the
summer. Fortunately, growth slowed significantly from its first-quarter pace, so
further interest rate hikes never materialized.
While economic growth in Europe and Japan has lagged that of the United
States for most of the period, we have seen sporadic signs of life in recent
months as the positive tone of the U.S. markets has spilled over into the global
arena. The Japanese economy, which has been struggling for quite some time, is
finally seeing progress as financial reforms continue to move forward. This is
evident with new commercial laws that allow options trading, stock buybacks, and
the formation of holding companies. The strength of the U.S. dollar versus other
major currencies has been a key factor in the marketplace. While its value has
stabilized since a surge in January and February, the impact of a strong dollar
continues to affect the outlook for global investors. In foreign economies
dependent on exports, such as Germany and Japan, a strong dollar is seen as a
potential engine for future growth.
Worldwide inflation rates remain low, allowing European central banks to
ease monetary policy. The European community is moving closer to the effective
date of the European Monetary Union (EMU), the agreement creating a single
European currency in 1999. As that date approaches, member countries have
maintained tight fiscal and monetary policies in order to meet the stringent
economic requirements called for in the EMU agreement. In the near term,
stringent fiscal policies have contributed to lethargic growth rates and more
severe unemployment. But underlying these concerns is a more positive outlook,
including prospects for added growth from a single currency, improved employment
policies, and a lessening of currency risk, which would smooth trading over the
long haul.
6
<PAGE>
Q How did you react to these conditions in managing the Fund?
A At 48.7 percent of the long-term investments, the United States is still
our largest regional commitment. The solid performance of the domestic stock
market and favorable conditions for fixed-income securities have proven to be an
irresistible combination, especially when compared to other international
markets.
Compared to the composition of the Morgan Stanley Capital International
(MSCI) World Index, our equity holdings are overweighted in the United States,
in selected Asian markets, such as Singapore and Hong Kong, and in a number of
core-EMU countries, such as Germany, France, Spain, and Italy. On the other
hand, we have been underweighted in Japan and in the United Kingdom, where the
recent election has created uncertainty over potential tax code revisions.
On the fixed-income side, we have been positioned for a period of low
volatility, which is basically what we've had. There have been no overriding
signals to suggest otherwise, so we sat tight and managed primarily through
country exposure.
We continue to be overweighted in the United States--and certainly skewed
toward dollar-denominated issues--and in some of the higher-yielding European
markets, including Denmark, Spain, and Italy. We took profits in our holdings in
the United Kingdom during the rally sparked by the recent election and are now
back to a neutral position. Our Canadian holdings have also performed well in
relation to the U.S. market. During recent market dips in Japan, we shifted
assets into Japan in order to capitalize on the relative value we saw there, but
we are still underweighted in that market.
As of June 30, approximately 60 percent of the portfolio was allocated to
stocks and approximately 40 percent to U.S. government agency obligations and
other short-term instruments. For additional Fund portfolio highlights, please
refer to page five.
Q How did the Fund perform over the six-month reporting period?
A The Fund achieved a total return of 8.74 percent1 (Class A shares at net
asset value) for the six-month period ended June 30. By comparison, the
Morgan Stanley Capital International (MSCI) World Index generated a total return
of 14.55 percent. The J.P. Morgan Global Traded Government Index achieved a
total return of -1.09 percent. The MSCI World Index is an unmanaged index that
is used as a benchmark to general equity funds. The J.P. Morgan Global Traded
Government Index is 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. Keep in mind that these indices are
unmanaged statistical composites and do not reflect 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 additional Fund performance results.
7
<PAGE>
Q What is your outlook for the markets and for the Fund's portfolio in the
months ahead?
A Against the positive backdrop of generally benign economic conditions in the
United States, the Fund appears to be well positioned for the second half of
the year.
Economic growth in the domestic markets, which influences factors such as
interest rates and corporate profits, should be moderate in the months ahead,
so we do not anticipate a sharp rebound in the inflation rate. Still, we will
closely monitor growth and inflation figures for possible surprises, especially
as we move into the latter part of the year.
One caution flag might be the high valuations carried by world markets at
this time. Stock prices, for example, while consistent with low global interest
rates, might be interpreted as high in relation to earnings growth. We are
increasingly uneasy about U.S. equity market levels and the global
repercussions of a U.S. pullback. Hence we are building a small cash position
for the short term, and will look for a better point to re-enter the market.
/s/ Barton M. Biggs /s/ Francine J. Bovich
Barton M. Biggs Francine J. Bovich
Portfolio Manager Portfolio Manager
Morgan Stanley Asset Management Inc. Morgan Stanley Asset Management Inc.
/s/ Madhav Dhar /s/ Ann D. Thivierge
Madhav Dhar Ann D. Thivierge
Portfolio Manager Portfolio Manager
Morgan Stanley Asset Management Inc. Morgan Stanley Asset Management Inc.
8 Please see footnotes on page four
<PAGE>
Portfolio of Investments
June 30, 1997 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Common and Preferred Stocks and Equivalents 59.9%
Canada 2.9%
Abitibi Consolidated Inc.................................. 300 $ 5,355
Alcan Aluminum, Ltd....................................... 600 20,464
Avenor, Inc............................................... 200 3,881
Bank of Montreal.......................................... 700 27,322
Bank of Nova Scotia....................................... 600 26,286
Barrick Gold Corp......................................... 1,000 21,760
BCE, Inc.................................................. 1,600 44,491
Bombardier, Inc., Class B................................. 800 18,132
Cameco Corp............................................... 200 7,495
Canadian Imperial Bank.................................... 1,000 25,200
Canadian Natural Resources (a)............................ 300 7,788
Canadian Occidental Petroleum............................. 400 8,979
Canadian Pacific.......................................... 900 25,613
Cominco................................................... 300 7,984
Corel Corp. (a)........................................... 300 1,977
Dofasco, Inc.............................................. 300 5,681
Echo Bay Mines............................................ 400 2,230
Gulf Canada Resource (a).................................. 800 6,546
Imasco.................................................... 600 17,379
Imperial Oil.............................................. 400 20,493
Inco...................................................... 400 11,948
IPL Energy, Inc........................................... 400 13,368
Laidlaw, Inc., Class B Non-Voting......................... 700 9,656
Loewen Group, Inc......................................... 100 3,469
MacMillan Bloedel......................................... 400 5,489
Magna International, Inc., Class A........................ 200 12,021
Moore Corp................................................ 300 5,909
Newbridge Networks Corp. (a).............................. 400 17,148
Noranda, Inc.............................................. 700 15,080
Norcen Energy Resources................................... 400 9,530
Northern Telecom.......................................... 600 54,072
Nova Corp................................................. 1,400 11,963
Petro..................................................... 900 14,599
</TABLE>
9 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Description Shares Market Value
<S> <C> <C>
Canada (Continued)
Placer Dome, Inc.......................................... 600 $ 9,732
Potash Corporation of Saskatchewan, Inc................... 100 7,527
Power Corporation of Canada............................... 300 7,365
Renaissance Energy (a).................................... 400 11,123
Rogers Communications, Inc., Class B (a).................. 500 3,132
Royal Bank of Canada...................................... 800 36,236
Seagram................................................... 900 36,171
Talisman Energy, Inc. (a)................................. 400 12,296
Teck Corp., Class B Subordinated Voting................... 300 6,072
Thomson Corp.............................................. 1,500 34,541
TransCanada PipeLines..................................... 800 16,076
Westcoast Energy, Inc..................................... 400 7,328
Weston George............................................. 100 6,391
-------
683,298
-------
France 3.5%
Accor, SA................................................. 100 14,974
Air Liquide............................................... 150 23,814
Alcatel Alsthom, SA....................................... 300 37,572
Axa-UAP................................................... 650 40,427
Banque Nationale de Paris................................. 450 18,546
Carrefour, SA............................................. 100 72,626
Casino-Guichard-Perrachon, SA............................. 150 7,425
Compagnie Bancaire, SA.................................... 50 6,381
Compagnie de Saint Gobain................................. 200 29,166
Compagnie de Suez......................................... 5,700 14,016
Compagnie de Suez......................................... 300 15,181
Compagnie Financiere Paribas, SA.......................... 150 10,363
Compagnie Generale des Eaux............................... 200 25,627
Compagnie Generale des Eaux
(Warrants, expiring 05/21/02) (a)....................... 200 120
Elf Aquitaine, SA......................................... 600 64,730
Groupe Danone............................................. 200 33,046
Havas, SA................................................. 150 10,810
L'Oreal................................................... 150 63,199
Lafarge, SA............................................... 250 15,549
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
France (Continued)
Legrand, SA........................................ 50 $ 8,806
LVMH (Moet Hennessy Louis Vuitton) (a)............. 200 53,772
Michelin (CGDE), Class B........................... 400 24,020
Peugeot Citroen.................................... 150 14,498
Pinault-Printemps-Redoute, SA...................... 50 24,027
Promodes........................................... 50 19,475
Rhone-Poulenc, SA.................................. 700 28,587
Rhone-Poulenc, SA, Act A (Non-Negotiable).......... 14 403
Sanofi, SA......................................... 200 19,603
Schneider, SA...................................... 300 15,968
SEFIMEG (Societe Francaise d'Investissements
Immobiliers et de Gestion) (a)..................... 100 6,381
Societe BIC, SA.................................... 50 8,176
Societe Generale................................... 200 22,325
Ste Generale (Non-Negotiable)...................... 6 569
Suez Lyonnaise des Eaux............................ 150 15,110
Thomson CSF........................................ 300 7,729
Total, SA, Class B................................. 500 50,539
-------
823,560
-------
Germany 3.6%
AGIV, AG (a)....................................... 150 3,419
Allianz, AG........................................ 500 104,638
BASF, AG........................................... 1,150 42,496
Bayer Hypotheken Bank, AG.......................... 500 14,950
Bayer Vereinsbank, AG.............................. 350 14,308
Bayer, AG.......................................... 1,300 49,955
Daimler-Benz, AG................................... 950 77,074
Deutsche Bank, AG.................................. 1,000 58,426
Deutsche Telekom, AG............................... 3,800 91,509
Dresdner Bank, AG.................................. 900 31,116
Hochtief, AG....................................... 250 11,181
Karstadt, AG....................................... 50 17,803
Man, AG............................................ 50 15,395
Mannesmann, AG..................................... 50 22,275
</TABLE>
11 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
================================================================================
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Germany (Continued)
Merck KGaA............................................... 300 $ 13,236
Preussag, AG............................................. 50 14,635
RWE, AG.................................................. 650 27,951
RWE, AG, Non-Voting Preferred............................ 450 15,661
SAP, AG.................................................. 100 20,068
SAP, AG, Non-Voting Preferred............................ 50 10,378
Schering, AG............................................. 150 16,027
Siemens, AG.............................................. 1,050 62,340
Thyssen, AG.............................................. 50 11,840
Veba, AG................................................. 900 50,570
Viag, AG................................................. 50 22,734
Volkswagen, AG........................................... 50 38,329
------------
858,314
------------
Hong Kong 1.4%
Bank of East Asia (a).................................... 1,200 5,003
Cathay Pacific Air....................................... 5,000 10,359
Cheung Kong Holdings..................................... 3,000 29,623
China Light & Power Co................................... 3,000 17,000
Chinese Estates Holdings................................. 4,000 3,769
Hang Seng Bank........................................... 3,100 44,216
Hong Kong & China Gas Co. (ADR).......................... 3,000 6,002
Hong Kong & Shang Hotels................................. 3,000 4,782
Hong Kong Land Holdings.................................. 1,246 3,314
Hong Kong Telecommunications............................. 18,400 43,938
Hopewell Holdings........................................ 7,000 4,427
Hutchison Whampoa........................................ 5,000 43,241
Hysan Development........................................ 2,000 5,899
Johnson Electric Holdings (a)............................ 1,000 2,982
Miramar Hotel & Investment............................... 1,000 1,839
New World Development Co................................. 3,000 17,890
Shun Tak Holdings........................................ 4,174 2,559
South China Morning Post................................. 6,000 5,886
Sun Hung Kai Properties.................................. 3,000 36,109
Swire Pacific, Class A................................... 2,500 22,508
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
================================================================================
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Hong Kong (Continued)
Wharf Holdings........................................... 4,000 $ 17,348
Wing Lung Bank........................................... 300 1,913
--------
330,607
--------
Italy 2.1%
Assicurazioni Generali................................... 2,500 45,453
Banca Commerciale Italiana............................... 4,000 8,284
Banco Ambrosiano Veneto SpA.............................. 1,000 2,883
Credito Italiano......................................... 7,500 13,724
Edison, SpA.............................................. 2,000 9,950
Ente Nazionale Idrocarburi, SpA.......................... 21,000 118,927
Fiat, SpA................................................ 9,000 32,408
Fiat, SpA, Di Risp....................................... 2,000 3,760
Fiat, SpA, Priv.......................................... 3,000 5,543
Instituto Bancario San Paolo............................. 2,500 18,225
Instituto Mobiliare Italiano............................. 1,500 13,503
Instituto Nazionale delle Assicurazioni (INA)............ 10,000 15,239
Italcementi, SpA......................................... 1,000 6,237
Italgas, SpA............................................. 2,000 6,472
Mediaset, SpA............................................ 3,000 12,736
Mediobanca, SpA (a)...................................... 1,000 6,072
Montedison, SpA (a)...................................... 10,000 6,602
Montedison, SpA, Di Risp (a)............................. 5,000 3,236
Olivetti & C., SpA (a)................................... 10,000 2,833
Parmalat Finanziara, SpA (a)............................. 5,000 7,075
Pirelli, SpA............................................. 5,000 12,386
Rinascente, SpA.......................................... 1,000 5,557
Riunione Adriatica di Sicurta, SpA....................... 750 5,935
Sirti, SpA............................................... 1,000 5,769
Telecom Italia, SpA...................................... 17,500 56,632
Telecom Italia, SpA, Di Risp............................. 5,000 9,900
Telecom Italia, SpA, Di Risp (ITL 50).................... 5,000 8,943
Telecom Italia, SpA, ORD................................. 17,500 56,169
--------
500,453
--------
</TABLE>
13 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Japan 9.1%
Ajinomoto Co., Inc..................................... 2,000 $ 21,462
Aoyama Trading Co...................................... 100 3,211
Asahi Chemical Industry Co............................. 5,000 29,881
Asahi Glass Co......................................... 2,000 19,892
Bank of Tokyo.......................................... 5,400 108,358
Bank of Yokohama....................................... 2,000 11,255
Bridgestone Corp....................................... 2,000 46,414
Dai Nippon Printing.................................... 3,000 67,789
Daiei, Inc. (a)........................................ 1,000 6,412
Daiwa House Industries................................. 1,000 12,214
Daiwa Securities....................................... 2,000 15,774
Denso Corp............................................. 1,000 23,905
Fanuc.................................................. 600 23,033
Fuji Bank.............................................. 3,000 45,018
Fuji Photo Film Co..................................... 1,000 40,220
Fujitsu (a)............................................ 3,000 41,616
Hitachi................................................ 2,000 22,335
Honda Motor Co......................................... 1,000 30,099
Industrial Bank of Japan............................... 3,000 46,589
Japan Air Lines Co. (a)................................ 2,000 9,091
Japan Energy Corp...................................... 2,000 5,235
Jusco Co............................................... 1,000 33,764
Kajima Corp............................................ 2,000 11,708
Kansai Electric Power.................................. 1,500 28,922
Kao Corp............................................... 2,000 27,744
Kawasaki Steel Corp.................................... 1,000 3,254
Kirin Brewery Co....................................... 2,000 20,764
Kubota Corp............................................ 5,000 24,472
Kumagai Gumi Co........................................ 1,000 1,666
Kyocera Corp........................................... 400 31,757
Marubeni Corp.......................................... 6,000 27,220
Marui Co............................................... 1,000 18,583
Matsushita Electric Industries......................... 3,000 60,461
Mitsubishi Chemical.................................... 4,000 13,052
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Japan (Continued)
Mitsubishi Corp........................................ 2,000 $ 24,952
Mitsubishi Electric Corp............................... 3,000 16,777
Mitsubishi Estate...................................... 2,000 28,965
Mitsubishi Heavy Industries............................ 8,000 61,351
Mitsubishi Trust & Banking Corp........................ 2,000 31,583
Mitsui Fudosan Co...................................... 2,000 27,569
Mitsui Trust & Banking Co.............................. 1,000 7,547
Mitsukoshi............................................. 1,000 7,110
NEC Corp............................................... 2,000 27,918
Nippon Express Co...................................... 2,000 15,966
Nippon Oil Co.......................................... 4,000 21,881
Nippon Steel Corp...................................... 5,000 15,966
Nippon Telegraph & Telephone Corp...................... 13 124,760
Nissan Fire & Marine Insurance......................... 700 3,848
Nissan Motor Co........................................ 3,000 23,268
NKK Corp............................................... 6,000 12,877
Nomura Securities...................................... 2,000 27,569
Odakyu Electric Railway................................ 5,000 29,663
Osaka Gas Co........................................... 5,000 14,352
Sakura Bank............................................ 4,000 30,640
Sankyo Co.............................................. 1,000 33,589
Sanyo Electric Co...................................... 4,000 17,938
Sega Enterprises....................................... 200 6,631
Sekisui Chemical Co.................................... 1,000 10,120
Sekisui House.......................................... 1,000 10,120
Sharp Corp............................................. 1,000 13,785
Shimizu Corp........................................... 1,000 5,994
Shiseido Co............................................ 1,000 16,489
Softbank Corp.......................................... 210 13,430
Sony Corp.............................................. 500 43,579
Sumitomo Bank.......................................... 3,000 49,206
Sumitomo Chemical...................................... 4,000 18,112
Sumitomo Corp.......................................... 2,000 19,019
Sumitomo Metal Industries.............................. 1,000 2,844
</TABLE>
15 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Japan (Continued)
Sumitomo Metal Mining Co.................................. 1,000 $ 7,067
Taisei Corp............................................... 4,000 18,531
Taisho Pharmacy Co........................................ 1,000 26,959
Takeda Chemical Industries................................ 2,000 56,186
Tobu Railway Co........................................... 1,000 4,615
Tokai Bank................................................ 2,000 20,590
Tokio Marine & Fire Insurance Co.......................... 2,000 26,173
Tokyo Electric Power...................................... 1,800 37,847
Tokyo Gas Co.............................................. 5,000 13,872
Tokyu Corp................................................ 2,000 12,406
Toray Industries, Inc..................................... 3,000 21,384
Toto...................................................... 1,000 12,302
Toyota Motor Corp......................................... 4,000 117,955
Yamaichi Securities Co.................................... 2,000 5,950
Yamanouchi Pharmaceutical Co.............................. 1,000 26,871
Yasuda Trust & Banking.................................... 2,000 7,643
---------
2,164,939
---------
Netherlands 1.0%
ABN Amro Holdings, NV..................................... 1,200 22,375
Akzo Nobel, NV............................................ 100 13,704
Elsevier, NV.............................................. 600 10,026
ING Groep NV.............................................. 630 29,046
KLM Royal Dutch Air Lines, NV............................. 100 3,082
Koninklijke Ahold, NV..................................... 100 8,437
Koninklijke KNP BT, NV.................................... 100 2,277
Koninklijke PTT Nederland, NV (ADR)....................... 410 16,083
Philips Electronics, NV................................... 300 21,489
Royal Dutch Petroleum Co.................................. 1,600 68,485
Unilever, NV.............................................. 100 21,051
Wolters Kluwer, NV........................................ 101 12,298
---------
228,353
---------
Singapore 1.2%
City Developments......................................... 3,000 29,377
Cycle & Carriage.......................................... 1,000 10,352
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Singapore (Continued)
DBS Land............................................... 4,000 $ 12,646
Development Bank of Singapore.......................... 2,000 25,180
First Capital Corp..................................... 1,000 2,602
Fraser & Neave......................................... 1,000 7,134
Inchcape Berhad........................................ 1,000 3,602
Keppel Corp............................................ 3,000 13,325
Keppel Corp., Class A (a).............................. 250 1,084
NatSteel, Ltd.......................................... 1,000 2,546
Neptune Orient Lines................................... 4,000 3,581
Overseas Chinese Bank.................................. 2,800 28,985
Overseas Union Enterprise.............................. 1,000 4,616
Shangri-La Hotel....................................... 1,000 2,994
Singapore Airlines..................................... 4,000 35,812
Singapore Press Holdings............................... 1,000 20,144
Singapore Technologies Industrial Corp................. 3,000 7,722
Singapore Telecommunications........................... 24,000 44,317
Straits Trading Co..................................... 1,000 2,182
United Industrial Corp................................. 6,000 4,532
United Overseas Bank................................... 3,000 30,846
--------------
293,579
--------------
Spain 1.6%
Argentaria, SA......................................... 300 16,797
Autopistas Cesa........................................ 600 8,144
BCO Bilbao Vizcaya..................................... 600 48,741
BCO Central Hispan..................................... 400 14,632
BCO Santander.......................................... 900 27,730
Corporacion Financiera Alba, SA........................ 100 12,684
Corporacion Mapfre..................................... 100 5,321
Emp Nac Electricid (a)................................. 700 58,765
Empresa Nacional de Celulosas, SA...................... 100 1,764
Fomento Construcciones y Contratas, SA................. 100 12,752
Gas Natural SDG, SA.................................... 100 21,846
Iberdrola, SA.......................................... 2,300 29,033
</TABLE>
17 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Spain (Continued)
Inmobiliaria Metropolitana Vasco Central, SA
(Including 100 Bonus Rights Expiring 07/26/97).......... 100 $ 3,624
Repsol, SA.............................................. 800 33,824
Tabacalera, SA, Class A................................. 100 5,368
Telefonica De Espana.................................... 2,300 66,495
Union Electrica Fenosa, SA.............................. 800 7,275
Viscofan Industria Navarra De Envolturas
Celulosicas, SA........................................ 100 2,338
--------
377,133
--------
Sweden 1.5%
ABB, AB, Class A........................................ 2,000 28,052
AGA, AB, Class B........................................ 600 7,989
Astra, AB, Class A...................................... 3,733 69,492
Atlas Copco, AB, Class A................................ 500 13,057
Electrolux, AB, Class B................................. 200 14,427
Ericsson Telefan LM, Class B (a)........................ 2,300 90,537
Granges, AB (a)......................................... 100 1,325
Hennes & Mauritz, AB, Class B........................... 500 17,581
Securitas, AB, Class B.................................. 200 5,636
Skandia Forsakrings, AB................................. 300 11,053
Skandinaviska Enskilda Banken, Class A.................. 1,400 15,112
Skanska, AB, Class B.................................... 300 13,264
SKF, AB, Class B........................................ 400 10,342
Stora Kopparbergs Bergslags Aktiebolag, Class A......... 800 12,927
Svenska Cellulosa, AB, Class B.......................... 500 10,471
Svenska Handelsbkn, Class A (a)......................... 500 15,901
Volvo, AB, Class B...................................... 1,100 29,436
--------
366,602
--------
Switzerland 2.4%
ABB, AG................................................. 10 15,137
Alusuisse Lonza Holding................................. 10 10,356
Credit Suisse Group..................................... 300 38,527
Holderbank Financiere Glarus AG......................... 10 9,445
Nestle, AG.............................................. 60 79,151
Novartis (a)............................................ 100 159,863
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Switzerland (Continued)
Roche Holdings Bearer, AG.............................. 2 $ 27,466
Roche Holdings Genusscheine, AG........................ 10 90,445
SGS Holding............................................ 5 10,685
SMH, AG................................................ 10 5,712
Sulzer, AG (Including 10 Rights Expiring 07/09/97)..... 10 8,562
Swiss Bank Corp (a).................................... 110 29,421
Swiss Reinsurance...................................... 20 28,288
Union Bank of Switzerland.............................. 30 34,315
Zurich Versicherungs-Gesellschaft...................... 60 23,877
------------
571,250
------------
Thailand 0.1%
Siam Cement Co......................................... 1,000 17,294
Thai Military Bank, PLC................................ 14,600 16,344
------------
33,638
------------
United Kingdom 5.0%
Abbey National......................................... 1,400 19,118
Arjo Wiggins Apple..................................... 1,300 3,789
B.A.T Industries....................................... 3,700 33,119
Barclays............................................... 1,800 35,731
Bass................................................... 1,600 19,531
BG..................................................... 5,300 19,417
Blue Circle Industries................................. 3,500 25,004
BOC Group.............................................. 1,100 19,115
Boots Co............................................... 1,400 16,425
British Aerospace...................................... 500 11,128
British Airways........................................ 1,300 14,819
British Petroleum...................................... 7,200 89,567
British Sky Broadcast.................................. 2,100 15,520
British Telecommunications............................. 6,800 50,505
BTR.................................................... 4,700 16,084
Cable & Wireless....................................... 3,000 27,477
Centrica (a)........................................... 5,300 6,443
Commercial Union....................................... 1,000 10,516
EMI Group.............................................. 700 12,590
</TABLE>
19 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
United Kingdom (Continued)
General Electric.................................... 3,300 $ 19,729
Glaxo Wellcome...................................... 3,700 76,558
Grand Metropolitan.................................. 2,800 26,951
Great Universal Stores.............................. 1,200 12,180
Guinness............................................ 3,000 29,376
Hanson.............................................. 900 4,466
HSBC Holdings....................................... 49 1,474
HSBC Holdings (a)................................... 2,100 62,240
Imperial Chemical Industries........................ 1,200 16,666
Ladbroke Group...................................... 1,300 5,109
Land Securities..................................... 1,000 14,155
Lloyds TSB Group.................................... 6,200 63,704
Marks & Spencer..................................... 3,100 25,709
MEPC................................................ 1,100 9,008
National Power...................................... 1,700 14,778
P & O Finance (a)................................... 1,100 10,954
Prudential Corp..................................... 2,900 28,345
Redland............................................. 1,700 9,625
Reed International.................................. 2,400 23,181
Reuters Holdings.................................... 2,100 22,137
Rio Tinto........................................... 1,700 29,627
RMC Group........................................... 900 14,583
Royal Bank Scot Group............................... 700 6,551
Royal Sun Alliance.................................. 1,700 12,570
Safeway............................................. 1,000 5,787
Sainsbury J Finance................................. 1,900 11,517
Scottish Power...................................... 1,700 11,041
Smithkline Beecham.................................. 3,100 57,071
Tesco............................................... 2,500 15,446
Thames Water........................................ 1,100 12,640
Thorn............................................... 1,000 2,831
Unilever............................................ 900 25,764
Vodafone Group...................................... 3,900 19,029
Zeneca Group........................................ 1,100 36,380
----------
1,183,080
----------
</TABLE>
20 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
================================================================================
Description Shares Market Value
- --------------------------------------------------------------------------------
United States 24.5%
Abbott Laboratories, Inc............................... 1,400 $ 93,450
Aluminum Company of America............................ 400 30,150
American Express Co.................................... 900 67,050
American Home Products Corp............................ 1,000 76,500
American International Group, Inc...................... 800 119,500
Amoco Corp............................................. 800 69,550
AT&T Corp.............................................. 2,700 94,669
BancOne Corp........................................... 1,300 62,969
BankAmerica Corp....................................... 1,940 125,251
BellSouth Corp......................................... 1,900 88,112
Boeing Co.............................................. 1,140 60,491
Bristol-Myers Squibb Co................................ 880 71,280
Campbell Soup Co....................................... 800 40,000
Caterpillar, Inc....................................... 300 32,213
Chevron Corp........................................... 1,200 88,725
Chrysler Corp.......................................... 1,000 32,813
Citicorp............................................... 1,220 147,086
Coca Cola Co. (b)...................................... 3,100 209,250
Columbia/HCA Healthcare Corp........................... 1,200 47,175
Computer Associates International, Inc................. 700 38,981
Consolidated Edison Co................................. 1,700 50,044
CSX Corp............................................... 400 22,200
Dow Chemical Co........................................ 800 69,700
Du Pont (E. I.) de Nemours & Co........................ 2,000 125,750
Duke Power Co.......................................... 600 28,763
Dun & Bradstreet Corp.................................. 500 13,125
Eastman Kodak Co....................................... 1,300 99,775
Electronic Data Systems Corp........................... 800 32,800
Enron Corp............................................. 700 28,569
Exxon Corp............................................. 1,700 104,550
Federal National Mortgage Association.................. 1,600 69,800
First Union Corp....................................... 900 83,250
General Electric Co. (b)............................... 4,200 274,575
General Motors Corp.................................... 1,500 83,531
See Notes to Financial Statements
21
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
================================================================================================
Description Shares Market Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
United States (Continued)
General Reinsurance Corp. (a)........................................ 400 $ 72,800
Heinz, H. J. & Co.................................................... 1,000 46,125
Hewlett-Packard Co................................................... 1,400 78,400
Home Depot, Inc...................................................... 1,000 68,937
Intel Corp........................................................... 960 136,140
International Business Machines Corp................................. 1,800 162,337
International Paper Co............................................... 500 24,281
ITT Corp. (a)........................................................ 300 18,319
JP Morgan & Co., Inc................................................. 700 73,062
Kmart Corp. (a)...................................................... 1,300 15,925
Latin American Discovery Fund, Inc. (an affiliate of VKAC)........... 8,200 161,950
Lilly Eli & Co....................................................... 900 98,381
McDonald's Corp...................................................... 800 38,650
Merck & Co., Inc..................................................... 1,730 179,055
Microsoft Corp. (a).................................................. 1,530 193,354
Minnesota Mining & Manufacturing Co.................................. 600 61,200
Mobil Corp........................................................... 1,200 83,850
Morgan Stanley Asia Pacific Fund, Inc. (an affiliate of VKAC)........ 15,000 157,500
Morgan Stanley India Investment Fund (an affiliate of VKAC) (a)...... 11,500 148,781
Motorola, Inc........................................................ 1,100 83,600
Norfolk Southern Corp................................................ 400 40,300
Oracle Systems Corp. (a)............................................. 1,200 60,450
PepsiCo, Inc......................................................... 2,200 82,637
Pfizer, Inc.......................................................... 1,170 139,815
PG&E Corp............................................................ 1,000 24,250
Philip Morris Cos., Inc.............................................. 1,120 49,700
PPG Industries, Inc.................................................. 500 29,063
Procter & Gamble Co.................................................. 1,100 155,375
Sara Lee Corp........................................................ 1,100 45,788
SBC Communications, Inc.............................................. 900 55,687
Sears Roebuck & Co................................................... 1,300 69,875
Southern Co.......................................................... 2,100 45,937
Texas Utilities Co................................................... 600 20,663
Time Warner, Inc..................................................... 1,000 48,250
22 See Notes to Financial Statements
</TABLE>
<PAGE>
Portfolio of Investments (Continued)
June 30, 1997 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Description Shares Market Value
<S> <C> <C>
United States (Continued)
Travelers Group, Inc............................................................... 1,100 $ 69,369
Wal-Mart Stores, Inc............................................................... 4,700 158,919
Walt Disney Co..................................................................... 1,300 104,325
Weyerhaeuser Co.................................................................... 300 15,600
WMX Technologies, Inc.............................................................. 900 28,913
------------
5,829,210
------------
</TABLE>
<TABLE>
<CAPTION>
Total Common and Preferred Stocks and Equivalents 59.9%............................ 14,244,016
------------
U.S. Government Obligations 9.1%
<S> <C>
U.S. Treasury Bond ($650,000 par, 8.125% coupon, 08/15/19 maturity) (b).................... 741,507
U.S. Treasury Note ($450,000 par, 6.375% coupon, 05/15/99 maturity) (b).................... 452,250
U.S. Treasury Note ($300,000 par, 6.250% coupon, 10/31/01 maturity) (b).................... 298,593
U.S. Treasury Note ($650,000 par, 7.250% coupon, 05/15/04 maturity) (b).................... 677,521
------------
Total U.S. Government Obligations.................................................. 2,169,871
------------
Total Long-Term Investments 69.0% (Cost $14,462,718)....................................... 16,413,887
------------
Short-Term Investments
Repurchase Agreement 7.8%
State Street Bank & Trust Co. ($1,845,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 06/30/97, to be sold on 07/01/97 at
$1,845,256) (b)............................................................................ 1,845,000
------------
U.S. Government Agency Obligations 21.0%
Federal Home Loan Bank Discount Note ($4,500,000 par, yielding 5.480%,
07/03/97 maturity) (b)..................................................................... 4,498,630
Federal National Mortgage Association Discount Note ($500,000 par, yielding
5.428%, 07/17/97 maturity) (b)............................................................. 498,798
------------
Total U.S. Government Agency Obligations........................................... 4,997,428
------------
Total Short-Term Investments 28.8% (Cost $6,842,428)....................................... 6,842,428
------------
Total Investments 97.8% (Cost $21,305,146)................................................. 23,256,315
Foreign Currency 0.4%
(Various denominations, Cost $97,114)...................................................... 97,495
Other Assets in Excess of Liabilities 1.8%................................................. 436,663
------------
Net Assets 100.0%......................................................................... $ 23,790,473
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) Assets segregated as collateral for open futures transactions and
forward purchase commitments.
ADR-American Depository Receipt
23 See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
June 30, 1997 (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
<S> <C>
Assets:
Total Investments, (Cost $21,305,146)...................... $ 23,256,315
Foreign Currency, at Market Value (Cost $97,114)........... 97,495
Cash....................................................... 543
Receivables:
Investments Sold......................................... 751,312
Variation Margin on Futures.............................. 351,244
Dividends................................................ 35,898
Interest................................................. 29,288
Fund Shares Sold......................................... 28,328
Forward Commitments and Foreign Currency Contracts......... 127,148
Unamortized Organizational Costs........................... 5,986
Other...................................................... 688
------------------
Total Assets............................................. $ 24,684,245
------------------
Liabilities:
Payables:
Investments Purchased.................................... 770,710
Distributor and Affiliates............................... 45,424
Investment Advisory Fee.................................. 19,617
Fund Shares Repurchased.................................. 19,237
Accrued Expenses........................................... 20,423
Deferred Compensation and Retirement Plans................. 18,361
------------------
Total Liabilities........................................ 893,772
------------------
Net Assets................................................. $ 23,790,473
==================
Net Assets Consist of:
Capital.................................................... $ 19,422,748
Accumulated Net Realized Gain.............................. 2,518,612
Net Unrealized Appreciation................................ 2,066,795
Accumulated Net Investment Loss............................ (217,682)
------------------
Net Assets................................................. $ 23,790,473
==================
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share
(Based on net assets of $11,066,694 and 974,912
shares of beneficial interest issued and
outstanding)......................................... $ 11.35
Maximum sales charge (4.75%* of offering price)........ .57
------------------
Maximum offering price to public....................... $ 11.92
==================
Class B Shares:
Net asset value and offering price per share (Based
on net assets of $10,983,342 and 985,443 shares
of beneficial interest issued and outstanding)....... $ 11.15
==================
Class C Shares:
Net asset value and offering price per share (Based
on net assets of $1,740,437 and 155,913 shares of
beneficial interest issued and outstanding).......... $ 11.16
==================
</TABLE>
*On sales of $100,000 or more, the sales charge will be reduced.
24 See Notes to Financial Statements
<PAGE>
Statement of Operations
For the Six Months Ended June 30, 1997 (Unaudited)
===============================================================================
Investment Income:
Interest.......................................................... $ 180,610
Dividends (Net of foreign withholding taxes of $19,564)........... 114,758
----------
Total Income.................................................. 295,368
----------
Expenses:
Investment Advisory Fee........................................... 107,818
Custody........................................................... 84,025
Distribution (12b-1) and Service Fees (Attributed to Classes A,
B and C of $12,083, $51,266 and $8,220, respectively)............ 71,569
Shareholder Services.............................................. 72,332
Registration and Filing Fees...................................... 21,908
Shareholder Reports............................................... 34,140
Audit............................................................. 24,635
Trustees Fees and Expenses........................................ 4,205
Amortization of Organizational Costs.............................. 1,631
Legal............................................................. 1,660
Other............................................................. 22,670
----------
Total Expenses................................................ 446,593
----------
Net Investment Loss............................................... $ (151,225)
==========
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments..................................................... $2,315,489
Futures......................................................... 265,600
Forward Commitments............................................. (10,719)
Foreign Currency Transactions................................... (77,840)
----------
Net Realized Gain................................................. 2,492,530
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period......................................... 2,579,885
----------
End of the Period:
Investments................................................... 1,951,169
Futures....................................................... (13,000)
Forward Purchase Commitments.................................. 89,425
Forward Currency Contracts.................................... 60,250
Foreign Currency Translation.................................. (21,049)
----------
2,066,795
----------
Net Unrealized Depreciation During the Period..................... (513,090)
----------
Net Realized and Unrealized Gain.................................. $1,979,440
==========
Net Increase in Net Assets from Operations........................ $1,828,215
==========
25 See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
For the Six Months Ended June 30, 1997
and the Year Ended December 31, 1996 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Loss....................................... $ (151,225) $ (112,792)
Net Realized Gain......................................... 2,492,530 1,701,201
Net Unrealized Appreciation/Depreciation
During the Period....................................... (513,090) 1,005,068
------------ ------------
Change in Net Assets from Operations...................... 1,828,215 2,593,477
Distribution from Net Realized Gain*...................... (190,606) (1,608,530)
------------ ------------
Net Change in Net Assets from Investment Activities....... 1,637,609 984,947
------------ ------------
From Capital Transactions:
Proceeds from Shares Sold................................. 4,097,346 7,742,285
Net Asset Value of Shares Issued Through
Dividend Reinvestment................................... 174,446 1,377,670
Cost of Shares Repurchased................................ (2,220,590) (15,458,267)
------------ ------------
Net Change in Net Assets from Capital Transactions........ 2,051,202 (6,338,312)
------------ ------------
Total Increase/Decrease in Net Assets..................... 3,688,811 (5,353,365)
Net Assets:
Beginning of the Period................................... 20,101,662 25,455,027
------------ ------------
End of the Period (Including accumulated net investment
loss of $217,682 and $7,148, respectively).............. $ 23,790,473 $ 20,101,662
============ ============
<CAPTION>
Six Months
Ended Year Ended
*Distributions by Class June 30, 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Distributions from Net Realized Gain:
Class A Shares.......................................... $ (86,370) (713,178)
Class B Shares.......................................... (90,247) (762,464)
Class C Shares.......................................... (13,989) (132,888)
------------ ------------
$ (190,606) $ (1,608,530)
============ ============
</TABLE>
26 See Notes to Financial Statements
<PAGE>
Financial Highlights
The following schedule presents financial highlights for one share of the
Fund outstanding throughout the periods indicated. (Unaudited)
================================================================================
<TABLE>
<CAPTION>
May 16, 1994
Year Ended (Commencement
Six Months December 31, of Investment
Ended ------------------- Operations) to
Class A Shares June 30, 1997 1996 (c) 1995 December 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period............................... $ 10.530 $ 10.15 $ 9.19 $ 9.44
------- ------- ------- ---------
Net Investment Income/Loss............................ (.064) -0- .08 .10
Net Realized and Unrealized
Gain/Loss........................................... .979 1.242 1.1375 (.2475)
------- ------- ------- ---------
Total from Investment Operations........................... .915 1.242 1.2175 (.1475)
------- ------- ------- ---------
Less:
Distributions from and in Excess of Net
Investment Income................................... -0- -0- .0775 .075
Distributions from and in Excess of Net
Realized Gain....................................... .094 .862 .18 .0275
------- ------- ------- ---------
Total Distributions........................................ .094 .862 .2575 .1025
------- ------- ------- ---------
Net Asset Value, End of the Period......................... $11.351 $10.530 $ 10.15 $ 9.19
======= ======= ======= =========
Total Return* (a).......................................... 8.74%** 12.44% 13.30% (1.57%)**
Net Assets at End of the
Period (In millions).................................. $ 11.1 $ 8.5 $ 15.5 $ 11.5
Ratio of Expenses to Average Net Assets*................... 3.75% 2.87% 2.79% 2.75%
Ratio of Net Investment Income/Loss to
Average Net Assets*................................... (.97%) .00% .81% 1.54%
Portfolio Turnover......................................... 151%** 91% 135% 50%**
Average Commission
Paid Per Equity Share Traded (b)...................... $ .0149 $ .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................................................ N/A 3.17% 3.68% 2.76%
Ratio of Net Investment Income/Loss to
Average Net Assets.................................... N/A (.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
disclosure was not required in fiscal years prior to 1996.
(c) Based on average month-end shares outstanding.
N/A - Not Applicable.
27 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the
Fund outstanding throughout the periods indicated. (Unaudited)
====================================================================================================================
May 16, 1994
(Commencement
Six Months Year Ended of Investment
Ended December 31, Operations) to
-------------------
Class B Shares June 30, 1997 1996 (c) 1995 December 31, 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period............... $10.379 $ 10.10 $ 9.17 $ 9.44
------- ------- ------- -------
Net Investment Income/Loss........................... (.089) (.106) (.01) .01
Net Realized and Unrealized
Gain/Loss........................................ .950 1.247 1.1375 (.2065)
------- ------- ------- -------
Total from Investment Operations....................... .861 1.141 1.1275 (.1965)
------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Investment Income.................. -0- -0- .0175 .046
Distributions from and in Excess of Net
Realized Gain.................................... .094 .862 .18 .0275
------- ------- ------- -------
Total Distributions.................................... .094 .862 .1975 .0735
------- ------- ------- -------
Net Asset Value, End of the Period..................... $11.146 $10.379 $ 10.10 $ 9.17
------- ------- ------- -------
Total Return* (a)...................................... 8.48%** 11.51% 12.31% (2.09%)**
Net Assets at End of the Period
(In millions)........................................ $ 11.0 $ 9.9 $ 8.1 $ 7.4
Ratio of Expenses to Average Net Assets*............... 4.52% 3.76% 3.73% 3.92%
Ratio of Net Investment Income/Loss to
Average Net Assets*.................................. (1.77%) (1.01%) (.09%) .13%
Portfolio Turnover..................................... 151%** 91% 135% 50%**
Average Commission Paid
Per Equity Share Traded (b).......................... $ .0149 $ .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................ N/A 4.06% 4.61% 3.93%
Ratio of Net Investment Income/Loss to
Average Net Assets................................... N/A (1.30%) (.97%) .12%
** 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
disclosure was not required in fiscal years prior to 1996.
(c) Based on average month-end shares outstanding.
N/A - Not Applicable.
28 See Notes to Financial Statements
</TABLE>
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the
Fund outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
=============================================================================================================================
May 16, 1994
Year Ended (Commencement
Six Months December 31, of Investment
Ended ------------------- Operations) to
Class C Shares June 30, 1997 1996(c) 1995 December 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period....................................... $10.395 $10.12 $ 9.20 $ 9.44
------- ------- ------ -------
Net Investment Income/Loss...................................... (.099) (.104) (.02) .05
Net Realized and Unrealized Gain/Loss........................... .961 1.241 1.1375 (.2165)
------- ------- ------ -------
Total from Investment Operations................................... .862 1.137 1.1175 (.1665)
------- ------- ------ -------
Less:
Distributions from and in Excess of Net Investment Income....... -0- -0- .0175 .046
Distributions from and in Excess of Net Realized Gain........... .094 .862 .18 .0275
------- ------- ------ -------
Total Distributions................................................ .094 .862 .1975 .0735
------- ------- ------ -------
Net Asset Value, End of the Period................................. $11.163 $10.395 $10.12 $ 9.20
======= ======= ====== =======
Total Return*...................................................... 8.37%** 11.49% 12.16% (1.77%)**
Net Assets at End of the Period
(In millions).................................................... $ 1.7 $ 1.7 $ 1.9 $ 1.3
Ratio of Operating Expenses to Average Net Assets*................. 4.56% 3.78% 3.79% 3.36%
Ratio of Net Investment Income/Loss to
Average Net Assets*.............................................. (1.82%) (.99%) (.18%) .80%
Portfolio Turnover................................................. 151%** 91% 135% 50%**
Average Commission Paid Per Equity Share Traded (b)................ $ .0149 $ .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.................. N/A 4.07% 4.67% 3.38%
Ratio of Net Investment Income/Loss to Average Net Assets.......... N/A (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
disclosure was not required in fiscal years prior to 1996.
(c) Based on average month-end shares outstanding.
N/A - Not Applicable.
29 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
June 30, 1997 (Unaudited)
================================================================================
1. Significant Accounting Policies
Van Kampen American Capital Global Managed Assets Fund (the "Fund") is organized
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
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 their last quoted bid price. Fixed income securities 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 securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.
30
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
================================================================================
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 discounts
and premiums on the same basis as is used for federal income tax reporting.
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
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 Costs--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 initial shares of
the Fund originally purchased by VKAC are redeemed during the amortization
period, the Fund will be reimbursed for any unamortized organizational costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.
F. Federal Income Taxes--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At June 30, 1997, for federal income tax purposes cost of long- and short-
term investments, including foreign currencies, is $21,406,187, the aggregate
gross unrealized appreciation is $2,389,541 and the aggregate gross unrealized
depreciation is $301,316, resulting in net unrealized appreciation including
open futures, forward commitments, and forward currency contracts, of
$2,088,225.
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
31
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
================================================================================
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 reporting purposes.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and for
federal income tax purposes, permanent differences between book and tax basis
reporting have been identified and appropriately reclassified. As a result,
permanent differences of $1,568 due to the characterization of distributions for
tax purposes have been reclassified from accumulated net investment loss to
accumulated net realized gain. In addition, permanent differences of $60,877
relating to net currency losses were reclassified from accumulated net realized
gain to accumulated net investment loss.
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. On March 31, 1997, the Adviser terminated its subadvisory agreement
with John Govett & Co., Ltd. and with shareholder approval has changed the
subadviser to Morgan Stanley Asset Management Inc. (the "Subadviser") effective
April 1, 1997. The Subadviser provides advisory services to the Fund and the
Adviser with respect to the Fund's investments in foreign securities. Investment
advisory fees are calculated monthly, based on the average daily net assets of
the Fund at the annual rate of 1.00%. The Adviser pays 50% of its investment
advisory fee to the Subadviser.
For the six months ended June 30, 1997, the Fund recognized expenses of
approximately $1,700 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended June 30, 1997, the Fund recognized expenses of
approximately $9,400 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 six months ended
June 30, 1997, the Fund recognized expenses of approximately $58,500,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year
32
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
================================================================================
period and are based upon each trustee's years of service to the Fund. The
maximum annual benefit per trustee under the plan is equal to $2,500.
At 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....... .68% $128,784 $0
Morgan Stanley Asia Pacific Fund, Inc... .66% $148,575 $0
Morgan Stanley India Investment Fund.... .63% $124,341 $0
</TABLE>
At June 30, 1997, 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, 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 June 30, 1997, capital aggregated $8,561,192, $9,428,963 and $1,432,593
for Classes A, B and C, respectively. For the six months ended June 30, 1997,
transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A........................................ 239,709 $ 2,573,685
Class B........................................ 116,152 1,232,566
Class C........................................ 27,582 291,095
-------- -----------
Total Sales...................................... 383,443 $ 4,097,346
======== ===========
Dividend Reinvestment:
Class A........................................ 7,825 $ 83,327
Class B........................................ 7,617 79,835
Class C........................................ 1,075 11,284
-------- -----------
Total Dividend Reinvestment...................... 16,517 $ 174,446
======== ===========
Repurchases:
Class A........................................ (81,133) $ (871,438)
Class B........................................ (92,653) (982,165)
Class C........................................ (34,695) (366,987)
-------- -----------
Total Repurchases................................ (208,481) $(2,220,590)
======== ===========
</TABLE>
33
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
================================================================================
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>
34
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
================================================================================
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within five years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear the expense of their respective deferred sales
arrangements, 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 six months ended June 30, 1997, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$2,200 and CDSC on the redeemed shares of approximately $12,100. Sales charges
do not represent expenses of the Fund.
4. Investment Transactions
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments and forward commitments, were $24,945,225 and
$24,778,821, respectively.
5. Derivative Financial Instruments
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio, manage the portfolio's effective yield, foreign currency exposure, or
generate potential gain. All of the Fund's portfolio holdings, including
derivative instruments, are marked to market each day with the change in value
reflected in unrealized appreciation/depreciation. Upon disposition, a realized
gain or loss is recognized accordingly.
35
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
================================================================================
Forward Purchase Commitments
The Fund trades certain securities under the terms of forward commitments,
whereby the settlement occurs at a specific future date. Forward commitments are
privately negotiated transactions between the Fund and dealers. While forward
commitments are outstanding, the Fund maintains sufficient collateral of cash or
securities in a segregated account with its custodian. The commitments are
marked to market on a daily basis with changes in value reflected as a component
of unrealized appreciation on forwards. Risks may arise as a result of the
potential inability of the counterparties to meet the terms of their contracts.
The following forward purchase commitments were outstanding as of June 30,
1997:
<TABLE>
<CAPTION>
Par Amount
in Local Unrealized
Currency Appreciation/
(000) Description Coupon Maturity Depreciation
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Canada (Government of)
575--CA$ Settlement 07/10/97...................... 7.500% 03/01/01 $ 8,117
Denmark (Kingdom of)
1,400--DKK Settlement 08/28/97...................... 8.000 03/15/06 3,826
Germany Unity (Fed Republic of)
500--DEM Settlement 07/03/97...................... 8.000 01/21/02 6,106
Germany (Treuhandanstalt)
1,200--DEM Settlement 07/03/97...................... 7.500 09/09/04 18,439
200--DEM Settlement 08/18/97...................... 7.500 09/09/04 197
Italy (Republic of)
1,000,000--ITL Settlement 07/03/97...................... 10.500 07/15/00 16,950
Japan
40,000--JPY Settlement 07/10/97...................... 5.500 03/20/02 (1,723)
20,000--JPY Settlement 07/10/97...................... 3.400 03/22/04 (724)
10,000--JPY Settlement 08/15/97...................... 3.400 03/22/04 1,448
Japan (Government of)
20,000--JPY Settlement 08/28/97...................... 3.100 09/20/06 2,095
Sweden (Kingdom of)
4,000--SEK Settlement 07/10/97...................... 13.000 06/15/01 14,967
United Kingdom
250--GBP Settlement 07/03/97...................... 7.750 09/08/06 19,727
-------
Total Forward Purchase Commitments
(Cost $4,595,146)...................... $89,425
=======
</TABLE>
36
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
================================================================================
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
component 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 contracts.
The following forward currency contracts were outstanding as of June 30,
1997:
<TABLE>
<CAPTION>
Unrealized
Current Appreciation/
Description Value Depreciation
- ----------------------------------------------------------------------------------
<S> <C> <C>
Long Contracts
Austrian Schilling,
130,000 expiring 07/31/97........................ $ 98,274 $ (2,606)
100,000 expiring 08/22/97........................ 75,616 (2,034)
Canadian Dollar,
270,000 expiring 08/22/97........................ 196,166 514
Swiss Franc,
482,397 expiring 08/18/97........................ 332,352 (8,735)
Deutsche Mark,
327,350 expiring 07/30/97........................ 187,690 (2,652)
327,000 expiring 07/30/97........................ 187,915 (1,969)
1,070,000 expiring 08/29/97...................... 616,151 (19,618)
250,000 expiring 09/05/97........................ 144,033 (3,756)
740,000 expiring 09/26/97........................ 426,991 (2,992)
120,000 expiring 10/06/97........................ 69,293 (715)
Danish Krone,
535,000 expiring 09/26/97........................ 80,989 (536)
Spanish Peseta,
52,000,000 expiring 08/29/97..................... 353,108 (11,318)
French Franc,
1,071,115 expiring 09/15/97...................... 183,185 (1,815)
Pound Sterling,
333,489 expiring 07/16/97........................ 555,101 10,847
360,000 expiring 08/29/97........................ 598,445 14,957
Italian Lira,
276,853,091 expiring 07/02/97.................... 162,896 (1,614)
590,000,000 expiring 08/29/97.................... 346,506 (6,247)
</TABLE>
37
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Unrealized
Current Appreciation/
Description Value Depreciation
- --------------------------------------------------------------------------------
<S> <C> <C>
Long Contracts (Continued)
Japanese Yen,
29,375,728 expiring 07/18/97............... $ 256,992 $ 21,118
115,000,000 expiring 08/22/97.............. 1,011,044 16,072
28,551,168 expiring 08/25/97............... 249,094 (2,380)
26,676,000 expiring 09/16/97............... 235,351 (376)
112,740,000 expiring 01/26/98.............. 1,014,227 81,721
Netherlands Guilder,
95,624 expiring 08/18/97................... 48,716 (784)
Swedish Krona,
900,000 expiring 08/29/97.................. 116,347 (2,434)
100,000 expiring 08/29/97.................. 12,958 75
--------
72,723
--------
Short Contracts
Swiss Franc,
482,397 expiring 08/18/97.................. 332,352 5,585
Deutsche Mark,
654,350 expiring 07/30/97.................. 376,031 19,969
Spanish Peseta,
13,819,650 expiring 09/26/97............... 93,881 1,119
French Franc,
2,211,800 expiring 09/15/97................ 378,268 12,040
Pound Sterling,
333,489 expiring 07/16/97.................. 555,101 (55,101)
Japanese Yen,
58,751,456 expiring 07/18/97............... 513,280 (25,974)
27,000,000 expiring 08/22/97............... 237,376 (843)
84,315,168 expiring 08/25/97............... 741,571 14,429
26,676,000 expiring 09/16/97............... 235,351 4,649
112,740,000 expiring 01/26/98.............. 1,014,227 (14,227)
Netherlands Guilder,
214,728 expiring 08/18/97.................. 109,770 3,382
Singapore Dollar,
229,207 expiring 07/07/97.................. 160,291 (28)
--------
(35,000)
--------
$ 37,723
========
</TABLE>
38
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
================================================================================
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 as a substitute for purchasing and selling
specific securities. Upon entering into futures 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 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 six months ended June 30, 1997,
were as follows:
Contracts
- -------------------------------------------------------------------------------
Outstanding at December 31, 1996..................................... 0
Futures Opened....................................................... 4
Futures Closed....................................................... 0
----
Outstanding at June 30, 1997......................................... 4
====
The futures contracts outstanding as of June 30, 1997, and the description
and unrealized depreciation are as follows:
Unrealized
Contracts Depreciation
- -------------------------------------------------------------------------------
S&P 500 Index Futures
September 1997--Long Contracts
(Current notional value of $444,750 per contract)........ 4 $(13,000)
= ========
39
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1997 (Unaudited)
================================================================================
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 six
months ended June 30, 1997, are payments to VKAC of approximately $47,400.
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 investment
subadvisory agreement, the election of Trustees and the ratification of Price
Waterhouse LLP as independent public accountants. With regard to the approval
of a new investment advisory agreement between Van Kampen American Capital
Asset Management, Inc. and the Fund, 1,100,032 shares voted for the proposal,
9,497 shares voted against and 75,572 shares abstained. With regard to the
approval of a new investment subadvisory agreement between Morgan Stanley Asset
Management Inc. and the Fund, 1,104,807 shares voted for the proposal, 9,265
shares voted against and 71,028 shares abstained. With regard to the election
of J. Miles Branagan as elected trustee of the Fund, 1,172,145 shares voted in
his favor and 12,995 shares withheld. With regard to the election of Richard M.
DeMartini as elected trustee of the Fund, 1,168,653 shares voted in his favor
and 16,448 shares withheld. With regard to the election of Linda Hutton Heagy
as elected trustee of the Fund, 1,169,085 shares voted in her favor and 16,016
shares withheld. With regard to the election of R. Craig Kennedy as elected
trustee of the Fund, 1,172,535 shares voted in his favor and 12,566 shares
withheld. With regard to the election of Jack E. Nelson as elected trustee of
the Fund, 1,169,135 shares voted in his favor and 15,965 shares withheld. With
regard to the election of Jerome L. Robinson as elected trustee of the Fund,
1,172,535 shares voted in his favor and 12,566 shares withheld. With regard to
the election of Phillip B. Rooney as elected trustee of the Fund, 1,172,535
shares voted in his favor and 12,566 shares withheld. With regard to the
election of Fernando Sisto as elected trustee of the Fund, 1,172,535 shares
voted in his favor and 12,566 shares withheld. With regard to the election of
Wayne W. Whalen as elected trustee of the Fund, 1,172,535 shares voted in his
favor and 12,566 shares withheld. With regard to the ratification of Price
Waterhouse LLP as independent public accountants for the Fund, 1,106,351 shares
voted for the proposal, 4,191 shares voted against and 74,559 shares abstained.
40
<PAGE>
Van Kampen American Capital Global Managed Assets 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 December 31, 1997 the report must be
accompanied by a quarterly performance update, if applicable.
41
<PAGE>
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
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Bulk Rate
U.S. Postage
PAID
VAN KAMPEN
AMERICAN CAPITAL
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