<PAGE>
Van Kampen American Capital
RESERVE FUND
Annual Report
May 31, 1998
[ARTWORK APPEARS HERE]
____ A Wealth of Knowledge . A Knowledge of Wealth(SM) ____
VAN KAMPEN AMERICAN CAPITAL
<PAGE>
Table of Contents
<TABLE>
<S> <C>
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
Report of Independent Accountants...................... 16
</TABLE>
<PAGE>
Letter to Shareholders
June 19, 1998
[PHOTO]
Dennis J. McDonnell and Don G. Powell
Dear Shareholder,
The recent announcement that the Federal government will generate a budget
surplus this year for the first time since 1969 gives us pause to reflect on how
far the nation's finances have come during the past 15 years. Many Americans can
remember the 1970s, when a painful outbreak of inflation undermined investment
returns and lowered living standards. Just a few years ago, the Federal budget
was still nearly $300 billion in the red and the currency was weak.
Today, economic growth is robust, inflation is virtually nonexistent, the
job market is healthy, and the dollar is rising around the world. Against this
backdrop, stock and bond prices have appreciated considerably since the nation's
inflationary fever began to subside more than a decade ago. From a long-term
perspective, however, history tells us that the good times will not last
forever.
At Van Kampen American Capital, we are pleased to provide investors with
products and tools for all economic climates. As always, we remain vigilant in
identifying changes in the investment environment that might affect our fund
shareholders. In the meantime, we encourage you to talk to your adviser about
how diversification can help your portfolio's long-term performance.
ECONOMIC OVERVIEW
The 12 months comprising this reporting period were marked by strength in
the U.S. economy, a notable absence of increasing inflation, and turmoil in the
Asian markets. Although it was difficult to find a consensus on how the Asian
crisis might affect U.S. markets in the long term, some of the immediate effects
were a decrease in demand for U.S. goods from Asia and an increase in corporate
earnings disappointments, particularly by technology companies. Consequently,
the Federal Reserve Board has held short-term interest rates constant throughout
the year.
However, the Fund's reporting period ended on a note of uncertainty, as Fed
Chairman Alan Greenspan released cautionary comments about the strength of the
market and a willingness to increase rates if the economy's strength continued
unfettered. In spite of these crosscurrents, inter-
[PIE CHART APPEARS HERE]
Portfolio Compaosition by Investment Type*
<TABLE>
as of May 31, 1998 as of November 30, 1997
<S> <C> <C> <C>
Certificate of Deposit 1.7% Agencies 14.4%
Agencies 10.2% Repurchase Agreements 18.2%
Commercial Paper 67.1% Commercial Paper 67.4%
Repurchase Agreements 21.0%
</TABLE>
*As a Percentage of Total Investments
1 Continued on page two
<PAGE>
est rates remained within a fairly narrow trading range, with the 30-year U.S.
Treasury yield hovering around six percent.
PERFORMANCE SUMMARY
The Van Kampen American Capital Reserve Fund continued to provide
shareholders with relative stability, daily liquidity at $1.00 per share, and a
competitive level of current income. As of May 31, 1998, the Fund's seven-day
average yield was 4.72 percent, 3.92 percent, and 3.93 percent for Class A, B,
and C shares, respectively, with an effective annual yield of 4.83 percent, 4.00
percent, and 4.01 percent for Class A, B, and C shares, respectively. From May
31, 1997, through May 31, 1998, the Fund achieved a total return at net asset
value of 4.78 percent/2/ for Class A shares and 3.99 percent/2/ for both Class B
and C shares. The average total return for money market funds, as measured by
Lipper Analytical Services, was 4.97 percent over the same 12-month period.
Your Fund's portfolio management has continued to pursue the Fund's
investment objectives of capital protection and high current income in a
cautious fashion. During the period, we decreased the portfolio's weighting in
government obligations in favor of new commercial paper as well as certificates
of deposit (CDs)*, a new sector for the Fund. CDs add value to the portfolio by
providing enhanced yield opportunities in addition to the Fund's weighting in
repurchase agreements.
The commercial paper held in the portfolio is comprised of high-rated
short-term corporate securities with ratings of at least A-1/P-1 from Moody's
and Standard & Poor's. These corporate securities provide income without
assuming excessive risk. Due to a flat yield curve, the majority of commercial
paper held in the portfolio had maturities of 90 days or less. In the current
interest rate environment, there is little benefit in extending the portfolio's
risk by investing in longer-term paper that provides only a minimally higher
return.
OUTLOOK
Although the effects of the Asian crisis have prevented the Fed from
instituting a rate hike, a tightening of interest rates seems to be a realistic
possibility by the end of the year. The current "Goldilocks" economy of strong
growth and low inflation does not seem sustainable, as suggested by conditions
like a record-low unemployment rate, which is normally a trigger for inflation.
With this perspective, the Fund's portfolio will continue to hold short-term
securities that reduce the Fund's exposure to risks while contributing to its
return. If the Fed takes action or if there are significant changes in
inflationary pressures, we may extend the weighted-average maturity accordingly.
We also plan to expand the portfolio's position in CDs. As we monitor economic
developments, we will continue to seek to achieve the Fund's objectives 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 12-month
period ended May 31, 1998.
*CDs offer a guaranteed return of principal over a stated period of time, a
fixed rate of interest, and are typically issued by institutions whose deposits
are insured.
2
<PAGE>
Portfolio of Investments
May 31, 1998
<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 8.0%
$10,252 Federal Home Loan Bank Consolidated
Discount Note....................................... 5.412% 07/13/98 $ 10,187,344
12,080 Federal Home Loan Mortgage Discount Note............ 5.469 06/09/98 12,059,846
10,000 Federal National Mortgage Association
Discount Note....................................... 5.426 07/10/98 9,941,334
10,000 Federal National Mortgage Association
Discount Note....................................... 5.394 07/29/98 9,913,958
20,000 Federal National Mortgage Association
Medium Term Note.................................... 5.625 04/28/99 19,990,904
-------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS...................................... 62,093,386
-------------
CERTIFICATE OF DEPOSIT 1.3%
10,000 Societe Generale.................................... 5.550 07/10/98 10,000,000
-------------
COMMERCIAL PAPER 52.7%
19,000 Abbott Labs Corp..................................... 5.493 06/02/98 18,994,226
25,000 American Express Co.................................. 5.520 06/08/98 24,969,611
25,000 American General Finance Corp........................ 5.578 07/06/98 24,862,000
20,000 Associates Corp. of North America.................... 5.545 07/09/98 19,881,050
20,000 Chevron USA, Inc..................................... 5.511 06/12/98 19,963,466
25,000 CIT Group Holdings, Inc.............................. 5.508 06/22/98 24,916,431
25,000 Coca Cola Co......................................... 5.499 07/08/98 24,855,915
25,000 Commercial Credit Corp............................... 5.530 06/19/98 24,927,826
30,000 Ford Motor Credit Corp............................... 5.547 07/13/98 29,803,991
25,000 General Electric Capital Corp........................ 5.565 06/05/98 24,980,868
20,000 IBM Credit Corp...................................... 5.538 06/22/98 19,932,655
25,000 John Deere Capital Corp., Class B.................... 5.551 07/27/98 24,782,291
25,000 LaSalle National Bank................................ 5.530 07/16/98 25,000,000
20,000 Merrill Lynch & Co., Inc............................. 5.588 08/21/98 19,748,988
15,000 New York St Power Auth Rev & Genl Purp Ser D......... 5.881 02/15/99 15,000,000
20,000 Norwest Financial Inc................................ 5.530 06/01/98 19,996,944
20,000 Prudential Funding Corp.............................. 5.552 07/20/98 19,847,221
25,000 Toronto Dominion Holdings............................ 5.753 06/01/98 24,996,118
-------------
TOTAL COMMERCIAL PAPER................................................................. 407,459,601
-------------
</TABLE>
3 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
May 31, 1998
================================================================================
<TABLE>
<CAPTION>
Description Amortized Cost
- ------------------------------------------------------------------------------
<S> <C>
REPURCHASE AGREEMENTS 16.5%
BankAmerica Securities ($66,289,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 05/29/98,
to be sold on 06/01/98 at $66,319,769).......................... $ 66,289,000
Swiss Bank Corp. ($61,206,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated
05/29/98 to be sold on 06/01/98 at $61,234,308)................. 61,206,000
-------------
TOTAL REPURCHASE AGREEMENTS............................... 127,495,000
-------------
TOTAL INVESTMENTS 78.5% (A)..................................... 607,047,987
OTHER ASSETS IN EXCESS OF LIABILITIES 21.5%..................... 166,133,019
-------------
NET ASSETS 100.0%............................................... $ 773,181,006
=============
</TABLE>
(a) At May 31, 1998, cost is identical for both book and federal income tax
purposes.
4 See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
May 31, 1998
================================================================================
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Total Investments, at Amortized Cost which
Approximates Market, including repurchase
agreements of $127,495,000................................... $607,047,987
Cash........................................................... 1,113
Receivables:
Fund Shares Sold............................................. 170,184,339
Interest..................................................... 443,455
Other.......................................................... 89,404
------------
Total Assets................................................. 777,766,298
------------
LIABILITIES:
Payables:
Fund Shares Repurchased...................................... 3,175,829
Distributor and Affiliates................................... 509,070
Investment Advisory Fee...................................... 239,418
Income Distributions......................................... 152,637
Accrued Expenses............................................... 338,791
Trustees' Deferred Compensation and Retirement Plans........... 169,547
------------
Total Liabilities............................................ 4,585,292
------------
NET ASSETS..................................................... $773,181,006
============
NET ASSETS CONSIST OF:
Capital........................................................ $773,222,491
Accumulated Undistributed Net Investment Income................ 52,205
Accumulated Net Realized Loss.................................. (93,690)
------------
NET ASSETS..................................................... $773,181,006
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net Asset Value, Offering Price and Redemption Price per
share (Based on net assets of $634,076,293 and 634,125,237
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 $123,018,178 and 123,015,509
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 $16,086,535 and 16,086,219
shares of beneficial interest issued and outstanding)..... $ 1.00
============
</TABLE>
5 See Notes to Financial Statements
<PAGE>
Statement of Operations
For the Year Ended May 31, 1998
================================================================================
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................ $ 30,125,078
------------
EXPENSES:
Investment Advisory Fee................................................. 2,251,176
Shareholder Services.................................................... 1,885,679
Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C
of $632,729, $669,085 and $92,673, respectively)...................... 1,394,487
Legal................................................................... 38,650
Custody................................................................. 25,102
Trustees' Fees and Expenses............................................. 21,579
Other................................................................... 504,827
------------
Total Expenses........................................................ 6,121,500
------------
NET INVESTMENT INCOME................................................... $ 24,003,578
============
NET REALIZED LOSS....................................................... $ (25,912)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.............................. $ 23,977,666
============
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
For the Years Ended May 31, 1998 and 1997
===============================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1998 May 31, 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income................................... $ 24,003,578 $ 21,972,082
Net Realized Loss....................................... (25,912) (7,692)
----------------- ----------------
Change in Net Assets from Operations.................... 23,977,666 21,964,390
----------------- ----------------
Distributions from Net Investment Income:
Class A Shares......................................... (20,677,191) (18,710,328)
Class B Shares......................................... (2,897,824) (2,925,963)
Class C Shares......................................... (402,667) (339,500)
----------------- ----------------
Total Distributions................................... (23,977,682) (21,975,791)
----------------- ----------------
Net Change in Net Assets
from Investment Activities............................. (16) (11,401)
----------------- ----------------
From Capital Transactions:
Proceeds from Shares Sold............................... 11,140,736,165 8,126,739,596
Net Asset Value of Shares Issued Through
Dividend Reinvestment.................................. 23,977,682 21,975,791
Cost of Shares Repurchased.............................. (10,954,208,156) (8,117,517,908)
----------------- ----------------
Net Change in Net Assets
from Capital Transactions.............................. 210,505,691 31,197,479
----------------- ----------------
Total Increase in Net Assets............................ 210,505,675 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 $52,205 and
$26,309, respectively)................................. $ 773,181,006 $ 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.
================================================================================
<TABLE>
<CAPTION>
Year Ended May 31,
-----------------------------------------------
Class A Shares 1998 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........................... .0467 .0440 .0465 .0434 .0229
Less Distributions from Net
Investment Income............................. (.0467) (.0440) (.0465) (.0434) (.0229)
--------- -------- -------- ------- --------
Net Asset Value, End of the Period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== =======
Total Return.................................... 4.78% 4.52% 4.75% 4.43% 2.32%
Net Assets at End of the Period
(in millions)................................. $ 634.1 $ 451.3 $ 440.3 $ 319.7 $ 463.8
Ratio of Expenses to Average
Net Assets*................................... 1.02% 1.02% 1.07% 1.00% 1.03%
Ratio of Net Investment Income
to Average Net Assets*........................ 4.60% 4.38% 4.62% 4.28% 2.36%
</TABLE>
* 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%.
8 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
================================================================================
<TABLE>
<CAPTION>
April 18, 1995
(Commencement
Year Ended May 31, of Distribution) to
---------------------------
Class B Shares 1998 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........... .0391 .0363 .0388 .0047
Less Distributions from Net
Investment Income............. (.0391) (.0363) (.0388) (.0047)
------- ------- ------- -------
Net Asset Value, End of
the Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total Return (a)................ 3.99% 3.71% 3.95% .47%*
Net Assets at End of the
Period (in millions).......... $ 123.0 $ 103.0 $ 81.5 $ 4.2
Ratio of Expenses to Average
Net Assets**.................. 1.79% 1.77% 1.86% 1.76%
Ratio of Net Investment Income
to Average Net Assets**....... 3.91% 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.
9 See Notes to Financial Statements
<PAGE>
Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
===============================================================================
<TABLE>
<CAPTION>
April 18, 1995
(Commencement
Year Ended May 31, of Distribution) to
--------------------------
Class C Shares 1998 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.................. .0392 .0362 .0387 .0049
Less Distributions from Net
Investment Income.................. (.0392) (.0362) (.0387) (.0049)
------- ------- ------- -------
Net Asset Value, End of
the Period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total Return (a)....................... 3.99% 3.72% 3.94% .49%*
Net Assets at End of the
Period (in millions)............... $ 16.1 $ 8.4 $ 9.7 $ 0.6
Ratio of Expenses to Average
Net Assets**....................... 1.78% 1.78% 1.87% 1.76%
Ratio of Net Investment Income
to Average Net Assets**............ 3.91% 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.
10 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
May 31, 1998
================================================================================
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 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)
May 31, 1998
================================================================================
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, 1998, the Fund had an accumulated capital loss carryforward
for tax purposes of $66,693 which will expire between May 31, 2001 and May 31,
2006. Permanent book and tax differences of $2,038 relating to the expiration of
capital loss carryforward during fiscal year 1998 was reclassified from
accumulated net realized loss to capital.
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 year ended May 31, 1998, the Fund recognized expenses of
approximately $38,700 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the year ended May 31, 1998, the Fund recognized expenses of
approximately $131,800 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 year ended May
31, 1998, the Fund recognized
12
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
expenses of approximately $1,321,400. 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 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 $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 May 31, 1998, capital aggregated $634,111,567, $123,024,950 and
$16,085,974 for Classes A, B and C, respectively. For the year ended May
31, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
==============================================================================
<S> <C> <C>
Sales:
Class A................................ 10,148,446,425 $ 10,148,446,425
Class B................................ 844,805,255 844,805,255
Class C................................ 147,484,485 147,484,485
-------------- ----------------
Total Sales.............................. 11,140,736,165 $ 11,140,736,165
============== ================
Dividend Reinvestment:
Class A................................ 20,677,191 $ 20,677,191
Class B................................ 2,897,824 2,897,824
Class C................................ 402,667 402,667
-------------- ----------------
Total Dividend Reinvestment.............. 23,977,682 $ 23,977,682
============== ================
Repurchases:
Class A................................ (9,986,307,711) $ (9,986,307,711)
Class B................................ (827,716,565) (827,716,565)
Class C................................ (140,183,880) (140,183,880)
-------------- ----------------
Total Repurchases........................ (10,954,208,156) $(10,954,208,156)
============== ================
</TABLE>
13
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
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) (629,443,280)
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. Class B shares will automatically convert to Class A
shares after the eighth year following purchase.
14
<PAGE>
Notes to Financial Statements (Continued)
May 31, 1998
================================================================================
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
-------------------
Year of Redemption Class B Class C
- --------------------------------------------------------------------------------
<S> <C> <C>
First................................................... 4.00% 1.00%
Second.................................................. 4.00% None
Third................................................... 3.00% None
Fourth.................................................. 2.50% None
Fifth................................................... 1.50% None
Sixth and Thereafter.................................... None None
</TABLE>
For the year ended May 31, 1998, VKAC, as Distributor for the Fund,
received commissions on CDSC redeemed shares of approximately $497,700. 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 year ended May 31, 1998, are payments retained by
VKAC of approximately $630,100.
15
<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
material respects, the financial position of Van Kampen American Capital Reserve
Fund (the "Fund") at May 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 May 31,
1998 by correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Chicago, Illinois
June 26, 1998
16
<PAGE>
Funds Distributed by Van Kampen American Capital
EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VK Equity Growth
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International/Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS Latin American
FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Limited Maturity Government
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term
Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC Tax Free Money
To find out more about any of these funds, ask your financial adviser 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 American Capital or Morgan Stanley fund prospectus
or to receive additional fund information, choose from one of the following:
. visit our web site at WWW.VKAC.COM -- to view prospectuses, select
Investors' Place, then Download a 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.VKAC.COM and selecting Investors' Place
17
<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
DON G. POWELL*
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*
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., 1998 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.
18
<PAGE>
Van Kampen American Capital Reserve Fund
THIS PAGE INTENTIONALLY LEFT BLANK
19
<PAGE>
Van Kampen American Capital Reserve Fund
THIS PAGE INTENTIONALLY LEFT BLANK
20
<PAGE>
Bulk Rate
U.S. Postage
PAID
VAN KAMPEN
AMERICAN CAPITAL
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> RESERVE FUND A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 607,047,987<F1>
<INVESTMENTS-AT-VALUE> 607,047,987<F1>
<RECEIVABLES> 170,627,794<F1>
<ASSETS-OTHER> 28,136<F1>
<OTHER-ITEMS-ASSETS> 62,381<F1>
<TOTAL-ASSETS> 777,766,298<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 4,585,292<F1>
<TOTAL-LIABILITIES> 4,585,292<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 634,111,567
<SHARES-COMMON-STOCK> 634,125,237
<SHARES-COMMON-PRIOR> 451,309,332
<ACCUMULATED-NII-CURRENT> 52,205<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (93,690)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 0<F1>
<NET-ASSETS> 634,076,293
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 30,125,078<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (6,121,500)<F1>
<NET-INVESTMENT-INCOME> 24,003,578<F1>
<REALIZED-GAINS-CURRENT> (25,912)<F1>
<APPREC-INCREASE-CURRENT> 0<F1>
<NET-CHANGE-FROM-OPS> 23,977,666<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (20,677,191)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,148,446,425
<NUMBER-OF-SHARES-REDEEMED> (9,986,307,711)
<SHARES-REINVESTED> 20,677,191
<NET-CHANGE-IN-ASSETS> 242,685,435
<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> 2,251,176<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 6,121,500<F1>
<AVERAGE-NET-ASSETS> 449,408,642
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.047
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.047)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.02
<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 B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 607,047,987<F1>
<INVESTMENTS-AT-VALUE> 607,047,987<F1>
<RECEIVABLES> 170,627,794<F1>
<ASSETS-OTHER> 28,136<F1>
<OTHER-ITEMS-ASSETS> 62,381<F1>
<TOTAL-ASSETS> 777,766,298<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 4,585,292<F1>
<TOTAL-LIABILITIES> 4,585,292<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 123,024,950
<SHARES-COMMON-STOCK> 123,015,509
<SHARES-COMMON-PRIOR> 103,028,995
<ACCUMULATED-NII-CURRENT> 52,205<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (93,690)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 0<F1>
<NET-ASSETS> 123,018,178
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 30,125,078<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (6,121,500)<F1>
<NET-INVESTMENT-INCOME> 24,003,578<F1>
<REALIZED-GAINS-CURRENT> (25,912)<F1>
<APPREC-INCREASE-CURRENT> 0<F1>
<NET-CHANGE-FROM-OPS> 23,977,666<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (2,897,824)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 844,805,255
<NUMBER-OF-SHARES-REDEEMED> (827,716,565)
<SHARES-REINVESTED> 2,897,824
<NET-CHANGE-IN-ASSETS> 47,922,402
<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> 2,251,176<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 6,121,500<F1>
<AVERAGE-NET-ASSETS> 75,080,760
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.039
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.039)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.79
<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 C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 607,047,987<F1>
<INVESTMENTS-AT-VALUE> 607,047,987<F1>
<RECEIVABLES> 170,627,794<F1>
<ASSETS-OTHER> 28,136<F1>
<OTHER-ITEMS-ASSETS> 62,381<F1>
<TOTAL-ASSETS> 777,766,298<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 4,585,292<F1>
<TOTAL-LIABILITIES> 4,585,292<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,085,974
<SHARES-COMMON-STOCK> 16,086,219
<SHARES-COMMON-PRIOR> 8,382,947
<ACCUMULATED-NII-CURRENT> 52,205<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (93,690)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 0<F1>
<NET-ASSETS> 16,086,535
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 30,125,078<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (6,121,500)<F1>
<NET-INVESTMENT-INCOME> 24,003,578<F1>
<REALIZED-GAINS-CURRENT> (25,912)<F1>
<APPREC-INCREASE-CURRENT> 0<F1>
<NET-CHANGE-FROM-OPS> 23,977,666<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (402,667)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 147,484,485
<NUMBER-OF-SHARES-REDEEMED> (140,183,880)
<SHARES-REINVESTED> 402,667
<NET-CHANGE-IN-ASSETS> 4,977,996
<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> 2,251,176<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 6,121,500<F1>
<AVERAGE-NET-ASSETS> 10,394,519
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.039
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.039)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.78
<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>
