-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GrDOG6lYENnsftS8RqtnC3SQ2RVQ6toUPBChMAJ6PCgjsvH/TCdcIRDmruPpmo/R laJ72ImNeex+OgWmg9uz3Q== 0000950131-96-003631.txt : 19960806 0000950131-96-003631.hdr.sgml : 19960806 ACCESSION NUMBER: 0000950131-96-003631 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960805 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL RESERVE FUND CENTRAL INDEX KEY: 0000005114 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 741794065 FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02482 FILM NUMBER: 96603934 BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLAZA CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 7139934495 MAIL ADDRESS: STREET 1: ONE PARKVIEW PLAZA CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN CAPITAL RESERVE FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN GENERAL RESERVE FUND INC DATE OF NAME CHANGE: 19830912 N-30D 1 RESERVE FUND ANNUAL REPORT TABLE OF CONTENTS 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
RES ANR 7/96 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 [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 See Notes to Financial Statements PORTFOLIO OF INVESTMENTS May 31, 1996 - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------- 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 ------------
*dated 05/31/96, collateralized by U.S. Government obligations in a pool cash account 3 See Notes to Financial Statements STATEMENT OF ASSETS AND LIABILITIES May 31, 1996 - -------------------------------------------------------------------------------- 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 ------------
4 STATEMENT OF OPERATIONS Year Ended May 31, 1996 - -------------------------------------------------------------------------------- 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 -----------
5 See Notes to Financial Statements STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Year Ended May 31 -------------------------------- 1996 1995 - -------------------------------------------------------------------------------- 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 --------------- ---------------
6 See Notes to Financial Statements FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each of the periods indicated. - --------------------------------------------------------------------------------
Class A -------------------------------------- Year Ended May 31 -------------------------------------- 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------- 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% -- -- -- --
(1) See Note 3. 7 See Notes to Financial Statements FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for a share of beneficial interest outstanding throughout each of the periods indicated. - --------------------------------------------------------------------------------
Class B -------------------------------- Year April 18, 1995(/1/) Ended through May 31, 1996 May 31, 1995(/2/) - -------------------------------------------------------------------------------- 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% --
(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 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for a share of beneficial interest outstanding throughout each of the periods indicated. - --------------------------------------------------------------------------------
Class C -------------------------------- Year April 18, 1995(/1/) Ended through May 31, 1996 May 31, 1995(/2/) - -------------------------------------------------------------------------------- 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% --
(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 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 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 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 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:
Year Ended May 31 ------------------------------ 1996 1995 - ------------------------------------------------------------------------------ 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) -------------- --------------
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 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 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 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 -----END PRIVACY-ENHANCED MESSAGE-----