<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Performance in Perspective....................... 4
Glossary of Terms................................ 5
Portfolio Management Review...................... 6
Portfolio Highlights............................. 9
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 35
Statement of Operations.......................... 36
Statement of Changes in Net Assets............... 37
Financial Highlights............................. 38
Notes to Financial Statements.................... 41
Report of Independent Accountants................ 54
</TABLE>
GMA ANR 2/99
<PAGE> 2
LETTER TO SHAREHOLDERS
January 20, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together, we've
witnessed one of the greatest bull markets in investment history, unprecedented
growth in mutual fund investing, and a surge in personal retirement planning.
The coming millennium promises to hold even more opportunities.
To lead us into this new era of investing, Richard F. Powers III has joined
Van Kampen as Chairman and Chief Executive Officer. He comes to us from our
parent company, Morgan Stanley Dean Witter & Co., where he served as Executive
Vice President and Director of Marketing. He brings 27 years of experience in
the financial services industry, including an extensive background in product
management, strategic planning and brand development.
Although former Chairman Don G. Powell retired on January 1, he will remain
active in the industry and the community. Mr. Powell plans to continue his
service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
ECONOMIC OVERVIEW
Despite a stormy year in the global economy, the United States ended 1998
with only a moderate slowdown in growth. The nation's gross domestic product, a
measure of economic health, grew 3.9 percent during the year, matching 1997's
growth rate and indicating that our nation's economy remains strong. A
continuation of low inflation--only a 1.6 percent increase in the consumer price
index over the last 12 months--also helped sustain the domestic economy and kept
inflation-adjusted interest rates attractive.
Although the year ended on a positive note, the economic environment was
quite unsettled in the third quarter, with the Asian financial crisis
contributing to slowing corporate profits in the United States. Given the
uncertainty surrounding emerging market nations and the near-collapse of a major
U.S. hedge fund, the stock and bond markets experienced significant volatility
during this period. With instability as a backdrop, American and foreign
investors alike pursued a flight to quality--seeking the relative safety of
large-company stocks and government bonds.
In the last few months of the year the global financial situation improved
in conjunction with the Federal Reserve's interest rate decreases. In response
to declining corporate profits and mounting international concerns, the Fed
lowered interest rates three times, with 0.25 percent cuts in September,
October, and November. These rate cuts, coupled with a wave of corporate mergers
and cost-cutting measures, lent the support needed to keep the economy growing.
Dozens of foreign central banks also reduced interest rates in an effort to
stimulate their economies. These actions gave a boost to investor confidence and
encouraged a return to a more diversified range of investments in the last few
months of the year.
Continued on page 2
1
<PAGE> 3
MARKET REVIEW
The performance of international stocks varied widely based on regional
conditions, with most markets experiencing significant volatility as a result of
the economic turmoil in many emerging market nations. Stock indexes in most
European countries turned in solid gains for the year, with Belgium, Greece, and
Finland each posting gains of more than 50 percent. In anticipation of the
economic benefits of European Monetary Union and the introduction of the euro,
the new European transnational currency, the European Dow Jones Stoxx Index
climbed 18.4 percent in 1998. However, many Latin American, Asian and eastern
European stock indexes registered significant losses.
As a result of interest rate cuts by a number of foreign central banks,
international government bonds generally performed well. In addition to
benefiting from lower interest rates, demand for these bonds increased during
the global flight to quality, as investors pulled assets from riskier
investments and diverted them to government bonds.
OUTLOOK
Our outlook for the domestic economy is positive, and we anticipate
continued low inflation and healthy economic growth. However, the aftereffects
of the global economic slowdown may continue to put pressure on corporate
earnings in the first half of the year. Internationally, we anticipate that low
interest rates and declining inflation will lead to improvements in troubled
areas such as Asia and Latin America. With the successful launch of the euro, we
believe that many foreign markets will become increasingly attractive in 1999.
In the long term, we are optimistic that the U.S. stock market will continue
its record growth, although we could experience additional volatility in the
months ahead if concerns about high stock valuations and increasing earnings
pressure become more pronounced. Combined with growing questions about corporate
and government reactions to the Year 2000 computer problem, we could see an
increasingly cautious market by mid year.
Additional details about your fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.
Sincerely,
[SIG.]
Richard F. Powers III
Chairman
Van Kampen Asset Management Inc.
[SIG.]
Dennis J. McDonnell
President
Van Kampen Asset Management Inc.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1998
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
One-year total return based on NAV(1).... 15.84% 14.96% 14.93%
One-year total return(2)................. 10.30% 10.96% 13.93%
Three-year total return(2)............... 10.55% 10.68% 11.47%
Life-of-Fund average annual total
return(2)................................ 9.27% 9.30% 9.56%
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. There is no
assurance the Fund will achieve its investment objective. Investing in
international markets involves certain risks not typically associated with
investing solely in the United States, including fluctuations in currency rates,
withholding tax, restrictions on foreign investment and on repatriation of
capital, limited publicly available information, less governmental supervision
and regulation, less liquidity, and the potential for market volatility and
political and economic instability. Please read the Fund's prospectus and
"Foreign Investment" in the Additional Investment Information section for more
detailed information on global investing. Market volatility may have adversely
affected fund performance since December 31, 1998. Fund shares, when redeemed,
may be worth more or less than their original cost. Past performance does not
guarantee future results. Investment return and net asset value will fluctuate
with market conditions.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 5
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment performance at regular intervals. A
comparison of your Fund's performance to an applicable benchmark can:
- Illustrate the market environment in which your Fund is being managed.
- Reflect the impact of favorable market trends or difficult market
conditions.
- Help you evaluate how your Fund's management team has responded to
opportunities and challenges.
The following graph compares your Fund's performance to that of the Morgan
Stanley Capital International World Index and the J.P. Morgan Global Traded
Government Index over time. These indices are broad-based, statistical
composites that do not include any commissions or sales charges that would be
paid by an investor purchasing the securities they represent.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Global Managed Assets Fund vs. the Morgan Stanley Capital
International World Index and J.P. Morgan Global Traded Government Index
(May 16, 1994 through December 31, 1998)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
VAN KAMPEN GLOBAL MORGAN STANLEY CAPITAL J.P. MORGAN GLOBAL TRADED
MANAGED ASSETS FUND INTERNATIONAL WORLD INDEX GOVERNMENT INDEX
------------------- ------------------------- -------------------------
<S> <C> <C> <C>
5/16/94 9526 10000 10000
6/30/94 9422 9966 10035
9605 10139 10130
9676 10428 10104
9531 10138 10153
9653 10409 10305
9379 9941 10176
12/31/94 9376 10021 10199
9213 9854 10406
9294 9980 10674
9567 10443 11217
9752 10790 11396
9915 10864 11714
6/30/95 10036 10843 11787
10405 11367 11843
10292 11096 11514
10479 11401 11773
10346 11204 11888
10469 11575 12020
12/31/95 10623 11895 12169
10791 12092 12044
10864 12147 11974
11021 12331 11956
11343 12602 11912
11385 12594 11924
6/30/96 11406 12639 12028
10974 12173 12249
11227 12294 12300
11638 12756 12368
11607 12826 12613
12007 13526 12793
12/31/96 11945 13290 12704
12104 13431 12387
12149 13566 12301
11982 13278 12207
12073 13693 12139
12554 14519 12425
6/30/97 12989 15224 12566
13389 15906 12520
12749 14822 12505
13252 15608 12783
12771 14767 13053
12840 15009 12897
12/31/97 13013 15172 12883
13256 15576 13012
13922 16609 13109
14373 17291 13010
14438 17439 13210
14425 17201 13267
6/30/98 14594 17589 13304
14646 17540 13340
13464 15181 13709
13659 15428 14424
14295 16802 14747
14711 17781 14581
12/31/98 15073 18629 14856
- ------------------------------
Fund's Total Return
1 Year Avg. Annual = 10.30%
3 Year Avg. Annual = 10.55%
Inception Avg. Annual = 9.27%
- ------------------------------
</TABLE>
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions and includes payment of the maximum
sales charge (4.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
4
<PAGE> 6
GLOSSARY OF TERMS
BLUE-CHIP STOCKS: Stocks of large, well-known companies that have a long record
of growth. Examples of blue-chip stocks include General Motors,
International Business Machines (IBM), Coca-Cola, and General Electric.
BOTTOM-UP INVESTING: A management style that emphasizes the analysis of
individual stocks, rather than economic and market cycles.
CYCLICAL STOCKS: Stocks within industries where earnings tend to rise quickly
when the economy strengthens and fall quickly when the economy weakens.
Examples of cyclical stocks include housing, automobile, and paper
companies. Noncyclical or defensive stocks are typically less sensitive to
changes in the economy. These include utilities, grocery stores, and
pharmaceutical companies.
EMERGING MARKETS: The financial markets of developing economies. Many Latin
American and Asian countries are considered emerging markets.
EUROPEAN MONETARY UNION (EMU): A group of European countries creating one
currency for the entire region.
FEDERAL FUNDS RATE: The interest rate charged by one financial institution
lending federal funds to another. This overnight rate is used to meet banks'
daily reserve requirements. The Federal Reserve Board uses the federal funds
rate to affect the direction of interest rates.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its
policy-making committee, called the Federal Open Market Committee, meets
eight times a year to establish monetary policy and monitor the economic
pulse of the United States.
LIQUIDITY: The ease with which an investor can buy or sell a stock at a
reasonable price. Generally, it is easier to sell large-company stock than
small-company stock.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from the total assets in its portfolio and dividing
this amount by the number of shares outstanding. The NAV does not include
any initial or contingent deferred sales charge.
VALUE INVESTING: A strategy that seeks to identify stocks that are sound
investments but are temporarily out of favor in the marketplace. As a
result, the stocks trade at prices below the value that value investors
believe they are actually worth.
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
5
<PAGE> 7
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
We recently spoke with the management team of the Van Kampen Global Managed
Assets Fund about the key events and economic forces that shaped the markets
during the past 12 months. The Fund is managed by portfolio managers Barton M.
Biggs, J. David Germany, Michael B. Kushma, Paul E. O'Brien, and Ann D.
Thivierge, Morgan Stanley Dean Witter Investment Management. The following
excerpts reflect their views on the Fund's performance during the 12-month
period ended December 31, 1998.
Q HOW WOULD YOU DESCRIBE THE INVESTMENT ENVIRONMENT IN WHICH THE FUND
OPERATED DURING THE PAST 12 MONTHS?
A The first six months of the reporting period were characterized by strong
growth, falling interest rates, and low inflation in Europe and the United
States. As a result, stock markets in both regions generated impressive
first half gains. In contrast, Asia was plagued by economic, social, and
political turmoil, which pushed its stocks toward 12-month lows.
During the third quarter, continued economic weakness in Asia and in the
Japanese banking system spread to Russia and Latin America, and there were
warning signs that Asia's problems were beginning to affect Europe and the
United States. With turmoil in the emerging markets and a crisis of confidence
in U.S. and European markets, many investors moved out of stocks into
high-quality, government bonds, primarily those issued by the United States and
Germany.
Paced by the Federal Reserve Board and the approaching European economic and
monetary union (EMU), banks worldwide lowered interest rates during the fourth
quarter. The interest rate cuts renewed investor confidence and helped revive
stock markets in Europe and the United States, and some Asian markets began to
rebound.
Q WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND IN THIS INVESTMENT
ENVIRONMENT?
A We adjusted the Fund's mix of stocks and bonds in response to market
conditions. As a result, by year-end we had approximately 66 percent of
total investments in equities and 34 percent in fixed-income instruments.
EQUITY STRATEGY
During the first half of the period, we increased our exposure to Europe in
anticipation of monetary union with its long-term benefits, including improved
fiscal discipline, and the prospect for higher business growth, and consumer
confidence. In July, we saw signs of economic slowdown, particularly in Germany,
and we significantly reduced our positions in Europe in favor of cash. We held a
substantial cash position throughout the summer, which benefited the Fund as
global markets stumbled due to troubles in Asia and Russia.
Our positions in Italy, Spain, and Portugal helped the Fund's performance as
stock market liquidity improved when short-term interest rates in those
countries fell from more
6
<PAGE> 8
than five percent to three percent. At the same time, interest rates remained
high in most countries not participating in the monetary union.
In the United States, we remained underweight to our benchmark because of
concerns about overpriced stock valuations and potential deceleration in
corporate profit growth. Despite a mid-year slump, however, the U.S. market
rallied strongly in the fourth quarter to a record high.
Through September, we significantly reduced the Fund's holdings in Asia and
Japan because of the economic malaise of that region. In October, we felt that
Asia's economic, stock market, and sentiment cycles had reached the opposite end
of the spectrum compared to the euphoria and strength of the United States. As a
result, we increased our exposure to Japan, Hong Kong, and Singapore.
FIXED-INCOME STRATEGY
We invested heavily in the German fixed-income market to take advantage of
the convergence of interest rates in the European market. With monetary union,
interest rates have declined throughout Europe. As a result, we felt that
investing one large position in a single European country would provide the same
advantages as investing in multiple European markets. Because Germany is
considered the dominant economic country in Europe, we felt that this country
would benefit from the flight toward high-quality investments, and it did.
In addition, the Fund's fixed-income investments benefited from a decline in
value of the U.S. dollar relative to other currencies during the second half of
the period. At that time we had approximately 60 percent of the Fund's assets
invested outside the United States.
Our exposure to Australia, Sweden, and Denmark did not help performance.
Because these three markets are smaller and less liquid than major
industrialized markets, they are perceived as riskier and were hurt by the
flight toward higher-quality government bonds.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A We are pleased with the performance of the Fund, which achieved a total
return of 15.84 percent(1) (Class A shares at net asset value) for the
12-month period ended December 31, 1998. By comparison, the Morgan Stanley
Capital International (MSCI) World Index generated a total return of 22.78
percent and the J.P. Morgan Global Traded Government Index achieved a total
return of 15.31 percent. The MSCI World Index is a broad-based index that is
used as a benchmark for general equity funds. The J.P. Morgan Global Traded
Government Index is a broad-based 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
broad-based statistical composites and do not reflect any commissions or sales
charges that would be paid by an investor purchasing the securities they
represent. Please refer to the chart on page 3 for additional Fund performance
results.
7
<PAGE> 9
Q WHAT IS YOUR OUTLOOK FOR THE GLOBAL MARKETS AND THE FUND'S PORTFOLIO IN
THE MONTH'S AHEAD?
A Going forward, we are apprehensive about the current valuation levels of
global equity markets, particularly in the United States and Europe. We
believe consensus double-digit earnings expectations for 1999 in these
regions are too optimistic, and we are concerned that actual earnings will be
unable to support such lofty valuations.
Although the European market fell off sharply during the second half of the
period, we are not convinced there is value in European equity markets
especially with optimistic double-digit earnings forecasts. We do, however,
believe in the long-term positive effects of corporate restructuring and focus
on shareholder value. We continue to monitor economic data, such as
unemployment, manufacturing production, and export figures.
In Asia, we will look for signs that the economic crisis has ended. We have
begun to see currencies strengthen, interest rates fall, and corporate
cost-cutting accelerate. If the economic crisis ends, we expect the stock
markets and corporate earnings to lead the recovery.
For fixed-income investments, we expect interest rates worldwide to drop
further and we anticipate opportunities to take advantage of differences in
interest rates between the major regions. For example, because we currently see
value in long-term U.S. bonds, we may look to reduce our interest rate exposure
to European markets and move that exposure toward the U.S. market, but we will
remain cautious due to the unsettled global economic situation.
Q WILL THE ARRIVAL OF THE EURO AFFECT ANY OF YOUR STRATEGIES?
A We don't expect the euro to affect the Fund's positioning. We believe that
since the May announcement of the 11 participant nations most of the
financial implications from EMU have already been reflected in the market.
[SIG]
Barton M. Biggs
Portfolio Manager
[SIG]
Michael B. Kushma
Portfolio Manager
[SIG]
Ann D. Thivierge
Portfolio Manager
[SIG]
J. David Germany
Portfolio Manager
[SIG]
Paul E. O'Brien
Portfolio Manager
Please see footnotes on page 3
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
PORTFOLIO HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
TOP TEN HOLDINGS PERCENTAGE OF
AS OF THESE INVESTMENTS
DECEMBER 31, 1998 TWELVE MONTHS AGO
<S> <C> <C>
U.S. Treasury Bonds, 6.250%,
8/15/23 ........................ 5.1% ..... N/A
U.S. Treasury Notes, 6.250%,
10/31/01 ....................... 2.4% ..... 3.2%
U.S. Treasury Bonds, 12.000%,
05/15/05 ...................... 2.3% ..... N/A
U.S. Treasury Notes, 3.625%,
1/15/08 ........................ 1.4% ..... N/A
Microsoft Corp. .................. 1.2% ..... 1.3%
General Electric Co. ............. 1.1% ..... 1.1%
U.S. Treasury Bonds, 8.125%,
8/15/19 ........................ 0.9% ..... 4.7%
Glaxo Wellcome ................... 0.8% ..... 0.7%
New Zealand Bonds -- NZ$, 8.000%,
4/15/04 ........................ 0.8% ..... N/A
U.S. Treasury Notes, 7.250%,
05/15/04 ....................... 0.7% ..... 4.6%
</TABLE>
N/A = Not Applicable
ASSET ALLOCATION AS A PERCENTAGE OF TOTAL INVESTMENTS
AS OF DECEMBER 31, 1998
Common an Preferred Stocks...............65.5%
Government Obligations...................18.4%
Repurchase Agreement..................... 7.2% [PIE CHART]
Commercial Paper......................... 1.2%
U.S. Government Agency Obligations....... 7.7%
AS OF DECEMBER 31, 1997
Common and Preferred Stocks.............. 59.7%
Government Obligations................... 10.8% [PIE CHART]
Repurchase Agreement..................... 9.7%
U.S. Government Agency Obligations....... 19.8%
[PIE CHART]
TOP TEN COUNTRIES AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
<S> <C>
United States ............... 47.1%
United Kingdom .............. 12.6%
Japan ....................... 7.7%
France ...................... 6.2%
Germany ..................... 3.2%
Spain ....................... 3.2%
Italy ....................... 3.2%
Switzerland ................. 2.9%
Netherlands ................. 2.8%
Hong Kong ................... 2.4%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
<S> <C>
United States ............... 51.3%
United Kingdom .............. 9.6%
Japan ....................... 9.4%
France ...................... 5.5%
Germany ..................... 5.1%
Italy ....................... 3.7%
Switzerland ................. 3.3%
Canada ...................... 2.9%
Spain ....................... 2.4%
Sweden ...................... 2.3%
</TABLE>
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS AND EQUIVALENTS 67.5%
AUSTRALIA 1.1%
Amcor, Ltd. ................................................ 817 $ 3,491
AMP, Ltd. .................................................. 1,058 13,404
Australian Gas & Light Co., Ltd. ........................... 419 3,018
Boral, Ltd. ................................................ 1,364 1,939
Brambles Industries, Ltd. .................................. 260 6,333
Broken Hill Proprietary Co., Ltd. .......................... 2,497 18,390
Coca-Cola Amati, Ltd. ...................................... 925 3,446
Coles Myer, Ltd. ........................................... 1,329 6,963
Crown, Ltd. ................................................ 1,801 673
CSR, Ltd. .................................................. 1,316 3,218
Email, Ltd. ................................................ 425 607
FH Faulding & Co., Ltd. .................................... 160 755
Fosters Brewing Group, Ltd. ................................ 2,116 5,731
General Property Trust...................................... 1,595 2,982
GIO Australia Holding....................................... 774 2,542
Goodman Fielder, Ltd. ...................................... 1,564 1,581
Leighton Holdings, Ltd. .................................... 377 1,617
Lend Lease Corp. ........................................... 660 8,898
M.I.M. Holdings, Ltd. ...................................... 2,625 1,158
National Australia Bank, Ltd. .............................. 1,719 25,913
News Corp., Ltd. ........................................... 2,248 14,850
News Corp., Ltd. - Preferred Shares......................... 2,033 12,371
Normandy Mining, Ltd. ...................................... 2,835 2,623
North, Ltd. ................................................ 1,236 2,015
Orica, Ltd. ................................................ 360 1,873
Pacific Dunlop, Ltd. ....................................... 1,272 2,058
Pioneer International, Ltd. ................................ 1,075 2,273
QBE Insurance Group, Ltd. .................................. 486 2,010
Rio Tinto, Ltd. ............................................ 326 3,866
Santos, Ltd. ............................................... 726 1,949
Schroders Property Fund..................................... 673 1,097
Smith Howard................................................ 226 1,495
Southcorp Holdings, Ltd. ................................... 747 2,383
Stockland Trust Group....................................... 366 911
TAB Corp. Holdings, Ltd. ................................... 408 2,500
Telstra Corp., Ltd. ........................................ 6,153 28,768
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIA (CONTINUED)
Westfield Trust............................................. 1,303 $ 2,874
Westpac Banking Corp., Ltd. ................................ 2,293 15,344
WMC, Ltd. .................................................. 1,652 4,981
-----------
218,900
-----------
AUSTRIA 0.8%
Austria Tabakwerke, AG (d).................................. 149 11,425
Austrian Airlines (d)....................................... 199 7,128
Bank Austria, AG (d)........................................ 711 36,155
Bau Holdings, AG (d)........................................ 31 1,428
BBAG Oest Brau-Beteiligungs, AG (d)......................... 59 3,371
Bohler-Uddeholm, AG - ADR (d)............................... 73 3,398
BWT, AG (d)................................................. 11 2,438
Flughafen Wien, AG (d)...................................... 142 6,968
Generali, AG (d)............................................ 47 11,545
Lenzing, AG (a) (d)......................................... 26 1,619
Mayr Melnhof Karton, AG (d)................................. 80 3,739
Oest Elektrizitats, Class A (d)............................. 204 31,180
OMV, AG (d)................................................. 174 16,399
RHI, AG (d)................................................. 93 2,423
VA Technologie, AG (d)...................................... 94 8,146
Wienerberger Baustoffindustrie, AG (d)...................... 57 11,337
-----------
158,699
-----------
CANADA 1.0%
Abitibi Consolidated, Inc. ................................. 200 1,858
Agnico-Eagle Mines, Ltd. ................................... 700 2,885
Alberta Energy Co., Ltd. ................................... 100 2,159
Alcan Aluminum.............................................. 200 5,430
Bank of Montreal............................................ 200 8,073
Bank of Nova Scotia......................................... 300 6,624
Barrick Gold Corp. ......................................... 200 3,899
Barrick Gold Corp. - US$.................................... 300 5,850
BCE, Inc. .................................................. 400 15,139
Bombardier, Inc., Class B................................... 500 7,197
Canadian Hunter Exploration, Ltd. (a)....................... 50 327
Canadian Imperial Bank of Commerce.......................... 200 4,972
Canadian Occidental Petroleum............................... 100 1,040
Canadian Pacific............................................ 200 3,762
Gulf Canada Resource (a).................................... 500 1,466
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
CANADA (CONTINUED)
Imasco, Ltd. ............................................... 300 $ 6,418
Imperial Oil, Ltd. ......................................... 400 6,425
International Forest Products, Ltd., Class A (a)............ 500 1,178
Laidlaw, Inc. .............................................. 200 2,022
National Bank of Canada..................................... 100 1,623
Newbridge Networks Corp. (a)................................ 100 3,049
Nexfor, Inc. (a)............................................ 87 344
Noranda, Inc. .............................................. 200 1,995
Northern Telecom, Ltd. ..................................... 400 20,046
Northern Telecom, Ltd. - US$................................ 300 15,038
Nova Corp. ................................................. 52 680
Petro CDA................................................... 300 3,189
Placer Dome, Inc. .......................................... 200 2,296
Power Corp. of Canada....................................... 200 4,344
Royal Bank of Canada........................................ 200 10,016
Seagram Co., Ltd. .......................................... 200 7,622
Seagram Co., Ltd. - US$..................................... 200 7,600
Suncor Energy, Inc. ........................................ 100 3,010
Talisman Energy, Inc. (a)................................... 100 1,763
TELUS Corp. ................................................ 100 2,126
Thomson Corp. .............................................. 400 9,395
TransCanada PipeLines, Ltd. ................................ 564 8,284
Weston George, Ltd. ........................................ 100 3,827
-----------
192,971
-----------
FRANCE 4.9%
Accor, SA (d)............................................... 133 28,784
Air Liquide (d)............................................. 123 22,550
Alcatel Alsthom, SA (d)..................................... 207 25,324
AXA-UAP (d)................................................. 417 60,413
Banque Nationale de Paris (d)............................... 306 25,187
Banque Paribas (d).......................................... 96 8,340
Canal Plus (d).............................................. 45 12,274
Cap Gemini (d).............................................. 85 13,637
Carrefour, SA (d)........................................... 51 38,485
Casino-Guichard-Perrachon, SA (d)........................... 150 15,614
Cie Fonciere Klepierre (a) (d).............................. 288 29,361
Compagnie de Saint Gobain (d)............................... 136 19,192
Elf Aquitaine, SA (d)....................................... 316 36,512
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
FRANCE (CONTINUED)
France Telecom, SA (d)...................................... 940 $ 74,649
Groupe Danone (d)........................................... 125 35,772
L'Oreal (d)................................................. 93 67,201
Lafarge, SA (d)............................................. 170 16,146
Legrand, SA (d)............................................. 40 10,596
LVMH (Moet Hennessy Louis Vuitton) (d)...................... 131 25,914
Michelin (CGDE), Class B (d)................................ 239 9,554
Pernod Ricard (d)........................................... 94 6,103
Peugeot Citroen (d)......................................... 83 12,841
Pinault-Printemps-Redoute, SA (d)........................... 145 27,698
Promodes (d)................................................ 34 24,714
Rhone-Poulenc, SA (d)....................................... 466 23,971
Sagem, SA (d)............................................... 7 4,632
Sanofi, SA (d).............................................. 145 23,860
Schneider, SA (d)........................................... 194 11,763
Silic (d)................................................... 96 17,840
Simco (d)................................................... 218 19,769
Societe Generale (d)........................................ 126 20,395
Sodexho Alliance (d)........................................ 44 9,837
Sophia (d).................................................. 358 15,207
Suez Lyonnaise des Eaux (d)................................. 196 40,245
Thomson CSF (d)............................................. 211 9,057
Total, SA, Class B (d)...................................... 316 31,990
Unibail, SA (d)............................................. 213 31,049
Vivendi (d)................................................. 181 46,942
-----------
953,418
-----------
GERMANY 2.5%
Adidas Salomon, AG (d)...................................... 17 1,846
AGIV, AG (d)................................................ 67 1,729
Allianz, AG (Vinkulierte Regd) (d).......................... 208 76,256
AMB AACH & Mun Bet (Vinkulierte Regd) (d)................... 50 5,883
AXA Colonia Konzern (d)..................................... 33 3,742
BASF, AG (d)................................................ 367 14,005
Bayer Hypo Vereinsbank, AG (d).............................. 265 20,750
Bayer, AG (d)............................................... 500 20,866
Bilfinger & Berger (d)...................................... 17 434
Continental, AG (d)......................................... 17 469
DaimlerChrysler, AG (d)..................................... 752 74,225
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
GERMANY (CONTINUED)
Degussa, AG (d)............................................. 17 $ 934
Deutz, AG (d)............................................... 33 307
Deutsche Bank, AG (d)....................................... 350 20,591
Deutsche Telekom, AG (d).................................... 1,350 44,390
Dresdner Bank, AG (d)....................................... 333 13,987
Fag Kugelfischer (d)........................................ 17 144
Heidelberg Zement (d)....................................... 33 2,574
Hochtief, AG (d)............................................ 83 3,237
Lufthansa, AG (Vinkulierte Regd) (d)........................ 133 2,937
Man, AG - Preferred Shares (d).............................. 50 10,111
Mannesmann, AG (d).......................................... 250 28,651
Merck KGaA (d).............................................. 100 4,500
Metro, AG (d)............................................... 167 13,327
Preussag, AG (d)............................................ 17 7,681
RWE, AG (d)................................................. 347 18,999
SAP, AG (d)................................................. 67 28,945
Schering, AG (d)............................................ 67 8,412
Siemens, AG (d)............................................. 367 23,673
Veba, AG (d)................................................ 333 19,921
Viag, AG (d)................................................ 17 9,966
Volkswagen, AG (d).......................................... 100 7,980
-----------
491,472
-----------
HONG KONG 1.8%
Bank of East Asia........................................... 3,600 6,273
Cathay Pacific Air.......................................... 8,000 7,951
Cheung Kong Holdings, Ltd. ................................. 5,000 35,979
CLP Holdings, Ltd. ......................................... 6,500 32,384
Hang Lung Development Co. .................................. 2,992 3,205
Hang Seng Bank, Ltd. ....................................... 4,700 42,010
Hong Kong & China Gas Co. .................................. 10,000 12,714
Hong Kong & China Gas Co. - Warrants........................ 600 40
Hong Kong & Shanghai Hotels................................. 1,500 1,065
Hong Kong Land Holding - US$................................ 1,264 1,492
Hong Kong Telecommunications, Ltd. ......................... 29,400 51,418
Hopewell Holdings........................................... 3,000 1,636
Hutchison Whampoa........................................... 9,000 63,600
Hysan Development........................................... 2,992 4,460
Hysan Development - Warrants................................ 300 6
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
HONG KONG (CONTINUED)
Johnson Electric Holdings................................... 500 $ 1,284
New World Development Co. .................................. 5,000 12,585
Shangri-La Asia, Ltd. ...................................... 3,000 2,556
Sino Land Co. .............................................. 12,078 6,470
South China Morning Post.................................... 1,992 1,022
Sun Hung Kai Properties..................................... 6,000 43,755
Swire Pacific, Class A...................................... 4,000 17,915
Television Broadcast........................................ 996 2,571
Wharf Holdings, Ltd. ....................................... 6,000 8,751
-----------
361,142
-----------
ITALY 2.5%
Assicurazioni Generali (d).................................. 1,190 49,660
Banca Commerciale Italiana (d).............................. 2,000 13,789
BCA Intesa, SpA (d)......................................... 2,000 11,993
Benetton Group, SpA (d)..................................... 2,500 5,035
Ciga Hotels (d)............................................. 16,270 13,284
Ente Nazionale Idrocarburi, SpA (d)......................... 10,000 65,318
Fiat, Di Risp, SpA (d)...................................... 1,300 2,595
Fiat, Priv, SpA (d)......................................... 1,400 2,697
Fiat, SpA (d)............................................... 5,200 18,052
Immobil Metanopoli (d)...................................... 2,570 3,147
Instituto Nazionale delle Assicurazioni (INA) (d)........... 5,390 14,229
Mediaset, SpA (d)........................................... 1,500 12,156
Mediobanca, SpA (d)......................................... 700 9,716
Montedison, SpA (d)......................................... 5,000 6,638
Olivetti, SpA (d)........................................... 8,000 27,821
Pirelli, SpA (d)............................................ 5,000 16,012
Riunione Adriatica di Sicurta, SpA (d)...................... 500 7,242
Sao Paolo Imi, SpA (a) (d).................................. 2,283 40,318
Sirti, SpA (d).............................................. 500 3,015
Telecom Italia, Di Risp, SpA (d)............................ 2,906 18,278
Telecom Italia, SpA (d)..................................... 5,500 46,902
Telecom Italia Mob, SpA (d)................................. 7,500 55,339
Unicredito Italiano (d)..................................... 5,000 29,620
Unione Immobiliare, SpA (a) (d)............................. 21,240 11,073
-----------
483,929
-----------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
JAPAN 6.0%
Ajinomoto Co., Inc. ........................................ 1,000 $ 10,615
Asahi Bank, Ltd. ........................................... 1,900 6,958
Asahi Chemical Industry Co. ................................ 2,800 13,350
Asahi Glass Co. ............................................ 3,800 23,563
Bank of Tokyo............................................... 5,200 53,817
Bridgestone Corp. .......................................... 1,000 22,689
Dai Nippon Printing......................................... 1,800 28,692
Daiei, Inc. ................................................ 2,000 5,431
Daiwa House Industries...................................... 1,000 10,641
Daiwa Securities............................................ 2,400 8,195
Fanuc....................................................... 600 20,540
Fuji Bank................................................... 2,600 9,567
Fujitsu..................................................... 3,000 39,938
Hitachi..................................................... 4,800 29,721
Honda Motor Co. ............................................ 1,000 32,817
Japan Air Lines Co. ........................................ 2,000 5,272
Japan Energy Corp. ......................................... 1,000 947
Kajima Corp. ............................................... 1,000 2,609
Kansai Electric Power....................................... 1,500 32,839
Kao Corp. .................................................. 1,000 22,556
Kawasaki Steel Corp. ....................................... 1,000 1,495
Kirin Brewery Co. .......................................... 2,800 35,666
Kubota Corp. ............................................... 2,800 8,347
Kumagai Gumi Co. ........................................... 1,000 770
Kyocera Corp. .............................................. 400 21,123
Marubeni Corp. ............................................. 8,800 15,101
Matsushita Electric Industries.............................. 3,000 53,047
Mitsubishi Chemical......................................... 2,800 5,895
Mitsubishi Corp. ........................................... 1,000 5,750
Mitsubishi Electric Corp. .................................. 4,800 15,073
Mitsubishi Estate........................................... 2,800 25,090
Mitsubishi Heavy Industries................................. 3,000 11,676
Mitsubishi Trust & Banking Corp. ........................... 1,000 6,431
Mitsui Fudosan Co., Ltd. ................................... 2,000 15,126
Mitsui Trust & Banking Co. ................................. 4,800 5,477
Mitsukoshi.................................................. 2,000 5,307
NEC Corp. .................................................. 2,000 18,399
Nippon Express Co. ......................................... 1,800 10,127
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONTINUED)
Nippon Oil Co. ............................................. 1,000 $ 3,485
Nippon Steel Corp. ......................................... 4,800 8,704
Nippon Telegraph & Telephone Corp. ......................... 11 84,847
Nissan Fire & Marine Insurance.............................. 700 2,105
Nissan Motor Co. ........................................... 800 2,449
NKK Corp. .................................................. 6,000 4,087
Nomura Securities........................................... 2,400 20,911
Odakyu Electric Railway..................................... 6,000 20,964
Osaka Gas Co. .............................................. 4,000 13,764
Sakura Bank................................................. 1,800 4,124
Sanwa Bank.................................................. 1,000 7,705
Sega Enterprises............................................ 400 8,863
Sekisui Chemical Co. ....................................... 1,000 6,723
Sekisui House............................................... 800 8,456
Shimizu Corp. .............................................. 2,800 9,387
Softbank Corp. ............................................. 10 602
Sony Corp. ................................................. 400 29,120
Sumitomo Bank, Ltd. ........................................ 2,000 20,522
Sumitomo Chemical........................................... 2,000 7,784
Sumitomo Corp. ............................................. 1,000 4,865
Sumitomo Metal Mining Co.................................... 1,000 3,246
Taisei Corp. ............................................... 4,800 9,214
Takeda Chemical Industries.................................. 2,000 76,957
Tobu Railway Co. ........................................... 2,800 8,173
Tokyo Electric Power........................................ 1,700 41,955
Tokyo Gas Co. .............................................. 4,800 12,610
Tokyo Marine & Fire Insurance Co. .......................... 2,800 33,437
Tokyu Corp. ................................................ 2,000 5,254
Toray Industries, Inc. ..................................... 2,000 10,438
Tostem Corp. ............................................... 500 9,907
Toyota Motor Corp. ......................................... 1,800 48,881
Yasuda Trust & Banking...................................... 700 539
-----------
1,170,735
-----------
NETHERLANDS 2.2%
ABN AMRO Holdings, NV (d)................................... 1,090 22,917
AEGON, NV (d)............................................... 400 49,098
Ahold Koninklijke, NV (d)................................... 427 15,774
Akzo Nobel, NV (d).......................................... 100 4,551
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
NETHERLANDS (CONTINUED)
Buhrmann, NV (d)............................................ 260 $ 4,650
Elsevier, NV (d)............................................ 200 2,800
Hagemeyer, NV (d)........................................... 100 3,651
Heineken, NV (d)............................................ 200 12,030
ING Groep, NV (d)........................................... 773 47,112
KLM Royal Dutch Air Lines, NV (d)........................... 108 3,265
Kon KPN, NV (d)............................................. 432 21,615
Philips Electronics, NV (d)................................. 300 20,120
Rodamco (d)................................................. 615 15,615
Royal Dutch Petroleum Co. (d)............................... 1,700 84,606
TNT Post Groep, NV (d)...................................... 428 13,783
Uni-Invest, NV (d).......................................... 850 13,347
Unilever, NV (d)............................................ 500 42,716
Unilever, NV - ADR - US$.................................... 300 24,881
Vedior, NV (d).............................................. 100 1,969
Wolters Kluwer, NV (d)...................................... 102 21,815
-----------
426,315
-----------
NORWAY 0.1%
Choice Hotels............................................... 4,270 6,013
Linstow ASA................................................. 2,023 9,585
-----------
15,598
-----------
PORTUGAL 1.4%
BCO Comercial Portugues, SA (d)............................. 1,197 36,817
BCO Espirito Santo e Comercial de Lisboa (d)................ 500 15,526
BPI-SGPS, SA (d)............................................ 500 16,976
Brisa-Auto Estradas de Portugal, SA (d)..................... 300 17,667
Cimpor-Cimentos de Portugal (d)............................. 500 15,968
Corticeira Amorim, SGPS, SA (d)............................. 100 1,436
Elec De Portugal (d)........................................ 3,100 68,283
Jeronimo Martins, SGPS, SA (d).............................. 400 21,904
Portucel Industrial-Empresa Produtora de Celulose (d)....... 500 3,281
Portugal Telecom, SA (d).................................... 1,100 50,457
Soares Da Costa, SA (d)..................................... 100 340
Sonae Investimentos (d)..................................... 300 14,591
UNICER-Uniao Cervejeira, SA (d)............................. 300 7,162
-----------
270,408
-----------
SINGAPORE 0.7%
City Developments, Ltd. .................................... 2,000 8,661
Creative Technologies Corp. ................................ 150 2,117
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
SINGAPORE (CONTINUED)
Cycle & Carriage, Ltd. ..................................... 1,000 $ 3,422
DBS Land, Ltd. ............................................. 2,000 2,944
Development Bank of Singapore............................... 1,000 9,025
Fraser & Neave, Ltd. ....................................... 1,000 2,919
Keppel Corp., Ltd. ......................................... 2,000 5,354
NatSteel, Ltd. ............................................. 1,000 1,096
Neptune Orient Lines, Ltd. ................................. 2,000 642
Overseas Chinese Bank....................................... 2,000 13,568
Parkway Holdings, Ltd. ..................................... 1,000 1,781
Sembcorp Industries, Ltd. (a)............................... 18,000 20,497
Singapore Airlines, Ltd. ................................... 2,000 14,658
Singapore Press Holdings, Ltd. ............................. 900 9,812
Singapore Tech Engineering.................................. 6,000 5,597
Singapore Telecommunications................................ 12,000 18,316
United Industrial Corp., Ltd. .............................. 3,000 1,199
United Overseas Bank, Ltd. ................................. 2,000 12,841
United Overseas Land, Ltd. ................................. 1,000 678
-----------
135,127
-----------
SPAIN 2.5%
Acerinox, SA (d)............................................ 100 2,325
Argentaria Corp. (d)........................................ 1,000 25,858
Autopistas Cesa (d)......................................... 824 13,683
Azucarera Ebro Agr (d)...................................... 200 4,405
BCO Bilbao Vizcaya, SA (d).................................. 3,600 56,361
BCO Central Hispanoamericano (d)............................ 2,600 30,826
BCO Santander, SA (d)....................................... 1,698 33,692
Corporacion Mapfre, SA (d).................................. 400 10,836
Empresa Nacional de Celulosas, SA (d)....................... 100 1,675
Endesa, SA (d).............................................. 1,900 50,267
Fomento Construcciones y Contratas, SA (d).................. 200 14,847
Gas Natural SDG, SA (d)..................................... 100 10,871
Iberdrola, SA (d)........................................... 2,000 37,363
Metrovacesa, SA (d)......................................... 210 6,295
Repsol, SA (d).............................................. 700 37,285
Tabacalera, SA, Class A (d)................................. 600 15,114
Telefonica, SA (d).......................................... 1,809 80,318
Telefonica, SA - Rights (d)................................. 1,809 1,604
TelePizza, SA (a) (d)....................................... 675 6,412
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
SPAIN (CONTINUED)
Union Electrica Fenosa, SA (d).............................. 800 $ 13,819
Vallehermoso, SA (d)........................................ 2,020 28,853
Viscofan Industria Navarra De Envolturas Celulosicas, SA
(d)....................................................... 100 3,230
-----------
485,939
-----------
SWEDEN 1.2%
ABB, AB, Class B............................................ 200 2,117
ABB, AB, Class A............................................ 600 6,388
AGA, AB, Class B............................................ 100 1,311
Asticus, AB (a)............................................. 1,185 11,595
Astra, AB................................................... 300 6,092
Astra, AB, Class A.......................................... 1,133 23,079
Atlas Copco, AB, Class A.................................... 100 2,191
Castellum, AB............................................... 2,150 23,287
Diligentia.................................................. 1,900 13,329
Electrolux, AB (a).......................................... 300 5,151
Ericsson Telefon LM, Class B................................ 1,700 40,382
Foreningssparbk............................................. 300 7,754
Hennes & Mauritz, AB, Class B............................... 200 16,296
Netcom Systems, AB.......................................... 100 4,062
OM Gruppen, AB.............................................. 100 1,255
Piren, AB (a)............................................... 640 4,057
Sandvik, AB................................................. 200 3,471
Securitas, AB, Class B (a).................................. 200 3,102
Skandia Forsakrings, AB..................................... 400 6,105
Skandinaviska Enskilda Banken, Class A...................... 500 5,262
Skanska, AB, Class B........................................ 100 2,769
SKF, AB, Class B............................................ 100 1,163
SSAB Svenska Stal, Class A.................................. 100 954
Svenska Cellulosa, AB, Class B.............................. 200 4,357
Svenska Handelsbkn, Class A................................. 200 8,419
Tornet Fastighet............................................ 935 13,637
Trelleborg, AB, Class B..................................... 100 812
Volvo, AB, Class A.......................................... 100 2,234
Volvo, AB, Class B.......................................... 300 6,868
WM-Data, AB................................................. 100 4,258
-----------
231,757
-----------
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
SWITZERLAND 2.2%
ABB, AG..................................................... 10 $ 11,720
Credit Suisse Group......................................... 200 31,302
Holderbank Financiere Glarus, AG............................ 10 11,837
Nestle, SA.................................................. 30 65,298
Novartis, AG................................................ 50 98,275
Roche Holdings Bearer, AG................................... 1 18,108
Roche Holdings Genusscheine, AG............................. 5 61,003
SCHW Ruckversicher.......................................... 10 26,068
SGS Holdings................................................ 5 4,896
Sulzer, AG.................................................. 10 6,086
Swatch Group, AG............................................ 10 6,188
Swisscom, AG (a)............................................ 50 20,929
UBS, AG (a)................................................. 157 48,230
Zurich Allied, AG........................................... 40 29,613
-----------
439,553
-----------
UNITED KINGDOM 9.8%
Abbey National.............................................. 1,586 33,754
Albert Fisher Group......................................... 809 76
Alldays..................................................... 29 84
Allders..................................................... 38 81
Allied Zurich............................................... 2,359 35,450
AMEC........................................................ 113 333
Anglian Water............................................... 587 8,151
Arjo Wiggins Apple.......................................... 1,642 3,083
Associated British Ports Holdings........................... 2,175 10,118
Barclays.................................................... 1,432 31,048
Barratt Developments........................................ 277 1,063
Bass........................................................ 1,231 17,814
BBA Group................................................... 19 118
Beazer Group................................................ 936 2,379
Berisford................................................... 502 1,501
Berkeley Group.............................................. 204 1,496
BG, Class B................................................. 3,272 21,038
BICC Group.................................................. 115 134
Blue Circle Industries...................................... 4,647 24,320
BOC Group................................................... 1,073 15,385
Boots Co. .................................................. 1,211 20,703
British Petroleum........................................... 6,538 97,326
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
BPB......................................................... 1,000 $ 3,655
British Aerospace........................................... 2,325 19,816
British Airways............................................. 2,423 16,666
British American Tobacco.................................... 2,262 19,918
British Land Co. ........................................... 3,380 25,045
British Sky Broadcast....................................... 2,313 17,523
British Telecommunications.................................. 6,745 102,088
BTR......................................................... 8,796 18,048
Burford Holdings............................................ 7,220 11,755
Burmah Castrol.............................................. 617 8,816
Cable & Wireless............................................ 1,570 19,198
Capital Corp. .............................................. 74 77
Capital Shop Centers........................................ 4,810 26,771
Caradon..................................................... 1,305 2,233
Carpetright................................................. 351 1,312
Centrica.................................................... 5,897 12,100
Cobham Plc.................................................. 431 4,991
Commercial Union............................................ 1,339 21,112
Delta....................................................... 64 118
Diageo...................................................... 4,693 52,045
Dialog Corp. ............................................... 70 63
Emap........................................................ 122 2,331
EMI Group................................................... 2,482 16,618
Enterprise Oil.............................................. 752 3,686
FirstGroup.................................................. 726 4,795
FKI......................................................... 635 1,414
General Electric............................................ 4,321 39,125
Glaxo Wellcome.............................................. 3,487 120,038
Granada Group............................................... 834 14,618
Grantchester Holdings....................................... 10,130 23,562
Great Universal Stores...................................... 1,465 15,456
Greycoat.................................................... 6 16
Hammerson Plc............................................... 2,680 15,228
Hanson...................................................... 1,888 15,025
House Of Fraser............................................. 218 192
HSBC Holdings............................................... 1,991 50,445
Hyder....................................................... 1,080 13,637
IMI......................................................... 699 2,741
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Imperial Chemical Industries................................ 1,148 $ 9,946
Jarvis...................................................... 437 4,850
JBA Holdings................................................ 3 9
Johnson Matthey............................................. 837 5,646
Kingfisher.................................................. 2,476 26,821
Ladbroke Group.............................................. 1,686 6,779
Laird Group................................................. 49 133
Land Securities............................................. 1,339 17,130
Lasmo....................................................... 1,975 3,281
Lex Service................................................. 783 5,008
LIMIT....................................................... 1,752 4,774
Lloyds TSB Group............................................ 7,083 100,849
London Clubs International.................................. 616 1,678
London Forfaiting........................................... 113 216
Lonrho...................................................... 516 2,812
Low & Bonar................................................. 10 26
LucasVarity................................................. 2,162 7,220
Marks & Spencer............................................. 3,395 23,352
Marley...................................................... 1,144 2,319
Mayflower Corp. ............................................ 3 6
Meggitt..................................................... 14 29
MEPC........................................................ 1,252 8,320
Mirror Group................................................ 657 1,640
Misys....................................................... 1,050 7,711
National Power.............................................. 1,249 10,770
Next........................................................ 456 3,735
NFC......................................................... 1,159 2,291
Ocean Group................................................. 13 163
P & O Finance............................................... 1,456 17,223
Parity...................................................... 272 2,598
Pennon Group................................................ 440 8,509
Pilkington.................................................. 3,266 3,256
Powerscreen International................................... 31 58
Prudential Corp. ........................................... 3,664 55,893
Racal Electronics........................................... 315 1,821
Railtrack Group............................................. 635 16,563
Rank Group.................................................. 805 3,077
Reed International.......................................... 1,804 14,326
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Rentokil Initial............................................ 3,235 $ 24,455
Reuters Group............................................... 2,255 23,790
Rexam....................................................... 35 97
Rio Tinto................................................... 1,704 19,817
RMC Group................................................... 1,061 14,507
Rolls Royce................................................. 1,073 4,457
Royal Bank Scotland Group................................... 1,122 18,343
Royal Sun Alliance.......................................... 2,122 17,275
Rugby Group................................................. 388 599
Safeway..................................................... 1,339 6,718
Sainsbury J Finance......................................... 2,019 16,336
Schlumberger, Ltd. - US$.................................... 300 13,837
Scotia Holdings............................................. 90 96
Scottish & Southern Energy.................................. 651 7,338
Scottish Power.............................................. 1,360 14,009
Sears....................................................... 888 3,806
Sedgwick Group.............................................. 58 215
Skillsgroup................................................. 45 137
Smithkline Beecham.......................................... 5,383 74,604
Smiths Industries........................................... 160 2,294
Stagecoach Holdings......................................... 1,292 5,173
Tesco....................................................... 7,124 20,713
Thames Water................................................ 756 14,570
Torotrak.................................................... 15 22
Unilever.................................................... 4,144 46,610
Vickers Group............................................... 42 125
Vodafone Group.............................................. 4,347 70,632
Wates C Of L Properties..................................... 11,540 13,613
Wickes...................................................... 17 71
William Baird............................................... 669 1,134
WPP Group................................................... 860 5,215
Yorkshire Water............................................. 545 4,980
Zeneca Group................................................ 1,089 47,439
-----------
1,921,597
-----------
UNITED STATES 26.8%
3Com Corp. (a).............................................. 200 8,962
Abbott Laboratories, Inc. .................................. 800 39,200
AES Corp. .................................................. 100 4,738
</TABLE>
See Notes to Financial Statements
24
<PAGE> 26
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Aetna, Inc. ................................................ 100 $ 7,863
Air Products & Chemicals, Inc. ............................. 200 8,000
AirTouch Communications, Inc. (a)........................... 300 21,637
Albertsons, Inc. ........................................... 100 6,369
AlliedSignal, Inc. ......................................... 300 13,294
Allstate Corp. ............................................. 400 15,450
ALLTEL Corp. ............................................... 100 5,981
Aluminum Co. of America..................................... 200 14,912
Amerada Hess Corp. ......................................... 100 4,975
American Electric Power, Inc. .............................. 100 4,706
American Express Co. ....................................... 300 30,675
American General Corp. ..................................... 200 15,600
American Home Products Corp. ............................... 700 39,419
American International Group, Inc. (b)...................... 500 48,312
American Stores Co. ........................................ 100 3,694
Ameritech Corp. ............................................ 600 38,025
Amgen, Inc. (a)............................................. 200 20,912
Amoco Corp. ................................................ 500 29,500
AMP, Inc. .................................................. 200 10,412
AMR Corp. .................................................. 100 5,938
Anheuser-Busch Cos., Inc. .................................. 300 19,687
Aon Corp. .................................................. 100 5,538
Applied Materials, Inc. .................................... 200 8,538
Archer-Daniels-Midland Co. ................................. 300 5,156
Ascend Communications, Inc. (a)............................. 100 6,575
Associates First Capital Corp., Class A..................... 400 16,950
AT&T Corp. (b).............................................. 900 67,725
Atlantic Richfield Co. ..................................... 200 13,050
Automatic Data Processing, Inc. ............................ 200 16,037
Avery Dennison Corp. ....................................... 100 4,506
Avon Products, Inc. ........................................ 200 8,850
Baker Hughes, Inc. ......................................... 200 3,538
Bank of New York Co., Inc. ................................. 300 12,075
Bank One Corp. ............................................. 600 30,637
BankAmerica Corp. (b)....................................... 800 48,100
BankBoston Corp. ........................................... 200 7,788
Bankers Trust New York Corp. ............................... 100 8,544
Baxter International, Inc. ................................. 200 12,862
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
BB&T Corp. ................................................. 200 $ 8,063
Becton, Dickinson & Co. .................................... 200 8,538
Bell Atlantic Corp. ........................................ 800 42,400
BellSouth Corp. (b)......................................... 1,000 49,875
Berkshire Hathaway, Inc., Class B (a)....................... 11 24,675
Bestfoods................................................... 200 10,650
Black & Decker Corp. ....................................... 100 5,606
BMC Software, Inc. ......................................... 100 4,456
Boeing Co. ................................................. 500 16,312
Boston Scientific Corp. (a)................................. 200 5,363
Bristol-Myers Squibb Co. (b)................................ 500 66,906
Browning Ferris Industries, Inc. ........................... 100 2,844
Burlington Northern Santa Fe Corp. ......................... 200 6,750
Burlington Resources, Inc. ................................. 100 3,581
Campbell Soup Co. .......................................... 200 11,000
Capital One Financial Corp. ................................ 100 11,500
Cardinal Health, Inc. ...................................... 100 7,588
Carolina Power & Light Co. ................................. 100 4,706
Case Corp. ................................................. 300 6,544
Caterpillar, Inc. .......................................... 200 9,200
CBS Corp. .................................................. 400 13,100
Cendant Corp. (a)........................................... 500 9,531
Central & South West Corp. ................................. 100 2,744
Charles Schwab Corp. ....................................... 300 16,856
Chase Manhattan Corp. ...................................... 500 34,031
Chevron Corp. .............................................. 400 33,175
Chubb Corp. ................................................ 100 6,488
CIGNA Corp. ................................................ 100 7,731
Cincinnati Financial Corp. ................................. 100 3,663
Cinergy Corp. .............................................. 100 3,438
Cisco Systems, Inc. (a) (b)................................. 800 74,250
Citigroup, Inc. (b)......................................... 1,100 54,450
Clear Channel Communications, Inc. (a)...................... 100 5,450
Clorox Co. ................................................. 100 11,681
Coastal Corp. .............................................. 200 6,988
Coca-Cola Co. (b)........................................... 1,200 80,250
Coca-Cola Enterprises, Inc. ................................ 200 7,150
Colgate - Palmolive Co. .................................... 200 18,575
</TABLE>
See Notes to Financial Statements
26
<PAGE> 28
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Columbia/HCA Healthcare Corp. .............................. 400 $ 9,900
Comcast Corp., Class A...................................... 200 11,737
Comerica, Inc. ............................................. 100 6,819
Compaq Computer Corp. ...................................... 900 37,744
Computer Associates International, Inc. .................... 300 12,787
Computer Sciences Corp. (a)................................. 100 6,444
ConAgra, Inc. .............................................. 200 6,300
Conseco, Inc. .............................................. 100 3,056
Consolidated Edison, Inc. .................................. 100 5,288
Cooper Industries, Inc. .................................... 100 4,769
Corning, Inc. .............................................. 100 4,500
Costco Cos., Inc. (a)....................................... 100 7,219
Countrywide Credit Industries, Inc. ........................ 100 5,019
CSX Corp. .................................................. 100 4,150
CVS Corp. .................................................. 200 11,000
DaimlerChrysler, AG Stuttgart............................... 249 23,920
Dana Corp. ................................................. 100 4,088
Dayton Hudson Corp. ........................................ 300 16,275
Deere & Co. ................................................ 100 3,313
Dell Computer Corp. (a) (b)................................. 700 51,231
Delta Air Lines, Inc. ...................................... 200 10,400
Dominion Resources, Inc. ................................... 100 4,675
Dover Corp. ................................................ 100 3,663
Dow Chemical Co. ........................................... 200 18,187
DTE Energy Co. ............................................. 100 4,288
Duke Power Co. ............................................. 200 12,812
Dun & Bradstreet Corp. ..................................... 100 3,156
E. I. Du Pont de Nemours & Co. ............................. 600 31,837
Eastman Kodak Co. .......................................... 200 14,400
Edison International........................................ 200 5,575
Electronic Data Systems Corp. .............................. 300 15,075
Eli Lilly & Co. (b)......................................... 500 44,437
EMC Corp. (a)............................................... 300 25,500
Emerson Electric Co. ....................................... 200 12,100
Enron Corp. ................................................ 200 11,412
Entergy Corp. .............................................. 100 3,113
Equifax, Inc. .............................................. 100 3,419
Exxon Corp. (b)............................................. 1,200 87,750
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
FDX Corp. (a)............................................... 100 $ 8,900
Federal Home Loan Mortgage Corp. ........................... 300 19,331
Federal National Mortgage Assn. (b)......................... 600 44,400
Federated Department Stores, Inc. (a)....................... 100 4,356
Fifth Third Bancorp......................................... 200 14,262
First Data Corp. ........................................... 200 6,338
First Union Corp. .......................................... 500 30,406
FirstEnergy Corp. .......................................... 100 3,256
Fleet Financial Group, Inc. ................................ 300 13,406
Ford Motor Co. (b).......................................... 700 41,081
Fort James Corp. ........................................... 100 4,000
Fortune Brands, Inc. ....................................... 100 3,163
FPL Group, Inc. ............................................ 100 6,163
Franklin Resources, Inc. ................................... 100 3,200
Fred Meyer, Inc. ........................................... 100 6,025
Frontier Corp. ............................................. 100 3,400
Gannett, Inc. .............................................. 200 12,900
Gap, Inc. .................................................. 300 16,875
Gateway 2000, Inc. (a)...................................... 100 5,119
General Dynamics Corp. ..................................... 100 5,863
General Electric Co. (b).................................... 1,700 173,506
General Mills, Inc. ........................................ 100 7,775
General Motors Corp. ....................................... 400 28,625
Georgia-Pacific Corp. ...................................... 100 5,856
Gillette Co. ............................................... 600 28,987
Golden West Financial Corp. ................................ 100 9,169
Goodyear Tire & Rubber Co. ................................. 200 10,087
GPU, Inc. .................................................. 100 4,419
GTE Corp. .................................................. 500 32,500
Guidant Corp. .............................................. 100 11,025
H. J. Heinz & Co. .......................................... 200 11,325
Halliburton Co. ............................................ 200 5,925
Hartford Financial Services Group, Inc. .................... 100 5,488
HBO & Co. .................................................. 200 5,738
HEALTHSOUTH Corp. (a)....................................... 300 4,631
Hershey Foods Corp. ........................................ 100 6,219
Hewlett-Packard Co. ........................................ 600 40,987
Hilton Hotels Corp. ........................................ 100 1,913
</TABLE>
See Notes to Financial Statements
28
<PAGE> 30
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Home Depot, Inc. (b)........................................ 800 $ 48,950
Honeywell, Inc. ............................................ 100 7,531
Household International, Inc. .............................. 200 7,925
Houston Industries, Inc. ................................... 100 3,213
Huntington Bancshares, Inc. ................................ 100 3,006
Illinois Tool Works, Inc. .................................. 200 11,600
IMS Health, Inc. ........................................... 100 7,544
Ingersoll-Rand Co. ......................................... 100 4,694
Intel Corp. (b)............................................. 800 94,850
International Business Machines Corp. (b)................... 400 73,900
International Paper Co. .................................... 200 8,963
Interpublic Group of Cos., Inc. ............................ 100 7,975
ITT Industries, Inc. ....................................... 100 3,975
J.C. Penney, Inc. .......................................... 200 9,375
Jefferson-Pilot Corp. ...................................... 100 7,500
Johnson & Johnson, Inc. (b)................................. 600 50,325
JP Morgan & Co., Inc. ...................................... 100 10,506
Kellogg Co. ................................................ 200 6,825
Keycorp..................................................... 200 6,400
Kimberly-Clark Corp. ....................................... 300 16,350
Kmart Corp. (a)............................................. 300 4,594
Kohl's Corp. (a)............................................ 100 6,144
Kroger Co. (a).............................................. 200 12,100
Latin American Discovery Fund, Inc. (c) .................... 12,800 79,200
Lehman Brothers Holdings, Inc. ............................. 100 4,406
Limited, Inc. .............................................. 100 2,913
Lincoln National Corp. ..................................... 100 8,181
Lockheed Martin Corp. ...................................... 100 8,475
Loews Corp. ................................................ 100 9,825
Lowe's Cos., Inc. .......................................... 200 10,237
Lucent Technologies, Inc. (b)............................... 600 66,000
Marriott International, Inc., Class A....................... 100 2,900
Marsh & McLennan Cos., Inc.................................. 100 5,844
Masco Corp. ................................................ 200 5,750
Mattel, Inc. ............................................... 100 2,281
May Department Stores Co. .................................. 200 12,075
Maytag Corp. ............................................... 100 6,225
MBIA, Inc. ................................................. 100 6,556
</TABLE>
See Notes to Financial Statements
29
<PAGE> 31
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
MBNA Corp. ................................................. 400 $ 9,975
McDonald's Corp. ........................................... 400 30,650
McGraw-Hill, Inc. .......................................... 100 10,187
MCI Worldcom, Inc. (a) (b).................................. 900 64,575
MediaOne Group, Inc. ....................................... 300 14,100
Medtronic, Inc. ............................................ 300 22,275
Mellon Bank Corp. .......................................... 200 13,750
Mercantile Bancorporation, Inc. ............................ 100 4,613
Merck & Co., Inc. (b)....................................... 600 88,612
Merrill Lynch & Co., Inc. .................................. 200 13,350
MGIC Investment Corp. ...................................... 100 3,981
Micron Technology, Inc. (a)................................. 100 5,056
Microsoft Corp. (a) (b)..................................... 1,300 180,294
Minnesota Mining & Manufacturing Co. ....................... 300 21,337
Mobil Corp. ................................................ 400 34,850
Monsanto Co. ............................................... 300 14,250
Morgan Stanley Asia Pacific Fund, Inc. (c).................. 6,200 43,400
Motorola, Inc. ............................................. 400 24,425
National City Corp. ........................................ 200 14,500
New York Times Co., Class A................................. 100 3,469
Newell Co. ................................................. 100 4,125
Nextel Communications, Inc. (a)............................. 200 4,725
Nike, Inc., Class B......................................... 200 8,113
Norfolk Southern Corp. ..................................... 200 6,338
Northern Trust Corp. ....................................... 100 8,731
Novell, Inc. (a)............................................ 200 3,625
Occidental Petroleum Corp. ................................. 200 3,375
Omnicom Group, Inc. ........................................ 100 5,800
Oracle Corp. (a)............................................ 500 21,562
Owens Illinois, Inc. (a).................................... 100 3,063
PacifiCorp.................................................. 100 2,106
Paychex, Inc. .............................................. 100 5,144
PECO Energy Co. ............................................ 100 4,163
PepsiCo, Inc. .............................................. 800 32,750
Pfizer, Inc. (b)............................................ 600 75,262
PG&E Corp. ................................................. 200 6,300
Pharmacia & Upjohn, Inc. ................................... 300 16,987
Philip Morris Cos., Inc. (b)................................ 1,200 64,200
</TABLE>
See Notes to Financial Statements
30
<PAGE> 32
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Phillips Petroleum Co. ..................................... 200 $ 8,525
Pioneer Hi-Bred International, Inc. ........................ 100 2,700
Pitney Bowes, Inc. ......................................... 200 13,212
PNC Bank Corp. ............................................. 200 10,825
PPG Industries, Inc. ....................................... 200 11,650
Praxair, Inc. .............................................. 100 3,525
Procter & Gamble Co. (b) ................................... 600 54,787
Progressive Corp. .......................................... 100 16,937
Providian Financial Corp. .................................. 150 11,250
Public Service Enterprise Group............................. 100 4,000
Quaker Oats Co. ............................................ 100 5,950
Ralston Purina Group........................................ 200 6,475
Raytheon Co., Class B....................................... 200 10,650
Regions Financial Corp. .................................... 100 4,031
Republic New York Corp. .................................... 100 4,556
Rite Aid Corp. ............................................. 100 4,956
RJR Nabisco Holdings Corp. ................................. 100 2,969
Rockwell International Corp. ............................... 100 4,856
Rohm & Haas Co. ............................................ 200 6,025
Royal Dutch Petroleum Co. - ADR (Netherlands) (b)........... 1,100 52,662
Rubbermaid, Inc. ........................................... 100 3,144
SAFECO Corp. ............................................... 100 4,294
Sara Lee Corp. ............................................. 600 16,912
SBC Communications, Inc. (b) ............................... 1,000 53,625
Schering-Plough Corp. ...................................... 700 38,675
Seagate Technology, Inc. (a)................................ 100 3,025
Sears, Roebuck & Co. ....................................... 200 8,500
Sempra Energy............................................... 100 2,538
Service Corp. International................................. 100 3,806
Sherwin-Williams Co. ....................................... 100 2,938
SLM Holding Corp. .......................................... 100 4,800
Southern Co. ............................................... 400 11,625
Southwest Airlines Co. ..................................... 100 2,244
Sprint Corp. ............................................... 300 25,237
Sprint Corp. (PCS Group) ................................... 150 3,469
St. Paul Cos., Inc. ........................................ 200 6,950
Staples, Inc. .............................................. 200 8,738
State Street Corp. ......................................... 100 6,956
</TABLE>
See Notes to Financial Statements
31
<PAGE> 33
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Summit Bancorp.............................................. 100 $ 4,369
Sun Microsystems, Inc. (a).................................. 200 17,125
SunAmerica, Inc. ........................................... 200 16,225
SunTrust Banks, Inc. ....................................... 100 7,650
Synovus Financial Corp. .................................... 100 2,438
SYSCO Corp. ................................................ 200 5,488
Tele-Communications, Inc., Class A (a)...................... 300 16,594
Tellabs, Inc. (a)........................................... 200 13,712
Tenet Healthcare Corp. (a).................................. 200 5,250
Texaco, Inc. ............................................... 300 15,862
Texas Instruments, Inc. .................................... 200 17,112
Texas Utilities Co. ........................................ 100 4,669
Textron, Inc. .............................................. 100 7,594
Time Warner, Inc. .......................................... 600 37,237
Times Mirror Co., Class A................................... 100 5,600
TJX Cos., Inc. ............................................. 200 5,800
Torchmark, Inc. ............................................ 100 3,531
Transamerica Corp. ......................................... 100 11,550
Tribune Co. ................................................ 100 6,600
Tricon Global Restaurants, Inc. (a)......................... 100 5,013
TRW, Inc. .................................................. 100 5,619
Tyco International Ltd. .................................... 400 30,175
Unicom Corp. ............................................... 100 3,856
Union Carbide Corp. ........................................ 100 4,250
Union Pacific Corp. ........................................ 100 4,506
Union Planters Corp. - Rights............................... 100 4,531
Unisys Corp. (a)............................................ 100 3,444
United HealthCare Corp. .................................... 100 4,306
United Technologies Corp. .................................. 200 21,750
Unocal Corp. ............................................... 200 5,838
UNUM Corp. ................................................. 100 5,838
US Airways Group, Inc. (a).................................. 100 5,200
US Bancorp.................................................. 400 14,200
US West, Inc. .............................................. 300 19,387
UST, Inc. .................................................. 100 3,488
USX - Marathon Group........................................ 200 6,025
Viacom, Inc., Class B (a)................................... 200 14,800
Wachovia Corp. ............................................. 100 8,744
</TABLE>
See Notes to Financial Statements
32
<PAGE> 34
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Waddell & Reed Financial, Inc., Class A (a)................. 5 $ 118
Waddell & Reed Financial, Inc., Class B..................... 24 558
Wal-Mart Stores, Inc. (b) .................................. 1,100 89,581
Walgreen Co. ............................................... 300 17,569
Walt Disney Co. ............................................ 1,100 33,000
Warner-Lambert Co. ......................................... 500 37,594
Washington Mutual, Inc. .................................... 300 11,456
Waste Management, Inc. ..................................... 300 13,987
Wells Fargo & Co. (a)....................................... 800 31,950
Weyerhaeuser Co. ........................................... 200 10,162
Williams Cos., Inc. ........................................ 200 6,238
Winn-Dixie Stores, Inc. .................................... 100 4,488
Wm Wrigley Jr. Co. ......................................... 100 8,956
Xerox Corp. ................................................ 200 23,600
-----------
5,236,596
-----------
TOTAL COMMON AND PREFERRED STOCKS AND EQUIVALENTS 67.5%.......... 13,194,156
-----------
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 10.5%
New Zealand Bonds - NZ$ (200,000 par, 8.000% coupon, 04/15/04
maturity)......................................................... 117,668
U.S. Treasury Bonds - US$ (250,000 par, 12.000% coupon, 05/15/05
maturity) (b)..................................................... 347,814
U.S. Treasury Bonds - US$ (100,000 par, 8.125% coupon, 08/15/19
maturity) (b)..................................................... 133,547
U.S. Treasury Bonds - US$ (700,000 par, 6.250% coupon, 08/15/23
maturity) (b)..................................................... 782,362
U.S. Treasury Notes - US$ (350,000 par, 6.250% coupon, 10/31/01
maturity) (b)..................................................... 364,654
U.S. Treasury Notes - US$ (100,000 par, 7.250% coupon, 05/15/04
maturity) (b)..................................................... 112,078
U.S. Treasury Notes - US$ (210,000 par, 3.625% coupon, 01/15/08
maturity) (b)..................................................... 205,997
-----------
TOTAL GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS................ 2,064,120
-----------
TOTAL LONG-TERM INVESTMENTS 78.0%
(Cost $13,143,808)................................................ 15,258,276
-----------
SHORT-TERM INVESTMENTS 25.0%
COMMERCIAL PAPER 1.3%
Motorola, Inc. - US$ (250,000 par, 5.300% coupon, 01/26/99 maturity)
(b)............................................................... 249,089
-----------
REPURCHASE AGREEMENT 7.4%
State Street Bank & Trust Co. - US$ (1,441,000 par collateralized by
U.S. Government Obligations in a pooled cash account, dated
12/31/98, to be sold on 01/04/99 at $1,441,640) (b)............... 1,441,000
-----------
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 16.3%
Japan Treasury Bill - JPY (40,000,000 par, .061% yield, 02/22/99
maturity)......................................................... 353,794
Canada Government - CA$ (300,000 par, 4.695% yield, 01/11/99
maturity) (b)....................................................... 299,576
Federal Farm Credit Bank Discount Note - US$ (250,000 par, 4.322%
yield, 01/08/99 maturity) (b)....................................... 249,763
</TABLE>
See Notes to Financial Statements
33
<PAGE> 35
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Description Value
- ---------------------------------------------------------------------------
<S> <C>
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
Federal Home Loan Bank Consolidated Discount Note - US$
(300,000 par, 4.919% yield, 01/20/99 maturity).............. $ 299,193
Federal Home Loan Mortgage Discount Note - US$ (250,000 par,
4.720% yield, 01/22/99 maturity) (b)........................ 249,290
Federal National Mortgage Association Discount Note - US$
(350,000 par, 4.527% yield, 01/08/99 maturity).............. 349,653
Federal National Mortgage Association Discount Note - US$
(400,000 par, 4.756% yield, 01/26/99 maturity) (b).......... 398,647
U.S. Treasury Bills - US$ (1,000,000 par, 3.451% yield,
01/07/99 maturity) (b)...................................... 999,338
-----------
TOTAL GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 16.3%.. 3,199,254
-----------
TOTAL SHORT-TERM INVESTMENTS 25.0%
(Cost $4,870,107)......................................... 4,889,343
-----------
TOTAL INVESTMENTS 103.0%
(Cost $18,013,915)........................................ 20,147,619
FOREIGN CURRENCY 0.2% (VARIOUS DENOMINATIONS)
(Cost $33,506)............................................ 33,427
LIABILITIES IN EXCESS OF OTHER ASSETS (3.2%)............... (620,607)
-----------
NET ASSETS 100.0%.......................................... $19,560,439
===========
</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
commitments.
(c) Related party security. See Notes to Financial Statements.
(d) European assets as of December 31, 1998 were valued based on
country-specific currencies. On January 1, 1999, the currencies of countries
participating in the European economic and monetary union converted to the
euro.
ADR - American Depository Receipt
See Notes to Financial Statements
34
<PAGE> 36
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $18,013,915)........................ $20,147,619
Foreign Currency (Cost $33,506)............................. 33,427
Cash........................................................ 632
Deposit on Variation Margin................................. 69,393
Receivables:
Fund Shares Sold.......................................... 1,472,104
Variation Margin on Futures............................... 108,140
Interest.................................................. 31,738
Dividends................................................. 22,975
Investments Sold.......................................... 3,051
Forward Commitments and Foreign Currency Contracts.......... 86,016
Unamortized Organizational Costs............................ 1,040
Other....................................................... 2,655
-----------
Total Assets.......................................... 21,978,790
-----------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 2,199,760
Distributor and Affiliates................................ 44,844
Investments Purchased..................................... 29,830
Investment Advisory Fee................................... 16,774
Accrued Expenses............................................ 95,737
Trustees' Deferred Compensation and Retirement Plans........ 31,406
-----------
Total Liabilities..................................... 2,418,351
-----------
NET ASSETS.................................................. $19,560,439
===========
NET ASSETS CONSIST OF:
Capital..................................................... $17,041,996
Net Unrealized Appreciation................................. 2,216,687
Accumulated Net Realized Gain............................... 324,917
Accumulated Net Investment Loss............................. (23,161)
-----------
NET ASSETS.................................................. $19,560,439
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $8,483,190 and 820,473 shares of
beneficial interest issued and outstanding)............. $ 10.34
Maximum sales charge (4.75%* of offering price)......... .52
-----------
Maximum offering price to public........................ $ 10.86
===========
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $9,629,470 and 959,264 shares of
beneficial interest issued and outstanding)............. $ 10.04
===========
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $1,447,779 and 143,961 shares of
beneficial interest issued and outstanding)............. $ 10.06
===========
</TABLE>
*On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
35
<PAGE> 37
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 457,179
Dividends (Net of foreign withholding taxes of $19,297)..... 332,951
----------
Total Income............................................ 790,130
----------
EXPENSES:
Custody..................................................... 300,620
Investment Advisory Fee..................................... 226,999
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $27,721, $99,562 and $16,491,
respectively)............................................. 143,774
Shareholder Services........................................ 142,503
Reports to Shareholders..................................... 72,412
Registration and Filing Fees................................ 42,700
Audit....................................................... 29,524
Trustees' Fees and Expenses................................. 12,441
Amortization of Organizational Costs........................ 3,289
Other....................................................... 46,420
----------
Total Expenses.......................................... 1,020,682
----------
NET INVESTMENT LOSS......................................... $ (230,552)
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $2,308,819
Futures................................................... 442,145
Forward Commitments....................................... 291,512
Foreign Currency Transactions............................. 176,099
----------
Net Realized Gain........................................... 3,218,575
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 2,108,124
----------
End of the Period:
Investments............................................. 2,133,704
Futures................................................. (14,007)
Forward Commitments..................................... 67,630
Forward Currency Contracts.............................. 28,841
Foreign Currency Translation............................ 519
----------
2,216,687
----------
Net Unrealized Appreciation During the Period............... 108,563
----------
NET REALIZED AND UNREALIZED GAIN............................ $3,327,138
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $3,096,586
==========
</TABLE>
See Notes to Financial Statements
36
<PAGE> 38
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss................................... $ (230,552) $ (247,078)
Net Realized Gain..................................... 3,218,575 2,539,774
Net Unrealized Appreciation/Depreciation During the
Period.............................................. 108,563 (471,761)
----------- -----------
Change in Net Assets from Operations.................. 3,096,586 1,820,935
----------- -----------
Distributions in Excess of Net Investment Income*..... (76,480) -0-
Distributions from Net Realized Gain*................. (2,388,475) (2,665,787)
----------- -----------
Total Distributions................................... (2,464,955) (2,665,787)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... 631,631 (844,852)
----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................. 6,233,096 6,116,272
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................ 2,280,988 2,487,060
Cost of Shares Repurchased............................ (12,579,170) (4,866,248)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.... (4,065,086) 3,737,084
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS................. (3,433,455) 2,892,232
NET ASSETS:
Beginning of the Period............................... 22,993,894 20,101,662
----------- -----------
End of the Period (Including accumulated net
investment loss of $23,161 and $229,219,
respectively)....................................... $19,560,439 $22,993,894
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Distributions in Excess of
Net Investment Income:
Class A Shares.................... $ (76,480) $ -0-
Class B Shares.................... -0- -0-
Class C Shares.................... -0- -0-
----------- -----------
$ (76,480) $ -0-
=========== ===========
Distributions from Net Realized
Gain:
Class A Shares.................... $(1,080,329) $(1,273,008)
Class B Shares.................... (1,144,103) (1,192,389)
Class C Shares.................... (164,043) (200,390)
----------- -----------
$(2,388,475) $(2,665,787)
=========== ===========
</TABLE>
See Notes to Financial Statements
37
<PAGE> 39
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 16, 1994
(Commencement
Year Ended December 31, of Investment
------------------------------------- Operations) to
Class A Shares 1998(b) 1997 1996(b) 1995 December 31, 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................. $10.162 $10.530 $ 10.15 $ 9.19 $ 9.44
------- ------- ------- ------- -------
Net Investment Income/Loss.... (.066) (.088) -0- .08 .10
Net Realized and Unrealized
Gain/Loss................... 1.643 1.014 1.242 1.1375 (.2475)
------- ------- ------- ------- -------
Total from Investment
Operations.................. 1.577 .926 1.242 1.2175 (.1475)
------- ------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Investment
Income.................... .072 -0- -0- .0775 .075
Distributions from and in
Excess of Net Realized
Gain...................... 1.328 1.294 .862 .18 .0275
------- ------- ------- ------- -------
Total Distributions........... 1.400 1.294 .862 .2575 .1025
------- ------- ------- ------- -------
Net Asset Value, End of the
Period...................... $10.339 $10.162 $10.530 $ 10.15 $ 9.19
======= ======= ======= ======= =======
Total Return* (a)............. 15.84% 8.94% 12.44% 13.30% (1.57%)**
Net Assets at End of the
Period (In millions)........ $ 8.5 $ 11.2 $ 8.5 $ 15.5 $ 11.5
Ratio of Expenses to Average
Net Assets*................. 4.11% 3.66% 2.87% 2.79% 2.75%
Ratio of Net Investment
Income/Loss to Average Net
Assets*..................... (.60%) (.67%) .00% .81% 1.54%
Portfolio Turnover............ 222% 231% 91% 135% 50%**
* If certain expenses had not been assumed by Van Kampen, total return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net Assets.................. N/A N/A 3.17% 3.68% 2.76%
Ratio of Net Investment
Income/Loss to Average Net
Assets...................... N/A 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) Based on average shares outstanding.
N/A -- Not Applicable.
See Notes to Financial Statements
38
<PAGE> 40
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 16, 1994
(Commencement
Year Ended December 31, of Investment
------------------------------------- Operations) to
Class B Shares 1998(b) 1997 1996(b) 1995 December 31, 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................. $ 9.911 $10.379 $ 10.10 $ 9.17 $ 9.44
------- ------- ------- ------- -------
Net Investment Income/Loss.... (.151) (.146) (.106) (.01) .01
Net Realized and Unrealized
Gain/Loss................... 1.606 .972 1.247 1.1375 (.2065)
------- ------- ------- ------- -------
Total from Investment
Operations.................. 1.455 .826 1.141 1.1275 (.1965)
------- ------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Investment
Income...................... -0- -0- -0- .0175 .046
Distributions from and in
Excess of Net Realized
Gain...................... 1.328 1.294 .862 .18 .0275
------- ------- ------- ------- -------
Total Distributions........... 1.328 1.294 .862 .1975 .0735
------- ------- ------- ------- -------
Net Asset Value, End of the
Period...................... $10.038 $ 9.911 $10.379 $ 10.10 $ 9.17
======= ======= ======= ======= =======
Total Return* (a)............. 14.96% 8.10% 11.51% 12.31% (2.09%)**
Net Assets at End of the
Period
(In millions)............... $ 9.6 $ 10.0 $ 9.9 $ 8.1 $ 7.4
Ratio of Expenses to Average
Net Assets*................. 4.89% 4.42% 3.76% 3.73% 3.92%
Ratio of Net Investment
Income/Loss to Average Net
Assets*..................... (1.42%) (1.45%) (1.01%) (.09%) .13%
Portfolio Turnover............ 222% 231% 91% 135% 50%**
*If certain expenses had not been assumed by Van Kampen, total return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net Assets.................. N/A N/A 4.06% 4.61% 3.93%
Ratio of Net Investment
Income/Loss to Average Net
Assets...................... N/A N/A (1.30%) (.97%) .12%
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Based on average shares outstanding.
N/A -- Not Applicable.
See Notes to Financial Statements
39
<PAGE> 41
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 16, 1994
(Commencement
Year Ended December 31, of Investment
------------------------------------- Operations) to
Class C Shares 1998(b) 1997 1996(b) 1995 December 31, 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................. $ 9.927 $10.395 $ 10.12 $ 9.20 $ 9.44
------- ------- ------- ------- -------
Net Investment Income/Loss.... (.147) (.139) (.104) (.02) .05
Net Realized and Unrealized
Gain/Loss................... 1.605 .965 1.241 1.1375 (.2165)
------- ------- ------- ------- -------
Total from Investment
Operations.................. 1.458 .826 1.137 1.1175 (.1665)
------- ------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Investment
Income.................... -0- -0- -0- .0175 .046
Distributions from and in
Excess of Net Realized
Gain...................... 1.328 1.294 .862 .18 .0275
------- ------- ------- ------- -------
Total Distributions........... 1.328 1.294 .862 .1975 .0735
------- ------- ------- ------- -------
Net Asset Value, End of the
Period...................... $10.057 $ 9.927 $10.395 $ 10.12 $ 9.20
======= ======= ======= ======= =======
Total Return* (a)............. 14.93% 8.09% 11.49% 12.16% (1.77%)**
Net Assets at End of the
Period (In millions)........ $ 1.4 $ 1.7 $ 1.7 $ 1.9 $ 1.3
Ratio of Expenses to Average
Net Assets*................. 4.91% 4.46% 3.78% 3.79% 3.36%
Ratio of Net Investment
Income/Loss to Average Net
Assets*..................... (1.38%) (1.50%) (.99%) (.18%) .80%
Portfolio Turnover............ 222% 231% 91% 135% 50%**
* If certain expenses had not been assumed by Van Kampen, total return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net Assets.................. N/A N/A 4.07% 4.67% 3.38%
Ratio of Net Investment
Income/Loss to Average Net
Assets...................... N/A 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) Based on average shares outstanding.
N/A -- Not Applicable.
See Notes to Financial Statements
40
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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. The
Fund's security valuation methodology, for unlisted securities and listed
securities for which the last sale price is not available, was changed in 1998
from bid side pricing to the mean of the bid and asked prices. The impact of
this change, which was not material, is included as a component of the change in
unrealized appreciation/depreciation for the year ended December 31, 1998. Fixed
income securities are stated at value using market quotations or indications of
value obtained from an independent pricing service. 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 Asset Management Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase
41
<PAGE> 43
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
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.
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. 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. Expenses of the Fund are allocated on a pro rata basis to each class
of shares, except for distribution and service fees and transfer agency costs
which are unique to each class of shares.
D. FOREIGN CURRENCY TRANSLATION--Assets and liabilities denominated in foreign
currencies and commitments under forward 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. Realized and unrealized gains and losses on
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 Funds Inc. or its
affiliates (collectively "Van Kampen") 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 Van Kampen 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
42
<PAGE> 44
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
substantially all of its taxable income to its shareholders. Therefore, no
provision for federal income taxes is required.
At December 31, 1998, for federal income tax purposes cost of long- and
short-term investments, including foreign currencies, is $18,173,307, the
aggregate gross unrealized appreciation is $2,714,081 and the aggregate gross
unrealized depreciation is $706,342, resulting in net unrealized appreciation on
long- and short-term investments, including foreign currencies of $2,007,739.
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of the timing of gain/loss recognition on wash
sales, straddle losses and unsettled forward contracts and the mark to market of
passive foreign investment companies and open forward currency contracts at
December 31, 1998.
G. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
annually from net investment income and from net realized gains on securities,
if any. Net investment income for federal income tax purposes includes gains and
losses realized on 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 $513,090 related to net realized foreign currency gains
have been reclassified from accumulated net realized gain to accumulated net
investment loss.
For federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
December 31, 1998. The Fund designated and paid $1,481,637 as a 20% rate gain
distribution. Shareholders were sent a 1998 Form 1099-DIV in January 1999
representing their proportionate share of the capital gain distribution to be
reported on their income tax returns.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly. The Adviser has entered into a subadvisory agreement with Morgan
Stanley Dean Witter Investment Management Inc. (the "Subadviser"), who provides
advisory services to the Fund and the Adviser with respect to the Fund's
investment in foreign securities.
43
<PAGE> 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
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 year ended December 31, 1998, the Fund recognized expenses of
approximately $1,800 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the year ended December 31, 1998, the Fund recognized expenses of
approximately $39,700 representing Van Kampen's cost of providing accounting
services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the year ended December 31,
1998, the Fund recognized expenses of approximately $107,400. Beginning in 1998,
the transfer agency fees are determined through negotiations with the Fund's
Board of Trustees and are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
During the period, the Fund owned shares of the following Morgan Stanley
Funds which are managed by the Subadviser:
<TABLE>
<CAPTION>
TRANSACTIONS
DURING THE PERIOD
---------------------
% OF NET ASSETS COST OF PROCEEDS
AT DECEMBER 31, 1998 PURCHASES OF SALES
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Latin American Discovery Fund... .41% -0- -0-
Morgan Stanley Asia Pacific
Fund.......................... .22% -0- -0-
</TABLE>
At December 31, 1998, Van Kampen owned 10,604, 53 and 53 shares of Classes
A, B and C of the Fund, respectively.
44
<PAGE> 46
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
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 December 31, 1998, capital aggregated $6,809,856, $8,959,090 and
$1,273,050 for Classes A, B and C, respectively. For the year ended December 31,
1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 425,556 $ 4,563,674
Class B.................................... 85,315 901,857
Class C.................................... 73,498 767,565
---------- ------------
Total Sales.................................. 584,369 $ 6,233,096
========== ============
Dividend Reinvestment:
Class A.................................... 108,757 $ 1,109,902
Class B.................................... 105,262 1,037,178
Class C.................................... 13,537 133,908
---------- ------------
Total Dividend Reinvestment.................. 227,556 $ 2,280,988
========== ============
Repurchases:
Class A.................................... (819,174) $ (8,755,915)
Class B.................................... (244,540) (2,594,678)
Class C.................................... (116,317) (1,228,577)
---------- ------------
Total Repurchases............................ (1,180,031) $(12,579,170)
========== ============
</TABLE>
45
<PAGE> 47
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
At December 31, 1997, capital aggregated $9,892,195, $9,614,733 and
$1,600,154 for Classes A, B and C, respectively. For the year ended December 31,
1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A......................................... 326,563 $ 3,557,326
Class B......................................... 182,617 1,967,735
Class C......................................... 54,786 591,211
-------- -----------
Total Sales....................................... 563,966 $ 6,116,272
======== ===========
Dividend Reinvestment:
Class A......................................... 122,002 $ 1,233,093
Class B......................................... 110,121 1,086,423
Class C......................................... 16,955 167,544
-------- -----------
Total Dividend Reinvestment....................... 249,078 $ 2,487,060
======== ===========
Repurchases:
Class A......................................... (151,742) $(1,673,088)
Class B......................................... (233,838) (2,537,474)
Class C......................................... (60,449) (655,686)
-------- -----------
Total Repurchases................................. (446,029) $(4,866,248)
======== ===========
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. 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.
<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>
46
<PAGE> 48
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
For the year ended December 31, 1998, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $4,200 and CDSC on the redeemed shares of approximately $33,900.
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 $35,690,982 and
$39,588,566, 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, except when exercising a call option
contract or taking delivery of a security underlying a futures or forward
contract. In these instances, the recognition of gain or loss is postponed until
the disposal of the security underlying the contract. Forward commitments are
privately negotiated transactions between the Fund and dealers. Purchasing
securities on a forward basis involves a risk that the market value at the time
of delivery may be lower than the agreed upon purchase price resulting in an
unrealized loss. Selling securities on a forward basis involves different risks
and can result in losses more significant than those arising from the purchase
of such securities. Risks may arise as a result of the potential inability of
the counterparties to meet the terms of their commitments. While forward
commitments are outstanding, the Fund maintains sufficient collateral of cash or
securities in a segregated account with its custodian.
Summarized on the following pages are the specific types of derivative
financial instruments used by the Fund.
A. FORWARD PURCHASE COMMITMENTS--The Fund trades certain securities under the
terms of forward commitments, whereby the settlement occurs at a specific future
date. The commitments are marked to market on a daily basis with changes in
value reflected as a component of unrealized appreciation or depreciation on
forward commitments.
47
<PAGE> 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
The following forward purchase commitments were outstanding as of December 31,
1998:
<TABLE>
<CAPTION>
PAR AMOUNT
IN LOCAL UNREALIZED
CURRENCY APPRECIATION/
(000) DESCRIPTION COUPON MATURITY DEPRECIATION
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CANADA (GOVERNMENT OF)
150-CA$ Settlement 01/14/99.......... 8.750% 12/01/05 $ 2,313
200-CA$ Settlement 03/25/99.......... 5.250 09/01/03 (374)
DENMARK (KINGDOM OF)
700-DKK Settlement 02/26/99.......... 8.000 05/15/03 827
FRANCE (REPUBLIC OF)
250-ECU Settlement 01/14/99.......... 5.250 04/25/08 7,179
350-ECU Settlement 02/12/99.......... 4.500 07/12/03 4,151
FRANCE (GOVERNMENT OF)
200-ECU Settlement 02/19/99.......... 8.250 04/25/22 19,646
JAPAN
25,000-JPY Settlement 02/26/99.......... 3.400 03/22/04 (10,602)
SPAIN (GOVERNMENT OF)
300-ECU Settlement 02/19/99.......... 5.150 07/30/09 18,301
SWEDEN (KINGDOM OF)
700-SEK Settlement 02/26/99.......... 6.000 02/09/05 1,380
UNITED KINGDOM
330-GBP Settlement 02/19/99.......... 7.750 09/08/06 23,061
450-ECU Settlement 02/12/99.......... 4.250 01/29/01 1,748
-------
Total Forward Purchase Commitments
(Cost $3,331,365).................................... $67,630
=======
</TABLE>
B. CLOSED BUT UNSETTLED FORWARD COMMITMENTS--In certain situations, the Fund has
entered into closing transactions for outstanding forward commitments prior to
settlement of the obligation. In doing so, the Fund realizes a gain or loss on
the transaction at the time the forward commitment is closed. However,
settlement of both the purchase and sale is still scheduled to occur in the
denominated foreign currency at a future date. The net foreign currency
difference on the trade is marked to market daily and included as a component of
unrealized appreciation/depreciation on foreign currency translation.
48
<PAGE> 50
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
The following closed but unsettled forward transactions were still
outstanding as of December 31, 1998.
<TABLE>
<CAPTION>
LOCAL CURRENCY US$ NET
-------------------- UNREALIZED RECEIVABLE
DESCRIPTION/CURRENCY RECEIVABLE PAYABLE GAIN/LOSS (PAYABLE)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUSTRALIA (COMMONWEALTH) -- Australian Dollar
(70,000 par, 7.500%, 07/15/05,
settlement 01/21/99)......... 80,364 81,107 $ 15 $ (455)
FRANCE (REPUBLIC OF) -- ECU
(50,000 par, 4.500%, 07/12/03,
settlement 02/12/99)......... 53,376 52,990 (2) 452
FRANCE (GOVERNMENT OF) -- ECU
(450,000 par, 7.500%, 04/25/05,
settlement 01/28/99)......... 563,305 568,026 (46) (5,540)
(600,000 par, 8.250%, 04/25/22,
settlement 02/19/99)......... 883,746 887,703 18 (4,642)
UNITED KINGDOM -- British Pound
(100,000 par, 4.250%, 01/29/01,
settlement 02/12/99)......... 101,733 101,963 1 (270)
---- --------
$(14) $(10,455)
==== ========
</TABLE>
C. 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.
49
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
The following forward currency contracts were outstanding as of December 31,
1998:
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
DESCRIPTION VALUE DEPRECIATION
- -------------------------------------------------------------------------
<S> <C> <C>
LONG CONTRACTS
Australian Dollar,
130,000 expiring 01/12/99................. $ 79,672 $ 2,813
British Pound Sterling,
145,000 expiring 01/08/99................. 240,840 (2,079)
90,000 expiring 01/14/99.................. 149,457 (550)
Canadian Dollar,
150,000 expiring 01/08/99................. 98,137 392
105,000 expiring 01/13/99................. 68,697 828
Danish Krone,
1,535,000 expiring 01/11/99............... 241,260 8,966
350,000 expiring 01/11/99................. 55,011 19
Deutsche Mark,
182,780 expiring 01/15/99................. 109,751 99
182,624 expiring 01/15/99................. 109,658 1,513
1,295,000 expiring 01/19/99............... 777,742 8,100
1,225,000 expiring 01/19/99............... 735,702 8,928
European Currency Unit,
180,000 expiring 01/19/99................. 211,395 1,609
190,000 expiring 01/19/99................. 223,139 426
375,000 expiring 01/19/99................. 440,407 (3,091)
Japanese Yen,
10,771,500 expiring 01/11/99.............. 95,420 2,562
28,000,000 expiring 01/21/99.............. 248,370 15,009
39,000,000 expiring 01/21/99.............. 345,944 19,207
1,094,000 expiring 01/29/99............... 9,715 165
24,848,590 expiring 02/04/99.............. 220,826 3,817
1,199,272 expiring 02/08/99............... 10,663 184
15,902,128 expiring 02/08/99.............. 141,394 3,575
5,134,415 expiring 02/26/99............... 45,761 2,788
25,604,850 expiring 03/10/99.............. 228,584 5,804
7,607,160 expiring 03/10/99............... 67,912 1,912
Singapore Dollar,
47,386 expiring 03/03/99.................. 28,864 (84)
65,000 expiring 03/08/99.................. 39,606 (120)
</TABLE>
50
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
DESCRIPTION VALUE DEPRECIATION
- -------------------------------------------------------------------------
<S> <C> <C>
Swedish Krona,
850,000 expiring 01/15/99................. $ 104,686 $ 244
Swiss Franc,
50,000 expiring 01/15/99.................. 36,457 509
---------- --------
5,165,070 83,545
---------- --------
SHORT CONTRACTS
Australian Dollar,
40,000 expiring 01/12/99.................. 24,514 (882)
British Pound Sterling,
30,000 expiring 01/08/99.................. 49,829 249
Danish Krone,
1,100,000 expiring 01/11/99............... 172,890 (1,577)
Deutsche Mark,
60,776 expiring 01/15/99.................. 36,493 (545)
French Franc,
262,000 expiring 02/04/99................. 46,941 (992)
Japanese Yen,
7,221,000 expiring 01/11/99............... 63,968 (3,968)
3,550,500 expiring 01/11/99............... 31,452 (1,452)
4,000,000 expiring 01/21/99............... 35,481 (2,039)
1,094,000 expiring 01/29/99............... 9,715 (362)
9,126,000 expiring 02/04/99............... 81,101 (455)
15,722,590 expiring 02/04/99.............. 139,724 (9,724)
8,518,140 expiring 02/08/99............... 75,739 (1,739)
8,583,260 expiring 02/08/99............... 76,318 (2,318)
40,000,000 expiring 02/22/99.............. 356,319 (15,314)
5,134,415 expiring 02/26/99............... 45,761 (1,162)
26,694,000 expiring 03/10/99.............. 238,307 (12,073)
New Zealand Dollar,
110,000 expiring 03/02/99................. 57,927 439
115,000 expiring 03/02/99................. 60,560 (254)
Singapore Dollar,
47,386 expiring 03/03/99.................. 28,864 136
65,000 expiring 03/08/99.................. 39,606 271
</TABLE>
51
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
DESCRIPTION VALUE DEPRECIATION
- -------------------------------------------------------------------------
<S> <C> <C>
Swiss Franc,
150,000 expiring 01/15/99................. $ 109,370 $ 282
150,000 expiring 01/15/99................. 109,370 (1,225)
---------- --------
$1,890,249 (54,704)
---------- --------
$ 28,841
========
</TABLE>
D. 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 periodically received from or made to the
broker based upon changes in the value of the contract (the variation margin).
The risk of loss associated with a futures contract is in excess of the
variation margin reflected on the Statement of Assets and Liabilities.
Transactions in futures contracts for the year ended December 31, 1998, were
as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1997............................ 19
Futures Opened.............................................. 116
Futures Closed.............................................. (133)
Futures Split (Matif CAC 40 4-for-1)........................ 3
----
Outstanding at December 31, 1998............................ 5
====
</TABLE>
52
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
- --------------------------------------------------------------------------------
The futures contracts outstanding as of December 31, 1998, and the
descriptions and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
- -------------------------------------------------------------------------
<S> <C> <C>
OSA NIKKEI 225
March 1999--Long Contracts
(Current Notional Value of 13,700,000 JPY
per contract)........................... 2 $ (20,548)
TSE TOPIX
March 1999--Short Contracts
(Current Notional Value of 10,760,000 JPY
per contract)........................... 2 8,446
Matif CAC 40
March 1999--Short Contracts
(Current Notional Value of 197,175 FFR per
contract)............................... 1 (1,905)
- -----------
5 $ (14,007)
= ===========
</TABLE>
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% for Class A and 1.00% each for
Class B and Class C shares are accrued daily. Included in these fees for the
year ended December 31, 1998, are payments retained by Van Kampen of
approximately $47,800.
53
<PAGE> 55
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Van Kampen Global Managed Assets Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen Global Managed Assets
Fund (the "Fund") at December 31, 1998, and the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
February 11, 1999
54
<PAGE> 56
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at
WWW.VANKAMPEN.COM--to view a
prospectus, select Download Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Deaf users, call 1-800-421-2833.
- - e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
55
<PAGE> 57
GLOBAL MANAGED ASSETS FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
PAUL G. YOVOVICH
OFFICERS
DENNIS J. MCDONNELL*
President
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief
Financial Officer
CURTIS W. MORRELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT, INC.
1585 Broadway
New York, New York 10036
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN 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
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1999 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds 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 June 30, 1999, the report, if used with prospective
investors, must be accompanied by a quarterly performance update, if applicable.
TAX NOTICE TO CORPORATE SHAREHOLDERS For 1998, 15.26% of the dividends taxable
as ordinary income qualified for the 70% dividends received deduction for
corporations.
56
<PAGE> 58
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest which, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> GLOBAL MANAGED CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 18,047,421<F1>
<INVESTMENTS-AT-VALUE> 20,181,046<F1>
<RECEIVABLES> 1,638,008<F1>
<ASSETS-OTHER> 1,040<F1>
<OTHER-ITEMS-ASSETS> 158,696<F1>
<TOTAL-ASSETS> 21,978,790<F1>
<PAYABLE-FOR-SECURITIES> 29,830<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,388,521<F1>
<TOTAL-LIABILITIES> 2,418,351<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,809,856
<SHARES-COMMON-STOCK> 820,473
<SHARES-COMMON-PRIOR> 1,105,334
<ACCUMULATED-NII-CURRENT> (23,161)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 324,917<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 2,216,687<F1>
<NET-ASSETS> 8,483,190
<DIVIDEND-INCOME> 332,951<F1>
<INTEREST-INCOME> 457,179<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,020,682)<F1>
<NET-INVESTMENT-INCOME> (230,552)<F1>
<REALIZED-GAINS-CURRENT> 3,218,575<F1>
<APPREC-INCREASE-CURRENT> 108,563<F1>
<NET-CHANGE-FROM-OPS> 3,096,586<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (76,480)
<DISTRIBUTIONS-OF-GAINS> (1,080,329)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 425,556
<NUMBER-OF-SHARES-REDEEMED> (819,174)
<SHARES-REINVESTED> 108,757
<NET-CHANGE-IN-ASSETS> (2,749,148)
<ACCUMULATED-NII-PRIOR> (229,219)<F1>
<ACCUMULATED-GAINS-PRIOR> 7,907<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 226,999<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,020,682<F1>
<AVERAGE-NET-ASSETS> 11,049,722
<PER-SHARE-NAV-BEGIN> 10.162
<PER-SHARE-NII> (0.066)
<PER-SHARE-GAIN-APPREC> 1.643
<PER-SHARE-DIVIDEND> (0.072)
<PER-SHARE-DISTRIBUTIONS> (1.328)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.339
<EXPENSE-RATIO> 4.11
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>THIS ITEM RELATES TO THE FUND ON A COMPOSITE BASIS AND NOT ON A CLASS BASIS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> GLOBAL MANAGED CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 18,047,421<F1>
<INVESTMENTS-AT-VALUE> 20,181,046<F1>
<RECEIVABLES> 1,638,008<F1>
<ASSETS-OTHER> 1,040<F1>
<OTHER-ITEMS-ASSETS> 158,696<F1>
<TOTAL-ASSETS> 21,978,790<F1>
<PAYABLE-FOR-SECURITIES> 29,830<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,388,521<F1>
<TOTAL-LIABILITIES> 2,418,351<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,959,090
<SHARES-COMMON-STOCK> 959,264
<SHARES-COMMON-PRIOR> 1,013,227
<ACCUMULATED-NII-CURRENT> (23,161)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 324,917<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 2,216,687<F1>
<NET-ASSETS> 9,629,470
<DIVIDEND-INCOME> 332,951<F1>
<INTEREST-INCOME> 457,179<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,020,682)<F1>
<NET-INVESTMENT-INCOME> (230,552)<F1>
<REALIZED-GAINS-CURRENT> 3,218,575<F1>
<APPREC-INCREASE-CURRENT> 108,563<F1>
<NET-CHANGE-FROM-OPS> 3,096,586<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,144,103)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 85,315
<NUMBER-OF-SHARES-REDEEMED> (244,540)
<SHARES-REINVESTED> 105,262
<NET-CHANGE-IN-ASSETS> (412,245)
<ACCUMULATED-NII-PRIOR> (229,219)<F1>
<ACCUMULATED-GAINS-PRIOR> 7,907<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 226,999<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,020,682<F1>
<AVERAGE-NET-ASSETS> 9,921,270
<PER-SHARE-NAV-BEGIN> 9.911
<PER-SHARE-NII> (0.151)
<PER-SHARE-GAIN-APPREC> 1.606
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (1.328)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.038
<EXPENSE-RATIO> 4.89
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>THIS ITEM RELATES TO THE FUND ON A COMPOSITE BASIS AND NOT ON A CLASS BASIS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> GLOBAL MANAGED CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 18,047,421<F1>
<INVESTMENTS-AT-VALUE> 20,181,046<F1>
<RECEIVABLES> 1,638,008<F1>
<ASSETS-OTHER> 1,040<F1>
<OTHER-ITEMS-ASSETS> 158,696<F1>
<TOTAL-ASSETS> 21,978,790<F1>
<PAYABLE-FOR-SECURITIES> 29,830<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,388,521<F1>
<TOTAL-LIABILITIES> 2,418,351<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,273,050
<SHARES-COMMON-STOCK> 143,961
<SHARES-COMMON-PRIOR> 173,243
<ACCUMULATED-NII-CURRENT> (23,161)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 324,917<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 2,216,687<F1>
<NET-ASSETS> 1,447,779
<DIVIDEND-INCOME> 332,951<F1>
<INTEREST-INCOME> 457,179<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,020,682)<F1>
<NET-INVESTMENT-INCOME> (230,552)<F1>
<REALIZED-GAINS-CURRENT> 3,218,575<F1>
<APPREC-INCREASE-CURRENT> 108,563<F1>
<NET-CHANGE-FROM-OPS> 3,096,586<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (164,043)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 73,498
<NUMBER-OF-SHARES-REDEEMED> (116,317)
<SHARES-REINVESTED> 13,537
<NET-CHANGE-IN-ASSETS> (272,062)
<ACCUMULATED-NII-PRIOR> (229,219)<F1>
<ACCUMULATED-GAINS-PRIOR> 7,907<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 226,999<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,020,682<F1>
<AVERAGE-NET-ASSETS> 1,649,192
<PER-SHARE-NAV-BEGIN> 9.927
<PER-SHARE-NII> (0.147)
<PER-SHARE-GAIN-APPREC> 1.605
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (1.328)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.057
<EXPENSE-RATIO> 4.91
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>THIS ITEM RELATES TO THE FUND ON A COMPOSITE BASIS AND NOT ON A CLASS BASIS
</FN>
</TABLE>
