<PAGE>
Van Kampen American Capital
RESERVE FUND
Semi-Annual Report
November 30, 1997
[PHOTO]
_____ A Wealth of Knowledge . A Knowledge of Wealth/SM/ _____
VAN KAMPEN AMERICAN CAPITAL
<PAGE>
Table of Contents
Letter to Shareholders........................ 1
Portfolio of Investments...................... 3
Statement of Assets and Liabilities........... 5
Statement of Operations....................... 6
Statement of Changes in Net Assets............ 7
Financial Highlights.......................... 8
Notes to Financial Statements................. 11
RES ANR 7/97
<PAGE>
Letter to Shareholders
[PHOTO]
Dennis J. McDonnell and Don G. Powell
January 8, 1998
Dear Shareholder,
On August 4, 1997, the announcement of exchange privileges between Van
Kampen American Capital and Morgan Stanley funds opened the door to new
investment opportunities. We are proud to offer an expanded family of mutual
funds covering virtually every market and continent. In our view, the rapid
appreciation of U.S. stock prices in recent years has created a need for
investors to examine their portfolios carefully to ensure proper diversification
among domestic and foreign investments. The Morgan Stanley funds, with an
emphasis on global markets, can be valuable tools for accomplishing this
diversification.
Economic Review
In the months following a March interest rate increase by the Federal
Reserve Board, investors slowly came to the realization that additional Fed
intervention was unlikely for the remainder of the calendar year. This was
ushered in by a new paradigm of continuing strong GDP growth, underpinned by
consistently positive economic indicators with a surprising absence of
inflationary pressures. Any rumblings of Fed tightenings in the last few months
of the Fund's reporting period were definitively put to rest as ripple effects
from the fall 1997 Asian currency crisis hit U.S. shores. Domestic investors
were rudely awakened to the correlation of U.S. stock volatility with woes in
the Asian markets as the Dow Jones Industrial Average took a tumble in mid-
October. Although the market subsequently recovered, concerns about the long-
term effects of the turmoil overseas have lingered through the end of the Fund's
reporting period, and will likely follow the markets into 1998.
[pie chart]
Portfolio Composition by Investment Type*
as of November 30, 1997 as of May 31, 1997
----------------------- ------------------
Agencies 14.4% Agencies 51.9%
Repurchase Agreements 18.2% Repurchase Agreements 18%
Commercial Paper 67.4% Commercial Paper 30.1%
* As a Percentage of Total Investments
Continued on page two
1
<PAGE>
Performance Summary
The Van Kampen American Capital Reserve Fund continued to provide
shareholders with daily liquidity at $1.00 per share/1/ and a competitive level
of current income. As of November 30, 1997, the seven-day average yield for the
Fund's Class A shares was 4.59 percent, with an effective annual yield of 4.70
percent. For the six-month period ending November 30, 1997, the Fund's Class A
shares achieved a total return of 2.31 percent/2/ at net asset value. The
average total return for the money market category, as measured by Lipper
Analytical Services, was 2.45 percent over the same six-month period.
Your Fund's portfolio management team has continued to pursue the Fund's
investment objectives of protection of capital and high current income in a
cautious fashion. In response to economic conditions, particularly the absence
of Fed intervention during the period, your Fund's managers maintained an
average investment maturity of 43 days. The Fund's maturity was adjusted closer
to the benchmark average of 49 days over the period.
To enhance the Fund's return, we increased our overall weighting of high-
rated short-term corporate securities (commercial paper which has been issued
an A-1/P-1 rating from Moody's and Standard & Poor's) in the Fund's portfolio.
These corporate securities provide income without assuming excessive risk. The
additional yield offered by the corporate obligations served the portfolio well
during the reporting period. At the end of the period, 67 percent of the Fund's
total investments were invested in corporate notes. The remaining 33 percent of
total investments were invested in government obligations-government agencies
and repurchase agreements.
Outlook
We expect the economy to remain strong going into 1998, although its growth
rate is likely to slow from current levels. The financial crisis in Southeast
Asia is expected to slow U.S. exports to the region, which could trim the
earnings of many U.S. companies and reduce overall U.S. growth. As a result of
these factors, we believe there is little chance that the Fed will raise
interest rates in the near term, although a rate hike remains a possibility if
inflation picks up or if growth continues at its brisk pace.
We will continue to monitor events in Asia and other market developments in
order to assess their effects on the portfolio. At this time, we do not
anticipate making any major changes to the portfolio until market conditions
shift more dramatically. We will continue to seek to achieve the Fund's goals of
relative stability, daily liquidity, and a competitive level of income, and will
look to add value through careful security selection. Thank you for your
continued confidence and trust in Van Kampen American Capital.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
/1/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 per share.
/2/Total return assumes reinvestment of all distributions for the six-month
period ended November 30, 1997.
2
<PAGE>
Portfolio of Investments
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Par Discount Yield
Amount on Date
(000) Description of Purchase Maturity Amortized Cost
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Agency Obligations 15.2%
$ 15,000 Federal National Mortgage Association Discount Note.... 5.550% 03/03/98 $ 14,790,363
15,000 Federal National Mortgage Association Discount Note.... 5.623 03/25/98 14,735,500
10,000 Federal National Mortgage Association Discount Note.... 5.591 04/17/98 9,790,700
10,000 Federal National Mortgage Association Discount Note.... 5.621 04/21/98 9,783,450
24,000 Federal National Mortgage Association Discount Note.... 5.650 04/24/98 23,466,400
------------
Total U.S. Government Agency Obligations........................................ 72,566,413
------------
Commercial Paper 71.3%
28,000 American Express Co.................................... 5.620 02/09/98 27,695,173
27,000 Associates Corp. of North America...................... 5.601 01/05/98 26,850,690
26,000 Bank of Nova Scotia.................................... 5.588 12/26/97 25,896,534
28,000 CIT Group Holdings, Inc................................ 5.582 12/01/97 27,995,722
26,000 Commercial Credit Corp................................. 5.596 01/16/98 25,813,306
24,800 Ford Motor Credit Co................................... 5.707 01/13/98 24,632,076
31,000 General Electric Capital Corp.......................... 5.681 04/02/98 30,412,163
23,000 General Electric Co.................................... 5.768 03/18/98 22,609,460
30,000 IBM Credit Corp........................................ 5.566 12/08/97 29,963,467
15,000 John Deere Capital Corp., Class B...................... 5.597 01/15/98 14,894,200
10,000 John Deere Capital Corp., Class B...................... 5.605 02/09/98 9,891,528
19,000 Merrill Lynch & Co., Inc............................... 5.648 01/26/98 18,833,338
27,000 Prudential Funding Corp................................ 5.628 01/13/98 26,816,850
28,400 Toronto Dominion Holdings.............................. 5.553 12/01/97 28,395,685
------------
Total Commercial Paper.......................................................... 340,700,192
------------
Repurchase Agreements 19.3%
BankAmerica Securities ($49,745,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 11/28/97,
to be sold on 12/01/97 at $49,768,753)............................................................... 49,745,000
DLJ Mortgage Acceptance Corp. ($42,245,000 par collateralized
by U.S. Government obligations in a pooled cash account, dated
11/26/97, to be sold on 12/01/97 at $42,277,857)..................................................... 42,245,000
------------
Total Repurchase Agreements..................................................... 91,990,000
------------
</TABLE>
3
See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Description Amortized Cost
- -------------------------------------------------------------------------------
<S> <C>
Total Investments 105.8% (a)................................... $ 505,256,605
Liabilities in Excess of Other Assets (5.8%)................... (27,661,432)
--------------
Net Assets 100.0%.............................................. $ 477,595,173
==============
</TABLE>
(a) At November 30, 1997, cost is identical for both book and federal income tax
purposes.
4
See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Total Investments, at Amortized Cost which Approximates
Market, including repurchase agreements of $91,990,000............................... $ 505,256,605
Receivables:
Fund Shares Sold............................................................. 6,347,214
Interest..................................................................... 26,286
Other................................................................................ 88,257
--------------
Total Assets................................................................. 511,718,362
--------------
Liabilities:
Payables:
Fund Shares Repurchased...................................................... 33,266,343
Distributor and Affiliates................................................... 240,796
Investment Advisory Fee...................................................... 182,085
Income Distributions......................................................... 97,379
Custodian Bank............................................................... 3,649
Accrued Expenses..................................................................... 171,970
Trustees' Deferred Compensation and Retirement Plans................................. 160,967
--------------
Total Liabilities............................................................ 34,123,189
--------------
Net Assets........................................................................... $ 477,595,173
==============
Net Assets Consist of:
Capital.............................................................................. $ 477,637,498
Accumulated Undistributed Net Investment Income...................................... 41,777
Accumulated Net Realized Loss........................................................ (84,102)
--------------
Net Assets........................................................................... $ 477,595,173
==============
Maximum Offering Price Per Share:
Class A Shares:
Net Asset Value, Offering Price and Redemption Price per share
(Based on net assets of $391,390,858 and 391,438,736
shares of beneficial interest issued and outstanding)........................ $ 1.00
==============
Class B Shares:
Net Asset Value and Offering Price per share
(Based on net assets of $75,095,776 and 75,093,027
shares of beneficial interest issued and outstanding)........................ $ 1.00
==============
Class C Shares:
Net Asset Value and Offering Price per share
(Based on net assets of $11,108,539 and 11,108,172
shares of beneficial interest issued and outstanding)........................ $ 1.00
==============
</TABLE>
5
See Notes to Financial Statements
<PAGE>
Statement of Operations
For the Six Months Ended November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest....................................................................... $ 14,345,450
-------------
Expenses:
Investment Advisory Fee........................................................ 1,079,715
Shareholder Services........................................................... 1,064,112
Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C
of $302,945, $343,278 and $46,265, respectively)............................ 692,488
Custody........................................................................ 21,800
Legal.......................................................................... 18,892
Trustees' Fees and Expenses.................................................... 7,895
Other.......................................................................... 224,729
-------------
Total Expenses......................................................... 3,109,631
-------------
Net Investment Income.......................................................... $ 11,235,819
=============
Net Realized Loss.............................................................. $ (14,286)
=============
Net Increase in Net Assets from Operations..................................... $ 11,221,533
=============
</TABLE>
6
See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
For the Six Months Ended November 30, 1997
and the Year Ended May 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1997 May 31, 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income................................................... $ 11,235,819 $ 21,972,082
Net Realized Loss....................................................... (14,286) (7,692)
----------------- ---------------
Change in Net Assets from Operations.................................... 11,221,533 21,964,390
----------------- ---------------
Distributions from Net Investment Income:
Class A Shares........................................................ (9,565,649) (18,710,328)
Class B Shares........................................................ (1,457,405) (2,925,963)
Class C Shares........................................................ (197,297) (339,500)
----------------- ---------------
Total Distributions................................................ (11,220,351) (21,975,791)
----------------- ---------------
Net Change in Net Assets
from Investment Activities............................................ 1,182 (11,401)
----------------- ---------------
From Capital Transactions:
Proceeds from Shares Sold............................................... 4,823,436,949 8,126,739,596
Net Asset Value of Shares Issued Through
Dividend Reinvestment................................................. 11,220,351 21,975,791
Cost of Shares Repurchased.............................................. (4,919,738,640) (8,117,517,908)
----------------- ---------------
Net Change in Net Assets from Capital Transactions...................... (85,081,340) 31,197,479
----------------- ---------------
Total Increase/Decrease in Net Assets................................... (85,080,158) 31,186,078
Net Assets:
Beginning of the Period................................................. 562,675,331 531,489,253
----------------- ---------------
End of the Period (Including accumulated undistributed
net investment income of $41,777 and
$26,309, respectively)................................................ $ 477,595,173 $ 562,675,331
================= ===============
</TABLE>
7 See Notes to Financial Statements
<PAGE>
Financial Highlights
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Six Months Ended Year Ended May 31
----------------------------------
Class A Shares November 1997 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Net Investment Income................. .023 .0440 .0465 .0434 .0229
Less Distributions from Net
Investment Income................... (.023) (.0440) (.0465) (.0434) (.0229)
------ ------ ------ ------ ------
Net Asset Value, End of
the Period.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Return.......................... 2.31%* 4.52% 4.75% 4.43% 2.32%
Net Assets at End of the Period
(in millions)....................... $391.4 $451.3 $440.3 $319.7 $463.8
Ratio of Expenses to Average
Net Assets**........................ 1.09% 1.02% 1.07% 1.00% 1.03%
Ratio of Net Investment Income
to Average Net Assets**............. 4.55% 4.38% 4.62% 4.28% 2.36%
</TABLE>
* Non-Annualized
** For the years ended May 31, 1994 through 1997, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to VKAC
reimbursement of expenses was less than 0.01%.
See Notes to Financial Statements
8
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
April 18, 1995
(Commencement
Six Months Ended Year Ended May 31, of Distribution) to
-------------------
Class B Shares November 30, 1997 1997 1996 May 31, 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period......................... $1.00 $1.00 $1.00 $1.00
----- ----- ----- -----
Net Investment Income................ .019 .0363 .0388 .0047
Less Distributions from Net
Investment Income.................. (.019) (.0363) (.0388) (.0047)
----- ----- ----- -----
Net Asset Value, End of
the Period......................... $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
Total Return (a)..................... 1.93%* 3.71% 3.95% .47%*
Net Assets at End of the
Period (in millions)............... $75.1 $103.0 $81.5 $ 4.2
Ratio of Expenses to Average
Net Assets**....................... 1.88% 1.77% 1.86% 1.76%
Ratio of Net Investment Income
to Average Net Assets**............ 3.87% 3.70% 3.75% 3.52%
</TABLE>
* Non-Annualized
** For the period ended May 31, 1995 and the years ended May 31, 1996 and
1997, the impact on the Ratios of Expenses and Net Investment Income to
Average Net Assets due to VKAC reimbursement of expenses was less than
0.01%.
(a) Total return is based upon net asset value which does not include payment
of the contingent deferred sales charge.
See Notes to Financial Statements
9
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
April 18, 1995
Year Ended May 31, (Commencement
Six Months Ended ------------------ of Distribution) to
Class C Shares November 30, 1997 1997 1996 May 31, 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period............................ $1.00 $1.00 $1.00 $1.00
----- ----- ----- -----
Net Investment Income.................. .019 .0362 .0387 .0049
Less Distributions from Net
Investment Income..................... (.019) (.0362) (.0387) (.0049)
----- ----- ----- -----
Net Asset Value, End of
the Period............................ $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
Total Return (a)....................... 1.94%* 3.72% 3.94% .49%*
Net Assets at End of the
Period (in millions).................. $11.1 $ 8.4 $ 9.7 $ 0.6
Ratio of Expenses to Average
Net Assets**.......................... 1.85% 1.78% 1.87% 1.76%
Ratio of Net Investment Income
to Average Net Assets**............... 3.86% 3.64% 3.81% 3.52%
</TABLE>
* Non-Annualized
** For the period ended May 31, 1995 and the years ended May 31, 1996 and 1997,
the impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of expenses was less than 0.01%.
(a) Total return is based upon net asset value which does not include payment of
the contingent deferred sales charge.
See Notes to Financial Statements
10
<PAGE>
Notes to Financial Statements
November 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Van Kampen American Capital Reserve Fund (the "Fund") is organized as a
Delaware business trust. The Fund is an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek protection of capital and
high current income through investments in U.S. dollar denominated money market
securities. The Fund commenced investment operations on July 12, 1974. The
distribution of the Fund's Class B and Class C shares commenced on April 18,
1995.
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 are valued at amortized cost, which
approximates market. Under this valuation method, a portfolio instrument is
valued at cost and any discount or premium is amortized on a straight-line basis
to the maturity of the instrument.
B. Security Transactions--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
Interest income is recorded on an accrual basis.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital Asset Management, Inc. (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are fully collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.
C. Federal Income Taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income, if any, to
its shareholders. Therefore, no provision for federal income taxes is required.
11
<PAGE>
Notes to Financial Statements (Continued)
November 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At May 31, 1997, the Fund had an accumulated capital loss carryforward
for tax purposes of $62,624 which will expire between May 31, 1998 and May 31,
2005. Of this amount, $2,038 will expire in 1998.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of post October 31 losses which may not be
recognized for tax purposes until the first day of the following fiscal year.
D. Distribution of Income and Gains--The Fund declares dividends daily from net
investment income and automatically reinvests such dividends daily. Net
realized gains, if any, are distributed annually. Shareholders can elect to
receive the cash equivalent of their daily dividends at each month end.
2. Investment Advisory Fees and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide facilities and investment advice to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
Average Net Assets % Per Annum
- --------------------------------------------------------------------------------
<S> <C>
First $150 million................................................. .50 of 1%
Next $100 million.................................................. .45 of 1%
Next $100 million.................................................. .40 of 1%
Over $350 million.................................................. .35 of 1%
</TABLE>
For the six months ended November 30, 1997, the Fund recognized expenses of
approximately $18,900 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended November 30, 1997, the Fund recognized expenses of
approximately $51,500 representing Van Kampen American Capital Distributors,
Inc.'s, or its affiliates' (collectively "VKAC") cost of providing accounting
services to the Fund. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
November 30, 1997, the Fund recognized expenses of approximately $599,400,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
12
<PAGE>
Notes to Financial Statements (Continued)
November 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Fund. The maximum annual
benefit per trustee under the plan is equal to $2,500.
3. Capital Transactions
The Fund has outstanding three classes of shares of beneficial interest,
Classes A, B and C. There are an unlimited number of shares of each class with a
par value of $0.01 per share.
At November 30, 1997, capital aggregated $391,426,737, $75,102,791 and
$11,107,970 for Classes A, B and C, respectively. For the six months ended
November 30, 1997, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................ 4,346,291,088 $ 4,346,291,088
Class B................................ 404,160,437 404,160,437
Class C................................ 72,985,424 72,985,424
-------------- ----------------
Total Sales.............................. 4,823,436,949 $ 4,823,436,949
============== ================
Dividend Reinvestment:
Class A................................ 9,565,649 $ 9,565,649
Class B................................ 1,457,405 1,457,405
Class C................................ 197,297 197,297
-------------- ----------------
Total Dividend Reinvestment.............. 11,220,351 $ 11,220,351
============== ================
Repurchases:
Class A................................ (4,415,727,333) $ (4,415,727,333)
Class B................................ (433,553,810) (433,553,811)
Class C................................ (70,457,496) (70,457,496)
-------------- ----------------
Total Repurchases........................ (4,919,738,639) $ (4,919,738,640)
============== ================
</TABLE>
13
<PAGE>
Notes to Financial Statements (Continued)
November 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
At May 31, 1997, capital aggregated $451,297,333, $103,038,760 and
$8,382,745 for Classes A, B and C, respectively. For the year ended May 31,
1997, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 7,336,711,667 $ 7,336,713,031
Class B.................................. 648,076,624 648,076,384
Class C.................................. 141,950,203 141,950,181
-------------- ---------------
Total Sales................................ 8,126,738,494 $ 8,126,739,596
============== ===============
Dividend Reinvestment:
Class A.................................. 18,710,328 $ 18,710,328
Class B.................................. 2,926,008 2,925,963
Class C.................................. 339,500 339,500
-------------- ---------------
Total Dividend Reinvestment................ 21,975,836 $ 21,975,791
============== ===============
Repurchases:
Class A.................................. (7,344,457,086) $(7,344,457,086)
Class B.................................. (629,443,316) (629,433,280)
Class C.................................. (143,617,542) (143,617,542)
-------------- ---------------
Total Repurchases.......................... (8,117,517,944) $(8,117,517,908)
============== ===============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within five years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear the expense of their respective deferred sales
arrangements, including higher distribution and service fees and incremental
transfer agency costs.
14
<PAGE>
Notes to Financial Statements (Continued)
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Contingent Deferred
Sales Charge
-------------------
Year of Redemption Class B Class C
- --------------------------------------------------------------------------------
<S> <C> <C>
First....................................................... 4.00% 1.00%
Second...................................................... 4.00% None
Third....................................................... 3.00% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.50% None
Sixth and Thereafter........................................ None None
</TABLE>
For the six months ended November 30, 1997, VKAC, as Distributor for the
Fund, received commissions on CDSC redeemed shares of approximately $289,900.
Sales charges do not represent expenses of the Fund.
4. 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 .15% of average daily net assets of
Class A shares and .90% each of Class B and Class C shares are accrued daily.
Included in these fees for the six months ended November 30, 1997, are payments
to VKAC of approximately $330,500.
15
<PAGE>
Funds Distributed by Van Kampen American Capital
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Value Fund
Worldwide High Income Fund
Ask your investment representative for a
prospectus containing more complete
information, including sales charges and
expenses. Please read it carefully before you
invest or send money. Or call us weekdays
from 7:00 a.m. to 7:00 p.m. Central time at
1-800-341-2911 for Van Kampen American
Capital and Morgan Stanley funds.
16
<PAGE>
Van Kampen American Capital Reserve Fund
Board of Trustees
J. Miles Branagan
Richard M. DeMartini*
Linda Hutton Heagy
R. Craig Kennedy
Jack E. Nelson
Jerome L. Robinson
Phillip B. Rooney
Fernando Sisto
Wayne W. Whalen*--Chairman
Officers
Dennis J. McDonnell*
President
Ronald A. Nyberg*
Vice President and Secretary
Edward C. Wood, III*
Vice President and Chief Financial Officer
Curtis W. Morell*
Vice President and Chief Accounting Officer
John L. Sullivan*
Treasurer
Tanya M. Loden*
Controller
Peter W. Hegel*
Alan T. Sachtleben*
Paul R. Wolkenberg*
Vice Presidents
Investment Adviser
Van Kampen American Capital
Asset Management, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Distributor
Van Kampen American Capital
Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Shareholder Servicing Agent
ACCESS Investor
Services, Inc.
P.O. Box 418256
Kansas City, Missouri 64141-9256
Custodian
State Street Bank
and Trust Company
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Independent Accountants
Price Waterhouse LLP
200 E. Randolph
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company
Act of 1940.
/(c)/ Van Kampen American Capital Distributors, Inc., 1997 All rights
reserved.
SM denotes a service mark of
Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data.
<PAGE>
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
- ------------------
Bulk Rate
U.S. Postage
PAID
VAN KAMPEN
AMERICAN CAPITAL
- ------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> RESERVE FUND CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 505,256,605<F1>
<INVESTMENTS-AT-VALUE> 505,256,605<F1>
<RECEIVABLES> 6,373,500<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 88,257<F1>
<TOTAL-ASSETS> 511,718,362<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 34,123,189<F1>
<TOTAL-LIABILITIES> 34,123,189<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 391,426,737
<SHARES-COMMON-STOCK> 391,426,736
<SHARES-COMMON-PRIOR> 451,309,332
<ACCUMULATED-NII-CURRENT> 41,777<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (84,102)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 0<F1>
<NET-ASSETS> 391,390,858
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 14,345,450<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (3,109,631)<F1>
<NET-INVESTMENT-INCOME> 11,235,819<F1>
<REALIZED-GAINS-CURRENT> (14,286)<F1>
<APPREC-INCREASE-CURRENT> 0<F1>
<NET-CHANGE-FROM-OPS> 11,221,533<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (9,565,649)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,346,291,088
<NUMBER-OF-SHARES-REDEEMED> (4,415,727,333)
<SHARES-REINVESTED> 9,565,649
<NET-CHANGE-IN-ASSETS> (59,869,911)
<ACCUMULATED-NII-PRIOR> 26,309<F1>
<ACCUMULATED-GAINS-PRIOR> (69,816)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,079,715<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,109,631<F1>
<AVERAGE-NET-ASSETS> 418,674,891
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.023
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.023)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.09
<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>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> RESERVE FUND CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 505,256,605<F1>
<INVESTMENTS-AT-VALUE> 505,256,605<F1>
<RECEIVABLES> 6,373,500<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 88,257<F1>
<TOTAL-ASSETS> 511,718,362<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 34,123,189<F1>
<TOTAL-LIABILITIES> 34,123,189<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75,102,791
<SHARES-COMMON-STOCK> 75,093,027
<SHARES-COMMON-PRIOR> 103,028,995
<ACCUMULATED-NII-CURRENT> 41,777<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (84,102)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 0<F1>
<NET-ASSETS> 75,095,776
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 14,345,450<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (3,109,631)<F1>
<NET-INVESTMENT-INCOME> 11,235,819<F1>
<REALIZED-GAINS-CURRENT> (14,286)<F1>
<APPREC-INCREASE-CURRENT> 0<F1>
<NET-CHANGE-FROM-OPS> 11,221,533<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,457,405)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 404,160,437
<NUMBER-OF-SHARES-REDEEMED> (433,553,810)
<SHARES-REINVESTED> 1,457,405
<NET-CHANGE-IN-ASSETS> (27,935,570)
<ACCUMULATED-NII-PRIOR> 26,309<F1>
<ACCUMULATED-GAINS-PRIOR> (69,816)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,079,715<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,109,631<F1>
<AVERAGE-NET-ASSETS> 76,224,967
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.019
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.019)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.88
<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>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> RESERVE FUND CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 505,256,605<F1>
<INVESTMENTS-AT-VALUE> 505,256,605<F1>
<RECEIVABLES> 6,373,500<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 88,257<F1>
<TOTAL-ASSETS> 511,718,362<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 34,123,189<F1>
<TOTAL-LIABILITIES> 34,123,189<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,107,970
<SHARES-COMMON-STOCK> 11,108,172
<SHARES-COMMON-PRIOR> 8,382,947
<ACCUMULATED-NII-CURRENT> 41,777<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (84,102)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 0<F1>
<NET-ASSETS> 11,108,539
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 14,345,450<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (3,109,631)<F1>
<NET-INVESTMENT-INCOME> 11,235,819<F1>
<REALIZED-GAINS-CURRENT> (14,286)<F1>
<APPREC-INCREASE-CURRENT> 0<F1>
<NET-CHANGE-FROM-OPS> 11,221,533<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (197,297)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 72,985,424
<NUMBER-OF-SHARES-REDEEMED> (70,457,496)
<SHARES-REINVESTED> 197,297
<NET-CHANGE-IN-ASSETS> 2,725,592
<ACCUMULATED-NII-PRIOR> 26,309<F1>
<ACCUMULATED-GAINS-PRIOR> (69,816)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,079,715<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,109,631<F1>
<AVERAGE-NET-ASSETS> 10,276,781
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.019
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.019)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.85
<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>
