<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Portfolio of Investments.................... 3
Statement of Assets and Liabilities......... 4
Statement of Operations..................... 5
Statement of Changes in Net Assets.......... 6
Financial Highlights........................ 7
Notes to Financial Statements............... 10
Report of Independent Accountants........... 14
</TABLE>
RES ANR 7/96
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
DENNIS J. MCDONNELL AND DON G. POWELL
July 2, 1996
Dear Shareholder,
During the twelve-month period covered by this report, June 1, 1995 through
May 31, 1996, we saw the end of a solid year for the financial markets--and
the beginning of a new year that promises to offer investment challenges and
opportunities.
During the reporting period, the Van Kampen
American Capital Reserve Fund continued to achieve
its primary objectives of seeking protection of capital and providing a high
level of current income.
ECONOMIC OVERVIEW
While interest rates drifted downward during much of 1995, this has not been
the case in 1996. During the final half of 1995, the yields on three-month
Treasury bills fell from
5.8 percent to 5.0 percent, but during the first five months of this year they
entered a trading range of 4.9 percent to 5.2 percent. This reflected Febru-
ary's economic announcements, which revealed a revival in economic growth, im-
pressive employment levels and concerns that further easing of short-term
interest rates by the Federal Reserve Board would not be forthcoming. However,
there was little evidence of rising inflation, which often accompanies in-
creased economic growth, during the period.
In fact, recent Consumer Price Index reports indicated the closely watched
"core" rate (which excludes volatile food and energy components) increased at
a 2.7 percent rate in the twelve-month period ending May 1996. More important-
ly, we continue to see little sign of emerging inflation in either unit labor
costs, hourly earnings or the employment cost index, all of which have been
important drivers of inflation.
PERFORMANCE SUMMARY
On May 31, 1996, the Fund's Class A shares generated a seven-day average
yield of
4.18 percent with an effective annual yield of 4.27 percent, and a one-year
total return, at net asset value, of 4.75 percent/1/. In comparison, the aver-
age total return performance for money market funds, as calculated by Lipper
Analytical Services, Inc., was 5.09 percent for the same one-year period. The
Fund's yield is approximately equal to the average for six-month bank savings
certificates, and the Fund offers daily liquidity at $1 per share.
The average portfolio maturity at the end of the reporting period was 34
days. Since the most recent report to shareholders six months ago, the Fund's
average maturity has ranged from 15 to 56 days. Also, your managers have low-
ered the Fund's U.S. government obligations as a percentage of the portfolio.
Six months ago, more than one-half of the portfolio consisted of U.S. govern-
ment obligations. At the end of this reporting period, they represented
slightly less than one-half, while holdings in high-quality commercial paper
increased. The Fund's portfolio composition for the period is illustrated in
the chart on the following page.
Fund shares are not guaranteed or insured by the U.S. government, and there is
no assurance that the Fund will be able to maintain a stable net asset value
of $1.00. CDs offer a guaranteed return of principal, a fixed rate of interest
and are typically issued by institutions whose deposits are insured.
/1/Total return assumes reinvestment of all distributions for the period ended
May 31, 1996.
Continued on page two
1
<PAGE>
[Pie Chart of Portfolio Composition by Investment Type as of November 30, 1995
appears here]
U.S. Government Obligations 54%
Commercial Paper 19%
Repurchase Agreements 27%
[Pie Chart of Portfolio Composition by Investment Type as of May 31, 1996
appears here]
U.S. Government Obligations 48%
Commercial Paper 37%
Repurchase Agreements 15%
ECONOMIC OUTLOOK
The economy rebounded in the first quarter of 1996, despite poor weather in
the East and the remnants of a slow fourth quarter in 1995, which was hurt by
weak construction activity, two government shutdowns, and a strike at Boeing.
Upward momentum continued into the second quarter, due in part to renewed auto
production in the aftermath of the strike at several General Motors plants and
an end to the budget stalemate between the White House and Congress. This mo-
mentum was particularly evident in robust reports for retail sales. We expect a
modest slowdown in the summer months, as higher interest rates could slow ac-
tivity in interest-sensitive sectors of the economy, such as housing.
The Fed's protracted period of easing, and relatively neutral stance on in-
terest rates, favors a continuation of the existing trading range for short-
term interest rates, at least over the near-term. Given the strong employment
situation, we believe the Fed will await further economic evidence before act-
ing--probably mid- to late-summer at the earliest. Guides such as the Consumer
Price Index and unit labor costs continue to demonstrate modest levels of in-
flation.
Throughout this report, you can read more about your Fund's performance over
the past year. We hope this information is helpful as you review your invest-
ment in the Reserve Fund. We look forward to communicating with you on a regu-
lar basis about your Fund's performance, and we appreciate your continued
confidence in your portfolio management team.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS
May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES GOVERNMENT
OBLIGATIONS 43.9%
$ 6,000 Federal Farm Credit Banks............. 5.209% 07/03/96 $ 5,972,060
8,000 Federal Home Loan Banks............... 5.119 07/10/96 7,955,556
5,000 Federal Home Loan Banks............... 5.126 07/24/96 4,962,500
7,000 Federal Home Loan Banks............... 5.203 07/08/96 6,962,538
7,000 Federal Home Loan Banks............... 5.212 07/01/96 6,969,379
20,000 Federal Home Loan Banks............... 5.244 06/03/96 19,991,300
14,385 Federal Home Loan Banks............... 5.273 09/19/96 14,156,135
15,000 Federal Home Loan Banks............... 5.278 09/12/96 14,775,967
2,000 Federal Home Loan Mortgage Corp....... 5.206 06/06/96 1,998,267
14,500 Federal Home Loan Mortgage Corp....... 5.215 06/24/96 14,450,023
5,000 Federal Home Loan Mortgage Corp....... 5.391 06/03/96 4,997,812
5,000 Federal National Mortgage Association. 4.873 08/09/96 4,953,722
40,000 Federal National Mortgage Association. 5.249 07/03/96 39,809,333
20,000 Federal National Mortgage Association. 5.258 07/24/96 19,844,300
18,000 Federal National Mortgage Association. 5.286 10/22/96 17,629,200
7,000 Federal National Mortgage Association. 5.384 06/13/96 6,986,754
22,710 Federal National Mortgage Association. 5.394 11/05/96 22,188,134
14,000 Federal National Mortgage Association. 5.417 06/14/96 13,971,308
5,000 Federal National Mortgage Association. 5.436 08/16/96 4,943,961
------------
TOTAL UNITED STATES GOVERNMENT OBLIGATIONS
(Cost $233,518,249).................................. 233,518,249
------------
COMMERCIAL PAPER 33.6%
23,000 Associates Corp. of North America..... 5.337 07/15/96 22,847,913
10,000 Chevron Oil Finance Co................ 5.128 07/16/96 9,936,111
20,000 Chevron Oil Finance Co................ 5.296 06/11/96 19,967,794
25,000 General Electric Capital Corp......... 5.331 07/22/96 24,810,056
15,000 General Electric Co................... 5.314 06/28/96 14,939,567
6,500 Lilly (Eli) & Co...................... 5.309 06/12/96 6,488,582
28,000 MetLife Funding Inc................... 5.317 06/18/96 27,926,080
25,000 Pitney Bowes Credit Corp.............. 5.314 07/29/96 24,784,486
27,000 Toronto Dominion Holdings............. 5.326 07/15/96 26,821,462
------------
TOTAL COMMERCIAL PAPER (Cost $178,522,051)........... 178,522,051
------------
REPURCHASE AGREEMENTS* 13.3%
60,000 BA Securities, repurchase proceeds
$60,026,750 ......................... 5.350 06/03/96 60,000,000
10,425 SBC Capital Markets, Inc., repurchase
proceeds $10,429,630 ................ 5.330 06/03/96 10,425,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $70,425,000)................................... 70,425,000
------------
TOTAL INVESTMENTS (Cost $482,465,300) 90.8%.................... 482,465,300
OTHER ASSETS AND LIABILITIES, NET 9.2%......................... 49,023,953
------------
NET ASSETS 100%................................................ $531,489,253
------------
</TABLE>
*dated 05/31/96, collateralized by U.S. Government obligations in a pool cash
account
3
<PAGE>
See Notes to Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at amortized cost................................... $482,465,300
Cash............................................................. 48,466
Receivable for Fund shares sold.................................. 52,938,143
Other assets and receivables..................................... 44,588
------------
Total Assets.................................................... 535,496,497
------------
LIABILITIES
Payable for Fund shares redeemed................................. 3,160,942
Due to Adviser................................................... 223,306
Dividends payable................................................ 175,732
Due to shareholder service agent................................. 157,356
Due to Distributor............................................... 104,404
Deferred Trustees' compensation.................................. 68,650
Accrued expenses and other payables.............................. 116,854
------------
Total Liabilities............................................... 4,007,244
------------
NET ASSETS, equivalent to $1.00 per share for Class A, B, and C
shares........................................................... $531,489,253
------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest at par; 440,344,423 Class A,
81,469,679 Class B and 9,710,786 Class C shares outstanding..... $ 5,315,249
Capital surplus.................................................. 526,216,025
Accumulated net realized loss on securities...................... (53,843)
Undistributed net investment income.............................. 11,822
------------
NET ASSETS....................................................... $531,489,253
------------
</TABLE>
4
<PAGE>
STATEMENT OF OPERATIONS
Year Ended May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.......................................................... $23,817,971
-----------
EXPENSES
Management fees................................................... 1,842,244
Shareholder service agent's fees and expenses..................... 1,583,113
Accounting services............................................... 127,090
Service fees--Class A............................................. 495,324
Distribution and service fees--Class B............................ 298,817
Distribution and service fees--Class C............................ 44,485
Trustees' fees and expenses....................................... 30,934
Audit fees........................................................ 36,703
Legal fees........................................................ 10,098
Reports to shareholders........................................... 70,813
Registration and filing fees...................................... 242,777
Insurance......................................................... 4,529
Miscellaneous..................................................... 4,360
Retirement plan expense reimbursement (see Note 3)................ (6,000)
-----------
Total expenses................................................... 4,785,287
-----------
NET INVESTMENT INCOME............................................. 19,032,684
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $19,032,684
-----------
</TABLE>
5
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended May 31
--------------------------------
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period.............. $ 324,458,539 $ 463,827,313
--------------- ---------------
OPERATIONS
Increase from net investment income......... 19,032,684 18,614,115
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME
Class A..................................... (17,616,820) (18,623,009)
Class B..................................... (1,250,566) (15,317)
Class C..................................... (188,995) (2,167)
--------------- ---------------
(19,056,381) (18,640,493)
--------------- ---------------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A..................................... 5,916,701,540 3,148,142,161
Class B..................................... 402,157,689 21,754,203
Class C..................................... 99,265,824 3,049,049
--------------- ---------------
6,418,125,053 3,172,945,413
--------------- ---------------
Value received for shares issued in business
combination (see Note 6)
Class A..................................... 20,714,880 --
Class B..................................... 5,651,573 --
Class C..................................... -- --
--------------- ---------------
26,366,453 --
--------------- ---------------
Proceeds from shares issued for
distributions reinvested
Class A..................................... 17,616,820 18,623,009
Class B..................................... 1,250,566 15,317
Class C..................................... 188,995 2,167
--------------- ---------------
19,056,381 18,640,493
--------------- ---------------
Cost of shares redeemed
Class A..................................... (5,834,380,999) (3,310,885,859)
Class B..................................... (331,779,955) (17,579,714)
Class C..................................... (90,332,522) (2,462,729)
--------------- ---------------
(6,256,493,476) (3,330,928,302)
--------------- ---------------
Increase (decrease) in net assets resulting
from capital transactions................... 207,054,411 (139,342,396)
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS............ 207,030,714 (139,368,774)
--------------- ---------------
NET ASSETS, end of period (including
undistributed net investment income of
$11,822 and $51,874, respectively).......... $ 531,489,253 $ 324,458,539
--------------- ---------------
</TABLE>
6
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------------
Year Ended May 31
--------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income from operations
Investment income..................... .0572 .0535 .0329 .0353 .052
Expenses.............................. (.0107) (.0101) (.0100) (.0109) (.0105)
------ ------ ------ ------ ------
Net investment income.................. .0465 .0434 .0229 .0244 .0415
------ ------ ------ ------ ------
Distributions from net investment
income................................. (.0465) (.0434) (.0229) (.0244) (.0415)
------ ------ ------ ------ ------
Net asset value, end of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
TOTAL RETURN........................... 4.75% 4.43% 2.32% 2.44% 4.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)... $440.3 $319.7 $463.8 $279.3 $329.2
Average net assets (millions).......... $381.0 $434.4 $326.8 $306.7 $377.5
Ratios to average net assets(/1/)
Expenses.............................. 1.07% 1.00% 1.03% 1.09% 1.05%
Expense, without expense
reimbursement......................... 1.07% -- -- -- --
Net investment income................. 4.62% 4.28% 2.36% 2.44% 4.19%
Net investment income, without expense
reimbursement......................... 4.62% -- -- -- --
</TABLE>
(1) See Note 3.
7
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
--------------------------------
Year April 18, 1995(/1/)
Ended through
May 31, 1996 May 31, 1995(/2/)
- --------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.......... $ 1.00 $ 1.00
------ ------
Income from investment operations
Investment income............................ .0580 .0073
Expenses..................................... (.0192) (.0026)
------ ------
Net investment income......................... .0388 .0047
------ ------
Distributions from net investment income...... (.0388) (.0047)
------ ------
Net asset value, end of period................ $ 1.00 $ 1.00
------ ------
TOTAL RETURN(/3/)............................. 3.95% .47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions).......... $81.5 $4.2
Average net assets (millions)................. $33.2 $2.3
Ratios to average net assets (annualized)(/4/)
Expenses..................................... 1.86% 1.76%
Expense, without expense reimbursement....... 1.86% --
Net investment income........................ 3.75% 3.52%
Net investment income, without expense
reimbursement................................ 3.75% --
</TABLE>
(1) Commencement of operations.
(2) Based on average shares outstanding.
(3) Total return for a period of less than one full year is not annualized.
Total return does not consider the effect of sales charges.
(4) See Note 3.
8
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
--------------------------------
Year April 18, 1995(/1/)
Ended through
May 31, 1996 May 31, 1995(/2/)
- --------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.......... $ 1.00 $ 1.00
------ ------
Income from investment operations
Investment income............................ .0577 .0076
Expenses..................................... (.0190) (.0027)
------ ------
Net investment income......................... .0387 .0049
------ ------
Distributions from net investment income...... (.0387) (.0049)
------ ------
Net asset value, end of period................ $ 1.00 $ 1.00
------ ------
TOTAL RETURN(/3/)............................. 3.94% .49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions).......... $9.7 $0.6
Average net assets (millions)................. $5.0 $0.3
Ratios to average net assets (annualized)(/4/)
Expenses..................................... 1.87% 1.76%
Expense, without expense reimbursement....... 1.87% --
Net investment income........................ 3.81% 3.52%
Net investment income, without expense
reimbursement................................ 3.81% --
</TABLE>
(1) Commencement of operations.
(2) Based on average shares outstanding.
(3) Total return for a period of less than one full year is not annualized.
Total return does not consider the effect of sales charges.
(4) See Note 3.
9
See Notes to Financial Statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Reserve Fund (the "Fund", formerly American Capi-
tal Reserve Fund, Inc.) is registered under the Investment Company Act of
1940, as amended, as a diversified open-end management investment company. The
Fund seeks protection of capital
and high current income through investments in U.S. dollar denominated money
market securities.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The prep-
aration of financial statements in conformity with generally accepted account-
ing principles requires management to make estimates and assumptions that
affect the amounts reported. Actual amounts may differ from the estimates.
A. INVESTMENT VALUATIONS-Investments are valued at amortized cost, which ap-
proximates market value. The cost of investments for federal income tax pur-
poses is substantially the same as for financial reporting purposes.
B. REPURCHASE AGREEMENTS-A repurchase agreement is a short-term investment 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 in-
vest independently in repurchase agreements, or transfer uninvested cash bal-
ances into a pooled cash account along with other investment companies advised
by Van Kampen American Capital Asset Management, Inc. (the "Adviser"), the
daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are 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 re-
quired to maintain the value of the underlying security at not less than the
repurchase proceeds due the Fund.
C. FEDERAL INCOME TAXES-No provision for federal income taxes is required be-
cause the Fund has elected to be taxed as a "regulated investment company" un-
der the Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investment income and taxable net
realized gains to its shareholders.
The net realized capital loss carryforward for federal income tax purposes
of approximately $72,000 at the end of the period may be utilized to offset
future capital gains until expiration in 1997 through 2004.
D. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transac-
tions are accounted for on the trade date. Realized gains and losses on in-
vestments are determined on the basis of amortized cost. Interest income is
accrued daily.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
E. DIVIDENDS-The Fund records daily dividends from net investment income.
These dividends are automatically reinvested in additional shares of the Fund
at net asset value. Shares purchased by daily reinvestments are liquidated at
net asset value on the last business day of the month and the proceeds of such
redemptions paid to the shareholders electing to receive dividends in cash.
The Fund distributes tax basis earnings in accordance with the minimum distri-
bution requirements of the Internal Revenue Code, which may differ from gener-
ally accepted accounting principles. Such distributions may result in
dividends in excess of financial statement net investment income.
F. DEBT DISCOUNT AND PREMIUM-For financial and tax reporting purposes, all
discounts and premiums are amortized over the life of the security.
NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as investment manager of the Fund. Management fees are cal-
culated monthly, based on the average daily net assets of the Fund at an an-
nual rate of .50% of the first $150 million; .45% of the next $100 million;
.40% of the next $100 million; and .35% of the amount in excess of $350 mil-
lion.
Accounting services include the salaries and overhead expenses of the Fund's
Chief Accounting Officer and the personnel operating under his direction.
Charges are allocated among investment companies advised by the Adviser. Dur-
ing the period, these charges included $8,068 as the Fund's share of the em-
ployee costs attributable to the Fund's accounting officers. A portion of the
accounting services expense was paid to the Adviser in reimbursement of per-
sonnel, facilities and equipment costs attributable to the provision of ac-
counting services to the Fund. The services provided by the Adviser are at
cost.
ACCESS Investors Services, Inc., an affiliate of the Adviser, serves as the
Fund's shareholder service agent. These services are provided at cost plus a
profit. During the period, such fees aggregated $1,280,376.
The Fund has been advised that Van Kampen American Capital Distributors,
Inc. (the "Distributor") and Advantage Capital Corp. (the "Retail Dealer"),
both affiliates of the Adviser, received $690,949 and $24,778, respectively,
as their portion of the commissions on sales of Fund shares during the period.
As of January 2, 1996, Advantage Capital Corp. was no longer an affiliate of
the Adviser.
Under the Distribution Plans, each class of shares pays up to .15% per annum
of its average daily net assets to reimburse the Distributor for expenses and
service fees incurred. Class B and C shares pay an additional fee of up to
.75% per annum of their average daily net assets to reimburse the Distributor
for its distribution expenses. Actual distribution expenses incurred by the
Distributor for Class B and C shares may exceed the amounts reimbursed to
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
the Distributor by the Fund. At the end of the period, the unreimbursed ex-
penses incurred by the Distributor under the Class B and C plans aggregated
approximately $190,000 and $9,000, respectively, and may be carried forward
and reimbursed through either the collection of the contingent deferred sales
charges from share redemptions or, subject to the annual renewal of the plans,
future Fund reimbursements of distribution fees.
Legal fees were for services rendered by former counsel of the Fund,
O'Melveny & Myers. A former trustee was of counsel to that firm.
Certain officers and trustees of the Fund are officers and trustees of the
Adviser, the Distributor and the shareholder service agent.
NOTE 3-TRUSTEE COMPENSATION
Fund trustees who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $1,010 plus a fee of $29 per day for Board and Com-
mittee meetings attended. During the period, such fees aggregated $22,302.
The Fund has in effect a deferred compensation plan and a defined benefits
retirement plan for its trustees not affiliated with the Adviser. These plans
are not funded, and obligations under the plans will be paid solely out of the
Fund's general accounts. The Fund will not reserve or set aside funds for the
payment of its obligations under the plans by any form of trust or escrow.
Under the deferred compensation plan, trustees may elect to defer all or a
portion of their compensation to a later date. Each trustee covered under the
plan elects to earn on the deferred balances an amount equal to the total re-
turn of the Fund or equal to the income earned by the Fund on its short-term
investments.
Under the retirement plan which became effective in January, 1996, benefits
which are based on years of service will be received by the trustee for a ten
year period. The maximum annual benefit for each trustee is $2,500. Retirement
plan expenses for the period aggregated $6,000. During the calendar year 1996,
the Adviser has agreed to reimburse the Fund for these plan expenses.
NOTE 4-CAPITAL
The Fund offers three classes of shares at their respective net asset values
per share. Class B and C shares are subject to a sales charge imposed at the
time of redemption on a contingent deferred basis. All classes of shares have
the same rights, except that Class B and C shares bear the cost of distribu-
tion fees and certain other class specific expenses. Realized and unrealized
gains or losses, investment income and expenses (other than class specific ex-
penses) are allocated daily to each class of shares based upon the relative
proportion of net assets of each class. Class B and C shares automatically
convert to Class A shares six years and ten years after purchase, respective-
ly, subject to certain conditions. The offering of Class B
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
and C shares commenced April 18, 1995, at which time all previously outstand-
ing shares became Class A shares.
The Fund has an unlimited number of shares of $.01 par value beneficial in-
terest authorized. Transactions in shares of beneficial interest were as fol-
lows:
<TABLE>
<CAPTION>
Year Ended May 31
------------------------------
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A...................................... 5,916,698,879 3,148,142,161
Class B...................................... 402,157,689 21,754,203
Class C...................................... 99,265,826 3,049,049
-------------- --------------
6,418,122,394 3,172,945,413
-------------- --------------
Shares issued in business combination (see
Note 6)
Class A...................................... 20,714,880 --
Class B...................................... 5,651,573 --
Class C...................................... -- --
-------------- --------------
26,366,453 --
-------------- --------------
Shares issued for distributions reinvested
Class A...................................... 17,616,820 18,623,009
Class B...................................... 1,250,566 15,317
Class C...................................... 188,995 2,167
-------------- --------------
19,056,381 18,640,493
-------------- --------------
Shares redeemed
Class A...................................... (5,834,380,999) (3,310,885,862)
Class B...................................... (331,779,955) (17,579,714)
Class C...................................... (90,332,522) (2,462,729)
-------------- --------------
(6,256,493,476) (3,330,928,305)
-------------- --------------
Increase (decrease) in shares outstanding.... 207,051,752 (139,342,399)
-------------- --------------
</TABLE>
NOTE 5--FUND REORGANIZATION
On July 21, 1995, the shareholders approved the reorganization of the Fund to
a Delaware Business Trust and the election of fourteen trustees. On July 31,
1995, the reorganization became effective.
NOTE 6--BUSINESS COMBINATION
On September 22, 1995, the Fund acquired the net assets of Van Kampen Money
Market Fund ("VKMM") pursuant to a plan of reorganization approved by VKMM
shareholders on September 21, 1995. The acquisition resulted in a tax-free ex-
change of 26,366,453 shares of the Fund for the 26,366,453 shares of VKMM out-
standing on September 22, 1995. VKMM's net assets at that date were
$26,366,453; the Fund's net assets were $422,227,929. After the acquisition,
the combined net assets of the Fund were $448,594,382.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all mate-
rial respects, the financial position of Van Kampen American Capital Reserve
Fund (the "Fund") at May 31, 1996, the results of its operations, the changes
in its net assets and the financial highlights for each of the fiscal periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as "finan-
cial statements") are the responsibility of the Fund's management; our respon-
sibility 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 per-
form 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 presenta-
tion. We believe that our audits, which included confirmation of securities at
May 31, 1996 by correspondence with the custodian, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
July 8, 1996
14
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
15
<PAGE>
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
LINDA HUTTON HEAGY
ROGER HILSMAN
R. CRAIG KENNEDY
DENNIS J. MCDONNELL
DONALD C. MILLER*
JACK E. NELSON
DON G. POWELL
JEROME L. ROBINSON
FERNANDO SISTO*
WAYNE W. WHALEN
WILLIAM S. WOODSIDE
*Co-Chairman of the Board
OFFICERS
DON G. POWELL
President and Chief Executive Officer
DENNIS J. MCDONNELL
Executive Vice President
RONALD A. NYBERG
Vice President and Secretary
EDWARD C. WOOD, III
Vice President and Chief Financial Officer
CURTIS W. MORELL
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN
Treasurer
TANYA M. LODEN
Controller
WILLIAM N. BROWN
PETER W. HAGEL
ROBERT C. PECK, JR.
ALAN T. SACHTLEBEN
PAUL R. WOLKENBERG
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICE AGENT
ACCESS INVESTORS SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK AND TRUST CO.
225 Franklin Street
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1201 Louisiana
Houston, Texas 77002
(C) Van Kampen American Capital Distributors, Inc., 1996
All rights reserved.
SM denotes a service mark of
Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors un-
less it has been preceded or is accompanied by an effective prospectus of the
Fund which contains additional information on how to purchase shares, the
sales charge, and other pertinent data. If used for distribution to prospec-
tive investors after 9/30/96, this annual report must be accompanied by a Van
Kampen American Capital Reserve Fund performance data update for the most re-
cent quarter.
16
