-----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, MgKqahAgYMnCP/8Bp00OEHe/7TuHxSeqLn6ALKd+aEgXY6EIRB5dCqu6SPUn5DNv 8UDEJDsGoVueDtif+g4hNA== 0000950131-98-004321.txt : 19980717 0000950131-98-004321.hdr.sgml : 19980717 ACCESSION NUMBER: 0000950131-98-004321 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980531 FILED AS OF DATE: 19980716 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: SEC FILE NUMBER: 811-02482 FILM NUMBER: 98667342 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 DATED MAY 31, 1998 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 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 Report of Independent Accountants...................... 16
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* as of May 31, 1998 as of November 30, 1997 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%
*As a Percentage of Total Investments 1 Continued on page two 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 Portfolio of Investments May 31, 1998
=============================================================================================================== Par Discount Yield Amount on Date (000) Description of Purchase Maturity Amortized Cost - --------------------------------------------------------------------------------------------------------------- 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 -------------
3 See Notes to Financial Statements Portfolio of Investments (Continued) May 31, 1998 ================================================================================
Description Amortized Cost - ------------------------------------------------------------------------------ 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 =============
(a) At May 31, 1998, cost is identical for both book and federal income tax purposes. 4 See Notes to Financial Statements Statement of Assets and Liabilities May 31, 1998 ================================================================================
ASSETS: 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 ============
5 See Notes to Financial Statements Statement of Operations For the Year Ended May 31, 1998 ================================================================================ 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 ============
6 See Notes to Financial Statements Statement of Changes in Net Assets For the Years Ended May 31, 1998 and 1997 ===============================================================================
Year Ended Year Ended May 31, 1998 May 31, 1997 - --------------------------------------------------------------------------------------------- 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 ================= ================
7 See Notes to Financial Statements Financial Highlights The following schedule presents financial highlights for one share of the Fund outstanding throughout the periods indicated. ================================================================================
Year Ended May 31, ----------------------------------------------- Class A Shares 1998 1997 1996 1995 1994 - ----------------------------------------------------------------------------------------------------- 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%
* 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 Financial Highlights (Continued) The following schedule presents financial highlights for one share of the Fund outstanding throughout the periods indicated. ================================================================================
April 18, 1995 (Commencement Year Ended May 31, of Distribution) to --------------------------- Class B Shares 1998 1997 1996 May 31, 1995 - -------------------------------------------------------------------------------- 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%
* 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 Financial Highlights (Continued) The following schedule presents financial highlights for one share of the Fund outstanding throughout the periods indicated. ===============================================================================
April 18, 1995 (Commencement Year Ended May 31, of Distribution) to -------------------------- Class C Shares 1998 1997 1996 May 31, 1995 - ---------------------------------------------------------------------------------------------- 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%
* 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 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 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:
AVERAGE NET ASSETS % PER ANNUM ============================================================================ First $150 million............................................ .50 of 1% Next $100 million............................................. .45 of 1% Next $100 million............................................. .40 of 1% Over $350 million............................................. .35 of 1%
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 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:
SHARES VALUE ============================================================================== 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) ============== ================
13 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:
SHARES VALUE ================================================================================ 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) ============= ===============
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 Notes to Financial Statements (Continued) May 31, 1998 ================================================================================
Contingent Deferred Sales Charge ------------------- Year of Redemption Class B Class 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
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 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 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 - -------------------------------------------------------------------------------- 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 Van Kampen American Capital Reserve Fund THIS PAGE INTENTIONALLY LEFT BLANK 19 Van Kampen American Capital Reserve Fund THIS PAGE INTENTIONALLY LEFT BLANK 20 Bulk Rate U.S. Postage PAID VAN KAMPEN AMERICAN CAPITAL Van Kampen American Capital Distributors, Inc. One Parkview Plaza Oakbrook Terrace, Illinois 60181 EX-27.1 2 FINANCIAL DATA SCHEDULE
6 11 RESERVE FUND A 1 12-MOS MAY-31-1998 JUN-01-1997 MAY-31-1998 607,047,987 607,047,987 170,627,794 28,136 62,381 777,766,298 0 0 4,585,292 4,585,292 0 634,111,567 634,125,237 451,309,332 52,205 0 (93,690) 0 0 634,076,293 0 30,125,078 0 (6,121,500) 24,003,578 (25,912) 0 23,977,666 0 (20,677,191) 0 0 10,148,446,425 (9,986,307,711) 20,677,191 242,685,435 26,309 (69,816) 0 0 2,251,176 0 6,121,500 449,408,642 1.000 0.047 0.000 (0.047) 0.000 0.000 1.000 1.02 0 0 This item relates to the Fund on a composite basis and not on a class basis
EX-27.2 3 FINANCIAL DATA SCHEDULE
6 12 RESERVE FUND B 1 12-MOS MAY-31-1998 JUN-01-1997 MAY-31-1998 607,047,987 607,047,987 170,627,794 28,136 62,381 777,766,298 0 0 4,585,292 4,585,292 0 123,024,950 123,015,509 103,028,995 52,205 0 (93,690) 0 0 123,018,178 0 30,125,078 0 (6,121,500) 24,003,578 (25,912) 0 23,977,666 0 (2,897,824) 0 0 844,805,255 (827,716,565) 2,897,824 47,922,402 26,309 (69,816) 0 0 2,251,176 0 6,121,500 75,080,760 1.000 0.039 0.000 (0.039) 0.000 0.000 1.000 1.79 0 0 This item relates to the Fund on a composite basis and not on a class basis
EX-27.3 4 FINANCIAL DATA SCHEDULE
6 13 RESERVE FUND C 1 12-MOS MAY-31-1998 JUN-01-1997 MAY-31-1998 607,047,987 607,047,987 170,627,794 28,136 62,381 777,766,298 0 0 4,585,292 4,585,292 0 16,085,974 16,086,219 8,382,947 52,205 0 (93,690) 0 0 16,086,535 0 30,125,078 0 (6,121,500) 24,003,578 (25,912) 0 23,977,666 0 (402,667) 0 0 147,484,485 (140,183,880) 402,667 4,977,996 26,309 (69,816) 0 0 2,251,176 0 6,121,500 10,394,519 1.000 0.039 0.000 (0.039) 0.000 0.000 1.000 1.78 0 0 This item relates to the Fund on a composite basis and not on a class basis
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